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 March 31, 2026. The company operates as a single segment and is classified as a non-accelerated filer and a smaller reporting company. Following a reverse recapitalization merger with AlloVir, Inc. in March 2025, the company's financial statements reflect the combined entity, with Legacy Kalaris deemed the accounting acquirer.

Key Financial Metrics

Note: The company has no product revenue. The Q1 2025 period includes significant non-cash items related to the merger and convertible note conversions that are not present in Q1 2026.

Material Changes vs. Prior Period

• Operating Expenses: Total operating expenses increased by $1.5 million (14%) year-over-year. R&D expenses rose by $1.5 million, driven by a $1.4 million increase in third-party clinical trial and CRO costs as the company advanced its Phase 1a and Phase 1b/2 trials for TH103. G&A expenses remained relatively flat.
• Other Income/Expense: Q1 2025 included significant non-cash gains from changes in fair value of derivative liabilities ($1.2 million) and tranche liabilities ($0.4 million), as well as interest expense ($1.4 million) related to convertible notes. These items were absent in Q1 2026 as the notes were converted or cancelled during the merger in March 2025. Consequently, "Other income, net" increased to $1.0 million in Q1 2026, primarily due to interest income on a larger cash balance.
• Liquidity: Cash and cash equivalents decreased from $98.1 million at year-end 2025 to $34.4 million at March 31, 2026, while marketable securities increased significantly to $70.4 million. The company invested $70.4 million in marketable securities during the quarter.

Guidance, Outlook, and Risks

• Clinical Outlook: The company is actively screening patients for its Phase 1b/2 multiple ascending dose trial of TH103 in neovascular Age-related Macular Degeneration (nAMD). New clinical trial material is scheduled for delivery in mid-May 2026. Preliminary data from this trial is expected in the first half of 2027. Phase 3 trials are targeted for initiation by year-end 2027, pending successful Phase 1b/2 results.
• Liquidity Runway: Management expects existing cash, cash equivalents, and marketable securities ($104.9 million) to fund operations into the fourth quarter of 2027. However, the company anticipates needing substantial additional funding to continue development and commercialization efforts.
• Capital Markets: In April 2026, the company filed a shelf registration statement (Form S-3) and entered into an At-the-Market (ATM) offering agreement with TD Cowen to sell up to $100 million of common stock. No shares had been sold under this agreement as of March 31, 2026.
• Internal Controls: The company has identified material weaknesses in its internal control over financial reporting as of December 31, 2025, which remained unremediated as of March 31, 2026. These weaknesses relate to the control environment, risk assessment, and monitoring activities. Management is implementing remediation plans, including hiring additional accounting personnel and implementing new ERP systems.
• Legal Proceedings: Two individual complaints have been filed by purported AlloVir stockholders challenging the merger proxy statement. Additionally, a securities class action regarding AlloVir's legacy operations was settled for $1.0 million in July 2025.

Investor Verification Checklist

• Runway Validation: Verify the accuracy of the "fourth quarter of 2027" liquidity projection given the high burn rate and potential for clinical delays.
• Internal Control Remediation: Monitor the progress of remediation efforts for the identified material weaknesses in internal controls, as failure to remediate could lead to restatements or loss of investor confidence.
• Clinical Milestones: Track the resumption of dosing in the Phase 1b/2 trial following the mid-May 2026 delivery of new clinical material and the subsequent data readout expected in H1 2027.
• Related Party Obligations: Review the $32.1 million royalty obligation to Samsara BioCapital LP (majority shareholder) and the terms under which this liability may accrete or be triggered.
• Capital Raising: Monitor the utilization of the new ATM facility and any future equity offerings, which may result in significant dilution to existing shareholders.