Zentalis Pharmaceuticals, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a quarterly filing; selected unaudited quarterly results are included. Zentalis is a clinical-stage oncology biopharmaceutical company with no approved products and no product-sales revenue.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $84.9 million | $38.4 million |
| General and administrative expense | $33.9 million | $8.5 million |
| Total operating expenses / operating loss | $118.8 million | $46.8 million |
| Net loss | $118.5 million | $46.4 million |
| Net loss attributable to Zentalis | $117.8 million | $45.7 million |
| Net loss per common share, basic and diluted | $4.19 loss | Not comparable: LLC units were outstanding |
| Net cash used in operating activities | $86.8 million | $39.1 million |
| Cash, cash equivalents and marketable securities, at year-end | $338.5 million | $67.2 million cash and cash equivalents; no marketable securities reported |
| Debt | None | Not stated in the supplied comparative balance-sheet excerpt |
At December 31, 2020, current assets were $345.1 million and current liabilities were $28.6 million. Stockholders’ equity was $308.6 million; accumulated deficit was $200.8 million. No meaningful operating margin is available because the company had no revenue. Interest and other income was $0.7 million in 2020, versus $0.5 million in 2019.
Unaudited Q4 2020 results included R&D expense of $29.5 million, G&A expense of $10.7 million, operating loss of $40.2 million and net loss of $40.4 million. The filing’s quarterly EPS table is not clearly rendered in the supplied text.
Changes versus 2019
- Net loss increased by $72.2 million, while R&D expense rose $46.5 million and G&A expense rose $25.4 million, primarily reflecting expanded clinical and research activity, higher staffing and public-company costs.
- Share-based compensation increased to $23.1 million from $0.6 million, including $15.9 million in G&A and $7.3 million in R&D.
- Operating cash use increased by $47.7 million. The company also invested $284.1 million net in marketable securities during 2020.
- Financing provided $360.4 million, including net proceeds of approximately $172.4 million from the April IPO and $155.3 million from the August follow-on offering, plus contributions from noncontrolling-interest owners.
Business, outlook and key risks
The pipeline comprised four clinical-stage candidates: ZN-c5 (oral SERD for ER+/HER2− breast cancer), ZN-c3 (WEE1 inhibitor for solid tumors), ZN-d5 (BCL-2 inhibitor for hematologic cancers) and ZN-e4 (mutant EGFR inhibitor for NSCLC). These were investigational therapies; the filing reports no completed clinical trials and no product approvals.
- ZN-c5: Management planned to start Phase 2 monotherapy and palbociclib-combination work in the first half of 2021, report Window of Opportunity study results in that period, and pursue additional combination and earlier-stage studies, subject to FDA feedback. As of June 30, 2020, six of 15 patients in the Phase 1 monotherapy dose-escalation group had stable disease for at least 24 weeks; one patient in the expansion group had a confirmed partial response. These were preliminary, cutoff-date results.
- ZN-c3: Management planned to present Phase 1 monotherapy data in 2021 and initiate a uterine serous carcinoma Phase 2 trial and additional combination trials. As of June 19, 2020, 22 patients had been dosed and no dose-limiting toxicities had been observed; efficacy data were described as premature.
- ZN-d5 and ZN-e4: ZN-d5 entered Phase 1 in 2020; plans included expanding enrollment to AML and evaluating a ZN-c5 combination. ZN-e4 was in Phase 1/2, with topline Phase 1 results expected in 2021. Its cited clinical results were preliminary and based on a February 2020 cutoff.
- Management estimated existing cash, cash equivalents and marketable securities would fund operating expenses and capital expenditure requirements into 2023, but said this would not fund all activities necessary to complete development. The company had no committed external funding source and expected to need additional capital.
- COVID-19 had caused trial-site, enrollment, supply-chain and laboratory disruptions, with further effects and timing uncertain. Other central risks include clinical failure or delay, reliance on CROs and contract manufacturers, limited manufacturing redundancy, competition, intellectual-property and licensing risks, and the need for additional financing.
- The company relied on third-party manufacturers and had no long-term supply arrangements. A San Diego lease not yet commenced carried approximately $85.6 million in minimum lease payments. A March 2021 New York lease added approximately $18.1 million in minimum payments; its stated base rent was about $1.9 million annually for the first five years, subject to abatements and lease terms.
Most important facts for investors to verify
- Whether subsequent trial data support the preliminary efficacy and tolerability signals, and whether planned 2021 milestones were achieved.
- Cash burn, remaining liquidity and the assumptions behind the stated runway into 2023, including the funding gap to complete development.
- The scale and timing of clinical, manufacturing and facility commitments, especially the San Diego and New York leases.
- The effect of share-based compensation and future equity issuance on expenses and dilution.
- Whether COVID-19, enrollment, supply-chain or regulatory developments altered trial timelines or costs after the reporting date.