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What changed in Kezar Life Sciences, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Kezar Life Sciences, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+373 added−393 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-14)

Top changes in Kezar Life Sciences, Inc.'s 2023 10-K

373 paragraphs added · 393 removed · 276 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

93 edited+24 added−67 removed161 unchanged
Biggest changeIn addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
Biggest changeIn addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. 15 Table of Contents Federal false claims laws, including the federal civil False Claims Act, and the civil monetary penalties prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.
The license agreement may be terminated by us with prior notice, by either party in the event of a material breach by the other party that remains uncured for a certain number of days, such number depending on the type of breach, by either party for insolvency of the other party, or immediately by Onyx if we challenge any of the licensed patents.
The Onyx License Agreement may be terminated by us with prior notice, by either party in the event of a material breach by the other party that remains uncured for a certain number of days, such number depending on the type of breach, by either party for insolvency of the other party, or immediately by Onyx if we challenge any of the licensed patents.
KP-00-005—Patent application pending in numerous jurisdictions, directed to various salts and polymorphs of zetomipzomib, including the clinical salt form. We have issued patents in numerous jurisdictions, including the United States, Australia, Chile, Eurasia, Japan, Mexico, and Taiwan. The 20-year term for this family is June 2037, absent any patent term extensions available.
The 20-year term for this family is June 2037, absent any patent term extensions available. KP-00-005—Patent application pending in numerous jurisdictions directed to various salts and polymorphs of zetomipzomib, including the clinical salt form. We have issued patents in numerous jurisdictions, including the United States, Australia, Chile, Eurasia, Japan, Mexico, and Taiwan.
If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, criminal and civil monetary penalties, damages, fines, imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings, disgorgement, exclusion from participation in government healthcare programs and the curtailment or restructuring of our operations.
If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, criminal and civil monetary penalties, damages, fines, disgorgement, imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings, disgorgement, exclusion from participation in government healthcare programs and the curtailment or restructuring of our operations.
See the section titled “Risk Factors – Risks Related to Our Business Operations, Employee Matters and Managing Growth” for additional information about the laws and regulations to which we are or may become subject and about the risks to our business associated with such laws and regulations.
See the section titled “Risk Factors – Risks Related to Our Business Operations, Employee Matters and Managing Growth” for additional information about the laws and regulations to which we are or may become subject to and about the risks to our business associated with such laws and regulations.
Item 1. B usiness. Overview We are a clinical-stage biotechnology company, discovering and developing novel small molecule therapeutics to treat unmet needs in immune-mediated diseases and cancer. We believe therapies that inhibit multiple drivers of disease by targeting fundamental upstream control processes within the cell have the potential for profound therapeutic benefit in a number of difficult-to-treat diseases.
Item 1. B usiness. Overview We are a clinical-stage biotechnology company developing novel small molecule therapeutics to treat unmet needs in immune-mediated diseases and cancer. We believe therapies that inhibit multiple drivers of disease by targeting fundamental upstream control processes within the cell have the potential for profound therapeutic benefit in a number of difficult-to-treat diseases.
If successfully developed and approved, zetomipzomib may have the ability to become the standard of care across a range of immune-mediated diseases based on the following key attributes: • broad and potent immunomodulatory activity that may provide meaningful therapeutic benefit without immunosuppression across a range of treatable and currently untreatable immune-mediated diseases; • subcutaneous, once weekly dosing schedule which is amenable to patient self-administration with the potential of less frequent dosing for chronic use; • rapid drug clearance from the plasma with a half-life of less than five hours; • minimal predicted risk for drug-drug interactions; • no teratogenicity or reproductive toxicity observed in nonclinical studies; • full recovery of immunoproteasome activity occurs within three to seven days following dose administration; and • unique chemical structure leads to highly specific inhibition of the immunoproteasome without known off-target effects.
If successfully developed and approved, zetomipzomib may have the ability to become the standard of care across a range of immune-mediated diseases based on the following key attributes: • broad and potent immunomodulatory activity that may provide meaningful therapeutic benefit without immunosuppression across a range of treatable and currently untreatable immune-mediated diseases; • subcutaneous, once weekly dosing schedule which is amenable to patient self-administration with the potential of less frequent dosing for chronic use; • rapid drug clearance from the plasma with a half-life of less than five hours; • minimal predicted clinically relevant risk for drug-drug interactions; • no teratogenicity or reproductive toxicity observed in nonclinical studies; • full recovery of immunoproteasome activity occurs within three to seven days following dose administration; and • unique chemical structure leads to highly specific inhibition of the immunoproteasome without known off-target effects.
We are committed to conducting our business ethically and helping ensure that we comply with the laws and regulations that govern our business and industry in all markets in which we operate. Our employees receive training on our Code of Business Conduct and Ethics and other compliance measures. Additional corporate governance measures are discussed in our proxy statement.
We are also committed to conducting our business ethically and helping ensure that we comply with the laws and regulations that govern our business and industry in all markets in which we operate. Our employees receive training on our Code of Business Conduct and Ethics and other compliance measures. Additional corporate governance measures are discussed in our proxy statement.
License Agreement with Onyx In June 2015, we entered into an exclusive license agreement with Onyx Therapeutics, Inc., or Onyx, a wholly owned subsidiary of Amgen, or the Onyx License Agreement, pursuant to which Onyx granted us an exclusive license under certain patent rights, and a non-exclusive license to certain know-how, in each case controlled by Onyx, to develop, manufacture and commercialize pharmaceutical products containing certain types of compounds, including zetomipzomib, that are selective inhibitors of the immunoproteasome for any and all uses other than those related to the diagnosis and/or treatment in humans of cancerous or pre-cancerous diseases and/or conditions, including those related to hematological diseases and/or conditions that are not inflammatory diseases or disorders.
License and Collaboration Agreements License Agreement with Onyx In June 2015, we entered into an exclusive license agreement with Onyx Therapeutics, Inc., or Onyx, a wholly owned subsidiary of Amgen, or the Onyx License Agreement, pursuant to which Onyx granted us an exclusive license under certain patent rights, and a non-exclusive license to certain know-how, in each case controlled by Onyx, to develop, manufacture and commercialize pharmaceutical products containing certain types of compounds, including zetomipzomib, that are selective inhibitors of the immunoproteasome for any and all uses other than those related to the diagnosis and/or treatment in humans of cancerous or pre-cancerous diseases and/or conditions, including those related to hematological diseases and/or conditions that are not inflammatory diseases or disorders.
We have highlighted our work from the protein secretion platform during several scientific and medical conferences, including the American Association of Cancer Research (AACR), American Society of Clinical Oncology (ASCO), American Society of Hematology (ASH), the International Cytokine and Interferon Society (ICIS) and the Society of Immunotherapy in Cancer (SITC).
We have highlighted our research from the protein secretion platform during several scientific and medical conferences, including the American Association of Cancer Research (AACR), American Society of Clinical Oncology (ASCO), American Society of Hematology (ASH), the International Cytokine and Interferon Society (ICIS) and the Society of Immunotherapy in Cancer (SITC).
The licensed product patent portfolio includes issued patents in the United States, Australia, Canada, China, Europe, Japan, Mexico, Singapore and South Korea with expiration dates ranging from 2027 to 2034, absent any patent extensions available.
The licensed product patent portfolio includes issued patents in the United States, Australia, Canada, China, Europe, Japan, Mexico, Singapore and South Korea with expiration dates ranging from 2027-2034, absent any patent extensions available.
PALIZADE Phase 2b Trial PALIZADE is a Phase 2b global, placebo-controlled, randomized, double-blind clinical trial evaluating the efficacy and safety of two dose-levels of zetomipzomib in patients with active LN.
PALIZADE Phase 2b Trial PALIZADE is a Phase 2b global, placebo-controlled, double-blind clinical trial evaluating the efficacy and safety of two dose-levels of zetomipzomib in patients with active LN.
In August 2011, then President Obama signed into law the Budget Control Act of 2011, as amended, which, among other things, included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which began in 2013 and, following passage of subsequent legislation, including the BBA, will continue until 2031 unless additional Congressional action is taken.
In August 2011, then President Obama signed into law the Budget Control Act of 2011, as amended, which, among other things, included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which began in 2013 and, following passage of subsequent legislation, including the BBA, will continue until 2032 unless additional Congressional action is taken.
Over the initial 16 weeks, there will be a mandatory corticosteroid taper to 5 mg per day or less. End-of-treatment assessments will occur at Week 53, and the end-of-study assessments will occur at Week 57. 5 Table of Contents The primary efficacy endpoint is the proportion of patients who achieve a complete renal response, or CRR, at Week 37.
Over the initial 16 weeks, there will be a mandatory corticosteroid taper to 5 mg per day or less. End-of-treatment assessments will occur at Week 53, and the end-of-study assessments will occur at Week 57. The primary efficacy endpoint is the proportion of patients who achieve a complete renal response, or CRR, at Week 37.
The SEC maintains a website that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov. The information found on our website is not incorporated by reference into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC. 24 Table of Contents
The SEC maintains a website that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov. The information found on our website is not incorporated by reference into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC. 20 Table of Contents
These inflammatory disorders are currently treated one cytokine or cell type at a time or with powerful immunosuppressive agents. Across all immune-mediated diseases, both large and small, there remain significant unmet medical needs and indications with no approved drugs beyond broadly prescribed corticosteroids and similar immunosuppressive agents.
These inflammatory disorders are currently treated one cytokine or cell type at a time with biologic agents or with powerful synthetic immunosuppressive agents. Across all immune-mediated diseases, both large and small, there remain significant unmet medical needs and indications with no approved drugs beyond broadly prescribed corticosteroids and similar immunosuppressive agents.
Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.
Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, effective January 1, 2024.
In addition, the IRA, among other things, (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare, and subject drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated “maximum fair price” for such drugs and biologics under the law, and (ii) imposes rebates with respect to certain drugs and biologics covered under Medicare Part B or Medicare Part D to penalize price increases that outpace inflation.
In addition, the IRA, among other things, (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and 18 Table of Contents biologics covered under Medicare, and subject drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated “maximum fair price” for such drugs and biologics under the law, and (ii) imposes rebates with respect to certain drugs and biologics covered under Medicare Part B or Medicare Part D to penalize price increases that outpace inflation.
In over 15 peer-reviewed publications, our selective inhibitors of the immunoproteasome and related compounds have demonstrated strong therapeutic potential by blocking disease progressions in animal models multiple immune-mediated diseases. Additionally, this immunomodulatory response was broadly seen across many cell types of the immune system, including both T-cells and B-cells, and was demonstrated in a non-immunosuppressive manner.
In over 15 peer-reviewed publications, our selective inhibitors of the immunoproteasome and related compounds have demonstrated strong therapeutic potential by blocking disease progressions in animal models multiple immune-mediated diseases. Additionally, this immunomodulatory response was broadly seen across many cell types of the immune system, including 6 Table of Contents both T-cells and B-cells, and was demonstrated in a non-immunosuppressive manner.
Additional secondary and exploratory endpoints include measures of SLE disease activity including flare. We expect a primary analysis from PALIZADE to occur in mid-2026, and we expect to receive the full 52-week end-of-treatment data in second half 2026.
Additional secondary and exploratory endpoints include measures of SLE disease activity including flare. We expect a primary analysis from PALIZADE to occur in mid-2026, and we expect to receive the full end-of-treatment data in the second half of 2026.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; 18 Table of Contents • refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; or • injunctions or the imposition of civil or criminal penalties.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; or • injunctions or the imposition of civil or criminal penalties.
Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. 19 Table of Contents In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
Patent coverage for zetomipzomib extends to at least 2034. As partial consideration for the intellectual property rights licensed to us, we issued Onyx shares of our Series A Preferred Stock, which converted into 1,121,384 shares of our common stock upon the closing of our initial public offering on June 25, 2018.
Patent coverage for zetomipzomib extends to at least 2034. As partial consideration for the intellectual property rights licensed to us, we issued Onyx shares of our Series A Preferred Stock, which converted into 1,121,384 shares of our common stock upon the closing of our initial public offering in June 2018.
If third-party payors do not consider our product candidates to be cost-effective compared to other available therapies, they 21 Table of Contents may not cover our product candidates, once approved, as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our product on a profitable basis.
If third-party payors do not consider our product candidates to be cost-effective compared to other available therapies, they may not cover our product candidates, once approved, as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our product on a profitable basis.
These obligations may include limiting personal data processing to only what is necessary for specified, explicit, and legitimate purposes; requiring a legal basis for personal data processing; complying with specific requirements to process health-rated data; requiring the appointment of a data protection officer in certain circumstances; increasing transparency obligations to data subjects; requiring data protection impact assessments in certain circumstances; limiting the collection and retention of personal data; increasing rights for data subjects; formalizing a heightened and codified standard of data subject consents; requiring the implementation and maintenance of technical and organizational safeguards for personal data; mandating notice of certain personal data breaches to the relevant 20 Table of Contents supervisory authorities and affected individuals; and mandating the appointment of representatives in the UK and/or the EU in certain circumstances.
These obligations may include limiting personal data processing to only what is necessary for specified, explicit, and legitimate purposes; requiring a legal basis for personal data processing; complying with specific requirements to process health-rated data; requiring the appointment of a data protection officer in certain circumstances; increasing transparency obligations to data subjects; requiring data protection impact assessments in certain circumstances; limiting the collection and retention of personal data; increasing rights for data subjects; formalizing a heightened and codified standard of data subject consents; requiring the implementation and maintenance of technical and organizational safeguards for personal data; mandating notice of certain personal data breaches to the relevant supervisory authorities and affected individuals; and mandating the appointment of representatives in the UK and/or the EEA in certain circumstances.
