kron-20230630

0001741830-23-000057.txt : 20230808 0001741830-23-000057.hdr.sgml : 20230808 20230808160420 ACCESSION NUMBER: 0001741830-23-000057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 69 CONFORMED PERIOD OF REPORT: 20230630 FILED AS OF DATE: 20230808 DATE AS OF CHANGE: 20230808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Kronos Bio, Inc. CENTRAL INDEX KEY: 0001741830 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39592 FILM NUMBER: 231151134 BUSINESS ADDRESS: STREET 1: 1300 S. EL CAMINO REAL STREET 2: SUITE 400 CITY: SAN MATEO STATE: CA ZIP: 94402 BUSINESS PHONE: (650) 781-5200 MAIL ADDRESS: STREET 1: 1300 S. EL CAMINO REAL STREET 2: SUITE 400 CITY: SAN MATEO STATE: CA ZIP: 94402 10-Q 1 kron-20230630.htm 10-Q kron-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2023

☐ 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: 001-39592

Kronos Bio, Inc.

(Exact name of registrant as specified in its charter)


Delaware			82-1895605
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

1300 So. El Camino Real, Suite 400

San Mateo, California 94402

(650) 781-5200

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

(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	KRON	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes or ☐ 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 or ☐ No.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See 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	☐	Smaller reporting company	☒
Non-accelerated filer	☒	Accelerated filer	☐
		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 or ☒ No

As of August 2, 2023 the registrant had 58,316,520 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements:
	Condensed Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022	3
	Condensed Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	4
	Condensed Statements of Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	5
	Condensed Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (unaudited)	7
	Notes to Condensed Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93
Item 5.	Other Information	93
Item 6.	Exhibits	94
	Signatures	95

PART 1. FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

KRONOS BIO, INC.

Condensed Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)


	June 30, 2023		December 31, 2022(1)
Assets
Current assets:
Cash and cash equivalents	$	44,396	$	75,973
Short-term investments	175,064		162,212
Prepaid expenses and other current assets	4,662		6,106
Total current assets	224,122		244,291
Long-term investments	244		9,762
Property and equipment, net	11,805		12,985
Operating lease right-of-use assets	21,251		24,707
Restricted cash	2,026		2,026
Other noncurrent assets	1,167		1,167
Total assets	$	260,615	$	294,938
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable	$	2,676	$	5,047
Accrued expenses	6,936		12,963
Current portion of operating lease liabilities	3,038		2,347
Current portion of deferred revenue	8,824		—
Current portion of other liabilities	581		1,129
Total current liabilities	22,055		21,486
Noncurrent operating lease liabilities	27,126		28,744
Deferred revenue, net of current portion	8,092		—
Other noncurrent liabilities	—		209
Total liabilities	57,273		50,439
Commitments and contingencies (Note 11)
Stockholders’ equity (deficit):
Common stock, $0.001 par value, 200,000,000 authorized as of June 30, 2023 and December 31, 2022; 58,122,299 and 56,967,436 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.	58		57
Preferred stock, $0.001 par value; 10,000,000 authorized; no shares issued and outstanding.
Additional paid-in capital	655,920		641,422
Accumulated deficit	(452,167)		(396,188)
Accumulated other comprehensive income (loss)	(469)		(792)
Total stockholders' equity (deficit)	203,342		244,499
Total liabilities and stockholders’ equity (deficit)	$	260,615	$	294,938

(1) The balance sheet as of December 31, 2022 is derived from the audited financial statements as of that date.

The accompanying notes are an integral part of these unaudited condensed financial statements.

KRONOS BIO, INC.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Revenue	$	1,864	$	—	$	3,084	$	—
Operating expenses:
Research and development	22,673		22,706		42,331		47,142
General and administrative	11,359		10,824		21,415		22,752
Total operating expenses	34,032		33,530		63,746		69,894
Loss from operations	(32,168)		(33,530)		(60,662)		(69,894)
Other income (expense), net:

Interest and other income, net	2,427		627		4,683		728
Total other income (expense), net	2,427		627		4,683		728
Net loss	$	(29,741)	(32,903)		(55,979)		(69,166)
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities	(109)		(491)		323		(622)
Net comprehensive loss	$	(29,850)	$	(33,394)	$	(55,656)	$	(69,788)
Net loss per share, basic and diluted	$	(0.52)	$	(0.59)	$	(0.98)	$	(1.24)
Weighted-average shares of common stock, basic and diluted	57,397,931		56,116,070		57,273,284		55,978,482

The accompanying notes are an integral part of these unaudited condensed financial statements.

KRONOS BIO, INC.

Condensed Statements of Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share and per share data)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance at December 31, 2022	56,967,436	$	57	$	641,422	$	(792)	$	(396,188)	$	244,499
Issuance of common stock upon vesting and exercise of options and vesting of restricted stock	386,318	—		305		—		—		305
Stock-based compensation expense	—	—		6,607		—		—		6,607
Net unrealized gain (loss) on available-for-sale securities	—	—		—		432		—		432
Net loss	—	—		—		—		(26,238)		(26,238)
Balance at March 31, 2023	57,353,754	$	57	$	648,334	$	(360)	$	(422,426)	$	225,605
Issuance of common stock upon vesting and exercise of options and vesting of restricted stock	521,497	1		332		—		—		333
Stock-based compensation expense	—	—		6,906		—		—		6,906
Employee stock purchase plan	247,048	—		348		—		—		348
Net unrealized gain (loss) on available-for-sale securities	—	—		—		(109)		—		(109)
Net loss	—	—		—		—		(29,741)		(29,741)
Balance at June 30, 2023	58,122,299	$	58	$	655,920	$	(469)	$	(452,167)	$	203,342

Balance, December 31, 2021	55,703,327	$	56	$	608,064	$	(39)	$	(262,984)	$	345,097
Issuance of common stock upon vesting and exercise of options and vesting of restricted stock	361,182	—		529		—		—		529
Stock-based compensation expense	—	—		7,788		—		—		7,788
Net unrealized gain (loss) on available-for-sale securities	—	—		—		(131)		—		(131)
Net loss	—	—		—		—		(36,263)		(36,263)
Balance at March 31, 2022	56,064,509	$	56	$	616,381	$	(170)	$	(299,247)	$	317,020
Issuance of common stock upon vesting and exercise of options and vesting of restricted stock	142,189	—		375		—		—		375
Stock-based compensation expense	—	—		8,207		—		—		8,207
Employee stock purchase plan	12,539	—		35		—		—		35
Net unrealized gain (loss) on available-for-sale securities	—	—		—		(491)		—		(491)

KRONOS BIO, INC.

Condensed Statements of Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share and per share data)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Net loss	—	—		—		—		(32,903)		(32,903)
Balance at June 30, 2022	56,219,237	$	56	$	624,998	$	(661)	$	(332,150)	$	292,243

The accompanying notes are an integral part of these unaudited condensed financial statements.

KRONOS BIO, INC.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(55,979)	$	(69,166)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	1,148		1,121
Net amortization/accretion on available-for-sale securities	(2,735)		563
Change in accrued interest on available-for-sale securities	408		765
Stock-based compensation expense	13,513		15,995
Noncash lease expense	1,185		1,074
Impairment of long-lived assets	2,916		—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	1,304		823

Accounts payable	(2,550)		2,287
Accrued expenses	(6,027)		1,638
Right-of-use operating assets and liabilities, net	(927)		(801)
Deferred revenue	16,916		—
Current portion of other liabilities and other noncurrent liabilities	(144)		(303)
Net cash provided by (used in) operating activities	(30,972)		(46,004)

Cash flows from investing activities:
Purchase of property and equipment	(434)		(452)
Purchase of available-for-sale securities	(140,320)		(216,117)
Maturities of marketable securities	139,773		149,003
Sale of marketable securities	—		501
Net cash provided by (used in) investing activities	(981)		(67,065)

Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options	28		904
Proceeds from issuance of common stock under the employee stock purchase plan	348		35
Net cash provided by (used in) financing activities	376		939

Net increase (decrease) in cash and cash equivalents	(31,577)		(112,130)
Cash, cash equivalents and restricted cash at beginning of period	77,999		200,296
Cash, cash equivalents and restricted cash at end of period	$	46,422	$	88,166

Supplemental disclosures of non-cash activities:
Property and equipment additions included in accounts payable and accrued expenses	$	199	$	—

Cash and cash equivalents at end of period	$	44,396	$	86,140
Restricted cash at end of period	2,026		2,026
Cash, cash equivalents and restricted cash at end of period	$	46,422	$	88,166

The accompanying notes are an integral part of these unaudited condensed financial statements.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

1.NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Kronos Bio, Inc. (Kronos or the Company), a Delaware corporation, was incorporated on June 2, 2017. The Company is an integrated discovery through clinical development biopharmaceutical company, with a focus on developing therapeutics that target the dysregulated transcription that causes cancer and other serious diseases.

The Company operates in one business segment: the development of biopharmaceutical products.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

Unaudited Interim Financial Information

The accompanying condensed balance sheet as of June 30, 2023, the condensed statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022, the condensed statements of stockholders’ equity (deficit) as of June 30, 2023 and 2022, the condensed statements of cash flows for the six months ended June 30, 2023 and 2022, and the financial data and other financial information disclosed in the notes to the condensed financial statements are unaudited. The unaudited interim condensed financial statements have been prepared on a basis consistent with the Company’s audited annual financial statements and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2023 and the results of its operations for the three and six months ended June 30, 2023 and 2022. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the full year ending December 31, 2023, any other interim periods, or any future year or period. These condensed financial statements should be read in conjunction with the Company's audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 15, 2023 (Annual Report)

Need for Additional Capital

The Company has incurred net losses since its inception of $452.2 million as of June 30, 2023. The Company expects that its cash, cash equivalents and investments as of June 30, 2023 will be sufficient to fund its operations for a period of at least one year from the date of issuance of these condensed financial statements. Management expects to incur additional losses in the future to fund its operations and conduct product research and development and recognizes the need to raise additional capital.

The Company intends to raise additional capital through the issuance of equity securities, debt financings or other sources in order to continue its operations. However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidates.

The future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company’s failure to raise capital as and when needed could have a material adverse effect on its financial condition and ability to pursue business strategies. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaboration arrangements or obtain government grants. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce, or eliminate its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects. In the event that the Company requires additional funding, there can be no assurance that it will be successful in obtaining sufficient funding on terms acceptable to the Company to fund its continuing operations, if at all.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

2.SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

Significant Accounting Policies

In 2023, the Company began to recognize revenue related to research and development services and licenses. Refer below for a description of the revenue recognition policy. There have been no additional changes to the accounting policies during the six months ended June 30, 2023, as compared to the significant accounting policies described in Note 2 of the “Notes to Financial Statements” of the Company’s audited financial statements included in its Annual Report for the year ended December 31, 2022.

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed financial statements include, but are not limited to, revenue, the accrual of research and development expenses, the fair value of investments, the fair value of the Company’s long-lived assets, income tax uncertainties, the valuation of equity instruments and the incremental borrowing rate for determining the operating lease assets and liabilities. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

Revenue Recognition

The Company recognizes revenue in accordance with the provisions of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company recognizes revenue when the Company’s customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods and services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

The Company evaluates the promised goods or services in these agreements to determine which ones represent distinct performance obligations. These agreements may include the following types of promised goods or services: (i) grants of licenses and related transfer of know-how, (ii) performance of research and development services, and (iii) participation on joint research and/or development committees. They also may include options to obtain further research and development services and licenses to the Company’s intellectual property. The payment terms of these agreements may include nonrefundable upfront fees, payments for electing the contractual options, payments based upon the achievement of certain milestones, and royalty payments based on product sales derived from the collaboration.

The Company exercises judgment in assessing those promised goods and services that are distinct and thus representative of performance obligations. To the extent the Company identifies multiple performance obligations in a contract, the Company must develop assumptions that require judgment to determine the estimated standalone selling price for each performance obligation in order to allocate the transaction price among the identified performance obligations. The transaction is allocated on a relative standalone selling price basis.

Prior to recognizing revenue, the Company makes estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are reassessed each reporting period as required.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligations when or as the performance obligations are satisfied. For performance obligations satisfied over time, the Company estimates the efforts needed to complete the performance obligations and recognizes revenue by measuring the progress towards complete satisfaction of the performance obligations using an input measure. For arrangements that include sales-based royalties, including commercial milestone payments based on pre-specified level of sales, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligations to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Achievement of these royalties and commercial milestones may solely depend upon the performance of the licensee. Funds received in advance are recorded as deferred revenue and are recognized as the related performance obligations are satisfied.

There are no performance, cancellation, termination, or refund provisions in any of the arrangements that contain material financial consequences to the Company.

3.FAIR VALUE MEASUREMENTS

The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The Company measures and reports its cash equivalents and investments at fair value.

Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1. Investments measured at fair value based on inputs other than quoted prices that are derived from observable market data are classified as Level 2.

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of June 30, 2023 and December 31, 2022 were as follows:


	June 30, 2023
	Level 1		Level 2		Level 3		Fair Value
			(in thousands)
Financial Assets:
Money market funds	$	26,601	$	—	$	—	$	26,601
Certificates of deposit	974		—		—		974
Commercial paper	—		727		—		727
Corporate bonds	—		17,205		—		17,205
U.S. agency securities	—		2,491		—		2,491
U.S. treasury securities	162,023		—		—		162,023
Total financial assets	$	189,598	$	20,423	$	—	$	210,021

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)


	December 31, 2022
	Level 1		Level 2		Level 3		Fair Value
	(in thousands)
Financial Assets:
Money market funds	$	49,003	$	—	$	—	$	49,003
Certificates of deposit	490		—		—		490
Commercial paper	—		1,667		—		1,667
Corporate bonds	—		30,657		—		30,657
U.S. agency securities	—		13,000		—		13,000
U.S. treasury securities	138,734		—		—		138,734
Total financial assets	$	188,227	$	45,324	$	—	$	233,551

The carrying amounts of accounts payable and accrued expenses approximate their fair values due to their short-term maturities. The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly.

