Kezar Life Sciences Inc.
03/27/2026 | Press release | Distributed by Public on 03/27/2026 14:16
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in "Special Note Regarding Forward-Looking Statements" and "Risk Factors."
A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 25, 2025.
Overview
We are a clinical-stage biotechnology company developing novel small molecule therapeutics to treat unmet needs in immune-mediated diseases. In October 2025, we announced plans to explore strategic alternatives focused on maximizing stockholder value after being unable to align with the Food and Drug Administration, or FDA, on a potential registrational clinical trial of zetomipzomib, a novel, selective inhibitor of the immunoproteasome in patients with relapsed and refractory autoimmune hepatitis, or AIH. We retained TD Cowen to support the Company through the strategic review process. Following this announcement, we have been implementing a restructuring plan and wind-down of our business operations to focus on strategic alternatives for zetomipzomib development.
Our product candidate, zetomipzomib, is a first-in-class selective immunoproteasome inhibitor in development for the treatment of severe autoimmune diseases of high unmet medical need. We believe that the immunoproteasome is a validated target for the treatment of a wide variety of immune-mediated diseases given its ability to regulate multiple drivers of the inflammatory disease process. Many inflammatory disorders are currently treated one cytokine or cell type at a time, but the immunoproteasome affects a broad spectrum of immune regulators. Based on clinical data generated to date, we believe that zetomipzomib has the potential to address multiple chronic immune-mediated diseases.
Since the commencement of our operations in 2015, we have devoted substantially all of our resources to performing research and development activities in support of our product development efforts, hiring personnel, raising capital to support and expand such activities and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily from the issuance and sale of convertible preferred stock, from public offerings of common stock and pre-funded warrants to purchase common stock as described below, and debt. We acquired exclusive worldwide rights to zetomipzomib and an accompanying library of similar molecules pursuant to a license agreement, or the Onyx License Agreement, with Onyx Therapeutics, Inc., or Onyx, a wholly owned subsidiary of Amgen, Inc. in June 2015. Patent coverage for zetomipzomib extends to at least 2034.
Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates and programs. Our net losses were $56.0 million, $83.7 million and $101.9 million for the years ended December 31, 2025, 2024 and 2023, respectively, and we expect to continue to incur significant losses for the foreseeable future. As of December 31, 2025, we had an accumulated deficit of $490.5 million. We expect operating expenses to continue to decrease over the prior year due to the implementation of reductions in our workforce and suspension of various development efforts.
Recent Developments
On March 6, 2026, we entered into an asset purchase agreement, or the Enodia Agreement, with Enodia Therapeutics SAS, or Enodia, under which Enodia has acquired the assets from our Sec61-based discovery and development program, or the Assets. In connection with the transaction, Enodia assumed liabilities related to certain transferred contracts and from the ownership, use, operation or maintenance of the Assets. The Enodia Agreement does not cover any other of our assets, including any assets related to the zetomizomib program, employee contracts, cash, accounts receivable, real property or equipment.
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While the significant accounting policies are more fully described in Note 2 to our audited financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following critical accounting estimates are most important to understanding and evaluating our reported financial results.
Accrued Research and Development Costs
We record accrued expenses for estimated costs of our research and development activities conducted by third-party service providers, which include the conduct of clinical studies, contract manufacturing activities and preclinical studies. We determine the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with our internal personnel and external service providers as to the progress or stage of completion of trials or services for the services when we have not yet been invoiced or notified of the actual progress and cost. Any payments made in advance of services provided are recorded as prepaid assets, which are expensed as the contracted services are performed. As actual costs become known, we adjust our accrued estimates. 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, the number of patients enrolled and the rate of patient enrollment may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. For the periods presented, we have experienced no material differences between our accrued expenses and actual expenses.
Financial Operations Overview
Collaboration Revenue
We have no products approved for commercial sale and, to date, have not generated any revenue from the sale of products, and we do not expect to generate any revenue from the sale of products in the near future.
Our revenue to date has been generated from the upfront payment pursuant to our collaboration with Everest Medicines II (HK) Limited, or Everest, under our license agreement with them, or the Everest License Agreement. Collaboration revenue consists of revenue received from upfront, milestone and contingent payments received from the strategic partner. We recognize collaboration revenue when the performance obligation is satisfied. In addition to receiving the upfront payment, we may also be entitled to milestones and other contingent payments upon achieving predefined objectives. If a milestone being reached is considered probable of being reached, and if it is probable that a significant revenue reversal would not occur, the associated milestone amount would also be included in the transaction price.