As a result of the Medicare Access and CHIP Reauthorization Act of 2015, which introduced a merit based incentive bonus program for Medicare physicians, also referred to as the Quality Payment Program, Medicare payments are increasingly tied to quality of care 22 Table of Contents and value measures, and reporting of related data by providers such as physicians and hospitals.
As a result of the Medicare Access and CHIP Reauthorization Act of 2015, which introduced a merit based incentive bonus program for Medicare physicians, also referred to as the Quality Payment Program, Medicare payments are increasingly tied to quality of care and value measures, and reporting of related data by providers such as physicians and hospitals.
Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined.
Information about certain clinical trials must be submitted within a specific timeframe to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and 14 Table of Contents these state agencies for compliance with cGMP requirements.
Key secondary endpoints include: the proportion of patients achieving partial renal response, or PRR, at Week 37; the number of CRRs at Weeks 25 and 53; and the number of PRRs at Weeks 25 and 53.
Key secondary endpoints include: the proportion of patients achieving partial renal response, or PRR, at Weeks 25, 37 and 53 and the number of CRRs at Weeks 25 and 53.
We are also continuing to explore development opportunities for zetomipzomib in patients with SLE, a chronic inflammatory disease. Based on clinical data generated to date with zetomipzomib, we believe that zetomipzomib has the potential to address multiple chronic immune-mediated diseases.
We are also continuing to explore development opportunities for zetomipzomib in patients with SLE. Based on clinical data generated to date with zetomipzomib, we believe that zetomipzomib has the potential to address multiple chronic immune-mediated diseases.
For more information on our intellectual property, see “Business — Intellectual Property.” Upon the expiration of such royalty term in such country, our license to such product will become fully paid-up, irrevocable, and non-exclusive.
For more information on our 7 Table of Contents intellectual property, see “Business — Intellectual Property.” Upon the expiration of such royalty term in such country, our license to such product will become fully paid-up, irrevocable, and non-exclusive.
The primary efficacy endpoint measures the proportion of patients who achieve a complete response, measured as normalization of alanine aminotransferase (ALT) and aspartate aminotransferase (AST) levels with a successful corticosteroid taper by Week 24. We expect to receive topline data from the PORTOLA trial in mid-2025.
The primary efficacy endpoint measures the proportion of patients who 5 Table of Contents achieve a complete response, measured as normalization of alanine aminotransferase (ALT) and aspartate aminotransferase (AST) levels with a successful corticosteroid taper by Week 24. We expect to receive topline data from the PORTOLA trial by mid-2025.
Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance with GCP requirements. 16 Table of Contents The testing and approval process for an NDA requires substantial time, effort and financial resources, and takes several years to complete.
Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance with GCP requirements. The testing and approval process for an NDA requires substantial time, effort and financial resources, and takes several years to complete.
The process required by the FDA before a drug may be marketed in the United States generally involves: • completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice regulations; • submission to the FDA of an IND, which must become effective before human clinical trials may begin; • approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated; • performance of adequate and well-controlled clinical trials, in accordance with good clinical practice, or GCP, requirements to establish the safety and efficacy of the proposed drug for each indication; • submission to the FDA of an NDA; • satisfactory completion of an FDA advisory committee review, if applicable; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; • satisfactory completion of an FDA inspection of selected clinical sites to assure compliance with GCP and the integrity of the clinical data; • payment of user fees; and • FDA review and approval of the NDA.
The process required by the FDA before a drug may be marketed in the United States generally involves: • completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice regulations; • submission to the FDA of an Investigational New Drug Application, or IND, which must become effective before human clinical trials may begin; • approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated; • performance of adequate and well-controlled clinical trials, in accordance with good clinical practice, or GCP, requirements to establish the safety and efficacy of the proposed drug for each indication; • submission to the FDA of a New Drug Application, or NDA; • satisfactory completion of an FDA advisory committee review, if applicable; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; • satisfactory completion of an FDA inspection of selected clinical sites to assure compliance with GCP and the integrity of the clinical data; • payment of user fees; and • FDA review and approval of the NDA. 11 Table of Contents Preclinical Studies Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy.
PORTOLA Trial We have initiated PORTOLA, a randomized, placebo-controlled, double-blind Phase 2a clinical trial evaluating the safety and efficacy of zetomipzomib in patients with AIH who are insufficiently responding to standard of care or have relapsed.
PORTOLA Phase 2a Trial PORTOLA is a Phase 2a placebo-controlled, double-blind clinical trial evaluating the safety and efficacy of zetomipzomib in patients with AIH who are insufficiently responding to standard of care or have relapsed.
In addition, 15 Table of Contents an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must continue to oversee the clinical trial while it is being conducted.
In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must continue to oversee the clinical trial while it is being conducted.
These therapies result in increased risks of infection and malignancy and a wide variety of side effects. In many autoimmune diseases, immunosuppressive regimens do not always induce high rates of clinically meaningful responses. Even if these agents are initially effective, over time patients often experience loss of response.
These therapies can increase the risks of infection and malignancy and cause a wide variety of side effects. In many autoimmune diseases, immunosuppressive regimens do not always induce high rates of clinically meaningful responses. Even if these agents are initially effective, over time patients often experience loss of response.
In longer term exposure to zetomipzomib during the PRESIDIO open-label extension trial, seven patients have received zetomipzomib 45mg weekly for more than 12 months, and one patient received zetomipzomib weekly for up to two years. With chronic exposure, no new safety or tolerability events were observed and there remained no signs or symptoms of immunosuppression.
In longer term exposure to zetomipzomib during our PRESIDIO open-label extension trial, nine patients received zetomipzomib 45mg weekly for more than 12 months, including one patient who received zetomipzomib weekly for up to two years. With chronic exposure, no new safety or tolerability events were observed and there remained no signs or symptoms of immunosuppression.
The 20-year term of this family is March 2034, absent any patent term extensions available. KP-00-004—Patent application pending in numerous jurisdictions, directed to process for preparing zetomipzomib. We have issued patents in numerous jurisdictions, including the United States, Australia, Chile, Eurasia, Japan, Mexico, and Taiwan. The 20-year term for this family is June 2037, absent any patent term extensions available.
This patent covers zetomipzomib and its closely related analogs. The 20-year term of this family is March 2034, absent any patent term extensions available. KP-00-004—Patent application pending in numerous jurisdictions directed to process for preparing zetomipzomib. We have issued patents in numerous jurisdictions, including the United States, Australia, Chile, Eurasia, Japan, Mexico, and Taiwan.
Targeting these fundamental regulators of cellular function offers an attractive approach to treating many diseases. Our lead product candidate, zetomipzomib, is a first-in-class selective immunoproteasome inhibitor that has completed Phase 1a testing in healthy volunteers and a Phase 1b trial in patients with systemic lupus erythematosus, or SLE.
Targeting these fundamental regulators of cellular function offers an attractive approach to treating many diseases. Our lead product candidate, zetomipzomib, is a first-in-class selective immunoproteasome inhibitor that has successfully completed Phase 1a testing in healthy volunteers and a Phase 1b/2a clinical trial in patients with systemic lupus erythematosus, or SLE, with or without lupus nephritis, or LN (the MISSION trial).
Such obligations may include, without limitation, the Federal Trade Commission Act, the Telephone Consumer Protection Act of 1991the California Consumer Privacy Act of 2018, the European Union’s General Data Protection Regulation 2016/679, or EU GDPR, the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018, or UK GDPR, and the ePrivacy Directive.
Such obligations may include, without limitation, the 16 Table of Contents Federal Trade Commission Act, the Telephone Consumer Protection Act of 1991, the California Consumer Privacy Act of 2018, the European Union’s General Data Protection Regulation 2016/679, or EU GDPR, the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018, or UK GDPR.
We do not have long term supply agreements or arrangements for redundant supply in place; however, we believe we can identify and establish additional CMOs to manufacture our product candidates. We may continue to rely on CMOs to develop and manufacture our products for commercial sale.
We do not have long term supply agreements or arrangements for redundant supply in place; however, we believe we can identify and establish additional CMOs to manufacture our product candidates. We expect to utilize CMOs to develop and manufacture our products for commercial sale.
Employees and Human Capital Resources As of December 31, 2022, we had 84 full-time employees, 66 of whom were primarily engaged in research and development activities and 24 of whom had an M.D. or Ph.D. degree. None of our employees is represented by a labor union and we consider our employee relations to be good.
Employees and Human Capital Resources As of December 31, 2023, we had 58 full-time employees, 39 of whom were primarily engaged in research and development activities and 14 of whom had an M.D. or Ph.D. degree. None of our employees is represented by a labor union and we consider our employee relations to be good.
We require our employees, consultants and advisors to enter into confidentiality agreements prohibiting the disclosure of confidential information and requiring disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. For our product candidates, generally we initially pursue patent protection covering compositions of matter and methods of use.
We require our employees, consultants and advisors to enter into confidentiality agreements prohibiting the disclosure of confidential information and requiring disclosure and assignment to us of intellectual property related to our business. For our product candidates, generally we initially pursue patent protection covering compositions of matter and methods of use.
Some nonclinical testing may continue even after the IND application is submitted. An IND application automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold.
An IND application automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold.
This is distinct from other agents currently used to treat autoimmunity, which typically target a single cytokine or immune cell type or are broadly immunosuppressive. 9 Table of Contents KZR-261: A First-In-Class Protein Secretion Inhibitor KZR-261 is a novel, first-in-class protein secretion inhibitor and the first clinical candidate nominated from our protein secretion platform.
This is distinct from other agents currently used to treat autoimmunity, which typically target a single cytokine or immune cell type or are broadly immunosuppressive. KZR-261: A First-In-Class Protein Secretion Inhibitor KZR-261 is a novel, first-in-class protein secretion inhibitor and the first clinical candidate nominated from our protein secretion platform. KZR-261 acts through direct interaction and inhibition of Sec61translocon activity.
Under the Onyx License Agreement, we are obligated to pay Onyx milestone payments of up to $172.5 million in the aggregate upon the achievement of certain development, regulatory and sales milestones.
We have paid $5.0 million in milestone payments to date under the Onyx License Agreement, and we are obligated to pay Onyx additional milestone payments of up to $167.5 million in the aggregate upon the achievement of certain development, regulatory and sales milestones.
The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges.
The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. These provisions take effect progressively starting in fiscal year 2023.
For more information, see the section titled “Risk Factors—Risks Related to Our Intellectual Property.” Trademarks and Know-How In connection with the ongoing development and advancement of our products and services in the United States and various international jurisdictions, we seek to create protection for our marks and enhance their value by pursuing trademarks and service marks where available and when appropriate.
Item 1A titled “Risks Related to Our Intellectual Property.” 10 Table of Contents Trademarks and Know-How In connection with the ongoing development and advancement of our products and services in the United States and various international jurisdictions, we seek to create protection for our marks and enhance their value by pursuing trademarks and service marks where available and when appropriate.
In cells of the immune system, the immunoproteasome is the predominant form. While both forms of the proteasome mediate protein degradation, the two forms of the proteasome accomplish this utilizing different active sites.
In cells of the immune system, the immunoproteasome is the predominant form. While both forms of the proteasome mediate protein degradation, the two forms of the proteasome accomplish this utilizing different active sites. These active sites are responsible for cleaving and degrading proteins.
The study is designed to evaluate safety and tolerability, pharmacokinetics and pharmacodynamics, identify a recommended Phase 2 dose and explore the preliminary anti-tumor activity of KZR-261 in patients with locally advanced or metastatic disease.
The study is designed to evaluate safety and tolerability, pharmacokinetics and pharmacodynamics, identify a recommended Phase 2 dose and explore the preliminary anti-tumor activity of KZR-261 in patients with locally advanced or metastatic disease. To date, we have enrolled a total of 35 patients and completed rapid dose escalation without significant safety concerns.
LN is associated with considerable morbidity, including an increased risk of end-stage renal disease requiring dialysis or renal transplantation and an increased risk of death. Management of this disease typically consists of induction therapy to achieve remission and long-term maintenance therapy to prevent relapse. There are FDA-approved drugs for the treatment of LN.
LN is associated with considerable morbidity, including an increased risk of end-stage renal disease requiring dialysis or renal transplantation and an increased risk of death. Management of this disease typically consists of induction therapy to achieve remission and long-term maintenance therapy involving corticosteroids or similar immunosuppressive agents to prevent relapse.
Competition Drug development is highly competitive and subject to rapid and significant technological advancements. Our ability to compete will significantly depend upon our ability to complete necessary clinical trials and regulatory approval processes, and effectively market any drug that we may successfully develop. Our current and potential future competitors include pharmaceutical and biotechnology companies, academic institutions and government agencies.
Our ability to compete will significantly depend upon our ability to complete necessary clinical trials and regulatory approval processes, and effectively market any drug that we may successfully develop. Our current and potential future competitors include pharmaceutical and biotechnology 8 Table of Contents companies, academic institutions and government agencies.
KP-00-008—Patent application directed to formulations of zetomipzomib is pending, with no issued patents yet. The 20-year term of this family is expected to be October 2039, absent any patent term extensions available.
The 20-year term of this family is August 2038, absent any patent term extensions available. KP-00-008—Patent application directed to formulations of zetomipzomib is pending, with an issued patent in Taiwan. The 20-year term of this family is October 2039, absent any patent term extensions available.
