UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_______________ to _______________ Commission File Number: 001-39103 CABALETTA BIO, INC. (Exact Name of Registrant as Specified in its Charter) Delaware (State or ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_______________ to _______________ Commission File Number: 001-39103 CABALETTA BIO, INC. (Exact Name of Registrant as Specified in its Charter) Delaware (State o ...

Cabaletta Bio° Corporate Presentation APRIL 2021 © 2021 Cabaletta Bio. All rights reserved. Disclaimer 2 The following presentation, including any printed or electronic copy of these slides, the talks given by the presenters, the information communicated during any delivery of the presentation and any question and answer session and any document or material distributed at or in connection with the presentation (collectively, the "Presentation") has been prepared by Cabaletta Bio, Inc. ("we," "us," "our," "C ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-39103 82-1685768 (I.R.S.Employer Identification No.) CABALETTA BIO, INC. (Exact name of Registrant as specified in its Charter) Delaw ...

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed financial statements for Cabaletta Bio, Inc., including the balance sheets, statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders' (deficit) equity, and statements of cash flows, along with their accompanying notes. The company continues to incur significant losses and relies on external financing for its operations [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed financial statements for Cabaletta Bio, Inc., including the balance sheets, statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders' (deficit) equity, and statements of cash flows, along with their accompanying notes. The company continues to incur significant losses and relies on external financing for its operations [Condensed Balance Sheets](index=6&type=section&id=Condensed%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of September 30, 2020, and December 31, 2019 | Metric | Sep 30, 2020 (Unaudited) (in thousands) | Dec 31, 2019 (in thousands) | |:---|:---|:---| | Cash and cash equivalents | $108,679 | $136,204 | | Short-term investments | $8,062 | — | | Prepaid expenses and other current assets | $2,477 | $4,348 | | **Total current assets** | **$119,218** | **$140,552** | | Property and equipment, net | $980 | $815 | | Long-term investments | $1,333 | — | | Other assets | $239 | $101 | | **Total assets** | **$121,770** | **$141,468** | | Accounts payable | $953 | $920 | | Accrued and other current liabilities | $3,312 | $2,227 | | **Total current liabilities** | **$4,265** | **$3,147** | | Additional paid-in capital | $174,482 | $171,280 | | Accumulated other comprehensive income | $12 | — | | Accumulated deficit | $(56,989) | $(32,959) | | **Total stockholders' equity** | **$117,505** | **$138,321** | | **Total liabilities and stockholders' equity** | **$121,770** | **$141,468** | - **Total assets decreased** from **$141,468 thousand** at **December 31, 2019**, to **$121,770 thousand** at **September 30, 2020**, primarily due to a decrease in **cash and cash equivalents**[24](index=24&type=chunk) - **Total stockholders' equity decreased** from **$138,321 thousand** at **December 31, 2019**, to **$117,505 thousand** at **September 30, 2020**, driven by an increase in **accumulated deficit**[24](index=24&type=chunk) [Condensed Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section details the company's revenues, operating expenses, and net loss for the three and nine months ended September 30, 2020 and 2019 | Metric (in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | |:---|:---|:---|:---|:---|\ | Research and development | $5,650 | $3,220 | $15,601 | $8,645 | | General and administrative | $2,766 | $1,811 | $8,902 | $4,178 | | **Total operating expenses** | **$8,416** | **$5,031** | **$24,503** | **$12,823** | | Loss from operations | $(8,416) | $(5,031) | $(24,503) | $(12,823) | | Interest income | $23 | $381 | $473 | $1,283 | | **Net loss** | **$(8,393)** | **$(4,650)** | **$(24,030)** | **$(11,540)** | | Net loss per share, basic and diluted | $(0.36) | $(2.17) | $(1.09) | $(9.34) | - **Net loss** for the **three months ended September 30, 2020**, **increased to $8,393 thousand** from **$4,650 thousand** in the prior year, primarily due to **higher operating expenses**[27](index=27&type=chunk) - For the **nine months ended September 30, 2020**, **net loss significantly increased to $24,030 thousand** compared to **$11,540 thousand** in the same period of **2019**, driven by **increased R&D and G&A expenses**[27](index=27&type=chunk) [Condensed Statements of Convertible Preferred Stock and Stockholders' (Deficit) Equity](index=8&type=section&id=Condensed%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20(Deficit)%20Equity) This section outlines changes in the company's equity, including preferred stock conversions, stock-based compensation, and the accumulated deficit - **Total stockholders' equity decreased** from **$138,321 thousand** at **December 31, 2019**, to **$117,505 thousand** at **September 30, 2020**, primarily due to **net losses incurred**[29](index=29&type=chunk) - **Stock-based compensation recognized** for the **nine months ended September 30, 2020**, was **$3,067 thousand**, contributing to **additional paid-in capital**[29](index=29&type=chunk) - The **accumulated deficit increased** from **$32,959 thousand** at **December 31, 2019**, to **$56,989 thousand** at **September 30, 2020**, reflecting **ongoing operating losses**[29](index=29&type=chunk) [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2020 and 2019 | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | |:---|:---|:---|\ | Net cash used in operating activities | $(17,597) | $(8,162) | | Net cash used in investing activities | $(9,872) | $(420) | | Net cash (used in) provided by financing activities | $(56) | $46,606 | | Net (decrease) increase in cash and cash equivalents | $(27,525) | $38,024 | | Cash and cash equivalents—beginning of period | $136,204 | $33,017 | | Cash and cash equivalents—end of period | $108,679 | $71,041 | - **Net cash used in operating activities increased to $17,597 thousand** for the **nine months ended September 30, 2020**, from **$8,162 thousand** in the prior year, primarily due to **higher net loss**[31](index=31&type=chunk) - **Investing activities used $9,872 thousand** in **2020**, mainly for purchases of **available-for-sale investments**, compared to **$420 thousand** in **2019**[31](index=31&type=chunk) [Notes to Unaudited Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed financial statements, covering accounting policies, fair value measurements, and commitments [1. Basis of Presentation](index=10&type=section&id=1.