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, 2022

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.)
1359 Broadway, Suite 1710
New York,
New York	10018
(Address of principal executive offices)	(Zip Code)

(212) 433-3791

(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 (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 2, 2022, the registrant had 46,629,804 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	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statement of Stockholders’ Equity	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION	35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	96
Item 3.	Defaults Upon Senior Securities	96
Item 4.	Mine Safety Disclosures	96
Item 5.	Other Information	96
Item 6.	Exhibits	97
	Signatures	98

i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Quarterly Report, including without limitation statements regarding our future results of operations and financial position, the anticipated impact of the COVID-19 pandemic on our business, the sufficiency of our cash and cash equivalents to fund our operations, business strategy, prospective products and product candidates, clinical trial timelines and expected timing for the release of data, research and development costs, future revenue, timing and likelihood of success, activities under our existing collaborations and potential collaboration opportunities, and plans and objectives of management are forward-looking statements.

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, 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 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.

SUMMARY RISK FACTORS

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

•We have a limited operating history, have not completed any clinical trials 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 or eliminate one or more of our research and drug development programs or future commercialization efforts.

•We are substantially dependent on the success of our lead product candidates, ZN-c3 and ZN-d5, which are currently in clinical trials. If we are unable to complete development of, obtain approval for and commercialize ZN-c3 and/or ZN-d5 in a timely manner, our business will be harmed.

•The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA, EMA or other comparable foreign regulatory authorities.

•We may face additional risks associated with the development of ZN-c3, ZN-d5, ZN-c5, ZN-e4 and potentially other product candidates in combination with other therapies.

•The clinical trial and regulatory approval processes are lengthy, time-consuming and inherently unpredictable, and we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

•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

ii

maintain issued patents which are sufficient to protect our product candidates, then others could compete against us more directly, which would negatively impact our business.

•Our existing collaborations are important to our business and future licenses may also be important to us and, if we are unable to maintain any of these collaborations, or if these arrangements are not successful, our business could be adversely affected.

•We rely, and expect to continue to rely, on third parties, including independent clinical investigators and CROs, to conduct certain aspects of our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

•Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts.

•The competition for qualified personnel is particularly intense in our industry. If we are unable to retain or hire key personnel, then we may not be able to sustain or grow our business.

•The COVID-19 pandemic has adversely impacted, and we expect will continue to adversely impact, our business, including our preclinical studies and clinical trials.

iii

BASIS OF PRESENTATION

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to “we,” “us,” “our,” the “Company,” “Zentalis” and similar references refer: (1) following the consummation of our statutory conversion to a Delaware corporation on April 2, 2020 in connection with our initial public offering, to Zentalis Pharmaceuticals, Inc., and (2) prior to the completion of such conversion, to Zentalis Pharmaceuticals, LLC.

iv

PART I—FINANCIAL INFORMATION

3

Item 1. Financial Statements.

Zentalis Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share amounts and par value)

	March 31,		December 31,
	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	30,572	$	59,714
Marketable securities, available-for-sale	258,797		280,173
Prepaid expenses and other current assets	11,670		10,640
Restricted cash	243		243
Total current assets	301,282		350,770
Property and equipment, net	8,480		8,148
Operating lease right-of-use assets	43,644		44,691
Prepaid expenses and other assets	10,164		7,040
Goodwill	3,736		3,736
Investment in Zentera Therapeutics	35,744		37,495
Restricted cash	2,627		2,627
Total assets	$	405,677	$	454,507
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	13,163	$	11,590
Accrued expenses	30,322		32,354
Total current liabilities	43,485		43,944
Deferred tax liability	1,548		1,622
Other long-term liabilities	44,978		44,459
Total liabilities	90,011		90,025
Commitments and contingencies
EQUITY
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2022 and December 31, 2021	—		—
Common stock, $0.001 par value; 250,000,000 shares authorized; 45,583,900 and 45,490,764 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	46		45
Additional paid-in capital	734,997		723,593
Accumulated other comprehensive loss	(1,109)		(125)
Accumulated deficit	(418,636)		(359,559)
Total stockholders’ equity	315,298		363,954
Noncontrolling interests	368		528
Total equity	315,666		364,482
Total liabilities and stockholders’ equity	$	405,677	$	454,507

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,
	2022		2021
Operating Expenses
Research and development	$	46,112	$	38,394
General and administrative	11,767		11,953
Total operating expenses	57,879		50,347
Operating loss	(57,879)		(50,347)
Other Income (Expense)
Investment and other income, net	426		99
Net loss before income taxes	(57,453)		(50,248)
Income tax expense	33		196
Loss on equity method investment	1,751		—
Net loss	(59,237)		(50,444)
Net loss attributable to noncontrolling interests	(160)		(543)
Net loss attributable to Zentalis	$	(59,077)	$	(49,901)
Net loss per common share outstanding, basic and diluted	$	(1.31)	$	(1.24)
Common shares used in computing net loss per share, basic and diluted	45,244		40,359

See notes to condensed consolidated financial statements.

5

Zentalis Pharmaceuticals, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2022		2021
Net loss	$	(59,237)	$	(50,444)
Other comprehensive income:
Unrealized gain (loss) on marketable securities	(984)		14
Total comprehensive loss	(60,221)		(50,430)
Comprehensive loss attributable to noncontrolling interests	(160)		(543)
Comprehensive loss attributable to Zentalis	$	(60,061)	$	(49,887)

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,
	2022		2021
Operating Activities:
Consolidated net loss	$	(59,237)	$	(50,444)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	344		79
Share-based compensation	10,147		9,691
Loss on disposal of equipment	—		15
Amortization of premiums on marketable securities, net	146		289
Loss on equity method investment	1,751		—
Changes in operating assets and liabilities:
Accounts receivable	—		169
Prepaid expenses and other assets	(4,154)		(1,357)
Accounts payable and accrued liabilities	(574)		3,307
Operating lease right-of-use assets and liabilities, net	1,381		782
Net cash used in operating activities	(50,196)		(37,469)
Investing activities:
Purchases of marketable securities	(79,254)		(54,434)
Proceeds from maturities of marketable securities	99,500		68,328
Purchases of property and equipment	(450)		(436)
Net cash used in investing activities	19,796		13,458
Financing Activities:
Proceeds from issuance of common stock under equity incentive plans	1,258		—
Net cash provided by financing activities	1,258		—
Net increase/(decrease) in cash, cash equivalents and restricted cash	(29,142)		(24,011)
Cash, cash equivalents and restricted cash at beginning of period	62,584		56,271
Cash, cash equivalents and restricted cash at end of period	$	33,442	$	32,260
Supplemental disclosure of non-cash investing and financing activities:
Accrued capital expenditures	$	226	$	67

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,
	2022		2021
Cash and cash equivalents	$	30,572	$	28,996
Restricted cash	2,870		3,264
Total cash, cash equivalents and restricted cash reported in the Condensed Consolidated Statement of Cash Flows	$	33,442	$	32,260

See notes to condensed consolidated financial statements.

7

Zentalis Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

	Three Months Ended March 31, 2022
	Common			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance at December 31, 2021	45,491	$	45	$	723,593	$	(125)	$	(359,559)	$	528	$	364,482
Share-based compensation expense	—	—		10,147		—		—		—		10,147
Other comprehensive income	—	—		—		(984)		—		—		(984)
Issuance of common stock in connection with restricted stock unit vesting	45	1		—		—		—		—		1
Issuance of common stock upon exercise of options, net	33	—		645		—		—		—		645
Shares issued under employee stock purchase plan	16			612								612
Cancellation of restricted stock awards	(1)	—		—		—		—		—		—
Net loss attributable to non-controlling interest	—	—		—		—		—		(160)		(160)
Net loss attributable to Zentalis	—	—		—		—		(59,077)		—		(59,077)
Balance at March 31, 2022	45,584	$	46	$	734,997	$	(1,109)	$	(418,636)	$	368	$	315,666

	Three Months Ended March 31, 2021
	Common			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance at December 31, 2020	41,040	$	41	$	509,339	$	36	$	(200,834)	$	24,795	$	333,377
Share-based compensation expense	—	—		9,691		—		—		—		9,691
Other comprehensive income	—	—		—		14		—		—		14
Net loss attributable to non-controlling interest	—	—		—		—		—		(543)		(543)
Net loss attributable to Zentalis	—	—		—		—		(49,901)		—		(49,901)
March 31, 2021	41,040	$	41	$	519,030	$	50	$	(250,735)	$	24,252	$	292,638

See notes to condensed consolidated financial statements.

