Cabaletta Bio(CABA) - 2021 Q3 - Quarterly Report

Part I Financial Statements (Unaudited) The unaudited financial statements present Cabaletta Bio's financial position as of September 30, 2021, showing a net loss of $32.4 million for the first nine months of 2021 and increased cash and equivalents due to stock offerings Condensed Balance Sheets As of September 30, 2021, total assets increased to $122.6 million, driven by a rise in cash and cash equivalents to $118.3 million, while total stockholders' equity grew to $116.6 million Condensed Balance Sheet Data (in thousands) | Account | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $118,260 | $101,429 | | Total current assets | $120,852 | $113,535 | | Total Assets | $122,638 | $114,724 | | Liabilities & Equity | | | | Total current liabilities | $6,023 | $5,180 | | Accumulated deficit | ($98,699) | ($66,298) | | Total stockholders' equity | $116,615 | $109,544 | | Total Liabilities and Stockholders' Equity | $122,638 | $114,724 | Condensed Statements of Operations and Comprehensive Loss For the nine months ended September 30, 2021, the company reported a net loss of $32.4 million, primarily due to increased Research and Development costs of $22.6 million and General and Administrative expenses of $9.8 million Statement of Operations Highlights (in thousands) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Research and development | $22,575 | $15,601 | | General and administrative | $9,845 | $8,902 | | Total operating expenses | $32,420 | $24,503 | | Loss from operations | ($32,420) | ($24,503) | | Net loss | ($32,401) | ($24,030) | | Net loss per share | ($1.31) | ($1.09) | Condensed Statements of Stockholders' Equity Total stockholders' equity increased to $116.6 million as of September 30, 2021, driven by common stock issuances that offset the $32.4 million net loss incurred - For the nine months ended September 30, 2021, the company issued common stock raising net proceeds of $34.7 million through its ATM program and an additional $0.5 million from stock option exercises[31][82] - The accumulated deficit increased from $66.3 million at the end of 2020 to $98.7 million by September 30, 2021, due to ongoing net losses[31] Condensed Statements of Cash Flows For the nine months ended September 30, 2021, net cash used in operating activities was $23.6 million, while financing activities provided $35.3 million, resulting in a net increase in cash and cash equivalents of $16.8 million Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($23,594) | ($17,597) | | Net cash provided by (used in) investing activities | $5,150 | ($9,872) | | Net cash provided by (used in) financing activities | $35,275 | ($56) | | Net increase (decrease) in cash | $16,831 | ($27,525) | | Cash and cash equivalents—end of period | $118,260 | $108,679 | Notes to Unaudited Condensed Financial Statements The notes detail Cabaletta Bio's clinical-stage focus on engineered T cell therapies, its high dependence on the University of Pennsylvania (Penn) for research and manufacturing, and its financial commitments and liquidity projections - The company is a clinical-stage biotechnology firm focused on developing engineered T cell therapies for B cell-mediated autoimmune diseases. It is highly dependent on the University of Pennsylvania (Penn) for preclinical research, clinical development, and initial manufacturing activities[36][39] - Management expects that cash and cash equivalents of $119.3 million as of September 30, 2021, will be sufficient to fund operations for at least 12 months from the filing date[41][42] - The company has a sales agreement for an "at-the-market" (ATM) offering of up to $75.0 million. During the nine months ended September 30, 2021, it sold 3,606,005 shares for net proceeds of $34.7 million[82] - The company has committed to funding a research plan with Penn through February 2023 with a total estimated cost of $12.3 million, of which $9.3 million has been incurred as of September 30, 2021[67][108] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on developing CAAR T cell therapies, its increased net loss of $32.4 million for the nine months ended September 30, 2021, driven by higher R&D expenses, and its liquidity supported by equity offerings Overview Cabaletta Bio is a clinical-stage biotech developing engineered T cell therapies for autoimmune diseases, with its lead candidate DSG3-CAART in a Phase 1 trial and $119.3 million in cash and investments as of September 30, 2021 - The company's lead product candidate, DSG3-CAART, is being evaluated in the Phase 1 DesCAARTes™ trial for mucosal pemphigus vulgaris (mPV)[102] - The lead preclinical candidate, for MuSK myasthenia gravis (MuSK MG), is in IND-enabling studies with an IND submission planned for Q4 2021[102] - As of September 30, 2021, the company had $119.3 million in cash, cash equivalents, and investments, funded primarily by its IPO and at-the-market offerings[102] Results of Operations Operating expenses increased for the nine months ended September 30, 2021, with R&D expenses rising by $7.0 million to $22.6 million and G&A expenses by $0.9 million to $9.8 million, leading to a net loss of $32.4 million Comparison of Operating Expenses for the Nine Months Ended September 30 (in thousands) | Expense Category | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development | $22,575 | $15,601 | $6,974 | | General and administrative | $9,845 | $8,902 | $943 | | Total operating expenses | $32,420 | $24,503 | $7,917 | - The $7.0 million increase in R&D expenses for the nine months ended Sep 30, 2021, was primarily driven by a $2.8 million increase in development services, a $1.7 million increase in personnel costs, and a $1.5 million increase in clinical trial costs for the DesCAARTes™ trial[130] Liquidity and Capital Resources The company holds $119.3 million in cash, equivalents, and investments as of September 30, 2021, sufficient to fund operations through at least Q1 2023, but anticipates continued losses requiring substantial additional financing - As of September 30, 2021, the company had $119.3 million in cash, cash equivalents, and investments and an accumulated deficit of $98.7 million[134][135] - The company believes its existing cash will fund operating expenses and capital requirements through at least the first quarter of 2023[137] - Through its ATM Program, the company sold 3,606,005 shares for net proceeds of $34.7 million during the nine months ended September 30, 2021, and an additional 600,000 shares for $6.3 million subsequent to the quarter-end[138] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its $119.3 million in cash and investments, but a 1% change in rates is not expected to have a material effect due to their short-term, low-risk nature - The company's primary market risk is interest rate sensitivity on its $119.3 million of cash, cash equivalents, and investments[156] - Due to the short-term and low-risk nature of its investments, a 1% change in interest rates is not expected to have a material effect on fair market value[156] - The company does not have any foreign currency or derivative financial instruments[157] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective at a reasonable assurance level[158] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[159] Part II Legal Proceedings As of September 30, 2021, the company is not involved in any material litigation or legal proceedings expected to have a material adverse impact on its financial position - The company is not currently involved in any material legal proceedings[162] Risk Factors The company faces significant risks including its early development stage, dependence on DSG3-CAART and the University of Pennsylvania, a history of losses requiring substantial funding, and complexities in manufacturing and intellectual property - The company is an early-stage clinical company with a limited operating history, dependent on the success of its initial product candidates, particularly DSG3-CAART[6][164][185] - The company is highly dependent on its relationship with the University of Pennsylvania (Penn) for preclinical R&D, technology, and clinical trial manufacturing[7][331] - The company has incurred significant losses since inception and will need to raise substantial additional funding to complete development of its product candidates[6][9][257] - Manufacturing of the company's CAAR T cell product candidates is complex, novel, and susceptible to technical and logistical failures, with reliance on a limited number of third-party suppliers for key components like viral vectors[14][360][369] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities in the reported period[506] Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities[506] Mine Safety Disclosures This item is not applicable to the company - Not applicable[506] Other Information The company reported no other information for this period - None[507] Exhibits This section lists the exhibits filed with the quarterly report, including amendments to key agreements with the University of Pennsylvania and officer certifications - Filed exhibits include amendments to key agreements with the University of Pennsylvania and the Children's Hospital of Philadelphia, as well as required CEO and CFO certifications[510]