NEW YORK, June 27, 2024 (GLOBE NEWSWIRE) -- Tourmaline Bio, Inc. (Tourmaline) (NASDAQ: TRML), a late-stage clinical biotechnology company developing transformative medicines to dramatically improve the lives of patients with life-altering immune and inflammatory diseases, today announced the promotion of Ryan Robinson, CPA, to Chief Financial Officer and Treasurer, effective June 25, 2024. Mr. Robinson most recently held the role of Vice President, Finance and Controller at Tourmaline, in addition to servin ...

A live webcast and replay will be posted under "Events and Presentations" in the News & Investors section of the Tourmaline Bio website at https://ir.tourmalinebio.com. NEW YORK, May 23, 2024 (GLOBE NEWSWIRE) -- Tourmaline Bio, Inc. (Tourmaline) (NASDAQ:TRML), a late-stage clinical biotechnology company developing transformative medicines to dramatically improve the lives of patients with life-altering immune and inflammatory diseases, today announced that Sandeep Kulkarni, CEO, is expected to participate i ...

Financial Performance - The company reported net losses of $13.3 million and $7.5 million for the three months ended March 31, 2024 and 2023, respectively, with an accumulated deficit of $75.4 million as of March 31, 2024[97]. - The net loss for the three months ended March 31, 2024, was $13.3 million, compared to a net loss of $7.5 million for the same period in 2023[130]. - As of March 31, 2024, the company has not generated any revenue since inception and does not expect to do so in the near future[116]. - The company expects significant increases in research and development and general and administrative costs as it advances clinical development and prepares for potential commercialization[133]. - The company has raised approximately $359.7 million in aggregate gross proceeds since inception, primarily through outside capital[134]. - Future capital requirements will necessitate additional funding through equity or debt financings, collaborations, or licensing arrangements[137]. - The company is unable to estimate exact capital requirements due to various uncertainties related to product development and commercialization[138]. Cash and Investments - The company has total cash, cash equivalents, and investments of $350.3 million as of March 31, 2024[96]. - As of March 31, 2024, the company had $350.3 million in cash, cash equivalents, and investments, which is expected to fund operations into 2027[135]. - Net cash used in operating activities for Q1 2024 was $14.9 million, an increase of $11.1 million compared to $3.8 million in Q1 2023[142]. - Net cash used in investing activities for Q1 2024 was $188.9 million, a significant increase from less than $0.1 million in Q1 2023, primarily due to investment purchases[143]. - Net cash provided by financing activities for Q1 2024 was $161.4 million, compared to no cash provided in Q1 2023, attributed to proceeds from the January 2024 Offering[144]. Product Development - TOUR006, the company's lead product candidate, is a fully human monoclonal antibody targeting interleukin-6 (IL-6), with the potential to establish new standards of care in autoimmune and inflammatory diseases[89]. - The pivotal Phase 2b trial for TOUR006 in thyroid eye disease (TED), named spiriTED, was initiated in September 2023, with topline data expected in 2025[92]. - The company expects to commence a pivotal Phase 3 trial of TOUR006 in first-line TED in the second half of 2024, with topline data anticipated in 2026[92]. - The FDA cleared the Investigational New Drug application for TOUR006 related to atherosclerotic cardiovascular disease (ASCVD) in March 2024, with a Phase 2 trial initiated in April 2024[94]. - The company plans to identify additional indication opportunities for TOUR006 and evaluate new in-licensing and acquisition opportunities for assets in immune and inflammatory diseases[95]. Expenses and Obligations - Research and development expenses increased by $5.2 million from $6.1 million for the three months ended March 31, 2023, to $11.4 million for the same period in 2024[131]. - General and administrative expenses rose by $4.8 million from $1.4 million for the three months ended March 31, 2023, to $6.1 million for the same period in 2024[132]. - The company may owe Pfizer up to $128.0 million upon achieving specific development and regulatory milestones, and up to $525.0 million upon achieving specific sales milestones[140]. - The company is obligated to pay Pfizer up to $128.0 million upon achieving specific development and regulatory milestones related to TOUR006[106]. - The company has not included milestone or royalty payments under the Pfizer License Agreement due to the uncertainty of timing and amounts[146]. Company Classification - The company remains classified as an "emerging growth company" and a "smaller reporting company," with annual revenue below $100.0 million and market value of stock held by non-affiliates below $700.0 million[152]. - Future funding requirements will depend on the progress and costs associated with the development of TOUR006 and other product candidates[138].

