Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________

FORM 10-Q

____________________________________________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

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: 001-36296

Carisma Therapeutics Inc.

(Exact Name of Registrant as Specified in its Charter)

____________________________________________________________


Delaware			26-2025616
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

3675 Market Street, Suite 401 Philadelphia, PA			19104
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (267) 491-6422

(Former Name or Former Address, if Changed Since Last Report)

____________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of exchange
on which registered

Common Stock, $0.001 par value per share

CARM

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 5, 2024, the registrant had 41,750,109 shares of common stock, $0.001 par value per share, outstanding.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q may include, but are not limited to, statements about:

•our ability to obtain additional financing;

•the timing and conduct of our pre-clinical studies and clinical trial of CT-0525 for solid tumors that overexpress human epidermal growth factor receptor 2, or HER2;

•the timing and conduct of our pre-clinical studies for fibrosis;

•our plans to conduct discovery and pre-clinical testing of the development of in vivo chimeric antigen receptor macrophage and monocyte, or CAR-M, therapeutics for up to twelve research targets, including Glypican-3, or GPC3, as well as two autoimmune and multiple other targets and indications in connection with our collaboration with ModernaTX, Inc., or Moderna;

•our ability to replicate in later clinical trials positive results found in pre-clinical studies and early-stage clinical trials of our product candidates;

•our ability to successfully enroll patients in our Phase 1 clinical trial of CT-0525 and complete clinical trials;

•our plans to conduct discovery and pre-clinical testing of other product candidates;

•our ability to enter into and realize the anticipated benefits of our research and development programs, strategic partnerships, research and licensing programs and academic and other collaborations;

•the timing of applying for and receiving, and our ability to maintain, marketing approvals from applicable regulatory authorities for our product candidates;

•our ability to obtain and maintain intellectual property protection and regulatory exclusivity for CT-0525 and any other product candidates we are developing or may develop in the future;

•acceptance of CT-0525 and any other product candidates we are developing or may develop, if and when approved, by patients, the medical community and third-party payors;

•our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash and cash equivalents;

•the potential advantages of our product candidates;

•our estimates regarding the potential market opportunity for our product candidates;

•our commercialization and manufacturing capabilities and strategy;

•the potential impact of public health epidemics or pandemics and of global economic developments on our business, operations, strategy and goals;

•our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•our competitive position;

•the impact of government laws and regulations;

•political and economic developments; and

•such other matters as discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 including Part I, Item 1A, “Risk Factors” and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024 including Part II, Item 1A, "Risk Factors."

In some cases, forward-looking statements can be identified by terminology such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “goals,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those expressed or implied by the forward-looking statements. No forward-looking statement is a promise or a guarantee of future performance.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date

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of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

In this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise requires, references to the “Company,” “Carisma,” “we,” “us,” and “our” refer to Carisma Therapeutics Inc. (formerly Sesen Bio, Inc.) and its consolidated subsidiaries.

References to “Legacy Carisma” refer to CTx Operations, Inc. (formerly CARISMA Therapeutics Inc.) and references to “Sesen Bio” refer to Sesen Bio, Inc. prior to completion of the business combination on March 7, 2023 in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of September 20, 2022, as amended, by and among the Company, Legacy Carisma and Seahawk Merger Sub, Inc., a wholly owned subsidiary of the Company, or Merger Sub, pursuant to which Merger Sub merged with and into Legacy Carisma, with Legacy Carisma continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger, or the Merger.

Pursuant to the Merger Agreement, we changed our name from “Sesen Bio, Inc.” to “Carisma Therapeutics Inc.” Following the completion of the Merger, the business conducted by us became primarily the business conducted by Legacy Carisma, which is a biopharmaceutical company dedicated to developing a differentiated and proprietary cell therapy platform focused on engineered macrophages, cells that play a crucial role in both the innate and adaptive immune response.

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CARISMA THERAPEUTICS INC.

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		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Interim Financial Statements (Unaudited).	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations and Comprehensive Loss	2
	Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	3
	Consolidated Statements of Cash Flows	4
	Notes to the Interim Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	29
Item 4.	Controls and Procedures.	30

PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings.	31
Item 1A.	Risk Factors.	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	89
Item 5.	Other Information.	84
Item 6.	Exhibits.	90

SIGNATURES		91

iii

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CARISMA THERAPEUTICS INC.

Unaudited Consolidated Balance Sheets

(in thousands, except share and par value)


	September 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	26,881	$	77,605

Prepaid expenses and other assets	7,256		2,866
Total current assets	34,137		80,471
Property and equipment, net	5,391		6,764
Right of use assets – operating leases	2,322		2,173
Deferred financing costs	208		146
Total assets	$	42,058	$	89,554

Liabilities and Stockholders' (Deficit) Equity
Current liabilities:
Accounts payable	$	1,728	$	3,933
Accrued expenses	4,542		7,662
Deferred revenue	682		1,413
Operating lease liabilities	1,386		1,391
Finance lease liabilities	1,074		544
Other current liabilities	1,146		965
Total current liabilities	10,558		15,908
Deferred revenue	41,250		45,000
Operating lease liabilities	761		860
Finance lease liabilities	96		328
Other long-term liabilities	519		926
Total liabilities	53,184		63,022
Commitments and contingencies (Note 6)

Stockholders’ (deficit) equity:
Preferred stock $0.001 par value, 5,000,000 shares authorized, none issued or outstanding	—		—
Common stock $0.001 par value, 350,000,000 shares authorized, 41,750,109 and 40,609,915 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively	41		40
Additional paid-in capital	276,777		271,594

Accumulated deficit	(287,944)		(245,102)


Total stockholders’ (deficit) equity	(11,126)		26,532
Total liabilities and stockholders’ (deficit) equity	$	42,058	$	89,554

See accompanying notes to unaudited interim consolidated financial statements.

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CARISMA THERAPEUTICS INC.

Unaudited Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Collaboration revenues	$	3,385	$	3,827	$	15,979	$	10,630
Operating expenses:
Research and development	11,326		19,551		44,095		54,710
General and administrative	5,203		6,620		16,208		22,201
Total operating expenses	16,529		26,171		60,303		76,911
Operating loss	(13,144)		(22,344)		(44,324)		(66,281)
Change in fair value of derivative liability	—		—		—		(84)
Interest income, net	442		941		1,482		641
Pre-tax loss	(12,702)		(21,403)		(42,842)		(65,724)
Income tax expense	—		—		—		(197)
Net loss	$	(12,702)	$	(21,403)	$	(42,842)	$	(65,921)

Share information:
Net loss per share of common stock, basic and diluted	$	(0.31)	$	(0.53)	$	(1.04)	$	(2.11)
Weighted-average shares of common stock outstanding, basic and diluted	41,588,035		40,285,858		41,357,528		31,209,904
Comprehensive loss
Net loss	$	(12,702)	$	(21,403)	$	(42,842)	$	(65,921)
Unrealized gain on marketable securities	—		108		—		414
Comprehensive loss	$	(12,702)	$	(21,295)	$	(42,842)	$	(65,507)

See accompanying notes to unaudited interim consolidated financial statements.

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CARISMA THERAPEUTICS INC.

