10-Q 1 kzr-20220930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-38542

 

Kezar Life Sciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-3366145

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

4000 Shoreline Court, Suite 300

South San Francisco, CA, 94080

(650) 822-5600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

KZR

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of November 4, 2022, the registrant had 68,378,059 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Comprehensive Loss

3

 

Condensed Consolidated Statement of Stockholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 6.

Exhibits

64

 

 

 

 

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “should,” “would,” “potential,” “project,” “plan,” “expect,” “seek,” “target” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include statements concerning the following:

statements regarding the impact of the ongoing COVID-19 pandemic and its effects on our operations, research and development, clinical trials and financial position, and its potential effects on the operations of third-party manufacturers, contract research organizations, other service providers, and collaborators with whom we conduct business;
our plans to develop and commercialize our product candidates;
the initiation, timing, progress and expected results of our current and future clinical trials and our research and development programs;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to maintain and establish collaborations or strategic relationships or obtain additional funding;
the timing and likelihood of obtaining regulatory approval of our current and future product candidates;
our expectations regarding the potential market size and the rate and degree of market acceptance of such product candidates;
our ability to fund our working capital requirements and expectations regarding the sufficiency of our capital resources;
the implementation of our business model and strategic plans for our business and product candidates;
the scope of protection we are able to establish and maintain for intellectual property rights and the duration of our patent rights covering our product candidates;
developments or disputes concerning our intellectual property or other proprietary rights;
the scalability and commercial viability of our manufacturing methods and processes;
our expectations regarding government and third-party payor coverage and reimbursement;
our ability to compete in the markets for our product candidates;
the impact of government laws and regulations;
developments relating to our competitors and our industry; and
other factors that may impact our financial results.

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors” and elsewhere in this report. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements in this report, whether as a result of new information, future events or otherwise, after the date of this report.

Unless the context otherwise requires, the terms “Kezar,” “Kezar Life Sciences,” “the Company,” “we,” “us,” “our” and similar references in this Quarterly Report on Form 10-Q refer to Kezar Life Sciences, Inc. and our wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd.

 

 

 

 

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

64,453

 

 

$

62,882

 

Marketable securities

 

 

225,930

 

 

 

145,473

 

Prepaid expenses

 

 

7,726

 

 

 

2,570

 

Other current assets

 

 

818

 

 

 

729

 

Total current assets

 

 

298,927

 

 

 

211,654

 

Property and equipment, net

 

 

3,369

 

 

 

3,283

 

Operating lease right-of-use asset

 

 

2,192

 

 

 

2,714

 

Other assets

 

 

282

 

 

 

282

 

Total assets

 

$

304,770

 

 

$

217,933

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,274

 

 

$

2,028

 

Accrued and other current liabilities

 

 

5,992

 

 

 

4,985

 

Operating lease liabilities, current

 

 

1,329

 

 

 

1,199

 

Total current liabilities

 

 

9,595

 

 

 

8,212

 

Operating lease liabilities, noncurrent

 

 

2,207

 

 

 

3,223

 

Debt, noncurrent

 

 

9,780

 

 

 

9,622

 

Total liabilities

 

 

21,582

 

 

 

21,057

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.001 par value, 125,000,000 shares authorized as of September 30,
   2022 (unaudited) and December 31, 2021;
68,372,115 and 56,259,747 shares issued
   and outstanding as of September 30, 2022 (unaudited) and December 31, 2021,
   respectively

 

 

68

 

 

 

56

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized, zero shares issued
   and outstanding as of September 30, 2022 (unaudited) and December 31, 2021

 

 

 

 

 

 

Additional paid-in capital

 

 

515,297

 

 

 

377,765

 

Accumulated other comprehensive loss

 

 

(1,465

)

 

 

(291

)

Accumulated deficit

 

 

(230,712

)

 

 

(180,654

)

Total stockholders' equity

 

 

283,188

 

 

 

196,876

 

Total liabilities and stockholders' equity

 

$

304,770

 

 

$

217,933

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

 

1


 

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

13,860

 

 

$

10,527

 

 

$

36,150

 

 

$

29,154

 

General and administrative

 

 

5,067

 

 

 

3,972

 

 

 

14,978

 

 

 

11,402

 

Total operating expenses

 

 

18,927

 

 

 

14,499

 

 

 

51,128

 

 

 

40,556

 

Loss from operations

 

 

(18,927

)

 

 

(14,499

)

 

 

(51,128

)

 

 

(40,556

)

Interest income

 

 

1,390

 

 

 

37

 

 

 

1,906

 

 

 

138

 

Interest expense

 

 

(310

)

 

 

 

 

 

(836

)

 

 

 

Net loss

 

$

(17,847

)

 

$

(14,462

)

 

$

(50,058

)

 

$

(40,418

)

Net loss per common share, basic and diluted

 

$

(0.25

)

 

$

(0.28

)

 

$

(0.76

)

 

$

(0.78

)

Weighted-average shares used to compute net loss per common
   share, basic and diluted

 

 

72,153,952

 

 

 

52,048,563

 

 

 

65,730,202

 

 

 

51,674,063

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

2


 

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(17,847

)

 

$

(14,462

)

 

$

(50,058

)

 

$

(40,418

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(51

)

 

 

(30

)

 

 

(90

)

 

 

(54

)

Unrealized loss on marketable securities

 

 

(250

)

 

 

(10

)

