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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 June 30, 2020
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: 001-39263
Zentalis Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware82-3607803
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
530 Seventh Avenue,
Suite 2201
New York,
 New York
10018
(Address of principal executive offices)(Zip Code)
(212) 433-3791
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock,
$0.001 par value per share
ZNTLThe Nasdaq Global Market
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 August 11, 2020, the registrant had 40,002,821 shares of common stock, $0.001 par value per share, outstanding.


Table of Contents
Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
i


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Quarterly Report, including without limitation statements regarding our future results of operations and financial position, the anticipated impact of the novel coronavirus (“COVID-19”) pandemic on our business, business strategy, prospective products and product candidates, clinical trial timelines and expected timing for the release of data, research and development costs, future revenue, timing and likelihood of success, potential collaboration opportunities, and plans and objectives of management are forward-looking statements.
The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties, assumptions and other important factors, including those described under the sections in this Quarterly Report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
ii


BASIS OF PRESENTATION
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to “we,” “us,” “our,” the “Company,” “Zentalis” and similar references refer: (1) following the consummation of our statutory conversion to a Delaware corporation on April 2, 2020 in connection with our initial public offering, to Zentalis Pharmaceuticals, Inc., and (2) prior to the completion of such conversion, to Zentalis Pharmaceuticals, LLC. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations”—“Corporate Conversion” in this Quarterly Report on Form 10-Q for further information.
iii


PART I—FINANCIAL INFORMATION
3


Item 1. Financial Statements.
Zentalis Pharmaceuticals, Inc. (Successor to Zentalis Pharmaceuticals, LLC)
FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except unit and share amounts)
June 30,December 31,
 20202019
ASSETS
Current assets
Cash and cash equivalents$96,016  $67,246  
Marketable securities, available-for-sale137,175    
Accounts receivable from government grants, net73  140  
Prepaid expenses and other current assets5,217  1,505  
Total current assets238,481  68,891  
Property and equipment, net481  501  
Operating lease right-of-use assets2,090  2,335  
Prepaid expenses and other assets3,218  2,134  
Deferred financing costs  841  
Goodwill3,736  3,736  
In-process research and development8,800  8,800  
Restricted cash411  243  
Total assets$257,217  $87,481  
LIABILITIES, CONVERTIBLE PREFERRED UNITS AND EQUITY/(DEFICIT)
Current liabilities
Accounts payable$4,217  $4,289  
Accrued expenses11,350  10,608  
Total current liabilities15,567  14,897  
Deferred tax liability2,463  2,463  
Other long-term liabilities1,262  1,700  
Total liabilities19,292  19,060  
Commitments and contingencies
Convertible preferred units; Redemption value of $146,944,000 at December 31, 2019
  141,706  
EQUITY (DEFICIT)
Class A common units; 20,000,000 units authorized; 5,601,478 units issued and outstanding at December 31, 2019
  709  
Class B common units, 3,458,522 units authorized; 2,670,668 units issued and outstanding at December 31, 2019
  2,178  
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2020
    
Common stock, $0.001 par value; 250,000,000 shares authorized; 35,878,108 shares issued and outstanding at June 30, 2020
36    
Additional paid-in capital
339,160    
Accumulated other comprehensive income4    
Accumulated deficit(125,976) (82,993) 
Total stockholders’ equity/members’ (deficit)213,224  (80,106) 
Noncontrolling interests24,701  6,821  
Total equity (deficit)237,925  (73,285) 
Total liabilities, convertible preferred units and equity (deficit)$257,217  $87,481  

See notes to condensed consolidated financial statements.


