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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 March 31, 2024

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: 001-39103

 

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.

 

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 May 10, 2024, the registrant had 48,276,522 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

33

Item 4.

Controls and Procedures

33

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

92

Item 3.

Defaults Upon Senior Securities

92

Item 4.

Mine Safety Disclosures

92

Item 5.

Other Information

92

Item 6.

Exhibits

93

Signatures

94

 

 

 

i


 

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 relationships with University of Pennsylvania, or Penn, and/or WuXi Advanced Therapies, Inc., or WuXi, for our current manufacturing needs for our Phase 1/2 RESETTM, or Restoring Self-Tolerance, clinical trials for CABA-201, our Phase 1 clinical trial of DSG3-CAART, or the DesCAARTesTM trial, and our Phase 1 clinical trial of MuSK-CAART, or the MusCAARTesTM trial, and if Penn's or WuXi's manufacturing capacity is reduced or otherwise delayed or limited, including due to legislative action, or if we, Penn, WuXi or any third-party manufacturers encounter difficulties in manufacturing our product candidates, this could adversely impact the supply of product candidates for and enrollment in our trials.
We are reliant on intellectual property licensed to us by Penn and Nanjing IASO Biotherapeutics Co., Ltd., or IASO, and termination of one of these license agreements 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 RESETTM clinical trials for CABA-201, our DesCAARTesTM trial, or the MusCAARTesTM trial, or future clinical trials, 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.
Manufacturing and administering our product candidates is complex and we may encounter difficulties in technology transfer 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.

 

1


 

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 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 Phase 1/2 RESETTM clinical trials for CABA-201, our DesCAARTesTM trial, our MusCAARTesTM trial, and any other product candidates, including statements regarding the timing of initiation, enrollment 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 RESETTM clinical trials for CABA-201, DesCAARTesTM trial, or MusCAARTesTM trial;
the timing of and our ability to obtain and maintain regulatory approval of our product candidates, including CABA-201, DSG3-CAART, MuSK-CAART, and our other product candidates, 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 IASO;
the potential benefits of our Orphan Drug, Rare Pediatric Disease and Fast Track designations;
our expected use of proceeds from sales of our common stock in “at-the-market” offerings and other 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;
the potential advantages of our proprietary Cabaletta Approach for B cell Ablation platform, called our CABA® platform, and our product candidates;
the extent to which our scientific approach and CABA® platform may potentially address a broad range of diseases;
the potential benefits and success of our arrangements with Penn, the Children’s Hospital of Philadelphia, or CHOP, and WuXi;
our ability to successfully leverage our research and translational insights;
our expectations regarding the results observed with the similarly-designed construct employed in recent academic publications, including the dosing regimen, and the implications on CABA-201;
our ability to successfully commercialize our product candidates, including CABA-201, DSG3-CAART, MuSK-CAART and any other product candidates;
the potential receipt of revenue from future sales of CABA-201, DSG3-CAART, MuSK-CAART and any other product candidates, if approved;
the rate and degree of market acceptance and clinical utility of CABA-201, DSG3-CAART, MuSK-CAART and any other product candidates;
our estimates regarding the potential market opportunity for CABA-201, DSG3-CAART, MuSK-CAART and any 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 CABA-201, DSG3-CAART, MuSK-CAART and any other product candidates;
our ability to obtain funding for our operations, including funding necessary to initiate and complete our RESETTM clinical trials of CABA-201, our DesCAARTesTM trial, our MusCAARTesTM trial and any ongoing preclinical studies of other product candidates;

2


 

our expectations for the efficiency of the trial design for our RESETTM clinical trials for CABA-201 and the potential success and therapeutic benefits of CABA-201, including our belief that CABA-201 may enable an “immune system reset” and provide deep and durable responses in patients across an increasing number of autoimmune diseases;
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.

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CABALETTA BIO, INC.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Assets

 

(unaudited)

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

175,293

 

 

$

193,238

 

Short-term investments

 

 

48,552

 

 

 

48,011

 

Prepaid expenses and other current assets

 

 

3,635

 

 

 

3,241

 

Total current assets

 

 

227,480

 

 

 

244,490

 

Property and equipment, net

 

 

2,918

 

 

 

2,541

 

Operating lease right-of-use assets

 

 

7,691

 

 

 

4,910

 

Other assets

 

 

2,368

 

 

 

1,709

 

Total Assets

 

$

240,457

 

 

$

253,650

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,843

 

 

$

4,547

 

Accrued and other current liabilities

 

 

4,725

 

 

 

7,887

 

Operating lease liabilities, current portion

 

 

7,404

 

 

 

3,560

 

Total current liabilities

 

 

17,972

 

 

 

15,994

 

Operating lease liabilities, net of current portion

 

 

765

 

 

 

1,458

 

Total Liabilities

 

 

18,737

 

 

 

17,452

 

Commitments and contingencies (see Notes 5 and 6)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

  Preferred stock, $0.00001 par value: 10,000,000 shares authorized as of March
   31, 2024 and December 31, 2023;
no shares issued or outstanding at March 31,
   2024 and December 31, 2023

 

 

 

 

 

 

  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 March 31,
   2024 and December 31, 2023;
48,249,115 (46,804,820 voting and
   
1,444,295 non-voting) shares issued and outstanding as of March 31, 2024 and
   
47,823,232 (46,378,937) voting and 1,444,295 non-voting) shares issued and
   outstanding as of December 31, 2023

 

 

 

 

 

 

Additional paid-in capital

 

 

480,042

 

 

 

469,396

 

Accumulated other comprehensive loss

 

 

(38

)

 

 

39

 

Accumulated deficit

 

 

(258,284

)

 

 

(233,237

)

Total stockholders’ equity

 

 

221,720

 

 

 

236,198

 

Total liabilities and stockholders’ equity

 

$

240,457

 

 

$

253,650

 

 

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

4


 

CABALETTA BIO, INC.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

 

Three Months Ended
March 31,

 

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

 

$

21,954

 

 

$

12,435

 

General and administrative

 

 

 

6,077

 

 

 

4,521

 

Total operating expenses

 

 

 

28,031

 

 

 

16,956

 

Loss from operations

 

 

 

(28,031

)

 

 

(16,956

)

Other income:

 

 

 

 

 

 

 

Interest income

 

 

 

2,984

 

 

 

1,102

 

Net loss

 

 

$

(25,047

)

