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, 2024


☐	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 8, 2024, the registrant had 48,877,164 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 Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated 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	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	95
Item 3.	Defaults Upon Senior Securities	95
Item 4.	Mine Safety Disclosures	95
Item 5.	Other Information	95
Item 6.	Exhibits	96
Signatures		97

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 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 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.

•

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, 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;

•

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;

•

our expectations regarding international expansion and results of our efforts to do so;

•

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 Consolidated Balance Sheets

(in thousands, except share and per share amounts)


	September 30, 2024			December 31, 2023
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	170,608		$	193,238
Short-term investments		12,404			48,011
Prepaid expenses and other current assets		2,503			3,241
Total current assets		185,515			244,490
Property and equipment, net		2,813			2,541
Operating lease right-of-use assets		13,600			4,910
Other assets		2,482			1,709
Total Assets	$	204,410		$	253,650
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,180		$	4,547
Accrued and other current liabilities		12,765			7,887
Operating lease liabilities, current portion		7,937			3,560
Total current liabilities		22,882			15,994
Operating lease liabilities, net of current portion		7,287			1,458
Total Liabilities		30,169			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 September 30, 2024 and December 31, 2023; no shares issued or outstanding at September 30, 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 September 30, 2024 and December 31, 2023; 48,850,423 voting shares issued and outstanding as of September 30, 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		490,755			469,396
Accumulated other comprehensive income		1			39
Accumulated deficit		(316,515	)		(233,237	)
Total stockholders’ equity		174,241			236,198
Total liabilities and stockholders’ equity	$	204,410		$	253,650

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

CABALETTA BIO, INC.

Condensed Consolidated 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,
	2024			2023			2024			2023
Operating expenses:
Research and development	$	26,290		$	13,787		$	71,671		$	38,019
General and administrative		6,756			4,881			19,685			13,495
Total operating expenses		33,046			18,668			91,356			51,514
Loss from operations		(33,046	)		(18,668	)		(91,356	)		(51,514	)
Other income:
Interest income		2,417			2,220			8,078			4,725
Net loss	$	(30,629	)	$	(16,448	)	$	(83,278	)	$	(46,789	)
Other comprehensive income:
Net unrealized gain (loss) on available-for-sale investments, net of tax		30			(18	)		(38	)		(21	)
Net comprehensive loss	$	(30,599	)	$	(16,466	)	$	(83,316	)	$	(46,810	)
Net loss per share of voting and non-voting common stock, basic and diluted	$	(0.62	)	$	(0.37	)	$	(1.69	)	$	(1.18	)

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

CABALETTA BIO, INC.

Condensed Consolidated 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
Stock-based compensation		—		—		2,803		—			—			2,803
Issuance of common stock, net of issuance costs of $6,295		8,337,500		—		93,755		—			—			93,755
Issuance of common stock in connection with exercise of stock options		107,122		—		390		—			—			390
Issuance of common stock under employee stock purchase plan		8,071		—		32		—			—			32
Net unrealized losses on available-for-sale securities		—		—		—		(3	)		—			(3	)
Net loss		—		—		—		—			(14,487	)		(14,487	)
Balance—June 30, 2023		39,793,682	$	—	$	370,047	$	(3	)	$	(195,903	)	$	174,141
Stock-based compensation		—		—		3,009		—			—			3,009
Net unrealized losses on available-for-sale securities		—		—		—		(18	)		—			(18	)
Issuance of common stock in connection with exercise of stock options		81,640		—		239		—			—			239
Issuance of common stock upon exercise of pre-funded warrants		1,784,847		—		—		—			—			—
Net loss		—		—		—		—			(16,448	)		(16,448	)
Balance—September 30, 2023		41,660,169	$	—	$	373,295	$	(21	)	$	(212,351	)	$	160,923

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

CABALETTA BIO, INC.

Condensed Consolidated 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
Stock-based compensation		—		—		5,013		—			—			5,013
Issuance of common stock in connection with exercise of stock options		27,407		—		250		—			—			250
Issuance of common stock under employee stock purchase plan		14,947		—		129		—			—			129
Net unrealized gains on available-for-sale securities		—		—		—		9			—			9
Net loss		—		—		—		—			(27,602	)		(27,602	)
Balance—June 30, 2024		48,291,469	$	—	$	485,434	$	(29	)	$	(285,886	)	$	199,519
Stock-based compensation		—		—		5,250		—			—			5,250
Issuance of common stock in connection with exercise of stock options		15,475		—		71		—			—			71
Issuance of common stock upon exercise of pre-funded warrants		543,479		—		—		—			—			—
Net unrealized gains on available-for-sale securities		—		—		—		30			—			30
Net loss		—		—		—		—			(30,629	)		(30,629	)
Balance—September 30, 2024		48,850,423	$	—	$	490,755	$	1		$	(316,515	)	$	174,241