%20Basis%20of%20Presentation) Cabaletta Bio, Inc. is a clinical-stage biotechnology company focused on engineered T cell therapies for B cell-mediated autoimmune diseases. The company commenced principal operations in April 2018, completed an IPO in October 2019, and has incurred significant operating losses since inception, expecting to continue to do so. The COVID-19 pandemic has not significantly impacted current financial results but poses future uncertainties regarding capital raising and clinical trial timing - **Cabaletta Bio, Inc. is a clinical-stage biotechnology company** focused on engineered T cell therapies for B cell-mediated autoimmune diseases, with principal operations commencing in **April 2018**[33](index=33&type=chunk)[34](index=34&type=chunk) - The company completed its **initial public offering (IPO) on October 29, 2019**, raising **net proceeds of $66,156 thousand**, and converted all outstanding Convertible Preferred Stock into common stock[36](index=36&type=chunk) - The company has sustained **annual operating losses since inception**, with an **accumulated deficit of $56,989 thousand** as of **September 30, 2020**, and expects to incur additional losses, requiring future capital raises[39](index=39&type=chunk) - The **COVID-19 pandemic did not significantly impact financial results** for the **three and nine months ended September 30, 2020**, but the company cannot predict its full future impact on financial condition, operations, and business plans[37](index=37&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the company's significant accounting policies, including the basis for preparing unaudited interim financial statements in conformity with GAAP, the use of estimates, and the classification and valuation of investments. It also details the company's status as an emerging growth company and its election to use the extended transition period for new accounting standards - **Unaudited interim financial statements are prepared in conformity with GAAP and SEC rules**, with certain footnotes condensed or omitted[41](index=41&type=chunk) - The company's financial instruments primarily consist of **cash and cash equivalents** (U.S. treasury-based money market funds) and **available-for-sale debt securities** (investment grade corporate bonds), with no off-balance sheet risks[44](index=44&type=chunk) - **Investments are classified as available-for-sale** and carried at estimated fair value, with unrealized gains and losses reported as a component of comprehensive income[47](index=47&type=chunk) - The company is an **emerging growth company** and has elected to use the **extended transition period** for complying with new or revised accounting standards, which may affect comparability with other public companies[53](index=53&type=chunk) [3. Fair Value Measurements](index=13&type=section&id=3.%20Fair%20Value%20Measurements) This section details the fair value measurements of the company's financial assets, categorizing them into a three-tier hierarchy based on the observability of inputs. As of September 30, 2020, cash and cash equivalents are Level 1, while short-term and long-term corporate bonds are Level 2 | Financial Assets (in thousands) | Total (Sep 30, 2020) | Level 1 (Sep 30, 2020) | Level 2 (Sep 30, 2020) | Level 3 (Sep 30, 2020) | |:---|:---|:---|:---|:---|\ | Cash and money market funds | $108,679 | $108,679 | — | — | | Corporate bonds (short-term) | $8,062 | — | $8,062 | — | | Corporate bonds (long-term) | $1,333 | — | $1,333 | — | | **Total** | **$118,074** | **$108,679** | **$9,395** | **—** | | Financial Assets (in thousands) | Total (Dec 31, 2019) | Level 1 (Dec 31, 2019) | Level 2 (Dec 31, 2019) | Level 3 (Dec 31, 2019) | |:---|:---|:---|:---|:---|\ | Cash and money market funds | $136,204 | $136,204 | — | — | | **Total** | **$136,204** | **$136,204** | **—** | **—** | - The company's **Level 2 securities are valued using third-party pricing sources with observable inputs**, and there were no transfers between fair value measurement levels during the reported periods[58](index=58&type=chunk) [4. Accrued and Other Current Liabilities](index=14&type=section&id=4.%20Accrued%20and%20Other%20Current%20Liabilities) This section provides a breakdown of accrued and other current liabilities, showing an increase from $2,227 thousand at December 31, 2019, to $3,312 thousand at September 30, 2020, primarily driven by higher research and development services and compensation expenses | Accrued Liability (in thousands) | Sep 30, 2020 | Dec 31, 2019 | |:---|:---|:---|\ | Research and development services | $1,507 | $231 | | General and administrative services | $118 | $297 | | Compensation expense | $1,547 | $1,522 | | Other | $140 | $177 | | **Total** | **$3,312** | **$2,227** | - **Accrued research and development services increased significantly** from **$231 thousand** in **December 2019** to **$1,507 thousand** in **September 2020**[61](index=61&type=chunk) [5. Commitments and Contingencies](index=14&type=section&id=5.%20Commitments%20and%20Contingencies) This section details the company's contractual obligations and contingent liabilities, including an operating lease for office space, research service agreements with CHOP and Penn, a license agreement with Penn/CHOP, manufacturing agreements, and a collaboration agreement with Artisan Bio, Inc. The company also has indemnification obligations - The company has an **operating lease for office space in Philadelphia**, expiring in **July 2022**, with future minimum payments totaling **$493 thousand** as of **September 30, 2020**[62](index=62&type=chunk)[63](index=63&type=chunk) - A **license agreement with Penn and CHOP** grants the company exclusive, worldwide, royalty-bearing rights to intellectual property for autoimmune and alloimmune diseases, with annual funding obligations and potential **milestone payments up to $20,000 thousand**[66](index=66&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - **Sponsored research agreements with Penn faculty members** commit the company to funding a defined research plan through **February 2023**, with an estimated total cost of **$11,781 thousand**[71](index=71&type=chunk) - In **July 2020**, the company entered into a **collaboration and license agreement with Artisan Bio, Inc.** to enhance pipeline products using Artisan's gene editing technology, involving an upfront fee and potential future milestone and royalty payments[77](index=77&type=chunk) [6. Preferred Stock](index=17&type=section&id=6.%20Preferred%20Stock) This section outlines the company's preferred stock history, noting that all Convertible Preferred Stock was converted into common stock in October 2019 in connection with the IPO, and no preferred stock was outstanding as of September 30, 2020 - As of **September 30, 2020**, the company had **10,000,000 shares of authorized preferred stock**, none of which were issued or outstanding[82](index=82&type=chunk) - In **October 2019**, all Convertible Preferred Stock (Series A, A-1, A-2, and B) was converted into **12,904,534 shares of Common Stock** as part of the company's **IPO**[84](index=84&type=chunk) [7. Common Stock](index=17&type=section&id=7.%20Common%20Stock) This section details the company's common stock structure, including authorized shares, voting and non-voting classes, and stock-based compensation plans. It highlights the increase in stock-based compensation expense and the activity of stock options - As of **September 30, 2020**, the company had **150,000,000 authorized shares of common stock** (**143,590,481 voting** and **6,409,519 non-voting**), with **24,055,467 shares issued and outstanding**[24](index=24&type=chunk) - **Stock-based compensation expense totaled $1,127 thousand** for the **three months ended September 30, 2020** (up from **$569 thousand** in **2019**) and **$3,067 thousand** for the **nine months ended September 30, 2020** (up from **$1,481 thousand** in **2019**)[94](index=94&type=chunk) | Stock Option Activity | Number of Shares (Sep 30, 2020) | Weighted Average Exercise Price (Sep 30, 2020) | |:---|:---|:---|\ | Outstanding as of Jan 1, 2020 | 2,129,632 | $5.12 | | Granted | 797,572 | $13.06 | | Exercised | (21,445) | $6.30 | | Forfeited | (16,714) | $6.30 | | **Outstanding as of Sep 30, 2020** | **2,889,045** | **$7.30** | | Options Exercisable at Sep 30, 2020 | 784,221 | $3.58 | [8. Income Taxes](index=21&type=section&id=8.%20Income%20Taxes) The company did not record an income tax benefit for the three and nine months ended September 30, 2020 and 2019, due to accumulated losses and the determination that it is more likely than not that future tax benefits from deferred tax assets would not be realized, resulting in a full valuation allowance - **No income tax benefit was recorded** for the **three and nine months ended September 30, 2020 and 2019**[99](index=99&type=chunk) - A **full valuation allowance has been provided for net deferred tax assets and liabilities** as of **September 30, 2020**, and **December 31, 2019**, as future benefit realization is not considered more likely than not[99](index=99&type=chunk) [9. Net Loss Per Share](index=21&type=section&id=9.