Zentalis Pharmaceuticals Inc.
03/26/2026 | Press release | Distributed by Public on 03/26/2026 14:47
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 and analysis of financial condition and operating results together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K contains forward-looking statements based upon current plans, expectations and beliefs involving significant risks and uncertainties. As a result of many important factors, including those set forth under "Risk Factors" and elsewhere in this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements. For convenience of presentation some of the numbers have been rounded in the text below.
A discussion regarding our financial condition and results of operations for the years ended December 31, 2025 and 2024, including a year-to-year comparison between 2025 and 2024, is presented below. For a discussion regarding our financial condition and results of operations for the year ended December 31, 2023, including a year-to-year comparison between 2024 and 2023, refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024 filed on March 26, 2025.
Overview
We are a clinical-stage biopharmaceutical company developing azenosertib (ZN-c3), an investigational, potentially first-in-class and best-in-class WEE1 inhibitor, for patients with ovarian cancer and other tumor types. In clinical trials, azenosertib has been well tolerated and has demonstrated anti-tumor activity as a single agent across multiple tumor types. We are currently focused on advancing the clinical development of azenosertib in Cyclin E1-positive platinum-resistant ovarian cancer, or PROC. We believe that our DENALI (ZN-c3-005) Part 2 clinical trial of azenosertib in patients with Cyclin E1-positive PROC, if successful, has the potential to support an accelerated approval, subject to U.S. Food and Drug Administration, or FDA, review. Azenosertib also has broad franchise potential beyond Cyclin E1-positive PROC. We exclusively in-license or solely own worldwide development and commercialization rights to azenosertib.
Azenosertib (WEE1 Inhibitor)
Mechanism of Action
Azenosertib is an investigational, potentially first-in-class and best-in-class oral, small molecule WEE1 inhibitor. The inhibition of WEE1, a DNA damage response kinase, drives cancer cells into mitosis without being able to repair damaged DNA, resulting in cell death and thereby preventing tumor growth and potentially causing tumor regression. We have designed azenosertib to have advantages over other investigational therapies targeting WEE1, including superior selectivity and pharmacokinetic, or PK, properties.
Cyclin E1 Expression as a Sensitive and Specific Predictive Biomarker
Cells with Cyclin E1 activation are exquisitely sensitive to WEE1 inhibition via azenosertib because Cyclin E1 activation further accelerates cancer cells into the DNA replication phase without adequate DNA repair. As a result, we have used retrospective analyses to establish Cyclin E1 as a sensitive and specific predictive biomarker that can be used to identify patients who might benefit from azenosertib. In addition, based on published retrospective analyses, Cyclin E1 alteration is a biomarker of poor prognosis and low benefit from standard-of-care single-agent chemotherapy in PROC patients.
We are working with a diagnostic partner to validate a companion diagnostic test that will identify patients with PROC that overexpress the Cyclin E1 protein using our proprietary immunohistochemistry, or IHC, cutoff. A prototype of this test is being used in DENALI Part 2 and is ready for use in our Phase 3 trial, ASPENOVA.
Market Opportunity
In 2022, the global ovarian cancer market was approximately $3 billion, with significant growth expected over the next several years. PROC is a subset of the ovarian cancer market. Based on our analysis utilizing our IHC cutoff, we estimate that approximately 50% of PROC patients overexpress Cyclin E1 protein, which accounts for approximately 21,500 patients on an annual basis in the United States, EU4 (France, Germany, Italy, Spain) and the United Kingdom, based on 2024 estimates. As a result, we believe there is a large market opportunity for azenosertib in Cyclin E1-positive PROC patients. Moreover, the successful launch of mirvetuximab in PROC patients with high folate receptor alpha, or FRα-high, expression underscores the demand for biomarker-directed therapies for PROC patients. The limited overlap between FRα-high PROC patients and those
that have Cyclin E1 overexpression is estimated to be less than 20%, which highlights the significant unmet need in patients with Cyclin E1-positive PROC.
