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 June 30, 2023

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 August 4, 2023, the registrant had 72,692,963 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	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 6.	Exhibits	63

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:

•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;

•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 crisis or geopolitical tensions;

•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)

	June 30, 2023			December 31, 2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	28,109		$	40,456
Marketable securities		208,480			236,105
Prepaid expenses		5,982			8,241
Other current assets		933			920
Total current assets		243,504			285,722
Property and equipment, net		4,666			3,431
Operating lease right-of-use asset		8,647			9,741
Other assets		6,562			674
Total assets	$	263,379		$	299,568
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,492		$	2,479
Accrued and other current liabilities		8,463			5,953
Operating lease liabilities, current		2,782			2,565
Total current liabilities		13,737			10,997
Operating lease liabilities, noncurrent		7,413			8,865
Long-term debt		9,952			9,834
Total liabilities		31,102			29,696
Stockholders' equity:
Common stock, $0.001 par value, 250,000,000 and 125,000,000 shares authorized as of    June 30, 2023 (unaudited) and December 31, 2022, respectively; 72,532,814    and 68,493,429 shares issued and outstanding as of June 30, 2023 (unaudited)    and December 31, 2022, respectively		73			68
Preferred stock, $0.001 par value, 10,000,000 shares authorized; zero shares issued    and outstanding as of June 30, 2023 (unaudited) and December 31, 2022		—			—
Additional paid-in capital		528,434			519,620
Accumulated other comprehensive loss		(830	)		(923	)
Accumulated deficit		(295,400	)		(248,893	)
Total stockholders' equity		232,277			269,872
Total liabilities and stockholders' equity	$	263,379		$	299,568

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						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Operating expenses:
Research and development	$	20,999		$	11,346		$	39,317		$	22,290
General and administrative		5,785			4,977			11,991			9,911
Total operating expenses		26,784			16,323			51,308			32,201
Loss from operations		(26,784	)		(16,323	)		(51,308	)		(32,201	)
Interest income		2,861			408			5,556			516
Interest expense		(385	)		(272	)		(755	)		(526	)
Net loss	$	(24,308	)	$	(16,187	)	$	(46,507	)	$	(32,211	)
Net loss per common share, basic and diluted	$	(0.34	)	$	(0.25	)	$	(0.64	)	$	(0.52	)
Weighted-average shares used to compute net loss per common    share, basic and diluted		72,461,850			64,279,634			72,395,410			62,465,092

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						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Net loss	$	(24,308	)	$	(16,187	)	$	(46,507	)	$	(32,211	)
Other comprehensive loss
Foreign currency translation adjustments		(5	)		(64	)		(17	)		(39	)
Unrealized (loss) gain on marketable securities		(302	)		(318	)		110			(834	)
Total other comprehensive (loss) gain, net of tax		(307	)		(382	)		93			(873	)
Comprehensive loss	$	(24,615	)	$	(16,569	)	$	(46,414	)	$	(33,084	)

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			GAIN (LOSS)			DEFICIT			EQUITY
Balance as of December 31, 2022		68,493,429	$	68	$	519,620		$	(923	)	$	(248,893	)	$	269,872
Cashless exercise of pre-funded warrants		2,236,233		2		(2	)		—			—			—
Issuance of common stock under equity incentive plans		86,338		1		153			—			—			154
Stock-based compensation expense		—		—		4,263			—			—			4,263
Other comprehensive gain		—		—		—			400			—			400
Net loss		—		—		—			—			(22,199	)		(22,199	)
Balance as of March 31, 2023		70,816,000	$	71	$	524,034		$	(523	)	$	(271,092	)	$	252,490
Cashless exercise of pre-funded warrants		1,556,643		2		(2	)		—			—			—
Issuance of common stock under equity incentive plans		160,171		—		382			—			—			382
Stock-based compensation expense		—		—		4,020			—			—			4,020
Other comprehensive loss		—		—		—			(307	)		—			(307	)
Net loss		—		—		—			—			(24,308	)		(24,308	)
Balance as of June 30, 2023		72,532,814	$	73	$	528,434		$	(830	)	$	(295,400	)	$	232,277
	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

See accompanying notes to the unaudited condensed consolidated financial statements

4

KEZAR LIFE SCIENCES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six Months Ended
	June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(46,507	)	$	(32,211	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		508			848
Stock-based compensation		8,283			6,402
Amortization of premiums and discounts on marketable securities		(3,532	)		579
Amortization of debt discount and issuance costs and other    non-cash interest		118			106
Loss on disposition of fixed assets		—			4
Changes in operating assets and liabilities
Prepaid expenses, other current assets and other long-term assets		(3,642	)		(1,191	)
Accounts payable, accrued and other current liabilities		2,453			(560	)
Operating lease assets and liabilities		(141	)		(580	)
Net cash used in operating activities		(42,460	)		(26,603	)
Cash flows from investing activities:
Purchases of property and equipment		(1,673	)		(632	)
Purchases of marketable securities		(95,233	)		(142,080	)
Maturities of marketable securities		126,500			84,689
Net cash provided by (used in) investing activities		29,594			(58,023	)
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants, net of issuance costs		—			126,542
Proceeds from issuance of common stock under equity incentive plans		536			628
Net cash provided by financing activities		536			127,170
Effect of exchange rate changes on cash and cash equivalents		(17	)		(39	)
Net (decrease) increase in cash and cash equivalents		(12,347	)		42,505
Cash and cash equivalents at the beginning of period		40,456			62,882
Cash and cash equivalents at the end of period	$	28,109		$	105,387
Supplemental disclosures of noncash investing and financing information:
Purchases of property and equipment in accounts payable	$	117		$	557
Par value of common stock upon cashless exercise of prefunded warrants	$	4		$	—
Supplemental disclosures
Cash paid for interest	$	637		$	219

See accompanying notes to the unaudited condensed consolidated financial statements

5

Kezar Life Sciences, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Description of the Business

Description of Business

Kezar Life Sciences, Inc. (the “Company,” “we,” “us,” or “our”) was incorporated in the state of Delaware in February 2015 and commenced operations in June 2015. The Company is a clinical-stage biotechnology company discovering and developing breakthrough treatments in immune-mediated and oncologic disorders. The Company’s principal operations are in South San Francisco, California, and it operates in one segment.

Liquidity

Since commencing operations in mid-2015, substantially all of the Company’s efforts have been focused on research, development, and the advancement of the Company’s product candidates, zetomipzomib (KZR-616) and KZR-261. The Company’s ultimate success depends on the outcome of these ongoing research and development activities. The Company has not yet generated product sales and as a result has experienced operating losses since inception and had an accumulated deficit of $295.4 million as of June 30, 2023. The Company expects to incur additional losses in the future to conduct research and development and will need to raise additional capital to fully implement management’s business plan. The Company intends to raise such capital through the issuance of additional equity, and potentially through borrowings, strategic alliances with partner companies and other licensing transactions. However, if such financing is not available at adequate levels, the Company may need to reevaluate its operating plans. Management believes that its existing cash, cash equivalents and marketable securities will be sufficient to fund the Company’s cash requirements for at least 12 months following the issuance of these financial statements.

In December 2021, the Company entered into a Sales Agreement (the “ATM Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company can offer and sell, from time to time at its sole discretion through Cowen, as its sales agent, shares of its common stock having an aggregate offering price of up to $200.0 million. Any shares of its common stock sold will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-261774). The Company will pay Cowen a commission up to 3.0% of the gross sales proceeds of any shares of its common stock sold through Cowen under the ATM Agreement and also has provided Cowen with indemnification and contribution rights. As of June 30, 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 June 30, 2023, approximately $68.3 million remains available under the ATM Agreement. No shares were sold under the ATM Agreement during the three months ended June 30, 2023.

2. Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2022 and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 14, 2023 (the “Annual Report”), and there have been no material changes during the six months ended June 30, 2023.

Basis of Presentation and Consolidation

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the Company’s accounts and those of its wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd., which is a proprietary company limited by shares. All intercompany balances and transactions have been eliminated upon consolidation.

The condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Annual Report.

Unaudited Condensed Consolidated Financial Statements

The accompanying financial information as of June 30, 2023 is unaudited. The interim condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that our management considers necessary for the fair statement of the results of operations for the interim periods covered and of our financial condition at the date of

6

the interim balance sheet. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The results for interim periods are not necessarily indicative of the results for the entire year or any other interim period. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto included in our Annual Report.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant items subject to such estimates and assumptions include the valuation of marketable securities, stock-based compensation, and accrued research and development costs. Management bases its estimates on historical experience and on various other market-specific relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s consolidated financial statements.

Recent Accounting Pronouncements

Reference Rate Reform. In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance generally allows for contract modifications solely related to the replacement of the reference rate to be accounted for as a continuation of the existing contract instead of as an extinguishment of the contract, without triggering certain accounting impacts that could be required associated with an extinguishment of the contract. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, to expand the scope of this guidance to include derivatives. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31, 2024. As discussed in note 7 of the condensed consolidated financial statements, in June 2023 our loan agreement was amended and effective July 1, 2023, the interest base transitioned from LIBOR to Secured Overnight Financing Rate ("SOFR"). We applied the above guidance when accounting for this change (as discussed further in note 7), and adoption of this guidance did not have a material impact on our financial statements. As of June 30, 2023, we have no debt instruments that use LIBOR as a reference rate, and this guidance is not expected to have a material impact on our financial statements in the future.

There have been no other recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance that are expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.

3. Fair Value Measurements

Financial assets and liabilities are recorded at fair value. The carrying amount of certain financial instruments, including cash, cash equivalents, other current assets, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. Assets and liabilities recorded at fair value on a recurring basis in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

7

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company applies fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are required to be recognized or disclosed at fair value in the financial statements. The Company determines the fair value of Level 1 assets using quoted prices in active markets for identical assets. The Company reviews trading activity and pricing for Level 2 investments as of each measurement date. Level 2 inputs, which are obtained from various third-party data providers, represent quoted prices for similar assets in active markets and were derived from observable market data, or, if not directly observable, were derived from or corroborated by other observable market data.

In certain cases, where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. The Company did not have any assets or liabilities measured using Level 3 inputs as of June 30, 2023 or December 31, 2022.

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above (in thousands):

	June 30, 2023
	Total		Level 1		Level 2		Level 3
Financial Assets:
Cash equivalents:
U.S. Treasury money market funds	$	27,429	$	27,429	$	—	$	—
Marketable securities:
U.S. Treasury securities		15,951		15,951		—		—
Commercial paper		75,544		—		75,544		—
U.S. agency bonds		116,985		—		116,985		—
Total	$	235,909	$	43,380	$	192,529	$	—

	December 31, 2022
	Total		Level 1		Level 2		Level 3
Financial Assets:
Cash equivalents:
U.S. Treasury money market funds	$	38,745	$	38,745	$	—	$	—
Marketable securities:
U.S. Treasury securities		40,141		40,141		—		—
Commercial paper		117,478		—		117,478		—
Corporate debt securities		1,978		—		1,978		—
U.S. agency bonds		76,508		—		76,508		—
Total	$	274,850	$	78,886	$	195,964	$	—

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4. Available-for-Sale Securities

The following table is a summary of available-for-sale securities recorded in cash and cash equivalents or marketable securities in the Company’s condensed consolidated balance sheets (in thousands):

	June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
U.S. Treasury money market funds	$	27,429	$	—	$	—		$	27,429
Marketable securities:
U.S. Treasury securities		16,076		—		(125	)		15,951
Commercial paper		75,708		2		(166	)		75,544
U.S. agency bonds		117,265		2		(282	)		116,985
Total available-for-sale securities	$	236,478	$	4	$	(573	)	$	235,909
Cash									680
Total cash, cash equivalent and marketable securities								$	236,589

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
U.S. Treasury money market funds	$	38,745	$	—	$	—		$	38,745
Marketable securities:
U.S. Treasury securities		40,340		—		(199	)		40,141
Commercial paper		117,855		2		(379	)		117,478
Corporate debt securities		1,978		—		—			1,978
U.S. agency bonds		76,610		56		(158	)		76,508
Total available-for-sale securities	$	275,528	$	58	$	(736	)	$	274,850
Cash									1,711
Total cash, cash equivalent and marketable securities								$	276,561

The Company has not recognized an allowance for credit losses on any securities in an unrealized loss position as of June 30, 2023 and December 31, 2022.

The following table displays additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023
	Less than 12 consecutive months					12 months or greater
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities	$	6,393	$	(30	)	$	9,558	$	(95	)
Commercial paper		64,610		(166	)		—		—
U.S. agency bonds		110,538		(282	)		—		—
Total	$	181,541	$	(478	)	$	9,558	$	(95	)

	December 31, 2022
	Less than 12 consecutive months					12 months or greater
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities	$	33,782	$	(196	)	$	6,359	$	(3	)
Commercial paper		112,706		(379	)		—		—
Corporate debt securities		1,978		—			—		—
U.S. agency bonds		33,942		(147	)		5,490		(11	)
Total	$	182,408	$	(722	)	$	11,849	$	(14	)

The Company believes that the individual unrealized losses represent temporary declines primarily resulting from interest rate changes. The Company currently does not intend to sell these securities prior to maturity and does not consider these investments to be

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other-than-temporarily impaired as of June 30, 2023. There were no sales of available-for-sale securities in any of the periods presented.

As of June 30, 2023, the amortized cost and estimated fair value of the Company’s available-for-sale securities by contractual maturity are shown below (in thousands):

	Amortized		Estimated
Available-for-sale securities maturing in:	Cost		Fair Value
One year or less	$	226,825	$	226,351
One to two years		9,653		9,558
Total available-for-sale securities	$	236,478	$	235,909

5. Balance Sheet Components

Prepaid Expenses

Prepaid expenses consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Advance for clinical-related costs, current	$	4,523	$	6,760
License, dues and subscription		678		376
Insurance		172		741
Others		609		364
Total prepaid expenses	$	5,982	$	8,241

Property and Equipment, Net

Property and equipment consisted of the following (in thousands):

	June 30, 2023			December 31, 2022
Leasehold improvements	$	3,551		$	3,366
Furniture, laboratory and office equipment		5,832			4,423
Computer equipment		353			244
Total property and equipment		9,736			8,033
Less accumulated depreciation and amortization		(5,070	)		(4,602	)
Property and equipment, net	$	4,666		$	3,431

Depreciation expense was $0.2 million and $0.5 million for each of the three and six months ended June 30, 2023, respectively, compared to $0.2 million and $0.5 million for the three and six months ended June 30, 2022, respectively.

Other Assets

Other assts consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Advance for clinical related costs, non-current	$	5,696	$	—
Deposits for operating lease		674		674
Others		192		—
Total other assets	$	6,562	$	674

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Accrued and Other Current Liabilities

Accrued liabilities consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Accrued clinical costs	$	4,426	$	1,007
Accrued preclinical and research costs		1,792		1,368
Accrued employee-related costs		1,926		3,260
Accrued professional services		141		53
Other		178		265
Total accrued liabilities	$	8,463	$	5,953

6. Lease

In November 2022, the Company entered into an amendment to the lease agreement for its corporate headquarters in South San Francisco, California, which expanded the leased premises in the same building as its corporate headquarters and extended the lease term of the original premises to be coterminous with the expansion premises to July 31, 2026. The transaction was treated as a lease modification as of the effective date and resulted in the recognition of approximately $8.0 million in new lease liabilities and right-of-use (“ROU”) assets.

Information related to the Company’s ROU asset and related lease liabilities were as follows (in thousands):

	Three months ended June 30, 2023		Six months ended June 30, 2023
Cash paid for operating lease liabilities	$	631	$	1,236
Operating lease costs		866		1,732
Variable lease costs		387		735
Maturities of lease liabilities as of June 30, 2023 were as follows:
Less than 12 months			$	3,828
13 - 24 months				3,957
25 - 36 months				4,095
37 - 48 months				347
Total undiscounted lease payments				12,227
Less: imputed interest				(2,032	)
Total lease liabilities			$	10,195
Operating lease liabilities, current			$	2,782
Operating lease liabilities, noncurrent				7,413
Total operating lease liabilities			$	10,195

7. Long-Term Debt

In November 2021, the Company entered into a loan agreement (the “Loan Agreement”) with Oxford Finance, LLC (“Oxford Finance”), which provided the Company up to $50.0 million in borrowing capacity across five potential tranches (each a “Term Loan,” and collectively “Term Loans”). 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. The Company has declined these tranches in borrowing capacity available to it under the Loan Agreement. The loan facility is secured by all assets except intellectual property, which is subject to a negative pledge, and will mature on November 1, 2026. There are no warrants or financial covenants associated with the Loan Agreement.

Until June 30, 2023, the Term Loans 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) 30-day U.S. LIBOR rate reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue and (ii) 0.08%, plus (b) 7.87%. The Company is required to make monthly interest-only payments prior to the amortization date of January 1, 2025, subject to a potential one-year extension upon satisfaction of certain conditions. In June 2023, Oxford Finance informed the Company that a LIBOR transition event would occur effective July 1, 2023 and replaced the LIBOR rate with the 1-month CME term SOFR plus 0.1%. 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.

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All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on November 1, 2026 (the “Maturity Date”). The Company has the option to prepay the outstanding balance prior to maturity, subject to a prepayment fee of 1.0% to 2.0% depending upon when the prepayment occurs. Upon repayment of the Term Loans, the Company is required to make a final payment fee to the lenders equal to 6.5% of the original principal amount of the Term Loans funded which will be accrued by charges to interest expense over the term of the loans using the effective interest method.

The Loan Agreement also includes subjective acceleration clauses which permit the lenders to accelerate the Maturity Date under certain circumstances, including, but not limited to, material adverse effects on a Company’s financial status or otherwise. As of June 30, 2023, the Company is in compliance with all covenants in the Loan Agreement.

Interest expense was $0.4 million and $0.8 million for the three and six months ended June 30, 2023, respectively, compared to $0.3 million and $0.5 million for the three and six months ended June 30, 2022, respectively. The initial effective interest rate on the Term Loans, including the amortization of the debt discount and issuance costs, and accretion of the final payment, was 11%. The components of the long-term debt balance are as follows:

	June 30, 2023			December 31, 2022
Principal loan balance	$	10,000		$	10,000
Unamortized debt discount and issuance costs		(292	)		(342	)
Cumulative accretion of final fee		244			176
Long-term debt, net	$	9,952		$	9,834

As of June 30, 2023, the estimated future principal payments due were as follows:

Years Ending December 31,
2023	$	—
2024		—
2025		5,217
2026		4,783
Total	$	10,000

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8. Pre-Funded Warrants

In connection with the Company’s previous underwritten public offerings, the Company issued pre-funded warrants to purchase an aggregate of 3,793,706 shares of the Company’s common stock. Each pre-funded warrant entitled the holder to purchase shares of common stock at an exercise price of $0.001 per share and expired 20 years from the date of issuance. These warrants were recorded as a component of stockholders’ equity within additional paid-in capital. In January 2023, warrant holders exercised 2,236,553 shares of outstanding pre-funded warrants at an exercise price of $0.001 per share. In April 2023, warrant holders exercised the remaining 1,557,153 shares of outstanding pre-funded warrants. As of June 30, 2023, there were no pre-funded warrants outstanding.

9. Stock-Based Compensation

Stock Incentive Plans

2022 Inducement Plan

In April 2022, the Company adopted the Kezar Life Sciences, Inc. 2022 Inducement Plan (the “Inducement Plan”), which is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq Listing Rule 5635(c)(4), for the award of nonstatutory stock options (“NSOs”), restricted stock units (“RSUs”) and other equity awards as permitted by the Inducement Plan (collectively, “Inducement Awards”) to persons not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company (“Eligible Recipients”). Under the Inducement Plan, the Company may grant up to 3,000,000 shares of Common Stock in the form of Inducement Awards to Eligible Recipients in compliance with the requirements of Nasdaq Listing Rule 5635(c)(4). Awards must be approved by either a majority of the Company’s independent directors or the Company’s independent compensation committee. Consultants and directors are not eligible to received grants under the Inducement Plan.

As of June 30, 2023, options to purchase 1,313,000 shares of common stock were outstanding, and 1,687,000 shares were available for future issuance under the Inducement Plan.

2018 Equity Incentive Plan

In June 2018, the Company’s board of directors adopted and its stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”), which became effective as of June 20, 2018, at which point no further grants could be made under the 2015 Equity Incentive Plan (the “2015 Plan”) described below. Under the 2018 Plan, the Company may grant incentive stock options (“ISOs”), NSOs, stock appreciation rights, restricted stock awards, RSUs and other stock-based awards. As of June 30, 2023, options to purchase 10,212,197 shares of common stock and 433,611 RSUs were outstanding, and 1,499,142 shares were available for future issuance under the 2018 Plan.

Initially, subject to adjustment as provided in the 2018 Plan, the aggregate number of shares of the Company’s common stock authorized for issuance pursuant to stock awards under the 2018 Plan was 4,000,000 shares, which is the sum of (i) 1,600,692 shares plus (ii) the number of shares reserved and available for issuance under the 2015 Plan at the time the 2018 Plan became effective and (iii) the number of shares subject to stock options or other stock awards granted under the 2015 Plan that expire, terminate are forfeited or otherwise not issued, or are withheld to satisfy a tax withholding obligation in connection with an award or to satisfy a purchase or exercise price of an award (such as upon the expiration or termination of a stock award prior to vesting). The number of shares of the Company’s common stock reserved for issuance under the 2018 Plan automatically increases on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by 5% of the total number of shares of capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors prior to such increase.

The maximum number of shares that may be issued upon the exercise of ISOs under the 2018 Plan is 12,500,000 shares.

2015 Equity Incentive Plan

The Company’s 2015 Plan provided for the granting of ISOs and NSOs to employees, directors and consultants at the discretion of its board of directors. The 2015 Plan was terminated as to future awards in June 2018, although it continues to govern the terms of options that remain outstanding under the 2015 Plan.

No additional stock awards will be granted under the 2015 Plan, and all outstanding stock awards granted under the 2015 Plan that are repurchased, forfeited, expire or are cancelled will become available for grant under the 2018 Plan in accordance with its terms.

Options granted under the 2015 Plan expire no later than 10 years from the date of grant. Options granted under the 2015 Plan vest over periods determined by the Company’s board of directors, generally over four years. The 2015 Plan allows for early exercise of

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certain options prior to vesting. Upon termination of employment, the unvested shares are subject to repurchase at the original exercise price. As of June 30, 2023, options to purchase 1,436,808 shares of common stock were outstanding under the 2015 Plan.

2018 Employee Stock Purchase Plan

In June 2018, the Company’s board of directors adopted and its stockholders approved the 2018 Employee Stock Purchase Plan (the “ESPP”), which became effective as of June 20, 2018. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended. The number of shares of common stock initially reserved for issuance under the ESPP was 200,000 shares. The ESPP provides for an annual increase on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, equal to the lesser of (i) 1% of the shares of common stock outstanding on the last day of the prior fiscal year or (ii) 375,000 shares, or a lesser number of shares determined by the Company’s board of directors prior to such increase. In December 2022, the Company’s board of directors acted such that there was no increase of the number of shares of common stock reserved for issuance under the ESPP as of January 1, 2023. As of June 30, 2023, 503,836 shares of common stock had been issued under the ESPP and 829,388 shares remained available for future issuance under the ESPP.

The price per share of common stock to be paid by an ESPP participant on the applicable purchase date of an offering period shall be equal to 85% of the lesser of the fair market value of a share of common stock on (i) the applicable offering date or (ii) the applicable purchase date. The Company’s board of directors authorized an initial six-month offering period beginning on November 16, 2018 and ending on May 15, 2019. The Company’s board of directors has subsequently authorized additional six-month offering periods, with the most recent offering period beginning on May 16, 2023.