%20Net%20Loss%20Per%20Share) This section presents the basic and diluted net loss per share calculations, which are identical due to the company's net loss, making all potentially dilutive shares anti-dilutive. The weighted average shares outstanding increased significantly from 2019 to 2020 | Metric | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2020 | |:---|:---|:---|\ | Net loss per share, basic and diluted | $(0.36) | $(1.09) | | Weighted average shares used in basic per share computation | 17,828,169 | 16,943,599 | | Weighted average shares used in diluted per share computation | 23,257,655 | 22,136,713 | | Potentially Dilutive Shares (in thousands) | As of Sep 30, 2020 | As of Sep 30, 2019 | |:---|:---|:---|\ | Convertible preferred stock | — | 19,356,835 | | Stock options to purchase common stock | 2,889,045 | 1,942,411 | | Non-vested common stock | 696,595 | 1,619,772 | | **Total anti-dilutive shares** | **3,585,640** | **22,919,018** | - All outstanding potentially dilutive shares, including **stock options and non-vested common stock**, were excluded from the diluted net loss per share calculation as their effect was **anti-dilutive** due to the **net loss**[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting its focus on developing CAAR T cell therapies, the impact of the COVID-19 pandemic, key agreements, and detailed analysis of operating expenses, liquidity, and cash flows. The company continues to incur significant losses and requires additional funding for its clinical development programs [Overview](index=23&type=section&id=Overview) This section introduces Cabaletta Bio's focus on CAAR T cell therapies for autoimmune diseases, its lead product candidate, and historical financing - **Cabaletta Bio is a clinical-stage biotechnology company** developing engineered T cell therapies (CAAR T cells) for B cell-mediated autoimmune diseases, aiming for deep and durable treatments[106](index=106&type=chunk) - The lead product candidate, **DSG3-CAART**, is in a **Phase 1 trial (DesCAARTes™ trial)** for mucosal pemphigus vulgaris (mPV), with acute safety data expected in **H1 2021**[106](index=106&type=chunk) - The company's operations have been financed by **$86.4 million** from convertible notes/preferred stock and **$71.0 million** from its **October 2019 IPO**, holding **$118.1 million in cash and investments** as of **September 30, 2020**[107](index=107&type=chunk) [Impact of the COVID-19 Pandemic](index=23&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic) This section discusses the COVID-19 pandemic's limited financial impact to date, implemented safety measures, and future uncertainties for operations and capital raising - The **COVID-19 pandemic has not significantly impacted the company's financial results** for the **three and nine months ended September 30, 2020**[112](index=112&type=chunk) - The company has implemented **work-from-home policies** and stringent safety measures for essential staff to ensure employee safety and business continuity[109](index=109&type=chunk) - Future impact of **COVID-19** on financial condition, operations, capital raising, and clinical trial timing and enrollment remains **highly uncertain**[112](index=112&type=chunk) [Key Agreements](index=24&type=section&id=Key%20Agreements) This section outlines critical agreements, including the license with Penn/CHOP, sponsored research agreements, and a master translational research services agreement - The company holds an **Amended and Restated License Agreement with the University of Pennsylvania (Penn) and Children's Hospital of Philadelphia (CHOP)** for exclusive, worldwide, royalty-bearing rights to intellectual property for autoimmune and alloimmune diseases[114](index=114&type=chunk) - **Two sponsored research agreements (SRAs) with Penn faculty** commit the company to funding a defined research plan through **February 2023**, with an estimated total cost of **$11.8 million**[116](index=116&type=chunk) - A **Master Translational Research Services Agreement with Penn**, expiring **October 2021**, covers additional R&D, clinical, regulatory, and manufacturing services[117](index=117&type=chunk) [Components of Operating Results](index=25&type=section&id=Components%20of%20Operating%20Results) This section explains the company's revenue expectations, and anticipated increases in research and development and general and administrative expenses - The company has **not generated any revenue from product sales to date** and does not expect to for several years, if at all, relying on successful preclinical and clinical development and regulatory approval[119](index=119&type=chunk) - **Research and development expenses are expected to increase substantially** due to investments in product candidate development, manufacturing, and clinical trials, with costs expensed as incurred[124](index=124&type=chunk) - **General and administrative expenses are also projected to rise** to support R&D, manufacturing, public company operations, and potential commercialization efforts[129](index=129&type=chunk) [Results of Operations for the Three Months ended September 30, 2020 and 2019](index=27&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20ended%20September%2030%2C%202020%20and%202019) This section analyzes the company's financial performance, including operating expenses and net loss, for the three-month periods ended September 30, 2020 and 2019 | Metric (in thousands) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Change | |:---|:---|:---|:---|\ | Research and development | $5,650 | $3,220 | $2,430 | | General and administrative | $2,766 | $1,811 | $955 | | Total operating expenses | $8,416 | $5,031 | $3,385 | | Loss from operations | $(8,416) | $(5,031) | $(3,385) | | Interest income | $23 | $381 | $(358) | | Net loss | $(8,393) | $(4,650) | $(3,743) | - **Research and development expenses increased by $2.4 million**, driven by higher development services, manufacturing costs, and personnel expenses[132](index=132&type=chunk) - **General and administrative expenses rose by $1.0 million**, primarily due to increased personnel costs (including stock-based compensation) and higher insurance costs as a public company[133](index=133&type=chunk) - **Interest income decreased by $0.4 million** due to a significant decline in interest rates, despite a higher cash balance[136](index=136&type=chunk) [Results of Operations for the Nine Months ended September 30, 2020 and 2019](index=28&type=section&id=Results%20of%20Operations%20for%20the%20Nine%20Months%20ended%20September%2030%2C%202020%20and%202019) This section analyzes the company's financial performance, including operating expenses and net loss, for the nine-month periods ended September 30, 2020 and 2019 | Metric (in thousands) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | Change | |:---|:---|:---|:---|\ | Research and development | $15,601 | $8,645 | $6,956 | | General and administrative | $8,902 | $4,178 | $4,724 | | Total operating expenses | $24,503 | $12,823 | $11,680 | | Loss from operations | $(24,503) | $(12,823) | $(11,680) | | Interest income | $473 | $1,283 | $(810) | | Net loss | $(24,030) | $(11,540) | $(12,490) | - **Research and development expenses increased by $7.0 million**, primarily due to higher personnel costs (**$3.0M**), manufacturing costs (**$2.0M**), and development services (**$1.5M**)[138](index=138&type=chunk) - **General and administrative expenses increased by $4.7 million**, mainly