We believe there is additional market opportunity for azenosertib in earlier lines of treatment for ovarian cancer, and across other solid tumor types.
Clinical Development Program
The following ongoing and planned studies constitute the current clinical development program for azenosertib:
•Monotherapy - Phase 2 Clinical Trial in PROC (DENALI - ZN-c3-005).
◦DENALI Part 1bis a single-arm study that evaluated azenosertib monotherapy at our primary dose-of-interest, 400 mg QD 5:2, in 102 patients with PROC. Tissue collection for biomarker assessment was mandated in the study and upon a retrospective analysis, approximately 50% of the patients were Cyclin E1-positive per our IHC cutoff. In January and March of 2025, we announced clinical data from this study, which is described in Part I Item 1, "Business - Clinical Data - DENALI Part 1b" in this Annual Report on Form 10-K.
◦DENALI Part 2is designed to enroll approximately 100 patients with Cyclin E1-positive PROC at the selected dose who have received one to three prior lines of therapy, or for patients whose tumors are also FRα-high and who have received mirvetuximab soravtansine, one to four prior lines of therapy. We have aligned with the FDA on the design of our DENALI Part 2 study in patients with Cyclin E1-positive PROC, which allows for seamless enrollment across Parts 2a and 2b. DENALI Part 2a is designed to confirm 400 mg QD 5:2 as the recommended pivotal study dose by enrolling approximately 30 patients at each of two dose levels, 400 mg QD 5:2 and 300 mg QD 5:2. DENALI Part 2b is designed to enroll approximately 70 patients at a single dose, the selection of which will be informed by the Part 2a results and FDA interaction. In April 2025, we announced that the first patient was dosed in DENALI Part 2a. In January 2026, we announced that the enrollment for Part 2a was completed in 2025 and we plan to announce dose selection from Part 2a in the first half of 2026. We anticipate a topline readout for DENALI Part 2 by year end 2026. We believe that DENALI Part 2, if successful, has the potential to support an accelerated approval, subject to FDA review. The FDA has granted Fast Track Designation to azenosertib for the treatment of patients with PROC who are positive via IHC for Cyclin E1 protein levels.
•Monotherapy - Phase 3 Clinical Trial in Cyclin E1-positive PROC (ASPENOVA). We have aligned with the FDA on the trial design for ASPENOVA, a randomized Phase 3 confirmatory clinical trial of azenosertib versus standard-of-care chemotherapy for the treatment of patients with Cyclin E1-positive PROC designed to support a full approval of azenosertib in this setting. We plan to initiate ASPENOVA in the first half of 2026 and enroll concurrently with DENALI Part 2b.
•Combination - Phase 1b Clinical Trial of Azenosertib and Chemotherapy or Bevacizumab in Ovarian Cancer (MUIR - ZN-c3-002).We are currently enrolling patients in an arm of our ZN-c3-002 Phase 1b clinical trial that is evaluating azenosertib in combination with bevacizumab as maintenance therapy in ovarian cancer. The dose expansion portion will enroll second-line platinum-sensitive ovarian cancer (PSOC) patients for maintenance treatment, whose disease progressed while on a PARP inhibitor.
We also completed enrollment in a Phase 2 clinical trial evaluating azenosertib as a monotherapy in patients with uterine serous carcinoma, or USC (TETON - ZN-c3-004). We plan to publish results from this trial in the future. We do not plan further development of azenosertib in USC.
Liquidity Overview
Since our inception, our operations have been limited to organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of our product pipeline. We do not have any products approved for commercial sale and have not generated any revenues from product sales. We will not generate revenue from product sales unless and until we successfully complete clinical development, obtain regulatory approval for, and commercialize one or more of our product candidates. We will need to raise substantial additional capital to support our continuing operations and pursue our growth strategy.
Since inception, we have incurred significant operating losses. Our net losses were $137.1 million for the year ended December 31, 2025. We had an accumulated deficit of $1.2 billion as of December 31, 2025. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We had cash, cash equivalents and marketable securities of $245.9 million as of December 31, 2025. We believe that our existing cash, cash equivalents and marketable securities as of December 31, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements into late 2027. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.