Stock Option Activity

The following table summarizes activity under the Company’s stock option plans and related information (in thousands, except share and per share amounts):

	Number of Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2022		9,684,810		$	8.12		7.6	$	15,407
Options granted		4,043,994		$	5.91
Options exercised		(106,921	)	$	2.00			$	302
Options cancelled/forfeited		(659,878	)	$	9.16
Outstanding as of June 30, 2023		12,962,005		$	7.43		7.8	$	489
Vested and exercisable as of June 30, 2023		6,151,141		$	7.19		6.5	$	489

The weighted average grant date fair value of options granted during the three and six months ended June 30, 2023 was $2.19 and $4.45 per share, respectively. The aggregate intrinsic values of exercised stock options during the three and six months ended June 30, 2023 were $24 thousand and $0.3 million, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of the Company’s common stock at the date of exercise.

Restricted Stock Units Activity

During the six months ended June 30, 2023, the Company granted RSUs to certain employees pursuant to the 2018 Plan. One-third of each RSU grant will vest annually following the vesting commencement dates, over a vesting period of 3 years. RSUs are awards that entitle the holder to receive freely tradable shares of the Company's common stock upon vesting and are not forfeitable once fully vested. The valuations for these RSUs were based on the closing prices of the Company's common stock on the grant dates and recognized as stock-based compensation expenses over the respective vesting terms.

	Number of RSUs Outstanding			Weighted Average Grant-Date Fair Price
Outstanding as of December 31, 2022		434,790		$	9.80
RSUs granted		81,619		$	6.84
RSUs vested		(13,989	)	$	14.55
RSUs forfeited		(68,809	)	$	9.27
Outstanding as of June 30, 2023		433,611		$	9.17

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Stock-Based Compensation Expense

Total stock-based compensation expense recognized by function was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Research and development	$	2,013	$	1,595	$	4,281	$	2,918
General and administrative		2,007		1,703		4,002		3,484
Total stock-based compensation expense	$	4,020	$	3,298	$	8,283	$	6,402

As of June 30, 2023, the unrecognized stock-based compensation cost related to outstanding unvested stock options and RSUs that are expected to vest was $39.5 million with an estimated weighted average amortization period of 2.8 years.

The fair value of the stock options granted is calculated using the Black-Scholes option-pricing model with the following range of assumptions:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Expected term (years)	5.5 - 6.1		5.5 - 6.0		5.5 - 6.1		5.3 - 6.0
Expected volatility	88.0 - 88.3	%	84.3 - 88.4	%	87.8 - 88.3	%	84.3 - 88.4	%
Risk-free interest rate	3.5 - 3.9	%	2.8 - 3.2	%	3.5 - 4.3	%	1.6 - 3.2	%
Expected dividend yield	—		—		—		—

The expected term of options granted represents the period of time that options granted are expected to be outstanding and was determined by calculating the midpoint between the date of vesting and the contractual life of each option. The expected term of the ESPP rights is equal to the six-month look-back period. Volatility is based on the average of the historical volatility of the Company's stock price and that of a peer group of public companies over the expected term. The peer group was selected on the basis of operational and economic similarity with the Company’s principal business operations. The risk-free interest rate for the expected term of the options is based on the U.S. Treasury yield curve with a maturity equal to the expected term in effect at the time of grant. The Company has not paid, and does not anticipate paying, cash dividends on its shares of common stock; therefore, the expected dividend yield is zero.

10. Income Taxes

No provision for income taxes was recorded for the three and six months ended June 30, 2023 and 2022, respectively. Deferred tax assets generated from the Company’s net operating losses have been fully reserved, as the Company believes it is not more likely than not that the benefit will be realized.

Effective January 1, 2022, under the Tax Cuts and Jobs Act, for tax purposes the Company is required to capitalize and subsequently amortize all R&D expenditures over five years for research activities conducted in the U.S. and over fifteen years for research activities conducted outside of the U.S. Given the significant loss and credit carryforwards in the U.S., the Company does not anticipate having a change in valuation allowance assertion.

In March 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. The CARES Act included several tax changes as part of its economic package. These changes principally related to expanded net operating loss carryback periods, increases to interest deductibility limitations, and accelerated alternative minimum tax refunds. The CARES Act enacted the Employee Retention Credit (“ERC”) to incentivize companies to retain employees, which was subsequently modified by extension of the CARES Act. Under the provisions of the CARES Act and its subsequent extension, the Company was eligible for ERCs, subject to certain criteria. During the six months ended June 30, 2023, the Company received refunds of approximately $1.4 million related to ERCs that offset the related payroll expenses in the respective operating costs and expenses line item in the condensed consolidated statements of operations.

In December 2015, the Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”) was signed into law, which created several new research and development (“R&D”) tax credit provisions, including allowing qualified small businesses to utilize the R&D credit against the employer’s portion of payroll tax up to a maximum of $250,000 per year. The Company qualified as a small business under the PATH Act for 2016 through 2020. During the six months ended June 30, 2022, the Company utilized $79,000 of R&D tax credits as a reduction of payroll expenses to offset its payroll tax liabilities. All R&D tax credits have been fully utilized as of December 31, 2022.

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11. Net Loss Per Share

Net Loss Per Share

The following table sets forth the calculation of basic and diluted net loss per share during the periods presented (in thousands, except share and per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Numerator:
Net loss	$	(24,308	)	$	(16,187	)	$	(46,507	)	$	(32,211	)
Denominator:
Weighted-average shares of common stock outstanding		72,461,850			64,279,634			72,395,410			62,465,092
Net loss per share, basic and diluted	$	(0.34	)	$	(0.25	)	$	(0.64	)	$	(0.52	)

Basic net loss per common share is calculated by dividing net loss by the weighted-average number of shares of common stock and pre-funded warrants outstanding during the period, without consideration of common share equivalents. Diluted net loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock, pre-funded warrants and common share equivalents outstanding for the period. The pre-funded warrants are included in the computation of basic and diluted net loss per common share as the exercise price is negligible and the pre-funded warrants were fully vested and exercisable. Common share equivalents are only included in the calculation of diluted net loss per common share when their effect is dilutive.

Potential dilutive securities, which include, vested and unvested options to purchase common stock and RSUs subject to future vesting have been excluded from the computation of diluted net loss per share as the effect is antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in all periods presented.

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share for the periods presented because their effect would have been anti-dilutive:

	Three and Six Months Ended June 30,
	2023		2022
Stock options to purchase common stock		12,962,005		9,206,327
Restricted stock units subject to future vesting		433,611		41,935
Total		13,395,616		9,248,262

12. Related Party Transactions

In connection with the resignation of Christopher Kirk, Ph.D. from his role as President and Chief Scientific Officer of the Company, the Company and Dr. Kirk entered into an Advisor Agreement, effective as of April 22, 2023 (the “Advisor Agreement”), pursuant to which Dr. Kirk will provide scientific and strategic advisory services as a consultant to the Company (the “Services”). The Services will be provided at a rate of $41,050 per month, and the Company will reimburse Dr. Kirk for the cost of premiums for continued COBRA coverage through the expiration date of the Advisor Agreement. Dr. Kirk remains a member of the Board of Directors of the Company following his resignation.

Pursuant to the Advisor Agreement, the Company recognized approximately $96,000 of compensation expense during the three and six months ended June 30, 2023, which was recorded in accounts payable and accrued liabilities as of June 30, 2023.

13. Subsequent Event

On July 24, 2023, the Compensation Committee of the Company’s Board of Directors approved a stock option repricing (the “Option Repricing”) in which the exercise price of certain outstanding options to purchase shares of the Company’s common stock under the 2018 Plan was reduced to $2.28 per share, the closing price of the Common Stock on July 24, 2023. Outstanding options that were granted under the 2015 Plan and the Inducement Plan were not included in the Option Repricing. The Option Repricing includes options granted pursuant to the 2018 Plan that are held by, among others, members of the Company’s Board of the Directors (other than options granted in June 2023) and the Company’s named executive officers and principal financial officer.

As a result of the Option Repricing, 9,904,755 vested and unvested stock options outstanding as of July 24, 2023 granted under the 2018 Plan with original exercise prices ranging from $2.44 to $22.85, were repriced. We will account for the Option Repricing as an equity modification whereby the incremental fair value attributable to the repriced option awards, as measured on the date of reprice,

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will be recognized as additional stock-based compensation expense over the remaining requisite service period, which is largely through the end of 2026.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2022 included in our Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission, or the SEC, on March 14, 2023, or the Annual Report.

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. To that end, we are advancing two drug development programs that harness different regulators of cellular function: the first targets the immunoproteasome which is responsible for protein degradation in cells of the immune system and drives many key aspects of immune cell function, and the second targets the Sec61 translocon, which is located on the endoplasmic reticulum and represents the beginning of the protein secretion pathway. 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. 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 initiated PALIZADE, a global, placebo-controlled, double-blind Phase 2b clinical trial evaluating zetomipzomib in patients with LN. Target enrollment is 279 patients, who will be randomly assigned (1:1:1) to receive 30 mg of zetomipzomib, 60 mg of zetomipzomib or placebo subcutaneously once weekly for 52 weeks, in addition to standard background therapy. Background therapy can, but will not be mandated to, include standard induction therapy. We are also continuing to explore development opportunities for zetomipzomib in patients with SLE, a chronic inflammatory disease.

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. Target enrollment is 24 patients, who will be randomly assigned (2:1) to receive either zetomipzomib or placebo in addition to background corticosteroid therapy for 24 weeks and includes a protocol-mandated steroid taper by Week 14.
 

Based on clinical data generated to date with zetomipzomib, we believe that zetomipzomib has the potential to address multiple chronic immune-mediated diseases. We believe that the immunoproteasome is a validated target for the treatment of a wide variety of immune-mediated diseases given its ability to regulate multiple drivers of the inflammatory disease process. Many inflammatory disorders are currently treated one cytokine or cell type at a time, but the immunoproteasome affects a broad spectrum of immune regulators. 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.
 

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. As of August 2023, the dose escalation portion of the study is enrolling Cohort 7 (40 mg/m2). 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.
 

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. 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. 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.

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Since the commencement of our operations, we have devoted substantially all of our resources to performing research and development activities in support of our product development efforts, hiring personnel, raising capital to support and expand such activities and providing general and administrative support for these operations. 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, public offerings of common stock and pre-funded warrants to purchase common stock and debt. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates and programs. We have incurred significant operating losses since our inception. Our net losses were $68.2 million and $46.5 million for the year ended December 31, 2022 and the six months ended June 30, 2023, respectively, and we expect to continue to incur significant losses for the foreseeable future. As of June 30, 2023, we had an accumulated deficit of $295.4 million. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on discovering new potential therapeutics, 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. Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures on other research and development activities. We expect our expenses will increase substantially over time as we:

•continue the ongoing and planned development of zetomipzomib and KZR-261;

•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 and trade secrets;

•seek marketing approvals for zetomipzomib and KZR-261, as well as 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.

Our Pipeline

The following table sets forth the status and initial focus of our product candidates and protein secretion program:

 

m

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Financial 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;

•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 facility-related costs and supplies.

We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers.

The following table summarizes our research and development expenses incurred during the respective periods (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(unaudited)				(unaudited)
Research and development expenses by program:
Zetomipzomib	$	12.5	$	6.3	$	24.0	$	12.7
KZR-261		4.4		2.6		7.7		5.0
Protein Secretion		4.1		2.4		7.6		4.6
Total research and development expenses	$	21.0	$	11.3	$	39.3	$	22.3

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 process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

General and Administrative Expenses

Our general and administrative expenses consist primarily of personnel costs, allocated facilities costs and expenses for outside professional services, including legal, human resource, information technology and audit services. Personnel costs consist of salaries, benefits and stock-based compensation. We will incur additional expenses as we increase the size of our administrative function to support the growth of our business.

Interest Income

Our interest income consists of interest income earned on our cash, cash equivalents and marketable securities.

Interest Expense

Our interest expense consists of interest expense related to our debt facility. A portion of the interest expense is non-cash expense relating to the accretion of the final payment fees and amortization of debt discount and debt issuance costs associated with our Loan Agreement with Oxford Finance.

July 2023 Option Repricing

On July 24, 2023, the Compensation Committee of the Company’s Board of Directors approved a stock option repricing (the “Option Repricing”) in which the exercise price of certain outstanding options to purchase shares of the Company’s common stock under the

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2018 Plan was reduced to $2.28 per share, the closing price of the Common Stock on July 24, 2023. As a result of the Option Repricing, 9,904,755 vested and unvested stock options outstanding as of July 24, 2023 granted under the 2018 Plan with original exercise prices ranging from $2.44 to $22.85, were repriced. The repricing of eligible option awards has and is expected to continue to result in incremental non-cash stock-based compensation expense over the remaining requisite service period, which is largely through the end of 2026.

Results of Operations

Comparison of the Three Months Ended June 30, 2023 and 2022

	Three Months Ended June 30,
(dollars in millions)	2023			2022			$ Change
Operating expenses:
Research and development	$	21.0		$	11.3		$	9.7
General and administrative		5.8			5.0			0.8
Total operating expenses		26.8			16.3			10.5
Loss from operations		(26.8	)		(16.3	)		(10.5	)
Interest income		2.9			0.4			2.5
Interest expense		(0.4	)		(0.3	)		(0.1	)
Net loss	$	(24.3	)	$	(16.2	)	$	(8.1	)

Research and Development Expenses

Research and development expenses increased by $9.7 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase was due to an increase of $3.9 million in clinical expenses primarily related to start-up activities for the PALIZADE trial, an increase of $2.1 million in personnel and recruiting expenses due to an increase in headcount to support the progression of our programs and drug discovery, an increase of $1.1 million in manufacturing expenses related to the timing of drug manufacturing runs, an increase of $1.0 million in research and preclinical activities, an increase of $0.9 million in facility-related expense due to the increase rent from additional lease space, an increase of $0.4 million in stock-based compensation and an increase of $0.3 million in consulting expenses.

General and Administrative Expenses

General and administrative expenses increased by $0.8 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase was due to an increase of $0.5 million in personnel and recruiting expenses due to an increase in headcount, an increase of $0.3 million in stock-based compensation and an increase of $0.2 million in facility-related expense, offset by a decrease of $0.2 million in consulting and professional services.

Interest Income

Interest income increased by $2.5 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase was primarily due to an increase in interest rates.

Interest Expense

Interest expense increased by $0.1 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. 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 Loan Agreement entered into in November 2021.

Comparison of the Six Months Ended June 30, 2023 and 2022

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	Six Months Ended June 30,
(dollars in millions)	2023			2022			$ Change
Operating expenses:
Research and development	$	39.3		$	22.3		$	17.0
General and administrative		12.0			9.9			2.1
Total operating expenses		51.3			32.2			19.1
Loss from operations		(51.3	)		(32.2	)		(19.1	)
Interest income		5.6			0.5			5.1
Interest expense		(0.8	)		(0.5	)		(0.3	)
Net loss	$	(46.5	)	$	(32.2	)	$	(14.3	)

Research and Development Expenses

Research and development expenses increased by $17.0 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase was due to an increase of $7.4 million in clinical expenses primarily related to start-up activities for the PALIZADE trial, an increase of $2.8 million in personnel and recruiting expenses due to an increase in headcount to support the progression of our programs and drug discovery, an increase of $1.9 million in facility-related expense due to the increase rent from additional lease space, an increase of $1.8 million in research and preclinical activities related to protein secretion, an increase of $1.6 million in manufacturing expenses, an increase of $1.4 million in stock-based compensation and an increase of $0.1 million in consulting expenses.

General and Administrative Expenses

General and administrative expenses increased by $2.1 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase was due to an increase of $1.0 million in personnel and recruiting expenses due to an increase in headcount and salaries, an increase of $0.5 million in stock-based compensation, an increase of $0.4 million in legal and other professional services and an increase of $0.2 million in facility-related expense.

Interest Income

Interest income increased by $5.1 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase was due to an increase in interest rates.

Interest Expense

Interest expense increased by $0.3 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. 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 Loan Agreement entered into in November 2021.

Liquidity and Capital Resources

Overview

As of June 30, 2023, we had $236.6 million in cash, cash equivalents and marketable securities. As of June 30, 2023, our cash equivalents and marketable securities had an average maturity of approximately five months and the longest maturity was thirteen 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. Our net loss was $46.5 million for the six months ended June 30, 2023, and we had an accumulated deficit of $295.4 million as of June 30, 2023.

We believe that our cash, cash equivalents and marketable securities as of June 30, 2023 will be sufficient to meet our projected operating requirements through at least the next 12 months from the date these financial statements were issued. 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.

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At-the-Market Offering Program

In December 2021, we entered into a Sales Agreement, or the 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. Any shares of common stock sold will be issued pursuant to our shelf registration statement on Form S-3 (File No. 333-261774). We will pay Cowen a commission up to 3.0% of the gross sales proceeds of any shares of common stock sold through Cowen under the ATM Agreement and also have provided Cowen with indemnification and contribution rights. As of June 30, 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 June 30, 2023, approximately $68.3 million remains available under the ATM Agreement. No shares were sold under the ATM Agreement during the three months ended June 30, 2023.

Debt Facility

In November 2021, we entered into the Loan Agreement with Oxford Finance, which provides 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. As of June 30, 2023, we declined these tranches in borrowing capacity available to us under the Loan Agreement.

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. LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue and (ii) 0.08%, plus (b) 7.87%. We are required to make monthly interest-only payments prior to the amortization date of January 1, 2025, subject to a potential one-year extension upon satisfaction of certain conditions. The loan facility is secured by all assets except intellectual property, which is subject to a negative pledge, and will mature on November 1, 2026. There are no warrants or financial covenants associated with the Loan Agreement. In June 2023, Oxford Finance informed the Company that a LIBOR transition event would occur effective July 1, 2023 and revised the Loan Agreement to replace the LIBOR rate with the 1-month CME term SOFR plus 0.1%. 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.

Funding Requirements

We believe that our available cash, cash equivalents and short-term investments are sufficient to fund existing and planned cash requirements for the next 12 months. 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.

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.

Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies.

Our material cash requirements as of June 30, 2023 primarily relate to the maturities of principal obligations under our Term Loan and operating leases for office space and equipment. As of June 30, 2023, we have $4.6 million payable within 12 months. Refer to Notes 6 and 7 to our condensed consolidated financial statements for additional information.

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Our expected material cash requirements do not include any potential contingent payments upon the achievement by us of clinical, regulatory and commercial events, as applicable, or royalty payments that we may be required to make under license agreements we have entered into or may enter into with various entities pursuant to which we have in-licensed certain intellectual property, including our Onyx License Agreement. 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 excluded the contingent payments given that the timing and amount (if any) of any such payments cannot be reasonably estimated at this time. We also have no material non-cancellable purchase commitments with service providers, as we have generally contracted on a cancellable, purchase order basis.

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. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us or at all. Funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our preclinical studies, clinical trials, research and development programs or commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations and other licensing arrangements. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Cash Flows

The following summarizes our cash flows for the periods indicated:

	Six Months Ended June 30,
	2023			2022
(dollars in millions)	(unaudited)
Net cash used in operating activities	$	(42.5	)	$	(26.6	)
Net cash provided by (used in) investing activities	$	29.6		$	(58.0	)
Net cash provided by financing activities	$	0.5		$	127.2

Cash Flows from Operating Activities

During the six months ended June 30, 2023, cash used in operating activities was $42.5 million, which consisted of a net loss of $46.5 million and a net change of $1.3 million in our net operating assets and liabilities, adjusted by non-cash charges of $5.4 million. The non-cash charges consisted of $8.3 million for stock-based compensation expense, $0.5 million for depreciation, and $0.1 million of non-cash interest expense, offset by $3.5 million of amortization of premium and discounts on marketable securities. The change in our net operating assets and liabilities was primarily due to an increase of $3.7 million in prepaid and other current assets driven by the start-up clinical activities related to the PALIZADE trial, and a decrease of $0.1 million in operating lease asset and liabilities, offset by an increase of $2.5 million in accounts payable and accrued liabilities due to increased clinical expenditures.

During the six months ended June 30, 2022, cash used in operating activities was $26.6 million, which consisted of a net loss of $32.2 million and a net change of $2.3 million in our net operating assets and liabilities, adjusted by non-cash charges of $7.9 million. The non-cash charges consisted of $6.4 million for stock-based compensation expense, $0.8 million for depreciation and amortization, $0.6 million of amortization of premium and discounts on marketable securities and $0.1 million of non-cash interest expense. The change in our net operating assets and liabilities was primarily due to an increase of $1.2 million in prepaid and other current assets, a decrease of $0.6 million in accounts payable and accrued liabilities and a decrease of $0.6 million in operating lease liabilities.

Cash Flows from Investing Activities

Net cash provided by investing activities was $29.6 million for the six months ended June 30, 2023, primarily relating to the maturities of marketable securities exceeding purchases of such marketable securities. Payments for the purchases of property and equipment were $1.7 million during the six months ended June 30, 2023.

Net cash used in investing activities was $58.0 million for the six months ended June 30, 2022, primarily relating to the purchases of marketable securities exceeding maturities of such marketable securities. Payments for the purchases of property and equipment were $0.6 million during the six months ended June 30, 2022.

Cash Flows from Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2023 was $0.5 million, primarily from the issuance of common stock pursuant to our employee equity plans.

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Net cash provided by financing activities for the six months ended June 30, 2022 was $127.2 million, primarily relating to the net proceeds received from sales of common stock under the ATM Agreement and $0.6 million from the issuance of common stock pursuant to our employee equity plans.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting estimates from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

Status as an Emerging Growth Company and a Smaller Reporting Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we expect to cease being an “emerging growth company” on December 31, 2023. 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. 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.

In addition, until December 31, 2023, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we 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) or (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. These exemptions will apply until December 31, 2023 or until we no longer meet the requirements of being an emerging growth company, whichever is earlier.

We are also a smaller reporting company as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. 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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The primary objectives of our investment activities are to ensure liquidity and to preserve capital. The market risk inherent in our financial instruments and in our financial position reflects the potential losses arising from adverse changes in interest rates and concentration of credit risk. We had cash, cash equivalents and marketable securities of $236.6 million as of June 30, 2023, which consisted of bank deposits, highly liquid U.S. Treasury money market funds, U.S. Treasury securities, commercial paper and U.S. agency bonds. 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 June 30, 2023, our cash equivalents and marketable securities had an average maturity of approximately five months and the longest maturity was thirteen months. Due to the short-term duration and the lower risk profile of our cash equivalents and marketable securities, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents and marketable securities. 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.

Our investment portfolio consists of investment grade securities diversified amongst security types, industries, and issuers. We maintain cash, cash equivalents, and investments with multiple financial institutions that we believe are financially sound and have minimal credit risk exposure, although at times our balances may exceed the applicable insurance coverage limits. We monitor and manage the overall counterparty credit risk exposure of our cash balances to individual financial institutions on an ongoing basis. All our securities are held in custody by a recognized financial institution. Our policy limits the amount of credit exposure to a maximum of 10% to any one issuer, except for the U.S. Treasury, Federal Agencies, or Government Money Market Funds, and we believe no significant concentration risk exists with respect to these investments.

Approximately $0.7 million of our cash balance was located in Australia as of June 30, 2023. Our expenses, except those related to our Australian operations, are generally denominated in U.S. dollars. For our operations in Australia, the majority of the expenses are denominated in Australian dollars. To date, we have not had a formal hedging program with respect to foreign currency. A 10% increase or decrease in current exchange rates would not have a material effect on our consolidated financial results.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting.

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We 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 1A. Risk Factors.

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Quarterly Report on Form 10-Q, including our financial statements and related notes hereto, before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment. We cannot assure you that any of the events discussed below will not occur.

Summary of Selected Risks Associated with our Business

Our business is subject to numerous risks and uncertainties, including those discussed at length in the section titled “Risk Factors.” These risks include, among others, the following:

•We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.

•We have a limited operating history and have never generated revenue from product sales, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

•We will require substantial additional capital to finance our operations, which may not be available on acceptable terms, if at all. Failure to obtain this necessary capital when needed may force us to delay, reduce or terminate certain of our product development programs or other operations.

•Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish proprietary rights.

•Our future success is substantially dependent on the successful clinical development, regulatory approval and commercialization of zetomipzomib and KZR-261, as well as any future product candidates.

•We may explore strategic collaborations, which would require us to relinquish important rights to and control over the development and commercialization of our product candidates to any future collaborators.