from higher personnel costs (**$2.3M**), increased insurance costs (**$1.7M**) as a public company, and higher professional service fees (**$0.7M**)[140](index=140&type=chunk) - **Interest income decreased by $0.8 million**, to **$0.5 million**, due to a significant decrease in interest rates starting **March 2020**[141](index=141&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, accumulated deficit, and future funding requirements to support ongoing operations and development - As of **September 30, 2020**, the company had **$118.1 million in cash and cash equivalents and investments**, with an **accumulated deficit of $57.0 million**[142](index=142&type=chunk)[143](index=143&type=chunk) - The company expects its existing capital to fund operations through at least the **third quarter of 2022**, but will require **substantial additional financing** for further development and commercialization[145](index=145&type=chunk) - Future funding will depend on factors such as preclinical/clinical trial progress, regulatory approvals, manufacturing costs, and strategic collaborations, with potential for dilution or debt covenants if additional capital is raised[147](index=147&type=chunk)[145](index=145&type=chunk) [Cash Flows](index=30&type=section&id=Cash%20Flows) This section details the company's cash flow activities from operations, investing, and financing for the nine months ended September 30, 2020 and 2019 | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | |:---|:---|:---|\ | Net cash used in operating activities | $(17,597) | $(8,162) | | Net cash used in investing activities | $(9,872) | $(420) | | Net cash (used in) provided by financing activities | $(56) | $46,606 | | Net (decrease) increase in cash and cash equivalents | $(27,525) | $38,024 | - **Operating activities used $17.6 million in cash** for the **nine months ended September 30, 2020**, primarily due to a **net loss of $24.0 million**, partially offset by non-cash charges and changes in operating assets/liabilities[149](index=149&type=chunk) - **Investing activities used $9.9 million** in **2020**, mainly for purchases of available-for-sale investments, a **significant increase** from **$0.4 million** in **2019**[151](index=151&type=chunk) - **Financing activities used $56 thousand** in **2020**, primarily for IPO issuance costs, a **stark contrast to $46.6 million provided in 2019** from convertible preferred stock issuance[154](index=154&type=chunk)[155](index=155&type=chunk) [Contractual Obligations and Commitments](index=31&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines recent amendments to sponsored research and license agreements, increasing future financial commitments - In **May 2020**, the company amended a Sponsored Research Agreement with Penn, **increasing its research commitment by $3.3 million**[157](index=157&type=chunk) - An amendment to the License Agreement with Penn and CHOP added intellectual property for an undisclosed disease target[157](index=157&type=chunk) - The CAROT agreement was amended, **increasing future expenses by $1.3 million**[157](index=157&type=chunk) [Off-Balance Sheet Arrangements](index=31&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements during the reported period - The company did not have any off-balance sheet arrangements as defined under SEC rules during the period presented[158](index=158&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section notes no material changes to critical accounting policies, except for the Investments accounting policy, since December 31, 2019 - There have been **no material changes** to the company's critical accounting policies and significant judgments and estimates since **December 31, 2019**, except for the Investments accounting policy[159](index=159&type=chunk) [Emerging Growth Company Status](index=31&type=section&id=Emerging%20Growth%20Company%20Status) This section explains the company's status as an emerging growth company, allowing for reduced reporting requirements and delayed adoption of new accounting standards - The company is an **emerging growth company (EGC)** under the **JOBS Act**, allowing it to take advantage of reduced reporting requirements, including delayed adoption of new accounting standards[160](index=160&type=chunk)[161](index=161&type=chunk) - The company has elected to use the **extended transition period** for new or revised accounting standards, which may affect comparability with other public companies[160](index=160&type=chunk) [Recently Issued Accounting Pronouncements](index=32&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section discusses the anticipated adoption of ASU 2016-02, Leases (Topic 842), and its potential impact on future financial statements - The company expects to adopt **ASU 2016-02, Leases (Topic 842)**, for its annual period ending **December 31, 2021**, but has not yet evaluated its full effect on financial statements[164](index=164&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate sensitivity. As of September 30, 2020, the company held $118.1 million in cash, cash equivalents, and investments, primarily in low-risk, short-term instruments. Declines in interest rates would reduce future investment income, but an immediate 100 basis point change would not materially affect the fair value of cash equivalents - The company's primary market risk exposure is **interest rate sensitivity**, with **$118.1 million in cash, cash equivalents, and investments** as of **September 30, 2020**[165](index=165&type=chunk) - Investments are primarily in **U.S. treasury-based money market funds** and **investment-grade corporate bonds** with high credit quality issuers[165](index=165&type=chunk) - An immediate **100 basis point change in interest rates** would not materially affect the fair market value of cash equivalents due to their short-term maturities and low-risk profile[165](index=165&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that management, with the participation of the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of September 30, 2020, and concluded they were effective. No material changes in internal control over financial reporting occurred during the quarter, despite most employees working remotely due to COVID-19 - Management concluded that the company's **disclosure controls and procedures were effective** at a reasonable assurance level as of **September 30, 2020**[167](index=167&type=chunk) - **No material changes in internal control over financial reporting occurred** during the fiscal quarter ended **September 30, 2020**[168](index=168&type=chunk) - The company is continually monitoring and assessing the **COVID-19 situation** for potential impacts on internal controls, but has not identified any material changes due to remote work[168](index=168&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information pertinent to the company's operations and financial standing [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) As of September 30, 2020, Cabaletta Bio, Inc. was not involved in any material litigation or legal proceedings that would be expected to have a material adverse impact on its financial position, results of operations, or cash flow - As of **September 30, 2020**, the company was **not involved in any material litigation or legal proceedings**[171](index=171&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This extensive section outlines various material risks associated with Cabaletta Bio's business, including those related to clinical development, the COVID-19 pandemic, competition, financial condition, intellectual property, reliance on third parties, manufacturing, government regulation, healthcare, data privacy, and common stock ownership. These risks highlight the speculative nature of biopharmaceutical development and