The Company did not have any financial assets or liabilities as of June 30, 2023 and December 31, 2022 that required Level 3 inputs.

4.INVESTMENTS

The fair value and amortized cost of available-for-sale securities by major security type as of June 30, 2023 and December 31, 2022 were as follows:


	June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
			(in thousands)
Money market funds	$	26,601	$	—	$	—	$	26,601
Certificates of deposit	980		—		(6)		974
Commercial paper	727		—		—		727
Corporate bonds	17,225		1		(21)		17,205
U.S. agency securities	2,500		—		(9)		2,491
U.S. treasury securities	162,457		8		(442)		162,023
Total cash equivalents and investments	$	210,490	$	9	$	(478)	$	210,021

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)


	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(in thousands)
Money market funds	$	49,003	$	—	$	—	$	49,003
Certificates of deposit	490		—		—		490
Commercial paper	1,667		—		—		1,667
Corporate bonds	30,683		3		(29)		30,657
U.S. agency securities	13,024		—		(24)		13,000
U.S. treasury securities	139,477		4		(747)		138,734
Total cash equivalents and investments	$	234,344	$	7	$	(800)	$	233,551

These available-for-sale securities were classified on the Company’s condensed balance sheets as of June 30, 2023 and December 31, 2022 as:


	Fair Value
	June 30, 2023		December 31, 2022
	(in thousands)
Cash equivalents	$	34,713	$	61,577
Short-term investments	175,064		162,212
Long-term investments	244		9,762
Total cash equivalents and investments	$	210,021	$	233,551

The fair values of available-for-sale securities by contractual maturity as of June 30, 2023 and December 31, 2022 were as follows:


	June 30, 2023		December 31, 2022
	(in thousands)
Due in 1 year or less	$	183,177	$	174,786
Due in 1 to 2 years	244		9,762

Total	$	183,421	$	184,548

As of June 30, 2023 and December 31, 2022, the remaining contractual maturities of available-for-sale securities were less than two years, respectively. There have been no significant realized losses on available-for-sale securities for any of the periods presented in the accompanying condensed financial statements. As of June 30, 2023 and December 31, 2022, securities with a fair value of $22.3 million and zero, respectively, were in a continuous net unrealized loss position of $0.2 million and zero, respectively, for more than 12 months. Unrealized losses on available-for-sale securities are not attributed to credit risk for any of the periods presented. The Company believes that it is more likely than not that investments in an unrealized loss position will be held until maturity and all interest and principal will be received. The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s available-for-sale securities are due to market factors. To date, the Company has not recorded any impairment charges on available-for-sale securities.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

5.PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following as of June 30, 2023 and December 31, 2022:


	June 30, 2023		December 31, 2022
	(in thousands)
Accrued interest on short-term available-for-sale securities	$	343	$	572
Prepaid equipment service contracts	246		289
Prepaid external research and development and outside services	1,808		2,276
Prepaid software	1,260		905
Prepaid insurance	630		1,630
Other prepaid expenses	375		434
Total prepaid expenses and other current assets	$	4,662	$	6,106

6.PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following as of June 30, 2023 and December 31, 2022:


	June 30, 2023		December 31, 2022
	(in thousands)
Property and equipment:
Lab equipment	$	9,075	$	8,475
Leasehold improvements	8,703		9,348
Furniture and fixtures	619		619

Computer equipment	71		58
Total property and equipment	18,468		18,500
Less: Accumulated depreciation and amortization	(6,663)		(5,515)
Total property and equipment, net	$	11,805	$	12,985

Depreciation and amortization expense was $0.6 million and $0.6 million for the three months ended June 30, 2023 and 2022, respectively and $1.1 million and $1.1 million for the six months ended June 30, 2023 and 2022, respectively.

During the three and six months ended June 30, 2023, the Company recognized a non-cash impairment charge of $0.6 million to the Leasehold improvements. There was no charge in the three and six months ended June 30, 2022. Please refer to Note 12, “Leases,”, section “Impairment of Operating Lease Right-of-Use Asset and Other Long-Lived Assets” for further details.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

7.ACCRUED EXPENSES AND CURRENT PORTION OF OTHER LIABILITIES

Accrued expenses consisted of the following as of June 30, 2023 and December 31, 2022:


	June 30, 2023		December 31, 2022
	(in thousands)
Accrued compensation	$	2,471	$	4,277
External research and development	3,452		7,694
Accrued outside services	547		945
Accrued taxes	—		40
Other accrued expenses	466		7
Total accrued expenses	$	6,936	$	12,963

Current portion of other liabilities consist of the following as of June 30, 2023 and December 31, 2022:


	June 30, 2023		December 31, 2022
	(in thousands)
Current portion of unvested early exercised share liability	$	490	$	891
ESPP withholdings	91		238
Total current portion of other liabilities	$	581	$	1,129

8.STOCK-BASED COMPENSATION

2020 Equity Incentive Plan

In October 2020, the Company adopted its 2020 Equity Incentive Plan (the 2020 Plan) which replaced the 2017 Equity Incentive Plan (Prior Plan) upon completion of the IPO. The 2020 Plan provides for the grant of incentive stock options or nonqualified stock options, stock appreciation rights, restricted stock awards (“RSA”), restricted stock units (“RSU”), performance awards and other forms of awards to employees, directors, and consultants of the Company. The number of shares of common stock reserved for issuance under the 2020 Plan will automatically increase each year for a period of ten years, beginning in 2021 and continuing through 2030, in an amount equal to (1) 5.0% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Board of Directors no later than December 31 of the immediately preceding year. As of June 30, 2023, the maximum number of shares of common stock that may be issued was 20,417,192 shares.

The Company recognizes the impact of forfeitures on stock-based compensation expense as forfeitures occur. The Company applies the straight-line method of expense recognition to all awards with only service-based vesting conditions. Options shall not have an exercise price less than 100% of the fair market value of the Company’s common stock on the grant date. Vesting periods are determined at the discretion of the Board of Directors. Stock options typically vest over four years. The maximum contractual term is 10 years.

As of June 30, 2023, there were 3,973,320 shares reserved by the Company under the 2020 Plan for the future issuance of equity awards.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

Stock Options

Stock option activity under the 2020 Plan as of June 30, 2023 is summarized as follows:


	Number of Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
				(in years)	(in thousands)
Balance, December 31, 2022	7,454,665	$	11.83	7.69	$	54
Granted	2,962,946	1.97
Forfeited	(961,749)	12.03
Exercised	(200,215)	3.18
Balance, June 30, 2023	9,255,647	$	8.84	7.99	$	155

The aggregate intrinsic values of options outstanding was calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Global Select Market on June 30, 2023. There was no future tax benefit related to options exercised, as the Company had accumulated net operating losses as of June 30, 2023 and December 31, 2022.

The weighted-average grant-date fair value per share of stock options granted, using the Black-Scholes option pricing model, was $1.32 during the six months ended June 30, 2023.

As of June 30, 2023 and December 31, 2022, there was $25.8 million and $35.4 million of unrecognized stock-based compensation related to stock options, respectively, which is expected to be recognized over a weighted-average period of 2.03 and 2.25 years, respectively.

2020 Employee Stock Purchase Plan

In October 2020, the Company adopted its 2020 Employee Stock Purchase Plan (ESPP), which initially reserved 688,000 shares of the Company’s common stock for employee purchase under terms and provisions established by the Board of Directors. The number of shares of our common stock reserved for issuance under the ESPP automatically increased in 2021 and continues to increase through 2030, by the lesser of (i) 1.0% of the total number of shares of common stock outstanding on December 31 of the immediately preceding year, and (ii) 1,376,000 shares, except before the date of any increase, the Board of Directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). The Company issued 247,048 shares of common stock during both the three and six months ended June 30, 2023 and 12,539 shares of common stock during both the three and six months ended June 30, 2022 under the ESPP. The Company has 1,780,271 shares reserved for future issuance as of June 30, 2023.

Restricted Stock

Restricted stock awards and units as of June 30, 2023 are summarized as follows:


	Number of Restricted Stock	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Vesting Life	Aggregate Intrinsic Value
				(in years)	(in thousands)
Unvested, December 31, 2022	2,297,745	$	9.18	1.58	$	3,722
Granted	1,357,762	2.04
Vested and converted to shares	(707,600)	8.30
Forfeited	(384,969)	6.30
Unvested, June 30, 2023	2,562,938	$	6.08	1.93	$	4,408

As of June 30, 2023, there was $10.6 million of unrecognized stock-based compensation related to RSUs, which is expected to be recognized over a weighted average remaining vesting life.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

As of June 30, 2023, there was $0.2 million of unrecognized stock-based compensation related to RSAs, which is expected to be recognized over a weighted average remaining vesting life.

Stock-Based Compensation Summary

Total stock-based compensation expense related to stock options, restricted stock units, restricted stock awards and the employee stock purchase plan for the three and six months ended June 30, 2023 and 2022 is as follows:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(in thousands)				(in thousands)
Research and development expenses	$	3,123	$	4,051	$	6,235	$	7,855
General and administrative expenses	3,783		4,156		7,278		8,140
Total stock-based compensation expense	$	6,906	$	8,207	$	13,513	$	15,995

Early Exercised Options

The Company allows certain of its employees and its consultants to exercise options granted under the Prior Plan prior to vesting. The shares related to early exercised stock options are subject to the Company’s lapsing repurchase right upon termination of employment or service on the Board of Directors at the lesser of the original purchase price or fair market value at the time of repurchase. In order to vest, the holders are required to provide continued service to the Company. The early exercise by an employee or consultant of a stock option is not considered to be a substantive exercise for accounting purposes, and therefore the payment received by the employer for the exercise price is recognized as a liability. For accounting purposes, unvested early exercised shares are not considered issued and outstanding and therefore not reflected as issued and outstanding in the accompanying balance sheets or the accompanying statements of stockholders' equity (deficit) until the awards vest.

The deposits received are initially recorded in current portion of other liabilities and other noncurrent liabilities for the noncurrent portion. The liabilities are reclassified to common stock and paid-in capital as the repurchase right lapses. At June 30, 2023 and December 31, 2022, there was $0.5 million and $0.9 million recorded in current portion of other liabilities, and zero and $0.2 million recorded in other noncurrent liabilities, respectively, related to shares held by employees and nonemployees that were subject to repurchase.

9.INCOME TAXES

The Company did not record any income tax expense for the three and six months ended June 30, 2023 and 2022. The Company has incurred net operating losses for all the periods presented and has not reflected any benefit of such net operating loss carryforwards in the accompanying condensed financial statements. The Company has recorded a full valuation allowance against all of its deferred tax assets as it is not more likely than not that such assets will be realized in the near future.

It is the Company’s policy to record penalties and interest related to income taxes as a component of income tax expense. The Company has not recorded any interest or penalties related to income taxes during the three and six months ended June 30, 2023 and 2022. The Company has not identified any new uncertain tax positions as of June 30, 2023. Unrecognized tax benefits are not expected to change during the next 12 months. The reversal of the unrecognized tax benefits would not affect the effective tax rate. The Company is subject to examination by U.S. federal and state tax authorities for all years since its inception.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

10.NET LOSS PER SHARE

The following table summarizes the computation of basic and diluted net loss per share of the Company for the three and six months ended June 30, 2023 and 2022 (in thousands, except share and per share amounts):


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Net loss	$	(29,741)	$	(32,903)	$	(55,979)	$	(69,166)
Weighted-average common stock outstanding, basic and diluted	57,397,931		56,116,070		57,273,284		55,978,482
Net loss per share, basic and diluted	$	(0.52)	$	(0.59)	$	(0.98)	$	(1.24)

The Company’s potentially dilutive securities, which include options to purchase shares of the Company's common stock and restricted stock subject to future vesting, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each stated period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	June 30, 2023	June 30, 2022
Stock options to purchase common stock	9,115,293	7,766,205
Early exercised stock options subject to future vesting	140,354	469,397
Restricted stock awards subject to future vesting	37,151	71,443
Restricted stock units subject to future vesting	2,525,787	1,417,368

Expected shares to be purchased under Employee Stock Purchase Plan	630,380	—
Total	12,448,965	9,724,413

In addition to the potentially dilutive securities noted above, the Company also has the option under its agreement with Tempus to issue common shares upon the achievement of specified milestones. Please refer to Note 11, “Commitment and Contingencies” for further details. Because the necessary conditions for issuance of the shares had not been met as of June 30, 2023, the Company excluded these shares from the table above.

11. COMMITMENTS AND CONTINGENCIES

Amended Research and Development Services Agreement

In October 2021, as subsequently amended in April 2023, the Company entered into an agreement for research and development services (the Amended Tempus Agreement) with Tempus Labs, Inc. (Tempus), pursuant to which Tempus agreed to provide the Company with research and development services for a period of four years. The three primary services are analytical services, data licensing, and organoid services. The Company intends to utilize the services contemplated under the Amended Tempus Agreement to advance the development of KB-0742 and lanraplenib.

