Zentalis Pharmaceuticals, Inc.

1. Organization and Business

Organization

Zentalis Pharmaceuticals, Inc. (“Zentalis,” “We” or the “Company”) is a clinical-stage biopharmaceutical company developing azenosertib (ZN-c3), an investigational potentially first-in-class and best-in-class WEE1 inhibitor for patients with Cyclin E1-positive platinum-resistant ovarian cancer ("Cyclin E1-positive PROC"). The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. All of the Company’s tangible assets are held in the United States.

Liquidity

The Company has incurred significant net losses since inception and expects to continue to incur significant net losses for the foreseeable future as it pursues development of azenosertib. As of March 31, 2026, the Company had an accumulated deficit of $1.2 billion and cash, cash equivalents and marketable securities of $211.8 million, The Company does not have any products approved for commercial sale, has not generated any revenues from product sales and will not generate revenue from product sales unless and until it successfully completes clinical development, obtains regulatory approval for, and commercializes one or more of its product candidates.

Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statements issuance date. The Company determined that there are no conditions or events that raise substantial doubt about its ability to continue as a going concern within one year after the date that the interim unaudited condensed consolidated financial statements for the quarter ended March 31, 2026 are issued. Beyond that date, the Company may need to raise additional capital through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements to achieve its longer-term business objectives.

2. Interim Unaudited Financial Statements

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) related to a Quarterly Report on Form 10-Q. The year-end condensed consolidated balance sheet data were derived from the Company’s audited financial statements but do not include all disclosures required by U.S. GAAP. These interim unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 26, 2026. The unaudited financial information for the interim periods presented herein reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operation for the periods presented, with such adjustments consisting only of normal recurring adjustments.

The accompanying interim unaudited condensed consolidated financial statements include our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates

3. Restructuring

On January 28, 2025, the Company announced a corporate restructuring, (the “Restructuring”) that reduced its work force by approximately 40%. In connection with the Restructuring, the Company recorded restructuring charges of $7.8 million primarily consisting of employee separation costs which are reported as a separate line item in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2025. The Company has completed all of the activities included in the restructuring plan as of December 31, 2025 and all of the costs associated with the restructuring were incurred during the quarter ended March 31, 2025.

4. Segment Reporting and Disaggregation of Relevant Expense Captions

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The determination of a single business segment is consistent with the consolidated financial information periodically reviewed by the Chief Executive Officer as chief operating decision maker ("CODM") in assessing segment performance and deciding how to allocate resources.

The CODM uses net income or loss to monitor budgets, forecasts and expected and actual cash flow from operations in assessing segment performance and in deciding how to allocate resources. The measure of segment assets is reported on the consolidated balance sheets as total assets.

The following table presents information about reported significant segment expenses and net loss (in thousands):

(1)The Company tracks external development costs by product candidate or development program, but does not allocate personnel costs, general license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates. These costs are included in unallocated research and development expenses and discontinued programs.

(2)Other consists of investment and other income (expense), net, restructuring charges and income tax expense.

5. Fair Value Measurement

Available-for-sale marketable debt securities consisted of the following (in thousands):

As of March 31, 2026, eleven of our available-for-sale debt securities with a fair market value of $100.0 million were in a gross unrealized loss position of $87 thousand. Eleven have been in a gross unrealized loss position of $87 thousand for less than one year andnone have been in a gross unrealized loss position of more than one year. When evaluating an investment for impairment, we review factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, our intent to sell or the likelihood that we would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. Based on our review of these marketable securities, we believe none of the unrealized loss is as a result of a credit loss as of March 31, 2026, because we do not intend to sell these securities, and it is not more-likely-than-not that we will be required to sell these securities before the recovery of their amortized cost basis.

Contractual maturities of available-for-sale debt securities are as follows (in thousands):

Equity investment gains comprised the following (in thousands):

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. The Company determines the fair value of financial assets and liabilities using three levels of inputs as follows:

Level 1—Inputs which include quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted market prices included in Level 1) that are either directly or indirectly observable, 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 instrument’s anticipated life.