 

$

(15,854

)

Other comprehensive income:

 

 

 

 

 

 

 

Net unrealized (loss) gain on available-for-sale investments, net of tax

 

 

 

(77

)

 

 

47

 

Net comprehensive loss

 

 

$

(25,124

)

 

$

(15,807

)

Net loss per share of voting and non-voting common stock, basic and diluted

 

 

$

(0.51

)

 

$

(0.45

)

 

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

5


 

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

 

 

Accumulated Deficit

 

 

Total
Stockholders’ Equity

 

Balance—December 31, 2022

 

29,445,134

 

 

$

 

 

$

270,129

 

 

$

(47

)

 

$

(165,562

)

 

$

104,520

 

Stock-based compensation

 

 

 

 

 

 

 

2,480

 

 

 

 

 

 

 

 

 

2,480

 

Net unrealized gains on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

47

 

 

 

 

 

 

47

 

Issuance of common stock in connection with exercise of stock options

 

84,264

 

 

 

 

 

 

458

 

 

 

 

 

 

 

 

 

458

 

Issuance of common stock upon exercise of pre-funded warrants

 

1,811,591

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,854

)

 

 

(15,854

)

Balance—March 31, 2023

 

31,340,989

 

 

$

 

 

$

273,067

 

 

$

 

 

$

(181,416

)

 

$

91,651

 

 

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

 

6


 

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, 2023

 

47,823,232

 

 

$

 

 

$

469,396

 

 

$

39

 

 

$

(233,237

)

 

$

236,198

 

Issuance of common stock, net of issuance costs of $147

 

258,070

 

 

 

 

 

 

5,746

 

 

 

 

 

 

 

 

 

5,746

 

Stock-based compensation

 

 

 

 

 

 

 

3,791

 

 

 

 

 

 

 

 

 

3,791

 

Net unrealized losses on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

(77

)

 

 

 

 

 

(77

)

Issuance of common stock in connection with exercise of stock options

 

167,813

 

 

 

 

 

 

1,109

 

 

 

 

 

 

 

 

 

1,109

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,047

)

 

 

(25,047

)

Balance—March 31, 2024

 

48,249,115

 

 

$

 

 

$

480,042

 

 

$

(38

)

 

$

(258,284

)

 

$

221,720

 

 

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

 

7


 

CABALETTA BIO, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(25,047

)

 

$

(15,854

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

3,791

 

 

 

2,480

 

Depreciation

 

 

393

 

 

 

365

 

Non-cash lease expense

 

 

1,428

 

 

 

452

 

Accretion of lease liabilities

 

 

194

 

 

 

104

 

Amortization of discount on investments

 

 

(617

)

 

 

(13

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(394

)

 

 

398

 

Other assets

 

 

(659

)

 

 

(16

)

Accounts payable

 

 

1,655

 

 

 

1,724

 

Accrued and other current liabilities

 

 

(3,480

)

 

 

(1,678

)

Lease liabilities

 

 

(1,252

)

 

 

(570

)

Net cash used in operating activities

 

 

(23,988

)

 

 

(12,608

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(812

)

 

 

(380

)

Purchases of investments

 

 

 

 

 

 

Proceeds from maturities of investments

 

 

 

 

 

25,000

 

Net cash (used in) provided by investing activities

 

 

(812

)

 

 

24,620

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from the issuance of common stock, net of issuance costs

 

 

5,746

 

 

 

(232

)

Proceeds from issuance of common stock in connection with the exercise of
  stock options

 

 

1,109

 

 

 

458

 

Net cash provided by financing activities

 

 

6,855

 

 

 

226

 

Net (decrease) increase in cash and cash equivalents

 

 

(17,945

)

 

 

12,238

 

Cash and cash equivalents—beginning of period

 

 

193,238

 

 

 

81,607

 

Cash and cash equivalents—end of period

 

$

175,293

 

 

$

93,845

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

Property and equipment purchases included in accounts payable and accrued expenses

 

$

662

 

 

$

 

Right-of-use assets obtained in exchange for lease obligations

 

$

4,210

 

 

$

 

Offering costs included in accounts payable

 

$

 

 

$

60

 

 

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

8


 

CABALETTA BIO, INC.

Notes to Unaudited Condensed Financial Statements

(in thousands, except share and per share amounts)

1. Basis of Presentation

Cabaletta Bio, Inc. (the Company or Cabaletta) was incorporated in April 2017 in the State of Delaware as Tycho Therapeutics, Inc. and, in August 2018, changed its name to Cabaletta Bio, Inc. The Company is headquartered in Philadelphia, Pennsylvania. Cabaletta is a clinical-stage biotechnology company focused on the discovery and development of engineered T cell therapies for autoimmune diseases. Principal operations commenced in April 2018.

Risks and Uncertainties

 

The Company does not expect to generate revenue from sales of engineered T cell therapies for autoimmune diseases or any other revenue unless and until the Company completes preclinical and clinical development and obtains regulatory approval for one or more product candidates. If the Company seeks to obtain regulatory approval for any of its product candidates, the Company expects to incur significant commercialization expenses.

The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. As a result, the Company is unable to predict the timing or amount of increased expenses or when or if the Company will be able to achieve or maintain profitability. Further, the Company is dependent on third parties for certain research and development activities, including manufacturing services (Note 5 and Note 6). Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. Even if the Company is able to generate revenues from the sale of its product candidates, if approved, it may not become profitable. If the Company fails to become profitable or is unable to sustain profitability on a continuing basis, then it may be unable to continue its operations at planned levels and be forced to reduce its operations.

 

Liquidity

The Company has sustained annual operating losses since inception and expects to continue to generate operating losses for the foreseeable future. The Company’s ultimate success depends on the outcome of its research and development activities. The Company had cash, cash equivalents and investments of $223,845 as of March 31, 2024. Through March 31, 2024, the Company has incurred an accumulated deficit of $258,284. Management expects to incur additional losses in the future as it continues its research and development and will need to raise additional capital to fully implement its business plan and to fund its operations.

The Company intends to raise such additional capital through a combination of equity offerings, debt financings, government funding arrangements, strategic alliances or other sources. However, if such financing is not available at adequate levels and on a timely basis, or such agreements are not available on favorable terms, or at all, as and when needed, the Company will need to reevaluate its operating plan and may be required to delay or discontinue the development of one or more of its product candidates or operational initiatives. The Company expects that its cash, cash equivalents and investments as of March 31, 2024, will be sufficient to fund its projected operations for at least 12 months following the date the Company files this Quarterly Report on Form 10-Q with the Securities and Exchange Commission (SEC).