Unaudited Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)


	Convertible preferred stock			Stockholders’ Equity (Deficit)
				Common stock			Additional paid-in capital		Accumulated other comprehensive (loss) income		Accumulated deficit		Noncontrolling interests		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2023	—	$	—	40,609,915	$	40	$	271,594	$	—	$	(245,102)	$	—	$	26,532
Exercise of stock options	—	—		1,579	—		2		—		—		—		2
Stock-based compensation	—	—		—	—		1,057		—		—		—		1,057
Sale of common stock under Open Market Sales Agreement, net of issuance costs	—	—		931,250	1		2,281		—		—		—		2,282
Net loss	—	—		—	—		—		—		(18,978)		—		(18,978)
Balance at March 31, 2024	—	—		41,542,744	41		274,934		—		(264,080)		—		10,895
Exercise of stock options	—	—		2,231	—		2		—		—		—		2
Stock-based compensation	—	—		—	—		625		—		—		—		625
Net loss	—	—		—	—		—		—		(11,162)		—		(11,162)
Balance at June 30, 2024	—	—		41,544,975	41		275,561		—		(275,242)		—		360
Stock-based compensation	—	—		—	—		1,115		—		—		—		1,115
Sale of common stock under Open Market Sales Agreement, net of issuance costs	—	—		205,134	—		101		—		—		—		101
Net loss	—	—		—	—		—		—		(12,702)		—		(12,702)
Balance at September 30, 2024	—	$	—	41,750,109	$	41	$	276,777	$	—	$	(287,944)	$	—	$	(11,126)

Balance at December 31, 2022	8,700,885	$	107,808	2,217,737	$	2	$	1,197	$	(41)	$	(158,223)	$	14,395	$	(142,670)
Stock-based compensation	—	—		—	—		265		—		—		—		265
Unrealized gain on marketable securities	—	—		—	—		—		177		—		—		177
Issuance of common stock for cash in pre-closing financing	—	—		3,730,608	4		30,636		—		—		—		30,640
Issuance of common stock upon settlement of convertible promissory note, accrued interest, and related derivative liability	—	—		5,059,338	5		42,442		—		—		—		42,447
Issuance of common stock to Sesen Bio shareholders in reverse capitalization	—	—		10,374,272	10		72,034		—		—		—		72,044
Conversion of convertible preferred stock and non-controlling interests to common stock	(8,700,885)	(107,808)		18,872,711	19		122,185		—		—		(14,395)		107,809
Net loss	—	—		—	—		—		—		(24,642)		—		(24,642)
Balance at March 31, 2023	—	—		40,254,666	40		268,759		136		(182,865)		—		86,070
Exercise of stock options	—	—		14,910	—		52		—		—		—		52
Stock-based compensation	—	—		—	—		330		—		—		—		330
Unrealized gain on marketable securities	—	—		—	—		—		129		—		—		129
Net loss	—	—		—	—		—		—		(19,876)		—		(19,876)
Balance at June 30, 2023	—	—		40,269,576	40		269,141		265		(202,741)		—		66,705
Exercise of stock options	—	—		34,860	—		40		—		—		—		40
Stock-based compensation	—	—		—	—		848		—		—		—		848
Unrealized gain on marketable securities	—	—		—	—		—		108		—		—		108
Net loss	—	—		—	—		—		—		(21,403)		—		(21,403)
Balance at September 30, 2023	—	$	—	40,304,436	$	40	270,029		$	373	$	(224,144)	$	—	$	46,298

See accompanying notes to unaudited interim consolidated financial statements.

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CARISMA THERAPEUTICS INC.

Unaudited Consolidated Statement of Cash Flows

(in thousands)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(42,842)	$	(65,921)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	2,685		2,115
Stock-based compensation expense	2,797		1,443
Reduction in the operating right of use assets	5,570		4,066
Amortization of debt discount	—		1,283
Change in fair value of derivative liability	—		84
Accretion on marketable securities	—		(741)
Write-off of property and equipment	74		—
Non-cash interest expense	192		117
Gain on sale of sale-leaseback	(82)		—
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(4,460)		484
Accounts payable	(2,228)		372
Accrued expenses	(3,120)		(3,534)
Deferred revenue	(4,481)		(1,274)
Operating lease liabilities	(5,823)		(3,574)
Other liabilities	153		—
Net cash used in operating activities	(51,565)		(65,080)
Cash flows from investing activities:
Purchase of marketable securities	—		(34,460)
Proceeds from the sale of marketable securities	—		97,000
Purchases of property and equipment	(123)		(571)
Net cash (used in) provided by investing activities	(123)		61,969
Cash flows from financing activities:
Cash, cash equivalents and restricted cash acquired in connection with the reverse recapitalization	—		37,903
Payment of reverse recapitalization finance costs	—		(5,814)
Proceeds from the issuance of common stock in pre-closing financing	—		30,640
Payment of principal related to finance lease liabilities	(1,158)		(1,151)
Proceeds from failed sale-leaseback arrangement	686		1,183
Payment of finance liability from failed sale-leaseback arrangement	(983)		(628)
Payment of deferred financing costs	—		(146)
Proceeds from the exercise of stock options	4		92
Sale of common stock under Open Market Sales Agreement, net of issuance costs	2,415		—
Net cash provided by financing activities	964		62,079
Net (decrease) increase in cash, cash equivalents and restricted cash	(50,724)		58,968
Cash, cash equivalents and restricted cash at beginning of the period	77,605		24,194
Cash, cash equivalents and restricted cash at end of the period	$	26,881	$	83,162

See accompanying notes to unaudited interim consolidated financial statements.

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CARISMA THERAPEUTICS INC.

Unaudited Consolidated Statement of Cash Flows

(in thousands)


	Nine Months Ended September 30,
	2024		2023
Supplemental disclosures of cash flow information:
Cash paid for interest	$	153	$	283
Supplemental disclosure of non-cash financing and investing activities:
Conversion of convertible preferred stock and non-controlling interests upon Merger	$	—	$	122,204
Conversion of convertible promissory note, accrued interest and derivative liability upon Merger	$	—	$	42,447
Unrealized gain on marketable securities	$	—	$	414
Financing costs in accounts payable	$	23	$	—

Reclassification of deferred financing costs to additional paid-in capital	$	9	$	—
Right of use assets obtained in exchange for new operating lease liabilities	$	5,719	$	908
Disposal of property and equipment in exchange for reduction in finance lease liability	$	396	$	—
Right of use assets obtained in exchange for new financing lease liabilities	$	1,660	$	—
Property and equipment in accounts payable	$	—	$	295

See accompanying notes to unaudited interim consolidated financial statements.

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

(1) Background

Carisma Therapeutics Inc., a Delaware corporation (collectively with its subsidiaries, the Company), is a clinical-stage cell therapy company focused on using the Company’s proprietary cell therapy platform to develop transformative immunotherapies to treat cancer and other serious diseases. The Company has created this comprehensive cell therapy platform to enable the therapeutic use of engineered macrophages and monocytes, which belong to a subgroup of white blood cells called myeloid cells. The Company’s focus is its proprietary chimeric antigen receptor macrophage and monocyte (CAR-M) cell therapy platform, which redirects macrophages against specific tumor associated antigens and enables targeted anti-tumor immunity by utilizing genetically modified myeloid cells (macrophages and monocytes) to express chimeric antigen receptors (CARs), enabling these potent innate immune cells to recognize specific tumor associated antigens on the surface of tumor cells. The Company has an ex vivo oncology program and an in vivo program. In addition, the Company utilizes its cell therapy platform to engineer macrophages with the potential to treat fibrosis.

Ex Vivo Oncology Program — The Company's lead product candidate, CT-0525, is intended to treat solid tumors that overexpress human epidermal growth factor receptor 2 (HER2), a protein found on the surface of a variety of solid tumors, including breast cancer, gastric cancer, esophageal cancer, salivary gland cancer, and others. CT-0525 utilizes a novel approach to CAR-M therapy that engineers patients’ monocytes directly, without ex vivo differentiation into macrophages. The Company believes that engineering monocytes directly (CAR-Monocyte) will result in a therapy with favorable attributes compared to engineering after ex vivo differentiation (CAR-Macrophage) and that this approach has the potential to improve upon the anti-tumor effect seen with CAR-Macrophages.