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

CABALETTA BIO, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2024			2023
Cash flows from operating activities:
Net loss	$	(83,278	)	$	(46,789	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		14,054			8,292
Depreciation		1,243			1,090
Non-cash lease expense		4,842			1,410
Accretion of lease liabilities		732			288
Amortization of discount on investments		(1,430	)		(839	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		738			500
Other assets		(773	)		(420	)
Accounts payable		(1,692	)		1,157
Accrued and other current liabilities		4,521			(81	)
Lease liabilities		(4,057	)		(1,709	)
Net cash used in operating activities		(65,100	)		(37,101	)
Cash flows from investing activities:
Purchases of property and equipment		(1,835	)		(502	)
Purchases of investments		—			(48,085	)
Proceeds from maturities of investments		37,000			25,000
Net cash provided by (used in) investing activities		35,165			(23,587	)
Cash flows from financing activities:
Proceeds from the issuance of common stock, net of issuance costs		5,746			93,463
Proceeds from issuance of common stock in connection with the exercise of stock options		1,430			1,087
Proceeds from issuance of common stock under employee stock purchase plan		129			32
Net cash provided by financing activities		7,305			94,582
Net (decrease) increase in cash and cash equivalents		(22,630	)		33,894
Cash and cash equivalents—beginning of period		193,238			81,607
Cash and cash equivalents—end of period	$	170,608		$	115,501
Supplemental disclosures of non-cash investing and financing activities:
Property and equipment purchases included in accounts payable and accrued expenses	$	383		$	—
Right-of-use assets obtained in exchange for lease obligations	$	13,532		$	554

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

CABALETTA BIO, INC.

Notes to Unaudited Condensed Consolidated 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 $183,012 as of September 30, 2024. Through September 30, 2024, the Company has incurred an accumulated deficit of $316,515. 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 September 30, 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 condensed consolidated 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. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated 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 September 30, 2024 and the results of its operations and its cash flows for the three and nine months ended September 30, 2024 and 2023. The results for the three and nine months ended September 30, 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 condensed consolidated financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements. These unaudited condensed consolidated 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 the condensed consolidated 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 nine months ended September 30, 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.

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 consolidated 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 consolidated financial statements and accompanying footnotes.

3. Fair Value Measurements

Fair value of financial instruments

At September 30, 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 consolidated 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:


	September 30, 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	$	169,997	$	169,997	$	—	$	—
Short-term investments:
U.S. Treasury securities		12,404		—		12,404		—
Total	$	182,401	$	169,997	$	12,404	$	—


	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.


	September 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
Financial assets
Cash	$	611	$	—	$	—	$	611
Money market funds		169,997		—		—		169,997
Included in cash and cash equivalents		170,608		—		—		170,608
U.S. Treasury securities - due in one year or less								—
Included in short-term investments		12,403		1		—		12,404
Total	$	183,011	$	1	$	—	$	183,012


	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

4. Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following:


	September 30, 2024		December 31, 2023
Research and development services	$	7,264	$	2,459
General and administrative services		351		188
Compensation expense		5,120		5,200
Other		30		40
	$	12,765	$	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 September 30, 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 $888 and $2,408 for the three and nine months ended September 30, 2024 and $668 and $2,873 for the three and nine months ended September 30, 2023, respectively. The Company may incur additional expenses up to $643 through the remaining term of the CAROT Amended Addendum.

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 $4,800 has been recognized. In February 2024, the Company and Oxford entered into a third amendment of the LSA to update the patent schedule. In June 2024, the Company and Oxford entered into a fourth amendment of the LSA eliminating royalties on net sales of products that incorporate the Oxford technology if Oxford manufactures the vector.

Option and License Agreement with Autolus

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, and as extended in August 2024, the Company entered into an agreement with WuXi to serve as one of the Company's manufacturing partners for the 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 August 2024, the Company sent a notice to WuXi to extend the initial term of the WuXi Agreement by 18 months through August 2026. In addition, the Company agreed to certain monthly minimum runs. In August 2024, the 2023 work order related to GMP manufacturing was amended to reduce the minimum monthly runs through the end of 2024. 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. 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 September 30, 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 1.9 years and 1.5 years as of September 30, 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 (ROU 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 ROU asset and lease liability of $4,032. In the third quarter of 2024, the 2023 work order related to GMP manufacturing was amended to reduce the minimum monthly runs through the end of 2024 and the term of the agreement was extended for an additional 18 months through August 2026. The lease was remeasured, resulting in an increase in the ROU asset and lease liability of $6,189. 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 leases office and lab space which 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. In the third quarter of 2024, the Company extended the terms of its lab and office operating leases. The leases were remeasured, resulting in an increase in the ROU asset and lease liability of $3,133.

The weighted average discount rate for the Company’s operating leases is 11.3% and 9.5% as of September 30, 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 $3,187 and $1,709 for the nine months ended September 30, 2024 and 2023, respectively.

Future lease payments under the non-cancelable operating leases as of September 30, 2024 are as follows:



October 1, 2024 - December 31, 2024	$	2,275
2025		8,857
2026		5,856
Total undiscounted lease payments		16,988
Less imputed interest		(1,764	)
Total lease liability	$	15,224

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

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