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited interim financial statements have been prepared in conformity with generally accepted accounting principles (GAAP) and the applicable rules and regulations of the SEC regarding interim financial reporting. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB). As permitted under these rules, certain footnotes and other financial information that are normally required by GAAP have been condensed or omitted.

9


 

In the opinion of management, the accompanying unaudited interim financial statements include all normal and recurring adjustments (which consist primarily of accruals and estimates that impact the financial statements) considered necessary to present fairly the Company’s financial position as of March 31, 2024 and the results of its operations and its cash flows for the three months ended March 31, 2024 and 2023. The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. The balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date. The unaudited interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements, which are included in the Company’s 2023 Annual Report on Form 10-K, filed with the SEC on March 21, 2024 (2023 Annual Report).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions made in the accompanying financial statements include but are not limited to advance payments and accruals related to the Company’s research and development expenses. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.

 

Off-Balance Sheet Risk and Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist of cash and cash equivalents, which are invested in U.S. treasury-based money market funds, and available-for-sale debt securities, which are invested in U.S. treasury securities. A portion of the Company’s cash is maintained at two federally insured financial institutions, and account balances may at times exceed federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk. The Company has no off‑balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.

 

Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies during the three months ended March 31, 2024, as compared to the significant accounting policies described in Note 2 of the “Notes to the Financial Statements” in the Company’s audited financial statements included in its 2023 Annual Report.

Fair Value Measurement

Assets and liabilities recorded at fair value on a recurring basis in the 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

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.

10


 

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). 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. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The Company's status as an emerging growth company will end on December 31, 2024, which will be the last day of the fiscal year ending after the fifth anniversary of the Company's initial public offering.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This ASU requires that a public entity provide additional segment disclosures on an interim and annual basis. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements, unless impracticable. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently planning to adopt this guidance when effective and is assessing the impact of the adoption on the Company’s financial statements and accompanying footnotes.

 

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. ASU 2023-09 enhances the transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently planning to adopt this guidance when effective and is assessing the impact of the adoption on the Company’s financial statements and accompanying footnotes.

 

3. Fair Value Measurements

 

Fair value of financial instruments

 

At March 31, 2024 and December 31, 2023, the Company’s financial instruments included cash and cash equivalents, available-for-sale debt securities, accounts payable and accrued expenses. The carrying amounts for cash and cash equivalents, accounts payable and accrued expenses reported in the Company’s financial statements for these instruments approximate their respective fair values because of the short-term nature of these instruments.

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

 

 

March 31, 2024

 

 

 

Total

 

 

Quoted
Prices in
Active Markets
for Identical
Assets (Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

173,956

 

 

$

173,956

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

48,552

 

 

 

 

 

 

48,552

 

 

 

 

Total

 

$

222,508

 

 

$

173,956

 

 

$

48,552

 

 

$

 

 

11


 

 

 

 

December 31, 2023

 

 

 

Total

 

 

Quoted
Prices in
Active Markets
for Identical
Assets (Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

180,124

 

 

$

180,124

 

 

$

 

 

$

 

U.S. Treasury securities - original maturity less than three months

 

 

12,371

 

 

 

 

 

 

12,371

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

48,011

 

 

 

 

 

 

48,011

 

 

 

 

Total

 

$

240,506

 

 

$

180,124

 

 

$

60,382

 

 

$

 

 

Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1 inputs. Investments are measured at fair value based on inputs other than quoted prices that are derived from observable market data and are classified as Level 2 inputs.

For debt securities classified as available-for-sale investments, the Company records unrealized gains or losses resulting from changes in fair value between measurement dates as a component of other comprehensive income.

 

 

 

March 31, 2024

 

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair value

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

1,337

 

 

$

 

 

$

 

 

$

1,337

 

Money market funds

 

 

173,956

 

 

 

 

 

 

 

 

 

173,956

 

Included in cash and cash equivalents

 

 

175,293

 

 

 

 

 

 

 

 

 

175,293

 

U.S. Treasury securities - due in one year or less

 

 

 

 

 

 

 

 

 

 

 

 

Included in short-term investments

 

 

48,590

 

 

 

 

 

 

(38

)

 

 

48,552

 

Total

 

$

223,883

 

 

$

 

 

$

(38

)

 

$

223,845

 

 

 

 

December 31, 2023

 

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

 

Gross Unrealized Losses

 

 

Fair value

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

743

 

 

$

 

 

 

$

 

 

$

743

 

Money market funds

 

 

180,124

 

 

 

 

 

 

 

 

 

 

180,124

 

U.S. Treasury securities - original maturity less than three months

 

 

12,367

 

 

 

4

 

 

 

 

 

 

 

12,371

 

Included in cash and cash equivalents

 

 

193,234

 

 

 

4

 

 

 

 

 

 

 

193,238

 

U.S. Treasury securities - due in one year or less

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in short-term investments

 

 

47,976

 

 

 

39

 

 

 

 

(4

)

 

 

48,011

 

Total

 

$

241,210

 

 

$

43

 

 

 

$

(4

)

 

$

241,249

 

 

12


 

 

4. Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following:

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Research and development services

 

$

2,521

 

 

$

2,459

 

General and administrative services

 

 

431

 

 

 

188

 

Compensation expense

 

 

1,723

 

 

 

5,200

 

Other

 

 

50

 

 

 

40

 

 

 

$

4,725

 

 

$

7,887

 

 

5. Collaborations, Licensing Agreements and Other Agreements

Amended and Restated License Agreement with the Trustees of the University of Pennsylvania and Children’s Hospital of Philadelphia

 

In August 2018, the Company entered into a license agreement with Penn, as amended and restated in July 2019 to include the Children’s Hospital of Philadelphia (CHOP) as a party, and as amended in May 2020 and October 2021 (the License Agreement) pursuant to which the Company obtained (a) a non-exclusive, non-sublicensable worldwide license to certain of Penn’s intellectual property to conduct research, product development, clinical trials, cell manufacturing and other activities, and (b) an exclusive, worldwide, royalty-bearing right and license, with a right to sublicense, on a target-by-target basis, under certain of Penn’s intellectual property to make, use, sell, offer for sale, import, and otherwise commercialize products for the treatment of autoimmune and alloimmune diseases. Unless earlier terminated, the License Agreement expires on the expiration or abandonment or other termination of the last valid claim in Penn’s intellectual property licensed by the Company. The Company may terminate the License Agreement at any time for convenience upon 60 days written notice. In the event of an uncured, material breach, Penn may terminate the License Agreement upon 60 days written notice. Under the terms of the License Agreement, the Company was obligated to pay $2,000 annually for three years beginning August 2018 for funding to the laboratories of each of Drs. Milone and Payne. This was satisfied through completed sponsored research agreements with a total cost of $12,560. During the term of the License Agreement until the first commercial sale of the first product, the Company is obligated to pay Penn a non-refundable, non-creditable annual license maintenance fee of $10. In May 2020, the Company paid Penn an additional, non-refundable, non-creditable license fee of $33 under the amended License Agreement.