In consideration for the access to the services throughout the term of the Amended Tempus Agreement, the Company has agreed to pay an annual minimum commitment of $1.5 million in year one, $2.5 million in year two, $3.0 million in year three and $2.5 million in year four. Payments are made in quarterly installments. As of June 30, 2023, the Company has paid cumulatively $3.0 million under the Amended Tempus Agreement, including $1.9 million paid for the six months ended June 30, 2023, $1.1 million paid for the year ended December 31, 2022 and null for the year ended December 31, 2021.

In addition, the Company is required to make milestone payments upon successful achievement of certain regulatory milestones for KB-0742, lanraplenib, and other discovery pipeline compounds up to a combined

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

maximum of $22.4 million. For each milestone payment that becomes due, the Company has the right to pay up to 50% of such milestone payment amount in shares of its common stock as long as certain regulatory requirements are met. As of June 30, 2023 and December 31, 2022, the Company determined that achievement of the milestones is not probable and therefore no corresponding liability has been recorded.

Asset Purchase Agreement

In July 2020, the Company entered into an asset purchase agreement (Gilead Asset Purchase Agreement) with Gilead Sciences, Inc. (Gilead), pursuant to which the Company acquired certain assets from Gilead related to entospletinib and lanraplenib, and patents and other intellectual property covering or related to the development, manufacture and commercialization of entospletinib and lanraplenib. Under the agreement, the Company is required to make milestone payments upon successful achievement of certain regulatory and sales milestones for lanraplenib, entospletinib and other SYK inhibitor compounds covered by the patent rights acquired pursuant to the Gilead Asset Purchase Agreement and developed by us as a back-up to entospletinib or lanraplenib (Other Compounds).

Upon successful completion of certain regulatory milestones in the United States, European Union and United Kingdom for lanraplenib, entospletinib and any Other Compounds, across up to two distinct indications, we will be required to pay to Gilead an aggregate total of $51.3 million. Upon achieving certain thresholds for the aggregate annual net sales of lanraplenib, entospletinib, and any Other Compounds combined, we would owe to Gilead potential milestone payments totaling $115.0 million.

Gilead is also eligible to receive (i) tiered marginal royalties ranging from high-single digits to the mid-teens on annual worldwide net sales of lanraplenib, (ii) tiered marginal royalties ranging from the very low-teens to high-teens on annual worldwide net sales of entospletinib, and (iii) tiered marginal royalties ranging from the low single digits to mid-single digits on annual worldwide net sales of any Other Compounds. The royalties in the foregoing clauses are subject to reduction, on a country-by-country basis, for products not covered by certain claims within the assigned patents, for generic entry and, in the case of lanraplenib and entospletinib, for any royalties paid for future licenses of third-party intellectual property required to develop or commercialize lanraplenib or entospletinib. Our royalty obligation with respect to a given product in a given country begins upon the first commercial sale of such product in such country and ends on the latest of (i) expiration of the last claim of a defined set of the assigned patent rights covering such product in such country, (ii) loss of exclusive data or marketing rights to such product in such country or (iii) 10 years from the first commercial sale of such product in such country.

Under the Gilead Asset Purchase Agreement, we are required to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize either lanraplenib or entospletinib.

We are currently unable to estimate the timing or likelihood of achieving remaining milestones or generating future product sales.

Purchase Commitments

In the normal course of business, the Company enters into contracts with contract research organizations (CROs) for preclinical and clinical studies and other vendors for services and products. These agreements generally provide for termination or cancellation, other than for costs already incurred and certain wind down costs that may be associated with the termination of a contract or clinical trial program.

Contingencies

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown, because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

Indemnification

In accordance with the Company’s amended and restated certificate of incorporation and amended and restated bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving in such capacity. There have been no claims to date, and the Company has a directors and officers liability insurance policy that may enable it to recover a portion of any amounts paid for future claims.

12.LEASES

In March 2020, the Company entered into an 11-year lease agreement to move its research and development operations from 21 Erie Street, Cambridge, Massachusetts, to a 40,514 square-feet facility at 301 Binney Street, Cambridge, Massachusetts (Cambridge facility). The lease commenced on February 28, 2020 with an initial annual base rent of $4.1 million. The initial rent payment was paid as of September 30, 2020, with rent payments escalating 3.0% annually after the initial 12 payments. The Company executed a letter of credit for $2.0 million in connection with the lease. The lease includes $3.7 million in certain tenant improvement allowances, which the Company included in its calculation of the right-of-use asset in the lease at commencement. As of June 30, 2023, $3.7 million in improvement costs incurred by the Company were reimbursed by the lessor and are now included within the total lease liability. In connection with the lease, the Company recognized an operating lease right-of-use asset of $19.2 million and $21.9 million and an aggregate lease liability of $27.0 million and $28.0 million as of June 30, 2023 and December 31, 2022, respectively. The remaining lease term is 7 years and 8 months, and the estimated incremental borrowing rate is 8.50%.

In February 2021, the Company entered into a new lease agreement for its office space in San Mateo, California totaling 17,340 square-feet. The initial annual base rent for the new space was $1.2 million, and such amount increases by 3% annually on each anniversary of the new premises commencement date. In connection with the larger space leased, the Company made a one-time cash security deposit in the amount of $59,000. The lease commenced in April 2021 and terminates August 31, 2026. In connection with the lease, the Company recognized an operating lease right-of-use asset of $2.1 million and $2.8 million and an aggregate lease liability of $3.2 million and $3.7 million as of June 30, 2023 and December 31, 2022, respectively. The remaining lease term is 3 years , and the estimated incremental borrowing rate is 11.18%.

The following table summarizes the presentation of the Company’s operating leases in its balance sheets as of June 30, 2023 and December 31, 2022:


Balance Sheet Caption	June 30, 2023		December 31, 2022
	(in thousands)
Assets:
Operating lease assets	$	21,251	$	24,707
Liabilities:
Current portion of operating lease liabilities	$	3,038	$	2,347
Noncurrent operating lease liabilities	27,126		28,744
Total operating lease liabilities	$	30,164	$	31,091

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

The following table summarizes the effect of operating lease costs in the Company’s statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022:


Statement of Operations and Comprehensive Loss Caption	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(in thousands)				(in thousands)
Research and development	$	2,173	$	767	$	2,940	$	1,534
General and administrative	1,375		511		1,886		1,021
Total operating lease cost	$	3,548	$	1,278	$	4,826	$	2,555

Under the lease agreements, the Company made cash payments of $1.5 million and $2.4 million during the three and six months ended June 30, 2023, respectively. The Company made cash payments of $1.2 million and $2.3 million during the three and six months ended June 30, 2022, respectively.

The undiscounted future non-cancellable lease payments under the Company's operating leases as of June 30, 2023 for the next five years and thereafter is expected to be as follows:


Period Ending December 31,	Amount
	(in thousands)
2023	$	2,725
2024	5,749
2025	5,921
2026	5,405
2027 and thereafter	21,298
Total undiscounted lease payments	41,098
Less: Present value adjustment	(10,934)

Present value of operating lease liabilities	$	30,164

Impairment of Operating Lease Right-of-Use Asset and Other Long-Lived Assets

The Company evaluates the carrying value of long-lived assets, which include property and equipment and right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the asset may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset or asset group and its eventual disposition are less than its carrying amount. Impairment, if any, is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

As a result of the sustained decline in the Company’s stock price, the Company determined an impairment indicator was present. The Company determined all of its long-lived assets represent a single asset group for the purpose of the long-lived asset impairment assessment. The Company concluded that the carrying value of the single asset group was not recoverable as it exceeded the future net undiscounted cash flows that are expected to be generated from the use and eventual disposition of the assets within the asset group. To allocate and recognize the impairment loss, the Company, with the assistance of a third-party valuation firm, determined the fair value of the Company using the adjusted net asset method under the cost approach. The implied allocated impairment loss to any individual asset within the long-lived asset group shall not reduce the carrying amount of that asset below its fair value. To determine the fair value of the individual assets within the asset group, the Company utilized the discounted cash flow method of the income approach and the indirect cost approach.

Based on this analysis, during the three and six months ended June 30, 2023, the Company recognized a non-cash impairment charge of $2.9 million, including $2.3 million for the right-of-use assets and $0.6 million for the leasehold improvements (please see Note 6, “Property and Equipment, Net” for further details). The Company recorded $1.9 million in “Research and Development” and $1.0 million in “General and Administration”, based on

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

the relative allocation of the operating lease costs and depreciation and amortization expense. No impairment charge was recorded for the three and six months ended June 30, 2022.

These represent a Level 3 nonrecurring fair value measurement. Calculating the fair value of the assets involves significant estimates and assumptions. These estimates and assumptions include, among others, projected future cash flows, risk-adjusted discount rates and market conditions. Changes in the factors and assumptions used could materially affect the amount of impairment loss recognized in the period the asset was considered impaired.

13.RELATED PARTIES

On December 1, 2017, the Company entered into a services agreement with Two River Consulting, LLC (Two River) to provide various clinical development, operational, managerial, accounting and financial, and administrative services to the Company. Arie Belldegrun, M.D., FACS, the Chairman of the Board of Directors, is the Chairman of Two River. Mr. Joshua Kazam and Mr. David Tanen, each a director of the Company, are each partners of Two River. Mr. Christopher Wilfong, a strategic advisor to the Company, is an Operating Partner of Two River and Mr. Sean Algeo, serving as a financial consultant to the Company, is the Chief Financial Officer of Two River. During the three and six months ended June 30, 2023, the Company incurred expenses of $24,000 and $48,000, respectively, for these services. During the three and six months ended June 30, 2022, the Company incurred expenses of $18,000 and $41,000, respectively, for these services.

In 2019, the Company entered into a consulting agreement with Bellco Capital, LLC (Bellco) to provide various executive services to the Company. Arie Belldegrun, M.D., FACS, the Chairman of the Board of Directors, is the Chairman of Bellco. During the three and six months ended June 30, 2023, the Company incurred expense of $6,300 and $12,600, respectively, for these services. During the three and six months ended June 30, 2022, the Company incurred expense of $6,300 and $12,600, respectively, for these services.

14.COLLABORATION AND LICENSE AGREEMENT

On January 6, 2023, the Company entered into a Collaboration and License Agreement (the “Agreement”) with Genentech, Inc., a member of the Roche Group (“Genentech”). Pursuant to the Agreement, the parties have agreed to initially collaborate on two discovery research programs in oncology, each focused on a designated transcription factor, to discover small-molecule GLP-Tox-ready candidates that modulate transcription factor targets selected by Genentech. Each discovery research program will primarily consist of (i) a mapping phase with the goal of identifying the transcription regulatory network for such designated transcription factor, and (ii) a screening phase having the goal of identifying and characterizing multiple screening hits suitable for nomination as a preclinical development program.

The Company will lead discovery and research activities under the discovery research programs and will use its proprietary drug discovery platform, including the small molecule microarray (SMM), for hit finding. Following the completion of initial discovery and research activities, Genentech will have the exclusive right to pursue further preclinical and clinical development and commercialization of compounds identified in the discovery research programs and designated by Genentech (each, a “Hit Program”).

Pursuant to the Agreement, the Company received an upfront payment of $20.0 million from Genentech. In addition, the Company is eligible for additional milestone payments upon achievement of certain preclinical, clinical and regulatory (including first-sale) milestones, totaling up to $177 million for the first development candidate per Hit Program, and is eligible to receive net sales milestones of up to $100 million for the first licensed product per Hit Program. The Company is also eligible to receive tiered royalties in the low- to high-single digits on any products that are commercialized by Genentech as a result of the collaboration.

The term of the discovery research programs under the Agreement will be up to 24 months, which may be extended by six months at the Company’s option subject to satisfying certain conditions.

Unless earlier terminated, the Agreement will remain in effect for each product licensed under the Agreement until expiration of the royalty term for such licensed product. Genentech has the right to terminate this Agreement in its entirety, or with respect to a particular discovery research program or Hit Program, in its sole discretion, at

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

any time by providing 60 days’ advance written notice to the Company. Each party may also terminate the Agreement upon the other party’s material breach that remains uncured for 90 days (or 45 days in the event of nonpayment), or in the event of certain insolvency events involving the other party.

The Company evaluated the agreement and determined it was within the scope of ASC 606. The Company determined there were performance obligations to perform research and development services. Each consists of various exclusive and non-exclusive licenses to use the Company’s intellectual property and know-how, initial discovery activities, and substitution of the designated transcription factor. The Company also identified customer options contained within the contract to perform further research and development services and the renewal of the licenses that were deemed a material right as these involved a discount to Genentech that they would not have otherwise received. As a result, the material rights for various options were recognized as separate performance obligations and the transaction price was allocated to the material rights based on the relative standalone selling price, the identified discount and the probability that the customer will exercise the option or the option is cancelled. Amounts allocated to a material right are not recognized as revenue until the option is exercised. The transaction price was determined to consist of the upfront payment of $20.0 million. Potential development and regulatory milestones have been fully constrained. The Company is expected to perform research and development services for each selected target up until a defined point at which time Genentech will decide whether or not to exercise an option to nominate a development candidate and take over future development and commercialization. The Company concluded this is not a material right. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to Genentech.