•Success in preclinical studies or earlier clinical trials may not be indicative of future clinical trial results, and we cannot assure you that any clinical trials will lead to results sufficient for the necessary regulatory approvals.

•Clinical trials are very expensive, time consuming and difficult to design and implement.

•Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be delayed, made more difficult or rendered impossible by multiple factors outside our control.

•We may encounter substantial delays or difficulties in enrolling and retaining patients in our clinical trials.

•The manufacture of our product candidates is complex and uncertain, and until we develop a validated manufacturing process, we may encounter difficulties in supplying our planned and future clinical trials. 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.

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•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.

•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 are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

•We rely on third parties to manufacture clinical supplies of our product candidates and to conduct, supervise and monitor our clinical trials and preclinical studies. If those third parties perform in an unsatisfactory manner, it may harm our business.

•Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues. If we breach our exclusive license agreement with Onyx Therapeutics, Inc., we could lose the ability to continue the development and commercialization of zetomipzomib.

•If we are unable to obtain and maintain patent protection for zetomipzomib, KZR-261 or any future product candidate, if the scope of patent protection is not sufficiently broad, or if our patents are insufficient to protect our product candidates for an adequate amount of time, we may not be able to compete effectively in our markets.

•Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.

•We are highly dependent on the services of our executive officers, and if we are not able to retain these members of our management team or recruit and retain additional management, clinical and scientific personnel, our business will be harmed.

•If securities or industry analysts do not publish research or reports, or publish unfavorable research or reports, about our business or our market, our stock price and trading volume could decline.

•Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.

Risks Related to Our Financial Position and Capital Needs

We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.

Since inception in February 2015, we have incurred significant operating losses. Our net loss was $68.2 million for the year ended December 31, 2022 and $46.5 million for the six months ended June 30, 2023. As of June 30, 2023, we had an accumulated deficit of $295.4 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Since inception, we have devoted substantially all of our efforts to research and preclinical and clinical development of our product candidates, as well as to expanding our management team and infrastructure. It could be several years, if ever, before we have a commercialized drug. The net losses we incur may fluctuate significantly from quarter to quarter and year to year. 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;

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•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.

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. Our expenses could increase, and profitability could be further delayed if we decide to or are required by regulatory authorities to perform studies or trials in addition to those currently expected or if there are any delays in the initiation, enrollment or completion of any planned or future preclinical studies or clinical trials of our current and future product candidates. Even if we complete the development and regulatory processes necessary to obtain marketing approval, we anticipate incurring significant costs associated with launching and commercializing zetomipzomib, KZR-261 and any future product candidates.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of the Company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.

We have a limited operating history and have never generated revenue from product sales, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

We are a clinical-stage company and our operations to date have been largely focused on raising capital and conducting preclinical and clinical development of zetomipzomib and KZR-261, as well as research and discovery activities of future product candidates under our protein secretion program. As an organization, we have not yet demonstrated an ability to successfully complete clinical development, obtain regulatory approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization of our product candidates. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history.

Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with any future collaborative partners, to successfully complete the development of and obtain the regulatory approvals necessary to commercialize zetomipzomib, KZR-261 and any future product candidates. We do not anticipate generating revenue from product sales for the next several years, if ever. 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;

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•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.

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. We may need to eventually transition from a company with a research and development focus to a company capable of undertaking commercial activities. We may encounter unforeseen expenses, difficulties, complications and delays and may not be successful in such a transition.

We will require substantial additional capital to finance our operations, which may not be available on acceptable terms, if at all. Failure to obtain this necessary capital when needed may force us to delay, reduce or terminate certain of our product development programs or other operations.

Our operations have consumed substantial amounts of cash since our inception. We expect our expenses to increase in connection with our ongoing and planned activities, particularly as we continue to develop and potentially commercialize our product candidates, in addition to costs associated with the acquisition or in-licensing of any additional product candidates we may pursue. Our expenses could increase beyond expectations if the U.S. Food and Drug Administration, or FDA, or comparable foreign regulatory authorities require us to perform clinical and other studies in addition to those that we currently anticipate. In addition, if we obtain marketing approval for our product candidates, we expect to incur significant expenses related to sales, marketing, manufacturing and distribution.

As of June 30, 2023, we had cash, cash equivalents and marketable securities of $236.6 million. We believe that our cash, cash equivalents and marketable securities as of June 30, 2023, 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. 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. If the adverse global economic conditions, including higher inflation rates and changes in interest rates, persist or worsen, we could experience an inability to access additional capital or engage in strategic transactions on terms reasonable to us, or at all.

In any event, we will require substantial additional capital to develop a delivery system for zetomipzomib, conduct additional clinical trials, seek regulatory approval and commence commercialization of zetomipzomib, KZR-261 or any future product candidates. Even if we believe we have sufficient capital for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. Any additional capital raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize zetomipzomib, KZR-261 and any future product candidates.

If we do not raise additional capital in sufficient amounts, or on terms acceptable to us, we may be prevented from pursuing discovery, development and commercialization efforts, which will harm our business, operating results and prospects.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish proprietary rights.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs 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. We do not have any committed external source of funds. 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 June 30, 2023, approximately $68.3 million remains available under the at-the-market program. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. In addition, we may issue equity or debt securities as consideration for obtaining rights to additional compounds.

Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our shares, making investments, incurring additional debt, making capital expenditures, declaring dividends or placing limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could negatively impact our ability to conduct our business. For example, our obligations under the Loan Agreement are secured by a security interest in all of our assets, other than our intellectual property which is subject to a negative pledge. In addition, the Loan Agreement contains customary covenants that, subject to specific exceptions, restrict our ability to, among other things, declare

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dividends or redeem or repurchase equity interests, incur additional liens, make loans and investments, incur additional indebtedness, engage in mergers, acquisitions and asset sales, transact with affiliates, undergo a change in control, add or change business locations, or engage in businesses that are not related to its existing business.

In addition, if we raise additional capital through future collaborations, strategic alliances or third-party licensing arrangements, we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional capital when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market ourselves.

The terms of the Loan Agreement with Oxford Finance place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

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. As of June 30, 2023, we declined the remaining tranches in borrowing capacity available to us under the Loan Agreement. Our overall leverage and certain obligations and affirmative and negative covenants contained in the related documentation could adversely affect our financial health and business and future operations by limiting our ability to, among other things, satisfy our obligations under the Loan Agreement, refinance our debt on terms acceptable to us or at all, plan for and adjust to changing business, industry and market conditions, use our available cash flow to fund future acquisitions and make dividend payments, and obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity.

If we default under the Loan Agreement, Oxford Finance may accelerate all of our repayment obligations and exercise all of their rights and remedies under the Loan Agreement and applicable law, potentially requiring us to renegotiate our agreement on terms less favorable to us. Further, if we are liquidated, the lenders’ right to repayment would be senior to the rights of the holders of our common stock to receive any proceeds from the liquidation. Oxford Finance could declare a default upon the occurrence of an event of default, including events that they interpret as a material adverse change as defined in the Loan Agreement, payment defaults or breaches of certain affirmative and negative covenants, thereby requiring us to repay the loan immediately. Any declaration by Oxford Finance of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. Additionally, if we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

We are required and expect to make significant payments in connection with our license agreement with Onyx Therapeutics, Inc., or Onyx, for zetomipzomib.

We acquired rights to zetomipzomib, pursuant to an exclusive license agreement with Onyx, or the Onyx License Agreement. 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. In addition, we are obligated to pay Onyx tiered royalties based on net sales of zetomipzomib. If these payments become due, we may not have sufficient funds available to meet our obligations and our development efforts may be harmed.

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 NOLs generated in tax years beginning on or prior to December 31, 2017 are permitted to be carried forward for only 20 years under applicable U.S. tax law. Our federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of current year taxable income. It is uncertain if and to what extent various states will conform to federal law with respect to the limitations on the use of NOLs.

In addition, under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” its ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points (by value) over their lowest ownership percentage over a rolling three-year period. We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of shifts in our stock ownership (some of which are outside our control). As a result, if we earn net taxable income, our ability to use our pre-change NOLs to offset such taxable income may be subject to limitations. Similar provisions of state tax law may also apply to limit our use of

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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.

Consequently, even if we achieve profitability, we may not be able to utilize a material portion of our NOL carryforwards and certain other tax attributes, which could have a material adverse effect on cash flow and results of operations.

Changes in tax laws or regulations could materially adversely affect our company.

The tax regimes to which we are subject or under which we operate are unsettled and may be subject to significant change. The issuance of additional guidance related to existing or future tax laws, or changes to tax laws or regulations proposed or implemented by the current or a future U.S. presidential administration, Congress, or taxing authorities in other jurisdictions, including jurisdictions outside of the United States, could materially affect our tax obligations and effective tax rate. To the extent that such changes have a negative impact on us, our suppliers, manufacturers, or our customers, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.

The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, tax rates, new or revised tax laws, or interpretations of tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency. Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.

Risks Related to the Development and Commercialization of Our Product Candidates

Our future success is substantially dependent on the successful clinical development, regulatory approval and commercialization of zetomipzomib and KZR-261, as well as any future product candidates. If we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate revenue will be adversely affected.

The time required to obtain approval or other marketing authorizations by the FDA and comparable foreign regulatory authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations and the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate, and it is possible that neither our current product candidates, nor any product candidates we may seek to develop in the future, will ever obtain regulatory approval. Neither we nor any future collaborator is permitted to market zetomipzomib or KZR-261 in the United States or abroad until we receive regulatory approval from the FDA or the applicable foreign regulatory authority.

Prior to obtaining approval to commercialize our product candidates in the United States or abroad, we must demonstrate with substantial evidence from well controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses. Results from clinical trials and preclinical studies can be interpreted in different ways. Even if we believe the clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and comparable foreign regulatory authorities. The FDA may also require us to conduct additional clinical trials or nonclinical studies for our product candidates either prior to or post-approval, or it may object to the design of our clinical trials and other elements of our clinical development programs. In addition, the FDA typically refers applications for novel drugs to an advisory committee comprising outside experts. The FDA is not bound by the recommendation of the advisory committee, but it considers such recommendation when making its decision.

Of the large number of product candidates in development, only a small percentage are successfully approved by the FDA or a comparable foreign regulatory authority and are commercialized. The lengthy approval or marketing authorization process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval or marketing authorization to market our product candidates, which would significantly harm our business, financial condition, results of operations and prospects.

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 approval for, and, if approved, successfully commercialize zetomipzomib and KZR-261 in a timely manner. Our resource allocation decisions may cause us to fail to capitalize on profitable market opportunities for our product candidates.

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Even if we eventually complete clinical testing and receive approval of a new drug application, or NDA, or foreign marketing application for zetomipzomib, KZR-261 or any future product candidates, the FDA or the comparable foreign regulatory authorities may grant approval or other marketing authorization contingent on the performance of costly additional clinical trials, including post-market clinical trials. The FDA or the comparable foreign regulatory authorities also may approve or authorize for marketing a product candidate for a more limited indication or patient population than we originally request, and the FDA or comparable foreign regulatory authorities may not approve or authorize the labeling that we believe is necessary or desirable for the successful commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval or other marketing authorization would delay or prevent commercialization of that product candidate and would materially adversely impact our business and prospects.

In addition, the FDA and comparable foreign regulatory authorities may change their policies, adopt additional regulations or revise existing regulations or take other actions, which may prevent or delay approval of our future products under development on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain approvals, increase the costs of compliance or restrict our ability to maintain any marketing authorizations we may have obtained. In addition, we could also experience delays in the timing of our interactions with regulatory authorities due to absenteeism by governmental employees, inability to conduct planned physical inspections related to regulatory approval, which could delay anticipated approval decisions and otherwise delay or limit our ability to make planned regulatory submissions or obtain new product approvals.

Even if we receive regulatory approval to market any of our product candidates, we cannot assure you that any such product candidate will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives. Furthermore, even if we obtain regulatory approval for any of our product candidates, we will still need to develop a commercial organization, establish a commercially viable pricing structure and obtain approval for adequate reimbursement from third-party and government payors. If we are unable to successfully commercialize zetomipzomib, KZR-261 and any future product candidates, we may not be able to generate sufficient revenue to continue our business.

If we are not successful in developing zetomipzomib and KZR-261, or discovering and developing additional product candidates, our ability to expand our pipeline and achieve our strategic objectives would be impaired.

A key element of our strategy is to build a pipeline of product candidates and to progress these product candidates through clinical development for the treatment of immune-mediated and oncologic disorders. We are conducting research and discovery efforts targeting the protein secretion pathway and, in October 2021, we initiated a Phase 1 clinical trial of KZR-261, our first clinical candidate for development in oncology. However, our current and future research programs may fail to yield product candidates with acceptable pharmaceutical properties for clinical development. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of safety, efficacy, pharmaceutical properties, competition or other characteristics that indicate that they are unlikely to be drugs that will receive marketing approval, achieve market acceptance or obtain reimbursements from third-party payors. Efforts to discover and develop new product candidates require substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. If we are unsuccessful in building our pipeline beyond our current product candidates, our ability to generate product revenue would be impaired, which could significantly harm our financial position and adversely affect the trading price of our common stock.

Clinical trials are very expensive, time consuming and difficult to design and implement.

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. We cannot predict with any certainty if or when we might submit an NDA for regulatory approval for any of our product candidates or whether any such NDA will be approved by the FDA. Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For instance, the FDA may not agree with our proposed endpoints for any future clinical trial of our product candidates, which may delay the commencement of our clinical trials. We may design the inclusion and exclusion criteria for trial participation too narrowly, which would make it difficult to find and enroll patients for our clinical trials. In addition, we may not succeed in developing and validating disease-relevant clinical endpoints based on insights regarding biological pathways for the disorders we are studying. Failure can occur at any stage, and we could encounter problems that cause us to suspend, abandon or repeat clinical trials.

In the first half of 2023, we initiated PALIZADE, a global, placebo-controlled, double-blind Phase 2b clinical trial evaluating zetomipzomib in patients with LN. As an organization, we have not previously conducted a clinical trial to the scale of the PALIZADE trial. We have engaged and intend to use a single contract research organization, or CRO, to manage the PALIZADE trial, and although we will oversee their performance and maintain certain regulatory responsibilities, the ultimate success of initiating,

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enrolling and completing this trial, and ensuring regulatory and quality compliance across several countries, will depend significantly on the CRO's performance, in addition to several other third-party service providers and clinical trial vendors in the United States and worldwide.

We plan to conduct the PALIZADE trial in several countries where we have not previously engaged with local regulatory authorities nor performed clinical trials. The process and timelines required to obtain approval from foreign regulatory authorities is unpredictable and may depend upon numerous factors and their substantial discretion. The inability to obtain and maintain regulatory approval for the conduct of the PALIZADE trial outside the United States may impact the timelines and completion of the PALIZADE trial.

If the market opportunities for zetomipzomib and KZR-261 are smaller than we believe they are, our business may suffer.

We currently focus our drug development of zetomipzomib on treatments of immune-mediated diseases, including lupus nephritis and autoimmune hepatitis. Our eligible patient population and pricing estimates may differ significantly from the actual market addressable by our product candidates. 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. These estimates have been derived from a variety of sources, including scientific literature, patient foundations or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these disorders. Our Phase 1 trial of KZR-261 is designed to evaluate safety and tolerability, pharmacokinetics and pharmacodynamics, and we have not yet selected the tumor types or patient populations for the next stages of clinical development. The number of eligible patients for either product candidate may turn out to be lower than expected. Likewise, the potentially addressable patient population for each of our product candidates may be limited or may not be amenable to treatment with our product candidates. If the market opportunities for our product candidates are smaller than we estimate, our business and results of operations could be adversely affected.

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.

In addition to our clinical trials underway for zetomipzomib and KZR-261, we are conducting research and discovery efforts targeting the protein secretion pathway. The development of these product candidates requires significant capital investment. 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. 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. 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.

We may explore strategic collaborations, which would require us to relinquish important rights to and control over the development and commercialization of our product candidates to any future collaborators.

Over time, our business strategy may include entering into product development collaborations, including strategic collaborations with major biotechnology or pharmaceutical companies. 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. 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;

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•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.

Success in preclinical studies or earlier clinical trials may not be indicative of future clinical trial results, and we cannot assure you that any clinical trials will lead to results sufficient for the necessary regulatory approvals.

Success in preclinical testing and earlier clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Preclinical tests and early clinical trials are primarily designed to test safety, to study pharmacokinetics and pharmacodynamics and to understand the side effects of product candidates at various doses and schedules. Success in preclinical studies and earlier clinical trials does not ensure that later trials designed to test efficacy will be successful, nor does it predict final results. Our product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical studies or having successfully advanced through earlier clinical trials. 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.

In addition, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. As an organization, we have limited experience designing clinical trials and may be unable to design and execute a clinical trial to support regulatory approval. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including changes in regulatory policy during the period of our product candidate development. Any such delays could negatively impact our business, financial condition, results of operations and prospects.

Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be delayed, made more difficult or rendered impossible by multiple factors outside our control.

Identifying and qualifying patients to participate in our clinical trials is critical to our success. We are developing zetomipzomib to address several autoimmune diseases with high degrees of unmet medical need, including lupus nephritis and autoimmune hepatitis. If the actual number of patients with these disorders is smaller than we anticipate, or if these patients are unwilling to participate in a clinical trial, we may encounter difficulties in enrolling patients in our clinical trials, thereby delaying or preventing development and approval of our product candidates. Even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, the existing body of safety and efficacy data, the number and nature of competing treatments and ongoing clinical trials of competing therapies for the same indication, the proximity of patients to clinical sites, our ability to provide zetomipzomib for at-home administration, and the eligibility criteria for the trial. 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. In addition, any negative results we may report in clinical trials of our product candidate may make it difficult or

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impossible to recruit and retain patients in other clinical trials of that same product candidate. Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop our product candidates or could render further development impossible. For example, the impact of public health crises, or geopolitical tensions, such as the Russia-Ukraine war, may delay or prevent patients from enrolling or from receiving treatment in accordance with the protocol and the required timelines, which could delay our clinical trials, or prevent us from completing our clinical trials at all. 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. 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.

We may not commercialize, market, promote or sell any product candidate without obtaining marketing approval from the FDA or a comparable foreign regulatory authority, and we may never receive such approvals. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans and will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. A failure of one or more clinical trials can occur at any stage of testing. 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. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. 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. The closure of sites, the inability to screen and enroll new patients or any premature discontinuation of treatment by patients already enrolled in our trial could result in the need to enroll additional patients, which would be costly and could delay our anticipated timeline for the completion of the trial. 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.

We 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;

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•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.

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. In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct additional testing to bridge our modified product candidate to earlier versions.

Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our product candidates, we may:

•be delayed in obtaining marketing approval, if at all;

•obtain approval for indications or patient populations that are not as broad as intended or desired;

•obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

•be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;

•have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy, or REMS;

•be subject to the addition of labeling statements, such as warnings or contraindications;

•be sued or held liable for harm causes to patients; or

•experience damage to our reputation.

Further, we, the FDA, comparable foreign regulatory authorities, or an IRB may suspend our clinical trials at any time if it appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including cGCP, that we are exposing participants to unacceptable health risks, or if the FDA finds deficiencies in our INDs, or the conduct of these trials. Therefore, we cannot predict with any certainty the schedule for commencement and completion of clinical trials. If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our product candidates could be negatively impacted, and our ability to generate revenues from our product candidates may be delayed.

The manufacture of our product candidates is complex and uncertain, and until we develop a validated manufacturing process, we may encounter difficulties in supplying our planned and future clinical trials. 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.

The processes involved in manufacturing the active drug substance and finished drug product of zetomipzomib and KZR-261 are complex, expensive, highly regulated and subject to multiple risks and uncertainties. As product candidates are developed through early to late-stage clinical trials and then to approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are modified along the way to optimize the scale, process and results. 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 support of our PALIZADE trial and future development strategies. In the fourth quarter 2022, we conducted a scale up GMP manufacturing run of zetomipzomib that did not meet the quality standards for use in our clinical trials. We believe our existing supply of zetomipzomib will allow us to initiate the PALIZADE trial and PORTOLA trial, and we are continuing manufacturing activities to increase our clinical supply of zetomipzomib for these trials. 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.

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In addition, our contract manufacturing organizations, or CMOs, may be unable to successfully increase the manufacturing scale for our product candidates in a timely or cost-effective manner and may experience delays due to limited manufacturing capacity. In addition, quality issues may arise during manufacturing activities. If our CMOs are unable to successfully manufacture our product candidates in sufficient quantity in a timely manner, our planned clinical trials may be delayed or modified.

Our product candidates have been involved, and may be involved in the future, in investigator-initiated clinical trials, and we have limited or no control over the conduct of such trials.

Zetomipzomib has been involved in an investigator-initiated clinical trial, and our product candidates may be involved in investigator-initiated clinical trials in the future. Investigator-initiated clinical trials pose similar risks as those set forth elsewhere in this “Risk Factor” section relating to our own internal clinical trials. 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. Despite this lack of control, negative results in investigator-initiated clinical trials could have a material adverse effect on our business and prospects and the perception of our product candidates.

Interim topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim topline or preliminary data from our clinical trials. Interim data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available, particularly from our open-label studies. Preliminary or topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. Preliminary or topline data may include, for example, data regarding a small percentage of the patients enrolled in a clinical trial, and such preliminary data should not be viewed as an indication, belief or guarantee that other patients enrolled in such clinical trial will achieve similar results or that the preliminary results from such patients will be maintained. As a result, interim and preliminary data may not be statistically significant and should be viewed with caution until the final data are available. Differences between preliminary or interim data and final data may cause the trading price of our common stock to fluctuate significantly and could significantly harm our business prospects.

Zetomipzomib is being developed as a lyophilized formulation which could adversely affect market acceptance if patients are required to reconstitute zetomipzomib themselves prior to injection.

We are developing zetomipzomib as a lyophilized product candidate, meaning that it will be freeze-dried and must be reconstituted with water 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. Beginning with our PRESIDIO OLE study, we provided patients with the ability to reconstitute zetomipzomib at home prior to injection.

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.

During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries, discomforts and other adverse events, to their doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. Regulatory authorities may draw different conclusions or require additional testing to confirm these determinations, if they occur. In addition, it is possible that as we test our product candidates in larger, longer and more extensive clinical trials, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by subjects or patients. Many times, side effects are only detectable after investigational drugs are tested in large-scale pivotal trials or, in some cases, after they are made available to patients on a commercial scale after approval. 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.

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. Any of these occurrences may harm our business, financial condition and prospects significantly.

Additionally, if any of our product candidates receive marketing approval, the FDA could require us to include a black box warning in our label or adopt a REMS to ensure that the benefits outweigh the risks, which may include, among other things, a Medication Guide

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outlining the risks of the drug for distribution to patients and a communication plan to healthcare practitioners. 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.

Any of the above events resulting from undesirable side effects or other previously unknown problems could prevent us from achieving or maintaining market acceptance of the affected product candidate, if approved. In addition, these events could substantially increase the costs of commercializing our product candidates and could significantly harm our business, prospects, financial condition and results of operations.

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.

Regulatory authorities in some jurisdictions, including the United States, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000, there is no reasonable expectation that sales of the drug in the United States will be sufficient to offset the costs of developing and making the drug available in the United States. If a drug with an orphan drug designation subsequently receives the first marketing approval for use in the rare disease or condition for which it was designated, then the sponsor is eligible for a seven-year period of marketing during which the FDA may not approve another sponsor’s marketing application for a drug with the same active moiety and intended for the same use or indication as the approved orphan drug, except in limited circumstances, such as if a subsequent sponsor demonstrates its product is clinically superior. During a sponsor’s orphan drug exclusivity period, however, competitors may receive approval for drugs with different active moieties for the same indication as the approved orphan drug, or for drugs with the same active moiety as the approved orphan drug, but for different indications. Further, if a designated orphan drug receives marketing approval for an indication broader than the rare disease or condition for which it received orphan drug designation, it may not be entitled to exclusivity.