A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current PDUFA guidelines. 17 Table of Contents Under the current PDUFA agreement, these six- and ten-month review periods are measured from the “filing” date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review and decision from the date of submission.
Under the current PDUFA agreement, these six- and ten-month review periods are measured from the “filing” date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review and decision from the date of submission.
The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of equity-based compensation awards and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives. 23 Table of Contents Corporate Information We were incorporated under the laws of the State of Delaware on February 19, 2015.
The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of equity-based compensation awards and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
KP-00-006—Patent application directed to combination of zetomipzomib and immunomodulator drugs, such as mycophenolate mofetil, for the treatment of lupus, lupus nephritis and other autoimmune diseases. There are no issued patents yet. The 20-year term of this family is expected to be August 2038, absent any patent term extensions available.
The 20-year term for this family is June 2037, absent any patent term extensions available. KP-00-006—Patent application directed to combination of zetomipzomib and immunomodulator drugs, such as mycophenolate mofetil, for the treatment of lupus, lupus nephritis and other autoimmune diseases. We have issued patents in China and Japan.
The 20-year term of this family is June 2027, absent any patent term extensions available. KP-00-002—Composition of matter patent covering selective immunoproteasome inhibitors, including selective LMP7 inhibitors and dual LMP7/LMP2 inhibitors. We have issued patents in numerous jurisdictions, including the United States, Europe, Eurasia, Australia, China, Columbia, Indonesia, Jordan, Japan, Lebanon, Mexico, Saudi Arabia, Singapore and Taiwan.
Zetomipzomib Our patent portfolio relating to zetomipzomib is outlined below: KP-00-002—Composition of matter patent covering selective immunoproteasome inhibitors, including selective LMP7 inhibitors and dual LMP7/LMP2 inhibitors. We have issued patents in numerous jurisdictions, including the United States, Europe, Eurasia, Australia, China, Columbia, Indonesia, Jordan, Japan, Lebanon, Mexico, Saudi Arabia, Singapore and Taiwan.
We have seen encouraging clinical activity and biomarker data in the SLE and LN patients who received zetomipzomib in the MISSION trial. The safety and tolerability profiles of zetomipzomib has been favorable and consistent with the needs for a long-term therapy. We intend to identify additional immune-mediated disease indications where a proof of principle exists to further develop zetomipzomib.
We have seen encouraging clinical activity and biomarker data in the SLE and LN patients who received zetomipzomib in our MISSION trial. The safety and tolerability profiles of zetomipzomib has been favorable and consistent with the needs for a long-term therapy.
Our patent portfolio includes issued patents in, among other jurisdictions, the United States, Australia, Canada, China, Europe, Japan, Mexico, Singapore and South Korea with expiration dates ranging from 2027 to 2037.
Our patent portfolio includes issued patents in, among other jurisdictions, the United States, Australia, Canada, 9 Table of Contents China, Europe, Japan, Mexico, Singapore and South Korea with expiration dates ranging from 2034 to 2039, absent any patent term extensions available.
These agents include antibodies against the interferon alpha receptor, such as Saphnelo® (anifrolumab) from AstraZeneca, against IL-17, such as Cosentyx® (secukinumab), under evaluation by 12 Table of Contents Novartis, the B-cell depleting agent Gazyva® (obinutuzimab) from Roche, and small molecule agents targeting TYK2, such as Sotyktu™ from Bristol Meyers Squibb.
These agents include antibodies against the interferon alpha receptor, such as Saphnelo® (anifrolumab) from AstraZeneca, against IL-17, such as Cosentyx® (secukinumab), or BAFF, such as ianalumab, both under evaluation by Novartis, against CD20, such as Gazyva® (obinutuzimab) from Roche, and small molecule agents targeting TYK2, such as Sotyktu™ from Bristol Meyers Squibb, and JAK1, such as Rinvoq™, from Abbvie.
In preclinical models of inflammation, selective inhibitors of the immunoproteasome were shown to block cytokine production and result in profound immunomodulatory therapeutic activity equivalent to or better than approved dual proteasome inhibitors without causing cytotoxicity.
Zetomipzomib is derived from medicinal chemistry efforts focused on potent and selective inhibition of the immunoproteasome-specific subunits LMP7 and LMP2. In preclinical models of inflammation, selective inhibitors of the immunoproteasome were shown to block cytokine production and result in profound immunomodulatory therapeutic activity equivalent to or better than approved dual proteasome inhibitors without causing cytotoxicity.
We conduct our operations in a single office and laboratory space to minimize waste and use of energy and water. We take steps to reduce waste streams and ensure proper treatment of both hazardous and non-hazardous materials.
We are committed to environmentally responsible operations, which includes using natural resources wisely and considering our impact on the environment. We conduct our operations in a single office and laboratory space to minimize waste and use of energy and water. We take steps to reduce waste streams and ensure proper treatment of both hazardous and non-hazardous materials.
In our clinical trials, zetomipzomib is reconstituted in the hospital pharmacy prior to patient administration. We first introduced at-home self-administration of zetomipzomib for patients in the PRESIDIO OLE study. We intend that if approved and commercialized, zetomipzomib will be self-administered by patients using the sterile vial-adaptor device.
In our clinical trials, zetomipzomib is reconstituted in the hospital pharmacy prior to patient administration or reconstituted and self-administered by the patient at home. We intend that if approved and commercialized, zetomipzomib will be self-administered by patients using the sterile vial-adaptor device. Competition Drug development is highly competitive and subject to rapid and significant technological advancements.
Impact of Healthcare Reform on our Business The United States and some foreign jurisdictions are considering enacting or have enacted a number of additional legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our product candidates profitably, if approved.
We cannot provide any assurances that we will be able to obtain and maintain third-party payor coverage or adequate reimbursement for our product candidates in whole or in part. 17 Table of Contents Impact of Healthcare Reform on our Business The United States and some foreign jurisdictions are considering enacting or have enacted a number of additional legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our product candidates profitably, if approved.
In addition, we are leveraging the broad therapeutic potential of zetomipzomib in other severe autoimmune diseases of high unmet medical need. PORTOLA is a placebo-controlled, double-blind Phase 2a clinical trial evaluating zetomipzomib in patients with autoimmune hepatitis, or AIH, a rare, chronic disease in which the immune system attacks the liver and causes inflammation and tissue damage.
We are now conducting PALIZADE, a global, placebo-controlled, double-blind Phase 2b clinical trial evaluating zetomipzomib in patients with LN. In addition, we are leveraging the broad therapeutic potential of zetomipzomib in other severe autoimmune diseases of high unmet medical need. Our PORTOLA trial is a placebo-controlled, double-blind Phase 2a clinical trial evaluating zetomipzomib in patients with autoimmune hepatitis, or AIH.
We continue to file applications for new methods of treatment, clinical protocols, and other uses in view of results from ongoing drug discovery and development efforts. 13 Table of Contents Protein Secretion Modulators Our scientists and the laboratory of our co-founder, Dr.
We expect to continue to file applications for new methods of treatment, clinical protocols, and other uses in view of results from ongoing drug discovery and development efforts.
KP-01-002—Composition of matter patent application pending directed to protein secretion modulators and covering our current clinical candidate KZR-261 as a tumor therapeutic, with a patent issued in the United States, and pending in numerous jurisdictions. The 20-year term of this family is expected to be March 2039, absent any patent term extensions available.
KZR-261 We have filed composition of matter patent applications directed to numerous protein secretion modulators and covering our current clinical candidate, KZR-261, with patents issued in the United States, Europe, Eurasia, Mexico, and Taiwan. The 20-year term of this family is March 2039, absent any patent term extensions available.
The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review.
The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review.
In addition, several states within the United States have enacted or proposed data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act.
In addition, various other states within the United States have enacted or proposed data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act. Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security.
Special FDA Expedited Review and Approval Programs The FDA has various programs, including fast track designation, accelerated approval, priority review, and breakthrough therapy designation, which are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life-threatening diseases or conditions and demonstrate the potential to address unmet medical needs.
Further, if a designated orphan drug receives marketing approval for an indication broader than the rare disease or condition for which it received ODD, it may not be entitled to exclusivity. 13 Table of Contents Special FDA Expedited Review and Approval Programs The FDA has various programs, including fast track designation, accelerated approval, priority review, and breakthrough therapy designation, which are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life-threatening diseases or conditions and demonstrate the potential to address unmet medical needs.
The Cohort 5 dose-level is approximately equivalent to the minimally effective dose as determined in preclinical anti-tumor studies. To date, KZR-261 has shown dose-proportional exposure, no signs of accumulation or altered pharmacokinetics with repeated dosing, and a half-life of greater than 25 hours with measurable levels at day 8, indicating continuous exposure with weekly dosing.
KZR-261 has shown dose-proportional exposure, no signs of accumulation or altered pharmacokinetics with repeated dosing, and a half-life of greater than 25 hours with measurable levels at day 8, indicating continuous exposure with weekly dosing. As of March 2024, the dose escalation portion of the study is enrolling Cohort 9 (80 mg/m2).
Our oncology product candidate, KZR-261, is being studied in an open-label Phase 1 clinical trial designed to evaluate safety and tolerability, pharmacokinetics and pharmacodynamics, as well to explore preliminary anti-tumor activity. This study is being conducted in two parts: dose escalation in patients with locally advanced or metastatic solid malignancies, and dose expansion in patients with selected tumor types.
Our oncology product candidate, KZR-261, is a small molecule agent being studied in an open-label Phase 1 clinical trial designed to evaluate safety and tolerability, pharmacokinetics and pharmacodynamics, as well to explore preliminary anti-tumor activity.
In addition, IpiNovyx Bio, founded in 2021, is engaged in preclinical research focused on small molecule immunoproteasome therapies for the treatment of autoimmune and inflammatory diseases. Currently, SLE is treated with corticosteroids and immunosuppressive agents such as azathioprine. Current guidance for the treatment of proliferative LN involves induction therapy with either CellCept or Cytoxan® (cyclophosphamide) and corticosteroids.
We are aware of one company currently engaged in drug discovery and development of selective inhibitors of the immunoproteasome. IpiNovyx Bio, founded in 2021, is engaged in preclinical research focused on small molecule immunoproteasome therapies for the treatment of autoimmune and inflammatory diseases. Currently, SLE is treated with corticosteroids and immunosuppressive agents such as azathioprine.
Our discovery-stage Sec61 inhibitors have shown to induce anti-tumor activity against multiple hematologic tumor types without inducing cell death in normal cells or significant toxicity in animals.
Our discovery-stage Sec61 inhibitors have shown to induce anti-tumor activity against multiple hematologic tumor types without inducing cell death in normal cells or significant toxicity in animals. Our tool compounds also block inflammation in animal models of autoimmunity at doses of less than 1/8th the maximum tolerated dose.
Our principal executive offices are located at 4000 Shoreline Court, Suite 300, South San Francisco, California 94080, and our telephone number is (650) 822-5600. In January 2016, we incorporated our wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd, which is a proprietary company limited by shares. Available Information Our website address is www.kezarlifesciences.com.
In January 2016, we incorporated our wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd, which is a proprietary company limited by shares. Available Information Our website address is www.kezarlifesciences.com.
To the extent that our commercial partners, collaborators, employees, and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. 14 Table of Contents Government Regulation and Product Approval Government authorities in the United States, at the federal, state and local levels, and in other countries, extensively regulate, among other things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export of pharmaceutical products, such as those we are developing.
Government Regulation and Product Approval Government authorities in the United States, at the federal, state and local levels, and in other countries, extensively regulate, among other things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export of pharmaceutical products, such as those we are developing.
The cost containment measures that third-party payors and healthcare providers are instituting and any healthcare reform could significantly reduce our revenues from the sale of any approved product candidates. We cannot provide any assurances that we will be able to obtain and maintain third-party payor coverage or adequate reimbursement for our product candidates in whole or in part.
The cost containment measures that third-party payors and healthcare providers are instituting and any healthcare reform could significantly reduce our revenues from the sale of any approved product candidates.
Preclinical Studies Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy. An IND sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND application.
An IND sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND application. Some nonclinical testing may continue even after the IND application is submitted.
The direct anti-tumor effect of KZR-261 is driven by induction of cell death through proteotoxic stress and other factors, as well as the reduced expression of key growth factors and receptors driving tumor survival and proliferation. In addition, KZR-261 modulates the tumor microenvironment by reducing angiogenic factor expression (e.g., VEGF) and reducing immune checkpoint expression.
In multiple in vitro and in vivo preclinical models, KZR-261 has shown broad tumor growth inhibition including tumors resistant to traditional chemotherapeutics. The direct anti-tumor effect of KZR-261 is driven by induction of cell death through proteotoxic stress and other factors, as well as the reduced expression of key growth factors and receptors driving tumor survival and proliferation.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe have experienced and may in the future experience numerous unforeseen events that may prevent the timely and successful completion of our clinical trials, or result in the termination of such clinical trials prior to their completion, including: • failure to recruit suitable patients to participate in a clinical trial, enrollment in these clinical trials may be slower than we anticipate, and participants may drop out during the course of these trials at a higher rate than we anticipate; • delays in manufacturing, testing, releasing, validating and shipping stable quantities of our product candidates and placebo for our clinical trial sites; • delays in reaching a consensus with the FDA and foreign regulatory authorities on the design of our clinical trials; • the number of patients required for clinical trials to produce statistically meaningful data may be larger than we anticipate; • the costs of clinical trials of our product candidates may be greater than we anticipate, which may be more likely as a result of increased price inflation worldwide; • occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; • imposition of a clinical hold by regulatory authorities as a result of a serious adverse event, concerns with a class of product candidates or after an inspection of our clinical trial operations, trial sites or manufacturing facilities; • regulators or institutional review boards, or IRBs, may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site, or may otherwise suspend our clinical trials at any time if it appears we are or our collaborators are failing to conduct a trial in accordance with regulatory requirements; • delays in identifying and recruiting suitable clinical investigators or reaching agreement on acceptable terms with prospective clinical trial sites; 34 Table of Contents • clinical trials of our product candidates may produce negative or inconclusive results, such as the topline data from our PRESIDIO Phase 2 clinical trial of zetomipzomib in patients with dermatomyositis and polymyositis, in which zetomipzomib did not demonstrate significant differentiation from placebo; • failure to perform our clinical trials in accordance with current Good Clinical Practice, or cGCP, or regulations required by the FDA or foreign regulatory authorities; • changes in regulatory requirements and guidance or other unforeseen regulatory developments that require amending or submitting new clinical protocols; • we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; or • business interruptions resulting from geo-political actions, war, terrorism, natural disasters or public health crises.