the significant uncertainties the company faces [Risks Related to Our Business, Technology and Industry](index=33&type=section&id=Risks%20Related%20to%20Our%20Business%2C%20Technology%20and%20Industry) This section details risks inherent to the company's business model, technology, and the broader industry, including clinical development, COVID-19, and competition [Risks Related to Clinical Development](index=33&type=section&id=Risks%20Related%20to%20Clinical%20Development) The company faces significant challenges in clinical development, including the novel nature of CAAR T cell therapies, potential for serious adverse events (like neurotoxicity and CRS), and the inherent uncertainties of clinical trials. Delays in patient enrollment, unexpected results, or regulatory hurdles could materially harm the business - The company's success heavily depends on the successful commercialization of its initial product candidates, particularly **DSG3-CAART**, which is in early-stage development and requires extensive preclinical and clinical trials[194](index=194&type=chunk) - **CAAR T cell therapies are novel**, creating challenges such as manufacturing complexities, potential for **severe side effects (neurotoxicity, CRS)**, and the need for regulatory acceptance in autoimmune diseases[176](index=176&type=chunk)[184](index=184&type=chunk) - **Delays in clinical trials** can arise from difficulties in patient enrollment, regulatory disagreements on trial design, unforeseen safety issues, or manufacturing challenges, increasing costs and potentially jeopardizing regulatory approval[227](index=227&type=chunk)[221](index=221&type=chunk) [Risks Related to the Current Novel Coronavirus (COVID-19) Pandemic](index=40&type=section&id=Risks%20Related%20to%20the%20Current%20Novel%20Coronavirus%20(COVID-19)%20Pandemic) The COVID-19 pandemic poses significant risks to the company's research, development, and commercialization efforts, despite not having a material financial impact to date. Potential disruptions include delays in clinical trial enrollment, interruptions in supply chains, and adverse effects on the broader economy and capital markets - The **COVID-19 pandemic could seriously harm research, development, and future commercialization efforts**, increase costs, and have a material adverse effect on business, financial condition, and results of operations[201](index=201&type=chunk) - Factors like diversion of healthcare resources, travel restrictions, supply chain interruptions, and business disruptions could **delay clinical trial enrollment** and impact operations[203](index=203&type=chunk) - Uncertainty around the pandemic's duration and impact could affect the company's ability to raise necessary capital[204](index=204&type=chunk) [Risks Related to the Industry](index=40&type=section&id=Risks%20Related%20to%20the%20Industry) The biopharmaceutical industry is highly competitive and characterized by rapid technological advancements. The company's product candidates may cause undesirable side effects, fail to demonstrate safety and efficacy in trials, or face challenges in gaining market acceptance, all of which could prevent regulatory approval and commercialization - **Undesirable side effects or unexpected characteristics** of product candidates could halt clinical development, prevent regulatory approval, or limit commercial potential[206](index=206&type=chunk) - Preclinical studies and early clinical trials may not predict later-stage results, and product candidates may fail to demonstrate necessary safety, potency, and purity for regulatory approval[209](index=209&type=chunk)[210](index=210&type=chunk) - Interim or preliminary data from clinical trials are subject to change and may differ from final data, potentially impacting regulatory acceptance and commercialization[215](index=215&type=chunk)[216](index=216&type=chunk) [Risks Related to Sales, Marketing and Competition](index=46&type=section&id=Risks%20Related%20to%20Sales%2C%20Marketing%20and%20Competition) The company faces significant competition from other biotechnology and pharmaceutical companies, many with greater resources. Its market opportunities may be limited to small patient populations, and the lack of an established marketing and sales organization could hinder commercial success, even if products are approved - The market opportunities for the company's product candidates may be limited to specific patient populations (e.g., mPV), potentially hindering profitability without additional indications[233](index=233&type=chunk) - The company currently lacks a marketing and sales organization and will need to invest significantly or rely on third-party collaborations, which may not be successful, to generate product revenue[235](index=235&type=chunk)[236](index=236&type=chunk) - The biopharmaceutical industry is **highly competitive**, with many competitors possessing greater financial and technical resources, potentially developing more effective or cheaper products[238](index=238&type=chunk) [Risks Related to Business Development](index=48&type=section&id=Risks%20Related%20to%20Business%20Development) The company's ability to identify and develop additional product candidates is crucial for future growth, but limited resources necessitate prioritization, which may lead to missed opportunities. Managing organizational growth and reliance on third-party consultants also present significant challenges and risks to business operations - Failure to identify additional viable product candidates or successfully advance existing ones beyond initial programs (**DSG3-CAART, MuSK-CAART, DSG3/1-CAART, FVIII-CAART**) will limit commercial opportunity[244](index=244&type=chunk)[249](index=249&type=chunk) - The company is **highly dependent on key personnel** and its ability to attract and retain qualified managerial, scientific, and medical staff is critical for successful business strategy implementation[250](index=250&type=chunk)[251](index=251&type=chunk) - Expected rapid expansion of the employee base and reliance on independent organizations for services pose challenges in managing growth, potentially diverting management attention and impacting operational efficiency[254](index=254&type=chunk)[256](index=256&type=chunk) [Risks Related to Litigation](index=51&type=section&id=Risks%20Related%20to%20Litigation) The company faces inherent product liability risks from clinical testing and potential commercialization of its product candidates. Successful defense against such claims would require significant resources, and an adverse outcome could lead to substantial liabilities, limit commercialization, or harm the company's reputation - The company faces an **inherent risk of product liability lawsuits** from clinical testing and future commercialization of its product candidates[260](index=260&type=chunk) - **Product liability claims**, regardless of merit, could result in **substantial liabilities**, decreased demand, reputational damage, and diversion of management resources[260](index=260&type=chunk) - Inability to obtain sufficient product liability insurance at an acceptable cost could prevent or inhibit commercialization[261](index=261&type=chunk) [Risks Related to Our Financial Condition and Capital Requirements](index=51&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%20and%20Capital%20Requirements) This section addresses financial risks, including the company's history of losses, future capital needs, and the uncertainty of achieving profitability [Risks Related to Past Financial Condition](index=51&type=section&id=Risks%20Related%20to%20Past%20Financial%20Condition) The company has a limited operating history and has incurred significant net losses since inception, with an accumulated deficit of $57.0 million as of September 30, 2020. It expects to