 

The Company is required to pay certain milestone payments upon the achievement of specified clinical and commercial milestones. Milestone payments are reduced by a certain percentage for the second product that achieves a milestone, by an additional percentage for the third product that achieves a milestone, and so on, for each subsequent product that achieves a milestone. In the event that the Company is able to successfully develop and launch multiple products under the License Agreement, total milestone payments could be approximately $21,000. Penn is also eligible to receive tiered royalties at percentage rates in the low single-digits, subject to an annual minimum royalty, on annual worldwide net sales of any products that are commercialized by the Company or its sublicensees that contain or incorporate, or are covered by, the intellectual property licensed by the Company. To the extent the Company sublicenses its license rights under the License Agreement, Penn would be eligible to receive tiered sublicense income at percentage rates in the mid-single to low double-digits. There were no amounts due under the License Agreement as of March 31, 2024.

 

Master Translational Research Services Agreements

 

In October 2018 and February 2023, the Company entered into services agreements (the CAART and CARTA Services Agreements) with Penn for research, development and manufacturing services from various laboratories within Penn. The activities are detailed in separately executed Penn organization-specific addenda. In May 2020, the Company amended its Addendum with the Center for Advanced Retinal and Ocular Therapeutics (CAROT) to expand access to vector manufacturing.

 

Research and development expense related to executed addenda under the master translational research service agreements with Penn recognized in the accompanying statements of operations was $713 and $1,511 for the three months ended March 31, 2024 and 2023, respectively. The Company may incur additional expenses up to $643 through the remaining term of the CAROT Amended Addendum.

13


 

 

Exclusive License Agreement with IASO Biotherapeutics

 

On October 7, 2022, the Company entered into an Exclusive License Agreement (the IASO Agreement) with Nanjing IASO Biotherapeutics Co., Ltd. (IASO). Pursuant to the IASO Agreement, the Company received an exclusive, worldwide license under certain IASO intellectual property to use a novel clinical-stage anti-CD19 binder to develop, manufacture, commercialize and otherwise exploit T cell products directed to CD19 for the purpose of diagnosis, prevention or treatment of any autoimmune or alloimmune indications in humans. As partial consideration for the exclusive license, IASO received an upfront payment of $2,500. IASO is also eligible to receive up to mid double digit millions in milestone payments based upon the achievement of specified pre-clinical, development and regulatory milestones, and up to an additional low triple digit millions in milestone payments based upon achievement of specified sales milestones, for a total consideration, inclusive of the upfront payment, of up to $162,000, along with tiered mid-single digit royalties on future net sales for licensed products that may result from the IASO Agreement. Upon the U.S. Food and Drug Association’s clearance of the CABA-201 Investigational New Drug application for the treatment of systemic lupus erythematosus in March 2023, a milestone payment of $1,000 was recognized in the accompanying statements of operations. A milestone payment of $1,500 was paid to IASO in the first quarter of 2024 after the first patient in a CABA-201 trial was dosed.

 

IASO has the right of first negotiation if the Company desires to grant a third party an exclusive license to develop, manufacture, commercialize or otherwise exploit the licensed products in the Greater China region. Pursuant to the IASO Agreement, each of IASO and the Company have agreed, subject to certain exceptions, to refrain from engaging in certain competitive activities with respect to certain programs. The Company also may sublicense through multiple tiers the rights granted to it by IASO under the IASO Agreement at any time, however, it must pay IASO a low double-digit percentage of any revenue obtained from sublicenses or options to third parties, subject to certain customary exclusions. The IASO Agreement will continue on a country-by-country, licensed product-by-licensed product basis until the expiration of the royalty term as identified in the IASO Agreement, unless earlier terminated. Each of the Company and IASO may terminate the Agreement for a material, uncured breach or insolvency of the other party. The Company may also terminate the Agreement at will upon advance written notice and in the event IASO rejects the Agreement due to bankruptcy-related matters. IASO may also terminate the Agreement if the Company fails to achieve certain specified diligence milestones in a timely manner and/or if the Company commences any patent challenges with respect to the patents and patent applications relating to the licensed sequence, in each case upon advance written notice.

Artisan Collaboration and License Agreement

In July 2020 and as amended in January 2023, the Company entered into a collaboration and license agreement with Artisan Bio, Inc. (Artisan), wherein the Company and Artisan agreed to collaborate to potentially enhance certain pipeline products of the Company at specific targets using Artisan’s gene editing and engineering technology. If the Artisan technology is applied to any of the Company’s products, the Company will be responsible for the development, manufacturing, and commercialization of any such products. Under the terms of the agreement, the Company was required to pay Artisan a nominal upfront fee, as well as costs associated with research and development activities. Artisan is eligible to receive future development and regulatory milestones, and is also eligible to receive sales milestones and tiered royalties on net sales of products that incorporate the Artisan technology. The Company can terminate the agreement at will upon advance written notice at no cost. In January 2024, the Company was notified that the agreement would be assigned in connection with Artisan's general assignment for the benefit of creditors. The agreement remains effective.