We expect that any collaboration revenue we generate from the Everest License Agreement, and from any future collaboration partners, will fluctuate as a result of the timing and amount of upfront, milestone and other collaboration agreement payments and other factors.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:
•employee-related expenses, which include salaries, benefits and stock-based compensation;
•fees paid to consultants for services directly related to our product development and regulatory effort;
•expenses incurred under agreements with third-party contract organizations, investigative clinical trial sites and consultants that conduct research and development activities on our behalf;
•costs associated with preclinical studies and clinical trials;
•costs associated with technology and intellectual property licenses;
•the costs related to production of clinical supplies; and
•facilities and other allocated expenses, which include expenses for rent and other facility related costs and other supplies.
We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers.
The following table summarizes our research and development expenses for the years ended:
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Year Ended December 31, |
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| 2025 | 2024 | 2023 | |||||||||||||||
| (dollars in millions) | (unaudited) | ||||||||||||||||
| Research and development expenses by program: | |||||||||||||||||
| Zetomipzomib | $ | 31.9 | $ | 54.2 | $ | 56.1 | |||||||||||
| KZR-261 | 1.9 | 11.2 | 15.6 | ||||||||||||||
| Other protein secretion discovery programs | - | 0.3 | 14.0 | ||||||||||||||
| Total research and development expenses | $ | 33.8 | $ | 65.7 | $ | 85.7 | |||||||||||
In August 2024, we made the strategic decision to halt enrollment in our Phase 1 clinical trial of KZR-261 and discontinue development of this product candidate. In October 2024, we made the strategic decision to terminate the PALIZADE Phase 2b clinical trial in patients with active LN and focus our clinical development efforts on zetomipzomib for the treatment of AIH. In October 2025, we initiated a process to explore a full range of strategic alternatives focused on maximizing stockholder value. Due to the suspension of various development efforts related to our programs and the recent reduction in our workforce, we expect our research and development expenses to decrease in 2026.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel expenses, allocated facilities costs and fees for outside consulting and professional services, including legal, human resource, information technology and audit services. Personnel expenses consist of salaries, benefits and stock-based compensation. As a result of the ongoing strategic review and workforce reduction, we expect that our general and administrative expenses will decrease in 2026, and will include costs associated with operating as a public company, including expenses related to legal, audit, accounting, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs, investor and public relations costs, and other administrative and professional services.
Restructuring and Impairment Charges
In October 2025, we announced the initiation of a process to explore a full range of strategic alternatives focused on maximizing stockholder value. In connection with the evaluation of strategic alternatives, we are in the process of implementing a restructuring plan including workforce reduction and other cost-containment and cash conservation measures, pursuant to which we reduced our workforce by approximately 70%.
In October 2023, we announced a strategic restructuring and workforce reduction, or Workforce Reduction, to prioritize our clinical-stage assets and extend our cash runway, reducing our workforce by approximately 40%. All employees affected by the Workforce Reduction separated from the Company by December 31, 2023. In connection with the Workforce Reduction, we committed to a plan to sublease Suite 400 of our corporate headquarters, which resulted in an
impairment to the right-of-use asset and certain property and equipment no longer utilized under then-current or expected future operations.
We recognize an impairment loss when the total estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount. See Note 16 to our consolidated financial statements located elsewhere in this Annual Report on Form 10-K for additional information on the restructuring and impairment charges.
Interest Income
Our interest income consists of interest income earned on our cash, cash equivalents and marketable securities.