Exhibit 99.1 Tourmaline Bio Reports First Quarter 2024 Financial Results and Recent Business Highlights – Initiated Phase 2 TRANQUILITY trial in April 2024 following U.S. FDA clearance of Investigational New Drug application (IND) for clinical development program in Atherosclerotic Cardiovascular Disease (ASCVD) – – Expanded Thyroid Eye Disease (TED) clinical development plan, including accelerating the planned initiation of a pivotal Phase 3 trial into 2024 – – Completed underwritten follow-on public offer ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________ FORM 10-K _____________________________ (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR o 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: 001-40384 ________________________________________________ ...

Merger and Corporate Changes - On October 19, 2023, Tourmaline Bio, Inc. completed a merger with Legacy Tourmaline, transitioning its business focus to developing transformative medicines for immune diseases [141]. - Following the merger, Talaris' common stock underwent a 1-for-10 reverse stock split, changing its ticker symbol from "TALS" to "TRML" on October 20, 2023 [142][145]. - The merger resulted in the issuance of approximately 15,877,090 shares of common stock to Legacy Tourmaline's stockholders based on an exchange ratio of 0.7977 [143]. - The company declared a special cash dividend of $64.7 million to pre-merger stockholders before the merger took effect [153]. Financial Performance - Prior to the merger, Talaris incurred a net loss of $7.0 million for the three months ended September 30, 2023, compared to a net loss of $19.0 million for the same period in 2022, reflecting a decrease of $12.0 million [164]. - General and administrative expenses increased to $9.1 million for the three months ended September 30, 2023, up from $4.8 million in the same period of 2022, representing a $4.3 million increase [168]. - Total operating expenses for the nine months ended September 30, 2023, were $50.1 million, a decrease of $6.6 million from $56.7 million in the same period of 2022 [172]. - Other income, net for the three months ended September 30, 2023, was $1.9 million, compared to $0.8 million in the same period of 2022, reflecting an increase of $1.1 million [170]. Research and Development - Research and development expenses for the three months ended September 30, 2023, were $0.3 million, a significant decrease of $14.7 million from $15.0 million in the same period of 2022 [165]. - Research and development expenses decreased to $17.8 million for the nine months ended September 30, 2023, down from $42.4 million in the same period of 2022, a reduction of $24.6 million [173]. - The company has estimated accrued research and development expenses based on contracts and services performed, which may vary from actual costs [198]. Cash and Capital Requirements - The company had approximately $67.1 million in cash and cash equivalents and $79.9 million in marketable securities as of September 30, 2023 [156]. - The company expects to need additional capital to fund operations and product development, as it has not generated any revenue from product sales [189]. - The company requires substantial additional capital to complete the development of TOUR006 and future product candidates, and plans to raise this capital through private or public equity or debt financings [190]. - The company had net proceeds of $186.2 million from convertible preferred stock sales and $137.2 million from its IPO through September 30, 2023 [177]. - Net cash used in operating activities for the nine months ended September 30, 2023, was $39.1 million, an improvement of $7.9 million compared to $47.0 million in the same period of 2022 [183]. - Investing activities provided $92.3 million of cash during the nine months ended September 30, 2023, primarily from marketable securities maturities [186]. Restructuring and Workforce Changes - The company implemented a restructuring plan that reduced its workforce by approximately 95% as of June 30, 2023, to extend resources and focus on core operations [152]. - Restructuring costs for the three months ended September 30, 2023, included $0.1 million in employee termination costs, while no restructuring costs were incurred in the same period of 2022 [169]. Company Status and Compliance - The company remains an emerging growth company and a smaller reporting company, with annual revenue less than $100 million and market value of stock held by non-affiliates below $700 million [205][206]. - The company may continue to rely on exemptions from certain disclosure requirements as a smaller reporting company [206]. - Recently issued accounting pronouncements that may impact the company's financial position are disclosed in the financial statements [207]. - The company is not required to provide certain market risk disclosures due to its status as a smaller reporting company [208].