We intend to pursue orphan drug designation for zetomipzomib in the treatment of autoimmune hepatitis and any other rare immune-mediated disease indications we pursue for development. Obtaining orphan drug designation in additional indications and other jurisdictions may be difficult, and we may not be successful in doing so. The exclusivity for our orphan drug designations, and for any other designations that we may obtain in the future, may not effectively protect the drug from the competition of different drugs for the same condition, which could have already been approved or could be approved before or during the exclusivity period. Additionally, after an orphan drug is approved, the FDA could subsequently approve another application for the same drug for the same indication if the FDA concludes that the later drug is shown to be safer, more effective or makes a major contribution to patient care. 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. The failure to obtain an orphan drug designation for any product candidates we may develop, the inability to maintain that designation for the duration of the applicable period, or the inability to obtain or maintain orphan drug exclusivity could reduce our ability to make sufficient sales of the applicable product candidate to balance our expenses incurred to develop it, which would have a negative impact on our operational results and financial condition.

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Even if we obtain and maintain approval for our product candidates from the FDA, we may never obtain approval for our product candidates outside of the United States, which would limit our market opportunities and could harm our business.

Approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. Sales of zetomipzomib and KZR-261 outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable foreign regulatory authorities also must approve the manufacturing and marketing of the product candidate in those countries. 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. In some cases, the price that we intend to charge for any product candidates, if approved, is also subject to approval. Obtaining approval for zetomipzomib and KZR-261 in the European Union from the European Commission following the opinion of the European Medicines Agency, if we choose to submit a marketing authorization application there, would be a lengthy and expensive process. Even if a product candidate is approved, the FDA or the European Commission, as the case may be, may limit the indications for which the drug may be marketed, require extensive warnings on the drug labeling or require expensive and time-consuming additional clinical trials or reporting as conditions of approval. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of zetomipzomib, KZR-261 and any future product candidates in certain countries.

Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Also, regulatory approval for our product candidates may be withdrawn. If we fail to comply with the regulatory requirements, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business, financial condition, results of operations and prospects could be harmed.

Even if we obtain regulatory approval for any of our product candidates, they will remain subject to ongoing regulatory oversight.

Even if we obtain regulatory approvals for our product candidates, such approvals will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information. For example, the FDA strictly regulates the promotional claims that may be made about drug products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. Additionally, any regulatory approvals that we receive for our product candidates may also be subject to a REMS, limitations on the approved indicated uses for which the drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 trials, and surveillance to monitor the quality, safety and efficacy of the drug. Such regulatory requirements may differ from country to country depending on where we have received regulatory approval.

In addition, drug manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and comparable foreign regulatory authorities for compliance with cGMP requirements and adherence to commitments made in the NDA or foreign marketing application. If we, or a regulatory authority, discover previously unknown problems with a drug, such as adverse events of unanticipated severity or frequency, or problems with the facility where the drug is manufactured or if a regulatory authority disagrees with the promotion, marketing or labeling of that drug, a regulatory authority may impose restrictions relative to that drug, the manufacturing facility or us, including requesting a recall or requiring withdrawal of the drug from the market or suspension of manufacturing.

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

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•refuse to allow us to enter into supply contracts, including government contracts.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and harm our business, financial condition, results of operations and prospects.

The FDA’s and comparable foreign regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. 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.

In addition, we cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.

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.

Even if our product candidates receive marketing approval, they may fail to gain market acceptance by physicians, patients, third-party payors and others in the medical community. If they do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of zetomipzomib, KZR-261 and any future product candidates, if approved for commercial sale, will depend on a number of factors, including but not limited to:

•the efficacy and potential advantages compared to alternative treatments and therapies;

•the effectiveness of sales and marketing efforts;

•the strength of our relationships with patient communities;

•the cost of treatment in relation to alternative treatments and therapies, including any similar generic treatments;

•our ability to offer such drug for sale at competitive prices;

•the convenience and ease of administration compared to alternative treatments and therapies;

•the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

•the strength of marketing and distribution support;

•the availability of third-party coverage and adequate reimbursement;

•the prevalence and severity of any side effects; and

•any restrictions on the use of the drug together with other medications.

Our efforts to educate physicians, patients, third-party payors and others in the medical community on the benefits of our product candidates may require significant resources and may never be successful. Such efforts may require more resources than are typically required due to the complexity and uniqueness of our product candidates. Because we expect sales of our product candidates, if approved, to generate substantially all of our revenues for the foreseeable future, the failure of our product candidates to find market acceptance would harm our business. In addition, if we enter into a strategic collaboration regarding any of our product candidates, our rights to receive milestone payments and royalties related to such product candidates will depend on our collaborators’ abilities to achieve market acceptance of those product candidates.

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. There are a number of large pharmaceutical and biotechnology companies that currently market and sell drugs or are pursuing the development of product candidates for the treatment of the indications that we are pursuing. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

More established companies may have a competitive advantage over us due to their greater size, resources and institutional experience. In particular, these companies have greater experience and expertise in securing reimbursement, government contracts and

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relationships with key opinion leaders, conducting testing and clinical trials, obtaining and maintaining regulatory approvals and distribution relationships to market products and marketing approved drugs. These companies also have significantly greater research and marketing capabilities than we do. If we are not able to compete effectively against existing and potential competitors, our business and financial condition may be harmed.

As a result of these factors, our competitors may obtain regulatory approval of their drugs before we are able to, which may limit our ability to develop or commercialize our product candidates. Our competitors may also develop therapies that are safer, more effective, more widely accepted or less expensive than ours, or may be more successful than we are in manufacturing and marketing their drugs. These advantages could render our product candidates obsolete or non-competitive before we can recover the costs of such product candidates’ development and commercialization.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, medical, management and commercial personnel, establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing such product candidates, if and when they are approved.

To successfully commercialize any product candidate that may result from our development programs, we will need to build out our sales and marketing capabilities, either on our own or with others. The establishment and development of our own commercial team or the establishment of a contract sales force to market any product candidate we may develop will be expensive and time-consuming and could delay any drug launch. Moreover, we cannot be certain that we will be able to successfully develop this capability. We may seek to enter into collaborations with other entities to utilize their established marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If any current or future collaborators do not commit sufficient resources to commercialize our product candidates, or we are unable to develop the necessary capabilities on our own, we may be unable to generate sufficient revenue to sustain our business. We compete with many companies that currently have extensive, experienced and well-funded marketing and sales operations to recruit, hire, train and retain marketing and sales personnel. We will likely also face competition if we seek third parties to assist us with the sales and marketing efforts of our product candidates. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

If we seek to commercialize our product candidates outside of the United States, a variety of risks associated with international operations could harm our business.

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.

We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by many of the individual countries in and outside of Europe with which we will need to comply. Many biopharmaceutical companies have found the process of marketing their own products in foreign countries to be very challenging.

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Coverage and adequate reimbursement may not be available for zetomipzomib or KZR-261, which could make it difficult for us to sell profitably, if approved.

Market acceptance and sales of any product candidates that we commercialize, if approved, will depend in part on the extent to which coverage and reimbursement for these drugs and related treatments will be available from third-party payors, including government health administration authorities, managed care organizations and other private health insurers. Third-party payors decide which therapies they will pay for and establish reimbursement levels. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates that we develop will be made on a payor-by-payor basis. One third-party payor’s determination to provide coverage for a drug does not assure that other payors will also provide coverage, and adequate reimbursement, for the drug. Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved. Each third-party payor determines whether or not it will provide coverage for a therapy, what amount it will pay the manufacturer for the therapy, and on what tier of its formulary it will be placed. The position on a third-party payor’s list of covered drugs, or formulary, generally determines the co-payment that a patient will need to make to obtain the therapy and can strongly influence the adoption of such therapy by patients and physicians. 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.

Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that coverage and reimbursement will be available for any drug that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Inadequate coverage and reimbursement may impact the demand for, or the price of, any drug for which we obtain marketing approval. If coverage and adequate reimbursement are not available, or are available only to limited levels, we may not be able to successfully commercialize zetomipzomib, KZR-261 or any future product candidates that we develop.

Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any product candidate that we may develop.

We face an inherent risk of product liability exposure related to the testing of our product candidates in clinical trials, both within and outside of the United States, and may face an even greater risk if we commercialize any product candidate that we may develop. If we cannot successfully defend ourselves against claims that any such product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

•decreased demand for any product candidate that we may develop;

•loss of revenue;

•substantial monetary awards to trial participants or patients;

•significant time and costs to defend the related litigation;

•withdrawal of clinical trial participants;

•increased insurance costs;

•the inability to commercialize any product candidate that we may develop; and

•injury to our reputation and significant negative media attention.

Although we maintain product liability insurance coverage, such insurance may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance coverage as we advance through clinical development and if we are able to successfully commercialize any product candidate. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

Risks Related to Regulatory Compliance

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 are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Healthcare providers, including physicians and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future

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arrangements with healthcare professionals, principal investigators, consultants, customers and third-party payors may subject us to various federal and state fraud and abuse laws and other healthcare laws, including, without limitation, the federal Anti-Kickback Statute, the federal civil and criminal false claims laws and the law commonly referred to as the Physician Payments Sunshine Act and regulations. These laws will impact, among other things, our clinical research, proposed sales, marketing and educational programs. In addition, we may be subject to patient privacy laws by both the federal government and the states in which we conduct or may conduct our business. The laws that will affect our operations include, but are not limited to:

•the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers, formulary managers and others, on the other hand. 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. Federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion, implicate the federal civil False Claims Act;

•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal civil and criminal statutes that prohibit, among other things, a person from knowingly and willfully executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program, or making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private);

•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and their implementing regulations, which impose certain requirements relating to the privacy, security and transmission of individually identifiable health information on health plans, health care clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates and their subcontractors that perform certain services involving the use or disclosure of individually identifiable health information;

•federal transparency laws, including the federal Physician Payments Sunshine Act, that require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to: (i) payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals; and (ii) ownership and investment interests held by physicians and their immediate family members; and

•state and foreign law equivalents of each of the above federal laws, state laws that require manufacturers to report information related to payments and other "transfers of value" to physicians and other healthcare providers, marketing expenditures, or drug pricing, state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and state and local laws that require the registration of pharmaceutical sales representatives, or that otherwise restrict payments that may be made to healthcare providers; as well as state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in government funded healthcare programs, such as Medicare and Medicaid, 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 and the curtailment or restructuring of our operations.

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The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.

Healthcare legislative reform measures may have a negative impact on our business and results of operations.

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.

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. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the PPACA, was passed, which substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. The PPACA, among other things: (i) addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; (ii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations; (iii) established annual fees and taxes on manufacturers of certain branded prescription drugs; (iv) expanded the availability of lower pricing under the 340B drug pricing program by adding new entities to the program; and (v) established a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

Since its passage, there have been varied executive, judicial and Congressional challenges to certain provisions of the PPACA. In addition, Congress has considered, and may consider in the future, legislation to repeal or repeal and replace all or part of the PPACA. While Congress has not passed any comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into law. On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Further, prior to the U.S. Supreme Court ruling, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the PPACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the PPACA. It is possible that the PPACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the PPACA and our business.

Other legislative changes have been proposed and adopted since the PPACA was enacted. 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. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. 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. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. 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. 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. The U.S. Department of Health

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and Human Services has and will continue to issue and update guidance as these programs are implemented. It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry.

Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under 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. At this time, the full impact of the introduction of the Medicare Quality Payment Program on overall physician reimbursement remains unclear.

Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which have resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Additionally, based on a recent executive order, the Biden administration expressed its intent to pursue certain policy initiatives to reduce drug prices and directed HHS to submit a report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. It is unclear whether these this executive order or similar policy initiatives will be implemented in the future. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private third-party payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Risks Related to Our Dependence on Third Parties

We will rely on third parties to manufacture clinical and commercial supplies of zetomipzomib, KZR-261 and any future product candidates.

We do not own or operate facilities for drug manufacturing, testing, storage or distribution. We are dependent on third parties to manufacture the clinical supplies of our product candidates. 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. We are completely dependent on our CMOs for compliance with cGMP for manufacture of both active drug substances and finished drug products. If our CMOs cannot successfully manufacture active drug substances and finished drug product that conform to our specifications and the strict regulatory requirements of the FDA and comparable foreign regulatory authorities, we will not be able to secure or maintain regulatory approval for our product candidates. In addition, we have no control over the ability of our CMOs to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our timelines and ability to develop, obtain regulatory approval for or market our product candidates, if approved.

The facilities used by our CMOs to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit an NDA for any of our product candidates. We also expect to rely on third-party manufacturers to supply us with sufficient quantities of our product candidates to be used, if approved, for commercialization.

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;

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•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.

Any of these events could lead to clinical trial delays, failure to obtain regulatory approval or impact our ability to successfully commercialize our current or any future product candidates once approved. Some of these events could be the basis for FDA action, including injunction, request for recall, seizure, or total or partial suspension of production.

We rely on third parties to conduct, supervise and monitor our clinical trials and preclinical studies, and if those third parties perform in an unsatisfactory manner, it may harm our business.

We do not currently have the ability to independently conduct clinical trials. We intend to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and we expect to have limited influence over their actual performance. We rely upon CROs to monitor and manage data for our clinical programs. We expect to control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. For example, we have engaged and intend to use a single CRO to manage the PALIZADE trial, and although we will oversee their performance and maintain certain regulatory responsibilities, the ultimate success of initiating, enrolling and completing this trial, and ensuring regulatory and quality compliance across several countries, will depend significantly on the CRO’s performance.

We and our CROs are required to comply with the good laboratory practices and good clinical practices, or GCP, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities in the form of International Council for Harmonisation guidelines for any of our product candidates that are in preclinical and clinical development, respectively. The regulatory authorities enforce GCP through periodic inspections of trial sponsors, principal investigators and clinical trial sites. Although we rely on CROs to conduct GCP-compliant clinical trials, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations, and our reliance on the CROs does not relieve us of our regulatory responsibilities. If we or our CROs fail to comply with GCP, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Accordingly, if our CROs fail to comply with these regulations, we may be required to repeat clinical trials, which would delay the regulatory approval process.

Our reliance on third parties to conduct clinical trials results in less direct control over the management of data developed through clinical trials than would be the case if we were relying entirely upon our own staff. Communicating with CROs and other third parties can be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. 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.

These factors may materially adversely affect the timelines of our clinical trials and may subject us to unexpected cost increases that are beyond our control. 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

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extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, the product candidate being developed. As a result, our financial results and commercial prospects would be harmed, our costs could increase, and our ability to generate revenue from the product candidate could be delayed. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities which could compete with recruitment of our clinical trials.

If our relationship with any of these CROs terminates, we may be delayed in entering into new arrangements with alternative CROs or unable to do so on commercially reasonable terms. Changing CROs during an ongoing clinical trial involves substantial cost, requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can negatively impact our ability to meet our desired clinical development timelines. Though we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a negative impact on our business, financial condition and prospects.

In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA. The FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the trial. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of our product candidates.

Risks Related to Our Intellectual Property

Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues. If we breach the Onyx License Agreement, we could lose the ability to continue the development and commercialization of zetomipzomib.

The licensing of intellectual property is of critical importance to our business and to our current and future product candidates, and we expect to enter into additional such agreements in the future. In particular, our immunoproteasome program, including zetomipzomib, is dependent on the Onyx License Agreement. Pursuant to the Onyx License Agreement, 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 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 or treatment in humans of cancerous or pre-cancerous diseases or conditions, including those related to hematological diseases or conditions.

The licensed compounds, including zetomipzomib, are selective for the immunoproteasome and therefore are not known or believed, based on scientific literature and the Company’s own research and development activities, to have any application in cancer or pre-cancerous conditions. However, notwithstanding these known characteristics of the licensed compounds, Onyx retains all rights under the licensed intellectual property rights that are not granted to the Company, and therefore Onyx retains rights under such intellectual property rights to develop and commercialize the licensed compounds in connection with the diagnosis or treatment in humans of cancerous or pre-cancerous diseases or conditions, including those related to hematological diseases or conditions, and also has the rights to transfer these rights to a third-party. If Onyx or its licensee develops and commercializes any of the licensed compounds in cancer or pre-cancerous indications that are commercially interchangeable with our product candidates, including zetomipzomib, sales by Onyx or its licensee of such compounds for cancer and pre-cancerous indications could result in the threat of off-label use in our licensed field, potentially diminishing our sales of the applicable licensed compounds in our licensed field.

The Onyx License Agreement may limit or delay our ability to consummate certain transactions, may impact the value of those transactions, or may limit our ability to pursue certain activities. 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.

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;

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•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.

These or other disputes over intellectual property that we have licensed, or will license or acquire in the future, may prevent or impair our ability to maintain our current arrangements on acceptable terms or may impair the value of the arrangement to us. Any such dispute could have an adverse effect on our business.

If we fail to meet our obligations under these agreements in any material respect, the counterparty may have the right to terminate the respective agreement. Any uncured, material breach under a license could result in our loss of exclusive rights and may lead to a complete termination of our product development and any commercialization efforts for each of our product candidates. While we would expect to exercise all rights and remedies available to us, including seeking to cure any breach by us, and otherwise seek to preserve our rights under the technology licensed to or acquired by us, we may not be able to do so in a timely manner, at an acceptable cost or at all.

Furthermore, certain provisions in our intellectual property agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could affect the scope of our rights to the relevant intellectual property or technology, or affect financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we are unable to obtain and maintain patent protection for zetomipzomib, KZR-261 or any future product candidates, or if the scope of the patent protection obtained is not sufficiently broad, or if our patents are insufficient to protect our product candidates for an adequate amount of time, we may not be able to compete effectively in our markets.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our development programs and product candidates. Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to zetomipzomib, KZR-261 and any future product candidates. We seek to protect our proprietary position by, among other methods, filing patent applications in the United States and abroad related to our current and future research programs and product candidates. The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

We file patent applications directed to our product candidates in an effort to establish intellectual property positions directed to their compositions of matter as well as uses of these product candidates in the treatment of diseases. Our intellectual property includes patents and patent applications that we own as well as patents and patent applications that we in-license. For example, we have a field-specific exclusive license under the Onyx License Agreement to certain patents and patent applications relating to zetomipzomib.

We or our licensors have not pursued or maintained, and may not pursue or maintain in the future, patent protection for our product candidates in every country or territory in which we may sell our products, if approved. In addition, we cannot be sure that any of our pending patent applications will issue or that, if issued, they have or will issue in a form that will be advantageous to us. 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.

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. Moreover, patent prosecution is a lengthy process, during which the scope of the claims initially submitted for examination by the USPTO may be significantly narrowed by the time they issue, if issued at all. The claims of our issued patents or patent applications when issued may not cover our current or future product candidates, or even if such patents provide coverage, the coverage obtained may not provide any competitive advantage. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our current or any future product candidates in the United States or in other foreign countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents cover our current or any future product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated, or held unenforceable. 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. Further, if we encounter delays in clinical trials or regulatory approvals, the period of time during which we could market our product candidates under patent protection would be reduced.

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If the patent applications we hold or have in-licensed with respect to our development programs and product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for zetomipzomib, KZR-261 or any future product candidates, it could dissuade companies from collaborating with us to develop and commercialize product candidates and future drugs and threaten our ability to commercialize, future drugs. Any such outcome could have a negative effect on our business.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does. Furthermore, other parties may have developed or may develop technologies that may be related or competitive to our own, and such parties may have filed or may file patent applications, or may have received or may receive patents, claiming inventions that may overlap or conflict with those claimed in our patent applications or issued patents. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after the initial filing. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions until such publication dates have passed. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or drugs, in whole or in part, or which effectively prevent others from commercializing competitive technologies and drugs. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to the United States patent law. These include provisions that affect the way patent applications are prosecuted and may affect the scope, strength and enforceability of our patent rights or the nature of proceedings that may be brought by or against us related to our patent rights. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could harm our business and financial condition.

Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or drugs and compete directly with us without payment to us, or result in our inability to manufacture or commercialize drugs without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize zetomipzomib, KZR-261 or any future product candidates.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. For example, we may be subject to a third-party submission of prior art to the USPTO challenging the priority of an invention claimed within one of our patents, which submissions may also be made prior to a patent’s issuance, precluding the granting of any of our pending patent applications. An adverse determination in any such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and drugs, or limit the duration of the patent protection of our technology and drugs. 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. Upon the expiration of patent protection for zetomipzomib, KZR-261 or any future product candidates, we may be open to competition from generic versions of such drugs. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting our product candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing drugs similar or identical to ours.

Even if they are unchallenged, our patents may not provide us with any meaningful protection or prevent competitors from designing around our patent claims to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. For example, a third-party may develop a competitive drug that is structurally similar to one or more of our product candidates but that has a different composition that falls outside the scope of our patent protection. 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.

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Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.

Given the amount of time required for the development, testing and regulatory review of new product candidates such as zetomipzomib and KZR-261, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication, or any additional indications approved during the period of extension. However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their drug earlier than might otherwise be the case.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In addition, periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and applications will have to be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of our owned and licensed patents and applications and any patent rights we may own or license in the future. We rely on our outside counsel or our licensing partners to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. government patent agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and we are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our products or technologies, we may not be able to stop a competitor from marketing products that are the same as or similar to our product candidates, which would have a material adverse effect on our business. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market and this circumstance could harm our business.

In addition, if we fail to apply for applicable patent term extensions or adjustments, we will have a more limited time during which we can enforce our granted patents. In addition, if we are responsible for patent prosecution and maintenance of patent rights in-licensed to us, any of the foregoing could expose us to liability to the applicable patent owner.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a negative impact on the success of our business.

Our commercial success depends, in part, upon our ability and the ability of our future collaborators to develop, manufacture, market and sell zetomipzomib, KZR-261 and any future product candidates and use our proprietary technologies without infringing the proprietary rights and intellectual property of third parties. The biotechnology and pharmaceutical industries are characterized by extensive and complex litigation regarding patents and other intellectual property rights. We may in the future become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to zetomipzomib, KZR-261 and any future product candidates and technology, including interference proceedings, post grant review and inter partes review before the USPTO. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit. There is a risk that third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could have a negative impact on our ability to commercialize zetomipzomib, KZR-261 or any future product candidates. In order to successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. Moreover, given the vast number of patents in our field of technology, we cannot be certain that we do not infringe existing patents or that we will not infringe patents that may be granted in the future. Many companies and research institutions have filed, and continue to file, patent applications related to selective immunoproteasome inhibitors and protein secretion inhibitors. 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

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be unsuccessful, and courts or patent offices in the United States and abroad could uphold the validity of any such patent. Furthermore, because patent applications can take many years to issue and may be confidential for 18 months or more after filing, and because pending patent claims can be revised before issuance, there may be applications now pending which may later result in issued patents that may be infringed by the manufacture, use or sale of our product candidates. Regardless of when filed, we may fail to identify relevant third party patents or patent applications, or we may incorrectly conclude that a third-party patent is invalid or not infringed by our product candidates or activities. If a patent holder believes our product candidate infringes its patent, the patent holder may sue us even if we have received patent protection for our technology. Moreover, we may face patent infringement claims from non-practicing entities that have no relevant drug revenue and against whom our own patent portfolio may thus have no deterrent effect. If a patent infringement suit were threatened or brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the drug or product candidate that is the subject of the actual or threatened suit.

If we are found to infringe a third party’s valid and enforceable intellectual property rights, we could be required to obtain a license from such third party to continue developing, manufacturing and marketing our product candidate(s) and technology. Under any such license, we would most likely be required to pay various types of fees, milestones, royalties or other amounts. Moreover, we may not be able to obtain any required license on commercially reasonable terms or at all.

The licensing or acquisition of third-party intellectual property rights is a competitive area, and more established companies may also pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Furthermore, even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technology or product candidate. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. We may be required to indemnify collaborators or contractors against such claims. A finding of infringement could prevent us from manufacturing and commercializing our product candidates or force us to cease some or all of our business operations, which could materially harm our business. Even if we are successful in defending against such claims, litigation can be expensive and time consuming and would divert management’s attention from our core business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects.

We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.

Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time consuming and is likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities. 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. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex parte reexaminations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is or will be no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and patent applications that we have licensed, we may have limited or no right to participate in the defense of any licensed patents against challenge by a third party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future product candidates. Such a loss of patent protection could harm our business.

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We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license, and such a license may not be on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our common stock.

We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating or from successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

The United States has recently enacted and implemented wide ranging patent reform legislation. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future. Similarly, changes in patent law and regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we have licensed or that we may obtain in the future.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patent protection for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets. Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective. 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.

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. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, 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. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

We also seek to preserve the integrity and confidentiality of our data and other confidential information by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached and detecting the disclosure or misappropriation of confidential information and enforcing a claim that a party illegally disclosed or misappropriated confidential information is difficult, expensive and time-consuming, and the outcome is unpredictable. 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.

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Reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Since we rely on third parties to develop and manufacture zetomipzomib and KZR-261, and if we collaborate with third parties for the development of our research programs or product candidates, we must, at times, share trade secrets with them. We may also conduct collaborative research and development programs that may require us to share trade secrets and proprietary know how. We seek to protect our proprietary information by entering into agreements containing confidentiality obligations and ownership provisions relating to intellectual property prior to disclosing proprietary information or beginning research projects with third party collaborators. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, sharing trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, the unauthorized disclosure or use of our confidential information could have an adverse effect on our business and results of operations.

In addition, these agreements typically restrict the ability of our collaborators, advisors, employees, investigators, contractors and consultants to publish data potentially relating to our trade secrets. Despite our efforts to protect our trade secrets, we may not be able to prevent the unauthorized disclosure or use of our technical know-how or other trade secrets by the parties to these agreements. Moreover, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our confidential information or proprietary technology and processes. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. If any of the collaborators, advisors, employees, investigators, contractors and consultants who are parties to these agreements breaches or violates the terms of any of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets as a result. Moreover, if confidential information that is licensed or disclosed to us by our partners, collaborators, or others is inadvertently disclosed or subject to a breach or violation, we may be exposed to liability to the owner of that confidential information. Enforcing a claim that a third-party illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets.

We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.

Filing, prosecuting and defending patents covering zetomipzomib, KZR-261 and any future product candidates throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

Intellectual property rights do not necessarily address all potential threats to our business.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business. 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;

•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;

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•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.

Risks Related to Our Business Operations, Employee Matters and Managing Growth

We are highly dependent on the services of our executive officers, and if we are not able to retain these members of our management team or recruit and retain additional management, clinical and scientific personnel, our business will be harmed.

Recruiting and retaining senior executives, qualified scientific and clinical personnel and, if we progress the development of any of our product candidates, commercialization, manufacturing and sales and marketing personnel, will be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Additionally, we do not currently maintain “key person” life insurance on the lives of our executives or any of our employees. Replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize our product candidates. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. If we are unable to continue to attract and retain high-quality personnel, our ability to pursue our growth strategy will be limited.

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

As the clinical development of our product candidates progresses, we also expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of research, drug development, medical affairs, regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

We are subject to stringent and changing 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 the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit and share personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, data we collect about trial participants in connection with clinical trials, and sensitive third-party data. Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations relating to data privacy and security.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, and consumer protection laws. 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. If we become subject to new data privacy laws, at the state level, the risk of enforcement action against us could increase because we may become subject to additional obligations, and the number of individuals or entities that can initiate actions against us may increase (including individuals, via a private right of action, and state actors). 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. For example, the European Union’s General Data Protection Regulation, or EU GDPR and the United Kingdom’s GDPR, or UK GDPR impose strict requirements for processing the personal data of individuals located, respectively within the European Economic Area, or EEA and the United Kingdom, or UK. 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. Further, companies may face private litigation related to processing of personal data brought by classes of data subjects or consumer

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protection organizations authorized at law to represent their interests. In Canada, the Personal Information Protection and Electronic Documents Act and various related provincial laws, as well as Canada’s Anti-Spam Legislation, may apply to our operations.

In addition, we may be unable to transfer personal data from Europe and other jurisdictions to the United States or other countries due to data localization requirements or limitations on cross-border data flows. Although there are various mechanisms that may be used in some cases to lawfully transfer personal data to the United States or other countries, these mechanisms are subject to legal challenges and may not be available to us. An inability or material limitation on our ability to transfer personal data to the United States or other countries could materially impact our business operations. In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the EEA and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the EU GDPR’s cross-border data transfer limitations.

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). These obligations may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal data on our behalf. Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations which could impact our compliance posture. If we fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face significant consequences. These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional reporting requirements and/or oversight; bans on processing personal data; orders to destroy or not use personal data; and imprisonment of company officials. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations (including clinical trials); inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or revision or restructuring of our operations.

Significant disruptions of our, or our contractors' or vendors', information technology systems or data security incidents could result in significant financial, legal, regulatory, business and reputational harm to us.

In the ordinary course of our business, we and the third parties upon which we rely may process proprietary, confidential, and sensitive data, including personal data (such as health-related data), intellectual property, and trade secrets. We may rely upon third parties (such as service providers) for our data processing–related activities. We may share or receive sensitive data with or from third parties. We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business. Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and continue to increase. 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. 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. 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. We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain

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attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats. Ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems or the third-party information technology systems that support us and our services.

Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations. 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. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

Any of the previously identified or similar threats could cause a security incident. A security incident could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to data. A security incident could disrupt our ability (and that of third parties upon whom we rely) to conduct our business. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. We may expend significant resources or modify our business activities (including our clinical trial activities) in an effort to protect against security incidents. Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standard or reasonable security measures to protect our information technology systems and data. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences. These consequences may include government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may negatively impact our ability to grow and operate our business.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. Additionally, we cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with FDA regulations or the regulations applicable in other jurisdictions, provide accurate information to the FDA and comparable foreign regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct also could involve the improper use of information obtained in the course of clinical trials or interactions with the FDA or comparable foreign regulatory authorities, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and

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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 and the curtailment or restructuring of our operations, any of which could have a negative impact on our business, financial condition, results of operations and prospects.

If we engage in future acquisitions or strategic collaborations, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.

From time to time, we may evaluate various acquisitions and strategic collaborations, including licensing or acquiring complementary drugs, intellectual property rights, technologies or businesses, as deemed appropriate to carry out our business plan. Any potential acquisition or strategic partnership may entail numerous risks, including:

•increased operating expenses and cash requirements;

•the assumption of additional indebtedness or contingent liabilities;

•assimilation of operations, intellectual property and drugs of an acquired company, including difficulties associated with integrating new personnel;

•the diversion of our management’s attention from our existing drug programs and initiatives in pursuing such a strategic partnership, merger or acquisition;

•retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

•risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or product candidates and regulatory approvals; and

•our inability to generate revenue from acquired technology and/or drugs sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

In addition, if we engage in future acquisitions or strategic partnerships, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities, and this inability could impair our ability to grow or obtain access to technology or drugs that may be important to the development of our business.

Risks Related to Ownership of Our Common Stock and Other General Matters

The market price of our common stock may be volatile and fluctuate substantially, and you could lose all or part of your investment.

The market price of our common stock has at times experienced price volatility and may continue to be volatile. For example, during the six months ended June 30, 2023, the closing price of our common stock on The Nasdaq Global Select Market ranged from $2.31 per share to $7.31 per share. The stock market in general and the market for biopharmaceutical and pharmaceutical companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. Broad market and industry factors, including potentially worsening economic conditions, including higher inflation rates and changes in interest rates, and other adverse effects or developments, may negatively affect the market price of our common stock, regardless of our actual operating performance. As a result of this volatility, you may not be able to sell your common stock at or above the price paid for the shares. 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;

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•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.

These and other market and industry factors may cause the market price and demand for our common stock to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from selling their shares at or above the price paid for the shares and may otherwise negatively affect the liquidity of our common stock.

Some companies that have experienced volatility in the trading price of their shares have been the subject of securities class action litigation. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices. Defending against litigation is costly and time-consuming, and could divert our management’s attention and our resources. Furthermore, during the course of litigation, there could be negative public announcements of the results of hearings, motions or other interim proceedings or developments, which could have a negative effect on the market price of our common stock.

If securities or industry analysts do not publish research or reports, or publish unfavorable research or reports, about our business or our market, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or financial analysts publish about us or our business. Equity research analysts may discontinue research coverage of our common stock, and such lack of research coverage may adversely affect the market price of our common stock. We do not have any control over the analysts or the content and opinions included in their reports. The price of our shares could decline if one or more equity research analysts downgrade our shares or issue other unfavorable commentary or research about us. If one or more equity research analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares could decrease, which in turn could cause the trading price or trading volume of our common stock to decline.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, changes in interest rates and uncertainty about economic stability. For example, the Russia-Ukraine war has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of recent bank failures, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive.

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A severe or prolonged global economic downturn could result in a variety of risks to our business. For example, inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation may result in increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital on acceptable terms, if at all. In addition, the U.S. 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. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Our common stock is thinly traded and our stockholders may be unable to sell their shares quickly or at market price.

Although we have had periods of high-volume daily trading in our common stock, generally our stock is thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. Our common stock price could, for example, decline significantly as a result of sales of a large number of shares of our common stock on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price, or from the perception that these sales could occur.

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

Based upon our shares of our common stock outstanding as of June 30, 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 61% of our outstanding common stock. If our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock acted together, they may be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. The concentration of voting power and transfer restrictions could delay or prevent an acquisition of our company on terms that other stockholders may desire or result in the management of our company in ways with which other stockholders disagree.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

You should not rely on an investment in our common stock to provide dividend income. We have never declared or paid cash dividends on our capital stock. 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. 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.

We are an “emerging growth company,” or EGC, as defined in the JOBS Act, and we expect to cease to be an EGC on December 31, 2023. As an EGC, we have been and will until December 31, 2023 be permitted to rely on exemptions from certain reporting requirements that are applicable to other public companies that are not EGC, including:

•not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

•not being required to 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;

•reduced disclosure obligations regarding executive compensation; and

•not being required to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We currently take advantage of some or all of these reporting exemptions until we are no longer an EGC. We cannot predict whether investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile.

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In addition, under Section 107(b) of the JOBS Act, EGCs can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not EGCs.

We are also a smaller reporting company as defined in the Securities Exchange Act of 1934, as amended. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. 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 will continue to incur increased costs as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, and particularly after we are no longer an EGC, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and rules subsequently implemented by the SEC and The Nasdaq Stock Market LLC have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costlier. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.

Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, we will be required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. 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. To achieve compliance with Section 404, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

•establish a classified board of directors such that not all members of the board are elected at one time;

•allow the authorized number of our directors to be changed only by resolution of our board of directors;

•limit the manner in which stockholders can remove directors from the board;

•establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;

•require that stockholder actions must be affected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;

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•limit who may call stockholder meetings;

•authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a stockholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and

•require the approval of the holders of at least 66 2⁄3% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

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.

This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. 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. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.

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Item 6. Exhibits.

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-38542), filed with the SEC on June 26, 2018).
3.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-38542), filed with the SEC on June 16, 2023).
3.3	Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (File No. 001-38542), filed with the SEC on June 26, 2018).
4.1	Form of Pre-Funded Warrant (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-38542), filed with the SEC on February 3, 2020).
10.1+	Advisor Agreement between the Company and Christopher Kirk, Ph.D., dated April 22, 2023.
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibit 101).

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* Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act (whether made before or after the date of this Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

+ Indicates a management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Kezar Life Sciences, Inc. (Registrant)
Date: August 10, 2023	By:	/s/ John Fowler
		John Fowler
		Chief Executive Officer (Principal Executive Officer)
Date: August 10, 2023	By:	/s/ Marc Belsky
		Marc Belsky
		Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

ADVISOR AGREEMENT

ThisAdvisor Agreement (“Agreement”) is entered into as of April 22, 2023 (the “Effective Date”) between Kezar Life Sciences, Inc. (the “Company”), a Delaware corporation, and Christopher Kirk, Ph.D. (“Consultant”). Company and the Consultant are referred to herein individually as “Party,” and collectively as the “Parties.”

Whereas, Consultant resigned from his position as President and Chief Scientific Officer of the Company, effective April 21, 2023 (the “Resignation Date”), and the Company wishes to retain Consultant as a Scientific and Strategic Advisor; and

Whereas, Consultant is also serving as a non-employee member of the Company’s Board of Directors.

Now, Therefore, the Parties hereby agree as follows:

1.The Services. Commencing on the Effective Date, the Company hereby retains Consultant as an independent contractor on the terms set forth herein. Consultant will serve as a Scientific and Strategic Advisor to the Company and will report to the Chief Executive Officer (“Services”). Consultant agrees to timely submit to Company any and all intellectual and tangible work product resulting from Consultant’s performance of the Services (the “Work Product”). During the Term (defined below) of this Agreement, Consultant shall not enter into any other service arrangements or employment that would reasonably constitute a conflict of interests with the Services provided to the Company or would be likely to result in the breach or anticipated breach of any provisions of this Agreement regarding Confidential Information or Kezar Intellectual Property, absent prior notice and the written consent of the Company.

2.Compensation.

2.1.Fees and Expenses. Consultant shall be paid a fee of $41,050 per calendar month for providing the Services (the “Rate”). Services for any partial months will be pro-rated based on the monthly Rate. The Company will also reimburse Consultant for reasonable out-of-pocket expenses that Consultant is required to incur in providing the Services.

2.2.Stock Options. During the Term of this Agreement, Consultant shall be deemed a “Service Provider” as such term is defined under the Company’s 2015 Equity Incentive Plan (the “2015 Plan”), and the provision of Services hereunder shall be deemed “Continuous Services” as such term is defined under the Company’s 2018 Equity Incentive Plan (the “2018 Plan”). Accordingly, all outstanding stock options held by Consultant as of the Effective Date will continue to vest for the duration of the Term, to the extent legally permissible under and subject to the terms and conditions of the 2015 Plan and 2018 Plan, as applicable. For clarity, however, all outstanding Incentive Stock Options held by Consultant will cease to qualify as Incentive Stock Options and will convert to Nonstatutory Stock Options three (3) months after the Resignation Date, to the extent not so exercised by Consultant on or before such day. During the Term, Consultant will remain eligible for additional awards under the 2018 Plan and will remain eligible for modifications, replacements or adjustments of outstanding stock options held by Consultant under the 2015 Plan or 2018 Plan, as determined in the sole discretion of the Board, including but not limited to changes resulting from the exercise of the Board’s (or its delegate’s) authority under Section 2(b) of the 2018 Plan.

2.3.Health Insurance. To the extent provided by the federal COBRA law or, if applicable, state insurance laws, and by the Company’s current group health insurance policies, Consultant will be eligible to continue group health insurance benefits following the Resignation Date. If Consultant timely elects continued coverage under COBRA, the Company shall reimburse Consultant for COBRA premiums to continue his health insurance coverage (including coverage for eligible dependents, if applicable) through the period starting on the Resignation Date and ending on the earliest to occur of: (i) the termination of this Agreement; (ii) December 31, 2023; (iii) the date Consultant becomes eligible for group health insurance

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coverage through a new employer; or (iv) the date Consultant ceases to be eligible for COBRA coverage for any reason. Consultant is required to timely pay all premiums, and then provide the Company with proof of same, to obtain reimbursement for COBRA premiums under this Section 2.3. Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot reimburse the COBRA premiums without a substantial risk of violating applicable law, then the Company instead shall pay Consultant a fully taxable cash payment equal to the remaining COBRA premiums due under this Section, subject to applicable tax withholdings, which Consultant may, but is not obligated to, use toward the cost of COBRA premiums. In the event Consultant becomes covered under another employer’s group health plan or otherwise ceases to be eligible for COBRA during the time that the Company is providing the COBRA premiums, Consultant must immediately notify the Company of such event.

2.4.Waiver of Director Compensation. Following the Resignation Date, Consultant would be considered an “Eligible Director,” as such term is defined under the Company’s Non-Employee Director Compensation Policy, as amended (the “Director Compensation Policy”). As consideration for the advisory fees and other compensation under this Agreement, Consultant expressly declines all cash and equity compensation that Consultant would otherwise be entitled to receive under the Director Compensation Policy during the Term of this Agreement. For clarity, however, this Section 2.4 shall immediately expire upon the termination or expiration of this Agreement.

2.5.Invoices. Consultant shall provide Company with monthly invoices for each calendar month of Services, including an itemized report and receipts for any expense reimbursements, as well as any COBRA reimbursements due under Section 2.3 of this Agreement. Company shall pay uncontested invoices within thirty (30) days of receipt. Notwithstanding anything herein to the contrary, the Company will not be obligated to pay for Services that do not comply with the terms of this Agreement.

3.Term and Termination.

3.1.Term. This Agreement shall constitute an “at will” agreement to provide the Services. This Agreement will terminate on December 31, 2023 (the “Term”); provided, that the Term may be extended by the mutual written agreement of the Parties. Notwithstanding the foregoing to the contrary, this Agreement may be terminated by either Party at any time, for any reason, with or without cause, by giving ninety (90) days’ written notice to the other Party. In addition, this Agreement may be terminated immediately upon written notice by either Party in the event of a material breach of this Agreement by the other Party, or if Consultant enters into full-time employment with another entity and such employment materially affects the Services that the Consultant is performing hereunder. If the Consultant enters into full-time employment with another entity, but this Agreement is not terminated by either Party, the fees paid by the Company will be reduced to fifty percent (50%) of the Rate for the remainder of the Term.

3.2.Survival. Section 2.5 and Sections 3 through 7 of this Agreement, and any other provision that by its nature must survive to adequately protect the rights, obligations and intentions of the Parties, shall continue in effect after expiration or termination of this Agreement.

4.Independent Contractor.

4.1.Relationship of Parties. It is the express intention of the Parties that Consultant will perform the Services as an independent contractor of the Company. This Agreement shall not be construed to create a partnership, joint venture, agency, or employment relationship between Consultant and the Company. Consultant shall not represent itself to be an employee or agent of the Company. Consultant shall have no authority (a) to enter into any agreement on the Company’s behalf or in the Company’s name, (b) to promote or sell the Company’s products or services, or (c) otherwise create obligations on the part of the Company. Consultant shall retain full control over the manner in which it performs the Services.

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Consultant shall not receive, nor be entitled to, any workers’ compensation, retirement plans, insurance, stock purchase plans, or other benefits offered to employees of the Company.

4.2.Tax Obligations.Consultant acknowledges and agrees that Consultant is obligated to report as income all compensation received by Consultant pursuant to this Agreement and that Consultant is solely responsible for all taxes (both income and employment), withholdings, and other similar statutory obligations including, but not limited to, self-employment tax and workers’ compensation insurance, as well as any federal immigration requirements. Consultant agrees to defend, indemnify and hold Company harmless from any and all penalties or claims made by any entity on account of an alleged failure by Consultant to satisfy any tax or withholding obligations of Consultant.

4.3.Representations and Warranties. Consultant represents and warrants to the Company that: (a) Consultant has not entered into, and Consultant agrees not to enter into, any agreement, either written or oral, that conflicts or would conflict with Consultant’s obligations under this Agreement during the Term, (b) neither Consultant’s performance of Services, nor the acceptance of the compensation described herein violates the policies of any institution or entity with which Consultant is affiliated, and that all necessary approvals from such institution or entity have been obtained; (c) Consultant is not required to disclose any Kezar Intellectual Property (as defined below) to any third party for any reason; and (d) Consultant has not been debarred under the U.S. Federal Food, Drug, and Cosmetic Act.

4.4.Performance. Consultant shall, and shall cause all permitted subcontractors to, perform the Services (a) in a professional manner, using commercially reasonable diligence and using a level of care which is consistent with the professional standards generally applicable to such Services, (b) in strict compliance with all applicable federal, state and local laws, rules, regulations and guidelines, and all applicable foreign laws and governmental requirements, and (c) in strict compliance with this Agreement, including using best efforts to meet any timelines and schedules for the performance of the Services, and with all reasonable instructions, direction and requests of the Chief Executive Officer.

5.Confidential Information.

5.1.Definition. As used herein, the term “Confidential Information” means any and all information relating to: (a) Company’s business and technology, including, but not limited to, information about research, data, methods, strategies, study results, analysis and findings, dosing, indications, products, samples, cell lines, biological materials, combinations, formulations, processes, trade secrets, designs, know-how, ideas, techniques, inventions, internal documentation, policies, software programs, databases, works of authorship, financial information, customers, clients, marketing and product development plans, forecasts, regulatory information, agreements with third parties and other information concerning Company’s actual or anticipated products or research; or (b) the Work Product, or other information, data or results derived from other Confidential Information or created by Consultant as part of the Services. Confidential Information may be disclosed in writing, orally, or embodied in documents, electronic files or other tangible items.

5.2.Exceptions. Notwithstanding the foregoing, Confidential Information shall not include information that Consultant can demonstrate by competent written proof: (a) was, at the time of disclosure hereunder, or has since become generally available or known to the general public through no action, inaction or fault of Consultant; (b) was known to Consultant, other than under an obligation of confidentiality (including such confidentiality obligations that existed between Consultant and Company during his tenure as an employee), before the time of disclosure hereunder; (c) was received by Consultant from a third party authorized to make such disclosure without confidentiality restrictions; or (d) is independently developed by Consultant without any use of or reference to the Confidential Information belonging to the Company (whether such Confidential Information was learned, received or generated by Consultant in his roles as an employee, director or consultant to the Company).

3

5.3.Use of Confidential Information. Consultant shall use the Confidential Information only in performing the Services under this Agreement and for no other purpose. Consultant shall retain the Confidential Information in strict confidence and not disclose any Confidential Information to any third party without Company’s prior written consent, which consent may be withheld in its sole discretion. Consultant shall take all reasonable precautions to prevent any unauthorized use, access or disclosure of Confidential Information, including, but not limited to: (a) using the highest degree of care that it utilizes to protect its own most sensitive confidential information of a similar nature, but in any case no less than a reasonable standard of care; (b) maintaining any Confidential Information or any information derived therefrom wholly separate from information provided to Consultant by any third party or belonging thereto; (c) not copying or reverse engineering any such Confidential Information, except to the extent necessary to perform the Services; and (d) immediately informing Company, in writing, of any actual or suspected unauthorized use, disclosure or access to Confidential Information.

5.4.Company Ownership. All Confidential Information shall be the sole property of Company. Consultant understands that the Confidential Information constitutes valuable property of Company and is important to its business. Consultant further agrees that, immediately upon Company’s request, and in any event upon completion of the Services or termination of this Agreement, Consultant shall, at Company’s sole discretion and request, permanently delete or deliver to Company all Confidential Information, including any document, media, or electronic file that contains Work Product. At all times before or after completion of the Services, Company shall have the right to examine the Work Product and any materials relating thereto to ensure Consultant’s compliance with the provisions of this Agreement. Consultant acknowledges that any disclosure or unauthorized use of Confidential Information will constitute a material breach of this Agreement and cause substantial harm to Company for which monetary damages would not be a fully adequate remedy and, therefore, in the event of any such breach, in addition to other available remedies, Company shall have the right to seek injunctive relief.

5.5.Third Party Agreements. If Company discloses to Consultant any confidential or proprietary information or trade secrets received from a third party, Consultant agrees to treat such information as Confidential Information hereunder. If Company identifies such third party information to Consultant and is obligated under a relevant confidential disclosure agreement, then Consultant agrees to comply with the terms of such third party agreement as if Consultant were a party thereto.

5.6.Prior Obligations. Consultant agrees that Consultant will not, during the term of this Agreement, improperly use or disclose to Company any proprietary information or trade secrets of any third party that is received by Consultant under a duty of confidentiality. Consultant will not bring onto the premises of Company any unpublished document or proprietary information belonging to such third party without written authorization to do so (except for computer files that Consultant does not access at Company’s premises). Consultant will indemnify Company and hold it harmless from and against all claims, liabilities, damages, and expenses, including attorneys’ fees and costs of suit, arising out of or in connection with any misappropriation of such third party’s confidential information resulting in whole or in part from Company’s use of the work product of Consultant under this Agreement.

6.Intellectual Property.