Other Expenses
Other expenses consist of interest expense and realized cumulative currency translation loss. Our interest expense is related to our debt facility. A portion of the interest expense is non-cash expense relating to the accretion of the final payment fees and amortization of debt discount and debt issuance costs associated with our loan agreement, or the Loan Agreement, that we entered into in November 2021 with Oxford Finance, LLC, or Oxford Finance. On October 20, 2025, we made a repayment of $6.3 million in full satisfaction of the aggregate outstanding amount, including accrued interest and final payment fee as of such date, under the Loan Agreement. Upon making the repayment, the Loan Agreement was terminated in accordance with its terms and all liens and security interests granted thereunder to secure the obligations were released. As a result, we expect interest expense to decrease in 2026.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
| Year Ended December 31, | Increase (decrease) | ||||||||||||||||
| (dollars in millions) | 2025 | 2024 | |||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | $ | 33.8 | $ | 65.7 | (31.9) | ||||||||||||
| General and administrative | 18.5 | 23.4 | (4.9) | ||||||||||||||
| Restructuring and impairment charges | 6.8 | 1.5 | 5.3 | ||||||||||||||
| Total operating expenses | 59.1 | 90.6 | (31.5) | ||||||||||||||
| Loss from operations | (59.1) | (90.6) | 31.5 | ||||||||||||||
| Interest income | 4.5 | 8.5 | (4.0) | ||||||||||||||
| Other expenses | (1.4) | (1.6) | 0.2 | ||||||||||||||
| Net loss | $ | (56.0) | $ | (83.7) | $ | 27.7 | |||||||||||
Research and Development Expenses
Research and development expenses decreased by $31.9 million in 2025 compared to 2024. The decrease was primarily due to a decrease of $26.3 million in clinical expenses resulting from our strategic decision to terminate the PALIZADE trial in October 2024 and the completion of the PORTOLA trial, a decrease of $4.8 million in personnel-related expenses driven by lower headcount resulting from a corporate restructuring, a decrease of $0.8 million in facility-related expenses and a decrease of $0.7 million in consulting expenses, offset by an increase of $0.7 million in manufacturing expenses related to the timing of drug manufacturing runs.
General and Administrative Expenses
General and administrative expenses decreased by $4.9 million in 2025 compared to 2024. The decrease was primarily due to a decrease of $4.4 million in stock-based compensation and personnel-related expenses driven by lower headcount from
a corporate restructuring, a decrease of $0.3 million in D&O insurance premiums and a decrease of $0.2 million in legal and professional services.
Restructuring and impairment charges
Restructuring and impairment charges increased by $5.3 million in 2025 compared to 2024. The increase was primarily related to one-time severance-related costs and higher impairment costs on certain equipment no longer utilized following a corporate restructuring.
Interest Income
Interest income decreased by $4.0 million in 2025 compared to 2024. The decrease was primarily attributable to the decrease in our cash equivalent and marketable securities balances and lower interest rates.
Other Expenses
Other expenses consist of interest expense and realized cumulative currency translation loss. Our interest expense is related to our prior debt facility. A portion of the interest expense is non-cash expense relating to the accretion of the final payment fees and amortization of debt discount and debt issuance costs associated with our loan agreement, or the Loan Agreement, that we entered into in November 2021 with Oxford Finance, LLC, or Oxford Finance. On October 20, 2025, we made a repayment of $6.3 million in full satisfaction of the aggregate outstanding amount, including accrued interest and final payment fee as of such date, under the Loan Agreement. Upon making the repayment, the Loan Agreement was terminated in accordance with its terms and all liens and security interests granted thereunder to secure the obligations were released. The cumulative currency translation loss of $0.3 million was offset by a decrease of $0.5 million of interest expense due to payoff Oxford loan balance in October 2025.
Liquidity and Capital Resources
Overview
As of December 31, 2025, we had $71.9 million in cash and cash equivalents invested in a U.S. Treasury money market fund.
We have incurred operating losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses for at least the foreseeable future. Our net loss was $56.0 million for the year ended December 31, 2025, and we had an accumulated deficit of $490.5 million as of December 31, 2025.
In October 2025, we announced plans to explore a full range of strategic alternatives focused on maximizing stockholder value. If the process for evaluating strategic alternatives does not result in the Company consummating a transaction or any other strategic outcome, the Board of Directors may decide to pursue a dissolution and liquidation of the Company.
As part of the cost reductions associated with the evaluation of strategic alternatives, we had reduced our workforce by approximately 70%. We expect to continue to incur additional losses in the future to fund our operations as we evaluate strategic alternatives. Failure to manage discretionary spending during this time may adversely impact our ability to achieve our intended business objectives. Based on our current operating plans, including our previously announced reduction in force and suspension of various development efforts, we estimate that our existing cash and cash equivalents as of December 31, 2025 will be sufficient to meet our projected operating requirements through at least the next 12 months from the date the financial statements were issued.
Debt Facility
In November 2021, we entered into the Loan Agreement with Oxford Finance, which provided for up to $50.0 million in borrowing capacity across five potential tranches. The initial tranche of $10.0 million was funded at the closing of the Loan Agreement. The remaining tranches were dependent on achieving certain clinical trial milestones. We had previously declined these tranches. In October 2025, we made a repayment of $6.3 million in full satisfaction of the aggregate
outstanding amount, including accrued interest and final payment fee as of such date, under the Loan Agreement, pursuant to a payoff letter from Oxford Finance. Refer to Note 7 to our condensed consolidated financial statements for additional information.