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Talaris Therapeutics reported a **$37.2 million** net loss for H1 2023, with assets declining to **$159.1 million**, reflecting restructuring and going concern doubts [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $18,351 | $13,670 | | Marketable securities | $133,901 | $167,612 | | Total current assets | $156,207 | $185,613 | | Total assets | $159,121 | $193,715 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $10,134 | $11,462 | | Total liabilities | $10,689 | $13,660 | | Total stockholders' equity | $148,432 | $180,055 | | Total liabilities and stockholders' equity | $159,121 | $193,715 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $4,088 | $13,187 | $17,503 | $27,383 | | General and administrative | $6,026 | $5,228 | $12,208 | $9,446 | | Restructuring costs | $6,388 | $— | $10,869 | $— | | **Total operating expenses** | **$16,502** | **$18,415** | **$40,580** | **$36,829** | | Loss from operations | $(16,502) | $(18,415) | $(40,580) | $(36,829) | | **Net loss** | **$(14,738)** | **$(18,096)** | **$(37,235)** | **$(36,355)** | | Net loss per common share | $(0.35) | $(0.44) | $(0.89) | $(0.89) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) - Total stockholders' equity decreased from **$180.1 million** at December 31, 2022, to **$148.4 million** at June 30, 2023. The decrease was primarily driven by a net loss of **$37.2 million** for the six-month period[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(31,581) | $(33,560) | | Net cash provided by investing activities | $36,329 | $40,355 | | Net cash provided by financing activities | $183 | $109 | | **Net increase in cash, cash equivalents and restricted cash** | **$4,931** | **$6,904** | | Cash, cash equivalents and restricted cash at end of period | $18,601 | $25,518 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant corporate events, including the discontinuation of key clinical trials, substantial workforce reductions, and the pending merger with Tourmaline Bio. Management has concluded there is substantial doubt about the company's ability to continue as a going concern. The notes also cover restructuring costs of **$10.9 million** for the first six months of 2023, asset impairments of **$3.4 million**, and details of the merger agreement, which includes a potential special cash dividend to Talaris stockholders. A subsequent event notes the sale of FCR001-related assets to ImmunoFree for approximately **$2.2 million** in July 2023 - In February 2023, the company discontinued its FREEDOM-1 and FREEDOM-2 clinical trials and initiated a restructuring that reduced its workforce by **33%**. A further **95%** reduction of the remaining workforce occurred in April 2023[25](index=25&type=chunk)[27](index=27&type=chunk) - On June 22, 2023, Talaris entered into a merger agreement with Tourmaline Bio, Inc. The transaction is subject to stockholder approval and other closing conditions[28](index=28&type=chunk) - Due to the discontinuation of all clinical trials, CMC operations, research activities, and significant workforce reductions, management has concluded there is substantial doubt about the company's ability to continue as a going concern[33](index=33&type=chunk) - In July 2023, the company sold certain clinical data and intellectual property related to its FCR001 product candidate to ImmunoFree, Inc. for approximately **$2.2 million**[109](index=109&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the strategic shift post-FCR001 trial discontinuation, leading to a Tourmaline Bio merger, reduced R&D, and over **12 months** of liquidity [Overview](index=24&type=section&id=Overview) - In February 2023, Talaris discontinued its FREEDOM-1 and FREEDOM-2 clinical trials for FCR001 due to slow enrollment and extended timelines[115](index=115&type=chunk) - Following a strategic review, the company entered into a merger agreement with Tourmaline Bio on June 22, 2023. If completed, Tourmaline's business will become the business of the combined company[119](index=119&type=chunk) - The company has incurred significant operating losses since inception, with a net loss of **$37.2 million** for the six months ended June 30, 2023, and an accumulated deficit of **$202.0 million**[126](index=126&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) For the three months ended June 30, 2023, the net loss decreased to **$14.7 million** from **$18.1 million** in the prior year, driven by a **$9.1 million** reduction in R&D expenses offset by **$6.4 million** in new restructuring costs. For the six-month period, the net loss was relatively flat at **$37.2 million** compared to **$36.4 million**, as a **$9.9 million** decrease in R&D was offset by **$10.9 million** in restructuring costs and a **$2.8 million** increase in G&A expenses related to the merger Comparison of Operating Expenses - Three Months Ended June 30 (in thousands) | Expense Category | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Research and development | $4,088 | $13,187 | $(9,099) | | General and administrative | $6,026 | $5,228 | $798 | | Restructuring costs | $6,388 | $— | $6,388 | Comparison of Operating Expenses - Six Months Ended June 30 (in thousands) | Expense Category | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Research and development | $17,503 | $27,383 | $(9,880) | | General and administrative | $12,208 | $9,446 | $2,762 | | Restructuring costs | $10,869 | $— | $10,869 | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2023, the company had **$18.4 million** in cash and cash equivalents and **$133.9 million** in marketable securities, totaling **$152.3 million**[159](index=159&type=chunk) - Net cash used in operating activities for the six months ended June 30, 2023, was **$31.6 million**, a slight decrease from **$33.6 million** in the same period of 2022[160](index=160&type=chunk)[161](index=161&type=chunk) - Management believes existing