10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_______________ to _______________

Commission File Number: 001-39103

CABALETTA BIO, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	82-1685768
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
2929 Arch Street, Suite 600	19104
Philadelphia, PA
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (267) 759-3100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.00001 per share

CABA

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 4, 2022, the registrant had 29,013,995 shares of common stock, $0.00001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements (Unaudited)	4
	Condensed Balance Sheets	4
	Condensed Statements of Operations and Comprehensive Loss	5
	Condensed Statements of Stockholders’ Equity	6
	Condensed Statements of Cash Flows	8
	Notes to Unaudited Condensed Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	94
Item 3.	Defaults Upon Senior Securities	94
Item 4.	Mine Safety Disclosures	94
Item 5.	Other Information	94
Item 6.	Exhibits	95
Signatures		96

Summary of the Material and Other Risks Associated with Our Business

•

We are a clinical-stage company with a limited operating history, have incurred significant losses since our inception, and anticipate that we will continue to incur significant losses for the foreseeable future.

•

We are highly dependent on our relationship with University of Pennsylvania, or Penn, for our preclinical research and development activities, key technology and our current manufacturing needs for our clinical trial of DSG3-CAART, or the DesCAARTesTM trial, and if Penn’s manufacturing capacity is reduced or otherwise delayed or limited, this could adversely impact enrollment in our DesCAARTesTM trial.

•

We are reliant on intellectual property licensed to us by Penn and termination of our license agreement with Penn would result in the loss of significant rights, which would have a material adverse effect on our business.

•

If we are unable to obtain and maintain sufficient intellectual property protection for our current product candidates and technologies or any future product candidates, we may not be able to compete effectively in our markets.

•

We will need to raise substantial additional funding before we can expect to complete development of any of our product candidates or generate any revenues from product sales.

•

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

•

If we are unable to successfully develop our current programs into a portfolio of product candidates, or experience significant delays in doing so, we may not realize the full commercial potential of our current and future product candidates.

•

If we encounter difficulties enrolling patients in our DesCAARTesTM trial, our planned Phase 1 clinical trial for MuSK-CAART, or the MusCAARTesTM trial, or future clinical trials, including our planned clinical trial for CABA-201, these clinical development activities could be delayed or otherwise adversely affected.

•

If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

•

Results of earlier studies may not be predictive of future study or trial results, and we may fail to establish an adequate safety and efficacy profile to conduct clinical trials or obtain regulatory approval for our product candidates.

•

If serious adverse events, undesirable side effects or unexpected characteristics are identified during the development of any of our product candidates, we may need to delay, abandon or limit our further clinical development of those product candidates.

•

The ongoing coronavirus disease, or COVID-19, pandemic and the future outbreak of other highly infectious or contagious diseases could seriously harm our research, development and potential future commercialization efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations.

•

Manufacturing and administering our product candidates is complex and we may encounter difficulties in technology transfer from Penn to a contract manufacturing organization.

•

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

•

We may establish our own manufacturing facility and infrastructure in addition to or in lieu of relying on third parties for the manufacture of our product candidates, which will be costly and time-consuming, and which may not be successful.

•

Our future success depends in part upon our ability to retain our key employees, consultants and advisors and to attract, retain and motivate other qualified personnel.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors, including, without limitation, risks, uncertainties and assumptions regarding the impact of the COVID-19 pandemic on our business, operations, strategy, goals and anticipated timelines, our ongoing and planned preclinical activities, our ability to initiate, enroll, conduct or complete ongoing and planned clinical trials, our timelines for regulatory submissions and our financial position that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•

the success, cost and timing and conduct of our clinical trial program, including our clinical trial of DSG3-CAART, or the DesCAARTesTM trial, our planned Phase 1 clinical trial of MuSK-CAART, or the MusCAARTesTM trial, our plans for clinical development of CABA-201, and our other product candidates, including statements regarding the timing of initiation and completion of the clinical trials and the period during which the results of the clinical trials will become available;

•

the expected timing and significance around the announcement of safety, biologic activity and/or any additional clinical data from our DesCAARTesTM trial;

•

the timing of and our ability to obtain and maintain regulatory approval of our product candidates, including DSG3-CAART, MuSK-CAART, CABA-201, FVIII-CAART, DSG3/1-CAART and PLA2R-CAART, in any of the indications for which we plan to develop them, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;

•

our expectations for the tolerability and clinical activity of CABA-201 and ability to advance this product candidate through our license agreement with Nanjing IASO Biotherapeutics Co., Ltd., or IASO;

•

the impact of any business interruptions to our operations, including the timing and enrollment of patients in our ongoing and planned clinical trials and our planned Investigational New Drug application submissions, or to those of our clinical sites, manufacturers, suppliers, or other vendors resulting from the COVID-19 pandemic or similar public health crisis;

