Cartesian Therapeutics, Inc. quarterly report, Q1 FY2021

Business Context and Reporting Period

The filing is Selecta Biosciences, Inc.’s unaudited Form 10-Q for the three months ended March 31, 2021. The request metadata identifies Cartesian Therapeutics, Inc., but the supplied filing identifies the registrant as Selecta Biosciences, Inc. Selecta is a clinical-stage biopharmaceutical company developing its ImmTOR immune-tolerance platform for biologic therapies, gene therapies and autoimmune diseases.

The company had no approved products or product sales. Its revenue consisted of collaboration and grant revenue, primarily under the Sobi license and development agreement for SEL-212.

Key Financial Metrics

Metric	Three Months Ended March 31, 2021	Three Months Ended March 31, 2020
Collaboration and grant revenue	$11.1 million	$0
Research and development expense	$13.0 million	$14.7 million
General and administrative expense	$5.2 million	$4.1 million
Loss from operations	$7.2 million	$18.8 million
Net loss	$24.6 million	$19.6 million
Net loss per share	$0.22	$0.21
Net cash used in operating activities	$12.1 million	$11.7 million

The 2021 net loss included a $16.7 million non-cash loss from the increase in the fair value of warrant liabilities, compared with a $0.8 million charge in the prior-year period. Excluding this revaluation effect, operating performance improved primarily because of collaboration revenue and lower research and development spending.

Balance Sheet, Liquidity and Debt

• Cash and cash equivalents were $125.4 million at March 31, 2021, compared with $138.7 million at December 31, 2020.
• Short-term marketable securities totaled $22.4 million at March 31, 2021; none were held at year-end 2020.
• Cash, cash equivalents, restricted cash and marketable securities totaled approximately $149.2 million.
• Total liabilities were $196.3 million, including $45.5 million of warrant liabilities, $108.1 million of deferred revenue and $25.0 million of outstanding term-loan principal.
• Stockholders’ deficit was $19.6 million, compared with $18.0 million at December 31, 2020.
• The company stated that available cash, investments and restricted cash were expected to fund operating expenses and capital requirements into the second quarter of 2023, subject to assumptions that may prove incorrect.

Material Changes Versus the Prior Comparable Period

• Revenue increased by $11.1 million, reflecting $11.1 million recognized under the Sobi agreement for clinical supply shipments and reimbursement of Phase 3 DISSOLVE program costs.
• Research and development expense declined 12% to $13.0 million, primarily because of lower SEL-212 and AskBio collaboration costs, partly offset by higher discovery and preclinical spending.
• General and administrative expense increased 27% to $5.2 million due to higher consulting, professional fees and salaries, partly offset by lower travel expense.
• Net loss increased by $5.0 million because the benefit from collaboration revenue and lower research and development expense was more than offset by the $15.9 million year-over-year increase in the warrant-liability revaluation charge.
• Operating cash use was broadly stable, while investing cash use increased to $22.4 million because the company purchased marketable securities. Financing cash flow improved to $21.3 million, primarily from $21.0 million of net proceeds from an at-the-market equity offering.
• The company issued 4.7 million common shares through the at-the-market offering and had 113.0 million shares outstanding as of May 7, 2021.

Guidance, Outlook, Risks and Unusual Items

• Topline data from the Phase 3 DISSOLVE program for SEL-212 was expected in the second half of 2022. The program was funded by Sobi.
• The company expected to file an IND for its IgA nephropathy program by the end of 2021, an IND or Clinical Trial Application for SEL-313 in 2022, and an IND for its primary biliary cholangitis program in the second half of 2022.
• Topline results for the SEL-399 clinical trial were expected in the fourth quarter of 2021.
• AskBio notified the company in April 2021 that it intended to opt out of development of the MMA indication. Selecta planned to assume all rights to the MMA program and continue MMA-101 development. A manufacturing issue involving a third-party component delayed the planned MMA-101 IND filing to the end of 2021.
• Sarepta notified the company in April 2021 that a $3.0 million milestone had been achieved; payment was due within 60 days after receipt of the related invoice.
• The company expects continuing operating losses and stated that substantial additional financing will be required. Additional equity financing could dilute existing stockholders, while collaborations could require relinquishing valuable rights.
• COVID-19 had not materially affected clinical programs as of the filing date, but could delay enrollment, trial execution, supply, manufacturing and access to capital.
• A stockholder derivative action and related litigation demand concern the company’s December 2019 private placement. The litigation was stayed in April 2021 pending review by a board-appointed Special Committee. No liability was accrued because any potential loss was considered not probable or not estimable.
• The warrant-liability valuation is sensitive to the company’s share price, expected volatility and other Black-Scholes assumptions, creating potentially significant non-cash earnings volatility.

Most Important Facts for Investors to Verify

1. Confirm the issuer identity: the supplied filing is for Selecta Biosciences, Inc., not Cartesian Therapeutics, Inc.
2. Assess the sustainability and timing of collaboration revenue, particularly Sobi reimbursements and deferred revenue recognition, versus the absence of product sales.
3. Review liquidity assumptions supporting funding into the second quarter of 2023 and the company’s expected need for additional financing.
4. Evaluate the $25.0 million term loan, its approximately 7.90% minimum interest rate, collateral package, covenants, maturity and potential acceleration provisions.
5. Monitor SEL-212 Phase 3 execution, DISSOLVE topline timing and the company’s obligations following AskBio’s MMA opt-out.
6. Separate recurring operating performance from the $16.7 million non-cash warrant-liability revaluation charge.
7. Review the Delaware stockholder litigation, the Special Committee’s findings and any subsequent changes in the company’s loss assessment.