Biggest changeWe have experienced and may in the future experience numerous unforeseen events that may prevent the timely and successful completion of our clinical trials, or result in the termination of such clinical trials prior to their completion, including: • failure to recruit suitable patients to participate in a clinical trial, enrollment in these clinical trials may be slower than we anticipate, and participants may drop out during the course of these trials at a higher rate than we anticipate; • delays in manufacturing, testing, releasing, validating and shipping stable quantities of our product candidates and placebo for our clinical trial sites; • delays in reaching a consensus with the FDA and foreign regulatory authorities on the design of our clinical trials; • the number of patients required for clinical trials to produce statistically meaningful data may be larger than we anticipate; • the costs of clinical trials of our product candidates may be greater than we anticipate, which may be more likely as a result of increased price inflation worldwide; • occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; • imposition of a clinical hold by regulatory authorities as a result of a serious adverse event, concerns with a class of product candidates or after an inspection of our clinical trial operations, trial sites or manufacturing facilities; • regulators or institutional review boards, or IRBs, may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site, or may otherwise suspend our clinical trials at any time if it appears we are or our collaborators are failing to conduct a trial in accordance with regulatory requirements; • delays in identifying and recruiting suitable clinical investigators or reaching agreement on acceptable terms with prospective clinical trial sites; • clinical trials of our product candidates may produce negative or inconclusive results, such as the topline data from our PRESIDIO Phase 2 clinical trial of zetomipzomib in patients with dermatomyositis and polymyositis, in which zetomipzomib did not demonstrate significant differentiation from placebo; • failure to perform our clinical trials in accordance with current Good Clinical Practice, or cGCP, or regulations required by the FDA or foreign regulatory authorities; • changes in regulatory requirements and guidance or other unforeseen regulatory developments that require amending or submitting new clinical protocols; • we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; or • business interruptions resulting from geo-political actions, war, terrorism, natural disasters or public health crises. 30 Table of Contents Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, or allow our competitors to bring competing drugs to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business, financial condition, results of operations and prospects.
For example, in May 2022, we reported topline data from our PRESIDIO Phase 2 clinical trial of zetomipzomib in patients with dermatomyositis and polymyositis, in which zetomipzomib did not demonstrate significant differentiation from placebo.
For example, in May 2022, we reported topline data from our PRESIDIO Phase 2 clinical trial of zetomipzomib in patients with dermatomyositis and polymyositis, in which zetomipzomib did not demonstrate significant differentiation from placebo.
Any inability to timely and successfully complete clinical development will increase our costs, slow our development plans and impair our ability to generate revenue from our product candidates.
Any inability to timely and successfully complete clinical development will increase our costs, slow our development plans and impair our ability to generate revenue from our product candidates.
Entering into future collaborations could subject us to a number of risks, including: • we may be required to relinquish important rights to and control over the development and commercialization of our product candidates; • we may be required to undertake the expenditure of substantial operational, financial and management resources; • we may be required to issue equity securities that would dilute our stockholders’ percentage ownership of our company; • we may be required to assume substantial actual or contingent liabilities; • we may not be able to control the amount and timing of resources that our strategic collaborators devote to the development or commercialization of our product candidates; 32 Table of Contents • strategic collaborators may select indications or design clinical trials in a way that may be less successful or slower than if we were doing so; • strategic collaborators may delay clinical trials, provide insufficient funding, terminate a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new version of a product candidate for clinical testing; • strategic collaborators may not pursue further development and commercialization of products resulting from the strategic collaboration arrangement or may elect to discontinue research and development programs; • strategic collaborators may not commit adequate resources to the marketing and distribution of our product candidates, limiting our potential revenues from these products; • disputes may arise between us and our strategic collaborators that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management’s attention and consumes resources; • strategic collaborators may experience financial difficulties; • strategic collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose us to potential litigation; • business combinations or significant changes in a strategic collaborator’s business strategy may adversely affect a strategic collaborator’s willingness or ability to complete its obligations under any arrangement; • strategic collaborators could decide to move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors; and • strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and may increase the cost of developing our product candidates.
Entering into future collaborations could subject us to a number of risks, including: • we may be required to relinquish important rights to and control over the development and commercialization of our product candidates; • we may be required to undertake the expenditure of substantial operational, financial and management resources; • we may be required to issue equity securities that would dilute our stockholders’ percentage ownership of our company; • we may be required to assume substantial actual or contingent liabilities; • we may not be able to control the amount and timing of resources that our strategic collaborators devote to the development or commercialization of our product candidates; • strategic collaborators may select indications or design clinical trials in a way that may be less successful or slower than if we were doing so; • strategic collaborators may delay clinical trials, provide insufficient funding, terminate a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new version of a product candidate for clinical testing; • strategic collaborators may not pursue further development and commercialization of products resulting from the strategic collaboration arrangement or may elect to discontinue research and development programs; • strategic collaborators may not commit adequate resources to the marketing and distribution of our product candidates, limiting our potential revenues from these products; • disputes may arise between us and our strategic collaborators that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management’s attention and consumes resources; 28 Table of Contents • strategic collaborators may experience financial difficulties; • strategic collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose us to potential litigation; • business combinations or significant changes in a strategic collaborator’s business strategy may adversely affect a strategic collaborator’s willingness or ability to complete its obligations under any arrangement; • strategic collaborators could decide to move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors; and • strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and may increase the cost of developing our product candidates.
Our reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves, including: • inability to meet our product specifications and quality requirements consistently; 44 Table of Contents • delay or inability to procure or expand sufficient manufacturing capacity; • issues related to scale-up of manufacturing; • costs and validation of new equipment and facilities required for scale-up; • our third-party manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements appropriately; • our third-party manufacturers may fail to comply with cGMP and other inspections by the FDA or comparable foreign regulatory authorities; • our inability to negotiate manufacturing agreements with third parties under commercially reasonable terms, if at all; • breach, termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; • reliance on single sources for drug components; • lack of qualified backup suppliers for those components that are currently purchased from a sole or single source supplier; • our third-party manufacturers may not devote sufficient resources to our product candidates; • we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our product candidates; • operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier; and • carrier disruptions or increased costs that are beyond our control.
Our reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves, including: • inability to meet our product specifications and quality requirements consistently; • delay or inability to procure or expand sufficient manufacturing capacity; • issues related to scale-up of manufacturing; • costs and validation of new equipment and facilities required for scale-up; • our third-party manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements appropriately; • our third-party manufacturers may fail to comply with cGMP and other inspections by the FDA or comparable foreign regulatory authorities; 41 Table of Contents • our inability to negotiate manufacturing agreements with third parties under commercially reasonable terms, if at all; • breach, termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; • reliance on single sources for drug components; • lack of qualified backup suppliers for those components that are currently purchased from a sole or single source supplier; • our third-party manufacturers may not devote sufficient resources to our product candidates; • we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our product candidates; • operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier; and • carrier disruptions or increased costs that are beyond our control.
We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by nonaffiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
We take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by nonaffiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
The following examples are illustrative: • others may be able to make compounds or formulations that are similar to our product candidates but that are not covered by the claims of any patents, should they issue, that we own or control; 52 Table of Contents • we or any strategic partners might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or control; • we might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our pending patent applications will not lead to issued patents; • issued patents that we own or control may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; • our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights and then use the information learned from such activities to develop competitive drugs for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; and • the patents of others may prevent us from fully exploiting our product candidates or technologies.
The following examples are illustrative: • others may be able to make compounds or formulations that are similar to our product candidates but that are not covered by the claims of any patents, should they issue, that we own or control; • we or any strategic partners might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or control; • we might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our pending patent applications will not lead to issued patents; • issued patents that we own or control may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; 49 Table of Contents • our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights and then use the information learned from such activities to develop competitive drugs for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; and • the patents of others may prevent us from fully exploiting our product candidates or technologies.
Our ability to generate revenue from product sales depends heavily on our, or any future collaborators’, success in: • timely and successfully completing preclinical and clinical development of zetomipzomib, KZR-261 and any future product candidates; • obtaining regulatory approvals for zetomipzomib, KZR-261 and any future product candidates for which we successfully complete clinical trials; • launching and commercializing any product candidates for which we obtain regulatory approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner; • qualifying for and obtaining coverage and adequate reimbursement by government and third-party payors for any product candidates for which we obtain regulatory approval, both in the United States and internationally; • developing, validating and maintaining commercially viable, sustainable, scalable, reproducible and transferable manufacturing processes for zetomipzomib, a self-administered dual-chamber system for administering zetomipzomib and any future product candidates that are compliant with current good manufacturing practices, or cGMP; • establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate amount and quality of starting materials, drug substance, drug product and drug delivery devices and services to support clinical development, as well as the market demand for zetomipzomib, KZR-261 and any future product candidates, if approved; • obtaining market acceptance, if and when approved, of zetomipzomib, KZR-261 or any future product candidate as a viable treatment option by physicians, patients, third-party payors and others in the medical community; • effectively addressing any competing technological and market developments; • implementing additional internal systems and infrastructure, as needed; • negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations pursuant to such arrangements; • maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and • securing appropriate pricing in the United States and internationally. 27 Table of Contents We expect our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control.
Our ability to generate revenue from product sales depends heavily on our, or any future collaborators’, success in: • timely and successfully completing preclinical and clinical development of zetomipzomib, KZR-261 and any future product candidates; • obtaining regulatory approvals for zetomipzomib, KZR-261 and any future product candidates for which we successfully complete clinical trials; • launching and commercializing any product candidates for which we obtain regulatory approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner; • qualifying for and obtaining coverage and adequate reimbursement by government and third-party payors for any product candidates for which we obtain regulatory approval, both in the United States and internationally; • developing, validating and maintaining commercially viable, sustainable, scalable, reproducible and transferable manufacturing processes for zetomipzomib, a self-administered dual-chamber system for administering zetomipzomib and any future product candidates that are compliant with current good manufacturing practices, or cGMP; • establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate amount and quality of starting materials, drug substance, drug product and drug delivery devices and services to support clinical development, as well as the market demand for zetomipzomib, KZR-261 and any future product candidates, if approved; • obtaining market acceptance, if and when approved, of zetomipzomib, KZR-261 or any future product candidate as a viable treatment option by physicians, patients, third-party payors and others in the medical community; • effectively addressing any competing technological and market developments; • implementing additional internal systems and infrastructure, as needed; • negotiating favorable terms in any collaboration, licensing, spin-off or other arrangements into which we may enter and performing our obligations pursuant to such arrangements; • maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and • securing appropriate pricing in the United States and internationally. 23 Table of Contents We expect our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control.
If we seek to commercialize our product candidates outside of the United States, we expect that we will be subject to additional risks including: • different regulatory requirements for approval of therapies in foreign countries; • reduced protection for intellectual property rights; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • foreign reimbursement, pricing and insurance regimes; 40 Table of Contents • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, war, terrorism, natural disasters and public health epidemics.
If we seek to commercialize our product candidates outside of the United States, we expect that we will be subject to additional risks including: • different regulatory requirements for approval of therapies in foreign countries; • reduced protection for intellectual property rights; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • foreign reimbursement, pricing and insurance regimes; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, war, terrorism, natural disasters and public health epidemics.
Furthermore, if we or others identify undesirable side effects caused by our product candidates during development or after obtaining U.S. regulatory approval, several potentially significant negative consequences could result, including: • regulatory authorities may not permit us to initiate our studies or could put them on hold; • regulatory authorities may not approve, or may withdraw, their approval of the product; • regulatory authorities may require us to recall the product; • regulatory authorities may add new limitations for distribution and marketing of the product; • regulatory authorities may require the addition of warnings in the product label or narrowing of the indication in the product label; • we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients; • we may be required to change the way the product is administered or modify the product in some other way; • we may be required to implement a REMS program; • the FDA may require us to conduct additional clinical trials or costly post-marketing testing and surveillance to monitor the safety or efficacy of the product; • we could be sued and held liable for harm caused to patients; and • our reputation may suffer.
Furthermore, if we or others identify undesirable side effects caused by our product candidates during development or after obtaining U.S. regulatory approval, several potentially significant negative consequences could result, including: • regulatory authorities may not permit us to initiate our studies or could put them on hold; • regulatory authorities may not approve, or may withdraw, their approval of the product; • regulatory authorities may require us to recall the product; • regulatory authorities may add new limitations for distribution and marketing of the product; 32 Table of Contents • regulatory authorities may require the addition of warnings in the product label or narrowing of the indication in the product label; • we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients; • we may be required to change the way the product is administered or modify the product in some other way; • we may be required to implement a REMS program; • the FDA may require us to conduct additional clinical trials or costly post-marketing testing and surveillance to monitor the safety or efficacy of the product; • we could be sued and held liable for harm caused to patients; and • our reputation may suffer.
Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
In addition to the factors discussed in this “Risk Factors” section, the market price for our common stock may be influenced by the following: • the commencement, enrollment or results of our planned or future clinical trials of zetomipzomib, KZR-261 and any future product candidates; • the clinical or commercial success of competitive drugs, therapies or technologies; • regulatory or legal developments in the United States and other countries; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain and maintain patent protection for our technologies; • negative or inconclusive results from our clinical trials, such as the May 2022 topline data from the PRESIDIO Phase 2 clinical trial; • failure or discontinuation of any of our clinical development or research programs; • the recruitment or departure of key personnel; • the level of expenses related to our product candidates and clinical development or research programs; • our ability to discover, develop and broaden our pipeline beyond our current product candidates; • commencement or termination of collaborations for our research and development programs; • actual or anticipated changes in estimates as to financial results or development timelines; • changes in estimates or recommendations by securities analysts, if any, that cover our stock; • our inability to obtain or delays in manufacturing adequate supply for our clinical trials or the inability to do so at acceptable costs; • significant lawsuits, including patent or stockholder litigation or products liability claims; • variations in our financial results or those of companies that are perceived to be similar to us; • announcement, expectation or completion of additional financing efforts; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, political, and market conditions and overall fluctuations in the financial markets in the United States and abroad, including as a result of bank failures, public health crises or geopolitical tensions, such as the Russia-Ukraine war; and • investors’ general perception of us and our business.
In addition to the factors discussed in this “Risk Factors” section, the market price for our common stock may be influenced by the following: • the commencement, enrollment or results of our planned or future clinical trials of zetomipzomib, KZR-261 and any future product candidates; • the clinical or commercial success of competitive drugs, therapies or technologies; • regulatory or legal developments in the United States and other countries; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain and maintain patent protection for our technologies; • negative or inconclusive results from our clinical trials, such as the May 2022 topline data from the PRESIDIO Phase 2 clinical trial; • failure or discontinuation of any of our clinical development or research programs; • the recruitment or departure of key personnel; • the level of expenses related to our product candidates and clinical development or research programs; • our ability to discover, develop and broaden our pipeline beyond our current product candidates; • commencement or termination of collaborations for our research and development programs; 54 Table of Contents • actual or anticipated changes in estimates as to financial results or development timelines; • changes in estimates or recommendations by securities analysts, if any, that cover our stock; • our inability to obtain or delays in manufacturing adequate supply for our clinical trials or the inability to do so at acceptable costs; • significant lawsuits, including patent or stockholder litigation or products liability claims; • variations in our financial results or those of companies that are perceived to be similar to us; • announcement, expectation or completion of additional financing efforts; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, political, and market conditions and overall fluctuations in the financial markets in the United States and abroad, including as a result of bank failures, public health crises or geopolitical tensions; and • investors’ general perception of us and our business.
Disputes may arise between us and any of these counterparties regarding intellectual property rights that are subject to such agreements, including, but not limited to: • the scope of rights granted under the agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the agreement; • our right to sublicense patent and other rights to third parties; • our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations; • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; • our right to transfer or assign our license; and • the effects of termination.
Disputes may arise between us and any of these counterparties regarding intellectual property rights that are subject to such agreements, including, but not limited to: • the scope of rights granted under the agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the agreement; • our right to sublicense patent and other rights to third parties; 43 Table of Contents • our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations; • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; • our right to transfer or assign our license; and • the effects of termination.
If we fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory authority may: • issue an untitled letter or warning letter asserting that we are in violation of the law; • seek an injunction or impose administrative, civil or criminal penalties or monetary fines; • suspend or withdraw regulatory approval; • suspend any ongoing clinical trials; 38 Table of Contents • refuse to approve a pending NDA or comparable foreign marketing application or any supplements thereto submitted by us or our partners; • restrict the marketing or manufacturing of the drug; • seize or detain the drug or otherwise require the withdrawal of the drug from the market; • refuse to permit the import or export of product candidates; or • refuse to allow us to enter into supply contracts, including government contracts.
If we fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory authority may: • issue an untitled letter or warning letter asserting that we are in violation of the law; • seek an injunction or impose administrative, civil or criminal penalties or monetary fines; • suspend or withdraw regulatory approval; • suspend any ongoing clinical trials; • refuse to approve a pending NDA or comparable foreign marketing application or any supplements thereto submitted by us or our partners; • restrict the marketing or manufacturing of the drug; • seize or detain the drug or otherwise require the withdrawal of the drug from the market; • refuse to permit the import or export of product candidates; or • refuse to allow us to enter into supply contracts, including government contracts.
A person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation; • federal civil and criminal false claims laws, including, without limitation, the federal civil False Claims Act, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other government payors that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
A person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation; 38 Table of Contents • federal civil and criminal false claims laws, including, without limitation, the federal civil False Claims Act, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other government payors that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
In December 2021, we entered into Sales Agreement, or the ATM Agreement, with Cowen and Company, LLC, for an at-the-market offering program that allows us to sell up to an aggregate of $200 million of our common stock. As of December 31, 2022, approximately $68.3 million remains available under the at-the-market program.
In December 2021, we entered into Sales Agreement, or the ATM Agreement, with Cowen and Company, LLC, for an at-the-market offering program that allows us to sell up to an aggregate of $200 million of our common stock. As of December 31, 2023, approximately $68.3 million remains available under the at-the-market program.
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, effective January 1, 2024.
These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to the statute, will remain in effect through 2031 unless additional congressional action is taken.
These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to the statute, will remain in effect through 2032 unless additional congressional action is taken.
During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including cyberattacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
Similar provisions of state tax law may also apply to limit our use of 29 Table of Contents accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
Similar provisions of state tax law may also apply to limit our use of 25 Table of Contents accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
We have invested a significant portion of our time and limited financial and management resources in the development of zetomipzomib and KZR-261. Our business is dependent on our ability to successfully complete development of, obtain regulatory 30 Table of Contents approval for, and, if approved, successfully commercialize zetomipzomib and KZR-261 in a timely manner.
We have invested a significant portion of our time and limited financial and management resources in the development of zetomipzomib and KZR-261. Our business is dependent on our ability to successfully complete development of, obtain regulatory 26 Table of Contents approval for, and, if approved, successfully commercialize zetomipzomib and KZR-261 in a timely manner.
It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry.
It is unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry.
If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, fail to comply with regulatory requirements, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, the product candidate being developed.
If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, fail to comply with regulatory requirements, or if the quality or accuracy of the clinical data they obtain is compromised 42 Table of Contents due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, the product candidate being developed.
However, if future manufacturing of zetomipzomib fails to meet the quality standards for use in our clinical trials, or the active drug substance does not meet our quality specifications, it could impact our timelines or limit our development strategy.
However, if planned or future manufacturing of zetomipzomib fails to meet the quality standards for use in our clinical trials, or the active drug substance does not meet our quality specifications, it could impact our timelines and limit our development strategy.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we 34 Table of Contents may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
Patients who are prescribed treatments for their conditions and providers prescribing such services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.
Patients who are prescribed treatments for their conditions and providers prescribing such services generally rely on third-party payors to reimburse all or part of the 37 Table of Contents associated healthcare costs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.
However, while investigator-initiated clinical trials may provide us with clinical data that can inform our development strategy, we are not the sponsors of such trials, and therefore, we do not control the protocols, administration, quality or conduct of these trials, including follow-up with patients and ongoing data collection.
However, while investigator-initiated clinical trials may provide us with 31 Table of Contents clinical data that can inform our development strategy, we are not the sponsors of such trials, and therefore, we do not control the protocols, administration, quality or conduct of these trials, including follow-up with patients and ongoing data collection.
Orphan drug exclusive marketing rights in the United States also may be lost if the FDA later determines that the request for 37 Table of Contents designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
Orphan drug exclusive marketing rights in the United States also may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
In addition, we may be reliant on CROs and clinical trial sites to ensure proper and timely conduct of our clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance. We may encounter substantial delays or difficulties in our clinical trials.
In addition, we may be reliant on CROs and clinical trial sites to ensure proper and timely conduct of our clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance. 29 Table of Contents We may encounter substantial delays or difficulties in our clinical trials.
If the patent protection provided by our patents is not sufficiently broad to impede such competition, or if the breadth, strength or term (including any extensions or adjustments) of protection provided by our patents is successfully challenged, our ability to successfully commercialize our product candidates could be negatively affected, which would harm our business.
If the patent protection 45 Table of Contents provided by our patents is not sufficiently broad to impede such competition, or if the breadth, strength or term (including any extensions or adjustments) of protection provided by our patents is successfully challenged, our ability to successfully commercialize our product candidates could be negatively affected, which would harm our business.
Furthermore, our ability to pay cash dividends is currently restricted by the terms of the Loan Agreement. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In 58 Table of Contents addition, the terms of any future debt agreements may preclude us from paying dividends.
Furthermore, our ability to pay cash dividends is currently restricted by the terms of the Loan Agreement. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends.
In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do 50 Table of Contents not cover the technology in question.
In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.
Moreover, patents have a limited 48 Table of Contents lifespan. In the United States, the natural expiration of a patent is generally 20 years from the earliest filing date of a non-provisional patent application. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited.
Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years from the earliest filing date of a non-provisional patent application. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited.
Further, we may not be able to obtain adequate remedies for any breach. In addition, our confidential information may otherwise become known or be independently discovered by competitors, in which case we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.
Further, we may not be able to obtain 48 Table of Contents adequate remedies for any breach. In addition, our confidential information may otherwise become known or be independently discovered by competitors, in which case we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.
We face substantial competition, which may result in others developing or commercializing drugs before or more successfully than us. 39 Table of Contents The development and commercialization of new drugs is highly competitive. We face competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.
We face substantial competition, which may result in others developing or commercializing drugs before or more successfully than us. The development and commercialization of new drugs is highly competitive. We face competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.
More recently, on August 16, 2022, 43 Table of Contents President Biden signed the Inflation Reduction Act of 2022, or the IRA, into law, which included a number of significant drug pricing reforms, including the establishment of a drug price negotiation program within the U.S.
More recently, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or the IRA, into law, which included a number of significant drug pricing reforms, including the establishment of a drug price negotiation program within the U.S.
Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and more onerous than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country.
Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and more onerous than, those in the United States, including additional preclinical studies or clinical trials. In 33 Table of Contents many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country.
Specifically, under the Onyx License Agreement, Onyx has a right of 46 Table of Contents first negotiation under certain circumstances to obtain a license or a similar transfer of rights, if we are seeking to out-license rights to develop and/or commercialize certain licensed products.
Specifically, under the Onyx License Agreement, Onyx has a right of first negotiation under certain circumstances to obtain a license or a similar transfer of rights, if we are seeking to out-license rights to develop and/or commercialize certain licensed products.
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. We are an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to such companies may make our common stock less attractive to investors.
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. We are a “smaller reporting company,” and the reduced disclosure requirements applicable to such companies may make our common stock less attractive to investors.
Because our focus includes rare disorders, there are 33 Table of Contents limited patient pools from which to draw in order to complete our clinical trials in a timely and cost-effective manner. Furthermore, our efforts to build relationships with patient communities may not succeed, which could result in delays in patient enrollment in our clinical trials.
Because our focus includes rare disorders, there are limited patient pools from which to draw in order to complete our clinical trials in a timely and cost-effective manner. Furthermore, our efforts to build relationships with patient communities may not succeed, which could result in delays in patient enrollment in our clinical trials.
Our projections of both the number of people who have these disorders, as well as the subset of people with these disorders who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates.
Our projections of both the number of people who have these disorders, as well as the subset of 27 Table of Contents people with these disorders who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates.
Any successful opposition to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any product candidates or companion diagnostic that we may develop.
Any successful opposition to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any 44 Table of Contents product candidates or companion diagnostic that we may develop.
For example, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, imposes specific requirements relating to the privacy, security, and transmission of individually identifiable health information.
For example, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, imposes specific requirements relating to the privacy, 50 Table of Contents security, and transmission of individually identifiable health information.
In November 2021, we entered into a Loan Agreement with Oxford Finance that provided us with up to $50.0 million of borrowing capacity across five potential tranches. The initial tranche of $10.0 million was funded at the closing of the Loan Agreement.
In November 2021, we entered into a Loan Agreement with Oxford Finance that provided us with up to $50.0 million of borrowing capacity across five potential tranches. The initial tranche of $10.0 million was funded at the closing of the Loan Agreement, and we declined the remaining tranches in borrowing capacity available to us.
In addition, such parties may: • have staffing difficulties; 45 Table of Contents • fail to comply with contractual obligations; • not devote sufficient time and resources to our clinical trials; • experience regulatory compliance issues; or • undergo changes in priorities or become financially distressed.
In addition, such parties may: • have staffing difficulties; • fail to comply with contractual obligations; • not devote sufficient time and resources to our clinical trials; • experience regulatory compliance issues; or • undergo changes in priorities or become financially distressed.
Our obligations related to data privacy and security are quickly changing in an increasingly stringent fashion. These obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources (including, without limitation, financial and time-related resources).
Our obligations related to data privacy and security are quickly changing and are becoming increasingly stringent, and creating uncertainty. These obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources, including, without limitation, financial and time-related resources.
Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.