Level 3—Unobservable inputs for assets or liabilities and include little or no market activity.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company had $0.5 million in contingent consideration liabilities as of March 31, 2026 and December 31, 2025 related to the agreement to terminate its Collaboration and License Agreements with Zentera. The contingent consideration balance is limited toone potential milestone payment measured at fair value. The fair value of the contingent consideration is estimated based on the monetary value of the milestone discounted for the probability of achieving the milestone and a present value factor based on the timing of when the milestone is expected to be achieved. The value for the contingent consideration balance is based on significant inputs not observable in the market which represents Level 3 measurement within the fair value hierarchy.

The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):

The following significant unobservable inputs were used in the valuation of the contingent consideration payable to Zentera as variable consideration for a change in control milestone payment of either zero or $15.0 million pursuant to the termination of our Collaboration and License Agreement at March 31, 2026 and December 31, 2025:

The following table reflects the activity for the Company’s contingent consideration, measured at fair value using Level 3 inputs (in thousands):

There were no transfers between levels of the fair value hierarchy during the three months ended March 31, 2026. The Company hadone instrument that was classified within Level 3 as of March 31, 2026 and December 31, 2025. As of March 31, 2026 and December 31, 2025, no material fair value adjustments were required for non-financial assets and liabilities.

6. Prepaid Expenses and Other Assets

Prepaid expenses and other assets consisted of the following (in thousands):

7. Property and Equipment, net

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

Depreciation and amortization expense for thethree months ended March 31, 2026 and 2025 was$151 thousand and$262 thousand, respectively.

8. Accrued Expenses

Accrued expenses consist of the following (in thousands):

9. Stockholders’ Equity

Share-based Compensation

Effective April 2020, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the 2020 Incentive Award Plan (the “2020 Plan”), which allows for grants to selected employees, consultants and non-employee members of the Board of Directors. The Company currently grants stock options and restricted stock units (“RSUs”) under the 2020 Plan. Awards may be made under the 2020 Plan covering up to the sum of (1)5,600,000 shares of common stock; plus (2) any shares forfeited from the unvested restricted shares of our common stock issued upon conversion of unvested Class B common units (up to 1,250,000 shares); plus (3) an annual increase on the first day of each fiscal year beginning with the fiscal year ending December 31, 2021 and continuing to, and including, the fiscal year ending December 31, 2030, equal to the lesser of (a)5% of the shares of common stock outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as determined by our Board of Directors.

As of March 31, 2026,11,648,018 shares were subject to outstanding awards under the 2020 Plan and 6,717,068 shares were available for future grants of share-based awards under the 2020 Plan.

In July 2022, the Company’s Board of Directors approved the Zentalis Pharmaceuticals, Inc. 2022 Employment Inducement Incentive Award Plan (the “2022 Inducement Plan”), which is used exclusively for the grant of equity awards to new employees as an inducement material to the employees’ entering into employment with the Company. As of March 31, 2026, the Board of Directors has reserved 8,775,000 shares of the Company’s common stock for issuance pursuant to awards granted under the 2022 Inducement Plan.

As of March 31, 2026,6,784,792 shares were subject to outstanding awards under the 2022 Inducement Plan and 1,781,708 shares were available for future grants of share-based awards under the 2022 Inducement Plan.

Total share-based compensation expense related to share-based awards was comprised of the following (in thousands):

Share-based compensation expense by type of share-based award (in thousands):

Stock Options and Restricted Stock Units

The exercise price of stock options granted is equal to the closing price of the Company’s common stock on the date of grant. The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the Company estimates expected volatility based on the historical volatility of a group of similar companies that are publicly traded. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company uses the “simplified method” for estimating the expected term of employee options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years). The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has not issued any dividends and does not expect to issue dividends over the life of the options. As a result, the Company has estimated the dividend yield to bezero. The fair value of the stock options granted during the three months ended March 31, 2026 and March 31, 2025 was determined with the following assumptions:

Employee Stock Purchase Plan

Effective April 2020, the Company’s Board of Directors adopted, and the Company’s stockholders approved the Zentalis Pharmaceuticals, Inc. 2020 Employee Stock Purchase Plan (the “ESPP”), which was subsequently amended and restated effective March 15, 2021. The maximum aggregate number of shares of the Company’s common stock available for issuance under the ESPP at March 31, 2026 was 1,403,033. Under the terms of the ESPP, the Company’s employees may elect to have up to 20% of their compensation, up to a maximum of $21,250 per calendar year, withheld to purchase shares of the Company’s common stock for a purchase price equal to 85% of the lower of the fair market value per share (at closing) of the Company’s common stock on (i) the first trading day of asix-month offering period, or (ii) the applicable purchase date, defined as the last trading day of thesix-month offering period. The weighted average assumptions used to estimate the fair value of stock purchase rights under the ESPP during the period ended are as follows:

Compensation Expense Summary

Total unrecognized estimated compensation cost by type of award and the weighted average requisite service period over which such expense is expected to be recognized (in thousands, unless otherwise noted):

During the three months ended March 31, 2026, we issued 21 thousand shares of common stock in connection with the exercises of stock options. Outstanding stock options and unvested RSUs totaling approximately 15.5 million shares and 2.9 million shares of our common stock, respectively, were outstanding as of March 31, 2026.

10. Commitments and Contingencies

Legal Contingencies

From time to time, we may be involved in various disputes, including lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters. Any of these claims could subject us to costly legal expenses. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in our consolidated financial statements. While we do generally believe that we have adequate insurance to cover many different types of liabilities, our insurance carriers may deny coverage, or our policy limits may be inadequate to fully satisfy any damage awards or settlement. If this were to happen, the payment of any such awards could have a material adverse effect on our consolidated results of operations and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. We are currently not a party to any legal proceedings that require a loss liability to be recorded.

Leases

Our commitments include payments related to operating leases. Approximate annual future minimum operating lease payments as of March 31, 2026 are as follows (in thousands):

The weighted-average remaining lease term of our operating leases is approximately 6.5 years.

On March 6, 2023, we entered into a sublease agreement pursuant to which we sublet the office space located at 1359 Broadway, Suites 1710 and 1800 in New York, New York to a subtenant. For the three months ended March 31, 2026, we recorded lease income of $0.4 million relating to our New York sublease.

11. Net Loss Per Common Share

Basic and diluted net loss per common share were calculated as follows (in thousands except per share amounts):

Our potential and dilutive securities, which include outstanding stock options and unvested RSUs have been excluded from the computation of diluted net loss per common share as the effect would be anti-dilutive.

The following common stock equivalents have been excluded from the calculations of diluted net loss per common share because their inclusion would be antidilutive (in thousands).

12. Subsequent Events

In May 2026, we announced that the first patient had been dosed in the Phase 3 ASPENOVA trial. As a result of the commencement of our Phase 3 clinical trial, the Company incurred a $7.0 million milestone payment to Recurium IP Holdings, LLC (“Recurium IP”) subsequent to the quarter ended March 31, 2026. This payment was made pursuant to a license agreement (“the Recurium Agreement”) entered into between the Company’s wholly owned subsidiary, Zeno Management, Inc. (“ZMI”), and Recurium IP, as amended in June 2023.

The intellectual property rights exclusively licensed by ZMI under the Recurium Agreement include certain intellectual property covering azenosertib. Under the Recurium Agreement, ZMI has the right to sublicense its rights, subject to certain conditions. ZMI is required to use commercially reasonable efforts to develop and commercialize at least one product that comprises or contains a compound modulating one of ten specific biological targets and to execute certain development activities.

Under the terms of the Recurium Agreement, ZMI is obligated to make development and regulatory milestone payments, pay royalties on net sales, and make certain sublicensing payments with respect to products that comprise or contain a compound modulating one of ten specific biological targets, including azenosertib. ZMI is obligated to make development and regulatory milestone payments for each such licensed product of up to $44.5 million, which covers the first two indications for which such licensed product receives regulatory approval and includes the $7.0 million milestone payment payable upon commencement of our Phase 3 ASPENOVA clinical trial mentioned above. In the event that a licensed product receives regulatory approval in any additional indications beyond the first two, ZMI would be obligated to pay an additional one-time milestone payment for each such approval. In addition, ZMI is obligated to make milestone payments of up to $150,000 for certain licensed products used in animals. ZMI is also obligated to pay royalties on sales of such licensed products at a mid- to high-single digit percentage. In addition, if ZMI chooses to sublicense or assign to any third parties its rights under certain patents exclusively in-licensed under the Recurium Agreement, ZMI must pay to Recurium IP 20% of certain sublicensing income received in connection with such transaction.

The Recurium Agreement will expire on the later of December 21, 2032 and, on a country-by-country basis, on the date of expiration of the last-to-expire royalty term for all licensed products in such country, unless earlier terminated by either party for cause or a bankruptcy event.