4


Zentalis Pharmaceuticals, Inc. (Successor to Zentalis Pharmaceuticals, LLC)
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per unit and per share amounts)
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2020 201920202019
Operating Expenses 
Research and development$17,452  $8,689  $30,710  $15,778  
General and administrative9,924  1,946  13,065  3,579  
Total operating expenses27,376  10,635  43,775  19,357  
Operating loss(27,376) (10,635) (43,775) (19,357) 
Other Income (Expense)
Investment and other income, net84  49  248  111  
Net loss before income taxes(27,292) (10,586) (43,527) (19,246) 
Income tax expense  11    14  
Net loss(27,292) (10,597) (43,527) (19,260) 
Net loss attributable to noncontrolling interests(435) (127) (544) (447) 
Net loss attributable to Zentalis $(26,857) $(10,470) $(42,983) $(18,813) 
Net loss per common share outstanding, basic and diluted$(0.78) $  $(2.53) $  
Net loss per Class A common unit outstanding, basic and diluted$  $(1.87) $  $(3.36) 
Common shares/units used in computing net loss per share/Class A common unit, basic and diluted34,353  5,601  16,978  5,601  

See notes to condensed consolidated financial statements.
5


Zentalis Pharmaceuticals, Inc. (Successor to Zentalis Pharmaceuticals, LLC)
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Net loss(27,292) (10,597) (43,527) (19,260) 
Other comprehensive income:
Unrealized gain on marketable securities4    4    
Total comprehensive loss$(27,288) $(10,597) $(43,523) $(19,260) 
Comprehensive loss attributable to noncontrolling interests(435) (127) (544) (447) 
Comprehensive loss attributable to Zentalis$(26,853) $(10,470) $(42,979) $(18,813) 

See notes to condensed consolidated financial statements.
6


Zentalis Pharmaceuticals, Inc. (Successor to Zentalis Pharmaceuticals, LLC)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 Six Months Ended
June 30,
 20202019
Operating Activities: 
Consolidated net loss$(43,527) $(19,260) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization76  45  
Share-based compensation8,010  250  
Amortization of premiums on marketable securities, net65    
Changes in operating assets and liabilities:
Accounts receivable67  597  
Prepaid expenses and other assets(4,796) (384) 
Accounts payable and accrued liabilities1,212  2,701  
Operating lease right-of-use assets and liabilities, net(11) 87  
Net cash used in operating activities(38,904) (15,964) 
Investing activities:
Purchases of marketable securities(137,236)   
Purchases of property and equipment(56) (209) 
Net cash used in investing activities(137,292) (209) 
Financing Activities:
Proceeds from issuance of common stock in initial public offering, net172,482    
Contributions from noncontrolling interest owners, net18,424    
Proceeds from the issuance of Series C convertible preferred units, net14,228    
Net cash provided by financing activities205,134    
Net increase/(decrease) in cash, cash equivalents and restricted cash28,938  (16,173) 
Cash, cash equivalents and restricted cash at beginning of period67,489  25,154  
Cash, cash equivalents and restricted cash at end of period$96,427  $8,981  
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities$  $2,675  
Costs incurred in connection with initial public offering included in accounts payable and accrued expenses
$70  $  
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Statements of Cash Flows for the periods presented:
June 30,
20202019
Cash and cash equivalents$96,016  $8,738  
Restricted cash, non-current411  243  
Total cash, cash equivalents and restricted cash reported in the Consolidated Statement of Cash Flows
$96,427  $8,981  
See notes to condensed consolidated financial statements.
7


Zentalis Pharmaceuticals, Inc. (Successor to Zentalis Pharmaceuticals, LLC)
Condensed Consolidated Statements of Changes in Convertible Preferred Units and Members’/Stockholders’ Equity/(Deficit)
(In thousands)

Three Months Ended June 30, 2020
Zentalis Members/Stockholders
Convertible
Preferred Units
Convertible
Preferred Units
Class A
Common Units
 