8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business

Organization

Zentalis Pharmaceuticals, Inc. (“Zentalis”, “We” or the “Company”) is a clinical-stage pharmaceutical company focused on discovering and developing clinically differentiated, novel small molecule therapeutics targeting fundamental biological pathways of cancer. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. All of the Company’s tangible assets are held in the United States.

Liquidity

Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The Company determined that there are no conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date that the interim unaudited condensed consolidated financial statements for the quarter ended March 31, 2022 are issued.

2. Interim Unaudited Financial Statements

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q. The year-end condensed consolidated balance sheet data was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP. These condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022. 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 condensed consolidated financial statements include our wholly-owned subsidiaries and variable interest entity (“VIE”), for which we are the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

We evaluate our ownership, contractual and other interests in entities that are not wholly-owned to determine if these entities are VIEs, and, if so, whether we are the primary beneficiary of the VIE. In determining whether we are the primary beneficiary of a VIE and therefore required to consolidate the VIE, we apply a qualitative approach that determines whether we have both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of, or the rights to receive benefits from, the VIE that could potentially be significant to that VIE.

We will continuously assess whether we are the primary beneficiary of a VIE, as changes to existing relationships or future transactions may result in the consolidation or deconsolidation of such VIE. During the

9

periods presented, we have not provided any other financial or other support to our VIEs that we were not contractually required to provide.

The equity method is used to account for investments in which we have the ability to exercise significant influence, but not control, over the investee. Such investments are recorded on the balance sheet, and the share of net income or losses of equity investments is recognized on a one quarter lag in investment and other income (expense), net.

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.

Though the impact of the COVID-19 pandemic to our business and operating results presents additional uncertainty, we continue to use the best information available to inform our critical accounting estimates.

Significant Accounting Policies

During the three months ended March 31, 2022, there have been no changes to the Company’s significant accounting policies as described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

3. Significant Transactions

Zentera Therapeutics

In May 2020, we became a majority common shareholder of Zentera Therapeutics, Ltd., a Shanghai-based clinical-stage biopharmaceutical company focused on developing cancer therapeutics (“Zentera”), concurrent with its Series A convertible preferred stock offering. The financial position and results of operations of Zentera were included in our consolidated financial statements from the date of the initial investment as a result of our control of the entity and our determination that we were the primary beneficiary of Zentera. In July 2021, Zentera completed a Series B convertible preferred stock offering which diluted our investment to a position of less than majority owned. Upon review of the facts and circumstances, together with the authoritative accounting literature, we determined that while Zentera is a VIE, consolidation of Zentera is no longer appropriate. After the July 2021 Series B convertible preferred offering in which we did not participate, our review concluded that we ceased to be the primary beneficiary of Zentera as our equity ownership was reduced and changes were made to the corporate governance of Zentera. As a result, we no longer individually have the ability to direct the activities that most significantly impact Zentera's economic performance.

Beginning in July 2021, the financial position and results of operations of Zentera are no longer included in our consolidated financial statements. During the period of deconsolidation we measured the fair value of our retained investment in Zentera using the backsolve method with consideration for a lack of marketability. An equity method investment of $35.7 million is recorded on our balance sheet at March 31, 2022. This amount represents our maximum exposure to loss as a result of our involvement with Zentera. A deferred tax liability of $7.5 million representing the tax impact of the unrealized gain on deconsolidation is recorded on our balance sheet at March 31, 2022. A gain of $51.6 million, measured as the difference between the fair value of our retained noncontrolling interest together with the carrying amount of the Zentera noncontrolling interest, and the carrying amount of Zentera’s assets and liabilities was recognized during the year ended December 31, 2021. The difference between the carrying amount of our investment in Zentera and our portion of the Zentera net assets was $7.3 million as of

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March 31, 2022. This difference is accounted for in our equity method investment analogous to in-process research and development.

In May 2020, each of our subsidiaries Zeno Alpha, Inc., K-Group Alpha, Inc., Zeno Management Inc., and K-Group Beta, Inc. entered into a collaboration and royalty-bearing license agreement with Zentera, which we refer to as the “Zentera Sublicenses,” pursuant to which we collaborate with Zentera on the development and commercialization of ZN-c3, ZN-d5 and ZN-c5, respectively, in the People’s Republic of China, Macau, Hong Kong and Taiwan, which is referred to as the “Zentera Collaboration Territory.” Under each Zentera Sublicense, Zentera will lead development, and upon regulatory approval, the commercialization, of the collaboration products in the Zentera Collaboration Territory.

Under the terms of the Zentera Sublicenses, Zentera is responsible for the costs of developing the Collaboration Products in the Zentera Collaboration Territory, and we are responsible for the costs of developing the Collaboration Products outside the Zentera Collaboration Territory, provided that Zentera will reimburse us for a portion of the costs for global data management, pharmacovigilance, safety database management, and chemistry, manufacturing and controls activities with respect to each Collaboration Product. Prior to the deconsolidation of Zentera in July 2021, these costs were eliminated in consolidation. For the three months ended March 31, 2022, the amounts incurred under this arrangement totaled $2.1 million and are presented as contra-research and development expense in the consolidated statement of operations. A corresponding receivable is recorded within prepaid expenses and other current assets on the consolidated balance sheet. We have not provided financial or other support to Zentera during the periods ended March 31, 2022 and 2021 that was not previously contractually required.

4. Business Combinations

Kalyra Pharmaceuticals, Inc.

On December 21, 2017, we acquired $4.5 million of Kalyra’s Series B Preferred Stock representing a 25% equity interest in Kalyra for purposes of entering the analgesics therapeutic research space. The acquisition price was paid entirely in cash.

In accordance with the authoritative guidance, we concluded that Kalyra is a business consisting of inputs, employees, intellectual property and processes capable of producing outputs. Additionally, we have concluded that Kalyra is a variable interest entity, we are the primary beneficiary and have the power to direct the activities that most significantly affect Kalyra’s economic performance through common management and our board representation. Prior to the change of control, the Company and Kalyra transacted for the delivery of research and development services and support. The financial position and results of operations of Kalyra have been included in our consolidated financial statements from the date of the initial investment.

Pursuant with authoritative guidance, we have recorded the identifiable assets, liabilities and noncontrolling interests in the VIE at their fair value upon initial consolidation. The identified goodwill is comprised of the workforce and expected synergies from combining the entities. Total assets and liabilities of Kalyra as of March 31, 2022 and December 31, 2021 are immaterial. The liabilities recognized as a result of consolidating Kalyra do not

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represent additional claims on our general assets. Pursuant to the authoritative guidance, the equity interest in Kalyra not owned by Zentalis is reported as a noncontrolling interest on our condensed consolidated balance sheets.

The following is a reconciliation of equity (net assets) attributable to the noncontrolling interest (in thousands):

	March 31,		December 31,
	2022		2021
Noncontrolling interest at beginning of period	$	528	$	24,795
Net loss attributable to noncontrolling interest	(160)		(7,368)
Deconsolidation of Zentera	—		(16,899)
Noncontrolling interest at end of period	$	368	$	528

5. Fair Value Measurement

Available-for-sale marketable securities consisted of the following (in thousands):

	March 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Commercial paper	$	165,328	$	—	$	(541)	$	164,787
Corporate Debt Securities	15,118		—		(62)		15,056
US Government Agencies	5,000		—		(13)		4,987
US Treasury	74,459		—		(492)		73,967
	$	259,905	$	—	$	(1,108)	$	258,797

	December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Commercial paper	$	199,321	$	11	$	(55)	$	199,277
Corporate Debt Securities	10,085		—		(7)		10,078
US Government Agencies	20,032		1		—		20,033
US Treasury	50,860		—		(75)		50,785
	$	280,298	$	12	$	(137)	$	280,173

As of March 31, 2022, forty-three of our available-for-sale debt securities with a fair market value of $258.8 million were in a gross unrealized loss position of $1.1 million. 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,

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2022, 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.