License Agreements and Strategic Collaborations
Recurium IP Holdings, LLC License Agreement
In December 2014, our wholly owned subsidiary, Zeno Pharmaceuticals, Inc., entered into the Recurium Agreement with Recurium IP Holdings, LLC, or Recurium IP, which was subsequently amended, under which Zeno Pharmaceuticals, Inc. was granted an exclusive worldwide license to certain intellectual property rights owned or controlled by Recurium IP to develop and commercialize pharmaceutical products for the treatment or prevention of disease, other than for providing pain relief. Following a corporate restructuring disclosed elsewhere in this Annual Report on Form 10-K, our wholly owned subsidiary, ZMI, became the Zentalis contracting party to the Recurium Agreement. The intellectual property rights exclusively licensed by ZMI under the Recurium Agreement include certain intellectual property covering azenosertib. ZMI has the right to sublicense its rights under the Recurium Agreement, subject to certain conditions. ZMI is required to use commercially reasonable efforts to develop and commercialize at least one product that comprises or contains a compound modulating one of ten specific biological targets and to execute certain development activities.
Under the terms of the Recurium Agreement, ZMI is obligated to make development and regulatory milestone payments, pay royalties on net sales, and make certain sublicensing payments with respect to products that comprise or contain a compound modulating one of ten specific biological targets, including azenosertib. ZMI is obligated to make development and regulatory milestone payments for each such licensed product of up to $44.5 million. In addition, ZMI is obligated to make milestone payments of up to $150,000 for certain licensed products used in animals. ZMI is also obligated to pay royalties on sales of such licensed products at a mid- to high-single digit percentage. In addition, if ZMI chooses to sublicense or assign to any third parties its rights under certain patents exclusively in-licensed under the Recurium Agreement, ZMI must pay to Recurium IP 20% of certain sublicensing income received in connection with such transaction.
The Recurium Agreement will expire on the later of December 21, 2032 and, on a country-by-country basis, on the date of expiration of the last-to-expire royalty term for all licensed products in such country, unless earlier terminated by either party for cause or a bankruptcy event.
Pfizer Development Agreement
In April 2022, we entered into a development agreement with Pfizer to collaborate to advance the clinical development of azenosertib. We did not grant Pfizer any economic ownership or control of azenosertib or the rest of our pipeline. In October 2022, we announced our first clinical development collaboration with Pfizer to initiate a Phase 1/2 dose escalation study of azenosertib, in combination with encorafenib and cetuximab (an FDA-approved standard of care known as the BEACON regimen) in patients with BRAF V600E-mutant mCRC. In January 2025, we announced that we would not advance to the dose expansion phase of the study due to resource prioritization and an evolving treatment landscape.
GSK Clinical Trial Collaboration and Supply Agreement
In April 2021, we entered into a clinical trial collaboration and supply agreement with GSK under which we have evaluated the combination of azenosertib and niraparib, GSK's poly (ADP-ribose) polymerase (PARP) inhibitor, in patients
with PROC. In January 2025, we announced that the trial was fully enrolled and that we were not proceeding further with the development of the combination of azenosertib with niraparib as efficacious exposures of azenosertib were not reached. Pursuant to this agreement, we were responsible for the conduct and cost of the study, under the supervision of a joint development committee made up of our representatives and representatives of GSK. GSK supplied niraparib for use in the collaboration, at no cost to us.
This agreement does not grant any right of first negotiation to participate in future clinical trials, and neither party granted the other any additional right or ability to evaluate their respective compounds in any other clinical studies, either as monotherapy or in combination with any other product or compound, in any therapeutic area.
The agreement with GSK will expire upon completion of all obligations of the parties thereunder or upon termination by either party. In addition, there are standard early termination provisions under this agreement.