Some actors now engage and are expected to continue to engage in cyberattacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.
If we do not accurately evaluate the viability, development costs and commercial potential of our product candidates, we may fail to capitalize on profitable market opportunities, forego or delay opportunities to pursue other product candidates or other indications that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to product candidates 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 candidates.
If we do not accurately evaluate the viability, development costs and commercial potential of our product candidates, we may fail to capitalize on profitable market opportunities, forego or delay opportunities to pursue other product candidates or other indications that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to product candidates through strategic transactions, including collaboration, licensing or other royalty arrangements, asset sales, and spin-offs, in cases in which it would have been more advantageous for us to retain ownership and sole development and commercialization rights to such product candidates.
Department of Health and Human Services, or HHS, that would require pharmaceutical manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation, and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs and Part D beneficiaries’ annual out-of-pocket spending will be capped at $2,000 beginning in 2025.
Department of Health and Human Services, or HHS, that would require pharmaceutical manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation, and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs and Part D beneficiaries’ annual out-of-pocket spending will be capped at $2,000 beginning in 2025, although the Medicare drug price negotiation program is currently subject to legal challenges.
Based upon our shares of our common stock outstanding as of December 31, 2022, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock do, in the aggregate, beneficially own shares representing approximately 55% of our outstanding common stock.
Based upon our shares of our common stock outstanding as of December 31, 2023, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock do, in the aggregate, beneficially own shares representing approximately 40% of our outstanding common stock.
However, our operating plan may change as a result of many factors currently unknown to us, including as a result of the macroeconomic uncertainties and impacts, including as a result of future bank failures or geopolitical tensions such as the Russia-Ukraine war, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.
However, our operating plan may change as a result of many factors currently unknown to us, including as a result of the macroeconomic uncertainties and geopolitical tensions, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.
While lyophilized products are common in the drug industry, this method for administering zetomipzomib could adversely affect market acceptance and make it more difficult to conduct clinical trials of zetomipzomib. In our current trials, zetomipzomib is reconstituted in the hospital pharmacy prior to patient administration.
While lyophilized products are common in the drug industry, this method for administering zetomipzomib could adversely affect market acceptance and make it more difficult to conduct clinical trials of zetomipzomib. In our current trials, zetomipzomib is reconstituted in the hospital pharmacy prior to patient administration or reconstituted and self-administered by the patient at home.
If we encounter such difficulties, or fail to meet quality standards, our ability to meet clinical timelines and expand our development strategy could be impacted. • Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial potential or result in significant negative consequences following any potential marketing approval. • We may not be able to obtain or maintain orphan drug designations or exclusivity for our product candidates, which could limit the potential profitability of our product candidates. • Even if our product candidates receive marketing approval, they may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success. • We face substantial competition, which may result in others developing or commercializing drugs before or more successfully than us. 25 Table of Contents • Our relationships with customers, physicians, and third-party payors may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, transparency laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations.
If we encounter such difficulties, or fail to meet quality standards, our ability to meet clinical timelines and expand our development strategy could be impacted. • Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial potential or result in significant negative consequences following any potential marketing approval. • We may not be able to obtain or maintain orphan drug designations or exclusivity for our product candidates, which could limit the potential profitability of our product candidates. • Even if our product candidates receive marketing approval, they may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success. • We face substantial competition, which may result in others developing or commercializing drugs before or more successfully than us. 21 Table of Contents • We are dependent upon Everest for the further development and commercialization of zetomipzomib in the greater China region, South Korea and certain Southeast Asian countries. • Our relationships with customers, physicians, and third-party payors may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, transparency laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations.
Moreover, circumstances may arise that could result in suspending or terminating our ongoing clinical trials. As an example, some patients included in the MISSION Phase 2 clinical trial were located in Ukraine and Russia.
Moreover, circumstances may arise that could result in suspending or terminating our ongoing clinical trials. As an example, some patients included in the MISSION Phase 2 clinical trial were located in Ukraine and Russia at the time of the Russian invasion of Ukraine.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: • any derivative action or proceeding brought on our behalf; • any action asserting a breach of fiduciary duty; • any action asserting a claim against us or any of our directors, officers, employees or agents arising under the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws; • any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; and 60 Table of Contents • any action asserting a claim against us or any of our directors, officers, employees or agents that is governed by the internal-affairs doctrine.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: • any derivative action or proceeding brought on our behalf; • any action asserting a breach of fiduciary duty; • any action asserting a claim against us or any of our directors, officers, employees or agents arising under the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws; • any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; and • any action asserting a claim against us or any of our directors, officers, employees or agents that is governed by the internal-affairs doctrine. 57 Table of Contents This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act.
Our net loss was $68.2 million, $54.6 million and $41.7 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, we had an accumulated deficit of $248.9 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future.
Our net loss was $101.9 million, $68.2 million and $54.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $350.8 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future.
Our decisions concerning the allocation of research, development, management, and financial resources toward particular product candidates may not lead to the development of viable commercial products and may divert resources away from better opportunities.
Our decisions concerning the allocation of development, management and financial resources may not lead to the development of viable commercial products and may divert resources away from better opportunities.
We cannot predict what form such a strategic collaboration might take. We face significant competition in seeking appropriate strategic collaborators, and the negotiation process can be complicated and time consuming. Even if we are successful in our efforts to establish new development collaborations, the terms of such collaborations may not be favorable to us.
We face significant competition in seeking appropriate strategic collaborators, and the negotiation process can be complicated and time consuming. Even if we are successful in our efforts to establish new development collaborations, the terms of such collaborations may not be favorable to us.
For example, under the EU GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater.
For example, under GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros under the EU GDPR or 17.5 million pounds sterling under the UK GDPR, or, in each case, 4% of annual global revenue, whichever is greater.
These threats are becoming increasingly difficult to detect. These threats come from a variety of sources, including traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
Any significant delay in the supply of a product candidate or raw material components for an ongoing clinical trial due to the need to replace a third-party CMO could considerably delay the completion of our clinical trials.
Any significant delay in the supply of a product candidate or raw material components for an ongoing clinical trial due to the need to replace a third-party CMO could considerably delay the completion of our clinical trials or cause us to breach our obligations under the Everest License Agreement.
We anticipate that our expenses will increase substantially if, and as, we: • continue the ongoing and planned development of zetomipzomib, KZR-261 and future product candidates from our protein secretion program; • seek to discover and develop additional product candidates, including preclinical studies and clinical trials for such product candidates; • maintain, protect and expand our portfolio of intellectual property rights, including patents, trade secrets and know-how; • seek marketing approvals for zetomipzomib, KZR-261 and any future product candidates that successfully complete clinical trials; • establish a sales, marketing, manufacturing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval; • continue to build a portfolio of product candidates through the acquisition or in-license of drugs, product candidates or technologies; • implement operational, financial, management and compliance systems; and • attract, hire and retain additional administrative, clinical, regulatory and scientific personnel. 26 Table of Contents In addition, because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to accurately predict the timing or amount of increased expenses and when, or if, we will be able to achieve profitability.
We anticipate that our expenses will increase substantially if, and as, we: • continue the ongoing and planned development of zetomipzomib, KZR-261 and future product candidates from our protein secretion program; • seek to discover and develop additional product candidates, including preclinical studies and clinical trials for such product candidates; • maintain, protect and expand our portfolio of intellectual property rights, including patents, trade secrets and know-how; • seek marketing approvals for zetomipzomib, KZR-261 and any future product candidates that successfully complete clinical trials; • establish a sales, marketing, manufacturing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval; • continue to build a portfolio of product candidates through the acquisition or in-license of drugs, product candidates or technologies; • implement operational, financial, management and compliance systems; and 22 Table of Contents • attract, hire and retain additional administrative, clinical, regulatory and scientific personnel.
Some of these patent applications have already been allowed or issued, and others may issue in the future. While we may decide to initiate proceedings to challenge the validity of these or other patents in the future, we may be unsuccessful, and courts or patent offices in the United States and abroad could uphold the validity of any such patent.
While we may decide to initiate proceedings to challenge the validity of these or other patents in the future, we may be unsuccessful, and courts or patent offices in the United States and abroad could uphold the validity of any such patent.
We believe that our cash, cash equivalents and marketable securities as of December 31, 2022, and our available borrowing capacity will fund our current operating plans through at least the next 12 months from the date the financial statements were issued.
As of December 31, 2023, we had cash, cash equivalents and marketable securities of $201.4 million. We believe that our existing cash, cash equivalents and marketable securities as of December 31, 2023 will fund our current operating plans through at least the next 12 months from the date the financial statements were issued.
However, even after we are no longer an EGC, and while we remain a smaller reporting company that is not an accelerated filer, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
However, while we remain a smaller reporting 56 Table of Contents company that is not an accelerated filer, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.
In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.
Our ability to use net operating losses and certain other tax attributes to offset future taxable income may be subject to limitation. Our net operating loss, or NOL, carryforwards could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under U.S. tax law.
Our net operating loss, or NOL, carryforwards could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under U.S. tax law.
Due to the significant resources required for the development of zetomipzomib and KZR-261, we must focus our research and development efforts on specific indications and decide which product candidates to pursue and advance.
The development of zetomipzomib and KZR-261 requires significant capital investment. Due to the significant resources required for clinical development, we must focus our research and development efforts on specific indications and decide which development opportunities to pursue and advance for each program.
Our product candidates will require clinical testing before we are prepared to submit an NDA for regulatory approval. The clinical trial process is expensive, time consuming, difficult to design and implement, and subject to uncertainty. We estimate that the successful completion of clinical trials of our product candidates will take several years to complete.
The clinical trial process is expensive, time consuming, difficult to design and implement, and subject to uncertainty. We estimate that the successful completion of clinical trials of our product candidates will take several years to complete.
While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions.
While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions.
Any changes to the manufacturing processes carry the risk that they will not achieve these intended objectives, or that the product candidates may not meet the rigorous quality standards necessary for use in our clinical trials. We plan to manufacture zetomipzomib and placebo in larger quantities in connection with our PALIZADE trial and future development strategies.
Any changes to the manufacturing processes carry the risk that they will not achieve these intended objectives, or that the product candidates may not meet the rigorous quality standards necessary for use in our clinical trials. We are continuing to manufacture zetomipzomib and placebo in support of our PALIZADE and PORTOLA trials.
Due to the significant resources required for research and development, we must prioritize development of certain product candidates. We may expend our limited resources to pursue particular drug candidates and fail to capitalize on other product candidates that may be more profitable or for which there may be a greater likelihood of success.
Due to the significant resources required for clinical development, we are required to make strategic decisions for the development of our product candidates. We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on other opportunities that may be more profitable or for which there may be a greater likelihood of success.
Competitors could purchase our products and replicate some or all of the competitive advantages we derive from our development efforts for technologies on which we do not have patent protection.
Moreover, our competitors may independently develop knowledge, methods and know-how equivalent to our trade secrets. Competitors could purchase our products and replicate some or all of the competitive advantages we derive from our development efforts for technologies on which we do not have patent protection.
Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks. A weak or declining economy could also strain our suppliers and manufacturers, possibly resulting in supply and clinical trial disruption.
Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval. 39 Table of Contents Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access.
The United States Patent and Trademark Office, or the USPTO, international patent offices or judicial bodies may deny or significantly narrow claims made under our patent applications and our issued patents may be successfully challenged, may be designed around, or may otherwise be of insufficient scope to provide us with protection for our commercial products. 47 Table of Contents It is possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
The United States Patent and Trademark Office, or the USPTO, international patent offices or judicial bodies may deny or significantly narrow claims made under our patent applications and our issued patents may be successfully challenged, may be designed around, or may otherwise be of insufficient scope to provide us with protection for our commercial products.
If additional clinical experience indicates that zetomipzomib, KZR-261 or any future product candidates has side effects or causes serious or life-threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked, which would harm our business, prospects, operating results and financial condition. 36 Table of Contents Moreover, if we elect, or are required, to delay, suspend or terminate any clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed and our ability to generate revenue through their sale may be delayed or eliminated.
If additional clinical experience indicates that zetomipzomib, KZR-261 or any future product candidates has side effects or causes serious or life-threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked, which would harm our business, prospects, operating results and financial condition.
Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; and other adverse business consequences.
We are subject to stringent and changing U.S. and foreign laws, regulations and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; and other adverse business consequences.
In addition, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts. Outside the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security.
In addition, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts.
Under the Onyx License Agreement, we are subject to significant obligations, including payment obligations triggered upon achievement of specified milestones and royalties on licensed product sales. We are obligated to pay Onyx milestone payments up to an aggregate of $172.5 million upon the achievement of certain development, regulatory and sales milestone events.
Under the Onyx License Agreement, we are subject to significant obligations, including payment obligations triggered upon achievement of specified milestones and royalties on licensed product sales.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pro perties. Our principal corporate offices are located in South San Francisco, California and consists of approximately 49,000 square feet of leased office and laboratory space, all of which is located in a single building, under a lease that expires in July 2026. We believe that our facilities are adequate to meet our current needs.