The Company determined that the performance obligations to perform research and development services are satisfied over time, and therefore, the related revenue will be recognized as services are provided. The Company recognized $1.9 million and $3.1 million in revenue during the three and six months ended June 30, 2023, respectively, using the cost-based input model related to the research and development activities associated with the identified performance obligations. The remaining $16.9 million of the upfront payment is included in short and long-term deferred revenue as of June 30, 2023 and will be recognized as the performance obligations are satisfied.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with the condensed financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited financial statements and related notes as of and for the fiscal year ended December 31, 2022 included in our Annual Report on Form 10-K, as filed with the SEC on March 15, 2023.

Forward Looking Statements

This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. In some cases, you could identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will,” or the negative of these terms or similar expressions. As a result of many factors, including those factors set forth under “Risk Factors” included in Item 1A of Part II of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Overview

We are an integrated discovery through clinical development biopharmaceutical company, with a focus on developing therapeutics that target the dysregulated transcription that causes cancer and other serious diseases. We are enrolling patients in clinical trials for two compounds. Our product engine, which includes our proprietary small molecule microarray (SMM) screening platform, provides us with the capability to map and target transcription regulatory networks (TRNs) in a differentiated manner to enable discovery of novel compounds and improve our ability to discover and optimize clinical development candidates. In addition to our own internal preclinical programs, we have entered into a collaboration agreement with Genentech, Inc., a member of the Roche Group (Genentech).

We are developing KB-0742, our internally discovered, orally-administered, cyclin dependent kinase 9 (CDK9) inhibitor, for the treatment of MYC-amplified and other transcriptionally addicted solid tumors. We have initiated the Phase 2 portion of our Phase 1/2 clinical trial. KB-0742 was generated from our optimization of a compound that was identified using our SMM platform.

We are also developing lanraplenib, our next generation orally administered spleen tyrosine kinase (SYK) inhibitor, and are in the dose escalation stage of our Phase 1b/2 clinical trial. This clinical trial evaluates lanraplenib in combination with gilteritinib in patients with relapsed or refractory FLT3 - mutated acute myeloid leukemia (AML).

The following chart summarizes the current stages of our development programs, including KB-0742 and lanraplenib:

In our research efforts, we are leveraging our product engine to drive multiple oncology discovery programs targeting dysregulated transcription factors and their associated TRNs. Some of the most powerful oncogenes in all of human cancer encode transcription factors: proteins that bind to specific DNA sequences on the genome and control how sets of genes are turned on and off. Transcription factors historically have been difficult to target in drug development because they are typically intrinsically disordered, adopting a functional structure only when assembled with a complex of cofactors in the nucleus on the genome. Transcription factors with aberrant expression or activity result in dysregulated TRNs, which are frequently responsible for reprogramming healthy cells into cancerous tumor cells. Therapeutically modulating dysregulated transcription factors requires a sophisticated and holistic approach due to their complexity and their regulation of complex TRNs in a context-dependent manner. Based on this work, in November 2021, we announced the advancement of two programs, one focused on the MYC TRN and one focused on the androgen receptor (AR) TRN, which we are continuing to advance.

In addition, in January 2023, we entered into a research collaboration with Genentech, focused on discovering and developing small-molecule drugs that modulate transcription factor targets selected by Genentech. Under the collaboration, we will leverage our proprietary drug discovery platform, including the small molecule microarray, for hit finding, to build upon research conducted by Genentech.

Since our formation, we have incurred significant operating losses, primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. Our net loss was $29.7 million and $32.9 million for the three months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $452.2 million. As of June 30, 2023, we had $219.7 million of cash, cash equivalents and investments. We expect to continue to incur net losses for the foreseeable future, and we expect to continue to make significant investments in our research and development and general and administrative functions.

Strategic Agreements

Genentech Collaboration Agreement

On January 6, 2023, we entered into a Collaboration and License Agreement with Genentech, a member of the Roche Group. Pursuant to the agreement, the parties have agreed to initially collaborate on two discovery research programs in oncology, each focused on a designated transcription factor, to discover small-molecule GLP-Tox-ready candidates that modulate transcription factor targets selected by Genentech. Each discovery research program will primarily consist of (i) a mapping phase with the goal of identifying the transcription regulatory network for such designated transcription factor, and (ii) a screening phase having the goal of identifying and characterizing multiple screening hits suitable for nomination as a preclinical development program.

We will lead discovery and research activities under the discovery research programs and will use our proprietary drug discovery platform, including our SMM, for hit finding. Following the completion of initial discovery and research activities, Genentech will have the exclusive right to pursue further preclinical and clinical development and commercialization of compounds identified in the discovery research programs and designated by Genentech (each, a Hit Program).

In connection with the agreement, we received an upfront payment of $20.0 million from Genentech. In addition, we are eligible for additional milestone payments upon achievement of certain preclinical, clinical and regulatory (including first-sale) milestones, totaling up to $177.0 million for the first development candidate per Hit Program, and are eligible to receive net sales milestones of up to $100.0 million for the first licensed product per Hit Program. We are also eligible to receive tiered royalties in the low- to high-single digits on any products that are commercialized by Genentech as a result of the collaboration.

The term of the discovery research programs will be up to 24 months, which may be extended by six months at our option subject to satisfying certain conditions.

Tempus Research and Development Services Agreement

In October 2021, as subsequently amended in April 2023, we entered into an agreement for research and development services (the Amended Tempus Agreement) with Tempus Labs, Inc. (Tempus), pursuant to which Tempus has agreed to provide us with research and development services for a period of four years. The three primary services are analytical services, data licensing, and organoid services. We intend to utilize the services contemplated under the Amended Tempus Agreement to advance the development of KB-0742 and lanraplenib.

In consideration for the access to the services throughout the term of the Amended Tempus Agreement, we have agreed to pay an annual minimum commitment of $1.5 million in year one, $2.5 million in year two, $3.0 million in year three and $2.5 million in year four. Payments are made in quarterly installments. As of June 30, 2023, we have paid $3.0 million under the Amended Tempus Agreement.

In addition, we are required to make milestone payments upon successful achievement of certain regulatory milestones for KB-0742, lanraplenib, and other discovery pipeline compounds up to a combined maximum of $22.4 million. For each milestone payment that becomes due, we have the right to pay up to 50% of such milestone payment amount in shares of our common stock as long as certain regulatory requirements are met.

Gilead Asset Purchase Agreement

In July 2020, we entered into the Gilead Asset Purchase Agreement, pursuant to which we acquired certain assets from and assumed certain liabilities of Gilead related to lanraplenib or entospletinib, and patents and other intellectual property covering or related to the development, manufacture and commercialization of lanraplenib or entospletinib.

In consideration for such assets, on the date of the Gilead Asset Purchase Agreement, we made a $3.0 million upfront cash payment and issued a $3.0 million principal amount convertible promissory note, which was settled in exchange for 188,567 shares of common stock in connection with the closing of our IPO at a settlement price of $16.15 per share. We also made a $0.7 million payment to reimburse Gilead for certain liabilities we assumed pursuant to the Gilead Asset Purchase Agreement. In addition, we are required to make milestone payments upon successful achievement of certain regulatory and sales milestones for lanraplenib, entospletinib

and other SYK inhibitor compounds covered by the patent rights acquired pursuant to the Gilead Asset Purchase Agreement and developed by us as a back-up to entospletinib or lanraplenib (Other Compounds). Upon successful completion of certain regulatory milestones in the United States, European Union and United Kingdom for lanraplenib, entospletinib and any Other Compounds, across up to two distinct indications, we will be required to pay to Gilead an aggregate total of $51.3 million. Upon achieving certain thresholds for the aggregate annual net sales of lanraplenib, entospletinib, and any Other Compounds combined, we would owe to Gilead potential milestone payments totaling $115.0 million.

Under the Gilead Asset Purchase Agreement, we are required to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize either lanraplenib or entospletinib.

Harvard License Agreement

In January 2018, we entered into a license agreement with President and Fellows of Harvard College (Harvard), pursuant to which Harvard granted us a non-exclusive, worldwide, royalty-free license to certain patent rights covering aspects of our SMM platform. We paid a one-time license fee in the amount of $10,000 on the date of the agreement and an annual license maintenance fee of $20,000 on each of the first two anniversaries. We were required to pay $25,000 on each subsequent anniversary until the last to expire of any valid claim included in the licensed patent. The patent expired in June 2023.

Components of Our Results of Operations

Revenues

As of June 30, 2023, our revenue has been exclusively generated from our collaboration and license agreement with Genentech, Inc. We received a $20.0 million upfront payment from Genentech in February 2023 and are eligible for additional milestone payments upon achievement of certain preclinical, clinical and regulatory (including first-sale) milestones. See Note 14 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the Genentech, Inc. agreement.

Operating Expenses

Our operating expenses consisted of research and development expenses and general and administrative expenses.

Research and Development Expenses

Our research and development expenses consist primarily of direct and indirect costs incurred in connection with our therapeutic discovery efforts and the preclinical and clinical development of our product candidates, as well as the development of our product engine.

Direct costs include:

•expenses incurred under agreements with contract research organizations (CROs) and other vendors that conduct our clinical trials and preclinical activities;

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

•costs of acquiring, developing, and manufacturing clinical trial materials and lab supplies; and

•payments made under third-party strategic agreements.

Indirect costs include:

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

•costs related to compliance with regulatory requirements; and

•facilities costs, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.

We expense research and development costs as the services are performed or the goods are received. We recognize costs for certain development activities based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our internal management. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed financial statements as prepaid or accrued research and development expenses.

Because we are working on multiple research and development programs at any one time, we intend to track our direct costs by the stage of program, clinical or preclinical. However, our internal costs, employees and infrastructure are not directly tied to any one program and are deployed across multiple programs. As such, we do not track indirect costs on a specific program basis.

Our research and development expenses may vary significantly based on a variety of factors, such as:

•the scope, rate of progress, and results of our preclinical development activities;

•per patient trial costs;

•the number of trials required for approval; the number of sites included in the trials;

•the number of patients that participate in the trials;

•the countries in which the trials are conducted;

•uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates;

•potential additional safety monitoring requested by regulatory agencies;

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

•the safety and efficacy of our product candidates;

•the timing, receipt, and terms of any approvals from applicable regulatory authorities including the FDA and non-U.S. regulators;

•significant and changing government regulation and regulatory guidance;

•potential additional trials requested by regulatory agencies;

•establishing clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that we or our third-party manufacturers are able to make product successfully;

•the extent to which we establish additional strategic collaborations or other arrangements;

•the impact of any business interruptions to our operations or to those of the third parties with whom we work; and

•maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

We expect to continue to make significant investments into research and development for the foreseeable future as we continue to identify and develop additional product candidates and as more of our product candidates move into later stages of clinical development, which typically have higher development costs than those in earlier stages of clinical development due to the increased size and duration of later-stage clinical trials.

The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affected by a variety of factors. We may never succeed in achieving regulatory approval for any of our product candidates. Further, a number of factors, including those outside of our control, could adversely impact the timing and duration of our product candidates’ development, which could increase our research and development expenses.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, which include salaries, benefits and other employee related costs, such as stock-based compensation, for personnel in our executive, finance, corporate and business development, and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; recruiting costs; travel expenses; and facilities-related costs.

We expect to maintain the general and administrative function for the foreseeable future to support personnel in research and development and to support our operations generally as we execute on our research and development activities. We also expect to continue to incur expenses associated with operating as a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs, and investor and public relations costs.

Interest and Other Income, Net

Interest and other income, net primarily consists of interest earned on our cash, cash equivalents and investments.

Results of Operations

Comparison of Three Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022:


	Three Months Ended June 30,
	2023		2022		Change
	(in thousands)
Revenue	$	1,864	$	—	$	1,864
Operating expenses:
Research and development	$	22,673	$	22,706	$	(33)
General and administrative	11,359		10,824		535
Total operating expenses	34,032		33,530		502
Loss from operations	(32,168)		(33,530)		1,362
Other income (expense), net:


Interest and other income, net	2,427		627		1,800
Total other income (expense), net	2,427		627		1,800
Net loss	$	(29,741)	$	(32,903)	$	3,162

Revenue

Revenue was $1.9 million for the three months ended June 30, 2023 and zero for the three months ended June 30, 2022. The increase of $1.9 million was due to the revenue recognized under the Collaboration and License Agreement entered into with Genentech in January 2023.

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended June 30, 2023 and 2022:


	Three Months Ended June 30,
	2023		2022		Change
	(in thousands)
Direct Costs	$	10,516	$	11,642	$	(1,126)
Indirect Costs:
Personnel	7,955		9,067		(1,112)
Facilities, depreciation and other expenses	4,202		1,997		2,205
Total research and development expenses	$	22,673	$	22,706	$	(33)

Research and development expenses were $22.7 million for the three months ended June 30, 2023 compared to $22.7 million for the three months ended June 30, 2022. The research and development expenses remained flat primarily due to a decrease of $1.2 million in consulting and outside services related to the discontinuation of our Phase 3 entospletinib trial in the fourth quarter of 2022, a decrease of $0.9 million in stock compensation expense and a decrease of $0.2 million in personnel costs. These decreases were partially offset by an increase of $2.2 million in facilities, depreciation, and other expenses primarily contributed by the non-cash impairment charge of $1.9 million. Please refer to Part 1. Financial Information, Note 12, “Leases”, section “Impairment of Operating Lease Right-of-Use Asset and Other Long-Lived Assets” for further details.