Licence and Supply Agreement with Oxford Biomedica

 

In December 2021, the Company entered into a Licence and Supply agreement (LSA) with Oxford Biomedica (UK) Limited (Oxford), wherein the LSA grants the Company a non-exclusive license to Oxford’s LentiVector® platform for its application in the Company’s DSG3-CAART program and puts in place a multi-year vector supply agreement. Under the terms of the agreement, the Company was required to pay Oxford an upfront fee, as well as costs associated with initial vector manufacturing activities for a total cost of up to approximately $4,000, of which project to date expense of $1,100 has been recognized. Oxford is eligible to receive regulatory and sales milestones in the low tens of millions and royalties in the low single digits on net sales of products that incorporate the Oxford technology. The Company can terminate the agreement at will upon advance written notice and subject to certain manufacturing slot cancellation fees. In May 2023, the Company amended the LSA with Oxford to expand the license to include the Company's CABA-201 program for an upfront fee of $500 and in August 2023, the Company and Oxford entered into a vector supply agreement for CABA-201, and a related second amendment to the LSA, with a total cost under the vector supply agreement of up to approximately $5,000, of which project to date expense of approximately $2,100 has been recognized. In February 2024, the Company and Oxford entered into a third amendment of the LSA to update the patent schedule.

 

Option and License Agreement with Autolus

 

14


 

In January 2023, the Company entered into an Option and License Agreement (Autolus Agreement) with Autolus Holdings (UK) Limited (Autolus), wherein the Autolus Agreement granted the Company a non-exclusive license to access Autolus' RQR8 technology in its CD19-CAR T cell therapy program, and subject to additional nominal option exercise fees, up to four additional targets. Under the terms of the Autolus Agreement, the Company was required to pay Autolus an upfront license fee of $1,200 that was recognized as expense in the first quarter of 2023 in the accompanying statements of operations, of which $1,100 was paid in 2023 and $100 was paid in January 2024. Autolus is also eligible to receive regulatory milestones of up to $12,000 for each licensed target, sales milestones of up to a total of $15,000 and royalties in the low single digits on net sales of all products that incorporate the RQR8 technology. The Autolus Agreement will continue on a country-by-country, licensed product-by-licensed product basis until the expiration of the royalty term as identified in the Autolus Agreement, unless earlier terminated. The Company can terminate the Autolus Agreement at will upon advance written notice. Each of the Company and Autolus may terminate the Agreement for a material, uncured breach or insolvency of the other party.


 

6. Commitments and Contingencies

 

Manufacturing Agreement

In January 2021, the Company entered into a Development and Manufacturing Services Agreement (WuXi Agreement) with WuXi Advanced Therapies, Inc. (WuXi) to serve as an additional cell processing manufacturing partner for the MuSK-CAART Phase 1 clinical trial, or MusCAARTesTM trial. The WuXi Agreement is scheduled to expire upon completion of WuXi’s services related to MuSK-CAART and CABA-201. In August 2023, the Company entered into new work orders under the WuXi Agreement for WuXi to serve as one of the Company’s cell processing manufacturing partners for the planned global clinical development of CABA-201 in multiple indications, including potential late-stage clinical trials and commercial readiness activities for CABA-201. Under the August 2023 work orders, WuXi converted the Company’s non-dedicated suite to a dedicated suite for GMP manufacturing for the Company’s CABA-201 and MuSK-CAART programs, or the Dedicated Suite, for an initial term of 18 months with two 18-month extensions at the Company’s sole option on six months' notice prior to the end of the term. In addition, the Company agreed to certain monthly minimum runs. In lieu of the original $1,500 termination fee under the terms of the WuXi Agreement, the Company would incur a $1,080 termination fee if it terminates both the CABA-201 and MuSK-CAART work orders for any reason. The Company may terminate for convenience the WuXi Agreement or any work order with six months' prior written notice, however, the Company may not terminate the Dedicated Suite without terminating both the MuSK-CAART and CABA-201 GMP run work orders. WuXi may terminate for convenience the WuXi Agreement or any work order on 18 months' prior written notice, but such notice may not be effective prior to February 2028.

Other Purchase Commitments

In the normal course of business, the Company enters into various purchase commitments with third-party contract manufacturers for the manufacture and processing of its product candidates and related raw materials, contracts with contract research organizations for clinical trials and agreements with vendors for other services and products for operating purposes. These agreements generally provide for termination or cancellation, other than for costs already incurred.

Indemnification

The Company enters into certain types of contracts that contingently require the Company to indemnify various parties against claims from third parties. These contracts primarily relate to (i) the Company’s Amended and Restated Bylaws, as amended, (bylaws) under which the Company must indemnify directors and executive officers, and may indemnify other officers and employees, for liabilities arising out of their relationship, (ii) contracts under which the Company must indemnify directors and certain officers and consultants for liabilities arising out of their relationship, (iii) contracts under which the Company may be required to indemnify partners against certain claims, including claims from third parties asserting, among other things, infringement of their intellectual property rights, and (iv) procurement, consulting, or license agreements under which the Company may be required to indemnify vendors, consultants or licensors for certain claims, including claims that may be brought against them arising from the Company’s acts or omissions with respect to the supplied products, technology or services. From time to time, the Company may receive indemnification claims under these contracts in the normal course of business. In addition, under these contracts, the Company may have to modify the accused infringing intellectual property and/or refund amounts received.

In the event that one or more of these matters were to result in a claim against the Company, an adverse outcome, including a judgment or settlement, may have a material adverse effect on the Company’s future business, operating results or financial condition.

15


 

It is not possible to determine the maximum potential amount under these contracts due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.

Litigation

From time to time, the Company may become involved in litigation or legal proceedings. While the outcome of any such proceedings cannot be predicted with certainty, as of March 31, 2024, the Company is not involved in any material litigation or legal proceedings that it would expect to have a material adverse impact on its financial position, results of operations, or cash flows.

 

7. Leases

The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of an arrangement. The Company leases office, laboratory space and a dedicated manufacturing suite at WuXi under operating leases that have a weighted average remaining term of 1.1 years and 1.5 years as of March 31, 2024 and December 31, 2023, respectively.

As described further in Note 6, in August 2023, the Company entered into new work orders under the WuXi Agreement for WuXi to serve as one of the Company’s cell processing manufacturing partners for the global clinical development of CABA-201. WuXi converted the Company’s non-dedicated suite to a Dedicated Suite for GMP manufacturing for the Company’s CABA-201 and MuSK-CAART programs, for an initial term of 18 months. The terms of the August 2023 work orders included both fixed costs and contingent variable costs. The lease commenced October 1, 2023, and a right of use asset and lease liability of $953 was initially recorded for the fixed payments. In the first quarter of 2024, the contingency related to the variable costs was resolved and the lease was remeasured, resulting in an increase in the right of use asset and lease liability of $4,032. The Company may terminate the Dedicated Suite lease for convenience with six months’ prior written notice and a $1,080 termination fee if both the CABA-201 and MuSK-CAART work orders are terminated.