Biggest changeItem 2. Properties. Our principal corporate offices are located in South San Francisco, California and consists of approximately 49,000 square feet of leased office and laboratory space, all of which is located in a single building, under a lease that expires in July 2026. We believe that our facilities are adequate to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have an adverse effect on our business, operating results or financial condition. Item 4. Mine Saf ety Disclosures. Not Applicable. 61 Table of Contents PART II
Biggest changeWe are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have an adverse effect on our business, operating results or financial condition. Item 4. Mine Safety Disclosures. Not Applicable. 59 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 61 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 62 Item 6. [Reserved] 62 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 63 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 69 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 59 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 60 Item 6. [Reserved] 60 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 61 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 67 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders As of February 28, 2023, there were approximately 13 stockholders of record. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Biggest changeHolders As of February 28, 2024, there were approximately 10 stockholders of record. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe increase was primarily due to an increase of $5.9 million in personnel-related expenses and an increase of $3.7 million in stock-based compensation, each due to an increase in headcount to support the progression of our programs and drug discovery, an increase of $1.3 million in consulting expenses, an increase of $1.3 million in facility-related expenses due to the expansion of headquarters and higher allocation from the increase in headcount, an increase of $1.1 million in research expenses related to the protein secretion program, and an increase of $0.9 million in clinical trial related costs for KZR-261, offset by a decrease of $1.7 million in drug manufacturing expenses and a decrease of $0.5 million in clinical trial related costs for zetomipzomib due to the close-out of MISSION and PRESIDIO clinical trials.
Biggest changeThe increase was primarily due to an increase of $17.8 million in clinical trial costs primarily related to increased activities for the PALIZADE and PORTOLA trials, an increase of $5.4 million in research expenses primarily related to the milestone payment under Onyx License Agreement, an increase of $3.0 million in facility-related expenses due to the expansion of our headquarters, an increase of $2.4 million in personnel-related expenses due to increased headcount prior to the Workforce Reduction, an increase of $2.0 million in stock-based compensation primarily due to incremental expenses from the option repricing, an increase of $1.6 million in pre-clinical expenses related to the protein secretion program, an increase of $1.4 million in drug manufacturing expenses and an increase of $0.9 million in consulting expenses.
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.” Overview We are a clinical-stage biotechnology company, discovering and developing novel small molecule therapeutics to treat unmet needs in immune-mediated diseases and cancer.
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.” Overview We are a clinical-stage biotechnology company developing novel small molecule therapeutics to treat unmet needs in immune-mediated diseases and cancer.
Cash Flows from Financing Activities During the year ended December 31, 2022, cash provided by financing activities was $127.9 million, consisting of $126.5 million of net proceeds received from the at-the-market offering program described above and $1.3 million from the issuance of common stock pursuant to our employee equity plans.
During the year ended December 31, 2022, cash provided by financing activities was $127.9 million, consisting of $126.5 million of net proceeds received from the at-the-market offering program described above and $1.3 million from the issuance of common stock pursuant to our employee equity plans.
Critical Accounting Policies and 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.
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.
Our future funding requirements will depend on many factors, including the following: • the progress, timing, scope, results and costs of our clinical trials and preclinical studies for our product candidates, including the ability to enroll patients in a timely manner for our clinical trials; • the costs of obtaining clinical and commercial supplies for zetomipzomib, KZR-261 and any other product candidates we may identify and develop; • the cost, timing and outcomes of regulatory approvals; • the extent to which we may acquire or in-license other product candidates and technologies; • the cost of attracting, hiring and retaining qualified personnel; • our ability to successfully commercialize any product candidates for which we obtain regulatory approval; and • the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
Our future funding requirements will depend on many factors, including the following: • the progress, timing, scope, results and costs of our clinical trials and preclinical studies for our product candidates, including the ability to enroll patients in a timely manner for our clinical trials; 65 Table of Contents • the costs of obtaining clinical and commercial supplies for zetomipzomib, KZR-261 and any other product candidates we may identify and develop; • the cost, timing and outcomes of regulatory approvals; • the extent to which we may acquire or in-license other product candidates and technologies; • the cost of attracting, hiring and retaining qualified personnel; • our ability to successfully commercialize any product candidates for which we obtain regulatory approval; and • the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
As of December 31, 2022, we have sold an aggregate of 11,986,003 shares of our common stock for gross proceeds of approximately $131.7 million at a weighted average purchase price of $10.98 per share pursuant to the ATM Agreement. As of December 31, 2022, approximately $68.3 million remains available under the ATM Agreement.
As of December 31, 2023, we have sold an aggregate of 11,986,003 shares of our common stock for gross proceeds of approximately $131.7 million at a weighted average purchase price of $10.98 per share pursuant to the ATM Agreement. As of December 31, 2023, approximately $68.3 million remains available under the ATM Agreement.
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 63 Table of Contents below, and debt.
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 anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on discovering, completing the necessary development, obtaining regulatory approval and preparing for potential commercialization of our product candidates. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.
We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the necessary development, obtaining regulatory approval and preparing for potential commercialization of our product candidates. 61 Table of Contents We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.
We believe that our cash, cash equivalents and marketable securities as of December 31, 2022 will be sufficient to meet our projected operating requirements through at least the next 12 months from the date the financial statements were issued.
We believe that our existing cash, cash equivalents and marketable securities as of December 31, 2023 will be sufficient to meet our projected operating requirements through at least the next 12 months from the date the financial statements were issued.
F inancial Operations Overview 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; 64 Table of Contents • 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.
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; 62 Table of Contents • 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 are also continuing to explore development opportunities for zetomipzomib in patients with SLE, a chronic inflammatory disease. Based on clinical data generated to date with zetomipzomib, we believe that zetomipzomib has the potential to address multiple chronic immune-mediated diseases.
We are also continuing to explore development opportunities for zetomipzomib in patients with SLE. Based on clinical data generated to date with zetomipzomib, we believe that zetomipzomib has the potential to address multiple chronic immune-mediated diseases.
Cash Flows Discussion of our cash flow activities for the year ended December 31, 2020 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, 2021, filed with the SEC on March 17, 2022.
Cash Flows Discussion of our cash flow activities for the year ended December 31, 2021 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, 2022, filed with the SEC on March 14, 2023.
Results of Operations A discussion regarding our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results 65 Table of Contents of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 17, 2022.
Results of Operations 63 Table of Contents A discussion regarding our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 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, 2022, filed with the SEC on March 14, 2023.
The following table summarizes our research and development expenses for the years ended: Year Ended December 31, 2022 2021 2020 (dollars in millions) (unaudited) Research and development expenses by program: Zetomipzomib $ 29.6 $ 24.6 $ 18.9 KZR-261 11.5 7.8 6.7 Other protein secretion discovery programs 9.9 6.5 5.4 Total research and development expenses $ 51.0 $ 38.9 $ 31.0 We expect our research and development expenses to increase substantially for the foreseeable future as our product candidates advance into later stages of development.
The following table summarizes our research and development expenses for the years ended: Year Ended December 31, 2023 2022 2021 (dollars in millions) (unaudited) Research and development expenses by program: Zetomipzomib $ 56.1 $ 29.6 $ 24.6 KZR-261 15.6 11.5 7.8 Other protein secretion discovery programs 14.0 9.9 6.5 Total research and development expenses $ 85.7 $ 51.0 $ 38.9 We expect our research and development expenses to increase substantially for the foreseeable future as our product candidates advance into later stages of development.
Payments for the purchases of property and equipment was $1.6 million during the year ended December 31, 2022. 68 Table of Contents During the year ended December 31, 2021, net cash used in investing activities was $28.4 million primarily relating to the purchases of marketable securities exceeding maturities of such marketable securities.
During the year ended December 31, 2022, net cash used in investing activities was $91.4 million primarily relating to the purchases of marketable securities exceeding maturities of such marketable securities. Payments for the purchases of property and equipment was $1.6 million during the year ended December 31, 2022.
Targeting these fundamental regulators of cellular function offers an attractive approach to treating many diseases. Our lead product candidate, zetomipzomib, is a first-in-class selective immunoproteasome inhibitor that has completed Phase 1a testing in healthy volunteers and a Phase 1b trial in patients with systemic lupus erythematosus, or SLE.
Targeting these fundamental regulators of cellular function offers an attractive approach to treating many diseases. Our lead product candidate, zetomipzomib, is a first-in-class selective immunoproteasome inhibitor that has completed Phase 1a testing in healthy volunteers and a Phase 1b/2 clinical trial in patients with SLE, with or without LN (the MISSION trial).
Our net losses were $68.2 million, $54.6 million and $41.7 million for the years ended December 31, 2022, 2021 and 2020, respectively, and we expect to continue to incur significant losses for the foreseeable future. As of December 31, 2022, we had an accumulated deficit of $248.9 million.
Our net losses were $101.9 million, $68.2 million and $54.6 million for the years ended December 31, 2023, 2022 and 2021, respectively, and we expect to continue to incur significant losses for the foreseeable future. As of December 31, 2023, we had an accumulated deficit of $350.8 million.
General and Administrative Expenses General and administrative expenses increased by $4.4 million in 2022 compared to 2021.
General and Administrative Expenses General and administrative expenses increased by $6.4 million in 2023 compared to 2022.
The increase was primarily attributable to higher cash equivalent and marketable securities balances and increased interest rates. Interest Expense Interest expense increased by $1.0 million in 2022 compared to 2021.
Interest Income Interest income increased by $7.0 million in 2023 compared to 2022. The increase was primarily attributable to higher cash equivalent and marketable securities balances and increased interest rates. Interest Expense Interest expense increased by $0.4 million in 2023 compared to 2022.
The following summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 (dollars in millions) Net cash used in operating activities $ (58.8 ) $ (42.4 ) Net cash used in investing activities (91.4 ) (28.4 ) Net cash provided by financing activities 127.9 112.6 Effect of exchange rate changes on cash and cash equivalents (0.1 ) (0.1 ) Net (decrease) increase in cash and cash equivalents $ (22.4 ) $ 41.7 Cash Flows from Operating Activities During the year ended December 31, 2022, cash used in operating activities was $58.8 million, which consisted of a net loss of $68.2 million and a net change of $4.5 million in our net operating assets and liabilities, and adjusted by non-cash charges of $13.8 million.
The following summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 (dollars in millions) Net cash used in operating activities $ (81.6 ) $ (58.8 ) Net cash provided by (used in) investing activities 76.0 (91.4 ) Net cash provided by financing activities 0.6 127.9 Effect of exchange rate changes on cash and cash equivalents — (0.1 ) Net decrease in cash and cash equivalents $ (5.0 ) $ (22.4 ) 66 Table of Contents Cash Flows from Operating Activities During the year ended December 31, 2023, cash used in operating activities was $81.6 million, which consisted of a net loss of $101.9 million and a net change of $4.7 million in our net operating assets and liabilities, and adjusted by non-cash charges of $15.5 million.
Debt Facility In November 2021, we entered into a loan and security agreement, or the Loan Agreement, with Oxford Finance LLC, or 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.
Debt Facility In November 2021, we entered into the Loan Agreement with Oxford Finance LLC, or 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.
See the section titled “Business—License Agreement with Onyx” for additional information. We will require additional financing to fund working capital and pay our obligations. We may pursue financing opportunities through the issuance of debt or equity.
See the section titled “Business—License Agreement with Onyx” for additional information. We will require additional financing to fund working capital and pay our obligations. We may pursue financing opportunities through a combination of equity offerings, debt financings and additional funding from license and collaboration agreements.
Our material cash requirements through fiscal year 2027 are expected total in the aggregate of approximately $27.1 million, which includes debt payments, including principal, 67 Table of Contents future interest payments and the final payment fee due on maturity, and amounts due under our operating leases.
Our material cash requirements through fiscal year 2027 are expected to total approximately $22.5 million, which includes debt payments, including principal, future interest payments and the final payment fee due on maturity, and amounts due under our operating leases.
The change in our net operating assets and liabilities was primarily due to a decrease of $1.1 million in prepaid expenses and other current assets and an increase of $1.2 million in accounts payable and accrued expenses due to timing of payments and increased clinical and manufacturing expenditures, offset by a decrease of $1.0 million in operating lease liabilities.
The change in our net operating assets and liabilities was primarily due to an increase of $4.9 million of other assets driven by the clinical activities related to PALIZADE clinical trial, a decrease of $0.3 million in operating lease asset and liabilities, offset by an increase of $6.3 million in accounts payable and accrued expenses due to timing of payments and increased clinical and manufacturing expenditures, and a decrease of $3.6 million in prepaid expenses and other current assets.
During the year ended December 31, 2021, cash used in operating activities was $42.4 million, which consisted of a net loss of $54.6 million and a net change of $1.2 million in our net operating assets and liabilities, and adjusted by non-cash charges of $11.0 million.
During the year ended December 31, 2022, cash used in operating activities was $58.8 million, which consisted of a net loss of $68.2 million and a net change of $4.5 million in our net operating assets and liabilities, and adjusted by non-cash charges of $13.8 million.
We have seen encouraging clinical activity and biomarker data in the SLE and LN patients who received zetomipzomib in the MISSION trial. The safety and tolerability profiles of zetomipzomib has been favorable and consistent with the needs for a long-term therapy. We intend to identify additional immune-mediated disease indications where a proof of principle exists to further develop zetomipzomib.
We have seen encouraging clinical activity and biomarker data in the SLE and LN patients who received zetomipzomib in our MISSION trial. The safety and tolerability profiles of zetomipzomib has been favorable and consistent with the needs for a long-term therapy.
We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. 66 Table of Contents At-the-Market Offering Program In December 2021, we entered into a Sales Agreement (the “December 2021 ATM Agreement”) with Cowen and Company, LLC, or Cowen, pursuant to which we can offer and sell, from time to time at our sole discretion through Cowen, as our sales agent, shares of common stock having an aggregate offering price of up to $200.0 million.
At-the-Market Offering Program In December 2021, we entered into a Sales Agreement (the “December 2021 ATM Agreement”) with Cowen and Company, LLC, or Cowen, pursuant to which we can offer and sell, from time to time at our sole discretion through Cowen, as our sales agent, shares of common stock having an aggregate offering price of up to $200.0 million.