continue incurring substantial losses as it invests in R&D, clinical trials, and infrastructure, making profitability uncertain and dependent on successful product development and commercialization - The company has incurred **net losses in every period since its inception**, with an **accumulated deficit of $57.0 million** as of **September 30, 2020**[263](index=263&type=chunk) - **Significant losses are expected to continue** due to ongoing research and development, preclinical studies, clinical trials, and efforts to build manufacturing and commercial capabilities[264](index=264&type=chunk) - The company's limited operating history and early stage of development make it difficult to evaluate future viability and predict performance, with financial results expected to fluctuate significantly[269](index=269&type=chunk)[270](index=270&type=chunk) [Risks Related to Future Financial Condition](index=56&type=section&id=Risks%20Related%20to%20Future%20Financial%20Condition) The company will require substantial additional financing to complete clinical trials and commercialize its product candidates. Failure to obtain adequate funding on favorable terms could lead to delays, scaling back operations, or relinquishing rights to technologies, and future equity sales could dilute existing stockholders - The company will require **substantial additional financing** to complete Phase 1 trials, future clinical trials, and commercialization of its product candidates[282](index=282&type=chunk)[283](index=283&type=chunk) - As of **September 30, 2020**, existing cash and investments are expected to fund operations through at least **Q3 2022**, but this estimate is based on assumptions that may prove incorrect[284](index=284&type=chunk) - Inability to raise additional funds on acceptable terms could force delays, reductions, or termination of R&D initiatives and clinical development plans, or require unfavorable collaborations[285](index=285&type=chunk) [Risks Related to Our Intellectual Property](index=58&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's success depends on its ability to obtain and maintain robust intellectual property protection for its product candidates. Challenges include the uncertainty of patent issuance, validity, and enforceability, potential for competitors to design around patents, and the high costs and time associated with patent prosecution and litigation. Changes in patent laws or inability to protect trade secrets could also harm its competitive position - The company's success depends on obtaining and maintaining intellectual property protection, but the **patent application and approval process is expensive, complex, and uncertain** regarding issuance, scope, validity, and enforceability[291](index=291&type=chunk)[292](index=292&type=chunk) - Competitors may infringe, misappropriate, or otherwise violate intellectual property rights, leading to **expensive and time-consuming lawsuits** that could divert management attention and potentially result in adverse outcomes[303](index=303&type=chunk)[304](index=304&type=chunk) - **Changes in patent laws or their interpretation**, particularly in biotechnology, could diminish the value of patents and impair the ability to protect product candidates[305](index=305&type=chunk)[307](index=307&type=chunk) [Risks Related to Licensed Intellectual Property](index=64&type=section&id=Risks%20Related%20to%20Licensed%20Intellectual%20Property) The company heavily relies on in-licensed patent rights, particularly from Penn and CHOP. Failure to comply with license obligations could lead to loss of critical rights. Additionally, some licensed intellectual property, developed with government funding, is subject to federal regulations like 'march-in' rights and U.S. manufacturing preferences, which could limit exclusive rights and manufacturing flexibility - The company's ability to develop and commercialize product candidates is **heavily dependent on in-licensed patent rights**, especially from **Penn and CHOP**[319](index=319&type=chunk) - **Failure to comply with license obligations**, such as diligence or milestone payments, could result in termination of agreements and loss of critical license rights[319](index=319&type=chunk) - Intellectual property developed with U.S. government funding is subject to federal regulations, including **'march-in' rights** and a preference for U.S. manufacturing, which could limit exclusive rights and manufacturing options[318](index=318&type=chunk) [Risks Related to Patents](index=65&type=section&id=Risks%20Related%20to%20Patents) The company faces risks from changes in patent law, which could diminish the value of its patents, and from potential claims of infringement by third parties. Such claims could prevent or delay development and commercialization, incur substantial litigation expenses, and potentially lead to significant damages or the need for costly licenses - **Changes in patent law**, such as the **Leahy-Smith America Invents Act** and Supreme Court decisions (e.g., Myriad), could increase uncertainties and costs in patent prosecution and enforcement, negatively impacting the value of the company's patents[325](index=325&type=chunk)[326](index=326&type=chunk)[327](index=327&type=chunk) - The company may be subject to **claims of infringing third-party patents**, which could lead to injunctions, substantial litigation expenses, and potentially significant damages or the need to obtain costly licenses[328](index=328&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk) - Patent term may be inadequate to protect competitive position due to the lengthy development and regulatory review process, potentially allowing competitors to launch products earlier[335](index=335&type=chunk) [Risks Related to Our Reliance on Third Parties](index=68&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) This section highlights risks associated with the company's dependence on external partners for research, manufacturing, and strategic alliances [Risks Related to Our Reliance on Penn](index=68&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Penn) The company is highly dependent on the University of Pennsylvania (Penn) for nonclinical R&D, current manufacturing, and clinical trial conduct. Any failure by Penn to perform its obligations, termination of agreements, or delays in technology transfer could severely disrupt operations and hinder product development and regulatory approval - The company is **highly reliant on Penn** for nonclinical R&D activities and current manufacturing needs for its lead product candidate, **DSG3-CAART**[340](index=340&type=chunk)[345](index=345&type=chunk) - **Termination of the Services Agreement with Penn** or delays/inadequacies in technology transfer could disrupt business operations, clinical trials, and require additional resources[341](index=341&type=chunk)[342](index=342&type=chunk) - Reliance on third parties, including Penn, to conduct clinical trials means limited control over day-to-day activities, and non-compliance with GCPs could deem clinical data unreliable or lead to enforcement actions[346](index=346&type=chunk) [Risks Related to Our Reliance on Other Third Parties](index=71&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Other%20Third%20Parties) The company intends to rely on third-party contract development and manufacturing organizations (CDMOs) for future manufacturing, which exposes it to risks such as inability to identify suitable manufacturers, failure to meet quality/quantity requirements, and non-compliance with cGMP. Forming strategic alliances also carries risks of integration difficulties and failure to realize anticipated benefits - The company intends to rely on **third-party CDMOs for future manufacturing**, exposing it to risks like inability to identify