The Company also leases office space under short-term leases that provide for either party to terminate the lease without cause and with 30 days’ notice. The Company’s operating leases include rent escalations and are subject to additional variable charges, including common area maintenance, property taxes and property insurance. Given the variable nature of such costs, they are recognized as expense as incurred. Additionally, some of the Company’s leases are subject to certain fixed fees which the Company has determined to be non-lease components. The Company has elected the practical expedient to account for lease and non-lease components as a single-lease component and has included fixed payments related to non-lease components in calculating the operating lease liability.

The weighted average discount rate for the Company’s operating leases is 10.5% and 9.5% as of March 31, 2024 and December 31, 2023, respectively, representing the Company's incremental borrowing rate at the beginning of each lease. Cash paid for amounts included in the measurement of operating lease liabilities was $1,252 and $570 for the three months ended March 31, 2024 and 2023, respectively.

Future lease payments under the non-cancelable operating leases as of March 31, 2024 are as follows:

 

 

 

 

April 1, 2024 - December 31, 2024

 

$

6,145

 

2025

 

 

2,533

 

     Total undiscounted lease payments

 

 

8,678

 

Less imputed interest

 

 

(509

)

     Total lease liability

 

$

8,169

 

 

8. Common Stock

Common Stock

Pursuant to the Company’s Third Amended and Restated Certificate of Incorporation filed in October 2019, the Company is authorized to issue 143,590,481 shares of voting common stock and 6,409,519 shares of non-voting common stock. Holders of voting common stock shall have the exclusive right to vote for the election of directors of the Company and on all other matters requiring stockholder action. Each share of the Company’s non-voting common stock may be converted at any time into one share of common stock at the option of its holder by providing 61 days written notice to the Company, subject to certain limitations, as described in the amended and restated certificate of incorporation. In May 2024, 1,444,295 shares of non-voting common stock was converted to voting common stock and no shares of non-voting common stock remain outstanding.

 

May 2023 Financing

16


 

In May 2023, the Company issued 8,337,500 shares of its common stock in an underwritten public offering, including the exercise in full by the underwriters of their option to purchase an additional 1,087,500 shares, at a public offering price of $12.00 per share. Aggregate net proceeds were $93,755 after deducting underwriting discounts and commissions and offering expenses of $6,295.

 

December 2022 Financing

In December 2022, the Company issued 126,815 shares of its common stock at a price of $5.52 per share and to certain investors in lieu of common stock, pre-funded warrants to purchase 6,213,776 shares of common stock at a price of $5.51999 per pre-funded warrant. The purchase price per share of each pre-funded warrant represents the per share offering price for the common stock, minus the $0.00001 per share exercise price of such pre-funded warrant. Aggregate net proceeds were $32,562 after deducting underwriting discounts and commissions and offering expenses. As of March 31, 2024, 5,045,722 pre-funded warrants had been exercised and 1,168,054 remain outstanding.

The pre-funded warrants were classified as a component of permanent stockholders’ equity within additional paid-in capital and were recorded at the issuance date using a relative fair value allocation method. The pre-funded warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria. In addition, such pre-funded warrants do not provide any guarantee of value or return.

 

 

At-the-Market Offering

On March 21, 2024, the Company filed an automatic shelf registration statement (S-3 ASR) in relation to the registration of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof for the purposes of selling, from time to time, the Company’s common stock, debt securities or other equity securities in one or more offerings. This S-3 ASR became effective immediately.

The Company has a Sales Agreement with Cowen and Company, LLC (Cowen) to provide for the offering, issuance and sale of up to an aggregate amount of $200.0 million of common stock from time to time in “at-the-market” offerings (ATM Program) pursuant to its S-3 ASR, and subject to the limitations thereof.

The Company previously had a Sales Agreement with Cowen to provide for the offering, issuance and sale of up to an aggregate amount of $100.0 million of common stock from time to time in “at-the-market” offerings (2023 ATM Program) pursuant to its shelf registration statement on Form S-3 (File No. 333-270599), which was declared effective April 26, 2023. During the year ended December 31, 2023, the Company sold 4,760,899 shares pursuant to the 2023 ATM Program for net proceeds of $91,740, after deducting commissions of $2,352. In the first quarter of 2024, the Company sold 258,070 additional shares, completing the 2023 ATM Program for net proceeds of $5,746, after deducting commissions of $147.

2018 Stock Option and Grant Plan

In September 2018, the Company adopted the 2018 Stock Option and Grant Plan (the 2018 Plan), which provided for the Company to sell or issue common stock, or other stock-based awards, to employees, members of the board of directors and consultants of the Company. The Company generally granted stock-based awards with service conditions only (service-based awards), although there was one grant with performance conditions. There are no unvested options with performance conditions. Stock options granted under the 2018 Plan generally vest over three to four years. There were 1,959,411 options granted under the 2018 Plan prior to the Company’s IPO in October 2019. No further grants may be made under the 2018 Plan subsequent to the IPO.

 

2019 Stock Option and Incentive Plan

The 2019 Stock Option and Incentive Plan (2019 Plan) was approved by the Company’s board of directors on October 14, 2019, and became effective on October 23, 2019. The 2019 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights to the Company’s officers, employees, directors and consultants. The number of shares initially reserved for issuance under the 2019 Plan was 2,342,288, which will be increased each January 1 thereafter by 4% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation committee of the board of directors. On June 1, 2023, at the 2023 Annual Meeting of Stockholders of the Company, the stockholders of the Company approved Amendment No. 1 to the 2019 Plan, increasing the number of shares of common stock reserved for issuance under the 2019 Plan by 3,000,000 shares. On January 1, 2024, the total number of shares under the

17


 

2019 Plan was increased by 1,912,929 shares pursuant to the 2019 Plan Evergreen Provision. As of March 31, 2024, there were 2,821,913 shares remaining available for issuance under the 2019 Plan.