General and Administrative Expenses

General and administrative expenses were $11.4 million for the three months ended June 30, 2023 compared to $10.8 million for the three months ended June 30, 2022. The increase of $0.5 million was primarily due to a decrease of $0.3 million in professional fees primarily attributable to insurance and legal services and a decrease in stock-based compensation of $0.3 million. These decreases were partially offset by an increase of $1.1 million in personnel, facilities, depreciation and other expenses primarily contributed by the non-cash impairment charge of $1.0 million. Please refer to Part 1. Financial Information, Note 12, “Leases”, section “Impairment of Operating Lease Right-of-Use Asset and Other Long-Lived Assets” for further details.

Comparison of Six Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,
	2023		2022		Change
	(in thousands)
Revenue	$	3,084	$	—	$	3,084
Operating expenses:
Research and development	$	42,331	$	47,142	$	(4,811)
General and administrative	21,415		22,752		(1,337)
Total operating expenses	63,746		69,894		(6,148)
Loss from operations	(60,662)		(69,894)		9,232
Other income (expense), net:


Interest and other income, net	4,683		728		3,955
Total other income (expense), net	4,683		728		3,955
Net loss	$	(55,979)	$	(69,166)	$	13,187

Revenue was $3.1 million for the six months ended June 30, 2023 and zero for the six months ended June 30, 2022. The increase of $3.1 million was due to the revenue recognized under the Collaboration and License Agreement entered into with Genentech in January 2023.

Research and Development Expenses

The following table summarizes our research and development expenses for the six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,
	2023		2022		Change
	(in thousands)
Direct Costs(1)	$	19,977	$	24,846	$	(4,869)
Indirect Costs:
Personnel	16,114		18,431		(2,317)
Facilities, depreciation and other expenses(1)	6,240		3,865		2,375
Total research and development expenses	$	42,331	$	47,142	$	(4,811)

(1) Certain costs have been reclassified from Facilities, depreciation and other expenses to Direct Costs, and the prior period amounts have been adjusted by $4.5 million for comparison purposes.

Research and development expenses were $42.3 million for the six months ended June 30, 2023, compared to $47.1 million for the six months ended June 30, 2022. The decrease of $4.8 million was primarily due to a decrease of $5.0 million in consulting and other outside research expenses related to the discontinuation of our Phase 3 entospletinib trial in the fourth quarter of 2022, a decrease in stock-based compensation of $1.6 million and a decrease of $0.7 million in personnel costs. These decreases are partially offset by an increase in facilities, depreciation and other expenses of $2.3 million primarily contributed by the non-cash impairment charge of $1.9 million and an increase in lab costs of $0.2 million.

General and Administrative Expenses

General and administrative expenses were $21.4 million for the six months ended June 30, 2023 compared to $22.8 million for the six months ended June 30, 2022. The decrease of $1.3 million was primarily due to a decrease of $1.5 million in professional fees primarily attributable to insurance and other professional services and a decrease in stock-based compensation of $0.9 million. These decreases are partially offset by an increase in facilities, depreciation and other expenses of $1.0 million primarily contributed by the non-cash impairment charge of $1.0 million.

Liquidity and Capital Resources

Sources of Liquidity

To date, we have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for several years, if ever. Prior to our IPO, our operations were financed primarily by net proceeds from the sale and issuance of our convertible preferred stock and convertible notes, totaling aggregate gross proceeds of $278.2 million. Upon completion of our IPO on October 14, 2020, we sold an aggregate of 15,131,579 shares of our common stock including 1,973,684 shares of common stock sold pursuant to the full exercise of the underwriters’ option to purchase additional shares at a price of $19.00 per share and received approximately $263.7 million in net proceeds after deducting underwriting discounts and commissions and offering expenses.

As of June 30, 2023, we had cash, cash equivalents and investments of $219.7 million. We expect that our cash, cash equivalents and investments as of June 30, 2023, will enable us to fund our planned operating expenses and capital expenditure requirements into the second half of 2025.

Material Cash Requirements

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures related to our therapeutic discovery efforts, KB-0742 and lanraplenib, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Our product candidates are still in the early stages of clinical and preclinical development, and the outcomes of these efforts are uncertain. Accordingly, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration agreements. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise capital when needed, we will need to delay, reduce or terminate planned activities to reduce costs. Doing so will likely harm our ability to execute our business plans.

Contractual Obligations and Commitments

In March 2020, we entered into a lease agreement for our research and development operations facility at 301 Binney Street, Cambridge, Massachusetts (Cambridge facility). The initial annual base rent was $4.1 million with rent payments escalating 3.0% annually after the initial 12 payments. We executed a letter of credit for $2.0 million in connection with the lease. The remaining lease term is 7 years and 8 months.

with the larger space leased, the Company made a one-time cash security deposit in the amount of $59,000. The lease commenced in April 2021 and terminates August 31, 2026.

Pursuant to the Gilead Asset Purchase Agreement, we are obligated to make milestone payments upon the achievement of specified regulatory and clinical milestones as well as royalty payments. The payment obligations under this agreement are contingent upon future events, such as our achievement of specified milestones or generating product sales. We are currently unable to estimate the timing or likelihood of achieving these milestones or generating future product sales. See the subsection titled “—Strategic Agreements—Gilead Asset Purchase Agreement” above.

Pursuant to the Amended Tempus Agreement, we are obligated to make milestone payments upon the achievement of specified regulatory milestones as well as annual minimum commitments in quarterly installments. Some payment obligations under this agreement are contingent upon future events, such as our achievement of specified milestones. We are currently unable to estimate the timing or likelihood of achieving these milestones. See the subsection titled “—Strategic Agreements—Amended Tempus Research and Development Services Agreement” above.

We enter into contracts in the ordinary course of business with CROs for clinical trials, preclinical and clinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and are generally terminable by us upon prior notice. Payments due upon termination generally consist only of payments for services provided and expenses incurred up to the date of termination and certain wind down costs that may be associated with the termination of a contract or clinical trial program.

Cash Flows

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


	Six Months Ended June 30,
	2023		2022
	(in thousands)
Cash used in operating activities	$	(30,972)	$	(46,004)
Cash used in investing activities	(981)		(67,065)
Cash provided by financing activities	376		939
Net decrease in cash and cash equivalents	$	(31,577)	$	(112,130)

Operating Activities

During the six months ended June 30, 2023, cash used in operating activities was $31.0 million, which was primarily attributable to our net loss of $56.0 million, partially offset by non-cash charges of $16.4 million and changes in operating assets and operating liabilities, net, of $8.6 million. The non-cash charges primarily consisted of $13.5 million in stock-based compensation, impairment of long-lived assets of $2.9 million, depreciation and amortization of $1.1 million, noncash lease expense of $1.2 million, accrued interest on investment securities of $0.4 million partially offset by a decrease related to net amortization and accretion of investment securities of $2.7 million.

During the six months ended June 30, 2022, cash used in operating activities was $46.0 million, which was primarily attributable to our net loss of $69.2 million, partially offset non-cash charges of $19.5 million. The non-cash charges primarily consisted of $16.0 million in stock-based compensation, net amortization and accretion of investment securities of $0.6 million, noncash lease expense of $1.1 million, and depreciation and amortization of $1.1 million.

Investing Activities

During the six months ended June 30, 2023, cash used in investing activities was $1.0 million, consisting of $140.3 million in purchases of marketable securities and $0.4 million for the purchase of property and equipment, partially offset by $139.8 million in maturities of marketable securities.

During the six months ended June 30, 2022, cash used in investing activities was $67.1 million, consisting of $216.1 million in purchases of marketable securities and $0.5 million for the purchase of property and equipment partially offset by $149.5 million in maturities and sales of marketable securities.

Financing Activities

During the six months ended June 30, 2023, net cash provided by financing activities was $0.4 million, consisting of proceeds from issuance of common stock under the employee stock purchase plan of $0.3 million and proceeds from issuance of common stock upon exercise of stock options of less than $0.1 million.

During the six months ended June 30, 2022, net cash provided by financing activities was $0.9 million, consisting of proceeds from the exercise of stock options of $0.9 million.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our condensed financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

We consider the assumptions and estimates associated with revenues, accrued research and development expenditures, and stock-based compensation to have the most significant impact on our condensed financial statements and therefore we consider these to be our critical accounting policies and estimates.

Revenue Recognition

We recognize revenue in accordance with the provisions of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”). We recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods and services. To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the Company satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

We evaluate the promised goods or services in these agreements to determine which ones represent distinct performance obligations. These agreements may include the following types of promised goods or services: (i) grants of licenses, (ii) performance of research and development services, and (iii) participation on joint research and/or development committees. They also may include options to obtain further research and development services and licenses to our intellectual property. The payment terms of these agreements may include nonrefundable upfront fees, payments for electing the contractual options, payments based upon the achievement of certain milestones, and royalty payments based on product sales derived from the collaboration.

We exercise judgment in assessing those promised goods and services that are distinct and thus representative of performance obligations. To the extent we identify multiple performance obligations in a contract, the Company must develop assumptions that require judgment to determine the estimated standalone selling price for each performance obligation in order to allocate the transaction price among the identified performance obligations. The transaction price is allocated on a relative standalone selling price basis.

Prior to recognizing revenue, we make estimates of the transaction price, including variable consideration that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when

the uncertainty associated with the variable consideration is subsequently resolved. These estimates are re-assessed each reporting period as required.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligations when or as the performance obligations are satisfied. For performance obligations satisfied over time, we estimate the efforts needed to complete the performance obligations and recognizes revenue by measuring the progress towards complete satisfaction of the performance obligations using an input measure. For arrangements that include sales-based royalties, including commercial milestone payments based on pre-specified level of sales, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligations to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Achievement of these royalties and commercial milestones may solely depend upon the performance of the licensee. Funds received in advance are recorded as deferred revenue and are recognized as the related performance obligations are satisfied.

There are no performance, cancellation, termination, or refund provisions in any of the arrangements that contain material financial consequences to us.

Accrued Research and Development Expenses

As part of the process of preparing our condensed financial statements, we are required to estimate our accrued research and development and manufacturing expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our condensed financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

•CROs in connection with performing research activities on our behalf and conducting preclinical studies and clinical trials on our behalf;

•investigative sites or other service providers in connection with clinical trials;

•vendors in connection with preclinical and clinical development activities; and

•vendors related to product manufacturing and development and distribution of preclinical and clinical supplies.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract, which may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the completion of scientific milestones. In accruing fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

Stock-Based Compensation

We measure stock options and other stock-based awards granted to employees, directors, and non-employees based on their fair value on the date of grant and recognize stock-based compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. We

recognize the impact of forfeitures on stock-based compensation expense as forfeitures occur. We apply the straight-line method of expense recognition to all awards with only service-based vesting conditions.

We estimate the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model. This model requires the use of highly subjective assumptions to determine the fair value of stock-based awards, including:

•Fair Value of Common Stock—For grants before the completion of our IPO in October 2020 when we were a privately held company with no public market for our common stock, the fair value of our common stock underlying share-based awards was estimated on each grant date by our Board of Directors. In order to determine the fair value of our common stock underlying option grants, our Board of Directors considered, among other things, valuations of our common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accounts Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. For all grants subsequent to our IPO in October 2020, the fair value of common stock was determined by taking the closing price per share of common stock as reported on the Nasdaq Stock Market.

•Expected Term—The expected term represents the period that the stock-based awards are expected to be outstanding. We use the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the options.

•Expected Volatility—We use an average historical stock price volatility of comparable public companies within the biotechnology and pharmaceutical industry that were deemed to be representative of future stock price trends, in addition to some consideration to our own stock price volatility. We continue to utilize comparable public companies as part of this process as we do not have sufficient trading history for our common stock. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

•Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term of the awards.

•Expected Dividend—We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our cash equivalents and investments as of June 30, 2023 consist of money market funds and available-for-sale securities. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant for us. A one percent change in the interest rates in effect on June 30, 2023 would not have had a material effect on the fair market value of our cash equivalents and investments.

Foreign Currency Exchange Risk

All of our employees and our operations are currently located in the United States and our expenses are generally denominated in U.S. dollars. However, we have entered into a limited number of contracts with vendors for research and development services that permit us to satisfy our payment obligations in U.S. dollars (at prevailing exchange rates) but have underlying payment obligations denominated in foreign currencies, primarily including the Euro and GBP. We are subject to foreign currency transaction gains or losses on our contracts denominated in foreign currencies. To date, foreign currency transaction gains and losses have not been material to our condensed financial statements, and we have not had a formal hedging program with respect to foreign currency. A one percent increase or decrease in exchange rates at June 30, 2023 would not have had a material effect on our condensed financial statements.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, has evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in litigation or other legal proceedings. While the outcome of any such proceedings cannot be predicted with certainty, as of June 30, 2023, we were not a party to any litigation or legal proceedings that, in the opinion of our management, are probable to have a material effect on our business.

ITEM 1A. RISK FACTORS

RISK FACTOR SUMMARY

Below is a summary of material factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making investment decisions regarding our common stock.

•We have incurred significant net losses since inception and we expect to incur significant losses over the next several years and may not be able to achieve or sustain revenues or profitability in the future.

•We will need substantial additional funding. If we are unable to raise capital when needed, we may be compelled to delay, reduce, or eliminate our product development programs or commercialization efforts.

•We have a limited operating history and face significant challenges and will incur substantial expenses as we build our capabilities.

•Our discovery and development activities are primarily focused on novel cancer therapeutics for patients with genetically-defined cancers and it is difficult to predict the time and cost of developing our product candidates and obtaining regulatory approval.

•We have encountered and may continue to encounter delays and difficulties initiating clinical trial sites and enrolling patients in our clinical trials, and, as a result, our clinical development activities could be delayed or otherwise adversely affected.