cash, cash equivalents, and marketable securities are sufficient to fund operating expenses and capital requirements for more than **twelve months** from the report's issuance date[166](index=166&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is U.S. interest rate changes on its **$152.3 million** cash and marketable securities, with minimal foreign currency or inflation impact - The company's primary market risk is interest rate changes on its **$152.3 million** portfolio of cash, cash equivalents, and marketable securities. A **100 basis point** change in interest rates is not expected to have a material effect on the portfolio's fair value[187](index=187&type=chunk) - The company has minimal exposure to foreign currency fluctuations as all employees and operations are currently located in the United States[188](index=188&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter - As of June 30, 2023, the company's interim Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective at a reasonable assurance level[191](index=191&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[192](index=192&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) Talaris Therapeutics is not a party to any material legal proceedings expected to have a material adverse effect on its business as of June 30, 2023 - The company is not currently a party to any litigation or legal proceedings that management believes are probable to have a material adverse effect on the business[195](index=195&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including potential merger failure, employee dependence, biopharmaceutical development uncertainties, manufacturing complexities, and intellectual property reliance [Risks Related to Talaris' Strategic Alternative Process](index=37&type=section&id=Risks%20Related%20to%20Talaris%27%20Strategic%20Alternative%20Process) - Failure to complete the proposed merger with Tourmaline Bio could materially and adversely affect Talaris' operations, financial results, and stock price. The closing is subject to stockholder approval and other customary conditions[197](index=197&type=chunk)[199](index=199&type=chunk) - If the merger is not consummated, the board may pursue dissolution and liquidation. The cash available for distribution to stockholders would depend on the timing and the amount reserved for liabilities[202](index=202&type=chunk) - The company is substantially dependent on its few remaining employees to facilitate the merger. As of June 30, 2023, Talaris had only **four full-time employees**[204](index=204&type=chunk) [Risks Related to Talaris' Business and Product Candidates](index=39&type=section&id=Risks%20Related%20to%20Talaris%27%20Business%20and%20Product%20Candidates) - Should Talaris resume development, its business would depend on the successful development and regulatory approval of a biopharmaceutical candidate, a lengthy, expensive, and uncertain process[211](index=211&type=chunk)[215](index=215&type=chunk) - The company previously terminated its FREEDOM-1 and FREEDOM-2 trials primarily due to slow patient enrollment. Similar difficulties in enrolling patients for any future trials would have a material adverse effect[221](index=221&type=chunk) - Biopharmaceutical product candidates may cause undesirable side effects. A patient death occurred in the FREEDOM-1 trial, which triggered a temporary halt and review, highlighting the safety risks inherent in clinical development[241](index=241&type=chunk)[243](index=243&type=chunk) [Risks Related to Manufacturing](index=59&type=section&id=Risks%20Related%20to%20Manufacturing) - The company may fail to successfully operate its manufacturing facility, which would require substantial funds, personnel, and compliance with cGMP regulations to scale up for any potential commercial needs[309](index=309&type=chunk)[310](index=310&type=chunk) - The manufacture of cell therapies is complex and susceptible to contamination, production yield issues, and quality control problems. A contamination event occurred in late 2021, requiring an additional apheresis from a donor[313](index=313&type=chunk) [Risks Related to Intellectual Property](index=63&type=section&id=Risks%20Related%20to%20Intellectual%20Property) - As the company lacks in-house research capabilities, it will depend on intellectual property licensed from third parties for any future product development. Termination of such licenses could result in the loss of significant rights[335](index=335&type=chunk) - The company's ability to commercialize products depends on obtaining and maintaining sufficient intellectual property protection, which is highly uncertain in the biotechnology field[340](index=340&type=chunk)[341](index=341&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company's IPO raised approximately **$137.2 million** in net proceeds, with remaining funds now allocated for the Tourmaline Bio merger and other strategic alternatives following clinical program discontinuation - The company raised net proceeds of approximately **$137.2 million** from its IPO in May 2021[439](index=439&type=chunk) - Following the strategic review and merger agreement with Tourmaline, the planned use of remaining IPO proceeds will be partly for executing the merger and/or other strategic alternatives[440](index=440&type=chunk) [Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed, including the Agreement and Plan of Merger with Tourmaline Bio, Inc., corporate governance documents, and officer certifications - Key exhibits filed include the Agreement and Plan of Merger with Tourmaline Bio, Inc. dated June 22, 2023, and certifications from the Principal Executive Officer and Principal Financial Officer[446](index=446&type=chunk)

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, 2023 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: 001-40384 TALARIS THERAPEUTICS, INC. (Exact Name of Registrant as Specified in its Charter) D ...