A summary of stock option activity is presented below:

 

 

Number of
Shares

 

 

Weighted
Average
Exercise Price

 

 

Weighted
Average
Remaining
Contractual
Term (years)

 

 

Aggregate
Intrinsic
Value

 

Outstanding as of January 1, 2024

 

 

8,141,035

 

 

$

8.28

 

 

 

7.6

 

 

$

117,384

 

Granted

 

 

1,858,200

 

 

 

23.80

 

 

 

 

 

 

 

Exercised

 

 

(167,813

)

 

 

6.61

 

 

 

 

 

 

2,615

 

Outstanding as of March 31, 2024

 

 

9,831,422

 

 

$

11.24

 

 

 

7.8

 

 

$

69,765

 

Options Exercisable at March 31, 2024

 

 

4,457,253

 

 

$

7.63

 

 

 

6.5

 

 

$

42,026

 

 

The aggregate intrinsic value of options granted is calculated as the difference between the exercise price of the options and the estimated fair value of the Company’s common stock. The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2024 and 2023 was $19.72 and $9.12, respectively.

The fair value of each award is estimated using Black-Scholes based on the following assumptions:

 

 

 

Three months ended March 31,

 

 

2024

 

2023

Risk-free interest rate

 

3.78%—4.28%

 

3.38%—3.95%

Expected term

 

6.1 years

 

6.1 years

Expected volatility

 

106%

 

106%

Expected dividend yield

 

0%

 

0%

 

Black-Scholes requires the use of subjective assumptions which determine the fair value of stock-based awards. These assumptions include:

Expected term—The expected term represents the period that stock-based awards are expected to be outstanding. The expected term for option grants is determined using the simplified method, which is the midpoint between the vesting period and the contractual term of the option.

Expected volatility—As a privately held company prior to the Company’s IPO in October 2019, the Company has limited trading history for its common stock and, as such, the expected volatility is estimated based on a weighted average volatility for the Company's stock price and comparable publicly traded biotechnology companies over a period equal to the expected term of the stock-based awards. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of a stock-based award.

Expected dividend—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

Stock-based Compensation

 

The Company has recorded stock-based compensation in the accompanying statements of operations as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

1,960

 

 

$

1,236

 

General and administrative

 

 

1,831

 

 

 

1,244

 

Total

 

$

3,791

 

 

$

2,480

 

 

18


 

 

As of March 31, 2024, there was $58,691 of unrecognized compensation cost related to unvested option awards, which is expected to be recognized over a weighted-average period of 3.3 years.

 

2019 Employee Stock Purchase Plan

 

The 2019 Employee Stock Purchase Plan (2019 ESPP) was approved by the Company’s board of directors on October 14, 2019, and became effective on October 23, 2019. A total of 234,229 shares of common stock were initially reserved for issuance under the 2019 ESPP, and such number of shares will be increased each January 1 thereafter through January 1, 2029 by the least of (i) 234,229 shares of common stock, (ii) 1% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or (iii) such lesser number of shares determined by the 2019 ESPP’s administrator. There was no increase to the total number of shares available under the 2019 ESPP on January 1, 2024, 2023 or 2022, respectively. As of March 31, 2024, there were 372,315 shares remaining available for issuance under the 2019 ESPP.

 

Employee contributions are made through payroll deductions of up to 15% of eligible compensation over the offering period. A participant may not accrue rights to purchase more than $25 worth of the Company’s common stock for each calendar year in which such right is outstanding. At the end of each offering period, shares of the Company’s common stock may be purchased at 85% of the lesser of the Company’s common stock on (i) the first trading day of the relevant offering period and (ii) the last trading day of the relevant offering period. Each offering period will be six months in duration and will commence on each December 1 and June 1.

9. Income Taxes

The Company did not record an income tax benefit in its statements of operations for the three months ended March 31, 2024 and 2023 as it is more likely than not that the Company will not recognize the federal and state deferred tax benefits generated by its losses. The Company has provided a valuation allowance for the full amount of its net deferred tax assets and liabilities as of March 31, 2024 and December 31, 2023, as management has determined it is more likely than not that any future benefit from deductible temporary differences and net operating loss and tax credit carryforwards would not be realized. The Company has not recorded any amounts for unrecognized tax benefits as of March 31, 2024 and December 31, 2023.

 

10. Net Loss Per Share

The Company calculates basic and diluted net loss per share in conformity with the two-class method required for participating securities. For the three months ended March 31, 2024 and 2023, the Company had voting and non-voting common stock outstanding. Since the rights of the voting and non-voting common stock are identical, except with respect to voting, the undistributed losses of the Company have been allocated on a proportionate basis to the two classes. Basic net loss per share of common stock is computed by dividing the net loss per share of common stock by the weighted average number of shares of common stock outstanding for the period. The weighted-average shares of common stock outstanding as of March 31, 2024 and 2023 included outstanding pre-funded warrants to purchase, respectively, up to an aggregate of 1,168,054 and 4,130,442 shares of common stock.

Diluted net loss per share is calculated using the if-converted method, which assumes conversion of all non-voting common stock to voting common stock.

19


 

 

 

Three months ended
March 31, 2024

 

 

 

Voting common stock

 

 

Non-voting common stock

 

Basic net loss per share:

 

 

 

 

 

 

Numerator

 

 

 

 

 

 

Allocation of undistributed losses

 

$

(24,313

)

 

$

(734

)

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

Weighted average number of shares used in basic per share computation

 

 

47,858,608

 

 

 

1,444,295

 

Net loss per share, basic

 

$

(0.51

)

 

$

(0.51

)

 

 

 

 

 

 

 

Diluted net loss per share:

 

 

 

 

 

 

Numerator

 

 

 

 

 

 

Allocation of undistributed losses for basic computation

 

$

(24,313

)

 

$

(734

)

Reallocation of undistributed losses as a result of conversion of
     non-voting to voting common shares

 

 

(734

)

 

 

 

Allocation of undistributed losses

 

$

(25,047

)

 

$

(734

)

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

Weighted average number of shares used in basic per share computation

 

 

47,858,608

 

 

 

1,444,295

 

Add: conversion of non-voting to voting common shares outstanding

 

 

1,444,295

 

 

 

 

Weighted average number of shares used in diluted per share computation

 

 

49,302,903

 

 

 

1,444,295

 

Net loss per share, diluted

 

$

(0.51

)

 

$

(0.51

)

 

 

 

 

Three months ended
March 31, 2023

 

 

 

Voting common stock

 

 

Non-voting common stock

 

Basic net loss per share:

 

 

 

 

 

 

Numerator

 

 

 

 

 

 

Allocation of undistributed losses

 

$

(15,022

)

 