Immunome Agreements
In January 2024, we entered into an exclusive, worldwide license agreement with Immunome, or the Immunome License Agreement, under which Immunome licensed from us ZPC-21 (now known as IM-1021), a preclinical ROR1 ADC with best-in-class potential, and our proprietary ADC platform technology, or the ADC Assets. Under the terms of the deal, we received an up-front payment of $35.0 million in cash and Immunome common stock (with the stock valued at the trailing 30-day volume-weighted average price). In October 2024, we entered into an asset purchase agreement with Immunome, pursuant to which Immunome purchased the ADC Assets, or the Immunome Purchase Agreement. We received $25.0 million worth of Immunome common stock, with the shares valued at the trailing 30-day volume-weighted average price of Immunome's common stock. On the date of execution of the transaction, the Immunome stock was valued at $21.9 million based on the closing price of Immunome's common stock on that date. We were also eligible to receive $5.0 million of contingent consideration upon the achievement of a developmental milestone, which was achieved in December 2024. The Immunome License Agreement terminated upon the parties' entry into the Immunome Purchase Agreement.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue, and we do not expect to generate any revenue in the foreseeable future from product sales. We have generated, and may in the future generate, revenue from payments received under our licensing, collaboration and asset sale agreements, which included payments of upfront fees, license fees, milestone-based payments and reimbursements for research and development efforts.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:
•salaries, benefits and other related costs, including non-cash stock-based compensation expense, for personnel engaged in research and development functions;
•expenses incurred under agreements with third parties, including CROs and other third parties that conduct research, preclinical activities and clinical trials on our behalf as well as CMOs that manufacture drug material for use in our preclinical studies and clinical trials;
•costs of outside consultants, including their fees, non-cash stock-based compensation and related travel expenses;
•the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;
•license payments made for intellectual property used in research and development activities; and
•allocated expenses for rent and maintenance of facilities and other operating costs.
We expense research and development costs as incurred. Reimbursed research and development costs under certain collaborative arrangements are recorded as a reduction to research and development expenses and are recognized in the period in which the related costs are incurred.
We track external development costs by product candidate or development program, but we do not allocate personnel costs, general license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates. These costs are included in unallocated research and development expenses and discontinued programs in the table below.
The following table summarizes our research and development expenses by product candidate or development program:
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
|
Azenosertib
|
$ | 48,102 | $ | 75,837 | |||||||||||||||||||
| Unallocated research and development expenses and discontinued programs | 59,193 | 91,931 | |||||||||||||||||||||
|
Total research and development expenses
|
$ | 107,295 | $ | 167,768 | |||||||||||||||||||
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Following the strategic restructuring announced in January 2025, we incurred certain associated non-recurring expenses in the first quarter of 2025. As a result of the strategic restructuring, we realized a decrease in research and development expenses during the year ended December 31, 2025. If our azenosertib development program continues to advance successfully, we expect our research and development expenses to increase as we initiate and execute our planned Phase 3 ASPENOVA confirmatory study and prepare for potential commercialization.
The successful development of azenosertib, and any of our future product candidates is highly uncertain. At this time, we cannot determine with certainty the duration and costs of our existing and future clinical trials of azenosertib or any other product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for azenosertib, or any future product candidate. The duration, costs and timing of clinical trials and development of our product candidates and any other product candidate we may develop in the future will depend on a variety of factors, including:
•per patient trial costs;
•the number of patients who enroll in each trial;
•the number of trials required for approval;
•the number of sites included in the trials;
•the countries in which the trials are conducted;
•the length of time required to enroll eligible patients;
•the drop-out or discontinuation rates of patients;
•any delays in clinical trials, including as a result of clinical holds or the global macroeconomic environment;
•potential additional safety monitoring requested by regulatory agencies;
•the duration of patient participation in the trials and follow-up;
•the phase of development of the product candidate;
•the efficacy and safety profile of the product candidate.