In Vivo Program (Moderna Collaboration) — In addition to the Company's clinical program in ex vivo cell therapy, the Company has an in vivo mRNA/lipid nanoparticle (LNP) CAR-M program in partnership with ModernaTX Inc. (Moderna). This collaboration utilizes Moderna's mRNA/LNP technology, together with the Company's CAR-M platform technology, to create novel in vivo off the shelf gene therapy products.

Fibrosis Program — Using its macrophage and monocyte engineering platform, the Company is also pursuing early research and development of multiple assets for the potential treatment of diseases beyond oncology, including fibrosis and other immunologic and inflammatory diseases. In the second quarter of 2024, the Company achieved pre-clinical proof of concept in its liver fibrosis program, demonstrating the anti-fibrotic potential of engineered macrophages in two liver fibrosis models.

The Company's first product candidate to enter clinical development, CT-0508, was the first CAR-Macrophage to be evaluated in a human clinical trial and was an anti-HER2 product candidate. The Company also enrolled six patients in a sub-study evaluating the co-administration of CT-0508 and pembrolizumab, a programmed cell death protein 1 checkpoint inhibitor, evaluating the safety and tolerability of the co-administration, along with several customary secondary endpoints.

In late March 2024, the Company and its board of directors approved a revised operating plan to reduce monthly operating expenses and conserve cash, which it began implementing in April 2024. Pursuant to the revised operating plan, the Company has prioritized CT-0525 as the Company's lead product candidate going forward, ceased further development of CT-0508, paused further development of CT-1119 pending additional financing, reduced its workforce, including employees engaged in research and development and general and administration activities, and decreased spending on other non-essential activities. As of July 2024, all clinical activities related to the Phase 1 clinical trial of CT-0508 and its sub-study utilizing CT-0508 in combination with pembrolizumab have been completed and no further development of CT-0508 is planned. The Company completed its workforce reduction and paid the majority of related costs in the second quarter of 2024.

(2) Development-Stage Risks and Liquidity

The Company has incurred losses and negative cash flows from operations since inception and has an accumulated deficit of $287.9 million as of September 30, 2024. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales from its product candidates currently in development.

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

Management expects its cash and cash equivalents of $26.9 million as of September 30, 2024 are sufficient to sustain planned operations into the third quarter of 2025. As a result, the Company has concluded that there is substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company's cash forecast contains estimates and assumptions, and management cannot predict the timing of all cash receipts and expenditures with certainty. Variances from management's estimates and assumptions could impact the Company's liquidity prior to the third quarter of 2025. The accompanying unaudited interim consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited interim consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liability that might result from the outcome of this uncertainty.

Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include, but are not limited to, private placements of equity and/or debt, other offerings of equity and/or debt securities, licensing arrangements and/or marketing arrangements. There is no assurance that such financing will be available when needed. The Company also intends to continue to reassess its expense allocation.

The Company is subject to those risks associated with any specialty biotechnology company that has substantial expenditures for research and development. There can be no assurance that the Company’s research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants.

(3) Summary of Significant Accounting Policies

Interim Financial Statements

The summary of significant accounting policies is included in the Company’s audited consolidated financial statements and related notes as of and for the year ended December 31, 2023 found in the Annual Report filed on Form 10-K filed with the Securities and Exchange Commission (SEC) on April 1, 2024.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). Any references in these notes to applicable guidance are meant to refer to GAAP as found in Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) promulgated by the Financial Accounting Standards Board (FASB).

The accompanying unaudited interim consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. In the opinion of management, the accompanying unaudited interim consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the unaudited interim consolidated financial statements) considered necessary to present fairly the Company’s financial position as of September 30, 2024 and its results of operations for the three and nine months ended September 30, 2024 and 2023. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The unaudited interim consolidated financial statements, presented herein, do not contain all of the required disclosures under GAAP for annual financial statements. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes as of and for the year ended December 31, 2023 found in the Annual Report filed on Form 10-K filed with the SEC on April 1, 2024.

Use of Estimates

The preparation of unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates. Estimates and assumptions are periodically reviewed, and the effects of revisions are reflected in the unaudited interim consolidated financial statements in the period they are determined to be necessary.

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

Significant areas that require management’s estimates include accrued research and development expenses.

Fair Value of Financial Instruments

Management believes that the carrying amounts of the Company’s financial instruments, including cash equivalents and accounts payable, approximate fair value due to the short-term nature of those instruments.

Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

•Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

•Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

•Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:


(in thousands)	Fair value measurement at reporting date using
	(Level 1)		(Level 2)		(Level 3)
September 30, 2024
Assets:
Cash equivalents – money markets accounts	$	21,676	$	—	$	—

December 31, 2023
Assets:
Cash equivalents – money markets accounts	$	62,999	$	—	$	—

During the nine months ended September 30, 2024 and 2023, there were no transfers between Level 1, Level 2 and Level 3.

Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash and cash equivalents.

Segment information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one segment.

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

Net loss per share

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as convertible preferred stock and stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, potentially dilutive securities are not included in the calculation as their impact is anti-dilutive.

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:


	September 30,
	2024	2023
Stock options	8,777,638	6,515,345

Recently issued accounting pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.

(4) Prepaid Expenses and other assets

Prepaid expenses and other assets consisted of the following (in thousands):


	September 30, 2024		December 31, 2023
Research and development	$	1,434	$	278
Novartis credit (Note 6)	4,000		—

Deposits	1,248		891
Insurance	504		402
Other	70		1,295
	$	7,256	$	2,866

(5) Accrued Expenses

Accrued expenses consisted of the following (in thousands):


	September 30, 2024		December 31, 2023
Research and development	$	1,059	$	3,131
Professional fees	1,138		1,366
Compensation and related expenses	2,305		3,100

Other	40		65

	$	4,542	$	7,662

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

(6) Commitments and Contingencies

Leases

The Company has operating leases for its laboratory and office space in Philadelphia, Pennsylvania. The Company’s operating leases have term end dates ranging from 2024 to 2029. The Company also has obligations under an arrangement for the use of certain laboratory equipment that are classified as finance leases that commenced in 2022 and have end dates ranging from 2024 to 2026. Effective February 2024, the Company renewed an existing operating lease with an end date through 2026. In April 2024, in connection with the revised operating plan, the Company notified the lessor that it would terminate the lease effective August 2024. In July 2024, the Company entered into an amendment extending the termination of the lease to June 2025 with an option to extend to December 2025.

In September 2024, the Company modified existing finance leases and failed sale-leaseback arrangements by assigning the rights and obligations of certain underlying assets to an unrelated third party. The modifications resulted in a reduction of its finance lease right of use (ROU) assets and related lease liability of $0.4 million. In addition, the Company recorded a reduction of its failed sale-leaseback liability and gain on the sale of the corresponding assets of $0.1 million.

The Company’s operating and finance lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. The Company is responsible for payment of certain real estate taxes, insurance and other expenses on certain of its leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU assets and lease liability. The Company accounts for non-lease components, such as maintenance, separately from lease components.

The Company carries laboratory equipment from failed sale-leasebacks, as property and equipment, net on the accompanying unaudited interim consolidated balance sheets. The ongoing lease payments are recorded as reductions to the finance liability and interest expense. As of September 30, 2024, the Company had a $1.7 million financing liability recorded in other current liabilities and other long-term liabilities on the unaudited interim consolidated balance sheets.