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

	March 31, 2022		December 31, 2021
	Estimated Fair Value
Due within one year	$	245,854	$	258,948
After one but within five years	12,943		21,225
	$	258,797	$	280,173

The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):

	March 31, 2022						December 31, 2021
	Level 1		Level 2		Total estimated fair value		Level 1		Level 2		Total estimated fair value
Cash equivalents:
Money market funds	$	24,668	$	—	$	24,668	$	43,653	$	—	$	43,653
Total cash equivalents:	24,668		—		24,668		43,653		—		43,653
Available-for-sale marketable securities:
Commercial paper	—		164,787		164,787		—		199,277		199,277
Corporate Debt Securities	—		15,056		15,056		—		10,078		10,078
US Government Agencies	—		4,987		4,987		—		20,033		20,033
US Treasury securities	73,967		—		73,967		50,785		—		50,785
Total available-for-sale marketable securities:	73,967		184,830		258,797		50,785		229,388		280,173
Total assets measured at fair value	$	98,635	$	184,830	$	283,465	$	94,438	$	229,388	$	323,826

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There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2022. We had no instruments that were classified within Level 3 as of March 31, 2022 or December 31, 2021.

6. Prepaid Expenses and Other Assets

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

	March 31,		December 31,
	2022		2021
Prepaid insurance	$	540	$	990
Prepaid software licenses and maintenance	350		403
Foreign R&D credit refund	1,596		1,808
Prepaid research and development expenses	15,926		11,204
Interest receivable	266		258
Zentera receivable	2,348		2,373
Other prepaid expenses	808		644
Total prepaid expenses and other assets	21,834		17,680
Less long-term portion	10,164		7,040
Total prepaid expenses and other assets, current	$	11,670	$	10,640

7. Property and Equipment, net

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

	March 31,		December 31,
	2022		2021
Lab equipment	$	2,382	$	2,057
Leasehold improvements	4,673		4,515
Office equipment and furniture	2,156		2,123
Computer equipment	223		211
Construction in progress	157		34
Subtotal	9,591		8,940
Accumulated depreciation and amortization	(1,111)		(792)
Property and equipment, net	$	8,480	$	8,148

Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was approximately $344 thousand and $79 thousand, respectively.

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8. Accrued Expenses

Accrued expenses consist of the following (in thousands):

	March 31,		December 31,
	2022		2021
Accrued research and development expenses	$	21,363	$	18,531
Accrued employee expenses	5,873		9,250
Accrued legal expenses	643		669
Accrued general and administrative expenses	477		1,480
Lease liability	1,269		1,453
Taxes payable	697		971
Total accrued expenses	$	30,322	$	32,354

9. Members’ Equity

Share-based Compensation

In 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 under the 2020 Plan. The number of common shares available for issuance under the 2020 Plan is the sum of (1) 5,600,000 shares of common stock; plus (2) any shares forfeited from the unvested restricted shares of our common stock issued upon conversion of unvested Class B common units (up to 1,250,000 shares); plus (3) an annual increase on the first day of each fiscal year beginning with the fiscal year ending December 31, 2021 and continuing to, and including, the fiscal year ending December 31, 2030, equal to the lesser of (a) 5% of the shares of common stock outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as determined by our board of directors.

At March 31, 2022, 5,804,817 shares were subject to outstanding awards and 2,881,138 shares were available for future grants of share-based awards.

Total share-based compensation expense related to share based awards was comprised of the following (in thousands):

	Three Months Ended March 31,
	2022		2021
Research and development expense	$	5,042	$	3,126
General and administrative expense	5,105		6,565
Total share-based compensation expense	$	10,147	$	9,691

Total share-based compensation expense for the three months ended March 31, 2022 and 2021 includes $0 and $69 thousand of share-based compensation expense for employees, consultants and directors of Zentera, respectively.

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

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	Three Months Ended March 31,
	2022		2021
Stock Options	$	7,778	$	3,851
Employee Stock Purchase Plan	102		—
RSAs and RSUs	2,267		5,840
	$	10,147	$	9,691

Stock Options and Restricted Stock Units

The exercise price of stock options granted is equal to the closing price of the common stock on the date of grant. The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the Company estimates expected volatility based on the historical volatility of a group of similar companies that are publicly traded. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company uses the “simplified method” for estimating the expected term of employee options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years). The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has not issued any dividends and does not expect to issue dividends over the life of the options. As a result, the Company has estimated the dividend yield to be zero. The fair value of the stock options granted during the three months ended March 31, 2022 and March 31, 2021 was determined with the following assumptions:

	March 31, 2022		March 31, 2021
Expected volatility	73.6% - 74.3%		76.0% - 76.6%
Average expected term (in years)	6.0 - 6.1		5.3 - 6.1
Risk-free interest rate	1.5% - 2.3%		0.5% - 0.9%
Expected dividend yield	—	%	—	%

Employee Stock Purchase Plan

The weighted average assumptions used to estimate the fair value of stock purchase rights under the employee stock purchase plan (“ESPP”) are as follows:

	Ended March 31,
	2022
ESPP
Volatility	48.2	%
Expected term (years)	0.5
Risk free rate	0.1	%
Expected dividend yield	—

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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.

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):

	March 31, 2022
	Unrecognized Expense		Remaining Weighted-Average Recognition Period (years)
Stock options	$	105,024	3.18
RSAs	$	1,038	1.43
RSUs	$	14,828	3.41
ESPP	$	—	0

During the three months ended March 31, 2022, we issued 33.2 thousand shares of common stock in connection with the exercises of stock options. For the three months ended March 31, 2022, 0.1 million shares of common stock issued in conjunction with certain restricted stock awards vested. Outstanding stock options, unvested restricted stock awards, and unvested restricted stock units totaling approximately 5.4 million shares, 0.3 million shares and 0.4 million shares of our common stock, respectively, were outstanding as of March 31, 2022.

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.

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Leases

Our commitments include payments related to operating leases. Approximate annual future minimum operating lease payments as of March 31, 2022 are as follows (in thousands):

Year	Operating Leases
2022 (remaining)	$	2,088
2023	6,340
2024	6,486
2025	6,799
2026	7,278
Thereafter	46,229
Total minimum lease payments:	75,220
Less: imputed interest	(28,973)
Total operating lease liabilities	46,247
Less: current portion	(1,269)
Lease liability, net of current portion	$	44,978

The weighted-average remaining lease term of our operating leases is approximately 10.5 years.

11. Net Loss Per Common Share/Class A Common Unit

Basic and diluted net loss per common share/Class A common unit were calculated as follows (in thousands except per share and per unit amounts):

	Three Months Ended March 31,
	2022		2021
Numerator:
Net loss attributable to Zentalis	$	(59,077)	$	(49,901)
Denominator:
Weighted average number of common shares outstanding, basic and diluted	45,244		40,359
Net loss per common share	$	(1.31)	$	(1.24)

Our potential and dilutive securities, which include outstanding stock options, unvested RSAs and unvested RSUs have been excluded from the computation of diluted net loss per common share as the effect would be anti-dilutive.

The following common stock equivalents have been excluded from the calculations of diluted net loss per common share because their inclusion would be antidilutive (in thousands).

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	March 31,
	2022	2021
Outstanding stock options	5,372	3,757
Unvested RSAs	287	624
Unvested RSUs	433	797
	6,092	5,178

12. Related Party Disclosures

Tempus

Kimberly Blackwell, M.D., is a member of the Company's board of directors and is also the Chief Medical Officer of Tempus Labs, Inc. ("Tempus"). The Company entered into a Master Services Agreement with Tempus in December 2020 to provide data licensing and research services. There were an immaterial and $1.0 million fees incurred for services performed by Tempus for the three months ended March 31, 2022 and 2021, respectively.

Zentera

Anthony Y. Sun, M.D., our President and Chief Executive Officer, serves as Chief Executive Officer and a member of the board of directors of Zentera, and Kevin D. Bunker, Ph.D., our Chief Operating Officer, serves as a member of the board of directors of Zentera. Accordingly, the Company identifies Zentera as a related party.

In May 2020, we entered into the Zentera Sublicenses, pursuant to which we collaborate with Zentera on the development and commercialization of ZN-c3, ZN-d5 and ZN-c5, respectively, in the Zentera Collaboration Territory. Under the terms of the Zentera Sublicenses, Zentera is responsible for the costs of developing the Collaboration Products in the Zentera Collaboration Territory, and we are responsible for the costs of developing the Collaboration Products outside the Zentera Collaboration Territory, provided that Zentera will reimburse us for a portion of its costs for global data management, pharmacovigilance, safety database management, and chemistry, manufacturing and controls activities with respect to each Collaboration Product. Prior to the deconsolidation of Zentera during July 2021, these costs were eliminated in consolidation. For the three months ended March 31, 2022, the amounts incurred under this arrangement totaled $2.1 million and are presented as contra-research and development expense in the consolidated statement of operations.