•uncertainties in clinical trial design and patient enrollment rates;
•the actual probability of success for our product candidates, including the safety and efficacy, early clinical data, competition, manufacturing capability and commercial viability;
•significant and changing government regulation and regulatory guidance;
•the timing and receipt of any marketing approvals;
•the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and
•our ability to attract and retain skilled personnel.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including non-cash stock-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
Following the strategic restructuring announced in January 2025 for which we incurred certain associated non-recurring expenses in the first quarter of 2025, we have realized a decrease in general and administrative expenses during the year ended December 31, 2025; however, if our azenosertib development program continues to advance successfully, we expect our general and administrative expenses to increase as we initiate and execute our planned Phase 3 ASPENOVA confirmatory study and prepare for potential commercialization. We also expect to continue to incur expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements; director and officer insurance costs; and investor and public relations costs.
Restructuring Expenses
Restructuring expenses consist of involuntary employee termination benefits pursuant to a one-time benefit arrangement.
Investment and Other Income, Net
Investment and other income, net consists of interest earned on cash, cash equivalents and available-for-sale marketable securities, sublease income and the change in value of equity securities during the period.
Income Taxes
Since our inception, we and our corporate subsidiaries have generated cumulative federal, state and foreign net operating loss in certain jurisdictions for which we have not recorded any net tax benefit due to uncertainty around utilizing these tax attributes within their respective carryforward periods.
Results of Operations
Comparison of Years Ended December 31, 2025 and 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024, together with the changes in those items in dollars:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 |
Increase (Decrease) |
|||||||||||||||
| (in thousands) | |||||||||||||||||
| Revenues from Licensing and Sales of Intellectual Property | $ | - | $ | 67,425 | $ | (67,425) | |||||||||||
| Operating Expenses | |||||||||||||||||
| Research and development | 107,295 | 167,768 | (60,473) | ||||||||||||||
| General and administrative | 37,717 | 87,115 | (49,398) | ||||||||||||||
| Restructuring | 7,796 | - | 7,796 | ||||||||||||||
| Goodwill impairment | - | 3,736 | (3,736) | ||||||||||||||
| Total operating expenses | 152,808 | 258,619 | (105,811) | ||||||||||||||
| Loss from operations | (152,808) | (191,194) | 38,386 | ||||||||||||||
| Investment and other income, net | 16,190 | 25,504 | (9,314) | ||||||||||||||
| Net loss before income taxes | (136,618) | (165,690) | 29,072 | ||||||||||||||
| Income tax expense (benefit) | 442 | 177 | 265 | ||||||||||||||
| Net loss | (137,060) | (165,867) | 28,807 | ||||||||||||||
| Net loss attributable to noncontrolling interests | - | (28) | 28 | ||||||||||||||
| Net loss attributable to Zentalis | $ | (137,060) | $ | (165,839) | $ | 28,779 | |||||||||||
Revenues from Licensing and Sales of Intellectual Property
Revenues from licensing and sales of intellectual property for the year ended December 31, 2025 were zero compared to $67.4 million for the year ended December 31, 2024. The decrease relates to the Immunome License Agreement and related stock issuance agreement with Immunome entered during the three months ended March 31, 2024 and the Immunome Purchase Agreement and the related stock issuance agreement with Immunome entered during the three months ended December 31, 2024.
Research and Development Expenses
Research and development, or R&D, expenses for the year ended December 31, 2025 were $107.3 million, compared to $167.8 million for the year ended December 31, 2024. The decrease of $60.5 million was primarily due to decreases of $22.3 million for clinical expenses, $12.9 million for lab services, $8.8 million for drug manufacturing, and $1.3 million for supplies and other expense. A decrease of $16.4 million from personnel expense, of which $6.5 million was non-cash stock-based compensation, also contributed to the overall reduction in research and development expenses. These decreases were partially offset by an increase of $1.2 million from a one-time impairment charge recorded on research and development equipment during the first quarter ended March 31, 2025.