suitable manufacturers, failure to meet quality/quantity needs, and non-compliance with cGMP[352](index=352&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk) - Forming strategic alliances or licensing arrangements may require incurring charges, diluting stockholders, or disrupting management, and there's no assurance of realizing anticipated benefits[359](index=359&type=chunk)[360](index=360&type=chunk) - The success of strategic transactions, including the License Agreement, depends on mitigating risks such as unanticipated liabilities, integration difficulties, and diversion of management time[362](index=362&type=chunk) [Risks Related to Manufacturing and Supply](index=73&type=section&id=Risks%20Related%20to%20Manufacturing%20and%20Supply) The manufacturing process for the company's novel CAAR T cell product candidates is complex, costly, and not yet validated for commercial production. Risks include difficulties in scaling up, process reproducibility, supply chain interruptions for specialty raw materials and viral vectors, and potential non-compliance with FDA cGMP requirements, all of which could delay clinical trials or commercialization - The manufacturing process for **CAAR T cell product candidates is complex, novel, and not yet validated for commercial production**, leading to higher costs and lower reliability than traditional compounds[370](index=370&type=chunk) - Manufacturing is susceptible to logistical issues, variability in raw materials (e.g., white blood cells, lentiviral vectors), contamination, equipment failure, and operator error, which could lead to reduced yields or product defects[371](index=371&type=chunk) - The company relies on a **limited number of suppliers** for specialty raw materials and lentiviral vectors, posing risks of supply chain interruptions and delays in clinical or commercial manufacturing[377](index=377&type=chunk)[385](index=385&type=chunk) [Risks Related to Government Regulation](index=78&type=section&id=Risks%20Related%20to%20Government%20Regulation) The FDA regulatory approval process for the company's novel biological products is lengthy, complex, and uncertain, with no prior experience in commercial CAAR T cell therapies. Challenges include establishing acceptable endpoints, potential for biosimilar competition, and an evolving regulatory landscape. Delays in clinical trials, changes in regulatory requirements, or disruptions at government agencies could significantly impair the ability to commercialize products - The **FDA regulatory approval process for novel biological products is lengthy, complex, and uncertain**, with no prior experience for commercial CAAR T cells for pemphigus, leading to unclear guidance on endpoints and trial requirements[391](index=391&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk) - Product candidates are expected to be regulated as biologics, potentially subject to **biosimilar competition** after a **12-year exclusivity period**, which could be shortened by congressional action[398](index=398&type=chunk)[399](index=399&type=chunk) - **Disruptions at the FDA and other government agencies** (e.g., due to funding shortages or COVID-19) could hinder their ability to review and approve new products in a timely manner, adversely affecting the business[420](index=420&type=chunk)[422](index=422&type=chunk)[423](index=423&type=chunk) [Risks Related to Ongoing Regulatory Obligations](index=86&type=section&id=Risks%20Related%20to%20Ongoing%20Regulatory%20Obligations) Even with regulatory approval, the company will face extensive and ongoing regulatory obligations, including post-marketing surveillance, REMS requirements, and compliance with cGMPs and advertising rules. Failure to comply or unexpected problems with product candidates could lead to significant expenses, sanctions, or withdrawal of products from the market. Changes in environmental, health, and safety laws also pose compliance risks - Any regulatory approvals will entail **ongoing obligations**, including post-marketing surveillance, potential **Risk Evaluation and Mitigation Strategies (REMS)**, and strict compliance with cGMPs and advertising rules[426](index=426&type=chunk) - **Failure to comply with regulatory requirements** or discovery of unforeseen problems could result in sanctions, product recalls, withdrawal of approval, fines, or criminal penalties[427](index=427&type=chunk) - The company is subject to environmental, health, and safety laws, and non-compliance or accidental contamination could lead to fines, penalties, or business interruptions[431](index=431&type=chunk) [Risks Related to Healthcare](index=88&type=section&id=Risks%20Related%20to%20Healthcare) Commercial success depends on adequate coverage and reimbursement from government and private payors, which is uncertain and subject to various factors. Healthcare legislative measures, such as the ACA and drug pricing reforms, aim to reduce costs and could negatively impact the company's ability to generate revenue and achieve profitability - Commercialization depends on **adequate coverage and reimbursement** from government and private health insurers, which is a time-consuming and costly process with no guarantee of favorable rates[434](index=434&type=chunk)[438](index=438&type=chunk) - **Healthcare legislative measures**, including the **ACA** and proposals for drug price controls, could reduce Medicare and other healthcare funding, impose stricter coverage criteria, and exert downward pressure on product pricing[441](index=441&type=chunk)[443](index=443&type=chunk)[448](index=448&type=chunk) - Relationships with healthcare providers and customers are subject to federal and state fraud and abuse laws (e.g., **Anti-Kickback Statute, False Claims Act**), and non-compliance could lead to substantial penalties and legal action[455](index=455&type=chunk)[456](index=456&type=chunk) [Risks Related to Data and Privacy](index=95&type=section&id=Risks%20Related%20to%20Data%20and%20Privacy) The company is subject to restrictive data protection regulations, such as GDPR, which impose stringent requirements on processing and transferring personal data. Security breaches or unauthorized access to sensitive information could harm its reputation, lead to significant liabilities, and disrupt business operations, despite efforts to prevent such incidents - European data collection is governed by restrictive regulations like **GDPR**, imposing stringent operational requirements, expanded disclosures, and strict rules on cross-border data transfers, with potential for **significant fines for non-compliance**[464](index=464&type=chunk) - **Security breaches or unauthorized access to individually identifiable health information** could harm the company's reputation, lead to regulatory investigations, litigation, and significant remediation costs[465](index=465&type=chunk)[469](index=469&type=chunk) - Interruptions in server systems or cloud-based services, or failure to maintain data security, confidentiality, or integrity, could disrupt operations and incur substantial costs[472](index=472&type=chunk)[473](index=473&type=chunk) [Risks Related to Ownership of Our Common Stock](index=97&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) This section addresses risks associated with common stock ownership, including control by principal stockholders, internal control deficiencies, and stock price volatility [Risks Related to Ownership Generally](index=97&type=section&id=Risks%20Related%20to%20Ownership%20Generally) Principal stockholders and management hold significant control over corporate matters, potentially limiting other stockholders' influence. Failure to maintain effective internal controls could harm operating results. The dual-class stock structure may limit voting power, and future sales of common stock could