During the three months ended March 31, 2022 we divested an early stage asset to Zentera for $0.2 million.

13. Subsequent Events

Direct Offering of Common Stock

On April 29, 2022, pursuant to its registration statement on Form S-3 (Registration No. 333-255737), filed with the SEC on May 4, 2021, the Company completed a direct offering of common stock to Pfizer. The Company issued and sold 953,834 shares of its common stock at an offering price of $26.21 per share. The total gross proceeds for the offering were approximately $25.0 million, before deducting offering expenses of $0.3 million payable by the Company. The parties have entered into an agreement to collaborate to advance the clinical development of ZN-c3, a selective WEE1 inhibitor designed to induce synthetic lethality in cancer cells. Zentalis will maintain full economic ownership and control of ZN-c3 and the rest of its pipeline.

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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 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, 2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. As a result of many important factors, such as those set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. For convenience of presentation some of the numbers have been rounded in the text below.

Overview

We are a clinical-stage biopharmaceutical company focused on discovering and developing small molecule therapeutics targeting fundamental biological pathways of cancers. We use our highly efficient drug discovery engine, which we refer to as our Integrated Discovery Engine, to identify targets and develop small molecule new chemical entities, or NCEs, with properties that we believe could result in potentially differentiated product profiles. Our discovery engine combines our extensive experience and capabilities across cancer biology and medicinal chemistry. We believe our product candidates are differentiated from current programs targeting similar pathways and, if approved, have the potential to significantly impact clinical outcomes of patients with cancer.

We are developing a broad pipeline of product candidates with an initial focus on validated oncology targets with the potential to address large patient populations. We currently have two lead product candidates: ZN-c3, an inhibitor of WEE1, a protein tyrosine kinase, and ZN-d5, a selective inhibitor of B-cell lymphoma 2, or BCL-2. Our other clinical product candidates include ZN-c5, an oral selective estrogen receptor degrader, or SERD, and ZN-e4, an irreversible inhibitor of mutant epidermal growth factor receptor, or EGFR.

ZN-c3 is currently being evaluated in multiple Phase 1/2 clinical trials for the treatment of advanced solid tumors including uterine serous carcinoma, or USC, as a monotherapy and in combination with chemotherapies in patients with advanced ovarian cancer and osteosarcoma, and in combination with a poly (ADP-ribose) polymerase (PARP) inhibitor in ovarian cancer. ZN-d5 is currently in a Phase 1 clinical trial for the treatment of non-Hodgkin's lymphoma, or NHL, and acute myelogenous leukemia, or AML. ZN-c5 is currently in Phase 1/2 clinical trials for the treatment of estrogen receptor-positive, human epidermal growth factor receptor 2-negative, or ER+/HER2-, advanced or metastatic breast cancer, and ZN-e4 is currently in a Phase 1/2 clinical trial for the treatment of advanced non-small cell lung cancer, or NSCLC.

We plan to initiate combination trials of product candidates across our pipeline in 2022, including a Phase 1/2 combination trial of ZN-d5 and ZN-c3 in acute myeloid leukemia, or AML, and a Phase 1b combination trial of ZN-c5 and ZN-c3 for the treatment of CDK4/6i resistant breast cancer.

We currently own worldwide development and commercialization rights to each of our product candidates, other than in select Asian countries (including China) for each of ZN-c3, ZN-d5 and ZN-c5, for which we have out-licensed these rights to our joint venture, Zentera Therapeutics (Cayman), Ltd., or Zentera, and for ZN-e4, for which we have out-licensed these rights to SciClone Pharmaceuticals International (Cayman) Development Ltd., or SciClone. As of March 31, 2022, we hold a 40.3% equity interest in Zentera.

ZN-c3 (WEE1 Inhibitor)

ZN-c3 is currently being evaluated in multiple ongoing clinical trials, including a Phase 2 monotherapy clinical trial for the treatment of women with recurrent or persistent uterine serous carcinoma, or USC. The study was initiated following an end-of-Phase 1 meeting with the U.S. Food and Drug Administration, or FDA, which concurred in principle with the proposal that ZN-c3 has the potential for an accelerated approval pathway based on the proposed global study design. The FDA granted Fast Track designation in November 2021 to ZN-c3 for the treatment of patients with advanced metastatic uterine serous carcinoma who have received at least one prior platinum-based chemotherapy regimen.

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In addition, ZN-c3 in combination with chemotherapy has received orphan drug designation and rare pediatric disease designation from the FDA for osteosarcoma. We initiated a Phase 1/2 clinical trial of ZN-c3 in combination with chemotherapy in pediatric and adult patients with osteosarcoma during the third quarter of 2021. We expect to report initial results from this trial in the second half of 2022. If ZN-c3 were to obtain approval for the designated indication, we believe it may be eligible for a rare pediatric disease priority voucher upon approval.

ZN-c3 is also being evaluated in an ongoing Phase 1/2 clinical trial for the treatment of advanced solid tumors as a monotherapy and in an ongoing Phase 1b clinical trial in combination with chemotherapy in patients with platinum resistant ovarian cancer.

In the fourth quarter of 2021, we initiated a Phase 2 monotherapy trial for a tumor agnostic, predictive biomarker, subject to FDA feedback. We also initiated a Phase 1/2 clinical trial evaluating ZN-c3 in combination with GlaxoSmithKline’s PARP inhibitor niraparib (ZEJULA®), as part of a clinical research collaboration in ovarian cancer. We also announced plans to initiate a Phase 1/2 combination trial of ZN-d5 + ZN-c3 in AML and a Phase 1b combination trial of ZN-c5 and ZN-c3 in CDK4/6i resistant breast cancer in 2022.

We have agreed to support two planned additional investigator-initiated trials of ZN-c3 that we expect to initiate in 2022: a trial with the Ivy Brain Center in glioblastoma multiforme and a trial in combination with immunotherapy with Dana Farber in triple negative breast cancer.

ZN-d5 (BCL-2 Inhibitor)

The ongoing Phase 1 monotherapy dose escalation trial for ZN-d5 is enrolling patients with relapsed/refractory Non-Hodgkin’s Lymphoma and additionally began enrolling patients with AML in the third quarter of 2021. We reported initial results from this Phase 1 trial in the fourth quarter of 2021. We initiated a Phase 1/2 monotherapy trial of ZN-d5 c3 in Amyloidosis in the first quarter of 2022. We also announced plans to initiate a Phase 1/2 combination trial of ZN-d5 and ZN-c3 in AML in 2022.

ZN-c5 (Oral SERD)

We reported initial results from the ongoing Phase 1/2 trial evaluating ZN-c5 in combination with Pfizer Inc.’s, or Pfizer, CDK4/6 palbociclib, and the Phase 1b clinical trial evaluating ZN-c5 in combination with Lilly’s CDK4/6 abemaciclib, in the second quarter of 2022. In the fourth quarter of 2021, we announced our plans to initiate a Phase 1b combination of ZN-c5 and ZN-c3 in CDK4/6i resistant breast cancer in 2022.

ZN-e4 (EGFR Inhibitor)

The ongoing Phase 1/2 dose escalation trial for ZN-e4 in patients with advanced non-small cell lung cancer, or NSCLC, is enrolling both osimertinib-naïve and experienced patients. We plan to report results from the Phase 1/2 trial in 2022.

BCL-xL Heterobifunctional Degrader

We are developing BCL-xL heterobifunctional degraders based on E3 ligases not expressed in platelets, allowing for the avoidance of dose-limiting thrombocytopenia associated with BCL-xL inhibitors. We believe that our discovery efforts to select a BCL-xL degrader will lead to an attractive candidate for evaluation as monotherapy and in combination with other therapies, such as ZN-d5 and ZN-c3, for the treatment of hematological and solid malignancies.

Zentera Therapeutics

Our China joint venture, Zentera, is also advancing corresponding clinical trials in China for ZN-c3, ZN-d5 and ZN-c5. See “Zentera Therapeutics” below and Notes 3 and 12 to our interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Liquidity Overview

Since our inception, our operations have been limited to organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of our product pipeline. We do not have any products approved for commercial sale and have not generated any revenues from product sales. We will not generate revenue from product sales unless and until we successfully complete

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clinical development and obtain regulatory approval for our product candidates. We will need to raise substantial additional capital to support our continuing operations and pursue our growth strategy.