The elements of the lease costs were as follows (in thousands):


	Nine Months Ended September 30,
	2024		2023
Operating lease cost	$	4,226	$	4,322
Finance lease cost:
Amortization of lease assets	1,321		890
Interest on lease liabilities	192		117
Total finance lease cost	1,513		1,007
Variable lease cost	768		1,216
Short term lease cost	503		—
Total lease cost	$	7,010	$	6,545

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

Lease term and discount rate information related to leases was as follows:


	September 30,
	2024		2023
Weighted-average remaining lease term (in years)
Operating leases	2.4		3.6
Finance leases	1.1		1.8

Weighted-average discount rate
Operating leases	9.7	%	10.0	%
Finance leases	9.0	%	9.0	%

Supplemental cash flow information was as follows (in thousands):


	Nine Months Ended September 30,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used in operating leases	$	4,478	$	4,028
Operating cash used in finance leases	$	192	$	117
Financing cash used in finance leases	$	1,158	$	1,151

Future maturities of lease liabilities were as follows as of September 30, 2024 (in thousands):


	Operating Leases		Finance Leases
Fiscal year ending:
2024 (remaining three months)	$	1,329	$	271
2025	219		942
2026	226		20
2027	233		—
2028	240		—
Thereafter	184		—
Total future minimum payments	2,431		1,233
Less imputed interest	(284)		(63)
Present value of lease liabilities	$	2,147	$	1,170

Manufacturing and Supply Agreement

In March 2023, the Company entered into a manufacturing and supply agreement (Novartis Agreement) with Novartis Pharmaceuticals Corporation (Novartis) for the manufacturing of the Company’s CT-0508 product candidate. The Novartis Agreement is for five years and shall renew automatically for additional one-year periods unless and until terminated by either party. In addition to paying to manufacture the product, the Company will also pay $1.0 million per calendar year, payable in quarterly payments, for reserved capacity starting on the date on which the Novartis site is declared ready to produce CT-0508 as determined by the Company. In the event of termination without cause by the Company, a termination fee equal to $4.0 million will be payable by Carisma to Novartis which, pursuant to the terms of the agreement, can be credited in full against amounts due for a substitute product.

On June 26, 2024, in furtherance of its revised operating plan, the Company terminated the Novartis Agreement. Upon termination, the Company incurred a termination fee equal to $4.0 million, which was paid in the third quarter of 2024. A

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

prepaid asset was recorded as the Company has separately agreed with Novartis that if Novartis and the Company enter into an agreement for the tech transfer of another product to Novartis on or before December 31, 2024, then the $4.0 million termination fee shall be credited in full or in part against any amounts due from the Company to Novartis under such agreement relating to the substitute product. If an agreement is not entered into or the current agreement is not modified by December 31, 2024, the $4.0 million prepaid asset will be written-off to operating expenses.

Contingencies

Liabilities for loss contingencies, arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. No such loss contingencies were probable nor reasonably estimable as of September 30, 2024.

(7) Stockholders’ Equity

Open Market Sales Agreement

On May 12, 2023, the Company entered into an Amended and Restated Open Market Sale AgreementSM with Jefferies LLC, as sales agent, pursuant to which the Company may offer and sell shares of its common stock with an aggregate offering price of up to $100.0 million under an “at-the-market" offering program. During the nine months ended September 30, 2024, the Company sold 1,136,384 shares and received net proceeds of $2.4 million in connection with the Company's "at-the-market" offering program.

(8) Stock-based Compensation

2017 Stock Incentive Plan

The Company adopted the CARISMA Therapeutics Inc. 2017 Stock Incentive Plan, as amended (the Legacy Carisma Plan), that provided for the grant of incentive stock options to employees, directors, and consultants. The maximum term of options granted under the Legacy Carisma Plan was ten years, and stock options typically vested over a four-year period. The Company’s stock options vest based on the terms in the awards agreements and generally vest over four years. Upon completion of the Merger, the Company assumed the Legacy Carisma Plan and the outstanding and unexercised options issued thereunder and ceased granting awards under the Legacy Carisma Plan.

2014 Stock Incentive Plan

Stock options outstanding under the 2014 Amended and Restated Stock Incentive Plan (the 2014 Plan) generally vest over a four-year period and are exercisable for a period of ten years from the date of grant. As of September 30, 2024, approximately 3.8 million shares of common stock remained available for issuance.

2014 Employee Stock Purchase Plan

The Carisma Therapeutics Inc. 2014 Employee Stock Purchase Plan had 0.2 million shares of common stock available for issuance as of September 30, 2024.

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

The following table summarizes stock option activity for the nine months ended September 30, 2024:


	Options	Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2023	6,023,370	$	3.94
Exercised	(3,810)	0.99			$	4
Granted	3,766,765	1.76
Forfeited	(1,008,687)	4.70

Outstanding as of September 30, 2024	8,777,638	$	2.92	7.9	$	620
Exercisable as of September 30, 2024	3,871,741	$	2.37	6.4	$	619

The weighted-average grant-date per share fair values of options granted during the nine months ended September 30, 2024 and 2023 were $1.44 and $4.42, respectively. The fair values in the nine months ended September 30, 2024 and 2023 were estimated using the Black-Scholes option-pricing model based on the following assumptions:


	Nine Months Ended September 30,
	2024	2023
Risk-free interest rate	3.77% - 4.59%	2.92% - 4.03%
Expected term	6 years	6 years
Expected volatility	103.00% - 112.10%	57.77% - 65.00%
Expected dividend yield	—	—

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense in the following expense categories in its accompanying unaudited interim consolidated statements of operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Research and development	$	384	$	418	$	776	$	452
General and administrative	731		430		2,021		991
	$	1,115	$	848	$	2,797	$	1,443

In connection with the revised operating plan, 869,800 options were forfeited during the nine months ended September 30, 2024, resulting in a reduction in stock-based compensation expense related to research and development and general and administrative employees. The Company recognized stock-based compensation expense of $0.2 million related to the modification of Sesen Bio options assumed in connection with the Merger during nine months ended September 30, 2023. Compensation cost for awards not vested as of September 30, 2024 was $10.8 million and will be expensed over a weighted-average period of 2.7 years.

(9) Related-Party Transactions

The Company has outstanding licensing and scientific research agreements with the University of Pennsylvania (Penn), a significant stockholder as of September 30, 2023. As of December 31, 2023, Penn was no longer a significant stockholder. The Company recognized $0.3 million and $0.6 million of research and development expenses for the three and nine months ended September 30, 2023 related to the Penn License Agreement.

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

The Company has a collaboration and license agreement with Moderna, a significant stockholder (Note 10).

(10) Moderna Collaboration and License Agreement

In January 2022, the Company entered into the Moderna License Agreement, which provides for a broad strategic collaboration to discover, develop and commercialize in vivo engineered CAR-M therapeutics in oncology. Moderna has the right to designate up to twelve research targets as development targets under this collaboration. While the collaboration was initially limited to oncology, in September 2024, the companies agreed to expand the collaboration to discover, develop and commercialize in vivo engineered CAR-M therapeutics in specific autoimmune diseases. As a result, Moderna nominated two autoimmune research targets. As of September 30, 2024, the first seven of the twelve research targets, including the autoimmune targets, have been nominated and all programs are currently in the discovery or pre-clinical phase.

Upon Moderna’s designation of a development target (and payment of a related development target designation milestone) for commencement of pre-clinical development of a product candidate, the Company will grant Moderna an exclusive worldwide, sublicensable royalty bearing license to develop, manufacture and commercialize the product candidate.