•Our approach to the discovery and development of product candidates is unproven, and we may not be successful in our efforts to use and further develop our product engine to expand our pipeline of product candidates with commercial value.

•We may attempt to secure approval for our product candidates from the U.S. Food and Drug Administration (FDA) or comparable regulatory authorities through the use of accelerated approval pathways, which is uncertain.

•The COVID-19 pandemic has adversely impacted, and any future health epidemic or pandemic may adversely impact, our business, including our ongoing and planned clinical trials.

•If the market opportunities for our product candidates are smaller than we estimate or if any regulatory approval that we obtain is based on a narrower definition of the patient population, it will adversely affect our revenue potential and ability to achieve profitability.

•Our success depends in part on our ability to protect our intellectual property and our proprietary products and technologies and obtain, maintain and enforce our intellectual property, as well as our ability to operate without infringing the patents and other proprietary rights of third parties.

•We rely, and expect to rely in the future, on third parties, including independent clinical investigators, developers of companion diagnostics, and contract research organizations to conduct certain aspects of our preclinical studies and ongoing and planned clinical trials. We also rely, and expect to rely in the future, on contract manufacturing organizations for the manufacture of our product candidates for preclinical and clinical testing, as well as manufacture of any products that we may commercialize.

•Our success is highly dependent on our ability to attract and retain highly-skilled executive officers and employees.

RISK FACTORS

We have identified the following material factors that make an investment in our common stock speculative or risky. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our condensed financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before making investment decisions regarding our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. The risks described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. We have marked with an asterisk (*) those risk factors that were not included as separate risk factors in, or reflect changes from the similarly titled risk factors included in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission (SEC) on March 15, 2023.

Risks Related to Our Financial Condition and Capital Requirements

We have incurred significant net losses since inception, and we expect to incur significant losses over the next several years and may not be able to achieve or sustain revenues or profitability in the future.*

Investment in biopharmaceutical product development is a highly speculative undertaking and entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we will continue to incur significant research and development and other expenses related to our ongoing operations. We have financed our operations primarily through our IPO and, before that, private placements of our convertible preferred stock and convertible notes.

We have incurred significant net losses in each period since we commenced operations in June 2017. For the three months ended June 30, 2023 and 2022, we reported net losses of $29.7 million and $32.9 million, respectively. As of June 30, 2023, we had an accumulated deficit of $452.2 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase substantially if and as we:

•conduct preclinical studies and clinical trials for our current and future product candidates;

•continue our research and development efforts, submit INDs and clinically develop our product candidates;

•seek marketing approvals for any product candidates that successfully complete clinical trials;

•experience any delays or encounter any issues with any of the above, including but not limited to failed studies, negative or mixed clinical trial results, safety issues or other regulatory challenges, the risk of which in each case may be exacerbated by COVID-19 or another health epidemic or pandemic;

•establish a sales, marketing and distribution infrastructure and establish manufacturing capabilities, whether alone or with third parties, to commercialize product candidates for which we may obtain regulatory approval, if any;

•obtain, expand, maintain, enforce and protect our intellectual property portfolio; and

•hire additional clinical, regulatory and scientific personnel.

Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses we will incur or when, if ever, we will be able to achieve profitability. Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to develop, seek regulatory approval for and potentially market our product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability, if ever, to generate revenue from our product candidates. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity (deficit) and working capital.

We have not generated any revenue from our product candidates and may never be profitable.

Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from any of our product candidates. We do not expect to generate significant revenue unless or until we successfully complete clinical development and obtain regulatory approval of, and then successfully commercialize, our product candidates. Lanraplenib and KB-0742 are our only product candidates in the clinical stage of development. In addition, all of our product candidates will require additional clinical development, regulatory review and approval, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. Our ability to generate revenue from our product candidates depends on a number of factors, including, but not limited to:

•timely completion of our preclinical studies and ongoing and planned clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors;

•our ability to complete IND-enabling studies and successfully submit and receive authorizations to proceed under INDs or comparable applications;

•whether we are required by the FDA or similar foreign regulatory authorities to conduct additional clinical trials or other studies beyond those planned to support the potential approval and commercialization of our product candidates or of any future product candidates;

•our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, potency, purity, efficacy and acceptable risk-benefit profile of our product candidates or any future product candidates and such regulatory authorities’ acceptance of our biomarker-driven development strategy (i.e., our pursuit of approval based on a biomarker rather than a specific cancer indication);

•the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or future product candidates, if any;

•the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities;

•the willingness of physicians, operators of clinics and patients to utilize or adopt any of our product candidates or future product candidates over or to use in combination with alternative or more established therapies, such as intensive chemotherapy and hypomethylating agents (HMAs), to treat AML and MYC-amplified solid tumors and other transcriptionally addicted cancers;

•the actual and perceived availability, cost, risk profile and side effects and efficacy of our product candidates, if approved, relative to existing and future alternative cancer therapies and competitive product candidates and technologies;

•our ability and the ability of third parties with whom we contract to manufacture adequate clinical and commercial supplies of our product candidates or any future product candidates, remain in good standing with regulatory authorities and develop, validate and maintain commercially viable manufacturing processes that are compliant with current good manufacturing practices (cGMPs);

•our ability to successfully develop a commercial strategy and thereafter commercialize our product candidates or any future product candidates in the United States and internationally, if approved for marketing, reimbursement, sale and distribution in such countries and territories, whether alone or in collaboration with others;

•patient demand for our product candidates and any future product candidates, if approved; and

•our ability to establish and enforce intellectual property rights in and to our product candidates or any future product candidates.

Many of the factors listed above are beyond our control and could cause us to experience significant delays or prevent us from obtaining regulatory approvals or commercializing any of our product candidates. Even if we are able to commercialize our product candidates, we may not achieve profitability soon after generating product sales, if ever. If we are unable to generate sufficient revenue through the sale of our product candidates or any future product candidates, we may be unable to continue operations without continued funding.

We will need substantial additional funding. If we are unable to raise capital when needed, we would be compelled to delay, reduce or eliminate our product development programs or commercialization efforts.*

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we progress our ongoing clinical trials and commence our planned clinical trials and any other future clinical trials, and continue our discovery and preclinical development activities to identify new product candidates, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations, and we may need to raise additional funding sooner than expected if we choose to expand more rapidly than we presently anticipate. We cannot be certain that additional funding will be available on acceptable terms, or at all. Further, geopolitical events such as the military action initiated by Russia against Ukraine (and responses by the United States and certain other countries, including significant sanctions and trade actions against Russia), inflation, high interest rates, bank failures, a resurgence of COVID-19 or another health epidemic or pandemic, could adversely affect the economy and financial markets in general and our ability to raise additional capital. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of public or private equity offerings, debt financings, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate our discovery, preclinical and clinical development programs or any future commercialization efforts.

We had cash, cash equivalents, and investments of $219.7 million as of June 30, 2023. We believe that, based upon our current operating plan, our existing capital resources will enable us to fund our planned operating expenses and capital expenditure requirements into the second quarter of 2025. However, we have based this estimate on our current development plans and assumptions that may prove to be wrong. Additionally, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control, including as a result of global supply chain issues, inflation, high interest rates, bank failures, a resurgence of COVID-19 or another health epidemic or pandemic. In any event, our future capital requirements will depend on many factors, including:

•the scope, progress, results and costs of our ongoing Phase 1/2 clinical trial of KB-0742;

•the scope, progress, results and costs of our ongoing Phase 1b/2 clinical trial of lanraplenib;

•the costs associated with the close out of the discontinued Phase 3 AGILITY trial of entospletinib;

•the scope, progress, results and costs of discovery, preclinical development and clinical trials for our other product candidates;

•the costs, timing and outcome of regulatory review of our product candidates and any required companion diagnostic;

•the extent to which we develop, in-license or acquire other pipeline product candidates or technologies;

•the costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

•the costs associated with completing any post-marketing studies or trials required by the FDA or other regulatory authorities;

•revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;

•the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining, enforcing and protecting our intellectual property rights and defending intellectual property-related claims; and

•to the extent we pursue strategic collaborations, including collaborations to commercialize any of our product candidates or any companion diagnostic collaborations, our ability to establish and maintain collaborations on favorable terms, if at all.

We will require additional capital to complete our clinical development programs for our current product candidates to obtain regulatory approval. Any additional capital-raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future product candidates, if approved.

Risks Related to the Discovery and Development of our Product Candidates

We have a limited operating history and face significant challenges and will incur substantial expenses as we build our capabilities.*

We were incorporated in June 2017 and acquired certain rights to lanraplenib and other orally bioavailable small molecule SYK inhibitors from Gilead in July 2020. We have a limited operating history and are subject to the risks inherent in a growing company, including, among other things, risks that we may not be able to hire sufficient qualified personnel and establish operating controls and procedures. We currently do not have complete in-house resources to enable our operations. As we continue to build our capabilities, we expect to encounter risks and uncertainties frequently experienced by growing companies in new and rapidly evolving fields. If we are unable to continue to build our capabilities, our operating and financial results could differ materially from our expectations, and our business could suffer.

We cannot be certain that the clinical trials of our product candidates, including our ongoing Phase 1/2 clinical trial of KB-0742, our only internally generated product candidate, and our Phase 1b/2 clinical trial of lanraplenib will be completed when we currently expect, or at all.

We may not realize the benefits of our asset acquisition from Gilead or any future acquisitions or strategic transactions.*

In the third quarter of 2020, we completed the transfer from Gilead of a portfolio of selective, orally bioavailable small molecule SYK inhibitors, including entospletinib and lanraplenib. After a review of enrollment, we made the decision to close our Phase 3 trial of entospletinib to further enrollment in the fourth quarter of 2022. In this assessment, we projected significant delays due to several factors, including the operational challenges we faced enrolling a genetically defined subset of patients in the frontline setting, the impacts of COVID-19 on clinical trial site staffing and the loss of access to planned clinical trial sites in Ukraine and Russia. Patients who had already enrolled in the Phase 3 study were able to complete their course of treatment. With respect to lanraplenib, it is possible that we will encounter challenges with integrating the data and technology, along with the related regulatory materials, related to this acquired product candidate into our business. In such event, our clinical development plans related to this acquired SYK product candidate, including our ongoing Phase 1b/2 clinical trial of lanraplenib in a genetically defined subset of AML patients, or the associated or subsequent regulatory filings, could be delayed or otherwise adversely affected.

In addition, we may acquire other businesses, products or technologies as well as pursue joint ventures or investments in complementary businesses. The success of our SYK portfolio acquisition from Gilead, and any future acquisitions or strategic transactions depends on the risks and uncertainties involved including, but not limited to, the following:

•unanticipated liabilities related to acquired assets, companies or joint ventures;

•difficulties integrating acquired personnel, technologies and operations into our existing business;

•retention of key employees;

•diversion of management time and focus from operating our business to management of strategic alliances or joint ventures or acquisition integration challenges;

•increases in our expenses and reductions in our cash available for operations and other uses;

•disruption in our relationships with collaborators or suppliers as a result of such a transaction; and

•possible write-offs or impairment charges relating to acquired assets, businesses or joint ventures.

If any of these risks or uncertainties occur, we may not realize the anticipated benefit of any acquisition or strategic transaction. Additionally, foreign acquisitions and joint ventures are subject to additional risks, including those related to integration of operations across different cultures and languages, currency risks, potentially adverse tax consequences of overseas operations and the particular economic, political and regulatory risks associated with specific countries.

Future acquisitions or dispositions could also result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition.

Our discovery and development activities are focused on novel cancer therapeutics for patients with genetically-defined cancers and it is difficult to predict the time and cost of product candidate development and the likelihood of obtaining regulatory approval.*

The discovery and development of novel cancer therapeutics by targeting dysregulated transcription using a biomarker-driven precision medicine strategy is an emerging field, and the scientific discoveries that form the basis for our efforts to discover and develop product candidates are relatively new. The scientific evidence to support the feasibility of developing product candidates based on these discoveries is both preliminary and limited. Although we believe, based on our preclinical work, and the data for lanraplenib and entospletinib generated in clinical trials conducted by Gilead, the TRNs targeted by our programs drive oncogenic activity, future clinical results may not confirm this hypothesis or may only confirm it for certain mutations or certain tumor types. The patient populations for our product candidates are limited to those with cancers that exhibit specific target mutations that we believe serve as a genomic biomarker of transcription factor dysregulation, and may not be completely defined but are substantially smaller than the general treated cancer population. We will need to screen and identify those patients who have the targeted mutations. Successful identification of patients is dependent on several factors, including achieving certainty as to how specific genetic alterations respond to our product candidates and developing or otherwise obtaining access to satisfactory companion diagnostics to identify such genetic alterations. Furthermore, even if we are successful in identifying patients, we cannot be certain that the resulting patient populations for each mutation will be large enough to allow us to successfully obtain approval for each mutation type and commercialize our products and achieve profitability. In any event, we do not know if our approach of treating patients with genetically defined cancers will be successful, and if our approach is unsuccessful, our business will suffer and you may lose all or part of your investment.

In addition, we are pursuing a biomarker-driven development strategy (i.e., pursuing regulatory approval based on efficacy of our product candidates in a biomarker-defined subset of patients with a specific cancer indication, rather than all such patients who suffer from a specific cancer indication). There are currently a limited number of approved biomarker-specific therapies. We may not receive approval for a biomarker-specific indication or may be delayed in receiving biomarker-specific approval.