Class B
Common Units
Common
Additional
Paid-In
Capital
Accumulated Other Comprehensive IncomeAccumulated
Deficit
Noncontrolling
Interests
Total
Equity
(Deficit)
UnitsAmountUnitsAmountUnitsAmountUnitsAmountSharesAmount
Balance at March 31, 202010,817  $155,934  —  $—  5,601  $709  2,607  $2,507    $  $  $  $(99,119) $6,712  $(89,191) 
Issuance of common stock in connection with an equity offering, net of underwriting discounts, commissions and offering costs
—  —  —  —  —  —  —  —  10,589  11  172,354  —  —  —  172,365  
Contributions from noncontrolling interest owners—  —  —  —  —  —  —  —  —  —  —  —  —  18,424  18,424  
Share-based compensation expense
—  —  —  —  —  —  —  —  —  —  7,681  —  —  —  7,681  
Conversion of convertible preferred units to common stock
(10,817) (155,934) —  —  —  —  —  —  15,011  15  155,919  —  —  —  155,934  
Conversion of common and incentive units to common and restricted stock—  —  —  —  (5,601) (709) (2,607) (2,507) 10,278  10  3,206  —  —  —  —  
Other comprehensive income
—  —  —  —  —  —  —  —  —  —  —  4  —  —  4  
Net loss attributable to non-controlling interest
—  —  —  —  —  —  —  —  —  —  —  —  —  (435) (435) 
Net loss attributable to Zentalis
—  —  —  —  —  —  —  —  —  —  —  —  (26,857) —  (26,857) 
Balance at June 30, 2020  $  —  $—    $    $  35,878  $36  $339,160  $4  $(125,976) $24,701  $237,925  

8


Six Months Ended June 30, 2020
Zentalis Members/Stockholders
 Convertible
Preferred Units
Convertible
Preferred Units
Class A
Common Units
 
Class B
Common Units
 CommonAdditional
Paid-In
Capital
Accumulated Other Comprehensive IncomeAccumulated
Deficit
Noncontrolling
Interests
Total
Equity
(Deficit)
 UnitsAmountUnitsAmountUnitsAmountUnitsAmount SharesAmount
Balance at December 31, 20199,950  $141,706  —  $—  5,601  $709  2,671  $2,178    $  $  $  $(82,993) $6,821  $(73,285) 
Issuance of Series C convertible preferred units at $17.50 per unit net of issuance costs
867  14,228  —  —  —  —  —  —  —  —  —  —  —  —  —  
Cancellation of profit interest awards, net
—  —  —  —  —  —  (64) —  —  —  —  —  —  —  —  
Issuance of common stock in connection with an equity offering, net of underwriting discounts, commissions and offering costs
—  —  —  —  —  —  —  —  10,589  11  172,354  —  —  —  172,365  
Contributions from noncontrolling interest owners—  —  —  —  —  —  —  —  —  —  —  —  —  18,424  18,424  
Share-based compensation expense
—  —  —  —  —  —  —  329  —  —  7,681  —  —  —  8,010  
Conversion of convertible preferred units to common stock
(10,817) (155,934) —  —  —  —  —  —  15,011  15  155,919  —  —  —  155,934  
Conversion of common and incentive units to common and restricted stock—  —  —  —  (5,601) (709) (2,607) (2,507) 10,278  10  3,206  —  —  —  —  
Other comprehensive income
—  —  —  —  —  —  —  —  —  —  —  4  —  —  4  
Net loss attributable to non-controlling interest
—  —  —  —  —  —  —  —  —  —  —  —  —  (544) (544) 
Net loss attributable to Zentalis
—  —  —  —  —  —  —  —  —  —  —  —  (42,983) —  (42,983) 
Balance at June 30, 2020  $  —  $—    $    $$  35,878  $36  $339,160  $4  $(125,976) $24,701  $237,925  












9


Three Months Ended June 30, 2019
Zentalis Members
Convertible
Preferred Units
Convertible
Preferred Units
Class A
Common Units
 
Class B
Common Units
Accumulated
Deficit
Noncontrolling
Interests
Total
Equity
(Deficit)
UnitsAmountUnitsAmountUnitsAmount