cause price declines - **Principal stockholders and management beneficially own approximately 75.0% of outstanding voting common stock**, allowing them to exert significant control over matters requiring stockholder approval[475](index=475&type=chunk) - **Failure to establish and maintain proper internal control over financial reporting** could harm operating results and business operations, increasing costs and potentially impacting stock price[478](index=478&type=chunk)[480](index=480&type=chunk) - The **dual-class common stock structure**, with non-voting shares convertible to voting shares, may limit the ability of other stockholders to influence corporate matters[481](index=481&type=chunk) - Sales of a substantial number of common stock shares by existing stockholders in the public market could cause the stock price to fall[482](index=482&type=chunk)[483](index=483&type=chunk) [Risks Related to our Charter and Bylaws](index=99&type=section&id=Risks%20Related%20to%20our%20Charter%20and%20Bylaws) Anti-takeover provisions in the company's charter documents and Delaware law could delay or prevent a change of control or changes in the board of directors, potentially limiting the market price of common stock. Designated exclusive forum provisions in the bylaws could also limit stockholders' ability to choose a favorable judicial forum for disputes - **Anti-takeover provisions**, such as a classified board, prohibition on written consent, and supermajority voting requirements, could delay or prevent a change of control or changes in the board of directors[488](index=488&type=chunk)[489](index=489&type=chunk) - The amended and restated bylaws designate **Delaware courts as the sole and exclusive forum** for certain stockholder actions, potentially limiting stockholders' ability to obtain a favorable judicial forum[491](index=491&type=chunk) [Risks Related to Tax](index=100&type=section&id=Risks%20Related%20to%20Tax) Changes in tax laws, such as those introduced by the CARES Act, could adversely affect the company's business and financial condition. The company's ability to utilize its substantial net operating losses (NOLs) and other tax attributes to offset future taxable income may be subject to limitations due to ownership changes or if profitability is not achieved - **Changes in U.S. federal, state, and local income tax laws**, including those from the **CARES Act**, could adversely affect the company's business and financial condition[492](index=492&type=chunk) - The company's ability to utilize its **net operating losses (NOLs)** and other tax attributes to offset future taxable income may be limited by **'ownership changes'** under Sections 382 and 383 of the Code[493](index=493&type=chunk) - As of **December 31, 2019**, the company had significant U.S. federal, state, and local NOL carryforwards, but their utilization is conditioned upon attaining profitability and generating taxable income[493](index=493&type=chunk)[496](index=496&type=chunk) [Risks Related to Investments in Securities](index=102&type=section&id=Risks%20Related%20to%20Investments%20in%20Securities) The price of the company's common stock may be volatile due to various factors, including clinical trial results, regulatory decisions, competition, and overall market performance. As an emerging growth company and smaller reporting company, reduced reporting requirements may make its stock less attractive to investors. The company does not intend to pay dividends, limiting stockholder returns to stock appreciation - The price of the company's common stock may be **volatile** due to factors such as clinical trial results, regulatory decisions, competition, and overall equity market performance[497](index=497&type=chunk)[499](index=499&type=chunk) - As an **emerging growth company** and smaller reporting company, the company benefits from reduced reporting requirements, but this status may make its common stock less attractive to some investors[502](index=502&type=chunk)[505](index=505&type=chunk) - The company does not intend to pay dividends on its common stock, meaning any returns for stockholders will be limited to stock appreciation[501](index=501&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=105&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms that there were no unregistered sales of equity securities. It also details the use of proceeds from the company's initial public offering (IPO) in October 2019, which generated approximately $71.0 million in net proceeds. As of September 30, 2020, none of these net proceeds had been used, and management retains broad discretion over their allocation - **No unregistered sales of equity securities occurred** during the reported period[509](index=509&type=chunk) - The company received approximately **$71.0 million in net proceeds** from its **IPO in October 2019**[511](index=511&type=chunk) - As of **September 30, 2020**, **none of the net proceeds from the IPO had been used**, and management retains broad discretion over their allocation[511](index=511&type=chunk) [Item 3. Defaults Upon Senior Securities](index=105&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reported period - There were **no defaults upon senior securities**[512](index=512&type=chunk) [Item 4. Mine Safety Disclosures](index=105&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are **not applicable** to the company[513](index=513&type=chunk) [Item 5. Other Information](index=105&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - No other information is reported in this section[514](index=514&type=chunk) [Item 6. Exhibits](index=106&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including organizational documents, amendments to agreements, and certifications from principal officers - The exhibits include the **Third Amended and Restated Certificate of Incorporation** and **Amended and Restated Bylaws**[516](index=516&type=chunk) - **Amendment No. 2 to the Sponsored Research Agreement** with the University of Pennsylvania is filed as an exhibit[516](index=516&type=chunk) - **Certifications of the Principal Executive Officer and Principal Financial Officer** pursuant to the Sarbanes-Oxley Act are included[516](index=516&type=chunk) [Signatures](index=107&type=section&id=Signatures) This section contains the duly authorized signatures of Cabaletta Bio, Inc.'s Chief Executive Officer and President, Steven Nichtberger, and Chief Financial Officer, Anup Marda, certifying the filing of the report on November 10, 2020 - The report is signed by **Steven Nichtberger, Chief Executive Officer and President**, and **Anup Marda, Chief Financial Officer**, on **November 10, 2020**[524](index=524&type=chunk)

Cabaletta Bio" Corporate Presentation OCTOBER 2020 © 2020 Cabaletta Bio. All rights reserved. Disclaimer 2 The following presentation, including any printed or electronic copy of these slides, the talks given by the presenters, the information communicated during any delivery of the presentation and any question and answer session and any document or material distributed at or in connection with the presentation (collectively, the "Presentation") has been prepared by Cabaletta Bio, Inc. ("we," "us," "our," ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_______________ to _______________ Commission File Number: 001-39103 CABALETTA BIO, INC. (Exact Name of Registrant as Specified in its Charter) Delaware (State o ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-39103 CABALETTA BIO, INC. (Exact name of Registrant as specified in its Charter) Delaware 82-1685768 (State or other jurisdiction of ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_______________ to _______________ Commission File Number: 001-39103 CABALETTA BIO, INC. (Exact Name of Registrant as Specified in its Charter) Delaware (Sta ...