Cabaletta Bio, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2021; filed August 5, 2021. Cabaletta is a clinical-stage biotechnology company developing engineered CAAR T-cell therapies for B-cell-mediated autoimmune diseases. The company has no approved products and has not generated product revenue.
Financial performance and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $7.9 million, versus $5.3 million | $14.4 million, versus $10.0 million |
| General and administrative expense | $3.3 million, versus $2.9 million | $6.5 million, versus $6.1 million |
| Total operating expenses | $11.1 million, versus $8.2 million | $20.9 million, versus $16.1 million |
| Net loss | $11.1 million, versus $8.2 million | $20.8 million, versus $15.6 million |
| Net loss per share | $0.45, versus $0.35 | $0.86, versus $0.68 |
| Net cash used in operating activities | Not separately reported | $15.3 million, versus $12.6 million |
Operating margins are not meaningful because the company has no revenue. Research and development represented approximately 69% of operating expenses in the second quarter and approximately 69% for the first six months. The increases primarily reflected higher outsourced development services, clinical-trial costs, personnel costs and sponsored research.
- Cash and cash equivalents were $99.5 million at June 30, 2021, compared with $101.4 million at December 31, 2020.
- Short-term investments were $3.3 million, down from $7.2 million; total cash, cash equivalents and investments were $102.8 million.
- Accumulated deficit was $87.1 million, compared with $66.3 million at year-end 2020.
- Total current liabilities were $5.6 million; the filing reports no debt or credit facility.
- Cash decreased by $1.9 million during the first six months, after $15.3 million of operating cash use, $3.4 million of investing cash inflow and $9.9 million of financing cash inflow.
- The company sold 895,658 shares through its at-the-market program for $9.8 million of net proceeds during the first six months.
Material changes and operating developments
- Research and development expense increased $2.5 million year over year in the second quarter and $4.5 million for the first six months. Six-month increases included $2.3 million in outsourced development services, $1.0 million in personnel costs, $0.9 million in clinical-trial costs and $0.3 million in sponsored research.
- The DesCAARTes Phase 1 trial of DSG3-CAART was enrolling patients. In May 2021, the company reported no dose-limiting toxicities eight days after infusion in the first three patients dosed in the first cohort.
- In August 2021, after the quarter ended, the FDA cleared a protocol amendment reducing the minimum dosing interval between patients within a cohort from 14 days to seven days.
- MuSK-CAART remained in IND-enabling studies, with an IND submission planned for the second half of 2021. Other programs included DSG3/1-CAART, FVIII-CAART, PLA2R-CAART and additional undisclosed targets.
- The company entered a January 2021 manufacturing agreement with WuXi for anticipated MuSK-CAART Phase 1 manufacturing. Termination for convenience could require a $1.5 million fee.
- A February 2021 research services agreement with CHOP covered vector manufacturing; the agreement was amended in May 2021. Remaining expected costs were $1.1 million through 2023.
- The company had 24,972,830 common shares outstanding as of July 30, 2021. Stock-based compensation was $2.7 million for the first six months, and unrecognized compensation cost was $15.7 million as of June 30, 2021.
Guidance, outlook, risks and unusual items
- Management expected existing cash, cash equivalents and investments to fund operations through at least the fourth quarter of 2022, although the filing cautions that actual cash usage could be faster. The liquidity note separately states that cash and cash equivalents were expected to fund projected operations for at least 12 months following filing.
- The company expects research and development, general and administrative expenses and capital expenditures to increase substantially as clinical development, manufacturing activities and public-company infrastructure expand.
- Additional financing will be required. Potential sources include equity offerings, debt, government funding, collaborations and licensing arrangements; no committed financing source was in place.
- Key risks include failure or delay in clinical development, patient enrollment, regulatory approval and manufacturing scale-up; serious adverse events associated with CAAR T-cell therapies; dependence on Penn and CHOP for research, technology and manufacturing; intellectual-property license termination or disputes; competition; and future equity dilution.
- COVID-19 had not materially affected financial results through June 30, 2021, but could disrupt clinical enrollment, manufacturing, suppliers, trial sites, regulatory activities and future financing.
- The company reported no material litigation, no material off-balance-sheet arrangements and no significant changes to contractual obligations since December 31, 2020.
- Subsequent to quarter-end, in August 2021, the company agreed to purchase plasmids for $1.1 million, expected to be incurred during 2021 and 2022.
Investor verification checklist
- Verify enrollment, safety, target engagement and durability data from the DesCAARTes trial beyond the initial three-patient cohort.
- Verify whether the planned MuSK-CAART IND submission occurred in the second half of 2021 and whether FDA permitted clinical development to proceed.
- Assess actual cash burn against management’s projection of funding through the fourth quarter of 2022 and identify the timing and terms of future financing.
- Monitor transition of manufacturing from Penn to WuXi and other contract manufacturers, including comparability, capacity, quality and supply risks.
- Review the Penn and CHOP license and research agreements, remaining commitments, milestone obligations and potential royalty exposure.
- Evaluate dilution from the remaining ATM program, stock options, employee equity plans and any future capital raises.