Under the terms of the Moderna License Agreement, Moderna made an upfront non-refundable payment of $45.0 million to the Company. Assuming Moderna develops and commercializes 12 products, each directed to a different development target, the Company is eligible to receive up to between $247.0 million and $253.0 million per product in development target designation, development, regulatory and commercial milestone payments. Moderna also will reimburse the Company for all costs incurred by the Company in connection with its research and development activities under the Moderna License Agreement plus a reasonable margin for the respective services performed (with a minimum commitment to reimburse $10.0 million in research and development costs over the first three years from execution of the Moderna License Agreement). The Company is also eligible to receive tiered mid-to-high single digit royalties of net sales of any products that are commercialized under the agreement, which may be, subject to reductions. In addition, Moderna has agreed to cover the cost the Company incurs for certain milestone payments and royalties that the Company owes as a licensor under one of its intellectual property in-license agreements with Penn, which is sublicensed to Moderna under the Moderna License Agreement. Moderna may deduct these royalties in part from any royalties owed to the Company. The Moderna License Agreement terminates on a product-by-product basis upon the latest of expiration of the applicable product patents, expiration of regulatory exclusivity and the tenth anniversary of first commercial sale, unless terminated earlier by the Company or Moderna.

At commencement, the Company identified several potential performance obligations within the Moderna License Agreement, including research and development services on research targets, option rights held by Moderna, a non-exclusive royalty-free license to use the Company’s intellectual property to conduct research and development activities and participation on the joint steering committee (JSC). The Company determined that there were 2 performance obligations comprised of (i) research and development services and (ii) option rights.

For the research and development services, the stand-alone selling price was determined considering the expected passthrough costs and cost of the research and development services and a reasonable margin for the respective services. The material rights from the option rights were valued based on the estimated discount at which the option is priced and the Company’s estimated probability of the options’ exercise as of the time of the agreement. The transaction price allocated to research and development services is recognized as collaboration revenues as the research and development services are provided to satisfy the underlying obligation related to the research and development target. The transfer of control occurs over this period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.

The transaction price of $45.0 million allocated to the options rights, which are considered material rights, will be recognized in the period that Moderna exercises or determines not to exercise its option right to license and commercialize the designated development target.

In June 2024, the Company received notice from Moderna that Moderna had designated the first development candidate, an in vivo CAR-macrophage targeting GPC3 that is designed to treat solid tumors, including hepatocellular carcinoma. Pursuant to the terms of the Moderna License Agreement, the designation triggered a $2.0 million milestone payment from

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CARISMA THERAPEUTICS INC.

Notes to the Interim Consolidated Financial Statements

Moderna to the Company. As a result, the Company recognized collaboration revenue of $2.0 million. On July 3, 2024, the Company received the $2.0 million payment from Moderna.

In addition, the Company reduced its $45.0 million deferred revenue liability associated with the option rights by recognizing $3.8 million in collaboration revenue, which represents a proportional reduction based on the 12 potential early-stage research targets.

The Company included the $45.0 million up-front and nonrefundable payment and $73.9 million of variable consideration for expected research and development services to be performed during the five-year contract term, inclusive of passthrough costs, in the transaction price as of the outset of the arrangement. During the three months ended September 30, 2024 and 2023, the Company recognized $3.4 million and $3.8 million, respectively, of collaboration revenues. During the nine months ended September 30, 2024 and 2023, the Company recognized $16.0 million and $10.6 million, respectively, of collaboration revenues. Collaboration revenues for the nine months ended September 30, 2024 include $3.8 million of deferred option rights revenue recognition and $2.0 million of milestones.

The Company recognized $35.0 million and $3.8 million, respectively, of research and development services and option right collaboration revenues since inception of the Moderna License Agreement through September 30, 2024. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of September 30, 2024 (in thousands):


	Transaction price unsatisfied
Performance obligations:
Research and development	$	38,954
Option rights	41,250
Total performance obligations	$	80,204

Amounts due to the Company for satisfying the revenue recognition criteria or that are contractually due based upon the terms of the collaboration agreements are recorded as accounts receivable in the Company’s unaudited interim consolidated balance sheets. Contract liabilities consist of amounts received prior to satisfying the revenue recognition criteria, which are recorded as deferred revenue in the Company’s unaudited interim consolidated balance sheets.

The following table summarizes the changes in deferred revenue (in thousands):


	Nine Months Ended September 30,
	2024		2023
Balance at the beginning of the period	$	46,413	$	47,459
Deferral of revenue	9,498		9,356
Recognition of unearned revenue	(13,979)		(10,630)
Balance at the end of the period	$	41,932	$	46,185

The current portion of deferred revenue represents advanced payments received from Moderna for costs expected to be incurred by the Company within the next twelve months. The noncurrent portion of deferred revenue represents the unearned portion of the upfront, non-refundable and non-creditable payment allocated to Moderna's option rights of $41.3 million, which is not expected to be recognized within the next 12 months.

(11) Subsequent Events

The Company has evaluated subsequent events from the balance sheet date through November 7, 2024, the issuance date of these unaudited interim consolidated financial statements, and has not identified any additional items that have not previously been mentioned elsewhere requiring disclosure.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024 and in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated by these forward-looking statements.

Overview

We are a clinical-stage cell therapy company focused on using our proprietary cell therapy platform to develop transformative immunotherapies to treat cancer and other serious diseases. We have created this comprehensive cell therapy platform to enable the therapeutic use of engineered macrophages and monocytes, which belong to a subgroup of white blood cells called myeloid cells. Our focus is our proprietary chimeric antigen receptor macrophage and monocyte, or CAR-M, cell therapy platform, which redirects macrophages against specific tumor associated antigens and enables targeted anti-tumor immunity by utilizing genetically modified myeloid cells (macrophages and monocytes) to express chimeric antigen receptors, or CARs, enabling these potent innate immune cells to recognize specific tumor associated antigens on the surface of tumor cells.

We have an ex vivo oncology program and an in vivo program. In addition, we utilize our cell therapy platform to engineer macrophages with the potential to treat fibrosis.

•Ex Vivo Oncology Program — Our lead product candidate, CT-0525, is intended to treat solid tumors that overexpress human epidermal growth factor receptor 2, or HER2, a protein found on the surface of a variety of solid tumors, including breast cancer, gastric cancer, esophageal cancer, salivary gland cancer, and others. CT-0525 utilizes a novel approach to CAR-M therapy that engineers patients’ monocytes directly, without ex vivo differentiation into macrophages. We believe that engineering monocytes directly (CAR-Monocyte) will result in a therapy with favorable attributes compared to engineering after ex vivo differentiation (CAR-Macrophage) and that this approach has the potential to improve upon the anti-tumor effect seen with CAR-Macrophages. In November 2023, we received United States Food and Drug Administration, or FDA, clearance of our investigational new drug application, or IND, for CT-0525, we treated the first patient in May 2024. CT-0525 also received FDA Fast Track designation in the second quarter of 2024. We expect to report initial data from the CT-0525 Phase 1 clinical trial in the first quarter of 2025.