Restructuring Expenses
On January 22, 2025, our Board of Directors approved a strategic restructuring of the Company to support execution of late-stage development for azenosertib, and extend its cash runway beyond a potentially registration-enabling azenosertib topline readout from the Company's DENALI Part 2 study, anticipated by the end of 2026. In connection with this strategic restructuring, the Company reduced its workforce by approximately 40%. Restructuring expenses for the year ended December 31, 2025 were $7.8 million, compared to zero during the year ended December 31, 2024.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2025 were $37.7 million, compared to $87.1 million during the year ended December 31, 2024. The decrease of $49.4 million was primarily dueto a decrease of $47.1 million of personnel expense, of which $40.8 million was non-cash stock-based compensation. Decreases of $3.3 million related to consulting and outside services also contributed to the overall reduction in general and administrative expenses. These decreases were partially offset by an increase of $1.0 million related to allocated and other costs.
Goodwill Impairment
Goodwill impairment for 2024 of $3.7 million was the result of an impairment test performed in the fourth quarter of 2024.
Investment and Other Income, Net
Investment and other income, net was $16.2 million for the year ended December 31, 2025, compared to $25.5 million for the year ended December 31, 2024. The decrease of $9.3 million was primarily driven by a decrease of $8.4 million in returns on invested cash and marketable debt securities and decreases in the mark to market adjustment for the fair value of Immunome common stock of $4.1 million. The decreases were partially offset by a reduction of one-time miscellaneous expenses incurred in 2024.
Liquidity and Capital Resources
Since our inception, our operations have been limited to organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of our product pipeline. We do not have any products approved for commercial sale and have not generated any revenues from product sales, and we have incurred significant operating losses.
As a result, we will need to raise substantial additional capital to support our continuing operations and pursue our strategy. Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all, particularly in light of the global macroeconomic environment and fluctuating inflation and interest rates. If we are unable to secure adequate additional funding as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of azenosertib or delay our pursuit of potential in-licenses or acquisitions.
Because of the numerous risks and uncertainties associated with developing and commercializing therapeutics, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
We do not currently have any approved products and have never generated any revenue from product sales. To date, we have financed our operations primarily through the sale of equity securities. From inception through December 31, 2025, we raised a total of $1.2 billion in gross proceeds from the sale of shares of our common stock and convertible preferred units. As of December 31, 2025, we had $36.0 million in cash and cash equivalents, $209.9 million in marketable debt securities, and an accumulated deficit of $1.2 billion. We maintain the majority of our cash and cash equivalents in accounts with major financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position. We had no indebtedness as of December 31, 2025.
ATM Program
In May 2021, the Company entered into a sales agreement, or the Sales Agreement, with SVB Leerink LLC, or SVB Leerink, as sales agent (the "Sales Agreement"), pursuant to which the Company may, from time to time, issue and sell common stock with an aggregate value of up to $75.0 million in "at-the-market" offerings, or the ATM, under the Company's Registration Statement on Form S-3 (File No. 333-286122) filed with the SEC on March 26, 2025. Sales of common stock pursuant to the Sales Agreement, may be made in sales deemed to be an "at the market offering" as defined in Rule 415(a) of the Securities Act, including sales made directly through the Nasdaq Global Market or any other existing trading market for the Company's common stock. In December 2025, the Company sold 3,928,571 shares of common stock under the Sales Agreement at a price of $1.40 per share, raising aggregate gross proceeds of $5.5 million before fees and expenses of $0.1 million. As of December 31, 2025 there was $69.5 million of our common stock remaining available for sale under our ATM.
Stock Purchase Agreement
On December 15, 2025, the Company entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with Matrix Capital Master Fund, LP ("Matrix"), one of our then-stockholders. Pursuant to the Stock Purchase Agreement, the
Company agreed to repurchase 7,500,000 shares of the Company's common stock from Matrix at a price of $1.33 per share, representing a discount from the Company's closing share price of $1.40 on December 12, 2025 (the "Repurchase"). The Repurchase closed on December 15, 2025.