The non-cash charges consisted of $7.6 million for stock-based compensation expense, $1.8 million of amortization of premium and discounts on marketable securities, $1.5 million for depreciation and amortization, and $0.1 million of non-cash interest expense.
The non-cash charges consisted of $18.1 million for stock-based compensation expense, $2.9 million for impairment loss of long-lived assets, $1.1 million for depreciation, and $0.2 million of non-cash interest expense, offset by $6.8 million of amortization of premium and discounts on marketable securities.
In addition, we are leveraging the broad therapeutic potential of zetomipzomib in other severe autoimmune diseases of high unmet medical need. PORTOLA is a placebo-controlled, double-blind Phase 2a clinical trial evaluating zetomipzomib in patients with autoimmune hepatitis, or AIH, a rare, chronic disease in which the immune system attacks the liver and causes inflammation and tissue damage.
We are conducting PALIZADE, a global, placebo-controlled, double-blind Phase 2b clinical trial evaluating zetomipzomib in patients with LN. In addition, we are leveraging the broad therapeutic potential of zetomipzomib in other severe autoimmune diseases of high unmet medical need. PORTOLA is a placebo-controlled, double-blind Phase 2a clinical trial evaluating zetomipzomib in patients with AIH.
Our significant accounting policies are more fully described in Note 2 to our consolidated financial statements located elsewhere in this Annual Report on Form 10-K. We have listed below our critical accounting policies and estimates that we believe to have the greatest potential impact on our consolidated financial statements.
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.
Comparison of the Years Ended December 31, 2022 and 2021 Year Ended December 31, (dollars in millions) 2022 2021 Increase (decrease) Operating expenses: Research and development $ 51.0 $ 38.9 $ 12.1 General and administrative 20.1 15.7 4.4 Total operating expenses 71.1 54.6 16.5 Loss from operations (71.1 ) (54.6 ) (16.5 ) Interest income 4.1 0.2 3.9 Interest expense (1.2 ) (0.2 ) (1.0 ) Net loss $ (68.2 ) $ (54.6 ) $ (13.6 ) Research and Development Expenses Research and development expenses increased by $12.1 million in 2022 compared to 2021.
Comparison of the Years Ended December 31, 2023 and 2022 Year Ended December 31, (dollars in millions) 2023 2022 Increase (decrease) Collaboration revenue $ 7.0 $ — $ 7.0 Operating expenses: Research and development 85.7 51.0 34.7 General and administrative 26.5 20.1 6.4 Restructuring and impairment charges 6.2 — 6.2 Total operating expenses 118.4 71.1 47.3 Loss from operations (111.4 ) (71.1 ) (40.3 ) Interest income 11.1 4.1 7.0 Interest expense (1.6 ) (1.2 ) (0.4 ) Net loss $ (101.9 ) $ (68.2 ) $ (33.7 ) Collaboration Revenue Collaboration revenue increased by $7.0 million in 2023 compared to 2022 due to the upfront payment under the Everest License Agreement.
Our oncology product candidate, KZR-261, is being studied in an open-label Phase 1 clinical trial designed to evaluate safety and tolerability, pharmacokinetics and pharmacodynamics, as well to explore preliminary anti-tumor activity. This study is being conducted in two parts: dose escalation in patients with locally advanced or metastatic solid malignancies, and dose expansion in patients with selected tumor types.
Our oncology product candidate, KZR-261, is a small molecule agent being studied in an open-label Phase 1 clinical trial designed to evaluate safety and tolerability, pharmacokinetics and pharmacodynamics, as well to explore preliminary anti-tumor activity.
Cash Flows from Investing Activities During the year ended December 31, 2022, net cash used in investing activities was $91.4 million primarily relating to the purchases of marketable securities exceeding maturities of such marketable securities.
Cash Flows from Investing Activities During the year ended December 31, 2023, net cash provided by investing activities was $76.0 million primarily relating to the maturities of marketable securities exceeding purchases of such marketable securities. Payments for the purchases of property and equipment was $1.8 million during the year ended December 31, 2023.
As of December 31, 2022, our cash equivalents and marketable securities had an average maturity of approximately six months and the longest maturity was 15 months. 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.
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 $101.9 million for the year ended December 31, 2023, and we had an accumulated deficit of $350.8 million as of December 31, 2023.
As of December 31, 2022, a total of $40.0 million in borrowing capacity remained available to us across two potential tranches. The Loan Agreement bears interest at a floating per annum rate (based on the actual number of days elapsed divided by a year of 360 days) equal to the sum of (a) the greater of (i) the 30-day U.S.
Until June 30, 2023, the Loan Agreement bore interest at a floating per annum rate (based on the actual number of days elapsed divided by a year of 360 days) equal to the sum of (a) the greater of (i) the 30-day U.S.
There are no warrants or financial covenants associated with the Loan Agreement. Upon the occurrence of a LIBOR transition event, Oxford Finance may amend the Loan Agreement to replace the LIBOR rate with a LIBOR Replacement Rate.
There are no warrants or financial covenants associated with the Loan Agreement. A LIBOR transition event occurred effective July 1, 2023 and Oxford Finance revised the Loan Agreement to replace the LIBOR rate with the 1-month CME term SOFR plus 0.1%.
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, clinical costs, legal and other regulatory expenses 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.
Funding Requirements We believe that our available cash, cash equivalents and short-term investments are sufficient to fund existing and planned cash requirements. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, clinical costs, legal and other regulatory expenses and general overhead costs.
KZR-261 is the first clinical candidate from our novel research platform targeting the Sec61 translocon and the protein secretion pathway for the discovery and development of small molecule therapeutics for oncology and autoimmune indications. KZR-261 has demonstrated broad anti-tumor activity in preclinical models of both solid and hematologic malignancies by targeting multiple pathways driving tumor growth and survival.
KZR-261 has demonstrated broad anti-tumor activity in preclinical models of both solid and hematologic malignancies by targeting multiple pathways driving tumor growth and survival.
During the year ended December 31, 2021, cash provided by financing activities was $112.6 million, consisting of $101.0 million of net proceeds received from the at-the-market offering program described above, $9.5 million of net proceeds received under the Loan Agreement with Oxford Finance, and $2.1 million from the issuance of common stock pursuant to our employee equity plans.
Cash Flows from Financing Activities During the year ended December 31, 2023, cash provided by financing activities was $0.6 million from the issuance of common stock pursuant to our employee equity plans.
The interest expense was composed of the contractual coupon interest expense, the amortization of the debt discount and issuance costs and the accretion of the final payment fee associated with the Oxford Loan Agreement entered into in November 2021.
The interest expense was composed of the contractual coupon interest expense, the amortization of the debt discount and issuance costs and the accretion of the final payment fee associated with the Oxford Loan Agreement. 64 Table of Contents Liquidity and Capital Resources Overview As of December 31, 2023, we had $35.5 million in cash and cash equivalents and $165.9 million of marketable securities invested in a U.S.
The increase was primarily due to an increase of $2.8 million in stock-based compensation and an increase of $1.4 million in personnel-related expenses, each due to an increase in headcount and salaries, and an increase of $0.2 million in consulting and professional service fees. Interest Income Interest income increased by $3.9 million in 2022 compared to 2021.
The increase was primarily due to an increase of $2.1 million in stock-based compensation primarily related to incremental expenses from option repricing, an increase of $1.6 million in personnel-related expenses due to increased headcount prior to the Workforce Reduction, an increase of $2.0 million in consulting and professional service fees in connection with the Everest License Agreement and business development activities, and an increase of $0.7 million in facility-related expenses primarily due to the expansion of our headquarters.
Liquidity and Capital Resources Overview As of December 31, 2022, we had $40.5 million in cash and cash equivalents and $236.1 million of marketable securities invested in a U.S. Treasury money market fund, U.S. Treasury securities, U.S. agency bonds, commercial paper and corporate debt securities.
Treasury money market fund, U.S. Treasury securities, U.S. agency bonds, commercial paper and certificate of deposit. As of December 31, 2023, our cash equivalents and marketable securities had a weighted average maturity of approximately six months and the longest maturity was 16 months.
Removed
In November 2022, we reported positive results from the completed Phase 2a portion of the MISSION trial of zetomipzomib in patients with lupus nephritis, or LN. In the first half of 2023, we will be initiating PALIZADE, a global, placebo-controlled, double-blind Phase 2b clinical trial evaluating zetomipzomib in patients with LN.
Added
This study is being conducted in two parts: dose escalation in patients with locally advanced or metastatic solid malignancies, and dose expansion in patients with selected tumor types. KZR-261 was discovered from our novel research platform targeting the Sec61 translocon and the protein secretion pathway.
Removed
We believe this discovery platform has the potential to yield additional small molecule product candidates with the ability to inhibit multiple pathways as a single agent, as well as compounds designed to selectively inhibit a single secreted or transmembrane protein of interest.
Added
F inancial 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.
Removed
For example, in November 2022, we presented promising preclinical data on KZR-540, an orally bioavailable small molecule that selectively blocks PD-1 expression via inhibition of the Sec61 translocon.
Added
Our revenue to date has been generated from the upfront payment pursuant to our collaboration with Everest under the Everest License Agreement. 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.
Removed
If successfully developed and approved, small molecules generated from our protein secretion program could serve as alternatives to currently marketed biologic therapeutics to act as cytotoxic anti-cancer agents or to block the secretion of novel targets of interest in immuno-oncology or inflammation.
Added
If a milestone being reached is considered probable, 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.
Removed
We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles.
Added
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, milestones and other collaboration agreement payments and other factors.
Removed
Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results and no significant assumptions used have a high degree of subjectivity.
Added
Restructuring and Impairment Charges In October 2023, we announced a strategic restructuring and workforce reduction (the “Workforce Reduction”) to prioritize our clinical-stage assets and extend our cash runway, reducing our workforce by approximately 40%.
Removed
Our net loss was $68.2 million for the year ended December 31, 2022, and we had an accumulated deficit of $248.9 million as of December 31, 2022.
Added
All employees affected by the Workforce Reduction were eligible to receive, among other things, severance payments and the continuation of group health insurance coverage for a specified time period post-termination.
Removed
Subsequent tranches of up to $20.0 million each would become available upon achieving milestones related to our MISSION Phase 2 clinical trial, PRESIDIO Phase 2 clinical trial and our KZR-261 Phase 1 clinical trial, up to the aggregate maximum amount of $50.0 million.
Added
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 current or expected future operations.
Removed
Funding Requirements We believe that our available cash, cash equivalents and short-term investments and continued access to our term loan are sufficient to fund existing and planned cash requirements.
Added
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 17 to our consolidated financial statements located elsewhere in this Annual Report on Form 10-K for additional information on the restructuring and impairment charges.
Removed
Payments for the purchases of property and equipment was $0.3 million during the year ended December 31, 2021.
Added
Research and Development Expenses Research and development expenses increased by $34.7 million in 2023 compared to 2022.
Removed
JOBS Act Accounting Election We are, and will continue to be, an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, until December 31, 2023.
Added
Restructuring and impairment charges Restructuring and impairment charges increased by $6.2 million in 2023 compared to 2022. The increase was primarily related to one-time severance-related costs of $3.3 million and an impairment loss of $2.9 million due to the ROU asset and certain property and equipment no longer utilized.
Removed
Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
Added
We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
Removed
We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Added
As of December 31, 2023, we declined these tranches in borrowing capacity available to us under the Loan Agreement.
Removed
As an “emerging growth company,” we rely on certain exemptions and are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
Added
The rate change did not require contract remeasurement at the effective date of the change or a reassessment of any previous accounting determinations pertaining to the facility. The rate change did not have a material impact on the Company’s financial statements.
Removed
These exemptions will apply until December 31, 2023.
Added
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.
Added
Except for any obligations of Everest to reimburse us for research and development expenses or to make milestone or royalty payments under the Everest License Agreement, we have no committed external sources of funding.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed3 unchanged
Biggest changeWe had cash, cash equivalents and marketable securities of $276.6 million as of December 31, 2022, which consisted of bank deposits, highly liquid U.S. Treasury money market funds, U.S. Treasury securities, U.S. agency bonds, commercial paper and corporate debt securities.
Biggest changeWe had cash, cash equivalents and marketable securities of $201.4 million as of December 31, 2023, which consisted of bank deposits, highly liquid U.S. Treasury money market funds, U.S. Treasury securities, U.S. agency bonds, commercial paper and certificate of deposit.
We have the ability to hold our cash equivalents and marketable securities until maturity, and we therefore do not expect a change in market interest rates to affect our operating results or cash flows to any significant degree. Approximately $0.7 million of our cash balance was located in Australia as of December 31, 2022.
We have the ability to hold our cash equivalents and marketable securities until maturity, and we therefore do not expect a change in market interest rates to affect our operating results or cash flows to any significant degree. Approximately $0.7 million of our cash and marketable securities balance was located in Australia as of December 31, 2023.
A 10% increase or decrease in current exchange rates would not have a material effect on our consolidated financial results. 69 Table of Contents
A 10% increase or decrease in current exchange rates would not have a material effect on our consolidated financial results. 67 Table of Contents
Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. As of December 31, 2022, our cash equivalents and marketable securities had an average maturity of approximately six months and the longest maturity was 15 months.
Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. As of December 31, 2023, our cash equivalents and marketable securities had a weighted average maturity of approximately six months and the longest maturity was 16 months.

Other KZR 10-K year-over-year comparisons