•In Vivo Program (Moderna Collaboration) — In addition to our clinical program in ex vivo cell therapy, we have an in vivo mRNA/lipid nanoparticle, or LNP, CAR-M program in partnership with ModernaTX Inc., or Moderna. This collaboration utilizes Moderna's mRNA/LNP technology, together with our CAR-M platform technology, to create novel in vivo off the shelf gene therapy products. In November 2023, we announced pre-clinical proof of concept with this approach. In December 2023 we announced the lead candidate nomination for the first target in the partnership. In June 2024, we announced the designation of the first development candidate, or Development Candidate, under the collaboration. This Development Candidate targets GPC3, and is designed to treat solid tumors, including hepatocellular carcinoma, or HCC, the most prevalent type of liver cancer and the fastest-rising cause of cancer-related death in the U.S. While the collaboration was initially focused on oncology programs, in September 2024, we announced an expansion of the collaboration to develop two in vivo CAR-M therapies for autoimmune disease. As of September 30, 2024, seven of the twelve research targets, including the two autoimmune targets, have been nominated by Moderna with five remaining to be nominated.

•Fibrosis Program — Using our macrophage and monocyte engineering platform, we are also pursuing early research and development of multiple assets for the potential treatment of diseases beyond oncology, including fibrosis and other immunologic and inflammatory diseases. We are developing engineered macrophages to enhance the innate activity of macrophages with the potential to resolve liver fibrosis. In the second quarter of 2024, the Company achieved pre-clinical proof of concept in its liver fibrosis program, demonstrating the anti-fibrotic potential of engineered macrophages in two liver fibrosis models. We expect to nominate a development candidate in this program in the first quarter of 2025.

In late March 2024, the Company and its board of directors approved a revised operating plan to reduce monthly operating expenses and conserve cash, which it began implementing in April 2024. Pursuant to the revised operating plan, the Company has prioritized CT-0525 as the Company's lead product candidate going forward, ceased further development of CT-0508, will continue our fully funded program on in vivo CAR-M therapy in oncology and autoimmune disease in collaboration with Moderna, paused further development of CT-1119 pending additional financing, reduced its workforce, including employees engaged in research and development and general and administration activities, and decreased spending on other non-essential activities.

Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include, but are not limited to, private placements of equity and/or debt, other offerings of equity and/or debt securities, licensing arrangements and/or marketing arrangements. We will also continue to reassess our expense allocation.

Our Pipeline

Using our proprietary macrophage and monocyte cell therapy platform, we are developing a pipeline of product candidates, with an initial focus on advancing ex vivo autologous and in vivo CAR-M therapies for the treatment of solid tumors. We are also pursuing early research and development of multiple assets for the potential treatment of diseases beyond oncology, including fibrosis and other immunologic and inflammatory diseases. All of our programs, other than the targets/programs under the collaboration with Moderna, are wholly owned.

Our lead product candidate, CT-0525, a CAR-Monocyte intended to treat solid tumors that overexpress HER2, utilizes a novel approach to CAR-M therapy that engineers patients' monocytes directly, without ex vivo differentiation into macrophages, as we did for CT-0508. The CAR-Monocyte approach utilizes a single day manufacturing process, which enables the manufacture of up to ten billion cells from a single apheresis and leverages an automated manufacturing process. In addition, the CAR-Monocyte approach has the potential to improve upon the potential anti-tumor effect of a CAR-Macrophage. By increasing the cell yield, a CAR-Monocyte enables a larger dose than a CAR-Macrophage. In addition, CAR-Monocyte has the potential for improved persistence and trafficking, which were observed in pre-clinical studies. We believe that the increased cell yield, and the improved persistence and trafficking may improve tumor control. Moreover, based on the final results relating to our Phase 1 clinical trial of CT-0508, which are preliminary and limited, we believe that repeat dosing of CT-0525 in patients with HER2 overexpressing cancers could prolong pharmacologic efficacy and response.

Our Phase 1 clinical trial for CT-0525 is open for enrollment and we treated the first patient in May 2024. The FDA granted CT-0525 Fast Track designation in June 2024 and we expect to report initial data from the clinical trial in the first quarter of 2025. In September 2024, we submitted a protocol amendment for our Phase 1 study to allow for the expansion of the study to include additional alternative dosing regimens. Data from the study will dictate the utilization of specific alternative dosing regimens.

Our first product candidate to enter clinical development, CT-0508, was the first CAR-Macrophage to be evaluated in a human clinical trial and was an anti-HER2 product candidate. While the clinical trial has shown the product to be well tolerated, feasible to manufacture, to initiate remodeling of the tumor microenvironment and to have an anti-tumor effect, as of July 2024, all clinical activities related to the Phase 1 clinical trial of CT-0508 and its sub-study utilizing CT-0508 in combination with pembrolizumab have been completed and no further development of CT-0508 is planned. We recently completed analysis of circulating tumor DNA, or ctDNA, from 13 patients enrolled in groups 1 and 2 of our Phase 1 clinical trial of CT-0508. Based on preliminary results assessed to date, we observed that 75% (n=6/8) of evaluable HER2 3+ patients experienced a ctDNA reduction, indicating direct tumor killing activity. Zero percent (n=0/5) of evaluable HER2 2+ patients experienced a ctDNA reduction. In the 6 patients that experienced a ctDNA reduction, the median decrease was 81% (range 33%-93% decrease in ctDNA 4-weeks post treatment with CT-0508).

We also enrolled six patients in a sub-study evaluating the co-administration of CT-0508 and pembrolizumab, a programmed cell death protein 1 checkpoint inhibitor, evaluating the safety and tolerability of the co-administration, along with several customary secondary endpoints. The study met its primary endpoints of safety, tolerability and manufacturing feasibility of CT-0508. The data demonstrate that the combination therapy was generally well-tolerated with no dose-limiting toxicities. The best overall response was stable disease (n=1/6), with corticosteroid administration and / or loss of human leukocyte antigen, or HLA, expression being key limitations to potential efficacy in three of the patients who experienced progressive disease. The correlative data concerning immune activation suggest a synergistic potential for the combination of CAR-M with pembrolizumab based on increased peripheral blood T cell clonality, T cell activation, and frequency of effector memory cluster of differentiation, or CD,8 T cells compared to CT-0508 alone. Supported by these

safety and translational findings, as well as other results from the clinical trial of CT-0508, we intend to explore the strategy of combining CAR-M with pembrolizumab or another checkpoint inhibitor in the CT-0525 program.

Our pipeline also includes CT-1119, a mesothelin-targeted CAR-Monocyte, that has been paused pursuant to our revised operating plan pending additional financing.

In addition to the development of ex vivo CAR-M cell therapies, we are developing in vivo CAR-M cell therapies, wherein immune cells are directly engineered within the patient’s body. To advance our in vivo CAR-M therapeutics, in January 2022, we established the collaboration with Moderna by entering into the Moderna License Agreement to develop up to twelve in vivo CAR-M therapies. As part of the Moderna License Agreement, we received a $45.0 million up-front cash payment and an investment by Moderna in the form of a $35.0 million convertible promissory note, which converted into shares of common stock in connection with the consummation of the Merger, in addition to future research funding and the opportunity for milestone payments and royalties. This collaboration utilizes Moderna's mRNA/LNP technology, together with our CAR-M platform technology, to create novel in vivo off the shelf gene therapy products. While the collaboration was initially limited to oncology, in September 2024, the companies agreed to expand the collaboration to discover, develop and commercialize in vivo engineered CAR-M therapeutics in specific autoimmune diseases. As of September 30, 2024, the first seven of the twelve research targets, including the autoimmune research targets, have been nominated and all programs are currently in the discovery or pre-clinical phase. Since entering the agreement, we have made significant progress advancing this program. In the fourth quarter of 2023, we presented pre-clinical data from this collaboration demonstrating that CAR-M can be directly produced in vivo, successfully redirecting endogenous myeloid cells against tumor-associated antigens using mRNA/LNP. Additionally, the pre-clinical data demonstrated feasibility, tolerability, and early efficacy of in vivo CAR-M against metastatic solid tumors. In December 2023, we announced the nomination of the collaboration’s first lead candidate and in June 2024, we received notice from Moderna that Moderna intended to advance the first lead candidate into development by designating it as the first Development Candidate under the collaboration. The first Development Candidate is an in vivo CAR-M targeting Glypican-3, or GPC3 that is designed to treat HCC. We believe that GPC3 is a validated target in HCC, an area of significant unmet medical need. Pursuant to the terms of the Moderna License Agreement, the designation triggered a $2.0 million milestone payment from Moderna to us. On July 3, 2024, we received the $2.0 million payment from Moderna. In November 2024, we announced new pre-clinical data on our anti-GPC3 in vivo CAR-M therapy for treating HCC. These pre-clinical data demonstrate robust anti-tumor activity.