Part I [Business](index=7&type=section&id=Item%201.%20Business) Talaris Therapeutics, a cell therapy company, discontinued key clinical trials for FCR001 in early 2023 and initiated a strategic review, including a workforce reduction - In February 2023, the company discontinued its **FREEDOM-1 and FREEDOM-2 clinical trials** for **FCR001** in living donor kidney transplant (LDKT) recipients, citing slow enrollment and extended timelines to key milestones[18](index=18&type=chunk)[36](index=36&type=chunk) - Following the trial discontinuations, Talaris initiated a **comprehensive review of strategic alternatives** to maximize stockholder value, which could include an acquisition, merger, business combination, or divestiture of its cell therapy manufacturing capabilities[19](index=19&type=chunk)[35](index=35&type=chunk) - In connection with the strategic review, the company implemented a **restructuring plan**, reducing its workforce by **approximately one-third** to conserve resources[37](index=37&type=chunk)[244](index=244&type=chunk) - Enrollment in the **FREEDOM-3 Phase 2 trial** for severe autoimmune disease (scleroderma) was **voluntarily paused** in March 2023 pending the outcome of the strategic review[20](index=20&type=chunk)[36](index=36&type=chunk) [Our Therapeutic Approach and Programs](index=12&type=section&id=Our%20Therapeutic%20Approach%20and%20Programs) The company's core technology is the Facilitated Allo-HSCT Therapy with FCR001, designed to induce immune tolerance, showing promising Phase 2 results but facing trial discontinuations - The company's core technology is its **Facilitated Allo-HSCT Therapy**, which uses the lead product candidate **FCR001**[21](index=21&type=chunk)[58](index=58&type=chunk) - In the Phase 2 LDKT trial, 26 of 37 patients (**70%**) treated with FCR001 were able to completely discontinue chronic immunosuppression, improving to **82%** after protocol optimizations[27](index=27&type=chunk)[73](index=73&type=chunk) - A key finding from the Phase 2 trial was that achieving donor T-cell chimerism levels **>50%** at 3 and 6 months post-transplant was highly predictive of successful immunosuppression weaning[28](index=28&type=chunk)[77](index=77&type=chunk) - A **patient death** occurred in the FREEDOM-1 Phase 3 trial in October 2022 due to **Grade IV Graft versus Host Disease (GvHD)** complicated by infections, contributing to trial termination despite DMC recommendations[26](index=26&type=chunk)[112](index=112&type=chunk) [Intellectual Property and Manufacturing](index=25&type=section&id=Intellectual%20Property%20and%20Manufacturing) The company's intellectual property relies on an exclusive license from ULRF, with patents expiring around 2029, and it operates an in-house GMP manufacturing facility now subject to potential divestiture - The company's intellectual property is substantially dependent on an **exclusive license agreement** with the **University of Louisville Research Foundation (ULRF)** for patents and know-how related to its Facilitated Allo-HSCT Therapy[132](index=132&type=chunk)[391](index=391&type=chunk) - As of December 31, 2022, the patent portfolio includes **four patent families** with issued patents expected to expire around **2029** and pending applications expected to expire around **2038**[141](index=141&type=chunk) - Talaris operates its own **20,000 square foot GMP Cell Processing Facility** in Louisville, Kentucky, performing all manufacturing in-house, which is now subject to **potential divestiture** as part of the strategic review[149](index=149&type=chunk)[150](index=150&type=chunk) [Government Regulation](index=28&type=section&id=Government%20Regulation) The company's biological product candidates, including FCR001, are subject to extensive FDA regulation, with FCR001 receiving RMAT and Orphan Drug Designations, and operations adhering to various healthcare laws - The company's product candidates are regulated as **biological products** in the U.S. by the **FDA**, requiring a comprehensive process including preclinical studies, an Investigational New Drug (IND) application, and multi-phase clinical trials before a Biologics License Application (BLA) can be submitted for marketing approval[153](index=153&type=chunk)[154](index=154&type=chunk) - The FDA has granted FCR001 both **Regenerative Medicine Advanced Therapy (RMAT)** and **Orphan Drug Designation** for LDKT, providing expedited development and review, along with potential market exclusivity and financial incentives[30](index=30&type=chunk)[181](index=181&type=chunk)[173](index=173&type=chunk) - The company's operations are subject to numerous healthcare laws, including the federal **Anti-Kickback Statute**, **False Claims Act**, and **HIPAA**, which