Significant Transactions

9 Months Ended

Sep. 30, 2024

Equity Method Investments and Joint Ventures [Abstract]

Significant Transactions

Significant Transactions

Immunome

In January 2024, the Company and Immunome, Inc. (“Immunome”) entered into an exclusive, worldwide license agreement under which Immunome licensed from Zentalis ZPC-21 (now known as IM-1021), a preclinical ROR1 antibody-drug conjugate (“ADC”) and proprietary ADC technology platform (the “Immunome License Agreement”). Simultaneously, the Company and Immunome entered into a stock issuance agreement (together with the Immunome License Agreement, the “Immunome Agreements”). The upfront consideration from Immunome amounted to $40.6 million, which consisted of $15.0 million in cash and approximately 2.3 million shares (quantified using a 30-day volume average price) of Immunome common stock valued at approximately $25.6 million on the date of acquisition and presented within marketable securities, available for sale on the condensed consolidated balance sheet. Changes to the fair value of the Immunome stock are recorded as a component of investment and other income, net within the condensed consolidated statement of operations. The Company is eligible to receive up to $275.0 million in development, regulatory and sales milestones as well as tiered royalties on net sales of licensed products.

The Company determined that the Immunome Agreements fall within the scope of ASC 606, Revenue from Contracts with Customers (ASC 606) as Immunome has contracted to obtain goods and services that are an output of ordinary activities and is a customer. Furthermore, subsequent to the execution of the Immunome Agreements, the Company is no longer an active participant in the research and is no longer exposed to the significant risks and rewards of the research. Management of the Company determined there was one combined performance obligation for the Immunome Agreements and know-how given the deliverables are not distinct. The Company evaluated the performance obligation within the Immunome Agreements and determined the combined performance obligation was satisfied at a point in time with Immunome as the Immunome Agreements represents a right to use the functional intellectual property as it exists at the time of the Immunome Agreements, the customer has significant risk and rewards of ownership of the asset and the customer has accepted the asset with the transfer of know-how within the quarter ended March 31, 2024. In addition, variable consideration consisting of milestone payments was evaluated based on the Company’s analysis that the possibility of achieving any of the milestone payments was remote, and therefore determined to be constrained and excluded from the transaction price. Royalties will be recognized when the underlying sales occur based on estimates and a true-up of the estimated royalty revenue to the actual royalties earned will be recorded when royalty reports are received.

No License revenue related to the transaction price was recognized during the three months ended September 30, 2024 and 2023. During the nine months ended September 30, 2024 and 2023, the Company recognized $40.6 million and zero in License revenue related to the transaction price. During the nine months ended September 30, 2024 and 2023, the Company did not recognize revenue from milestone payments or royalties. See Note 12—Subsequent Events for disclosure of the Company’s sale of ZPC-21 and its proprietary ADC technology platform to Immunome that occurred in October 2024.

Pfizer

In April 2022, the Company and Pfizer entered into a securities purchase agreement (the “Pfizer Securities Purchase Agreement”) and the Pfizer Development Agreement relating to the Company’s product candidate, azenosertib (together with the Pfizer Securities Purchase Agreement, the “Pfizer Agreements”). As part of the Pfizer Securities Purchase Agreement, Pfizer agreed to purchase 953,834 shares of the Company’s common stock for $26.21 per share for total proceeds of $25 million.

As the Company and Pfizer are both active participants in various research activities and both parties are exposed to significant risks and rewards, the Pfizer Agreements are being accounted for under ASC 808, Collaborative arrangements. The Company considered by analogy the ASC 606 criteria for combining contracts and determined that the Pfizer Agreements should be combined into a single contract because they were negotiated and executed in contemplation of one another. Furthermore, management concluded that no parts of the Pfizer Agreements are within the scope of ASC 606, Revenue from Contracts with Customers, as Pfizer was not deemed to be a customer of research and development services. The Company determined that the Pfizer Development Agreement contained two components: (i) the parties joint development activities for azenosertib and (ii) access to the information generated in the related development activities.

The Company accounted for the common stock issued to Pfizer based on the fair market value of the common stock on the date of issuance. The fair value of the common stock issued to Pfizer was $20.8 million, based on the closing price of the Company’s common stock on the date of issuance, resulting in a $4.2 million premium. The Company determined that the premium paid by Pfizer for the common stock should be attributed to the transaction price of the Pfizer Development Agreement and accounted for as a reduction of research and development expense over the term of the anticipated research period of the project based on a percentage of total costs to be incurred. Research and development expense was reduced by $0.5 million and $0.7 million for the three and nine months ended September 30, 2023, and $0.1 million and $0.9 million for the three and nine months ended September 30, 2024, to account for the premium paid by Pfizer on the Company’s common stock.