In addition to acting as a first line of defense in the innate immune system, macrophages and monocytes are found in all tissues in the body where they serve key regulatory functions such as wound healing, termination of immune responses and tissue regeneration. Using our macrophage and monocyte engineering platform, we are pursuing early research and development of multiple assets for the potential treatment of diseases beyond oncology, including fibrosis and other immunologic and inflammatory diseases. In the second quarter of 2024, we achieved pre-clinical proof of concept in our liver fibrosis program, demonstrating the anti-fibrotic potential of engineered macrophages in two liver fibrosis models. We expect to nominate a development candidate in our fibrosis program in the first quarter of 2025.

To date, we have not yet commercialized any products or generated any revenue from product sales and have financed our operations primarily with proceeds from sales of our preferred stock, proceeds from our collaboration with Moderna, research tax credits, convertible debt financing, closing of pre-closing financing, and completion of the Merger. Our operations to date have been limited to organizing and staffing the Company, business planning, capital raising, establishing and maintaining our intellectual property portfolio, building our pipeline of product candidates, conducting drug discovery activities, undertaking pre-clinical studies, manufacturing process development studies, conducting early-stage clinical trials, and providing general and administrative support for these operations. We have devoted substantially all of our financial resources and efforts to pursuing discovery, research and development of our product candidates.

Financial Operations

Our net losses were $42.8 million and $65.9 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had $26.9 million in cash and cash equivalents and an accumulated deficit of $287.9 million. We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct our clinical trial of CT-0525 and continue our other product development efforts. If we obtain marketing approval for CT-0525 or any other product candidate we are developing or develop in the future, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. We believe our revised operating plan approved in March 2024 by our board of directors will facilitate cost control to support further development of our product candidates and other research and development programs.

As of September 30, 2024, we had 41,750,109 shares of common stock issued and outstanding. We will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise additional capital or obtain adequate funds on acceptable terms, we may be required to further delay, limit, reduce or terminate our discovery and product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. However, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and distract from our discovery and product development efforts. Considering the anticipated benefits of our revised operating plan, we believe that we have cash and cash equivalents sufficient to sustain our operating expenses and capital expenditure requirements into the third quarter of 2025.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand business, maintain discovery and product development efforts, diversify our pipeline of product candidates or even continue operations.

Revised Operating Plan

In late March 2024, our board of directors approved a revised operating plan to reduce our monthly operating expenses and conserve cash, which we began implementing in April 2024. Pursuant to the revised operating plan, the Company has prioritized CT-0525 as the Company's lead product candidate going forward, ceased further development of CT-0508, paused further development of CT-1119 pending additional financing, will continue our fully funded program on in vivo CAR-M therapy in oncology and autoimmune disease in collaboration with Moderna, continue research efforts in our fibrosis program, reduced our workforce by 39 full-time employees (representing approximately 37% of our total workforce), including employees engaged in research and development and general and administration activities, and decreased spending on other non-essential activities. We completed our workforce reduction and paid the majority of related costs in the second quarter of 2024. As of September 30, 2024, $0.3 million in severance costs from our workforce reduction remains and will be paid in equal installments through April 2025. As of July 2024, all clinical activities related to the clinical trial of CT-0508 and its sub-study utilizing CT-0508 in combination with pembrolizumab have been completed.

These changes have resulted in certain operating efficiencies which support our cash runway and support our product development programs as well as any potential collaborations or other strategic relationships we may enter into. We have incurred $1.6 million which consists primarily of one-time employee termination benefits directly associated with the workforce reduction, a majority of which has been paid as of September 30, 2024.

As part of the revised operating plan, on June 26, 2024, we notified Novartis Pharmaceuticals Corporation, or Novartis, of our termination of the Manufacturing and Supply Agreement, dated March 1, 2023, relating to the manufacture of our first product candidate to enter clinical development, CT-0508, or the Manufacturing Agreement. The termination is effective July 31, 2024. As a result of the termination of the Manufacturing Agreement, we incurred a termination fee of $4.0 million, or the Termination Fee, which we paid in the third quarter of 2024. We have separately agreed with Novartis that if we enter into an agreement for the tech transfer of another product, or a Substitute Product, to Novartis on or before December 31, 2024, then the Termination Fee shall be credited in full or in part against any amounts due to Novartis under such agreement relating to the Substitute Product.

Financial Operations Overview

Collaboration Revenues

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future. Our revenues to date have been generated from the Moderna License Agreement. Moderna reimburses us for all costs incurred by it in connection with its research and development activities under the Moderna License Agreement plus a reasonable margin for the respective services performed. We expect that our revenue for at least the next several years will be derived primarily from the Moderna License Agreement, other current

collaboration agreements and any additional collaborations that we may enter into in the future. To date, we have not received any royalties under the Moderna License Agreement.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including discovery efforts and the development of product candidates, and include:

•expenses incurred to conduct the necessary pre-clinical studies and clinical trials required to obtain regulatory approval;

•salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

•costs of funding research performed by third parties, including pursuant to agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our pre-clinical studies and clinical trials;

•expenses incurred under agreements with contract manufacturing organizations, or CMOs, including manufacturing scale-up expenses and the cost of acquiring and manufacturing pre-clinical study and clinical trial materials;

•costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

•the costs of laboratory supplies and acquiring materials for pre-clinical studies;

•facility-related expenses, which include direct depreciation costs of equipment and expenses for rent and maintenance of facilities and other operating costs; and

•third-party licensing fees.

Research and development activities are central to our business model. Product candidates in later stages of clinical development will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to decrease in the remainder of 2024 as we have begun to implement our revised operating plan, including a reduction in workforce, prioritization of CT-0525 and a pause in development of CT-1119. We expect that our expenses will increase again in future years as we continue to advance our clinical trials and potentially progress additional product candidates.

The successful development of our current or future product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of any product candidates. The success of CT-0525 and our other product candidates will depend on several factors, including the following:

•successfully completing pre-clinical studies;

•successfully initiating future clinical trials;

•successfully enrolling patients in and completing clinical trials;

•scaling up manufacturing processes and capabilities to support clinical trials of CT-0525 and any other product candidate;

•applying for and receiving marketing approvals from applicable regulatory authorities;

•obtaining and maintaining intellectual property protection and regulatory exclusivity for CT-0525 and any other product candidates the Company is developing or may develop in the future;

•making arrangements with third-party manufacturers, or establishing commercial manufacturing capabilities, for both clinical and commercial supplies of our product candidates;

•establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;

•acceptance of CT-0525 and any other product candidates, if and when approved, by patients, the medical community and third-party payors;

•effectively competing with other therapies;

•obtaining and maintaining coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors;

•maintaining, enforcing, defending and protecting our rights in our intellectual property portfolio;

•not infringing, misappropriating or otherwise violating others’ intellectual property or proprietary rights; and

•maintaining a continued acceptable safety profile of our products following receipt of any marketing approvals.

