KLRS

Business Context and Reporting Period

Kalaris Therapeutics, Inc. (KLRS) is a clinical-stage biopharmaceutical company focused on developing TH103, a novel anti-VEGF drug for retinal diseases. This Form 10-Q covers the quarterly period ended September 30, 2025. The reporting period is significantly impacted by the March 18, 2025, merger with AlloVir, Inc., which was accounted for as a reverse recapitalization. Following the merger, the company trades on the Nasdaq Global Market under the ticker "KLRS."

Key Financial Metrics

Note: All figures in millions unless otherwise noted. Q3 2024 figures are presented on a pro-forma basis reflecting the merger exchange ratio.

Material Changes vs. Prior Period

• Liquidity Surge: Total cash, cash equivalents, and short-term investments increased from $1.6 million at December 31, 2024, to $77.0 million at September 30, 2025. This was primarily driven by the acquisition of approximately $102.1 million in cash from AlloVir during the merger.
• Expense Reduction: Net loss decreased significantly in Q3 2025 compared to Q3 2024 ($11.9M vs. $38.1M). This reduction is largely attributable to the absence of a $32.1 million non-cash royalty obligation expense recorded in Q3 2024 related to an agreement with Samsara BioCapital.
• Debt Elimination: All outstanding convertible promissory notes and derivative liabilities were converted into equity or cancelled in connection with the March 2025 merger. As of September 30, 2025, the company has no outstanding debt.
• Stock Structure: The company's capital structure was reorganized, with all redeemable convertible preferred stock converted to common stock. Outstanding shares increased to approximately 18.7 million.

Guidance, Outlook, and Risks

Outlook and Guidance: Management expects existing cash resources ($77.0 million) to fund operating expenses and capital expenditures into 2027. The company anticipates continuing to incur substantial losses as it advances TH103 through clinical trials. No specific financial guidance was provided beyond the liquidity runway.

Operational Milestones:

• Enrolling patients in Phase 1a and Phase 1b/2 clinical trials for TH103 in neovascular Age-related Macular Degeneration (nAMD).
• Expectation to report initial Phase 1a data by year-end 2025.
• Expectation to report initial Phase 1b/2 data in the second half of 2026.

Material Risks and Contingencies:

• Internal Controls: The company has identified material weaknesses in internal control over financial reporting as of December 31, 2024, which remain unremediated as of September 30, 2025. Disclosure controls and procedures were deemed ineffective.
• Capital Needs: The company has never generated revenue and will require substantial additional funding to continue operations and achieve profitability.
• Legal Proceedings: A securities class action lawsuit regarding legacy AlloVir operations was settled for $1.0 million. Two individual lawsuits regarding the merger remain pending in New York Supreme Court.
• Regulatory Environment: Risks include potential FDA workforce reductions, government shutdowns, and evolving regulations regarding drug pricing and diversity action plans.

Investor Verification Checklist

• Remediation of Internal Controls: Verify the progress of hiring new accounting personnel and implementing controls to address the identified material weaknesses.
• Cash Burn Rate: Monitor quarterly operating expenses to ensure the $77.0 million liquidity runway remains sufficient to reach 2027 without dilutive financing.
• Clinical Trial Enrollment: Confirm patient enrollment rates for the Phase 1a and Phase 1b/2 trials of TH103 to assess the likelihood of meeting the 2025 and 2026 data readout timelines.
• Legal Settlements: Track the status of the pending merger-related lawsuits in New York to assess potential financial or operational impacts.
• Royalty Obligations: Review the terms of the royalty agreement with Samsara BioCapital to understand future cash flow obligations upon commercialization.