Zentalis Pharmaceuticals, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied filing text does not provide a clear standalone fourth-quarter income statement or cash-flow summary.
Business context
Zentalis is a clinical-stage oncology company with no approved products and no product-sales revenue. Its lead clinical programs are azenosertib (Wee1 inhibitor) and ZN-d5 (BCL-2 inhibitor); a BCL-xL degrader was in IND-enabling studies. The company relies on third parties for manufacturing and clinical-trial activities.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $172.7 million | $175.6 million |
| General and administrative expense | $54.6 million | $40.9 million |
| Total operating expenses | $227.3 million | $216.5 million |
| Net loss | $237.1 million | $166.1 million |
| Net loss attributable to Zentalis | $236.8 million | $158.7 million |
| Net loss per share, basic and diluted | $4.48 | $3.72 |
| Net cash used in operating activities | $163.8 million | $154.1 million |
| Net cash used in investing activities | $114.2 million | $18.1 million |
| Net cash provided by financing activities | $261.0 million | $178.5 million |
At December 31, 2022, cash and cash equivalents were $43.1 million and available-for-sale marketable securities were $394.3 million, totaling $437.4 million. Total assets were $539.3 million, total liabilities $105.3 million, and total equity $434.0 million. The company reported no indebtedness. Lease liabilities totaled $47.3 million, including $2.2 million current and $45.2 million long-term.
Changes versus the prior year
- Net loss attributable to Zentalis increased $78.1 million. Higher G&A expense and a $16.3 million equity-method investment loss contributed; FY2021 had a $51.6 million gain from deconsolidating Zentera that did not recur.
- R&D expense declined $2.9 million, mainly because FY2021 included $10.0 million of milestone payments and an $8.8 million in-process R&D impairment. Lower manufacturing costs were partly offset by higher clinical-trial and personnel costs.
- G&A expense rose $13.6 million, including higher employee-related, facilities, software, consulting and legal costs.
- Operating cash use increased $9.7 million. Financing cash flows included proceeds from the May follow-on offering, the Pfizer direct offering and ATM share sales.
Outlook, commentary and risks
- Management estimated that year-end cash, cash equivalents and marketable securities would fund operating expenses and capital expenditures into the second quarter of 2025. It cautioned that this estimate depends on assumptions and would not fund all activities necessary to complete development of its candidates; additional capital will be needed.
- No formal financial revenue or earnings guidance was provided. The filing described planned 2023 development updates, including azenosertib dose optimization and a monotherapy recommended Phase 2 dose in the first half of 2023, and planned ZN-d5 trial updates in the second half of 2023.
- Material risks include clinical-trial safety, efficacy and enrollment uncertainty; regulatory and companion-diagnostic requirements; ongoing losses and reliance on future financing; competition; intellectual-property and licensing risks; dependence on CROs and contract manufacturers, including some manufacturing in China; and potential COVID-19, supply-chain, inflation, interest-rate and geopolitical disruption.
- In August 2022, the company discontinued clinical development of ZN-c5 and ZN-e4. In November 2022, it selected a BCL-xL degrader candidate and began IND-enabling work.
- The company reported no material legal proceedings and no material weakness in internal control over financial reporting. The auditor issued an unqualified opinion on the financial statements and internal controls. Accrued clinical-trial expenses of $32.3 million were identified as a critical audit matter because the accrual relies on estimates and third-party information.
Investor verification checklist
- Review subsequent clinical results, dose-selection decisions, trial timelines and whether early or interim efficacy findings hold up with more complete data.
- Assess the cash runway against actual spending, planned trials and the timing and terms of any additional financing; note the dilution from 2022 equity offerings and ATM sales.
- Verify manufacturing capacity, supply redundancy and exposure to overseas suppliers, as well as progress on companion diagnostics and biomarker validation.
- Examine Zentera’s performance and the carrying value of Zentalis’s 40.3% equity-method investment, alongside related-party licensing terms and obligations.
- Track the $32.3 million clinical-trial accrual and future changes in trial costs, and confirm the assumptions underpinning management’s runway estimate.