4

6.1.Inventions. As used herein, “Kezar Intellectual Property” means all Work Product and data, results, information, technology, know-how, products, materials, designs, discoveries, formulae, compositions, processes, devices, trade secrets, ideas, inventions, developments, original works of authorship, concepts, improvements and methods, whether or not patentable or registrable under copyright or similar laws, discovered or developed, or conceived or reduced to practice, by Consultant, solely or in collaboration with others: (a) in the course of or as a result of performing the Services; (b) through use of or reference to Confidential Information belonging to the Company; (c) from direct use of facilities or materials that are owned or leased by Company (including the Company’s proprietary products); and/or (d) that directly relate to the Company’s research and development programs targeting the immunoproteasome (the “Immunoproteasome Program”) and the protein secretion pathway and Sec61 translocon (the “Protein Secretion Program”), including without limitation, any and all intellectual property relating to KZR-616 and KZR-261 and methods of use thereof. Consultant hereby agrees to promptly disclose to Company all Kezar Intellectual Property. Consultant shall not disclose any Kezar Intellectual Property to any person outside Company unless requested to do so in writing.

6.2.Assignment. Consultant hereby agrees to assign (or cause to be assigned) and does irrevocably assign fully to Company, all right, title, and interest throughout the world in and to the Kezar Intellectual Property and any copyrights, patents, or other rights relating to the Kezar Intellectual Property. Consultant agrees that Company shall have the sole right, but not the obligation, to prepare, file, prosecute, maintain, and enforce patents applications and patents worldwide with respect to Kezar Intellectual Property. Consultant agrees to sign, execute and acknowledge at the reasonable expense of Company, any and all documents and to perform, any and all reasonable acts necessary, useful or convenient by Company for perfecting the foregoing assignments and obtaining, enforcing and defending intellectual property rights in any and all jurisdictions with respect to Kezar Intellectual Property. Consultant agrees that Consultant’s foregoing obligation shall continue after the termination of this Agreement. Consultant hereby irrevocably designates and appoints Company and its duly authorized agents, as Consultant’s agents and attorneys-in-fact to act for and on behalf and instead of Consultant, solely to execute and file documents and to do other lawfully permitted acts to further the above purposes with the same legal force and effect as if executed by Consultant.

6.3.Prior Inventions. Consultant represents that, as of the Effective Date, Consultant does not own or control any inventions or other intellectual property rights that relate in any way to the Services, except for such inventions or rights owned or controlled by the Company pursuant to Consultant’s tenure as an officer and employee of the Company, or such inventions or rights that Consultant has disclosed in writing to the Company prior to entering into this Agreement, which written disclosure by the Consultant shall be attached to and incorporated herein by reference. If any Kezar Intellectual Property or Work Product are based on, or incorporate, or are improvements or derivatives of, or cannot be reasonably made, used, reproduced and distributed without using or violating, any intellectual property rights owned or controlled by Consultant, Consultant hereby grants Company a perpetual, worldwide, royalty-free, non-exclusive, sub-licensable right and license to exploit and exercise all such technology in support of Company’s exercise or exploitation of any Work Product or Kezar Intellectual Property, including any modifications, improvements and derivatives thereof.

7.Miscellaneous.

7.1.Non-Compete with Company Programs. During the term of this Agreement and for one (1) year thereafter, Consultant will not directly or indirectly, on behalf of Consultant or any other person or entity, own, be employed by or provide consulting services to any business or institution that directly competes with the Company, or is engaged in research, discovery and development activities, in the field of the Immunoproteasome Program and/or the Protein Secretion Program. If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long

5

a time or over too great a range of activities or in too broad a geographic area, the Parties agree that it will be interpreted to the maximum extent to which it may be enforceable.

7.2.Non-Solicitation. During the term of this Agreement and for one (1) year thereafter, Consultant will not personally or through others recruit, solicit, or induce any employee of Company to terminate his or her employment with Company, either directly or indirectly, or for the benefit of another entity with which the Consultant may be affiliated or employed. If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a time or over too great a range of activities or in too broad a geographic area, the Parties agree that it will be interpreted to the maximum extent to which it may be enforceable.

7.3.Assignment.This Agreement will be binding upon and will inure to the benefit of the parties’ permitted successors and assignees. Consultant may not assign this Agreement or any part of this Agreement without the Company’s prior written consent.

7.4.Notices.All notices hereunder shall be in writing and (a) delivered in person or by certified mail with a confirmed delivery receipt or sent by a nationally recognized overnight delivery service at such Party’s physical address set forth above, or (b) delivered by electronic mail to the such Party’s electronic mail address used during the course of this Agreement (or at such different physical or electronic address as may be designated by such Party by written notice to the other party). All notices by mail or electronic mail shall be deemed delivered upon receipt. The failure of either party to enforce any provision of this Agreement shall not constitute a waiver of the party’s rights to subsequently enforce the provision.

7.5.Governing Law; Arbitration. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to choice of law provisions. To ensure the timely and economical resolution of disputes that may arise between the Parties, both Consultant and Company mutually agree to the fullest extent permitted by applicable law, to submit solely to final, binding and confidential arbitration any and all disputes, claims, or causes of action arising from or relating to the negotiation, execution, interpretation, performance, breach or enforcement of this Agreement. The Arbitrator will have the sole and exclusive authority to determine whether a dispute, claim or cause of action is subject to arbitration under this section and to determine any procedural questions which grow out of such disputes, claims or causes of action and bear on their final disposition. Notwithstanding anything to the contrary, nothing in this section is intended to prevent either Consultant or Company from obtaining injunctive relief in court to prevent irreparable harm with respect to breach of Section 5 (Confidential Information) or specific performance or other equity relief with respect to Section 6 (Intellectual Property). Any final award in any arbitration proceeding hereunder may be entered as a judgment in the federal and state courts of any competent jurisdiction and enforced accordingly.

7.6.Entire Agreement. This Agreement represents the entire agreement between the Parties with respect to the subject matter hereof and supersedes any previous or contemporaneous oral or written agreements regarding such subject matter. This Agreement may be amended or modified only by a written instrument signed by a duly authorized agent of each Party. If any provision of this Agreement is held to be invalid, such invalidity shall not affect the remaining provisions. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument. This Agreement shall be effective upon full execution by PDF or original, and an electronic signature shall be deemed to be and shall be as effective as an original signature.

[Remainder of Page Left Blank]

6

In Witness Whereof, the Parties have executed this Agreement as of the Effective Date.

Christopher Kirk, Ph.D.

By: /s/ Christopher Kirk

Kezar Life Sciences, Inc.

By: /s/ John Fowler
John Fowler

Chief Executive Officer

7

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John Fowler, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Kezar Life Sciences, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 10, 2023	By:	/s/ John Fowler
		John Fowler
		Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Marc Belsky, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Kezar Life Sciences, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 10, 2023	By:	/s/ Marc Belsky
		Marc Belsky
		Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), John Fowler, Chief Executive Officer of Kezar Life Sciences, Inc. (the “Company”), and Marc Belsky, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

(1)The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2023, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

(2)The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 10, 2023

/s/ John Fowler	/s/ Marc Belsky
John Fowler	Marc Belsky
Chief Executive Officer	Chief Financial Officer
(Principal Executive Officer)	(Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2023	Aug. 04, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Trading Symbol	KZR
Entity Registrant Name	Kezar Life Sciences, Inc.
Entity Central Index Key	0001645666
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		72,692,963
Entity Interactive Data Current	Yes
Entity Current Reporting Status	Yes
Entity File Number	001-38542
Entity Tax Identification Number	47-3366145
Entity Address, Address Line One	4000 Shoreline Court
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	South San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94080
City Area Code	650
Local Phone Number	822-5600
Document Quarterly Report	true
Document Transition Report	false
Title of 12(b) Security	Common Stock, $0.001 par value
Security Exchange Name	NASDAQ
Entity Incorporation, State or Country Code	DE

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 28,109	$ 40,456
Marketable securities	208,480	236,105
Prepaid expenses	5,982	8,241
Other current assets	933	920
Total current assets	243,504	285,722
Property and equipment, net	4,666	3,431
Operating lease right-of-use asset	8,647	9,741
Other assets	6,562	674
Total assets	263,379	299,568
Current liabilities:
Accounts payable	2,492	2,479
Accrued and other current liabilities	8,463	5,953
Operating lease liabilities, current	2,782	2,565
Total current liabilities	13,737	10,997
Operating lease liabilities, noncurrent	7,413	8,865
Long-term debt	9,952	9,834
Total liabilities	31,102	29,696
Stockholders' equity:
Common stock, $0.001 par value, 250,000,000 and 125,000,000 shares authorized as of June 30,2023 (unaudited) and December 31, 2022; respectively; 72,532,814 and 68,493,429 shares issued and outstanding as of June 30, 2023 (unaudited) and December 31, 2022,respectively	73	68
Preferred stock, $0.001 par value, 10,000,000 shares authorized, zero shares issued and outstanding as of June 30, 2023 (unaudited) and December 31, 2022	0	0
Additional paid-in capital	528,434	519,620
Accumulated other comprehensive loss	(830)	(923)
Accumulated deficit	(295,400)	(248,893)
Total stockholders' equity	232,277	269,872
Total liabilities and stockholders' equity	$ 263,379	$ 299,568

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	250,000,000	125,000,000
Common stock, shares issued	72,532,814	68,493,429
Common stock, shares outstanding	72,532,814	68,493,429
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Operating expenses:
Research and development	$ 20,999	$ 11,346	$ 39,317	$ 22,290
General and administrative	5,785	4,977	11,991	9,911
Total operating expenses	26,784	16,323	51,308	32,201
Loss from operations	(26,784)	(16,323)	(51,308)	(32,201)
Interest income	2,861	408	5,556	516
Interest expense	(385)	(272)	(755)	(526)
Net loss	$ (24,308)	$ (16,187)	$ (46,507)	$ (32,211)
Net loss per common share, Basic	$ (0.34)	$ (0.25)	$ (0.64)	$ (0.52)
Net loss per common share, Diluted	$ (0.34)	$ (0.25)	$ (0.64)	$ (0.52)
Weighted-average shares used to compute net loss per common share, Basic	72,461,850	64,279,634	72,395,410	62,465,092
Weighted-average shares used to compute net loss per common share, Diluted	72,461,850	64,279,634	72,395,410	62,465,092

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Comprehensive Income [Abstract]
Net loss	$ (24,308)	$ (16,187)	$ (46,507)	$ (32,211)
Other comprehensive loss
Foreign currency translation adjustments	(5)	(64)	(17)	(39)
Unrealized (loss) gain on marketable securities	(302)	(318)	110	(834)
Total other comprehensive (loss) gain, net of tax	(307)	(382)	93	(873)
Comprehensive loss	$ (24,615)	$ (16,569)	$ (46,414)	$ (33,084)

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	ATM Agreement	Common Stock	Common Stock ATM Agreement	Additional Paid-in Capital	Additional Paid-in Capital ATM Agreement	Accumulated Other Comprehensive Loss	Accumulated Deficit
Balance at Dec. 31, 2021	$ 196,876		$ 56		$ 377,765		$ (291)	$ (180,654)
Balance, shares at Dec. 31, 2021			56,259,747
Issuance of common stock net of offering costs		$ 48,642		$ 4		$ 48,638
Issuance of common stock net of offering costs, shares				3,245,738
Issuance of common stock under equity incentive plans	208				208
Issuance of common stock under equity incentive plans, shares			59,174
Stock-based compensation expense	3,104				3,104
Other comprehensive gain (loss)	(491)						(491)
Net loss	(16,024)							(16,024)
Balance at Mar. 31, 2022	232,315		$ 60		429,715		(782)	(196,678)
Balance, shares at Mar. 31, 2022			59,564,659
Balance at Dec. 31, 2021	196,876		$ 56		377,765		(291)	(180,654)
Balance, shares at Dec. 31, 2021			56,259,747
Other comprehensive gain (loss)	(873)
Net loss	(32,211)
Balance at Jun. 30, 2022	297,364		$ 68		511,325		(1,164)	(212,865)
Balance, shares at Jun. 30, 2022			68,341,642
Balance at Mar. 31, 2022	232,315		$ 60		429,715		(782)	(196,678)
Balance, shares at Mar. 31, 2022			59,564,659
Issuance of common stock net of offering costs	77,900		$ 8		77,892
Issuance of common stock net of offering costs, shares			8,665,961
Issuance of common stock under equity incentive plans	420				420
Issuance of common stock under equity incentive plans, shares			111,022
Stock-based compensation expense	3,298				3,298
Other comprehensive gain (loss)	(382)						(382)
Net loss	(16,187)							(16,187)
Balance at Jun. 30, 2022	297,364		$ 68		511,325		(1,164)	(212,865)
Balance, shares at Jun. 30, 2022			68,341,642
Balance at Dec. 31, 2022	269,872		$ 68		519,620		(923)	(248,893)
Balance, shares at Dec. 31, 2022			68,493,429
Cashless exercise of pre-funded warrants, shares			2,236,233
Cashless exercise of pre-funded warrants			$ 2		(2)
Issuance of common stock under equity incentive plans	154		$ 1		153
Issuance of common stock under equity incentive plans, shares			86,338
Stock-based compensation expense	4,263				4,263
Other comprehensive gain (loss)	400						400
Net loss	(22,199)							(22,199)
Balance at Mar. 31, 2023	252,490		$ 71		524,034		(523)	(271,092)
Balance, shares at Mar. 31, 2023			70,816,000
Balance at Dec. 31, 2022	269,872		$ 68		519,620		(923)	(248,893)
Balance, shares at Dec. 31, 2022			68,493,429
Issuance of common stock net of offering costs, shares		0
Other comprehensive gain (loss)	93
Net loss	(46,507)
Balance at Jun. 30, 2023	232,277		$ 73		528,434		(830)	(295,400)
Balance, shares at Jun. 30, 2023			72,532,814
Balance at Mar. 31, 2023	252,490		$ 71		524,034		(523)	(271,092)
Balance, shares at Mar. 31, 2023			70,816,000
Cashless exercise of pre-funded warrants, shares			1,556,643
Cashless exercise of pre-funded warrants			$ 2		(2)
Issuance of common stock under equity incentive plans	382				382
Issuance of common stock under equity incentive plans, shares			160,171
Stock-based compensation expense	4,020				4,020
Other comprehensive gain (loss)	(307)						(307)
Net loss	(24,308)							(24,308)
Balance at Jun. 30, 2023	$ 232,277		$ 73		$ 528,434		$ (830)	$ (295,400)
Balance, shares at Jun. 30, 2023			72,532,814

XML

Condensed Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2022	Mar. 31, 2022
ATM Agreement
Issuance of common stock under the ATM Agreement, net of offering costs	$ 2,409	$ 1,504

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net loss	$ (46,507)	$ (32,211)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	508	848
Stock-based compensation	8,283	6,402
Amortization of premiums and discounts on marketable securities	(3,532)	579
Amortization of debt discount and issuance costs and other non-cash interest	118	106
Loss on disposition of fixed assets	0	4
Changes in operating assets and liabilities
Prepaid expenses, other current assets and other long-term assets	(3,642)	(1,191)
Accounts payable, accrued and other current liabilities	2,453	(560)
Operating lease asset and liabilities	(141)	(580)
Net cash used in operating activities	(42,460)	(26,603)
Cash flows from investing activities:
Purchases of property and equipment	(1,673)	(632)
Purchases of marketable securities	(95,233)	(142,080)
Maturities of marketable securities	126,500	84,689
Net cash provided by (used in) investing activities	29,594	(58,023)
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants, net of issuance costs	0	126,542
Proceeds from issuance of common stock under equity incentive plans	536	628
Net cash provided by financing activities	536	127,170
Effect of exchange rate changes on cash and cash equivalents	(17)	(39)
Net (decrease) increase in cash and cash equivalents	(12,347)	42,505
Cash and cash equivalents at the beginning of period	40,456	62,882
Cash and cash equivalents at the end of period	28,109	105,387
Supplemental disclosures of noncash investing and financing information:
Purchases of property and equipment in accounts payable	117	557
Par value of common stock upon cashless exercise of prefunded warrants	4	0
Supplemental disclosures
Cash paid for interest	$ 637	$ 219

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Organization and Description of the Business

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of the Business

1. Organization and Description of the Business

Description of Business

Kezar Life Sciences, Inc. (the “Company,” “we,” “us,” or “our”) was incorporated in the state of Delaware in February 2015 and commenced operations in June 2015. The Company is a clinical-stage biotechnology company discovering and developing breakthrough treatments in immune-mediated and oncologic disorders. The Company’s principal operations are in South San Francisco, California, and it operates in one segment.

Liquidity

Since commencing operations in mid-2015, substantially all of the Company’s efforts have been focused on research, development, and the advancement of the Company’s product candidates, zetomipzomib (KZR-616) and KZR-261. The Company’s ultimate success depends on the outcome of these ongoing research and development activities. The Company has not yet generated product sales and as a result has experienced operating losses since inception and had an accumulated deficit of $295.4 million as of June 30, 2023. The Company expects to incur additional losses in the future to conduct research and development and will need to raise additional capital to fully implement management’s business plan. The Company intends to raise such capital through the issuance of additional equity, and potentially through borrowings, strategic alliances with partner companies and other licensing transactions. However, if such financing is not available at adequate levels, the Company may need to reevaluate its operating plans. Management believes that its existing cash, cash equivalents and marketable securities will be sufficient to fund the Company’s cash requirements for at least 12 months following the issuance of these financial statements.

In December 2021, the Company entered into a Sales Agreement (the “ATM Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company can offer and sell, from time to time at its sole discretion through Cowen, as its sales agent, shares of its common stock having an aggregate offering price of up to $200.0 million. Any shares of its common stock sold will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-261774). The Company will pay Cowen a commission up to 3.0% of the gross sales proceeds of any shares of its common stock sold through Cowen under the ATM Agreement and also has provided Cowen with indemnification and contribution rights. As of June 30, 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 June 30, 2023, approximately $68.3 million remains available under the ATM Agreement. No shares were sold under the ATM Agreement during the three months ended June 30, 2023.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2022 and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 14, 2023 (the “Annual Report”), and there have been no material changes during the six months ended June 30, 2023.

Basis of Presentation and Consolidation

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the Company’s accounts and those of its wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd., which is a proprietary company limited by shares. All intercompany balances and transactions have been eliminated upon consolidation.

The condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Annual Report.

Unaudited Condensed Consolidated Financial Statements

The accompanying financial information as of June 30, 2023 is unaudited. The interim condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that our management considers necessary for the fair statement of the results of operations for the interim periods covered and of our financial condition at the date of

the interim balance sheet. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The results for interim periods are not necessarily indicative of the results for the entire year or any other interim period. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto included in our Annual Report.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant items subject to such estimates and assumptions include the valuation of marketable securities, stock-based compensation, and accrued research and development costs. Management bases its estimates on historical experience and on various other market-specific relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s consolidated financial statements.

Recent Accounting Pronouncements

Reference Rate Reform. In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance generally allows for contract modifications solely related to the replacement of the reference rate to be accounted for as a continuation of the existing contract instead of as an extinguishment of the contract, without triggering certain accounting impacts that could be required associated with an extinguishment of the contract. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, to expand the scope of this guidance to include derivatives. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31, 2024. As discussed in note 7 of the condensed consolidated financial statements, in June 2023 our loan agreement was amended and effective July 1, 2023, the interest base transitioned from LIBOR to Secured Overnight Financing Rate ("SOFR"). We applied the above guidance when accounting for this change (as discussed further in note 7), and adoption of this guidance did not have a material impact on our financial statements. As of June 30, 2023, we have no debt instruments that use LIBOR as a reference rate, and this guidance is not expected to have a material impact on our financial statements in the future.

There have been no other recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance that are expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

Financial assets and liabilities are recorded at fair value. The carrying amount of certain financial instruments, including cash, cash equivalents, other current assets, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. Assets and liabilities recorded at fair value on a recurring basis in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company applies fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are required to be recognized or disclosed at fair value in the financial statements. The Company determines the fair value of Level 1 assets using quoted prices in active markets for identical assets. The Company reviews trading activity and pricing for Level 2 investments as of each measurement date. Level 2 inputs, which are obtained from various third-party data providers, represent quoted prices for similar assets in active markets and were derived from observable market data, or, if not directly observable, were derived from or corroborated by other observable market data.

In certain cases, where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. The Company did not have any assets or liabilities measured using Level 3 inputs as of June 30, 2023 or December 31, 2022.

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above (in thousands):

	June 30, 2023
	Total		Level 1		Level 2		Level 3
Financial Assets:
Cash equivalents:
U.S. Treasury money market funds	$	27,429	$	27,429	$	—	$	—
Marketable securities:
U.S. Treasury securities		15,951		15,951		—		—
Commercial paper		75,544		—		75,544		—
U.S. agency bonds		116,985		—		116,985		—
Total	$	235,909	$	43,380	$	192,529	$	—

	December 31, 2022
	Total		Level 1		Level 2		Level 3
Financial Assets:
Cash equivalents:
U.S. Treasury money market funds	$	38,745	$	38,745	$	—	$	—
Marketable securities:
U.S. Treasury securities		40,141		40,141		—		—
Commercial paper		117,478		—		117,478		—
Corporate debt securities		1,978		—		1,978		—
U.S. agency bonds		76,508		—		76,508		—
Total	$	274,850	$	78,886	$	195,964	$	—

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Available-for-Sale Securities

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Available-for-Sale Securities

4. Available-for-Sale Securities

The following table is a summary of available-for-sale securities recorded in cash and cash equivalents or marketable securities in the Company’s condensed consolidated balance sheets (in thousands):

	June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
U.S. Treasury money market funds	$	27,429	$	—	$	—		$	27,429
Marketable securities:
U.S. Treasury securities		16,076		—		(125	)		15,951
Commercial paper		75,708		2		(166	)		75,544
U.S. agency bonds		117,265		2		(282	)		116,985
Total available-for-sale securities	$	236,478	$	4	$	(573	)	$	235,909
Cash									680
Total cash, cash equivalent and marketable securities								$	236,589

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
U.S. Treasury money market funds	$	38,745	$	—	$	—		$	38,745
Marketable securities:
U.S. Treasury securities		40,340		—		(199	)		40,141
Commercial paper		117,855		2		(379	)		117,478
Corporate debt securities		1,978		—		—			1,978
U.S. agency bonds		76,610		56		(158	)		76,508
Total available-for-sale securities	$	275,528	$	58	$	(736	)	$	274,850
Cash									1,711
Total cash, cash equivalent and marketable securities								$	276,561

The Company has not recognized an allowance for credit losses on any securities in an unrealized loss position as of June 30, 2023 and December 31, 2022.

The following table displays additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023
	Less than 12 consecutive months					12 months or greater
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities	$	6,393	$	(30	)	$	9,558	$	(95	)
Commercial paper		64,610		(166	)		—		—
U.S. agency bonds		110,538		(282	)		—		—
Total	$	181,541	$	(478	)	$	9,558	$	(95	)

	December 31, 2022
	Less than 12 consecutive months					12 months or greater
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities	$	33,782	$	(196	)	$	6,359	$	(3	)
Commercial paper		112,706		(379	)		—		—
Corporate debt securities		1,978		—			—		—
U.S. agency bonds		33,942		(147	)		5,490		(11	)
Total	$	182,408	$	(722	)	$	11,849	$	(14	)

The Company believes that the individual unrealized losses represent temporary declines primarily resulting from interest rate changes. The Company currently does not intend to sell these securities prior to maturity and does not consider these investments to be

other-than-temporarily impaired as of June 30, 2023. There were no sales of available-for-sale securities in any of the periods presented.