•

our expected use of proceeds from the initial public offering and from sales of our common stock in “at-the-market” offerings and the period over which such proceeds, together with existing cash, will be sufficient to meet our operating needs;

•

our plans to pursue research and development of other product candidates;

•

our plan to infuse our DSG3-CAART product candidate without lymphodepletion or other preconditioning agents initially in our DesCAARTesTM trial, and our plan to implement a cohort where a preconditioning regimen with a lymphodepleting agent and an immunomodulatory agent will be administered in the DesCAARTesTM and MusCAARTesTM trial;

•

the potential advantages of our proprietary Cabaletta Approach for selective B cell Ablation platform, called our CABATM platform, and our product candidates;

•

the extent to which our scientific approach and CABATM platform may potentially address a broad range of diseases;

•

the potential benefits and success of our arrangements and our expanded sponsored research agreement with the Trustees of the University of Pennsylvania, or Penn, and the Children’s Hospital of Philadelphia, or CHOP, and our scientific co-founders, Drs. Milone and Payne;

•

our ability to successfully commercialize our product candidates, including DSG3-CAART, MuSK-CAART, CABA-201 and our other product candidates;

•

the potential receipt of revenue from future sales of DSG3-CAART, MuSK-CAART, CABA-201 and our other product candidates;

•

the rate and degree of market acceptance and clinical utility of DSG3-CAART, MuSK-CAART, CABA-201 and our other product candidates;

•

our estimates regarding the potential market opportunity for DSG3-CAART, MuSK-CAART, CABA-201 and our other product candidates, and our ability to serve those markets;

•

our sales, marketing and distribution capabilities and strategy, whether alone or with potential future collaborators;

•

our ability to establish and maintain arrangements or a facility for manufacture of DSG3-CAART, MuSK-CAART, CABA-201 and our other product candidates;

•

our ability to obtain funding for our operations, including funding necessary to initiate and complete our DesCAARTesTM trial, our planned MusCAARTesTM trial and our ongoing preclinical studies of CABA-201, DSG3/1-CAART, FVIII-CAART and PLA2R-CAART;

•

the potential achievement of milestones and receipt of payments under our collaborations;

•

our ability to enter into additional collaborations with existing collaborators or other third parties;

•

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates and our ability to operate our business without infringing on the intellectual property rights of others;

•

the success of competing therapies that are or become available, and our competitive position;

•

the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

•

the impact of government laws and regulations in the United States and foreign countries; and

•

our ability to attract and retain key scientific or management personnel.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligations to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CABALETTA BIO, INC.

Condensed Balance Sheets

(in thousands, except share and per share amounts)


	September 30, 2022			December 31, 2021
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	61,163		$	122,222
Short-term investments		24,732			—
Prepaid expenses and other current assets		2,280			2,319
Total current assets		88,175			124,541
Property and equipment, net		2,811			1,438
Other assets		689			357
Total Assets	$	91,675		$	126,336
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,333		$	2,333
Accrued and other current liabilities		4,468			6,047
Total current liabilities		5,801			8,380
Commitments and Contingencies (see Note 6)
Stockholders’ equity:
Preferred stock, $0.00001 par value: 10,000,000 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued or outstanding at September 30, 2022 and December 31, 2021		—			—
Voting and non-voting common stock, $0.00001 par value: 150,000,000 (143,590,481 voting and 6,409,519 non-voting) shares authorized as of September 30, 2022 and December 31, 2021; 29,013,995 (25,601,495 voting and 3,412,500 non-voting) shares issued and outstanding as of September 30, 2022 and 28,927,129 (24,614,629 voting and 4,312,500 non-voting) shares issued and outstanding as of December 31, 2021		—			—
Additional paid-in capital		235,953			230,543
Accumulated other comprehensive loss		(209	)		—
Accumulated deficit		(149,870	)		(112,587	)
Total stockholders’ equity		85,874			117,956
Total liabilities and stockholders’ equity	$	91,675		$	126,336

The accompanying notes are an integral part of these financial statements.

CABALETTA BIO, INC.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating expenses:
Research and development	$	8,216		$	8,169		$	26,900		$	22,575
General and administrative		3,562			3,394			10,937			9,845
Total operating expenses		11,778			11,563			37,837			32,420
Loss from operations		(11,778	)		(11,563	)		(37,837	)		(32,420	)
Other income:
Interest income		351			3			554			19
Net loss	$	(11,427	)	$	(11,560	)	$	(37,283	)	$	(32,401	)
Other comprehensive income:
Net unrealized gain (loss) on available-for-sale investments, net of tax		40			(1	)		(209	)		(6	)
Net comprehensive loss	$	(11,387	)	$	(11,561	)	$	(37,492	)	$	(32,407	)
Net loss per share of voting and non-voting common stock, basic and diluted	$	(0.39	)	$	(0.45	)	$	(1.29	)	$	(1.31	)

The accompanying notes are an integral part of these financial statements.