Cash Flows
The following table summarizes our sources and uses of cash for the period presented:
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net cash used in operating activities | $ | (125,247) | $ | (170,860) | |||||||||||||||||||
| Net cash provided by investing activities | 131,623 | 176,561 | |||||||||||||||||||||
| Net cash (used in) provided by financing activities | (4,282) | 108 | |||||||||||||||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 2,094 | $ | 5,809 | |||||||||||||||||||
Operating Activities
We have incurred losses since inception. Net cash used in operating activities for the year ended December 31, 2025 was $125.2 million, consisting primarily of our net loss of $137.1 million as we incurred expenses associated with the restructuring event, research activities for our product candidate and incurred general and administrative expenses, as well as changes in operating assets and liabilities of $9.1 million, partially offset by non-cash adjustments of $20.9 million.
Net cash used in operating activities for the year ended December 31, 2024 was $170.9 million, consisting primarily of our net loss of $165.9 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses, as well as changes in operating assets and liabilities of $16.5 million, partially offset by non-cash adjustments of $11.5 million.
Investing Activities
Net cash provided by investing activities for the year ended December 31, 2025 of $131.6 million was attributable to proceeds from maturities of $250.0 million of marketable debt securities, the sale of marketable equity securities of $20.4 million and proceeds from the sale of property and equipment of $698 thousand offset by net investment of excess cash of $139.5 million.
Net cash provided by investing activities for the year ended December 31, 2024 of $176.6 million was attributable to proceeds from maturities of $271.2 million of marketable debt securities, the sale of marketable equity securities of $33.5 million and proceeds from the sale of property and equipment of $65 thousand offset by net investment of excess cash of $128.0 million and the purchases of property and equipment of $221 thousand.
Financing Activities
Net cash used in financing activities for the year ended December 31, 2025 of $4.3 million was attributable to the Repurchase of $10.0 million offset by the $5.4 million net cash provided by shares sold through the SVB Leerink ATM agreement, and an additional $304 thousand provided from the issuance of common stock under equity incentive plans.
Net cash provided by financing activities in the year ended December 31, 2024 of $108 thousand consisted of $349 thousand provided from the issuance of common stock under equity incentive plans, offset by cash used in the net-settlement of restricted stock unit vesting of $241 thousand.
Funding Requirements
Our future capital requirements will depend on many factors, including:
•the clinical development of azenosertib for the treatment of oncology indications;
•the preclinical and clinical development of other programs, resources allowing;
•the development of a companion diagnostic with a partner in conjunction with our clinical development of azenosertib as a monotherapy for the treatment of Cyclin E1-positive PROC, if applicable, diagnostics tools for additional biomarkers for azenosertib and any future product candidates;
•the costs of in-licensing or acquiring the rights to other products, product candidates or technologies;
•the legal costs related to maintaining, expanding and protecting our intellectual property portfolio;
•hiring additional personnel, if needed;
•the costs to seek regulatory approval for azenosertib for the treatment of Cyclin E1-positive PROC and support our diagnostic partner's seeking regulatory approval of a companion diagnostic to identify patients with Cyclin E1-positive PROC, and resources allowing, seek regulatory approval of azenosertib for additional oncology indications, assuming supportive clinical data; and
•the costs to seek regulatory approval for any future product candidates and, if needed, diagnostics tools for biomarkers associated with such product candidates, that successfully complete clinical development, resources allowing.
As of December 31, 2025, we have $3.9 million and $35.7 million in current and long-term lease liabilities, respectively. We believe that our existing cash, cash equivalents and marketable securities as of December 31, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements into late 2027. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drugs, it is difficult to estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including:
•the progress, costs and results of our clinical trials for azenosertib for patients with Cyclin E1-positive PROC and, resources allowing, any additional indications, and any future product candidates;
•the progress, costs and results to develop a companion diagnostic to identify patients with Cyclin E1-positive PROC;
•the progress, costs and results of additional research and preclinical studies in other research programs we initiate in the future and, if needed, of diagnostics tools for additional biomarkers for azenosertib and any future product candidates;
•the costs and timing of process development and manufacturing scale-up activities associated with azenosertib and, resources allowing, our product candidates and other programs as we advance them through preclinical and clinical development;
•our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;
•the extent to which we in-license or acquire rights to other products, product candidates or technologies;
•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims; and
•our ability to attract and retain skilled personnel.