On April 26, 2022, we entered into a securities purchase agreement with Pfizer pursuant to which Pfizer purchased 953,834 shares of our common stock, at a price of $26.21 per share. The shares were offered and sold in a registered direct offering conducted without an underwriter or placement agent and pursuant to an effective shelf registration statement of Form S-3 (Registration No. 333-255769), and a related prospectus supplement. The Pfizer offering closed on April 29, 2022, raising aggregate gross proceeds of approximately $25.0 million, before fees and expenses of $0.3 million.

Since inception, we have incurred significant operating losses. Our net losses were $166.1 million for the year ended December 31, 2021, and $59.2 million and $50.4 million for the three months ended March 31, 2022 and March 31, 2021, respectively. We had an accumulated deficit of $418.6 million as of March 31, 2022. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We had cash, cash equivalents and marketable securities of $289.4 million as of March 31, 2022. We believe that our existing cash, cash equivalents and marketable securities as of March 31, 2022, together with the net proceeds from the April 2022 Pfizer equity investment, prioritization of the clinical development of ZN-c3 and ZN-d5, and budget reallocation, will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2024. 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.

Impact of COVID-19 Pandemic

We continue to monitor how the COVID-19 pandemic is affecting our employees, business, preclinical studies and clinical trials. In response to the spread of COVID-19, we limited access to our executive offices, with the majority of our administrative employees continuing their work outside of our offices, and we limited the number of staff in any given research and development laboratory by operating on rotational schedules. As of March 31, 2022 our employees have begun working based on a hybrid work model, in which they work both from our executive office and remotely on different days of the week. Disruptions caused by the COVID-19 pandemic have resulted in difficulties including delays in initiating new trial sites and certain supply chain activities, suspension of enrollment at some of our existing trial sites, and the incurrence of additional costs as a result of preclinical study and clinical trial delays and adjustments and supply chain delays. Limited operations at our laboratory facilities have also resulted in delays in our research-stage programs. As a result, we expect that the COVID-19 pandemic will continue to impact our business, results of operations, clinical development timelines and financial condition. At this time, there is significant uncertainty relating to the trajectory of the COVID-19 pandemic and impact of related responses. The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, the impact of variants, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the continued impact on financial markets and the global economy, the adoption and effectiveness of vaccines and vaccine distribution efforts, and the effectiveness of the global response to contain and treat the disease. See “Risk Factors— The COVID-19 pandemic has adversely impacted and we expect will continue to adversely impact our business, including our preclinical studies and clinical trials.” in Part II, Item 1A. of this Quarterly Report on Form 10-Q.

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License Agreements and Strategic Collaborations Agreements

Recurium IP Holdings, LLC

In December 2014, and as amended and restated effective as of December 2017 and September 2019 and as amended in May 2020, we entered into a license agreement, or the Recurium Agreement, with Recurium IP Holdings, LLC, or Recurium IP, under which we were 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 pain. In connection with the May 2020 amendment, we clarified certain aspects of the sublicensing payment provisions. We have the right to sublicense our rights under the Recurium Agreement, subject to certain conditions. We are required to use commercially reasonable efforts to develop and commercialize at least one product that comprises or contains a licensed compound and to execute certain development activities.

Under the terms of the Recurium Agreement, we are obligated to make development and regulatory milestone payments, pay royalties for net sales and make sublicensing payments with respect to certain licensed products directed to one of ten specific biological targets, including ZN-c3, ZN-d5, ZN-c5 and ZN-e4. We are obligated to make development and regulatory milestone payments for such licensed products of up to $44.5 million. In addition, we are obligated to make milestone payments up to $150,000 for certain licensed products used in animals. We are also obligated to pay royalties on sales of such licensed products at a mid- to high-single digit percentage. In addition, if we choose to sublicense or assign to any third parties our rights under the Recurium Agreement with respect to such licensed products, we must pay to Recurium IP 20% of sublicensing income received in connection with such transaction.

Mayo Foundation for Medical Education and Research

In February 2016, and as amended in April 2017 and December 2017, we entered into an option agreement, or the Mayo Agreement, with Mayo Foundation for Medical Education and Research under which we were granted an exclusive option to obtain a nonexclusive worldwide license to know-how and an exclusive worldwide license to related patent rights created by Mayo under the Mayo Agreement. The Mayo Agreement provided that it will expire on the date of the last to expire of the Mayo patent rights or, if no Mayo patent rights arise, on February 11, 2021. No Mayo patent rights were created under the Mayo Agreement; therefore the agreement expired on February 11, 2021. In consideration for the grant of know-how we provided grants of common stock on the first anniversary and Class A common units on the second and third anniversaries following entry into the Mayo Agreement. As of March 31, 2022, we have granted equity securities which amount to 15,435 shares of common stock under the Mayo Agreement.

SciClone Pharmaceuticals International (Cayman) Development Ltd.

In December 2014, and as amended in December 2016 and December 2017, we entered into a collaboration and license agreement, or the SciClone Agreement, with SciClone Pharmaceuticals International (Cayman) Development Ltd., or SciClone, under which we granted an exclusive license certain intellectual property rights in the People’s Republic of China (including the territories of Macao and Hong Kong), South Korea, Taiwan and Vietnam, or the SciClone Territory, for SciClone to develop and commercialize a licensed product for the treatment or prevention of oncologic diseases and an exclusive option to obtain a similar license for up to two additional licensed products. Under the SciClone Agreement, SciClone is responsible for clinical development activities required in order to obtain regulatory approval in the SciClone Territory. SciClone paid to us a one-time upfront payment of $1.0 million upon entering into the SciClone Agreement, and $4.0 million in aggregate milestone payments. No additional development or commercial milestones or reimbursement for research and development expenses are payable under the SciClone Agreement, as amended. We are entitled to receive a mid-single digit royalty on net sales of licensed products in the SciClone Territory, which royalty is subject to certain reductions in the event that SciClone is unable to achieve certain gross margins or if generic products are sold or if technology covering a licensed product is licensed from a third party. We have also agreed to pay SciClone tiered royalties pursuant to the terms of the SciClone Agreement, the applicable rate of which are determined based on whether a compound is developed to a

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successful dual IND submission and the costs incurred by SciClone for the development of such product candidate. Following the December 2016 amendment to the SciClone Agreement, SciClone retains the exclusive license to develop and commercialize our EGFR inhibitor product candidate, ZN-e4, in the SciClone Territory, and the exclusive option to obtain an exclusive license to develop up to two specified compounds under the SciClone Agreement for which we submit an IND by providing notice and paying $5 million to us. SciClone’s and our royalty obligations will expire on a licensed product-by-licensed product and country-by-country basis on the later of fifteen years from the date of first commercial sale or when there is no longer a valid patent claim covering such licensed product in such country.

Pfizer Clinical Trial Collaboration and Supply Agreement

In May 2018, we entered into a clinical trial collaboration and supply agreement with Pfizer, Inc. to evaluate the safety, tolerability and efficacy of ZN-c5 in combination with their CDK4/6 inhibitor, palbociclib, in our ongoing Phase 1/2 clinical trial of ZN-c5. Pursuant to this agreement, we will be responsible for the conduct and cost of the relevant studies, under the supervision of a joint development committee made up of our representatives and representatives of Pfizer that meets quarterly. Pfizer will supply palbociclib for use in the trial, at no cost to us.

Eli Lilly and Company Clinical Trial Collaboration and Supply Agreement

In July 2020, we entered into a clinical trial collaboration and supply agreement with Eli Lilly and Company, or Lilly, to evaluate the safety, tolerability and efficacy of ZN-c5 in combination with their CDK4/6 inhibitor, abemaciclib, in a Phase 1b open label multi-center clinical trial that we initiated in November 2020. Pursuant to this agreement, we will be responsible for the conduct and cost of the relevant studies. Lilly is obligated to supply abemaciclib for use in the trial, at no cost to us. We are required to provide to Lilly clinical data and other reports at major decision points during the trial and no later than 60 days following completion of the planned Phase 1b clinical trial.

This agreement does not grant any right of first negotiation to participate in future clinical trials, and each of the parties retains all rights and ability to evaluate their respective compounds in any clinical studies, either as monotherapy or in combination with any other product or compound, in any therapeutic area.