CABALETTA BIO, INC.

Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


	Common Stock
	Shares		Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance—December 31, 2020		24,062,775	$	—	$	175,836	$	6		$	(66,298	)	$	109,544
Stock-based compensation		—		—		1,310		—			—			1,310
Common stock issuance, net of $67 of issuance costs		194,189		—		2,165		—			—			2,165
Net unrealized losses on available-for-sale securities		—		—		—		(3	)		—			(3	)
Net loss		—		—		—		—			(9,702	)		(9,702	)
Balance—March 31, 2021		24,256,964	$	—	$	179,311	$	3		$	(76,000	)	$	103,314
Stock-based compensation		—		—		1,385		—			—			1,385
Common stock issuance, net of $237 of issuance costs		701,469		—		7,665		—			—			7,665
Issuance of common stock in connection with exercise of stock options		9,563		—		60		—			—			60
Issuance of common stock under employee stock purchase plan		4,834		—		46		—			—			46
Net unrealized losses on available-for-sale securities		—		—		—		(2	)		—			(2	)
Net loss		—		—		—		—			(11,139	)		(11,139	)
Balance—June 30, 2021		24,972,830	$	—	$	188,467	$	1		$	(87,139	)	$	101,329
Stock-based compensation		—		—		1,508		—			—			1,508
Common stock issuance, net of $769 of issuance costs		2,710,347		—		24,880		—			—			24,880
Issuance of common stock in connection with exercise of stock options		48,461		—		459		—			—			459
Net unrealized losses on available-for-sale securities		—		—		—		(1	)		—			(1	)
Net loss		—		—		—		—			(11,560	)		(11,560	)
Balance—September 30, 2021		27,731,638	$	—	$	215,314	$	—		$	(98,699	)	$	116,615

The accompanying notes are an integral part of these financial statements.

CABALETTA BIO, INC.

Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


	Common Stock
	Shares		Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance—December 31, 2021		28,927,129	$	—	$	230,543	$	—		$	(112,587	)	$	117,956
Stock-based compensation		—		—		1,811		—			—			1,811
Net unrealized losses on available-for-sale securities		—		—		—		(152	)		—			(152	)
Issuance of common stock in connection with exercise of stock options		50,000		—		51		—			—			51
Net loss		—		—		—		—			(12,946	)		(12,946	)
Balance—March 31, 2022		28,977,129	$	—	$	232,405	$	(152	)	$	(125,533	)	$	106,720
Stock-based compensation		—		—		1,777		—			—			1,777
Net unrealized losses on available-for-sale securities		—		—		—		(97	)		—			(97	)
Issuance of common stock under employee stock purchase plan		36,866		—		40		—			—			40
Net loss		—		—		—		—			(12,910	)		(12,910	)
Balance—June 30, 2022		29,013,995	$	—	$	234,222	$	(249	)	$	(138,443	)	$	95,530
Stock-based compensation		—		—		1,731		—			—			1,731
Net unrealized gains on available-for-sale securities		—		—		—		40			—			40
Net loss		—		—		—		—			(11,427	)		(11,427	)
Balance—September 30, 2022		29,013,995	$	—	$	235,953	$	(209	)	$	(149,870	)	$	85,874

The accompanying notes are an integral part of these financial statements.

CABALETTA BIO, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(37,283	)	$	(32,401	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		5,319			4,203
Amortization of discount/premium on investments		(177	)		62
Depreciation		820			499
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		39			3,280
Other assets		(332	)		(25	)
Accounts payable		(1,055	)		409
Accrued and other current liabilities		(1,580	)		379
Net cash used in operating activities		(34,249	)		(23,594	)
Cash flows from investing activities:
Purchases of property and equipment		(2,137	)		(1,015	)
Purchases of investments		(49,764	)		—
Proceeds from maturities of investments		25,000			6,165
Net cash (used in) provided by investing activities		(26,901	)		5,150
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs		—			34,710
Proceeds from issuance of common stock in connection with the exercise of stock options		51			519
Proceeds from issuance of common stock under employee stock purchase plan		40			46
Net cash provided by financing activities		91			35,275
Net (decrease) increase in cash and cash equivalents		(61,059	)		16,831
Cash and cash equivalents—beginning of period		122,222			101,429
Cash and cash equivalents—end of period	$	61,163		$	118,260
Supplemental disclosures of non-cash investing and financing activities:
Property and equipment purchases included in accounts payable	$	191		$