 

 

(1,084

)

 

 

(4

)

Total other comprehensive loss, net of tax

 

 

(301

)

 

 

(40

)

 

 

(1,174

)

 

 

(58

)

Comprehensive loss

 

$

(18,148

)

 

$

(14,502

)

 

$

(51,232

)

 

$

(40,476

)

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

3


 

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

(In thousands, except share amounts)

 

 

 

COMMON STOCK

 

 

ADDITIONAL
PAID-IN

 

 

ACCUMULATED
OTHER
COMPREHENSIVE

 

 

ACCUMULATED

 

 

TOTAL
STOCKHOLDERS'

 

 

 

SHARES

 

 

AMOUNTS

 

 

CAPITAL

 

 

LOSS

 

 

DEFICIT

 

 

EQUITY

 

Balance as of December 31, 2021

 

 

56,259,747

 

 

$

56

 

 

$

377,765

 

 

$

(291

)

 

$

(180,654

)

 

$

196,876

 

Issuance of common stock under the ATM Agreement,
   net of offering costs of $
1,504

 

 

3,245,738

 

 

 

4

 

 

 

48,638

 

 

 

 

 

 

 

 

 

48,642

 

Issuance of common stock under equity incentive plans

 

 

59,174

 

 

 

 

 

 

208

 

 

 

 

 

 

 

 

 

208

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,104

 

 

 

 

 

 

 

 

 

3,104

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(491

)

 

 

 

 

 

(491

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,024

)

 

 

(16,024

)

Balance as of March 31, 2022

 

 

59,564,659

 

 

$

60

 

 

$

429,715

 

 

$

(782

)

 

$

(196,678

)

 

$

232,315

 

Issuance of common stock under the ATM Agreement,
   net of offering costs of $
2,409

 

 

8,665,961

 

 

 

8

 

 

 

77,892

 

 

 

 

 

 

 

 

 

77,900

 

Issuance of common stock under equity incentive plans

 

 

111,022

 

 

 

 

 

 

420

 

 

 

 

 

 

 

 

 

420

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,298

 

 

 

 

 

 

 

 

 

3,298

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(382

)

 

 

 

 

 

(382

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,187

)

 

 

(16,187

)

Balance as of June 30, 2022

 

 

68,341,642

 

 

$

68

 

 

$

511,325

 

 

$

(1,164

)

 

$

(212,865

)

 

$

297,364

 

Issuance of common stock under equity incentive plans

 

 

30,473

 

 

 

 

 

 

185

 

 

 

 

 

 

 

 

 

185

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,787

 

 

 

 

 

 

 

 

 

3,787

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(301

)

 

 

 

 

 

(301

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,847

)

 

 

(17,847

)

Balance as of September 30, 2022

 

 

68,372,115

 

 

$

68

 

 

$

515,297

 

 

$

(1,465

)

 

$

(230,712

)

 

$

283,188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMON STOCK

 

 

ADDITIONAL
PAID-IN

 

 

ACCUMULATED
OTHER
COMPREHENSIVE

 

 

ACCUMULATED

 

 

TOTAL
STOCKHOLDERS'

 

 

 

SHARES

 

 

AMOUNTS

 

 

CAPITAL

 

 

LOSS

 

 

DEFICIT

 

 

EQUITY

 

Balance as of December 31, 2020

 

 

46,359,743

 

 

$

46

 

 

$

267,093

 

 

$

(137

)

 

$

(126,024

)

 

$

140,978

 

Issuance of common stock under the ATM Agreement,
   net of offering costs of $
330

 

 

1,705,800

 

 

 

2

 

 

 

10,671

 

 

 

 

 

 

 

 

 

10,673

 

Issuance of common stock under equity incentive plans

 

 

14,325

 

 

 

 

 

 

48

 

 

 

 

 

 

 

 

 

48

 

Vesting related to shares of common stock issued
   pursuant to early exercises

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,928

 

 

 

 

 

 

 

 

 

1,928

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,994

)

 

 

(12,994

)

Balance as of March 31, 2021

 

 

48,079,868

 

 

$

48

 

 

$

279,747

 

 

$

(140

)

 

$

(139,018

)

 

$

140,637

 

Issuance of common stock under equity incentive plans

 

 

66,440

 

 

 

 

 

 

282

 

 

 

 

 

 

 

 

 

282

 

Vesting related to shares of common stock issued
   pursuant to early exercises

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,937

 

 

 

 

 

 

 

 

 

1,937

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

 

 

 

(15

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,962

)

 

 

(12,962

)

Balance as of June 30, 2021

 

 

48,146,308

 

 

$

48

 

 

$

281,973

 

 

$

(155

)

 

$

(151,980

)

 

$

129,886

 

Issuance of common stock under the ATM Agreement,
   net of offering costs of $
33

 

 

118,184

 

 

 

 

 

 

1,052

 

 

 

 

 

 

 

 

 

1,052

 

Issuance of common stock under equity incentive plans

 

 

332,389

 

 

 

1

 

 

 

1,159

 

 

 

 

 

 

 

 

 

1,160

 

Vesting related to shares of common stock issued
   pursuant to early exercises

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,878

 

 

 

 

 

 

 

 

 

1,878

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(40

)

 

 

 

 

 

(40

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,462

)

 

 

(14,462

)

Balance as of September 30, 2021

 

 

48,596,881

 

 

$

49

 

 

$