The agreement with Lilly will expire upon completion of all obligations of the parties thereunder or upon termination by either party. We and Lilly each have the right to terminate the agreement for material breach by the other party. In addition, the agreement may be terminated by either party due to safety considerations or if either party decides to discontinue development of its own compound for medical, scientific, legal or other reasons or if a regulatory authority takes any action preventing that party from supplying its compound for the study. Lilly also has the right to terminate this agreement if it notifies us in writing that it reasonably and in good faith believes that abemaciclib is being used in an unsafe manner, and we fail to incorporate changes to address such issue, and the issue is unable to be resolved following elevation to appropriate parties.

GlaxoSmithKline Clinical Trial Collaboration and Supply Agreement

In April 2021, we entered into a clinical trial collaboration and supply agreement with GlaxoSmithKline plc, or GSK, in which we will evaluate the combination of ZN-c3, our oral WEE1 inhibitor product candidate, and niraparib, GSK’s PARP inhibitor, in patients with advanced epithelial ovarian cancer. We are currently conducting clinical studies with ZN-c3 both as a monotherapy and in combination with certain standard of care therapies.

Pursuant to this agreement, we will be responsible for the conduct and cost of the relevant studies, under the supervision of a joint development committee made up of our representatives and representatives of GSK that meets quarterly. GSK will supply niraparib for use in the collaboration, at no cost to us. We are required to provide to GSK clinical data and other reports upon completion of the study.

This agreement does not grant any right of first negotiation to participate in future clinical trials, and each of the parties retains all rights and ability to evaluate their respective compounds in any clinical studies, either as monotherapy or in combination with any other product or compound, in any therapeutic area.

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The agreement with GSK will expire upon completion of all obligations of the parties thereunder or upon termination by either party. We and GSK each have the right to terminate the agreement for material breach by the other party. In addition, the agreement may be terminated by either party due to safety considerations or if either party decides to discontinue development of its own compound for medical, scientific, legal or other reasons or if a regulatory authority takes any action preventing that party from supplying its compound for the study or in the event the other party is subject to specified bankruptcy, insolvency or similar circumstances. GSK also has the right to terminate this agreement if it notifies us in writing that it reasonably and in good faith believes that niraparib is being used in an unsafe manner, and we fail to incorporate changes to address such issue, and the issue is unable to be resolved following elevation to appropriate parties.

Zentera Therapeutics

In May 2020, each of our subsidiaries Zeno Alpha, Inc., K-Group Alpha, Inc. Zeno Management, Inc. and K-Group Beta, Inc. entered into a collaboration and license agreement with our joint venture, Zentera, which we refer to as the “Zentera Sublicenses”, pursuant to which we collaborate with Zentera on the development and commercialization of ZN-c3, ZN-d5 and ZN-c5, respectively, whether alone or in a licensed product, or the Collaboration Products, in each case for the treatment or prevention of disease, other than for pain, which is referred to as the Zentera Field, in the People’s Republic of China, Macau, Hong Kong and Taiwan, which is referred to as the “Zentera Collaboration Territory”. Under each Zentera Sublicense, Zentera will lead development, and upon regulatory approval, the commercialization, of the Collaboration Products in the Zentera Collaboration Territory. On May 19, 2020, Zentera issued an aggregate of 60.2% of its issued shares of common stock to Zeno Alpha, Inc., K-Group Alpha, Inc., K-Group Beta, Inc., Zeno Management, Inc. and Zeno Beta, Inc. In July 2021, Zentera entered into a Series B Preference Shares Purchase Agreement, pursuant to which it raised $75.0 million in gross proceeds. As of March 31, 2022, we hold a 40.3% equity interest in Zentera. Anthony Y. Sun, M.D., our President and Chief Executive Officer, serves as Chief Executive Officer and a member of the board of directors of Zentera, and Kevin D. Bunker, Ph.D., our Chief Operating Officer, serves as a member of the board of directors of Zentera.

Under each Zentera Sublicense, we granted Zentera an exclusive, royalty-bearing license under certain of our technology, including technology licensed from Recurium under the Recurium Agreement, to develop and commercialize the Collaboration Products in the Zentera Field and in the Zentera Collaboration Territory, subject to certain rights that we retain, and upon a successful manufacturing transfer, a non-exclusive license under certain of our manufacturing technology to manufacture Collaboration Products in the Zentera Field and in the Zentera Collaboration Territory. Zentera has the right to sublicense its rights under the Zentera Sublicenses subject to certain conditions.

Under the terms of the Zentera Sublicenses, Zentera is responsible for the costs of developing the Collaboration Products in the Zentera Collaboration Territory, and we are responsible for the costs of developing the Collaboration Products outside the Zentera Collaboration Territory, provided that Zentera will reimburse us for a portion of its costs for global data management, pharmacovigilance, safety database management, and chemistry, manufacturing and controls activities with respect to each Collaboration Product. Under the Zentera Sublicenses, we will be eligible to receive future development and regulatory milestones of up to $4.45 million per Collaboration Product. Zentera will pay us royalties on net sales of Collaboration Products in the Zentera Collaboration Territory at a mid- to high-single digit percentage, subject to certain reductions. In addition, if Zentera or its affiliate chooses to sublicense or assign to any third parties its rights under the Zentera Sublicenses with respect to any Collaboration Product, Zentera must pay to us 20% of sublicensing income received by Zentera or its affiliates in connection with such transaction.

Zentera’s royalty obligations will expire on a Collaboration Product-by-Collaboration Product and region-by-region basis upon the later of the date on which such product is no longer covered by a valid claim of a licensed patent and the 15th anniversary of the first commercial sale of such product in such region.

Zentera filed four Clinical Trial Applications, or CTAs (China equivalent of IND), and four have been approved in China to date for ZN-c3, ZN-d5, ZN-c5 and ZN-c3 in combination. Zentera has begun enrolling four clinical trials for ZN-c3, ZN-d5 and ZN-c5.

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Components of Our Results of Operations

Revenue

To date, we have not generated any revenue, and we do not expect to generate any revenue in the foreseeable future from product sales. We have generated, and may in the future generate, revenue from payments received under our collaboration agreements, which includes payments of upfront fees, license fees, milestone-based payments and reimbursements for research and development efforts.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:

•salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

•expenses incurred under agreements with third parties, including contract research organizations, or CROs, and other third parties that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations, or CMOs, that manufacture drug material for use in our preclinical studies and clinical trials;

•costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

•the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

•license payments made for intellectual property used in research and development activities; and

•allocated expenses for rent and maintenance of facilities and other operating costs.

We expense research and development costs as incurred. Reimbursed research and development costs under government grants and certain collaborative arrangements are recorded as a reduction to research and development expenses and are recognized in the period in which the related costs are incurred.

We track external development costs by product candidate or development program, but we do not allocate personnel costs, general license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates. These costs are included in unallocated research and development expenses in the table below.

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The following table summarizes our research and development expenses by product candidate or development program:

	Three Months Ended March 31,
	2022		2021
ZN-c3	$	12,604	$	7,804
ZN-d5		5,043		4,172
ZN-c5		3,045		7,180
ZN-e4		389		317
Unallocated research and development expenses		25,031		18,921
Total research and development expenses	$	46,112	$	38,394

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have a higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase substantially for the foreseeable future and will comprise a larger percentage of our total expenses as we complete our ongoing clinical trials, initiate new clinical trials, continue to discover and develop additional product candidates and prepare regulatory filings for any product candidates that successfully complete clinical development.

The successful development of our product candidates is highly uncertain. At this time, we cannot determine with certainty the duration and costs of our existing and future clinical trials of our product candidates or any other product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of our product candidates and any other product candidate we may develop in the future will depend on a variety of factors, including:

•per patient trial costs;

•the number of patients who enroll in each trial;

•the number of trials required for approval;

•the number of sites included in the trials;

•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 as a result of the COVID-19 pandemic;

•potential additional safety monitoring requested by regulatory agencies;

•the duration of patient participation in the trials and follow-up;

•the phase of development of the product candidate;

•the efficacy and safety profile of the product candidate.

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•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; and

•the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support research and development activities relating to our clinical stage programs, and any other product candidate we may develop. We also expect to incur increased expenses associated with being a public company, particularly now that we are no longer an emerging growth 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.

Interest Income

Interest income consists of interest earned on cash, cash equivalents and available-for-sale marketable securities.

Income Taxes

Since our inception, we and our corporate subsidiaries have generated cumulative federal, state and foreign net operating loss in certain jurisdictions for which we have not recorded any net tax benefit due to uncertainty around utilizing these tax attributes within their respective carryforward periods.

