Cabaletta Bio, Inc. — 2021 Q3 Form 10-Q Summary
Business Context and Reporting Period
Cabaletta Bio is a clinical-stage biotechnology company developing engineered CAAR T-cell therapies for B-cell-mediated autoimmune diseases. The report covers the three and nine months ended September 30, 2021, with comparative periods ended September 30, 2020. The company has no approved products and has not generated product revenue.
Lead candidate DSG3-CAART is being evaluated in the Phase 1 DesCAARTes trial for mucosal pemphigus vulgaris. MuSK-CAART was in IND-enabling studies, while DSG3/1-CAART, FVIII-CAART and PLA2R-CAART remained in discovery or preclinical development.
Key Financial Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 | Change vs. Prior Period |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue |
| Research and development expense | $8.2 million | $22.6 million | Up $2.5 million and $7.0 million, respectively |
| General and administrative expense | $3.4 million | $9.8 million | Up $0.6 million and $0.9 million, respectively |
| Total operating expenses | $11.6 million | $32.4 million | Up $3.1 million and $7.9 million, respectively |
| Net loss | $11.6 million | $32.4 million | Loss increased from $8.4 million and $24.0 million |
| Net loss per share | $0.45 | $1.31 | Prior periods were $0.36 and $1.09 |
| Operating cash flow | Not separately disclosed | $(23.6) million | Prior period was $(17.6) million |
Margins are not meaningful because the company has no revenue. Stock-based compensation was $1.5 million in the third quarter and $4.2 million for the first nine months. Interest income was $19,000 for the nine-month period, down from $473,000 in the prior-year period.
At September 30, 2021, cash and cash equivalents were $118.3 million, short-term investments were $1.0 million, and total liquidity was $119.3 million. Current liabilities were $6.0 million, total assets were $122.6 million, and stockholders’ equity was $116.6 million. The filing does not identify outstanding debt or a credit facility; management stated that it had no credit facility or committed sources of capital.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased 45% for the quarter and 45% for the nine-month period, principally because of higher outsourced development services, personnel, clinical trial activity and manufacturing costs.
- DesCAARTes clinical trial costs increased by $0.6 million in the quarter and $1.5 million year to date.
- Manufacturing costs increased by $0.5 million in the quarter and $0.4 million year to date, reflecting vector manufacturing, cell processing and related activities.
- Cash used in operations increased to $23.6 million from $17.6 million, while financing cash flow increased to $35.3 million from a use of $56,000.
- The company sold 3.6 million shares through its at-the-market program during the first nine months, generating $34.7 million of net proceeds. Shares outstanding increased to 27.7 million at September 30, 2021 from 24.1 million at December 31, 2020.
- Investing activities provided $5.2 million, primarily from maturities of investments, compared with $9.9 million used in the prior-year period.
- Accumulated deficit increased to $98.7 million from $66.3 million at year-end 2020.
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, management stated that cash, cash equivalents and investments at September 30, 2021 were expected to fund operations through at least the first quarter of 2023. The notes also state that cash and cash equivalents were expected to fund projected operations for at least 12 months after filing. The company expects to require substantial additional financing to complete development and commercialization activities.
- Management expected to report top-line biologic activity data from the first two low-dose DesCAARTes cohorts in the fourth quarter of 2021 and 28-day safety data for the fourth dose cohort in the first quarter of 2022.
- The company planned to submit a MuSK-CAART IND in the fourth quarter of 2021 and conduct an FDA pre-IND interaction for PLA2R-CAART in that quarter.
- As of the reported period, no dose-limiting toxicities had been observed in the first two DesCAARTes cohorts. Subsequent November 2021 commentary, included in the filing, reported dose-dependent persistence in the third cohort and continued absence of dose-limiting toxicities or clinically relevant adverse events through October 31, 2021.
- The company remains highly dependent on Penn and CHOP for research, development, technology and manufacturing support. Penn’s services agreement was scheduled to expire on the later of October 19, 2021 or completion of the applicable projects, anticipated to extend at least through 2023, subject to termination rights.
- In October 2021, a CRO providing data management, biostatistics and pharmacovigilance services gave 60 days’ notice of termination. The company was transitioning to a replacement provider and acknowledged potential delays or execution challenges.
- COVID-19 may affect clinical enrollment, manufacturing, supply chains, trial-site operations, financing and regulatory timelines, although the company reported no significant financial impact through September 30, 2021.
- The amended Penn/CHOP license provides for potential milestone payments of approximately $21.0 million in aggregate if multiple products are successfully developed and launched, plus low-single-digit royalties and sublicense income payments. No amounts were due under the license at September 30, 2021.
- The company had an approximately $1.5 million early termination fee under its WuXi manufacturing agreement and approximately $1.6 million of plasmid purchase commitments expected to be incurred during 2021 and 2022.
- Subsequent to September 30, 2021, the company sold an additional 600,000 shares through the ATM program for $6.3 million of net proceeds.
Most Important Facts for Investors to Verify
- Whether DesCAARTes safety, persistence and biologic activity data support advancement, and whether later cohorts produce dose-limiting toxicities or clinically relevant adverse events.
- Whether the planned MuSK-CAART IND submission and other regulatory milestones occurred on schedule.
- The pace of cash burn relative to the stated funding runway through at least the first quarter of 2023.
- Future equity financing requirements, remaining ATM capacity and resulting shareholder dilution.
- Progress and costs of transferring manufacturing from Penn to WuXi or other contract manufacturers, including vector and plasmid supply.
- The effect of the CRO termination and transition on DesCAARTes data integrity, reporting and timelines.
- Continued license rights, sponsored research obligations and reliance on Penn and CHOP.
- Whether evolving COVID-19 conditions affect patient enrollment, clinical sites, manufacturing capacity or regulatory inspections.