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 are unable to predict when or if our products candidates will prove effective or safe in humans or will obtain marketing approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim or preliminary results of a clinical trial do not necessarily predict final results. It is not uncommon to observe results in clinical trials that are unexpected based on preclinical studies and early clinical trials, and many product candidates fail in clinical trials despite very promising early results. Moreover, preclinical and clinical data may be susceptible to varying interpretations and analyses. A number of companies in the biopharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to obtain marketing approval or commercialize our product candidates, including:

•regulators or institutional review boards (IRBs)/ethics committees (ECs) may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

•we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts with prospective trial sites;

•clinical trials for our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials, delay clinical trials or abandon product development programs;

•the number of patients required for clinical trials for our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or the duration of these clinical trials may be longer than we anticipate;

•competition for clinical trial participants from investigational and approved therapies may make it more difficult to enroll patients in our clinical trials;

•third-party collaborators may undergo a change of control, thus delaying progression of a clinical trial;

•we or potential future third-party collaborators may fail to obtain the clearance or approval of any required companion diagnostic on a timely basis, or at all;

•our third-party contractors, including those developing companion diagnostic tests, may fail to meet their contractual obligations to us in a timely manner, or at all, or may fail to comply with regulatory requirements;

•we may have to suspend or terminate clinical trials for our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;

•our product candidates may have undesirable or unexpected side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs/ECs to suspend or terminate the trials;

•the cost of clinical trials for our product candidates may be greater than we anticipate;

•the supply or quality of our product candidates or other materials necessary to conduct clinical trials for our product candidates may be insufficient or inadequate and result in delays or suspension of our clinical trials; and

•we or potential future third-party collaborators may fail to receive regulatory approval of a companion diagnostic for one or more of our product candidates, or for use with a marketed product.

Our product development costs will increase if we experience delays in preclinical studies or clinical trials or in obtaining marketing approvals. We do not know whether any of our planned preclinical studies or clinical trials will begin on a timely basis or at all, will need to be restructured or will be completed on schedule, or at all.

Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

Any delays in the commencement or completion, or termination or suspension, of our planned or future clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.*

Before we can initiate clinical trials of a product candidate in any indication, we must submit the results of preclinical studies to the FDA along with other information, including information about the product candidate’s chemistry, manufacturing and controls and our proposed clinical trial protocol, as part of an IND or similar regulatory submission under which we must receive authorization to proceed with clinical development.

Before obtaining marketing approval from the FDA of any product candidate in any indication, we must conduct extensive clinical studies to demonstrate safety and efficacy. Clinical testing is expensive, time consuming and uncertain as to outcome. In addition, we expect to rely in part on preclinical, clinical and quality data generated by our 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 are required to submit an IND to the FDA, which must be cleared prior to initiating any clinical trials in the United States, for our preclinical product candidates.

The FDA may require us to conduct additional preclinical studies for any product candidate before it allows us to initiate clinical trials under any IND, which may lead to additional delays and increase the costs of our preclinical development programs.

Any delays in the commencement or completion of our planned or future clinical trials could significantly affect our product development costs. We do not know whether our planned trials will begin on time or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

•obtaining FDA or foreign regulatory authority authorization to commence a clinical trial or reaching a consensus with the FDA or a foreign regulatory authority on clinical trial design;

•failing to obtain regulatory clearance or approval of companion diagnostics we may use to identify patients for enrollment in or test the possible effects of our product candidates in patients enrolled in our clinical trials;

•any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

•obtaining approval from one or more IRBs/ECs;

•IRBs/ECs 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;

•failing to manufacture or obtain sufficient quantities of product candidate or, if applicable, combination therapies for use in clinical trials;

•patients failing to enroll or remain in our trial at the rate we expect, or failing to return for post-treatment follow-up, including patients failing to remain in our trials due to movement restrictions, health reasons or contraction of or concerns associated with an infectious disease, such as COVID-19;

•patients choosing an alternative treatment, or participating in competing clinical trials;

•lack of adequate funding to continue the clinical trial;

•patients experiencing severe or unexpected drug-related adverse effects;

•occurrence of serious adverse events in trials of the same class of agents conducted by other companies;

•selecting or being required to use clinical end points that require prolonged periods of clinical observation or analysis of the resulting data;

•a facility manufacturing our product candidates or companion diagnostics or any of their components being ordered by the FDA or applicable foreign regulatory authorities to temporarily or permanently shut down due to violations of cGMP regulations or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process;

•interruptions to operations of clinical sites, manufacturers, suppliers, or other vendors from geopolitical events, such as the military action initiated by Russia against Ukraine, or from COVID-19 or another health epidemic or pandemic.

•any changes to our manufacturing process that may be necessary or desired;

•third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices (GCP) or other regulatory requirements;

•us, or our third-party contractors not performing data collection or analysis in a timely or accurate manner or improperly disclosing data prematurely or otherwise in violation of a clinical trial protocol;

•third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications; or

•disruptions caused by health epidemics or pandemics, which may increase the likelihood that we encounter difficulties or delays in initiating, enrolling, conducting or completing our ongoing or planned clinical trials.

In addition, our proposal for new or emerging biomarker surrogate endpoints may result in data that is not accepted by certain regulatory bodies or industry professionals, or if such endpoints are later found to be insufficient to establish clinical efficacy, may require us to change the design of our clinical trials. Moreover, we may fail to adequately explore and identify optimal doses for later stage trials and thereby add time and expense to development programs or lead to unnecessary conclusions of lack of effect for a product candidate.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs/ECs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA or foreign regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a pharmaceutical, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs/ECs for reexamination, which may impact the costs, timing or successful completion of a clinical trial.

We may also experience delays if our current or planned clinical trials are impacted by geopolitical, economic or military instability. For example, we had anticipated utilizing clinical trial sites in Ukraine and Russia for our Phase 3 clinical trial of entospletinib in combination with intensive chemotherapy in AML patients with NPM1 mutations. However, due to the military conflict in the region, we revised our plans to open clinical trial sites in the region and were planning to utilize clinical trial sites in other countries. The failure to identify and operationalize alternative clinical sites contributed to delays in enrollment for this trial.

Certain of our current or future scientific advisors or consultants who receive compensation from us may become investigators for our future clinical trials. Under certain circumstances, we may be required to report some of these relationships to the FDA. Although we expect any such relationships to be within the FDA’s guidelines, the FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected the interpretation of the study. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of our product candidates. If we experience delays in the completion of, or termination of, any clinical trial, the commercial prospects of such product candidate will be harmed, and our ability to generate product revenues will be delayed. Moreover, any delays in completing our clinical trials will increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and generate revenues which may harm our business, financial condition, results of operations and prospects significantly.

If we experience delays or difficulties in enrolling patients in our ongoing or planned clinical trials, regulatory approval could be delayed or we could fail to obtain regulatory approval.*

We may not be able to initiate or continue our ongoing or planned clinical trials for our product candidates if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA. In addition, some of our competitors may have ongoing clinical trials for product candidates that would treat the same or a similar patient population as we plan to treat with our product candidates in clinical trials, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.

We are conducting a Phase 1/2 clinical trial of KB-0742 in patients with cancer to evaluate the safety, pharmacokinetics (PK) and pharmacodynamics (PD) of the compound across multiple dose levels. Patients with these tumor types are relatively rare, and we may be unable to enroll or maintain a sufficient number of these patients in any such cohort, which could adversely affect our development and registration strategy for KB-0742.

Our Phase 3 trial of entospletinib in NPM1-mutated AML patients was discontinued in part due to the difficulties in identifying the small number of patients with this mutation, including the time required for screening diagnostics when physicians and patients have an urgency to begin treatment for their AML. We may encounter similar risks in future trials of our product candidates, which may result in delays and potentially the discontinuation of such trials.

Patient enrollment is also affected by other factors, including:

•severity of the disease under investigation;

•our ability to recruit clinical trial investigators of appropriate competencies and experience;

•the incidence and prevalence of our target indications;

•clinicians’ and patients’ awareness of, and perceptions as to the potential advantages and risks of our product candidates in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;

•invasive procedures required to enroll patients and to obtain evidence of the product candidate’s performance during the clinical trial;

•availability and efficacy of approved medications for the disease under investigation;

•eligibility criteria defined in the protocol for the trial in question;

•the size of the patient population required for analysis of the trial’s primary endpoints;

•efforts to facilitate timely enrollment in clinical trials;

•whether we are subject to a partial or full clinical hold on any of our clinical trials;

•reluctance of physicians to encourage patient participation in clinical trials;

•the ability to monitor patients adequately during and after treatment;

•our ability to obtain and maintain patient consents;

•proximity and availability of clinical trial sites for prospective patients; and

•our ability to timely activate clinical trial sites and other delays and complications resulting from COVID-19 or another health epidemic or pandemic.

Enrollment in our trials was adversely impacted by COVID-19 as healthcare facilities and patients experienced periodic delays in visits, scheduling and staffing that adversely impacted enrollment. As a result of ongoing global challenges in clinical trial enrollment for our Phase 3 AGILITY clinical trial of entospletinib in combination with intensive chemotherapy in patients with newly diagnosed NPM1-mutated AML, we closed enrollment in the fourth quarter of 2022 and have discontinued Kronos Bio-led clinical development of entospletinib. Our inability to enroll the required number of patients for our other ongoing and planned clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs, which would cause the value of our company to decline and limit our ability to obtain additional financing.

If adverse side effects or unexpected characteristics are identified during the development of our product candidates, we may need to abandon or limit the development of a product candidate.*

Results of our ongoing or planned clinical trials, including those for lanraplenib and KB-0742, could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by our product candidates could result in the delay, suspension or termination of clinical trials by us or the FDA or foreign regulatory authorities for a number of reasons. Additionally, due to the high mortality rates of the cancers for which we are initially pursuing development of lanraplenib and KB-0742, a significant percentage of patients in these clinical trials may die during a trial, which could impact development of these product candidates. If we elect or are required to delay, suspend or terminate any clinical trial, the commercial prospects of our product candidates will be harmed and our ability to generate product revenues from this product candidate will be delayed or eliminated. Serious adverse events observed in clinical trials could hinder or prevent market acceptance of our product candidates. Any of these occurrences may harm our business, prospects, financial condition and results of operations significantly.

Moreover, if our product candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we may elect to abandon or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial expectations for our product candidates, if approved. We may also be required to modify our study plans based on findings in our clinical trials. Many drugs that initially showed promise in early stage testing have later been found to cause side effects that prevented further development. In addition, regulatory authorities may draw different conclusions or require additional testing to confirm these determinations.

It is possible that as we test our product candidates in larger, longer and more extensive clinical trials, including with different dosing regimens, or as the use of our product candidates becomes more widespread following any regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. If such side effects become known later in development or upon approval, if any, such findings may harm our business, financial condition, results of operations and prospects significantly.

In addition, if any of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by treatment with such drug, a number of potentially significant negative consequences could result, including:

•regulatory authorities may withdraw or limit their approval of the product;

•we may be required to recall a product or we may voluntarily remove it from the marketplace;

•we may be required to change the way the product is administered to patients or conduct additional clinical trials;

•regulatory authorities may require additional warnings on the label, such as a “black box” warning or a contraindication, or issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;

•we may be required to implement a Risk Evaluation and Mitigation Strategy (REMS) or create a medication guide outlining the risks of such side effects for distribution to patients;

•additional restrictions may be imposed on the marketing or promotion of the particular product or the manufacturing processes for the product or any component thereof;

•we could be sued and held liable for harm caused to patients;

•the drug could become less competitive; and

•our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates, if approved, and could significantly harm our business, financial condition, results of operations and prospects.

Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available, and are subject to audit and verification procedures that could result in material changes in the final data.*

From time to time in the future, we may publicly disclose preliminary, interim or topline data from our ongoing or planned clinical trials. These updates are typically based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial or following the completion of such clinical trial or stage of such clinical trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, topline or preliminary results that we may report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Interim, topline and preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, such data should be viewed with caution until the final data are available. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Interim, topline, or preliminary data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse changes between interim data and final data could significantly harm our business and prospects. Further, additional disclosure of interim, topline or preliminary data by us or by our competitors in the future could result in volatility in the price of our common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a more extensive amount of available information. You or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a

particular drug, product candidate or our business. If the interim, topline or preliminary data that we report differ from late, final or actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, financial condition, results of operations and prospects.

If we are unable to successfully develop companion diagnostic tests for our product candidates that require such tests, experience significant delays in doing so, or are unable to obtain any necessary FDA approvals of such tests, we may not be able to obtain approval for our product candidates, may be delayed in doing so, or may not realize the full commercial potential of these product candidates.*

In developing a product candidate for certain indications, we may decide to use a biomarker-based test to identify patients for enrollment or monitor patients in clinical trials. For example, we are used a biomarker-based test to identify patients for enrollment in our discontinued registrational Phase 3 clinical trial of entospletinib in combination with intensive chemotherapy for the treatment of AML patients with NPM1 mutations, and would plan to use a biomarker-based test to identify patients for enrollment if lanraplenib moves into a registrational Phase 3 trial. If the FDA determines that a companion diagnostic device is essential to the safe and effective use of a novel therapeutic product or indication, the FDA generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic is not also approved or cleared for that indication. The FDA generally requires contemporaneous approvals of a new companion diagnostic with the proposed therapeutic. To date, the FDA has required premarket approval of all companion diagnostics for cancer therapies. As such, if a satisfactory companion diagnostic is not commercially available, we may be required to create or obtain one that would be subject to regulatory approval or clearance requirements.