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Results of Operations

Comparison of Three Months Ended March 31, 2022 to Three Months Ended March 31, 2021

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)
	2022		2021
	(in thousands)
Operating expenses
Research and development	$	46,112	$	38,394	$	7,718
General and administrative		11,767		11,953		(186)
Total operating expenses		57,879		50,347		7,532
Loss from operations		(57,879)		(50,347)		(7,532)
Investment and other income, net		426		99		327
Net loss before income taxes		(57,453)		(50,248)		(7,205)
Income tax expense		33		196		(163)
Loss on equity method investment		1,751		—		1,751
Net loss		(59,237)		(50,444)		(8,793)
Net loss attributable to noncontrolling interest		(160)		(543)		383
Net loss attributable to Zentalis	$	(59,077)	$	(49,901)	$	(9,176)

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2022 were $46.1 million, compared to $38.4 million for the three months ended March 31, 2021. The increase of $7.7 million was primarily due to increases in external research and development expenses related to our clinical product candidates as we advanced our clinical pipeline. In addition, in the three months ended March 31, 2022, we conducted additional preclinical studies, incurred additional manufacturing costs and incurred increased costs for study and lab materials. Increases of $9.4 million and $5.3 million were seen in clinical trial related costs and personnel expenditures, respectively. Increases of $1.6 million and $0.3 million were the result of additional overhead allocation to research and development as well as a decrease in grant revenue, respectively. These amounts were partially offset by decreases of $4.5 million and $4.4 million in collaboration costs and manufacturing expenditures, respectively.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2022 were $11.8 million, compared to $12.0 million during the three months ended March 31, 2021. This decrease of $0.2 million was primarily attributable to an increase in allocable overhead expenses to research and development expenses of $1.6 million and a decrease of $1.1 million in personnel costs. These amounts were partially offset by an increase of $1.8 million of facilities and related permits/fees and licenses expenses and $0.7 million of consulting, legal and insurance fees.

Investment and Other Income, Net

Investment and other income, net was $0.4 million for the three months ended March 31, 2022, compared to $0.1 million for the three months ended March 31, 2021. The increase of $0.3 million was driven by the divestment of an early stage asset for $0.2 million and foreign currency gains of $0.1 million from our Australian subsidiary.

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Loss on equity method investment

Loss on equity method investment was $1.8 million for the three months ended March 31, 2022. We did not have a comparable loss on equity method investment during the three months ended March 31, 2021.

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. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our research programs and product candidates. We expect that our research and development and general and administrative costs will increase in connection with conducting additional preclinical studies and clinical trials for our current and future research programs and product candidates, contracting with CMOs to support preclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations.

As a result, we will need to raise substantial additional capital to support our continuing operations and pursue our growth 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 economic downturn and ongoing uncertainty related to the COVID-19 pandemic, the conflict in Ukraine, ongoing supply chain issues and increased inflation. The COVID-19 pandemic and related global events could adversely affect the economies and financial markets of the global economy, resulting in an economic downturn that could also affect our operations, our ability to conduct our clinical trials, our ability to raise additional funds through public offerings and the volatility of our stock price and trading in our stock. Even after the COVID-19 pandemic has subsided, we expect we will continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. 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.

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, 2022, we raised a total of $701 million in gross proceeds from the sale of our common stock and Series A, B and C convertible preferred units. As of March 31, 2022, we had cash, cash equivalents, and marketable securities of $289.4 million, and an accumulated deficit of $418.6 million. We had no indebtedness as of March 31, 2022.

ATM Program

In May 2021, we entered into a sales agreement, or the Sales Agreement, with SVB Leerink LLC, or SVB Leerink, as sales agent, pursuant to which we may, from time to time, issue and sell common stock with an aggregate value of up to $200.0 million in “at-the-market” offerings, or the ATM, under our Registration Statement on Form S-3 (File No. 333-255769) filed with the Securities and Exchange Commission, or the SEC, on May 4, 2021. 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, 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, 2022, we

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did not sell any shares of common stock under the 2021 Sales Agreement. As of March 31, 2022, there was $190.0 million of common stock remaining available for sale under the 2021 Sales Agreement.

April 2022 Pfizer Investment

On April 26, 2022, we entered into a securities purchase agreement with Pfizer pursuant to which Pfizer purchased 953,834 shares of our common stock, at a price of $26.21 per share. The shares were offered and sold in a registered direct offering conducted without an underwriter or placement agent and pursuant to an effective shelf registration statement on Form S-3 (Registration No. 333-255769), and a related prospectus supplement filed with the SEC. The Pfizer offering closed on April 29, 2022, raising aggregate gross proceeds of approximately $25.0 million, before fees and expenses of $0.3 million.

Cash Flows

The following table summarizes our sources and uses of cash for the period presented:

	Three Months Ended March 31,
	2022		2021
	(in thousands)
Net cash used in operating activities	$	(50,196)	$	(37,469)
Net cash used in investing activities		19,796		13,458
Net cash provided by financing activities		1,258		—
Net increase/(decrease) in cash and cash equivalents	$	(29,142)	$	(24,011)

Operating Activities

We have incurred losses since inception. Net cash used in operating activities for the three months ended March 31, 2022 was $50.2 million, consisting primarily of our net loss of $59.2 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses, as well as changes in operating assets and liabilities of $3.3 million, partially offset by non-cash adjustments of $12.4 million.

Net cash used in operating activities for the three months ended March 31, 2021 was $37.5 million, consisting primarily of our net loss of $50.4 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses, and partially offset by changes in operating assets and liabilities of $2.9 million and non-cash adjustments of $10.0 million.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2022 of $19.8 million was attributable to the proceeds from maturities of marketable securities of $99.5 million, offset by net investment of excess cash of $79.3 million and the purchases of property and equipment of $0.5 million.

Net cash provided by investing activities for the three months ended March 31, 2021 was $13.5 million consisting of net proceeds from the sales and purchases of marketable securities of $13.9 million offset by purchases of property and equipment of $0.4 million.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2022 of $1.3 million related to the issuance of common stock under equity incentive plans.

There were no cash flows from financing activities in the three months ended March 31, 2021.

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Funding Requirements

Our operating expenses have increased substantially in 2021 and to date in 2022 and are expected to increase substantially in the future in connection with our ongoing activities.

Specifically, our expenses will increase as we:

•advance the clinical development of ZN-c3, ZN-d5, ZN-c5 and ZN-e4 for the treatment of oncology indications;

•pursue the preclinical and clinical development of other current and future research programs and product candidates;

•in-license or acquire the rights to other products, product candidates or technologies;

•maintain, expand and protect our intellectual property portfolio;

•hire additional personnel in research, manufacturing and regulatory and clinical development as well as management personnel;

•seek regulatory approval for any product candidates that successfully complete clinical development; and

•expand our operational, financial and management systems and increase personnel, including personnel to support our operations as a public company.

We believe that our existing cash, cash equivalents and marketable securities as of March 31, 2022, together with the net proceeds from the April 2022 Pfizer equity investment, prioritization of the clinical development of ZN-c3 and ZN-d5, and budget reallocation, will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2024. 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 our programs for ZN-c3, ZN-d5, ZN-c5 and ZN-e4;

•the progress, costs and results of additional research and preclinical studies in other research programs we initiate in the future;

•the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs 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;

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•the extent to which we in-license or acquire rights to other products, product candidates or technologies; and

•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.

In addition, the magnitude and duration of the COVID-19 pandemic and its impact on our liquidity and future funding requirements is uncertain as of the filing date of this Quarterly Report on Form 10-Q, as the pandemic continues to evolve globally. We have considered and will continue to consider the availability of relief provided by such legislative actions as the Families First Act and the CARES Act, and have opted to pursue certain, but not all measures including the deferral of employer payroll taxes, but not including Payroll Protection Plan loans. See “Impact of COVID-19 Pandemic” and “Risk Factors— The COVID-19 pandemic has adversely impacted and we expect will continue to adversely impact our business, including our preclinical studies and clinical trials”.

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, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements and marketing and distribution arrangements.

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 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 Policies and Use of Estimates

There have been no significant changes to our critical accounting policies from our disclosure reported in “Critical Accounting Policies and 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, 2021.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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Item 4. Controls and Procedures.

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 Chief Executive Officer and Chief 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 Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022.