Further, our operating results may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings, or other capital sources, which may include collaborations with other companies or other strategic transactions.
We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Critical Accounting Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures require 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 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.
While our significant accounting policies are described in more detail in the notes to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
| Impairment of Long-Lived Assets | ||||||||||||||
| Methodology | Judgment and Uncertainties | Effect if Actual Results Differ From Assumptions | ||||||||||||
| We evaluate long-lived assets, including property, equipment and operating lease right-of-use (ROU) assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. We group assets at the lowest level for which cash flows are separately identified in order to measure an impairment. | The determination of events or changes in circumstances that would result in an impairment review is subject to judgment. Additionally, the determination of impairment is subject to key assumptions including projected cash flows and discount rate. | We base our estimates on the best information available at the time. If actual results are not consistent with the assumptions used, the impairment expense may be overstated or understated. | ||||||||||||
| Revenue Recognition | ||||||||||||||
| Methodology | Judgment and Uncertainties | Effect if Actual Results Differ From Assumptions | ||||||||||||
| For revenue with customers, we are entitled to receive event-based payment subject to the customer's achievement of specific regulatory milestones. We recognize revenue when it is deemed probable that these milestones will be achieved, which could be in a period preceding its actual occurrence. At the end of each reporting period, we re-evaluate the probability of achievement of such milestones, and if necessary, adjust our estimate of the overall transaction price. | Revenue is recognized when we determine it is probable a milestone will be achieved. This assessment is based on market insight and customer communications. | An adjustment of our estimate of the overall transaction price and reversal of revenue will be required in the event it is determined that achievement of a milestone, previously deemed probable, will not occur. This adjustment and reversal may be material. | ||||||||||||
| Research and Development Expenses - Clinical Trial Accruals | ||||||||||||||
| Methodology | Judgment and Uncertainties | Effect if Actual Results Differ From Assumptions | ||||||||||||
| All of our clinical trials have been executed with support from CROs and other vendors. We accrue costs for clinical trial activities performed by CROs and other vendors based upon the estimated amount of work completed on each trial. |
For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, the activities to be performed for each patient, the number of active clinical sites, and the duration for which the patients will be enrolled in the trial. We monitor patient enrollment levels and related activities to the extent possible through internal reviews, correspondence with CROs and review of contractual terms. |
We base our estimates on the best information available at the time. However, additional information may become available to us, which may allow us to make a more accurate estimate in future periods. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates. There were no such significant changes during the years ended December 31, 2025 or 2024. | ||||||||||||
| Share-Based Payments | ||||||||||||||
| Methodology | Judgment and Uncertainties | Effect if Actual Results Differ From Assumptions | ||||||||||||
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We maintain equity incentive plans, which provide for share-based awards, including stock options, restricted stock units, or RSUs, restricted stock and performance awards. We also maintain an employee stock purchase plan. We determine the fair value of our stock option awards and performance awards at the date of grant using a Black-Scholes model. We determine the fair value of our restricted stock awards at the date of grant using the closing market value of our common stock on the date of grant.
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Option-pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of our awards. These assumptions and judgments include estimating the future volatility of our stock price, expected dividend yield and future employee stock option exercise behaviors. Changes in these assumptions can materially affect the fair value estimate.
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We do not currently believe there is a reasonable likelihood that there will be a material change in estimates or assumptions we use to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to changes in share-based compensation expense that could be material. If actual results are not consistent with the assumptions used, the share-based compensation expense reported in our financial statements may not be representative of the actual economic cost of the share-based compensation. A 10% change in our share-based compensation expense for the year ended December 31, 2025, would have affected pre-tax earnings by approximately $2.1 million. |
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Recent Accounting Pronouncements
See Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information on certain accounting standards that have been adopted during 2025 or that have not yet been required to be implemented and may be applicable to our future operations.
Zentalis Pharmaceuticals Inc. published this content on March 26, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 26, 2026 at 20:47 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]