SEC Filing - Kezar Life Sciences, Inc.

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10-Q

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


☐	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

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.

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

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

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

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	)		—