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, 2022 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. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. 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, have not completed any clinical trials, 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 ZN-c3, ZN-d5, ZN-c5 and ZN-e4. We have not yet demonstrated our ability to successfully complete any clinical trials, obtain marketing approvals, manufacture a commercial-scale product 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 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 each reporting period since our inception, have not generated any revenue from product sales to date and have financed our operations principally through private financings, our initial public offering, or IPO, and follow-on public offerings of our common stock. We have incurred net losses of $166.1 million for the year ended December 31, 2021, and $59.2 million and $50.4 million for the three months ended March 31, 2022 and March 31, 2021, respectively. As of March 31, 2022, we had an accumulated deficit of $418.6 million. 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. Four of our product candidates, ZN-c3, ZN-d5, ZN-c5 and ZN-e4, are in clinical trials. Our other programs are in preclinical research. As a result, 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 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 our 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 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 preclinical and clinical development of our product candidates, including ZN-c3, ZN-d5, ZN-c5 and ZN-e4 and any other future product candidates, as well as the associated costs, including any unforeseen costs we have incurred and may continue to incur as a result of preclinical study or clinical trial delays due to the prolonged COVID-19 pandemic, global economic issues, or the ongoing military conflict in Ukraine, among other causes;

•establishing and maintaining relationships with contract research organizations, or CROs, and clinical sites for the clinical development, both in the United States and internationally, of our product candidates, including ZN-c3, ZN-d5, ZN-c5 and ZN-e4 and any other future product candidates;

•timely receipt of marketing approvals from applicable regulatory authorities for any product candidates for which we successfully complete clinical development;

•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;

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•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 patent protection, trade secret protection 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 coverage and adequate 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.

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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, and we expect our expenses to increase in connection with our ongoing activities, particularly as we initiate and conduct clinical trials of, and seek marketing approval for, ZN-c3, ZN-d5, ZN-c5, ZN-e4 and our other product candidates. Even if one or more of the product candidates 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 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. Other unanticipated costs may also arise. In addition, if we obtain marketing approval for any of our product candidates, including ZN-c3, ZN-d5, ZN-c5 and ZN-e4, we expect to incur significant commercialization expenses related to 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, additional costs associated with operating as a public company, particularly now that we are no longer an emerging growth company. Accordingly, we will need to obtain substantial additional funding in order to maintain our continuing operations.

As of March 31, 2022, we had cash and cash equivalents and marketable securities of $289.4 million. Based on current business plans, we believe that our existing cash, cash equivalents and marketable securities as of March 31, 2022, together with the net proceeds from the April 2022 Pfizer equity investment, prioritization of the clinical development of ZN-c3 and ZN-d5, and budget reallocation, will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2024, but will not be sufficient to fund all of the activities that are necessary to complete the development of our 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 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 the COVID-19 pandemic 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 research-stage programs, 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 our lead product candidates, ZN-c3, and/or ZN-d5, which are currently in clinical trials. If we are unable to complete development of, obtain approval for and commercialize these product candidates 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 lead product candidates. We are investing significant efforts and financial resources in the research and development of ZN-c3 and ZN-d5. ZN-c3 and ZN-d5 will require additional clinical development, evaluation of 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 ZN-c3 or ZN-d5, or any other product candidate, before we receive marketing approval from the FDA and comparable foreign regulatory authorities, and we may never receive such marketing approvals.

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The success of our lead product candidates will depend on several factors, including the following:

•the successful and timely completion of our ongoing clinical trials of ZN-c3 and ZN-d5;

•the initiation and successful patient enrollment and completion of additional clinical trials of ZN-c3 and ZN-d5 on a timely basis;

•maintaining and establishing relationships with CROs and clinical sites for the clinical development of ZN-c3 and ZN-d5 both in the United States and internationally;

•the frequency and severity of adverse events in the clinical trials;

•the efficacy, safety and tolerability profiles that are satisfactory to the FDA, EMA or any comparable foreign regulatory authority for marketing approval;

•the timely receipt of marketing approvals for ZN-c3 and ZN-d5 from applicable regulatory authorities;

•the extent of any required post-marketing approval commitments to applicable regulatory authorities;

•the maintenance of existing or the establishment of new supply arrangements with third-party drug product suppliers and manufacturers for clinical development of ZN-c3 and ZN-d5;

•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 ZN-c3 and ZN-d5 if approved, including for supplies of drugs that we are testing in combination with ZN-c3 and ZN-d5;

•obtaining and maintaining patent protection, trade secret protection 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 ZN-c3 and ZN-d5, which would materially harm our business. If we do not receive marketing approvals for ZN-c3 and ZN-d5, we may not be able to continue our operations.

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We expect to depend on collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop. If any of these collaborations are not successful, we may not be able to capitalize on the market potential of those product candidates.

We anticipate seeking third-party collaborators for the research, development and commercialization of some of our product candidates. 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.

Collaborations involving our research programs or any product candidates we may develop pose the following risks to us:

•    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 considerations 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, 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 valuation rights under circumstances identified in our collaborations, including if we undergo a change of control.

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• 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 GLP and GCP requirements or to secure approval for clinical development plans from the FDA or foreign regulatory authorities.

If we do not receive the funding 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 annual 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 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.

There is currently no FDA-approved oral SERD, and our development of ZN-c5 may never lead to a marketable product.

We are developing ZN-c5 as an oral SERD. There is currently no FDA-approved oral SERD. We have not received regulatory approval for ZN-c5 and cannot be certain that our approach will lead to the development of an approvable or marketable product, alone or in combination with other therapies. We may not succeed in demonstrating safety and efficacy of ZN-c5 in our ongoing Phase 1/2 clinical trial or in larger-scale clinical trials. Advancing ZN-c5 as an oral SERD creates significant challenges for us, including:

•obtaining marketing approval, as the FDA or other regulatory authorities have never approved an orally available SERD;

•if ZN-c5 is approved, educating medical personnel regarding the potential efficacy and safety benefits, as well as the challenges, of incorporating our ZN-c5 into existing treatment regimens, including in combination with other treatments for breast cancer; and

•establishing the sales and marketing capabilities upon obtaining any marketing approvals to gain market acceptance.

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 those we currently have in clinical development. A

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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

•adverse events 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 other comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.

We are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Foreign regulatory authorities impose similar requirements. The time required to obtain approval by the FDA and other comparable foreign 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 other comparable foreign 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 none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Further, development of our product candidates and/or regulatory approval may be delayed for reasons beyond our control. For example, a U.S. federal government shutdown or budget sequestration, such as ones that occurred during 2013, 2018 and 2019, may result in significant reductions to the FDA’s budget, employees and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates.

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Applications for our product candidates could fail to receive regulatory approval for many reasons, including the following:

•the FDA or other comparable foreign regulatory authorities may disagree with the design, implementation or results of our clinical trials;

•the FDA or other comparable foreign 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 other comparable foreign 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 a New Drug Application, or NDA, or other submission or to obtain regulatory approval in the United States or elsewhere;

•we may be unable to demonstrate to the FDA or other comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio for its proposed indication is acceptable;

•the FDA or other comparable foreign 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; and

•the approval policies or regulations of the FDA or other comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

In addition, the policies of the FDA and other regulatory authorities' with respect to clinical trials may change and additional government regulations may be enacted. For instance, the regulatory landscape related to clinical trials in the European Union, or EU, recently evolved. 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 Clinical Trials Directive required a separate clinical trial application, or CTA, to be submitted in each member state, 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 to all member states concerned. 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 foresees a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. For clinical trials whose CTA was made under the Clinical Trials Directive before January 31, 2022, the Clinical Trials Directive will continue to apply on a transitional basis for three years. Additionally, sponsors may still choose to submit a CTA under either the Clinical Trials Directive or the CTR until January 31, 2023 and, if authorized, those will be governed by the Clinical Trials Directive until January 31, 2025. By that date, all ongoing trials will become subject to the provisions of the CTR.

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.

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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, or a Risk Evaluation and Mitigation Strategy, or 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 our product candidates may not demonstrate safety and efficacy to the satisfaction of the FDA or other comparable foreign regulatory authorities or otherwise produce positive results.

Before obtaining marketing approval from the FDA or other comparable foreign 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. 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. The outcome of preclinical studies and early-stage clinical trials may not be predictive of the success of 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.

In addition, we may rely in part on preclinical, clinical and quality data generated by CROs and other third parties for regulatory submissions for our product candidates. While we have or will have agreements governing these third parties’ services, 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 comparable foreign 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 institutional review boards, or 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 clinical trial protocol;

•clinical sites deviating from trial protocol or dropping out of a trial;