regulate relationships with healthcare providers and the handling of patient information[198](index=198&type=chunk)[311](index=311&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including the uncertain outcome of its strategic review, potential dissolution, clinical development failures for FCR001, manufacturing complexities, intellectual property dependence, and ongoing net losses requiring additional funding - A primary risk is the **failure to identify and implement a strategic transaction**, which is costly and time-consuming, with no assurance of increasing stockholder value[232](index=232&type=chunk)[233](index=233&type=chunk) - If a strategic transaction is not consummated, the board may pursue **dissolution and liquidation**, making the cash available for distribution to stockholders uncertain and dependent on reserves for liabilities[241](index=241&type=chunk) - The business substantially depends on the **success of FCR001**, and the recent **discontinuation of the FREEDOM-1 and FREEDOM-2 trials** due to slow enrollment highlights significant clinical development risks[248](index=248&type=chunk)[250](index=250&type=chunk)[259](index=259&type=chunk) - The company's product candidates may cause undesirable side effects, such as **Graft versus Host Disease (GvHD)**, which resulted in a **patient death** in the FREEDOM-1 trial and could delay or prevent regulatory approval[281](index=281&type=chunk)[282](index=282&type=chunk) - The company is a late-stage clinical company with a history of **net losses ($73.7 million in 2022)** and anticipates continued losses, requiring **substantial additional funding** to continue operations[435](index=435&type=chunk) [Unresolved Staff Comments](index=97&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the Securities and Exchange Commission - The company has **no unresolved staff comments** from the Securities and Exchange Commission[513](index=513&type=chunk) [Properties](index=97&type=section&id=Item%202.%20Properties) Talaris Therapeutics leases its primary cell therapy manufacturing facility and corporate offices across Louisville, Wellesley, and Houston, deeming them sufficient for foreseeable needs - The company leases four primary facilities: a **20,705 sq. ft.** manufacturing facility in Louisville, KY (lease expires **Nov 2023**); a **7,410 sq. ft.** corporate office in Wellesley, MA (lease expires **Sep 2025**); a **6,000 sq. ft.** lab in Houston, TX (lease expires **Jan 2025**); and **6,130 sq. ft.** of additional office space in Louisville, KY (lease expires **Nov 2023**)[514](index=514&type=chunk) [Legal Proceedings](index=97&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2022, the company is not involved in any material legal proceedings expected to adversely affect its business or financial condition - The company is **not currently a party to any material litigation or legal proceedings**[515](index=515&type=chunk) [Mine Safety Disclosures](index=97&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not Applicable[516](index=516&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=98&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "TALS" since May 2021, has never paid dividends, and the use of IPO proceeds is now contingent on the strategic review outcome - The company's common stock trades on the **Nasdaq Global Market** under the symbol "**TALS**" since its IPO on May 7, 2021[519](index=519&type=chunk) - The company has **never paid cash dividends** and does not anticipate doing so in the foreseeable future, intending to retain earnings for business development[521](index=521&type=chunk) - The planned use of the remaining net proceeds from the IPO is now dependent on the outcome of the **comprehensive review of strategic alternatives** announced in February 2023[525](index=525&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=100&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Talaris reported a net loss of $73.9 million in 2022, driven by increased R&D and G&A expenses, but expects R&D to decrease post-trial discontinuations, with $181.3 million in cash deemed sufficient for the next twelve months Financial Metric (in thousands) | Financial Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Research and development | $57,005 | $34,245 | $22,760 | | General and administrative | $19,472 | $13,262 | $6,210 | | **Total operating expenses** | **$76,477** | **$47,507** | **$28,970** | | **Net loss** | **$(73,894)** | **$(47,833)** | **$(26,061)** | - The **$22.8 million** increase in R&D expenses in 2022 was driven by a **$10.3 million** rise in personnel costs, a **$7.1 million** increase in direct clinical trial expenses for the FREEDOM programs, and a **$5.3 million** increase in external