Funding Requirements
We believe that our available cash and cash equivalents are sufficient to fund existing and planned cash requirements for the next 12 months. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party development services, legal, lease and general overhead costs. We have based our estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we currently expect. We expect that our operating expenses will decrease as we suspended various development efforts and commenced our reductions in force.
Our future funding requirements will depend on many factors, including the following:
•the extent of funding required to finance our streamlined operations and to operate as a public company;
•the extent to which we enter into a strategic transaction; and
•the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
Our expected material cash requirements comprise of contractually obligated expenditures. Our material cash requirements through fiscal year 2026 are expected to total approximately $2.4 million, which represents amounts due under our operating leases. For additional information relating to our leases, see Notes 6 to our audited consolidated financial statements found elsewhere in this Annual Report. We have no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis. Our expected material cash requirements do not include any potential contingent payments upon the achievement by us of clinical, regulatory and commercial events, as applicable, or royalty payments that we may be required to make under license agreements we have entered into or may enter into with various entities pursuant to which we have in-licensed certain intellectual property, including our Onyx License Agreement. See the section titled "Business-License Agreement with Onyx" for additional information.
Cash Flows
Discussion of our cash flow activities for the year ended December 31, 2023 is included in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 25, 2025.
The following summarizes our cash flows for the periods indicated:
| Year Ended December 31, | |||||||||||
| (dollars in millions) | 2025 | 2024 | |||||||||
| Net cash used in operating activities | $ | (51.8) | $ | (74.2) | |||||||
| Net cash provided by investing activities | 92.5 | 80.4 | |||||||||
| Net cash provided by (used in) financing activities | (10.6) | 0.1 | |||||||||
| Net increase in cash and cash equivalents | $ | 30.1 | $ | 6.3 | |||||||
Cash Flows from Operating Activities
During the year ended December 31, 2025, cash used in operating activities was $51.8 million, which consisted of a net loss of $56.0 million and a net change of $5.4 million in our net operating assets and liabilities, adjusted by non-cash charges of $9.7 million. The non-cash charges consisted of $9.0 million for stock-based compensation expense, $0.9 million for impairment loss of long-lived assets, $0.9 million for depreciation, $0.3 million of cumulative currency translation loss, $0.2 million of non-cash interest expense, $0.1 million of loss on debt extinguishment, and $0.3 million of loss on disposition of property and equipment, offset by $2.0 million of amortization of premium and discounts on
marketable securities. The change in our net operating assets and liabilities was primarily due to a decrease of $2.4 million in other assets and a decrease of $1.9 million in prepaid expenses and other current assets, offset by a decrease of $7.3 million in accounts payable and accrued expenses driven by the reduced operating activities following the corporate restructuring in October 2025, and a decrease of $2.4 million in operating lease asset and liabilities
During the year ended December 31, 2024, cash used in operating activities was $74.2 million, which consisted of a net loss of $83.7 million and a net change of $1.3 million in our net operating assets and liabilities, adjusted by non-cash charges of $10.8 million. The non-cash charges consisted of $13.0 million for stock-based compensation expense, $1.5 million for impairment loss of long-lived assets, $1.0 million for depreciation, and $0.3 million of non-cash interest expense, offset by $5.0 million of amortization of premium and discounts on marketable securities. The change in our net operating assets and liabilities was primarily due to a decrease of $3.2 million in other assets and a decrease of $0.3 million in prepaid expenses and other current assets, offset by a decrease of $3.1 million in accounts payable and accrued expenses driven by the timing of payments and reduced clinical expenditures from the termination of PALIZADE clinical trial in October 2024, and a decrease of $1.7 million in operating lease asset and liabilities.
Cash Flows from Investing Activities
During the year ended December 31, 2025, net cash provided by investing activities was $92.5 million primarily relating to the maturities of marketable securities exceeding purchases of such marketable securities.
During the year ended December 31, 2024, net cash provided by investing activities was $80.4 million primarily relating to the maturities of marketable securities exceeding purchases of such marketable securities.
Cash Flows from Financing Activities
During the year ended December 31, 2025, cash used in financing activities was $10.6 million primarily relating to the repayments and payoff of loan principal and final fee associated with the Loan Agreement with Oxford Finance.
During the year ended December 31, 2024, cash provided by financing activities was $0.1 million from the issuance of common stock pursuant to our employee equity plans.
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