$

(832

)

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

Weighted average number of shares used in basic per share computation

 

 

33,588,436

 

 

 

1,860,759

 

Net loss per share, basic

 

$

(0.45

)

 

$

(0.45

)

 

 

 

 

 

 

 

Diluted net loss per share:

 

 

 

 

 

 

Numerator

 

 

 

 

 

 

Allocation of undistributed losses for basic computation

 

$

(15,022

)

 

$

(832

)

Reallocation of undistributed losses as a result of conversion of
     non-voting to voting common shares

 

 

(832

)

 

 

 

Allocation of undistributed losses

 

$

(15,854

)

 

$

(832

)

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

Weighted average number of shares used in basic per share computation

 

 

33,588,436

 

 

 

1,860,759

 

Add: conversion of non-voting to voting common shares outstanding

 

 

1,860,759

 

 

 

 

Weighted average number of shares used in diluted per share computation

 

 

35,449,195

 

 

 

1,860,759

 

Net loss per share, diluted

 

$

(0.45

)

 

$

(0.45

)

 

The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share, as their effect is anti-dilutive:

20


 

 

 

As of March 31,

 

 

 

2024

 

 

2023

 

Stock options to purchase common stock

 

 

9,831,422

 

 

 

7,951,804

 

 

 

9,831,422

 

 

 

7,951,804

 

 

 

 

 

 

 

 

 

21


 

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

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “Risk Factors” and our unaudited interim condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

 

We are a clinical-stage biotechnology company focused on the discovery and development of innovative engineered T cell therapies that have the potential to provide deep and durable, perhaps curative, responses with one-time administration for patients with autoimmune diseases. Our proprietary CABA®, or Cabaletta Approach to B cell Ablation, platform encompasses two strategies. Our CARTA, or Chimeric Antigen Receptor T cells for Autoimmunity, approach is designed to potentially reset the immune system. Our legacy CAART, or Chimeric AutoAntibody Receptor T cells, approach is designed to engineer T cells to selectively engage and eliminate only disease-causing B cells. We believe our CABA® platform has the potential to safely enable complete and durable responses for a broad range of autoimmune diseases.

 

The CARTA strategy is designed to achieve transient and complete depletion of all B cells following a single treatment by using T cells engineered to express an antibody fragment that recognizes a B cell receptor expressed on the surface of all B cells. The construct is designed to allow for the complete elimination of all B cells, including all B cells that contribute to disease, with subsequent repopulation by healthy naïve B cells. This approach has the potential to reset the immune system, providing meaningful durable and complete clinical responses to patients off immunosuppressive therapies. The legacy CAART strategy is designed to selectively engage and eliminate only the pathogenic B cells responsible for driving disease by using T cells engineered to express disease specific targeting domains which are designed to mimic the antigen that is the subject of attack in an autoimmune disease. Our CAARs differ from chimeric antigen receptors, or CARs, in the use of the autoantigen rather than an antibody fragment, which may enable the CAAR T cells to serve as a “decoy” for specific autoreactive B cell receptors expressed on the surface of B cells, engaging them and resulting in their elimination. We believe our CABA® platform has potential applicability across dozens of autoimmune diseases that we have identified, evaluated and prioritized.

 

CABA-201, our lead product candidate and the first product candidate from our CARTA platform, is a 4-1BB co-stimulatory domain-containing fully human CD19-CAR T construct designed to treat patients with a broad range of autoimmune diseases. CABA-201 was designed for use in autoimmune patients to closely replicate the design of a CD19-CAR T construct employed in academic reports published in journals including Nature Medicine, Lancet Rheumatology, and the Journal of the American Medical Association. These studies have employed a CD19-CAR T cell therapy incorporating a 4-1BB co-stimulatory domain following standard lymphodepletion with fludarabine and cyclophosphamide. According to reports to date, in patients with systemic lupus erythematosus, anti-synthetase syndrome, and systemic sclerosis, the 4-1BB containing CD19-CAR T cell therapy has led to robust improvement in clinical disease activity within three months of treatment through rapid and deep depletion of CD19-expressing B cells followed by return of healthy B cells within seven months of treatment. Follow-up is ongoing, with the clinical responses in systemic lupus erythematosus, or SLE, maintained off immunosuppressive therapies with up to 2.5 years of follow-up, as of February 2024 (Müller F, et al. “CD19 CAR T-Cell Therapy in Autoimmune Disease - A Case Series with Follow-up.” The New England Journal of Medicine (2024): 687-700). It has been publicly reported that one idiopathic inflammatory myopathy (IIM, or myositis) subject in this academic study had a recurrence of muscle disease approximately 12 months after CD19-CAR T administration.

 

The fully human CD19 binder in CABA-201, which was exclusively licensed from Nanjing IASO Biotherapeutics Co., Ltd., or IASO, was designed to be a fully human equivalent of the murine FMC63 CD19 binder that was used in the academic clinical reports referenced above. T cells expressing a 4-1BB-containing CAR with our fully human binder have been demonstrated to possess similar biologic activity in vitro and in vivo when compared to T cells expressing a 4-1BB-containing CAR utilizing the murine FMC63 CD19 binder employed in the academic studies (Dai, Zhenyu, et al. “Development and functional characterization of novel fully human anti-CD19 chimeric antigen receptors for T-cell therapy.” Journal of Cellular Physiology 236.8 (2021): 5832-5847). The fully human binder has been clinically evaluated in a dual-CD19xCD22 CAR T candidate under development for B cell leukemia and lymphoma in an investigator-initiated trial in China in approximately 20 patients, and IASO has reported a tolerability profile that we believe is favorable for development in autoimmune diseases.

 

In March 2023, the United States Food and Drug Administration, or the FDA, granted clearance of our CABA-201 Investigational New Drug, or IND, application for treatment of SLE in patients with active lupus nephritis, or LN, or active SLE without renal involvement. SLE is a chronic, potentially severe, autoimmune disease, most commonly impacting young women between the ages of

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15 and 40 with higher frequency and more severity in people of color, where the immune system attacks healthy tissue throughout the body. SLE affects an estimated 160,000-320,000 patients in the U.S, with LN as the most common end-organ manifestation, affecting approximately 40% of SLE patients. In May 2023, we announced the FDA granted Fast Track Designation for CABA-201, designed to deplete CD19-positive B cells and improve disease activity in patients with SLE and LN. The RESET-SLE