As of June 30, 2023, the amortized cost and estimated fair value of the Company’s available-for-sale securities by contractual maturity are shown below (in thousands):

	Amortized		Estimated
Available-for-sale securities maturing in:	Cost		Fair Value
One year or less	$	226,825	$	226,351
One to two years		9,653		9,558
Total available-for-sale securities	$	236,478	$	235,909

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Balance Sheet Components

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet Components

5. Balance Sheet Components

Prepaid Expenses

Prepaid expenses consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Advance for clinical-related costs, current	$	4,523	$	6,760
License, dues and subscription		678		376
Insurance		172		741
Others		609		364
Total prepaid expenses	$	5,982	$	8,241

Property and Equipment, Net

Property and equipment consisted of the following (in thousands):

	June 30, 2023			December 31, 2022
Leasehold improvements	$	3,551		$	3,366
Furniture, laboratory and office equipment		5,832			4,423
Computer equipment		353			244
Total property and equipment		9,736			8,033
Less accumulated depreciation and amortization		(5,070	)		(4,602	)
Property and equipment, net	$	4,666		$	3,431

Depreciation expense was $0.2 million and $0.5 million for each of the three and six months ended June 30, 2023, respectively, compared to $0.2 million and $0.5 million for the three and six months ended June 30, 2022, respectively.

Other Assets

Other assts consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Advance for clinical related costs, non-current	$	5,696	$	—
Deposits for operating lease		674		674
Others		192		—
Total other assets	$	6,562	$	674

Accrued and Other Current Liabilities

Accrued liabilities consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Accrued clinical costs	$	4,426	$	1,007
Accrued preclinical and research costs		1,792		1,368
Accrued employee-related costs		1,926		3,260
Accrued professional services		141		53
Other		178		265
Total accrued liabilities	$	8,463	$	5,953

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Lease

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Lease

6. Lease

In November 2022, the Company entered into an amendment to the lease agreement for its corporate headquarters in South San Francisco, California, which expanded the leased premises in the same building as its corporate headquarters and extended the lease term of the original premises to be coterminous with the expansion premises to July 31, 2026. The transaction was treated as a lease modification as of the effective date and resulted in the recognition of approximately $8.0 million in new lease liabilities and right-of-use (“ROU”) assets.

Information related to the Company’s ROU asset and related lease liabilities were as follows (in thousands):

	Three months ended June 30, 2023		Six months ended June 30, 2023
Cash paid for operating lease liabilities	$	631	$	1,236
Operating lease costs		866		1,732
Variable lease costs		387		735
Maturities of lease liabilities as of June 30, 2023 were as follows:
Less than 12 months			$	3,828
13 - 24 months				3,957
25 - 36 months				4,095
37 - 48 months				347
Total undiscounted lease payments				12,227
Less: imputed interest				(2,032	)
Total lease liabilities			$	10,195
Operating lease liabilities, current			$	2,782
Operating lease liabilities, noncurrent				7,413
Total operating lease liabilities			$	10,195

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Debt

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Long-Term Debt

7. Long-Term Debt

In November 2021, the Company entered into a loan agreement (the “Loan Agreement”) with Oxford Finance, LLC (“Oxford Finance”), which provided the Company up to $50.0 million in borrowing capacity across five potential tranches (each a “Term Loan,” and collectively “Term Loans”). 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. The Company has declined these tranches in borrowing capacity available to it under the Loan Agreement. The loan facility is secured by all assets except intellectual property, which is subject to a negative pledge, and will mature on November 1, 2026. There are no warrants or financial covenants associated with the Loan Agreement.

Until June 30, 2023, the Term Loans 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) 30-day U.S. LIBOR rate reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue and (ii) 0.08%, plus (b) 7.87%. The Company is required to make monthly interest-only payments prior to the amortization date of January 1, 2025, subject to a potential one-year extension upon satisfaction of certain conditions. In June 2023, Oxford Finance informed the Company that a LIBOR transition event would occur effective July 1, 2023 and replaced the LIBOR rate with the 1-month CME term SOFR plus 0.1%. 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.

All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on November 1, 2026 (the “Maturity Date”). The Company has the option to prepay the outstanding balance prior to maturity, subject to a prepayment fee of 1.0% to 2.0% depending upon when the prepayment occurs. Upon repayment of the Term Loans, the Company is required to make a final payment fee to the lenders equal to 6.5% of the original principal amount of the Term Loans funded which will be accrued by charges to interest expense over the term of the loans using the effective interest method.

The Loan Agreement also includes subjective acceleration clauses which permit the lenders to accelerate the Maturity Date under certain circumstances, including, but not limited to, material adverse effects on a Company’s financial status or otherwise. As of June 30, 2023, the Company is in compliance with all covenants in the Loan Agreement.

Interest expense was $0.4 million and $0.8 million for the three and six months ended June 30, 2023, respectively, compared to $0.3 million and $0.5 million for the three and six months ended June 30, 2022, respectively. The initial effective interest rate on the Term Loans, including the amortization of the debt discount and issuance costs, and accretion of the final payment, was 11%. The components of the long-term debt balance are as follows:

	June 30, 2023			December 31, 2022
Principal loan balance	$	10,000		$	10,000
Unamortized debt discount and issuance costs		(292	)		(342	)
Cumulative accretion of final fee		244			176
Long-term debt, net	$	9,952		$	9,834

As of June 30, 2023, the estimated future principal payments due were as follows:

Years Ending December 31,
2023	$	—
2024		—
2025		5,217
2026		4,783
Total	$	10,000

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Pre-Funded Warrants

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

Pre-Funded Warrants

8. Pre-Funded Warrants

In connection with the Company’s previous underwritten public offerings, the Company issued pre-funded warrants to purchase an aggregate of 3,793,706 shares of the Company’s common stock. Each pre-funded warrant entitled the holder to purchase shares of common stock at an exercise price of $0.001 per share and expired 20 years from the date of issuance. These warrants were recorded as a component of stockholders’ equity within additional paid-in capital. In January 2023, warrant holders exercised 2,236,553 shares of outstanding pre-funded warrants at an exercise price of $0.001 per share. In April 2023, warrant holders exercised the remaining 1,557,153 shares of outstanding pre-funded warrants. As of June 30, 2023, there were no pre-funded warrants outstanding.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

9. Stock-Based Compensation

Stock Incentive Plans

2022 Inducement Plan

In April 2022, the Company adopted the Kezar Life Sciences, Inc. 2022 Inducement Plan (the “Inducement Plan”), which is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq Listing Rule 5635(c)(4), for the award of nonstatutory stock options (“NSOs”), restricted stock units (“RSUs”) and other equity awards as permitted by the Inducement Plan (collectively, “Inducement Awards”) to persons not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company (“Eligible Recipients”). Under the Inducement Plan, the Company may grant up to 3,000,000 shares of Common Stock in the form of Inducement Awards to Eligible Recipients in compliance with the requirements of Nasdaq Listing Rule 5635(c)(4). Awards must be approved by either a majority of the Company’s independent directors or the Company’s independent compensation committee. Consultants and directors are not eligible to received grants under the Inducement Plan.

As of June 30, 2023, options to purchase 1,313,000 shares of common stock were outstanding, and 1,687,000 shares were available for future issuance under the Inducement Plan.

2018 Equity Incentive Plan

In June 2018, the Company’s board of directors adopted and its stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”), which became effective as of June 20, 2018, at which point no further grants could be made under the 2015 Equity Incentive Plan (the “2015 Plan”) described below. Under the 2018 Plan, the Company may grant incentive stock options (“ISOs”), NSOs, stock appreciation rights, restricted stock awards, RSUs and other stock-based awards. As of June 30, 2023, options to purchase 10,212,197 shares of common stock and 433,611 RSUs were outstanding, and 1,499,142 shares were available for future issuance under the 2018 Plan.

Initially, subject to adjustment as provided in the 2018 Plan, the aggregate number of shares of the Company’s common stock authorized for issuance pursuant to stock awards under the 2018 Plan was 4,000,000 shares, which is the sum of (i) 1,600,692 shares plus (ii) the number of shares reserved and available for issuance under the 2015 Plan at the time the 2018 Plan became effective and (iii) the number of shares subject to stock options or other stock awards granted under the 2015 Plan that expire, terminate are forfeited or otherwise not issued, or are withheld to satisfy a tax withholding obligation in connection with an award or to satisfy a purchase or exercise price of an award (such as upon the expiration or termination of a stock award prior to vesting). The number of shares of the Company’s common stock reserved for issuance under the 2018 Plan automatically increases on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, by 5% of the total number of shares of capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors prior to such increase.

The maximum number of shares that may be issued upon the exercise of ISOs under the 2018 Plan is 12,500,000 shares.

2015 Equity Incentive Plan

The Company’s 2015 Plan provided for the granting of ISOs and NSOs to employees, directors and consultants at the discretion of its board of directors. The 2015 Plan was terminated as to future awards in June 2018, although it continues to govern the terms of options that remain outstanding under the 2015 Plan.

No additional stock awards will be granted under the 2015 Plan, and all outstanding stock awards granted under the 2015 Plan that are repurchased, forfeited, expire or are cancelled will become available for grant under the 2018 Plan in accordance with its terms.

Options granted under the 2015 Plan expire no later than 10 years from the date of grant. Options granted under the 2015 Plan vest over periods determined by the Company’s board of directors, generally over four years. The 2015 Plan allows for early exercise of

certain options prior to vesting. Upon termination of employment, the unvested shares are subject to repurchase at the original exercise price. As of June 30, 2023, options to purchase 1,436,808 shares of common stock were outstanding under the 2015 Plan.

2018 Employee Stock Purchase Plan

In June 2018, the Company’s board of directors adopted and its stockholders approved the 2018 Employee Stock Purchase Plan (the “ESPP”), which became effective as of June 20, 2018. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended. The number of shares of common stock initially reserved for issuance under the ESPP was 200,000 shares. The ESPP provides for an annual increase on January 1 of each year, beginning on January 1, 2019 and continuing through and including January 1, 2028, equal to the lesser of (i) 1% of the shares of common stock outstanding on the last day of the prior fiscal year or (ii) 375,000 shares, or a lesser number of shares determined by the Company’s board of directors prior to such increase. In December 2022, the Company’s board of directors acted such that there was no increase of the number of shares of common stock reserved for issuance under the ESPP as of January 1, 2023. As of June 30, 2023, 503,836 shares of common stock had been issued under the ESPP and 829,388 shares remained available for future issuance under the ESPP.

The price per share of common stock to be paid by an ESPP participant on the applicable purchase date of an offering period shall be equal to 85% of the lesser of the fair market value of a share of common stock on (i) the applicable offering date or (ii) the applicable purchase date. The Company’s board of directors authorized an initial six-month offering period beginning on November 16, 2018 and ending on May 15, 2019. The Company’s board of directors has subsequently authorized additional six-month offering periods, with the most recent offering period beginning on May 16, 2023.

Stock Option Activity

The following table summarizes activity under the Company’s stock option plans and related information (in thousands, except share and per share amounts):

	Number of Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2022		9,684,810		$	8.12		7.6	$	15,407
Options granted		4,043,994		$	5.91
Options exercised		(106,921	)	$	2.00			$	302
Options cancelled/forfeited		(659,878	)	$	9.16
Outstanding as of June 30, 2023		12,962,005		$	7.43		7.8	$	489
Vested and exercisable as of June 30, 2023		6,151,141		$	7.19		6.5	$	489

The weighted average grant date fair value of options granted during the three and six months ended June 30, 2023 was $2.19 and $4.45 per share, respectively. The aggregate intrinsic values of exercised stock options during the three and six months ended June 30, 2023 were $24 thousand and $0.3 million, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of the Company’s common stock at the date of exercise.

Restricted Stock Units Activity

During the six months ended June 30, 2023, the Company granted RSUs to certain employees pursuant to the 2018 Plan. One-third of each RSU grant will vest annually following the vesting commencement dates, over a vesting period of 3 years. RSUs are awards that entitle the holder to receive freely tradable shares of the Company's common stock upon vesting and are not forfeitable once fully vested. The valuations for these RSUs were based on the closing prices of the Company's common stock on the grant dates and recognized as stock-based compensation expenses over the respective vesting terms.

	Number of RSUs Outstanding			Weighted Average Grant-Date Fair Price
Outstanding as of December 31, 2022		434,790		$	9.80
RSUs granted		81,619		$	6.84
RSUs vested		(13,989	)	$	14.55
RSUs forfeited		(68,809	)	$	9.27
Outstanding as of June 30, 2023		433,611		$	9.17

Stock-Based Compensation Expense

Total stock-based compensation expense recognized by function was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Research and development	$	2,013	$	1,595	$	4,281	$	2,918
General and administrative		2,007		1,703		4,002		3,484
Total stock-based compensation expense	$	4,020	$	3,298	$	8,283	$	6,402

As of June 30, 2023, the unrecognized stock-based compensation cost related to outstanding unvested stock options and RSUs that are expected to vest was $39.5 million with an estimated weighted average amortization period of 2.8 years.

The fair value of the stock options granted is calculated using the Black-Scholes option-pricing model with the following range of assumptions:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Expected term (years)	5.5 - 6.1		5.5 - 6.0		5.5 - 6.1		5.3 - 6.0
Expected volatility	88.0 - 88.3	%	84.3 - 88.4	%	87.8 - 88.3	%	84.3 - 88.4	%
Risk-free interest rate	3.5 - 3.9	%	2.8 - 3.2	%	3.5 - 4.3	%	1.6 - 3.2	%
Expected dividend yield	—		—		—		—

The expected term of options granted represents the period of time that options granted are expected to be outstanding and was determined by calculating the midpoint between the date of vesting and the contractual life of each option. The expected term of the ESPP rights is equal to the six-month look-back period. Volatility is based on the average of the historical volatility of the Company's stock price and that of a peer group of public companies over the expected term. The peer group was selected on the basis of operational and economic similarity with the Company’s principal business operations. The risk-free interest rate for the expected term of the options is based on the U.S. Treasury yield curve with a maturity equal to the expected term in effect at the time of grant. The Company has not paid, and does not anticipate paying, cash dividends on its shares of common stock; therefore, the expected dividend yield is zero.

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Income Taxes

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

No provision for income taxes was recorded for the three and six months ended June 30, 2023 and 2022, respectively. Deferred tax assets generated from the Company’s net operating losses have been fully reserved, as the Company believes it is not more likely than not that the benefit will be realized.

Effective January 1, 2022, under the Tax Cuts and Jobs Act, for tax purposes the Company is required to capitalize and subsequently amortize all R&D expenditures over five years for research activities conducted in the U.S. and over fifteen years for research activities conducted outside of the U.S. Given the significant loss and credit carryforwards in the U.S., the Company does not anticipate having a change in valuation allowance assertion.

In March 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. The CARES Act included several tax changes as part of its economic package. These changes principally related to expanded net operating loss carryback periods, increases to interest deductibility limitations, and accelerated alternative minimum tax refunds. The CARES Act enacted the Employee Retention Credit (“ERC”) to incentivize companies to retain employees, which was subsequently modified by extension of the CARES Act. Under the provisions of the CARES Act and its subsequent extension, the Company was eligible for ERCs, subject to certain criteria. During the six months ended June 30, 2023, the Company received refunds of approximately $1.4 million related to ERCs that offset the related payroll expenses in the respective operating costs and expenses line item in the condensed consolidated statements of operations.

In December 2015, the Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”) was signed into law, which created several new research and development (“R&D”) tax credit provisions, including allowing qualified small businesses to utilize the R&D credit against the employer’s portion of payroll tax up to a maximum of $250,000 per year. The Company qualified as a small business under the PATH Act for 2016 through 2020. During the six months ended June 30, 2022, the Company utilized $79,000 of R&D tax credits as a reduction of payroll expenses to offset its payroll tax liabilities. All R&D tax credits have been fully utilized as of December 31, 2022.

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Net Loss per Share

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Net Loss Per Share

11. Net Loss Per Share

Net Loss Per Share

The following table sets forth the calculation of basic and diluted net loss per share during the periods presented (in thousands, except share and per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Numerator:
Net loss	$	(24,308	)	$	(16,187	)	$	(46,507	)	$	(32,211	)
Denominator:
Weighted-average shares of common stock outstanding		72,461,850			64,279,634			72,395,410			62,465,092
Net loss per share, basic and diluted	$	(0.34	)	$	(0.25	)	$	(0.64	)	$	(0.52	)

Basic net loss per common share is calculated by dividing net loss by the weighted-average number of shares of common stock and pre-funded warrants outstanding during the period, without consideration of common share equivalents. Diluted net loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock, pre-funded warrants and common share equivalents outstanding for the period. The pre-funded warrants are included in the computation of basic and diluted net loss per common share as the exercise price is negligible and the pre-funded warrants were fully vested and exercisable. Common share equivalents are only included in the calculation of diluted net loss per common share when their effect is dilutive.

Potential dilutive securities, which include, vested and unvested options to purchase common stock and RSUs subject to future vesting have been excluded from the computation of diluted net loss per share as the effect is antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in all periods presented.

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share for the periods presented because their effect would have been anti-dilutive:

	Three and Six Months Ended June 30,
	2023		2022
Stock options to purchase common stock		12,962,005		9,206,327
Restricted stock units subject to future vesting		433,611		41,935
Total		13,395,616		9,248,262

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Related Party Transactions

6 Months Ended

Jun. 30, 2023

Related Party Transactions [Abstract]

Related Party Transactions

12. Related Party Transactions

In connection with the resignation of Christopher Kirk, Ph.D. from his role as President and Chief Scientific Officer of the Company, the Company and Dr. Kirk entered into an Advisor Agreement, effective as of April 22, 2023 (the “Advisor Agreement”), pursuant to which Dr. Kirk will provide scientific and strategic advisory services as a consultant to the Company (the “Services”). The Services will be provided at a rate of $41,050 per month, and the Company will reimburse Dr. Kirk for the cost of premiums for continued COBRA coverage through the expiration date of the Advisor Agreement. Dr. Kirk remains a member of the Board of Directors of the Company following his resignation.

Pursuant to the Advisor Agreement, the Company recognized approximately $96,000 of compensation expense during the three and six months ended June 30, 2023, which was recorded in accounts payable and accrued liabilities as of June 30, 2023.

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Subsequent Event

6 Months Ended

Jun. 30, 2023

Subsequent Events [Abstract]

Subsequent Event

13. Subsequent Event

On July 24, 2023, the Compensation Committee of the Company’s Board of Directors approved a stock option repricing (the “Option Repricing”) in which the exercise price of certain outstanding options to purchase shares of the Company’s common stock under the 2018 Plan was reduced to $2.28 per share, the closing price of the Common Stock on July 24, 2023. Outstanding options that were granted under the 2015 Plan and the Inducement Plan were not included in the Option Repricing. The Option Repricing includes options granted pursuant to the 2018 Plan that are held by, among others, members of the Company’s Board of the Directors (other than options granted in June 2023) and the Company’s named executive officers and principal financial officer.

As a result of the Option Repricing, 9,904,755 vested and unvested stock options outstanding as of July 24, 2023 granted under the 2018 Plan with original exercise prices ranging from $2.44 to $22.85, were repriced. We will account for the Option Repricing as an equity modification whereby the incremental fair value attributable to the repriced option awards, as measured on the date of reprice,

will be recognized as additional stock-based compensation expense over the remaining requisite service period, which is largely through the end of 2026.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Basis of presentation and consolidation

Basis of Presentation and Consolidation

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the Company’s accounts and those of its wholly owned Australian subsidiary, Kezar Life Sciences Australia Pty Ltd., which is a proprietary company limited by shares. All intercompany balances and transactions have been eliminated upon consolidation.

The condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Annual Report.

Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidated Financial Statements

The accompanying financial information as of June 30, 2023 is unaudited. The interim condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that our management considers necessary for the fair statement of the results of operations for the interim periods covered and of our financial condition at the date of

the interim balance sheet. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The results for interim periods are not necessarily indicative of the results for the entire year or any other interim period. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto included in our Annual Report.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant items subject to such estimates and assumptions include the valuation of marketable securities, stock-based compensation, and accrued research and development costs. Management bases its estimates on historical experience and on various other market-specific relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s consolidated financial statements.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Reference Rate Reform. In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance generally allows for contract modifications solely related to the replacement of the reference rate to be accounted for as a continuation of the existing contract instead of as an extinguishment of the contract, without triggering certain accounting impacts that could be required associated with an extinguishment of the contract. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, to expand the scope of this guidance to include derivatives. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31, 2024. As discussed in note 7 of the condensed consolidated financial statements, in June 2023 our loan agreement was amended and effective July 1, 2023, the interest base transitioned from LIBOR to Secured Overnight Financing Rate ("SOFR"). We applied the above guidance when accounting for this change (as discussed further in note 7), and adoption of this guidance did not have a material impact on our financial statements. As of June 30, 2023, we have no debt instruments that use LIBOR as a reference rate, and this guidance is not expected to have a material impact on our financial statements in the future.

There have been no other recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance that are expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.