consulting and medical affairs costs[558](index=558&type=chunk)[559](index=559&type=chunk)[560](index=560&type=chunk) - As of December 31, 2022, the company had **$181.3 million** in cash, cash equivalents, and marketable securities, which management believes is sufficient to fund operations and capital expenditures for **more than twelve months**[540](index=540&type=chunk)[564](index=564&type=chunk) - Net cash used in operating activities increased to **$60.9 million** in 2022 from **$40.0 million** in 2021, primarily due to the higher net loss[569](index=569&type=chunk)[570](index=570&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=111&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on its cash and marketable securities, with minimal exposure to foreign currency or material inflation impact - The company's main market risk is **interest rate sensitivity** on its cash and marketable securities (**$181.3 million** as of Dec 31, 2022), where a **100 basis point change** in interest rates is not expected to materially affect the portfolio's fair value[596](index=596&type=chunk) - The company has **minimal exposure to foreign currency risk** and does **not believe inflation had a material effect** on its business in 2021 or 2022[597](index=597&type=chunk)[598](index=598&type=chunk) [Financial Statements and Supplementary Data](index=111&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited financial statements for 2021 and 2022, including balance sheets, statements of operations, stockholders' equity, and cash flows, with accompanying notes Balance Sheet (in thousands) | Balance Sheet (in thousands) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $13,670 | $18,614 | | Marketable securities | $167,612 | $225,357 | | **Total Assets** | **$193,715** | **$251,422** | | Total Liabilities | $13,660 | $8,613 | | **Total Stockholders' Equity** | **$180,055** | **$242,809** | Statement of Operations (in thousands) | Statement of Operations (in thousands) | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Research and development | $57,005 | $34,245 | | General and administrative | $19,472 | $13,262 | | **Loss from operations** | **$(76,477)** | **$(47,507)** | | **Net loss** | **$(73,894)** | **$(47,833)** | | **Net loss per share** | **$(1.79)** | **$(1.64)** | [Controls and Procedures](index=111&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of December 31, 2022, management concluded that the company's disclosure controls and internal control over financial reporting were effective, with no material changes reported - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2022[603](index=603&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2022, based on the COSO framework[605](index=605&type=chunk) [Other Information](index=112&type=section&id=Item%209B.%20Other%20Information) On March 30, 2023, the company amended its Executive Severance and Change in Control Plan, clarifying the "change in control" definition and period timing - On March 30, 2023, the company **amended its Executive Severance and Change in Control Plan**[608](index=608&type=chunk) - The amendment **clarifies the definition of "change in control"** and **modifies the "change in control period"** to begin three months prior to the announcement of a relevant transaction or liquidation plan[609](index=609&type=chunk)[610](index=610&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees](index=113&type=section&id=Items%2010-14) Information for Items 10-14, covering governance, compensation, and ownership, is incorporated by reference from the company's forthcoming 2023 proxy statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accounting Fees (Item 14) is **incorporated by reference** from the company's forthcoming 2023 proxy statement[615](index=615&type=chunk)[617](index=617&type=chunk)[618](index=618&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=114&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and officer certifications, with financial statement schedules omitted - Lists **all exhibits** filed with the annual report, including the Certificate of Incorporation, Bylaws, material contracts, and executive certifications[624](index=624&type=chunk) [Form 10-K Summary](index=115&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has elected not to include a summary of the Form 10-K - The Company has elected **not to include summary information**[627](index=627&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) 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: 001-40384 TALARIS THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Delaware 83-2377352 ( State or other jurisdiction of incorporation or organization) 93 Worcester St. Wellesley, MA 02481 (Address of pr ...