Cabaletta Bio, Inc. — Form 10-Q Summary
Business context and reporting period
Cabaletta Bio is a clinical-stage biotechnology company developing engineered T-cell therapies for B-cell-mediated autoimmune diseases through its CABA platform, including CAAR-T candidates and the CD19-directed CAR-T candidate CABA-201. This report covers the three and nine months ended September 30, 2022, and was filed November 10, 2022. The company had 29,013,995 common shares outstanding as of November 4, 2022.
The company has no approved products and has not generated revenue from product sales. Its lead clinical program, DSG3-CAART, was being evaluated in the Phase 1 DesCAARTes trial; the MuSK-CAART IND became effective in January 2022, and management planned to initiate the MusCAARTes trial in the fourth quarter of 2022.
Financial metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $8.2 million, versus $8.2 million | $26.9 million, versus $22.6 million |
| General and administrative expense | $3.6 million, versus $3.4 million | $10.9 million, versus $9.8 million |
| Total operating expenses | $11.8 million, versus $11.6 million | $37.8 million, versus $32.4 million |
| Net loss | $11.4 million, versus $11.6 million | $37.3 million, versus $32.4 million |
| Net loss per share | $0.39, versus $0.45 | $1.29, versus $1.31 |
| Net cash used in operating activities | Not separately provided | $34.2 million, versus $23.6 million |
Margins are not meaningful because the company reported no revenue. Interest income increased to $351,000 in the third quarter and $554,000 for the nine-month period, primarily due to higher interest rates.
As of September 30, 2022, cash and cash equivalents were $61.2 million, short-term investments were $24.7 million, and total cash, cash equivalents and investments were $85.9 million. Total assets were $91.7 million, current liabilities were $5.8 million, and stockholders’ equity was $85.9 million. The filing does not report outstanding debt or a credit facility; management states that the company has no committed sources of capital.
Cash used in investing activities was $26.9 million, including $49.8 million of investment purchases and $2.1 million of property and equipment purchases, partially offset by $25.0 million of investment maturities. Financing activities provided only $91,000, compared with $35.3 million in the prior-year period from equity issuance and employee equity transactions.
Material changes versus the prior comparable periods
- Nine-month research and development expense increased $4.3 million, driven primarily by $3.2 million of higher personnel costs and $1.3 million of higher clinical-trial costs, including DesCAARTes and MusCAARTes start-up activities.
- Nine-month general and administrative expense increased $1.1 million, primarily from higher personnel, legal, information technology and administrative costs, partly offset by lower director and officer insurance expense.
- Nine-month operating cash burn increased $10.7 million year over year, while the company made significant purchases of short-term investments.
- No shares were sold under the $75 million at-the-market program during 2022. The company sold 4,792,562 shares under the program in 2021 for net proceeds of $48.3 million.
- Common shares outstanding increased modestly from 28.9 million at December 31, 2021 to 29.0 million at September 30, 2022. Stock options outstanding increased to 6.1 million from 4.3 million at the beginning of 2022.
- DesCAARTes data through cohort A5 showed no dose-limiting toxicities, but the company reported no clear trends in antibody levels or disease-activity reduction through cohort A4. The combination cohort using IVIg and cyclophosphamide was prioritized for follow-on development.
Guidance, outlook, risks and unusual items
Management expects research and development, general and administrative expenses and capital expenditures to continue increasing. Based on its operating plan, the company stated that cash, cash equivalents and investments as of September 30, 2022 were expected to fund operations through the second quarter of 2024. The notes separately state that cash and cash equivalents were expected to fund projected operations for at least 12 months after filing. These estimates depend on assumptions that may prove incorrect, and additional financing will be required to advance clinical development and fund operations.
On October 7, 2022, after the quarter ended, the company entered into an exclusive worldwide license agreement with Nanjing IASO Biotherapeutics for a CD19 binder used in CABA-201. The agreement requires a $2.5 million upfront payment, up to $162 million in total potential milestone consideration, and tiered mid-single-digit royalties on future net sales. CABA-201 was announced in October 2022 as a potential therapy for multiple autoimmune diseases, including lupus, rheumatoid arthritis, myositis and systemic sclerosis.
Key risks include the absence of approved products and revenue, continuing losses, the need for substantial additional capital, uncertain clinical efficacy and safety, patient-enrollment and regulatory delays, complex individualized manufacturing, dependence on Penn for research and current manufacturing activities, technology-transfer and contract-manufacturing risks, reliance on licensed intellectual property, competition, inflation and supply-chain constraints, and potential effects from COVID-19. A shareholder securities lawsuit filed in February 2022 was voluntarily dismissed on October 17, 2022.
The company reported effective disclosure controls and procedures and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the reported cash runway through the second quarter of 2024 remains valid after incorporating the IASO upfront payment, expanded CABA-201 activities and evolving clinical plans.
- Updated DesCAARTes safety, persistence, antibody-level and disease-activity data, particularly for the combination cohort and later dose cohorts.
- Whether the MusCAARTes trial began as planned in the fourth quarter of 2022 and the timing of the CABA-201 IND and clinical trial.
- The pace of quarterly operating cash burn and the timing, structure and dilution effects of future financing.
- Progress in transferring manufacturing from Penn to contract manufacturers and the availability of lentiviral-vector and cell-processing capacity.
- The enforceability, scope and milestone obligations of the Penn/CHOP and IASO licenses, including potential royalty and sublicense payments.
- Whether clinical results support meaningful efficacy in autoimmune indications, given the early-stage, open-label trials and the limited evidence of biologic activity disclosed through the reported cohorts.