Carisma Therapeutics (CARM) - 2020 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited condensed consolidated financial statements for Sesen Bio, Inc., including Balance Sheets, Statements of Income, Changes in Stockholders' Equity, and Cash Flows Condensed Consolidated Balance Sheet (Unaudited, In thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $42,463 | $48,121 | | Total current assets | $44,883 | $54,447 | | Total Assets | $104,665 | $114,365 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $7,366 | $8,517 | | Contingent consideration | $66,320 | $120,020 | | Total Liabilities | $86,214 | $141,065 | | Total Stockholders' Equity (Deficit) | $18,451 | $(26,700) | Condensed Consolidated Statements of Operations (Unaudited, In thousands) | Account | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Research and development | $8,867 | $4,686 | | General and administrative | $3,448 | $3,055 | | Change in fair value of contingent consideration | $(53,700) | $(1,000) | | Income (Loss) from Operations | $41,385 | $(6,741) | | Net Income (Loss) | $41,564 | $(6,480) | Condensed Consolidated Statements of Cash Flows (Unaudited, In thousands) | Account | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(8,838) | $(7,992) | | Net Cash Provided by Financing Activities | $3,180 | $7 | | Net Decrease in Cash, Cash Equivalents and Restricted Cash | $(5,658) | $(7,985) | - The company is a late-stage clinical company focused on targeted fusion protein therapeutics (TFPTs) for cancer, with its lead product, Vicinium®, in a Phase 3 trial for high-risk non-muscle invasive bladder cancer (NMIBC), and a Biologics License Application (BLA) initiated with the FDA under Rolling Review in December 2019[27] - As of March 31, 2020, the company had cash and cash equivalents of $42.5 million, which management concluded is not sufficient to fund operations for at least twelve months, raising substantial doubt about the company's ability to continue as a going concern[29][31] - The fair value of contingent consideration liability decreased significantly from $120.0 million at year-end 2019 to $66.3 million as of March 31, 2020, with this $53.7 million decrease primarily due to significant increases in discount rates resulting from financial market volatility related to the COVID-19 pandemic[47][48] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operating results, liquidity, and critical accounting policies, highlighting progress of Vicinium and going concern doubt - The company initiated a Biologics License Application (BLA) for Vicinium under Rolling Review with the FDA in December 2019, with the final module (CMC) expected to be submitted in the second half of 2020, though potential disruptions from COVID-19 are noted[103] VISTA Trial Preliminary Efficacy Data (Pooled Cohorts 1 & 2, n=89) | Time Point | Complete Response Rate (95% CI) | | :--- | :--- | | 3-months | 40% (30%-51%) | | 6-months | 28% (19%-39%) | | 9-months | 21% (13%-31%) | | 12-months | 17% (10%-26%) | - The median Duration of Response (DoR) for patients in Cohorts 1 and 2 is 287 days, and among patients who achieved a complete response at 3 months, 52% remained disease-free for 12 months or longer[112] - The European Medicines Agency (EMA) provided clinical Scientific Advice, stating the existing data is sufficient to support a marketing authorization application (MAA), which the company expects to submit in early 2021[115] - Management does not believe its cash of $42.5 million as of March 31, 2020, is sufficient to fund operations for the next twelve months, leading to substantial doubt about its ability to continue as a going concern[123] Comparison of Operating Results (In thousands) | Account | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Research and development | $8,867 | $4,686 | 89% | | General and administrative | $3,448 | $3,055 | 13% | | Change in fair value of contingent consideration | $(53,700) | $(1,000) | 5,270% | | Net Income (Loss) | $41,564 | $(6,480) | (741)% | - The $4.2 million increase in R&D expense was primarily due to costs for technology transfer and manufacturing scale-up for commercial supply of Vicinium, while the $53.7 million decrease in the fair value of contingent consideration was due to higher discount rates from market volatility[133][135] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company, as a smaller reporting entity, is not required to provide market risk disclosures - As a smaller reporting company, Sesen Bio is not required to provide quantitative and qualitative disclosures about market risk[159] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2020[160] - There were no changes in the company's internal control over financial reporting during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[162] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings - As of the filing date, the company is not a party to any material legal proceedings[165] Item 1A. Risk Factors Updates risk factors, emphasizing potential adverse impacts of the COVID-19 pandemic and stock market volatility on the business - A significant new risk factor is the COVID-19 pandemic, which could adversely impact business operations, including difficulties in raising capital, delays in regulatory interactions, and interruptions to manufacturing and commercialization activities[167] - The company warns that its common stock price may fluctuate substantially due to general market volatility, particularly in response to the COVID-19 pandemic, which could be unrelated to the company's operational performance[169] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not issue any unregistered equity securities during the three months ended March 31, 2020 - No unregistered equity securities were issued during the first quarter of 2020[170] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - The company reports no defaults upon senior securities[172] Item 4. Mine Safety Disclosures This item is not applicable to the company - The company has no mine safety disclosures to report[172] Item 5. Other Information The company reports no other information to disclose for this period - There was no other information to report for the quarter[172] Item 6. Exhibits Lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents and CEO/CFO certifications - The report includes standard exhibits such as the Certificate of Incorporation, By-laws, and certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act[174][175][177]