Fair Value Measurements

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company applies fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are required to be recognized or disclosed at fair value in the financial statements. The Company determines the fair value of Level 1 assets using quoted prices in active markets for identical assets. The Company reviews trading activity and pricing for Level 2 investments as of each measurement date. Level 2 inputs, which are obtained from various third-party data providers, represent quoted prices for similar assets in active markets and were derived from observable market data, or, if not directly observable, were derived from or corroborated by other observable market data.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Summary of Financial Assets Measured at Fair Value on a Recurring Basis

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above (in thousands):

	June 30, 2023
	Total		Level 1		Level 2		Level 3
Financial Assets:
Cash equivalents:
U.S. Treasury money market funds	$	27,429	$	27,429	$	—	$	—
Marketable securities:
U.S. Treasury securities		15,951		15,951		—		—
Commercial paper		75,544		—		75,544		—
U.S. agency bonds		116,985		—		116,985		—
Total	$	235,909	$	43,380	$	192,529	$	—

	December 31, 2022
	Total		Level 1		Level 2		Level 3
Financial Assets:
Cash equivalents:
U.S. Treasury money market funds	$	38,745	$	38,745	$	—	$	—
Marketable securities:
U.S. Treasury securities		40,141		40,141		—		—
Commercial paper		117,478		—		117,478		—
Corporate debt securities		1,978		—		1,978		—
U.S. agency bonds		76,508		—		76,508		—
Total	$	274,850	$	78,886	$	195,964	$	—

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Available-for-Sale Securities (Tables)

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Summary of Available-For-Sale Securities Recorded in Cash and Cash Equivalents or Marketable Securities

The following table is a summary of available-for-sale securities recorded in cash and cash equivalents or marketable securities in the Company’s condensed consolidated balance sheets (in thousands):

	June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
U.S. Treasury money market funds	$	27,429	$	—	$	—		$	27,429
Marketable securities:
U.S. Treasury securities		16,076		—		(125	)		15,951
Commercial paper		75,708		2		(166	)		75,544
U.S. agency bonds		117,265		2		(282	)		116,985
Total available-for-sale securities	$	236,478	$	4	$	(573	)	$	235,909
Cash									680
Total cash, cash equivalent and marketable securities								$	236,589

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
U.S. Treasury money market funds	$	38,745	$	—	$	—		$	38,745
Marketable securities:
U.S. Treasury securities		40,340		—		(199	)		40,141
Commercial paper		117,855		2		(379	)		117,478
Corporate debt securities		1,978		—		—			1,978
U.S. agency bonds		76,610		56		(158	)		76,508
Total available-for-sale securities	$	275,528	$	58	$	(736	)	$	274,850
Cash									1,711
Total cash, cash equivalent and marketable securities								$	276,561

The Company has not recognized an allowance for credit losses on any securities in an unrealized loss position a

Summary of Gross Unrealized Losses and Fair Value by Major Security Type for Available-For-Sale Securities in Unrealized Loss Position

The following table displays additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023
	Less than 12 consecutive months					12 months or greater
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities	$	6,393	$	(30	)	$	9,558	$	(95	)
Commercial paper		64,610		(166	)		—		—
U.S. agency bonds		110,538		(282	)		—		—
Total	$	181,541	$	(478	)	$	9,558	$	(95	)

	December 31, 2022
	Less than 12 consecutive months					12 months or greater
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities	$	33,782	$	(196	)	$	6,359	$	(3	)
Commercial paper		112,706		(379	)		—		—
Corporate debt securities		1,978		—			—		—
U.S. agency bonds		33,942		(147	)		5,490		(11	)
Total	$	182,408	$	(722	)	$	11,849	$	(14	)

Summary of Amortized Cost and Estimated Fair Value of Available-for-sale Securities by Contractual Maturity

As of June 30, 2023, the amortized cost and estimated fair value of the Company’s available-for-sale securities by contractual maturity are shown below (in thousands):

	Amortized		Estimated
Available-for-sale securities maturing in:	Cost		Fair Value
One year or less	$	226,825	$	226,351
One to two years		9,653		9,558
Total available-for-sale securities	$	236,478	$	235,909

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Prepaid Expenses

Prepaid expenses consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Advance for clinical-related costs, current	$	4,523	$	6,760
License, dues and subscription		678		376
Insurance		172		741
Others		609		364
Total prepaid expenses	$	5,982	$	8,241

Property and Equipment, Net

Property and equipment consisted of the following (in thousands):

	June 30, 2023			December 31, 2022
Leasehold improvements	$	3,551		$	3,366
Furniture, laboratory and office equipment		5,832			4,423
Computer equipment		353			244
Total property and equipment		9,736			8,033
Less accumulated depreciation and amortization		(5,070	)		(4,602	)
Property and equipment, net	$	4,666		$	3,431

Other Assets

Other assts consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Advance for clinical related costs, non-current	$	5,696	$	—
Deposits for operating lease		674		674
Others		192		—
Total other assets	$	6,562	$	674

Accrued and Other Current Liabilities

Accrued liabilities consisted of the following (in thousands):

	June 30, 2023		December 31, 2022
Accrued clinical costs	$	4,426	$	1,007
Accrued preclinical and research costs		1,792		1,368
Accrued employee-related costs		1,926		3,260
Accrued professional services		141		53
Other		178		265
Total accrued liabilities	$	8,463	$	5,953

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Lease (Tables)

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Details of Right-of-Use Assets and Lease Liabilities

Information related to the Company’s ROU asset and related lease liabilities were as follows (in thousands):

	Three months ended June 30, 2023		Six months ended June 30, 2023
Cash paid for operating lease liabilities	$	631	$	1,236
Operating lease costs		866		1,732
Variable lease costs		387		735
Maturities of lease liabilities as of June 30, 2023 were as follows:
Less than 12 months			$	3,828
13 - 24 months				3,957
25 - 36 months				4,095
37 - 48 months				347
Total undiscounted lease payments				12,227
Less: imputed interest				(2,032	)
Total lease liabilities			$	10,195
Operating lease liabilities, current			$	2,782
Operating lease liabilities, noncurrent				7,413
Total operating lease liabilities			$	10,195

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Debt (Tables)

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Schedule of Long-term Debt Balance

The components of the long-term debt balance are as follows:

	June 30, 2023			December 31, 2022
Principal loan balance	$	10,000		$	10,000
Unamortized debt discount and issuance costs		(292	)		(342	)
Cumulative accretion of final fee		244			176
Long-term debt, net	$	9,952		$	9,834

Schedule of Estimated Future Principal Payments

As of June 30, 2023, the estimated future principal payments due were as follows:

Years Ending December 31,
2023	$	—
2024		—
2025		5,217
2026		4,783
Total	$	10,000

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Activity under Stock Option Plans and Related Information

The following table summarizes activity under the Company’s stock option plans and related information (in thousands, except share and per share amounts):

	Number of Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2022		9,684,810		$	8.12		7.6	$	15,407
Options granted		4,043,994		$	5.91
Options exercised		(106,921	)	$	2.00			$	302
Options cancelled/forfeited		(659,878	)	$	9.16
Outstanding as of June 30, 2023		12,962,005		$	7.43		7.8	$	489
Vested and exercisable as of June 30, 2023		6,151,141		$	7.19		6.5	$	489

Summary of RSU Activity

	Number of RSUs Outstanding			Weighted Average Grant-Date Fair Price
Outstanding as of December 31, 2022		434,790		$	9.80
RSUs granted		81,619		$	6.84
RSUs vested		(13,989	)	$	14.55
RSUs forfeited		(68,809	)	$	9.27
Outstanding as of June 30, 2023		433,611		$	9.17

Stock-Based Compensation Expense Recognized

Total stock-based compensation expense recognized by function was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Research and development	$	2,013	$	1,595	$	4,281	$	2,918
General and administrative		2,007		1,703		4,002		3,484
Total stock-based compensation expense	$	4,020	$	3,298	$	8,283	$	6,402

Fair Value of Employee Stock Options Granted is Calculated Using Black Scholes Option Pricing Model with Range of Assumptions

The fair value of the stock options granted is calculated using the Black-Scholes option-pricing model with the following range of assumptions:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Expected term (years)	5.5 - 6.1		5.5 - 6.0		5.5 - 6.1		5.3 - 6.0
Expected volatility	88.0 - 88.3	%	84.3 - 88.4	%	87.8 - 88.3	%	84.3 - 88.4	%
Risk-free interest rate	3.5 - 3.9	%	2.8 - 3.2	%	3.5 - 4.3	%	1.6 - 3.2	%
Expected dividend yield	—		—		—		—

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Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2023

Earnings Per Share [Abstract]

Calculation of Basic and Diluted Net Loss per Share

The following table sets forth the calculation of basic and diluted net loss per share during the periods presented (in thousands, except share and per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Numerator:
Net loss	$	(24,308	)	$	(16,187	)	$	(46,507	)	$	(32,211	)
Denominator:
Weighted-average shares of common stock outstanding		72,461,850			64,279,634			72,395,410			62,465,092
Net loss per share, basic and diluted	$	(0.34	)	$	(0.25	)	$	(0.64	)	$	(0.52	)

Anti-dilutive Outstanding Shares of Common Stock Equivalents Excluded from Computation of Diluted Net Loss per Share

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share for the periods presented because their effect would have been anti-dilutive:

	Three and Six Months Ended June 30,
	2023		2022
Stock options to purchase common stock		12,962,005		9,206,327
Restricted stock units subject to future vesting		433,611		41,935
Total		13,395,616		9,248,262

XML

Organization and Description of the Business - Additional Information (Details) $ / shares in Units, $ in Thousands	1 Months Ended	6 Months Ended	19 Months Ended
	Dec. 31, 2021 USD ($)	Jun. 30, 2023 USD ($) Segment shares	Jun. 30, 2023 USD ($) $ / shares shares	Dec. 31, 2022 USD ($)
Organization And Description Of Business [Line Items]
Number of operating segments | Segment		1
Accumulated deficit		$ 295,400	$ 295,400	$ 248,893
ATM Agreement
Organization And Description Of Business [Line Items]
Issuance of common stock | shares		0
ATM Agreement | Cowen and Company LLC
Organization And Description Of Business [Line Items]
Percentage of commission on gross sales proceeds of issuance of common stock	3.00%
Weighted average purchase price, per share | $ / shares			$ 10.98
Remaining amount with sales agreement		$ 68,300	$ 68,300
Issuance of common stock | shares			11,986,003
Net proceeds from the public offering			$ 131,700
Minimum
Organization And Description Of Business [Line Items]
Sufficient cash and cash equivalents available period term		12 months
Maximum | ATM Agreement | Cowen and Company LLC
Organization And Description Of Business [Line Items]
Common stock aggregate offering price	$ 200,000

XML

Fair Value Measurements - Summary of Financial Assets Measured at Fair Value on Recurring Basis (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	$ 235,909	$ 274,850
Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	43,380	78,886
Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	192,529	195,964
U.S. Treasury Money Market Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	27,429	38,745
U.S. Treasury Money Market Funds | Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	27,429	38,745
U.S. Treasury Securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	15,951	40,141
U.S. Treasury Securities | Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	15,951	40,141
Commercial paper
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	75,544	117,478
Commercial paper | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	75,544	117,478
Corporate debt securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets		1,978
Corporate debt securities | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets		1,978
U.S. agency bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	116,985	76,508
U.S. agency bonds | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Financial Assets	$ 116,985	$ 76,508

XML

Available-for-Sale Securities - Summary of Available-For-Sale Securities Recorded in Cash and Cash Equivalents or Marketable Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total available-for-sale securities, Amortized Cost	$ 236,478
Fair Value	235,909
Fair Value, Measurements, Recurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total available-for-sale securities, Amortized Cost	236,478	$ 275,528
Unrealized Gains	4	58
Unrealized Losses	(573)	(736)
Fair Value	235,909	274,850
Cash	680	1,711
Total cash, cash equivalent and marketable securities	236,589	276,561
Fair Value, Measurements, Recurring | U.S. Treasury Money Market Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total available-for-sale securities, Amortized Cost	27,429	38,745
Fair Value	27,429	38,745
Fair Value, Measurements, Recurring | U.S. Treasury Securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total available-for-sale securities, Amortized Cost	16,076	40,340
Unrealized Losses	(125)	(199)
Fair Value	15,951	40,141
Fair Value, Measurements, Recurring | Commercial paper
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total available-for-sale securities, Amortized Cost	75,708	117,855
Unrealized Gains	2	2
Unrealized Losses	(166)	(379)
Fair Value	75,544	117,478
Fair Value, Measurements, Recurring | Corporate debt securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total available-for-sale securities, Amortized Cost		1,978
Fair Value		1,978
Fair Value, Measurements, Recurring | U.S. agency bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total available-for-sale securities, Amortized Cost	117,265	76,610
Unrealized Gains	2	56
Unrealized Losses	(282)	(158)
Fair Value	$ 116,985	$ 76,508

XML

Available-for-Sale Securities - Additional Information (Details) - USD ($)	6 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Investments, Debt and Equity Securities [Abstract]
Allowance for credit losses on securities in unrealized loss position	$ 0	$ 0
Sale of available-for-sale securities	$ 0

XML

Available-for-Sale Securities - Summary of Gross Unrealized Losses and Fair Value by Major Security Type for Available-For-Sale Securities in Unrealized Loss Position (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value, Less than 12 months	$ 181,541	$ 182,408
Unrealized Losses, Less than 12 months	(478)	(722)
Fair Value, 12 months or greater	9,558	11,849
Unrealized Losses, 12 months or greater	(95)	(14)
U.S. Treasury Securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value, Less than 12 months	6,393	33,782
Unrealized Losses, Less than 12 months	(30)	(196)
Fair Value, 12 months or greater	9,558	6,359
Unrealized Losses, 12 months or greater	(95)	(3)
Commercial paper
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value, Less than 12 months	64,610	112,706
Unrealized Losses, Less than 12 months	(166)	(379)
Corporate debt securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value, Less than 12 months		1,978
U.S. agency bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value, Less than 12 months	110,538	33,942
Unrealized Losses, Less than 12 months	$ (282)	(147)
Fair Value, 12 months or greater		5,490
Unrealized Losses, 12 months or greater		$ (11)

XML

Available-for-Sale Securities - Summary of Amortized Cost and Estimated Fair Value of Available-for-sale Securities by Contractual Maturity (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Available-for-sale securities maturing, Amortized Cost:
In one year or less, Amortized Cost	$ 226,825
In one to two years, Amortized Cost	9,653
Total available-for-sale securities, Amortized Cost	236,478
Available-for-sale securities maturing, Estimated Fair Value:
In one year or less, Estimated Fair Value	226,351
In one to two years, Estimated Fair Value	9,558
Total available-for-sale securities, Estimated Fair Value	$ 235,909

XML

Balance Sheet Components - Prepaid Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Prepaid Expense, Current [Abstract]
Advance for clinical-related costs, current	$ 4,523	$ 6,760
License, dues and subscription	678	376
Insurance	172	741
Others	609	364
Total prepaid expenses	$ 5,982	$ 8,241

XML

Balance Sheet Components - Property and Equipment, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Property Plant And Equipment [Line Items]
Total property and equipment	$ 9,736	$ 8,033
Less accumulated depreciation and amortization	(5,070)	(4,602)
Property and equipment, net	4,666	3,431
Leasehold Improvements
Property Plant And Equipment [Line Items]
Total property and equipment	3,551	3,366
Furniture, Laboratory and Office Equipment
Property Plant And Equipment [Line Items]
Total property and equipment	5,832	4,423
Computer Equipment
Property Plant And Equipment [Line Items]
Total property and equipment	$ 353	$ 244

XML

Balance Sheet Components - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Depreciation expense	$ 0.2	$ 0.2	$ 0.5	$ 0.5

XML

Balance Sheet Components - Other Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Other Assets [Abstract]
Advance for clinical related costs, non-current	$ 5,696	$ 0
Deposits for operating lease	674	674
Others	192	0
Total other assets	$ 6,562	$ 674

XML

Balance Sheet Components - Accrued and Other Current Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accrued clinical costs	$ 4,426	$ 1,007
Accrued preclinical and research costs	1,792	1,368
Accrued employee-related costs	1,926	3,260
Accrued professional services	141	53
Other	178	265
Total accrued liabilities	$ 8,463	$ 5,953

XML

Lease - Additional Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Nov. 01, 2022
Operating lease liability	$ 10,195
South San Francisco, California [Member]
Operating lease, option to extend	July 31, 2026
Operating lease liability		$ 8,000

XML

Lease - Details of Right-of-Use Assets and Lease Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023	Dec. 31, 2022
Lessee Disclosure [Abstract]
Cash paid for operating lease liabilities	$ 631	$ 1,236
Operating lease costs	866	1,732
Variable lease costs	387	735
Less than 12 months	3,828	3,828
13 - 24 months	3,957	3,957
25 - 36 months	4,095	4,095
37 - 48 months	347	347
Total undiscounted lease payments	12,227	12,227
Less: imputed interest	(2,032)	(2,032)
Total lease liabilities	10,195	10,195
Operating lease liabilities, current	2,782	2,782	$ 2,565
Operating lease liabilities, noncurrent	7,413	7,413	$ 8,865
Total operating lease liabilities	$ 10,195	$ 10,195

XML

Debt - Additional Information (Details) - Oxford Finance LLC $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended
	Nov. 30, 2021 USD ($) Tranche	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)
SOFR
Debt Instrument [Line Items]
Line of credit facility, additional interest rate				0.10%
Loan and Security Agreement
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 50.0
Number of tranches | Tranche	5
Line of credit facility, Maturity period	Nov. 01, 2026
Line of credit facility frequency of payments				monthly interest-only payments
Line of credit facility, extension period	1 year
Final payment fee percentage	6.50%
Interest expense		$ 0.4	$ 0.3	$ 0.8	$ 0.5
Effective interest rate percentage	11.00%
Loan and Security Agreement | Minimum
Debt Instrument [Line Items]
Prepayment fee percentage	1.00%
Loan and Security Agreement | Maximum
Debt Instrument [Line Items]
Prepayment fee percentage	2.00%
Loan and Security Agreement | Tranche One
Debt Instrument [Line Items]
Current borrowing capacity	$ 10.0
Loan and Security Agreement | Equal To Sum Of A | Floor Rate
Debt Instrument [Line Items]
Line of credit facility, additional interest rate	0.08%
Loan and Security Agreement | Equal To Sum Of B
Debt Instrument [Line Items]
Line of credit facility, interest rate	7.87%

XML

Debt - Schedule of Long-term Debt Balance (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
Principal loan balance	$ 10,000	$ 10,000
Unamortized debt discount and issuance costs	(292)	(342)
Cumulative accretion of final fee	244	176
Long-term debt, net	$ 9,952	$ 9,834

XML

Debt - Schedule of Estimated Future Principal Payments (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Debt Disclosure [Abstract]
2025	$ 5,217
2026	4,783
Total	$ 10,000

XML

Pre-Funded Warrants - Additional Information (Details) - $ / shares	Jun. 30, 2023	Apr. 30, 2023	Jan. 31, 2023	Dec. 31, 2022
Class Of Warrant Or Right [Line Items]
Pre funded warrants to purchase shares of common stock		1,557,153	2,236,553
Pre funded warrants exercise price		$ 0.001	$ 0.001
Pre-funded warrants, term	20 years
Pre-funded warrants outstanding	0
Underwritten Public Offering
Class Of Warrant Or Right [Line Items]
Pre funded warrants to purchase shares of common stock				3,793,706

XML

Stock-Based Compensation - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Mar. 31, 2023	Jan. 01, 2023	Dec. 31, 2022	Jun. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options shares outstanding	12,962,005		12,962,005				9,684,810
Common stock, shares issued	72,532,814		72,532,814				68,493,429
Aggregate intrinsic value of exercised stock options	$ 24,000		$ 302,000
Payments of dividends of common stock			$ 0
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term	6 years 1 month 6 days	6 years	6 years 1 month 6 days	6 years
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term	5 years 6 months	5 years 6 months	5 years 6 months	5 years 3 months 18 days
ESPP
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term			6 months
Employee options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized stock-based compensation cost	$ 39,500,000		$ 39,500,000
Estimated weighted average amortization period			2 years 9 months 18 days
2022 Stock Inducement Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options shares outstanding	1,313,000		1,313,000
Shares granted					3,000,000
Shares available for future issuance	1,687,000		1,687,000
2018 Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options shares outstanding	10,212,197		10,212,197
Shares available for future issuance	1,499,142		1,499,142
Number of shares will increase automatically through every year on specified date			--01-01
Number of shares increase automatically continuing through maximum period			beginning on January 1, 2019 and continuing through and including January 1, 2028
Weighted average grant date fair value of options granted	$ 2.19		$ 4.45
2018 Equity Incentive Plan | Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum number of shares authorized available for issuance	1,600,692		1,600,692
Increase in number of shares reserved for issuance as percentage of total number of shares of capital stock outstanding on last date of preceding calendar year			5.00%
2018 Equity Incentive Plan | Maximum | Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum number of shares authorized available for issuance	4,000,000		4,000,000
2018 Equity Incentive Plan | Incentive Stock Options | Maximum | Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum number of shares issued upon exercise of incentive stock options	12,500,000		12,500,000
2018 Equity Incentive Plan | RSU Member
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options shares outstanding	433,611		433,611
Option grant vesting period			3 years
2015 Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Option grant vesting period			4 years
Options to purchase of common stock outstanding	1,436,808		1,436,808
2015 Equity Incentive Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options granted expiry period			10 years
2018 Employee Stock Purchase Plan | Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares available for future issuance	829,388		829,388					200,000
Additional shares available for future issuance						0
Common stock, shares issued	503,836		503,836
Authorized an offering beginning period			Nov. 16, 2018
Authorized an offering ending period			May 15, 2019
Authorized an additional offering beginning period			May 16, 2023
2018 Employee Stock Purchase Plan | Maximum | Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of annual increase in number of common stock shares			1.00%
Annual increase in number of common stock shares			375,000
Option price per share of common stock at fair market value			85.00%

XML

Stock-Based Compensation - Summary of Activity under Stock Option Plans and Related Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2023	Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]
Number of options outstanding, Outstanding, Beginning balance		9,684,810
Number of options outstanding, Options granted		4,043,994
Number of options outstanding, Options exercised		(106,921)
Number of Options outstanding, Options cancelled/forfeited		(659,878)
Number of options outstanding, Outstanding, Ending balance	12,962,005	12,962,005	9,684,810
Number of options outstanding, options vested and exercisable	6,151,141	6,151,141
Weighted average exercise price, Outstanding, Beginning balance		$ 8.12
Weighted average exercise price, Options granted		5.91
Weighted average exercise price, Options exercised		2.00
Weighted average exercise price, Options cancelled/forfeited		9.16
Weighted average exercise price, Outstanding, Ending balance	$ 7.43	7.43	$ 8.12
Weighted average exercise price, options vested and exercisable	$ 7.19	$ 7.19
Weighted average remaining contractual term, (Years) Outstanding balance		7 years 9 months 18 days	7 years 7 months 6 days
Weighted average remaining contractual term, (Years) options vested and exercisable		6 years 6 months
Aggregate intrinsic value, Outstanding, Beginning balance		$ 15,407
Aggregate intrinsic value, Options exercised	$ 24	302
Aggregate intrinsic value, Outstanding, Ending balance	489	489	$ 15,407
Aggregate intrinsic value, options vested and exercisable	$ 489	$ 489

XML

Stock-Based Compensation - Summary of RSU Activity (Details)	6 Months Ended
	Jun. 30, 2023 $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Weighted average exercise price, Outstanding, Beginning balance	$ 8.12
Weighted average exercise price, Options cancelled/forfeited	9.16
Weighted average exercise price, Outstanding, Ending balance	$ 7.43
RSU Member | 2018 Equity Incentive Plan
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of shares outstanding, beginning balance | shares	434,790
Number of shares, granted | shares	81,619
Number of shares, vested | shares	(13,989)
Number of shares, forfeited | shares	(68,809)
Number of shares outstanding, ending balance | shares	433,611
Weighted average exercise price, Outstanding, Beginning balance	$ 9.8
Weighted average exercise price, granted	6.84
Weighted Average Exercise Price, Vested	14.55
Weighted average exercise price, Options cancelled/forfeited	9.27
Weighted average exercise price, Outstanding, Ending balance	$ 9.17

XML

Stock-Based Compensation - Stock-Based Compensation Expense Recognized (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 4,020	$ 3,298	$ 8,283	$ 6,402
Research and Development Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	2,013	1,595	4,281	2,918
General and Administrative Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 2,007	$ 1,703	$ 4,002	$ 3,484

XML

Stock-Based Compensation - Fair Value of Stock Options Granted is Calculated Using Black Scholes Option Pricing Model with Range of Assumptions (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected volatility, Minimum	88.00%	84.30%	87.80%	84.30%
Expected volatility, Maximum	88.30%	88.40%	88.30%	88.40%
Risk-free interest rate, Minimum	3.50%	2.80%	3.50%	1.60%
Risk-free interest rate, Maximum	3.90%	3.20%	4.30%	3.20%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (years)	5 years 6 months	5 years 6 months	5 years 6 months	5 years 3 months 18 days
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (years)	6 years 1 month 6 days	6 years	6 years 1 month 6 days	6 years

XML

Income Taxes - Additional Information (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Operating Loss Carryforwards [Line Items]
Provision for income taxes		$ 0	$ 0	$ 0	$ 0
Income tax refunds received				$ 1,400,000
Research and development tax credit utilized as reduction of payroll expenses					$ 79,000
Research and development tax credit utilized against employer's portion of payroll tax	$ 250,000
U S [Member]
Operating Loss Carryforwards [Line Items]
Research and development activities amortize period				5 years
Non - U S [Member]
Operating Loss Carryforwards [Line Items]
Research and development activities amortize period				15 years

XML

Net Loss Per Share - Calculation of Basic and Diluted Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022
Numerator:
Net loss	$ (24,308)	$ (22,199)	$ (16,187)	$ (16,024)	$ (46,507)	$ (32,211)
Denominator:
Weighted-average shares of common stock outstanding	72,461,850		64,279,634		72,395,410	62,465,092
Net loss per common share, Basic	$ (0.34)		$ (0.25)		$ (0.64)	$ (0.52)
Net loss per common share, Diluted	$ (0.34)		$ (0.25)		$ (0.64)	$ (0.52)

XML

Net Loss Per Share - Anti-dilutive Outstanding Shares of Common Stock Equivalents Excluded from Computation of Diluted Net Loss per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted net loss per share	13,395,616	9,248,262	13,395,616	9,248,262
Stock Options to Purchase Common Stock [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted net loss per share	12,962,005	9,206,327	12,962,005	9,206,327
Restricted Stock Units Subject to Future Vesting [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted net loss per share	433,611	41,935	433,611	41,935

XML

Related Party Transactions - Additional Information (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023
Related Party Transaction [Line Items]
Advisor agreement, effective date		Apr. 22, 2023
Compensation expense	$ 96,000	$ 96,000
Director
Related Party Transaction [Line Items]
Consultant fee per month		$ 41,050

XML

Subsequent Event - Additional Information (Details) - $ / shares	Jul. 24, 2023	Jun. 30, 2023	Dec. 31, 2022
Subsequent Event [Line Items]
Stock options shares outstanding		12,962,005	9,684,810
Subsequent Event | 2018 Plan
Subsequent Event [Line Items]
Modified exercise price	$ 2.28
Stock options shares outstanding	9,904,755
Exercise prices, lower range	$ 2.44
Exercise prices, upper range	$ 22.85