We plan to develop, either by ourselves or with collaborators, companion diagnostic tests for our product candidates for certain indications, which will include lanraplenib for the treatment of AML patients with FLT3 mutations. To be successful, we or our collaborators will need to address a number of scientific, technical, regulatory and logistical challenges. Companion diagnostics are regulated as medical devices, and we have no prior experience with medical device or diagnostic test development. If we choose to or are required to develop and seek FDA approval for companion diagnostic tests on our own, we will require additional personnel. We may rely on third parties for the design, development and manufacture of companion diagnostic tests for our product candidates that require such tests. If these parties are unable to successfully develop companion diagnostics for these product candidates, or experience delays in doing so, we may be unable to enroll enough patients for our current and planned clinical trials, the development of these product candidates may be adversely affected, these product candidates may not obtain marketing approval, and we may not realize the full commercial potential of any of these products that obtain marketing approval. As a result, our business, results of operations and financial condition could be materially harmed.

COVID-19 has adversely impacted, and any future health epidemic or pandemic may adversely impact, our business, including our ongoing or planned clinical trials.

COVID-19 has caused, and a resurgence of COVID-19 or another health epidemic or pandemic may cause, significant disruptions that could severely impact our business, including:

•delays or difficulties in screening and enrolling patients in our ongoing and planned clinical trials;

•delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff, such as the challenges we experienced with clinical site staffing for our Phase 3 AGILITY trial of entospletinib;

•diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

•inability or unwillingness of subjects to travel to the clinical trial sites;

•delays or difficulties in data collection and analysis and other related activities;

•decreased implementation of protocol-required clinical trial activities and quality of source data verification at clinical trial sites;

•interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;

•limitations in employee resources that would otherwise be focused on the conduct of our clinical trials and our other research and development activities, including because of sickness of employees or their families or mitigation measures such as lock-downs and social distancing;

•delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

•delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;

•interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical trials;

•changes in local regulations as part of a response to a resurgence of COVID-19 or another health epidemic or pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, delays, or to discontinue the clinical trials altogether;

•delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;

•refusal of the FDA or foreign regulatory authorities to accept data from clinical trials in affected geographies; and

•adverse impacts on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our ability to raise additional capital when needed.

Such disruptions could impede, delay, limit or prevent completion of our preclinical studies or commencement or the continuation of ongoing, planned or future clinical trials and ultimately lead to the delay or denial of regulatory approval of our product candidates, which would seriously harm our operations and financial condition and increase our costs and expenses. In addition, we also experienced delays in our discovery and development activities as a result of the COVID-19 pandemic, primarily due to temporary and partial shutdowns at certain of our CROs that have since resumed normal operations, and due to the previous California and Massachusetts stay-at-home orders where our operations are located. Future stay-at-home orders could result in additional delays or otherwise negatively impact our discovery and development activities. A resurgence of COVID-19 or another health epidemic or pandemic could also affect the business of the FDA or other health authorities which could result in delays in meetings related to our ongoing and planned clinical trials and ultimately of reviews and approvals of our product candidates.

The extent to which a resurgence of COVID-19 or another health epidemic or pandemic may impact our business, preclinical development activities and ongoing and planned clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate duration and severity of the public health crisis, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Our approach to the discovery and development of product candidates is unproven, and we may not be successful in our efforts to use and further develop our product engine to expand our pipeline of product candidates with commercial value.

A key element of our strategy is to use our product engine to further develop our pipeline of product candidates and progress these product candidates through clinical development and ultimately achieve approval for the treatment of various cancers by focusing on dysregulated transcription factors and the TRNs through which they drive oncogenic activity. The discovery and development activities that we are conducting may not be successful in developing product candidates that are useful in treating cancer or other diseases.

With respect to internally developed product candidates, our research and development efforts to date have resulted in our discovery and preclinical development of KB-0742 as well as several early-stage discovery programs. KB-0742 may not be safe or effective as a cancer treatment and, with respect to our early-stage discovery programs, we may not identify suitable product candidates for preclinical or clinical development. Our product engine may not be successful in generating additional contributions to our pipeline of product candidates. For example, we may not be successful in identifying novel product candidates that can selectively modulate oncogenic TRNs. Even if we are successful in building our pipeline of product candidates, the potential product candidates that we identify may not be suitable for clinical development or generate acceptable clinical data, including as a result of being shown to have unacceptable toxicity or other characteristics that indicate that they are unlikely to be products that will receive marketing approval from the FDA or other regulatory authorities or achieve market acceptance. If we do not successfully develop and commercialize product candidates, we will not be able to generate product revenue in the future, which likely would result in significant harm to our financial position and adversely affect our stock price.

As a company, we have not completed any clinical trials to date.*

We have not as a company completed any clinical trials to date. We therefore cannot be certain that our ongoing Phase 1/2 clinical trial of KB-0742 or our ongoing Phase 1b/2 trial of lanraplenib will be completed on time, if at all. In addition, COVID-19 may continue to create additional challenges in initiating, enrolling or conducting such clinical trials.

In addition, large-scale clinical trials require significant financial and management resources and reliance on third-party clinical investigators, CROs, CMOs and consultants. Relying on third-party clinical investigators, CROs, CMOs and consultants may force us to encounter delays that are outside of our control. We may be unable to identify and contract with sufficient investigators, CROs, CMOs and consultants on a timely basis, or at all.

Because of the relatively small number of patients that are being or are planned to be dosed in our Phase 1/2 trials of KB-0742 and lanraplenib, the results from such clinical trials, if completed, may be less reliable than results achieved in larger clinical trials, which may hinder our efforts to further develop and obtain regulatory approval for these product candidates.*

In our Phase 1/2 clinical trial of KB-0742, we are evaluating the safety, PK and PD profile of KB-0742 in patients with advanced solid tumors, and are continuing to dose escalate. In our Phase 1b/2 clinical trial of lanraplenib, we are evaluating the safety, PK and PD profile of lanraplenib in combination with gilteritinib in patients with FLT3-positive relapsed/refractory AML, and we plan to define an optimal dose and schedule. Though enrollment is still ongoing in both trials, the total number of patients we expect to enroll in these clinical trials will be significantly smaller than the number of patients that would need to be enrolled in a registrational or other late-stage clinical trial. The results of clinical trials with smaller sample sizes, such as our ongoing Phase 1/2 clinical trial of KB-0742 and our ongoing Phase 1b/2 trial of lanraplenib, can be disproportionately influenced by various biases associated with the conduct of small clinical trials, such as the potential failure of the smaller sample size to accurately depict the features of the broader patient population, which limits the ability to generalize the results across a broader community, thus making the clinical trial results less reliable than clinical trials with a larger number of patients. As a result, there may be less certainty that such product candidates would achieve a statistically significant effect in any future clinical trials. If we conduct any future clinical trials of KB-0742 or lanraplenib, we may not achieve a statistically significant result or the same level of statistical significance, if any, that we might have anticipated based on the results observed in our initial Phase 1/2 clinical trial.

Risks Related to the Commercialization of Our Product Candidates

If the market opportunities for our product candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, it will adversely affect our revenue potential and ability to achieve profitability.*

The total addressable market opportunity for our product candidates will ultimately depend upon, among other things, the final label for each product candidate, acceptance by the medical community and patient access, drug and any related companion diagnostic pricing and reimbursement. The number of patients in our targeted commercial markets and elsewhere may turn out to be lower than expected, patients may not be amenable to treatment with our products, or new patients may become increasingly difficult to identify, all of which would adversely affect our results of operations and our business.

The market opportunities for certain of our product candidates may be relatively small as they may be limited to those patients who are ineligible for or have failed prior treatments and our estimates of the prevalence of our target patient populations may be inaccurate.*

Cancer therapies are sometimes characterized as first line, second line, or third line, and the FDA often approves new therapies initially only for a particular line of use. When cancer is detected early enough, first line therapy is sometimes adequate to cure the cancer or prolong life without a cure. Whenever first line therapy, usually chemotherapy, antibody drugs, tumor-targeted small molecules, hormone therapy, radiation therapy, surgery, or a combination of these, proves unsuccessful, second line therapy may be administered. Second line therapies often consist of more or different chemotherapy, radiation, antibody drugs, tumor-targeted small molecules, or a combination of these. Third line therapies can include chemotherapy, antibody drugs and small molecule tumor-targeted therapies, more invasive forms of surgery and new technologies. In some instances we may initially seek approval of our product candidates as a second- or third-line therapy. Subsequently, for those product candidates that prove to be sufficiently safe and beneficial, if any, we would expect to seek approval as a second line therapy and potentially as a first line therapy, but there is no guarantee that our product candidates, even if approved as a second or third or subsequent line of therapy, would be approved for an earlier line of therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.

Our projections of both the number of people who have the cancers we are targeting, who may have their tumors genetically sequenced, as well as the subset of people with these cancers in a position to receive a particular line of therapy and who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations or market research, and may prove to be incorrect. Further, new therapies may change the estimated incidence or prevalence of the cancers that we are targeting. Consequently, even if our product candidates are approved for a second or third line of therapy, the number of patients that may be eligible for treatment with our product candidates may turn out to be much lower than expected. In addition, we have not yet conducted market research to determine how treating physicians would expect to prescribe a product that is approved for multiple tumor types if there are different lines of approved therapies for each such tumor type.

Even if any of our product candidates are approved, they may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.*

The degree of market acceptance of any of our approved product candidates will depend on a number of factors, including:

•the efficacy and safety profile as demonstrated in clinical trials compared to alternative treatments, as well as other perceived advantages and disadvantages;

•the approval, availability, market acceptance, and reimbursement of any companion diagnostic;

•the timing of market introduction of the product candidate as well as competitive products;

•the clinical indications for which the product candidate is approved;

•restrictions on the use of our product candidates, such as boxed warnings or contraindications in labeling, or a REMS, if any, which may not be required of alternative treatments and competitor products;

•the ability to offer the product candidate for sale at competitive prices;

•the availability of coverage and adequate reimbursement by third-party payors, including government authorities;

•acceptance by hospital pharmacy and therapeutics committees in the U.S., E.U., and other geographies;

•the availability of the approved product candidate for use as a combination therapy, where applicable;

•the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

•the strength of marketing and distribution support;

•unfavorable publicity relating to our products or product candidates or similar approved products or product candidates in development by third parties; and

•the approval of other new therapies for the same indications.

If any of our product candidates is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate or derive sufficient revenue from that product candidate and our financial results could be negatively impacted.

We currently have no marketing and sales organization and have no experience as a company in marketing products. If we are unable to establish and maintain marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, if approved, we may not be able to generate product revenue.

We currently have no sales, marketing, or distribution capabilities and have no experience as a company in marketing products. We currently intend to build a commercial infrastructure to support sales of our product candidates. We expect to manage sales, marketing, market access and distribution through internal resources and third-party relationships. We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing, market access and sales personnel. While we may commit significant financial and management resources to commercial activities, we will also consider collaborating with one or more pharmaceutical companies to enhance our commercial capabilities.

If we are unable or decide not to establish internal sales, marketing and distribution capabilities in the United States, or any other geographic regions, we will pursue arrangements with third-party sales, marketing, and distribution collaborators regarding the sales and marketing of our products, if approved. However, there can be no assurance that we will be able to establish or maintain such arrangements on favorable terms or if at all, or if we are able to do so, that these third-party arrangements will provide effective sales forces or marketing and distribution capabilities. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.

There can be no assurance that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any product in the United States or overseas.

Product liability lawsuits could cause us to incur substantial liabilities and could limit the commercialization of any product candidates that we develop.

Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in an FDA, EMA or other regulatory authority investigation of the safety and effectiveness of our products, our manufacturing processes and facilities or our marketing programs. FDA, EMA or other regulatory authority investigations could potentially lead to a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources and substantial monetary awards to trial participants or patients. We currently have product liability insurance that we believe is appropriate for our stage of development and may need to obtain higher levels prior to marketing any of our product candidates, if approved. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have an adverse effect on our business and financial condition.

Any product candidates we develop may become subject to unfavorable third-party coverage and reimbursement policies, third-party reimbursement practices, or health care reform initiatives, which could harm our business.

The availability and extent of coverage and adequate reimbursement by third-party payors, including government health administration authorities, private health coverage insurers, managed care organizations and other third-party payors is essential for most patients to be able to afford expensive treatments. Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of our product candidates will be covered and reimbursed by third-party payors. If coverage is not available, or is available only to limited indications or strict coverage criteria, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize an adequate return on our investment. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval. In addition, companion diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, will apply to companion diagnostics.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs will be covered and reimbursed. The Centers for Medicare & Medicaid Services (CMS), an agency within the U.S. Department of Health and Human Services (HHS) responsible for administering the Medicare program, determines whether and to what extent a new product will be covered and reimbursed under Medicare. One third-party payor’s determination to provide coverage for a drug product, however, does not assure that other payors will also provide coverage for the product. As a result, the coverage determination process is often time-consuming and costly. This process may require us to provide scientific and clinical support for the use of our products to each third-party payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be available, which may impact physician utilization.

Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Further, such payors are increasingly challenging the price, examining the medical necessity and reviewing the cost effectiveness of medical product candidates. There may be significant delays in obtaining coverage and reimbursement for newly approved drugs. Third-party payors may limit coverage to specific product candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication. We may need to conduct expensive pharmacoeconomic studies to demonstrate the medical necessity and cost effectiveness of our products. Nonetheless, our product candidates may not be considered medically necessary or cost effective. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of therapeutics such as our produc