A change in the outcome of any of these variables with respect to the development, manufacture or commercialization activities of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive, if there are safety concerns or if we determine that the observed safety or efficacy profile would not be competitive in the marketplace, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years, and we expect to spend a significant amount in development costs.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expense for employees in executive, finance, accounting, business development and human resource functions. General and administrative expense also includes corporate facility costs, including rent, utilities, depreciation and maintenance, and costs not otherwise included in research and development expenses, legal fees related to intellectual property and corporate matters as well as fees for accounting and consulting services.

We expect that our general and administrative expenses will decrease in 2024, as we have begun to implement our revised operating plan, including reducing our workforce and decreasing expenses related to non-essential activities. In addition, our 2023 expenses included a significant amount of non-recurring costs related to the Merger that are described below. We expect that our expenses will increase again in future years as we continue to incur costs associated with being a public company.

Interest Income, Net

Interest income consists of interest earned on our excess cash. Interest expense consisted of interest on our finance leases and our convertible promissory note that was entered into concurrently with the Moderna License Agreement including non-cash interest expense associated with the amortization of the debt discount. The convertible promissory note was converted into common stock upon the closing of the Merger.

Change in Fair Value of Derivative Liability

Change in fair value of the derivative liability for the redemption feature of our convertible promissory note reflected the non-cash charge for changes in the fair value of the derivative liability that was subject to re-measurement at each balance sheet date through the settlement of the convertible promissory note upon the closing of the Merger at which time the redemption feature was derecognized.

Income Taxes

Since inception, we have incurred significant net losses. We have provided a valuation allowance against the full amount of our deferred tax assets since, in our opinion, based upon our historical and anticipated future losses, it is more likely than not that the benefits will not be realized. As of September 30, 2024, we remained in a full valuation allowance position.

The utilization of our net operating loss carryforwards, or NOLs, may be subject to a substantial annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the Internal Revenue of 1986, or the Code, respectively, as well as similar state provisions. We have recorded a valuation allowance on all of our deferred tax assets, including deferred tax assets related to NOLs.

Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023 (in thousands)


	Three Months Ended September 30,
	2024		2023
Collaboration revenues	$	3,385	$	3,827
Operating expenses:
Research and development	11,326		19,551
General and administrative	5,203		6,620
Total operating expenses	16,529		26,171
Operating loss	(13,144)		(22,344)
Change in fair value of derivative liability	—		—
Interest income, net	442		941
Pre-tax loss	(12,702)		(21,403)
Income tax expense	—		—
Net loss	$	(12,702)	$	(21,403)

Collaboration Revenues

Collaboration revenues were $3.4 million and $3.8 million for the three months ended September 30, 2024 and 2023, respectively. The decrease was primarily related to the research and development activities completed under the Moderna License Agreement.

Research and Development Expenses

We track outsourced development, outsourced personnel costs and other external research and development costs of our CT-0508, CT-0525, and CT-1119 programs. We do not track internal research and development costs on a program-by-program basis. The following table summarizes our research and development expenses for the three months ended September 30, 2024 and 2023 (in thousands):


	Three Months Ended September 30,
	2024		2023
CT-0508 (1)	$	702	$	3,094
CT-0525	2,033		2,894
CT-1119 (1)	183		285
Personnel costs, including stock-based compensation (2)	4,315		5,226
Other clinical and pre-clinical development expenses	592		1,423
Facilities and other expenses	3,501		6,629
Total research and development expenses	$	11,326	$	19,551

(1) Consistent with our revised operating plan, development activities with respect to CT-0508 ceased, and as of July 2024, all remaining clinical activities related to CT-0508 were completed. We have also elected to pause further development of CT-1119, a mesothelin-targeted CAR-Monocyte, pending additional financing.

(2) In late March 2024, we approved a revised operating plan to reduce monthly operating expenses and conserve cash, which we began implementing in April 2024, including a reduction of workforce of which a majority of associated costs were paid in the second quarter of 2024.

Research and development expenses for the three months ended September 30, 2024 were $11.3 million, compared to $19.6 million for the three months ended September 30, 2023. The decrease of $8.3 million was primarily due to

implementation of our revised operating plan in the second quarter of 2024 in which we halted further development of CT-0508, paused development of CT-1119 and implemented a workforce reduction. As result of the revised operating plan, we experienced a decrease of $2.4 million related to halting development of CT-0508 and a $0.1 million decrease from pausing the development of CT-1119. In addition, the implementation of the revised operating plan resulted in a decrease in facilities and other expenses of $3.1 million due to less laboratory supplies and laboratory space needs and a $0.9 million decrease in direct personnel costs due to a reduction in headcount. Further, we experienced a $0.9 million decrease in direct costs associated with pre-clinical development of CT-0525 due to the timing of the development program and a decrease of $0.9 million in other clinical and pre-clinical development expenses resulting from the timing of certain studies in our in vivo collaboration with Moderna.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended September 30, 2024 and 2023 (in thousands):


	Three Months Ended September 30,
	2024		2023
Personnel costs, including stock-based compensation (1)	$	2,229	$	1,751
Professional fees	2,247		3,546
Facilities and supplies	269		580
Insurance, taxes, and fees	353		574
Other expenses	105		169
Total general and administrative expenses	$	5,203	$	6,620

(1) In late March 2024, we approved a revised operating plan to reduce monthly operating expenses and conserve cash, which we began implementing in April 2024, including a reduction of workforce of which a majority of associated costs were paid in the second quarter of 2024.

General and administrative expenses for the three months ended September 30, 2024 were $5.2 million, compared to $6.6 million for the three months ended September 30, 2023. The decrease of $1.4 million was primarily due to our revised operating plan in which we recognized a $1.3 million decrease in professional fees as a result of our patent portfolio and expanding infrastructure in 2023, a $0.3 million decrease in facilities and supplies due to a decrease in office expenditures, a $0.2 million decrease in insurance costs, and a $0.1 million decrease in other expenses related to a decline in travel costs, partially offset by a $0.5 million increase in personnel costs driven by an increase in stock-based compensation.

Interest Income, Net

We recognized $0.4 million and $0.9 million in interest income, net for the three months ended September 30, 2024 and 2023, respectively, primarily attributable to interest earned on excess cash, partially offset by interest on our finance leases.

Comparison of the Nine Months Ended September 30, 2024 and 2023 (in thousands)


	Nine Months Ended September 30,
	2024		2023
Collaboration revenues	$	15,979	$	10,630
Operating expenses:
Research and development	44,095		54,710
General and administrative	16,208		22,201
Total operating expenses	60,303		76,911
Operating loss	(44,324)		(66,281)
Change in fair value of derivative liability	—		(84)
Interest income, net	1,482		641
Pre-tax loss	(42,842)		(65,724)
Income tax expense	—		(197)
Net loss	$	(42,842)	$	(65,921)

Collaboration Revenues

Collaboration revenues were $16.0 million and $10.6 million for the nine months ended September 30, 2024 and 2023, respectively. The increase was primarily related to Moderna's Development Candidate nomination which resulted in $5.8 million of collaboration revenue consisting of $3.8 million of deferred option rights revenue recognition and $2.0 million of milestone revenue that was recognized in the second quarter of 2024.

Research and Development Expenses

We track outsourced development, outsourced personnel costs and other external research and development costs of our CT-0508, CT-0525, and CT-1119 programs. We do not track internal research and development costs on a program-by-program basis. The following table summarizes our research and development expenses for the nine months ended September 30, 2024 and 2023 (in thousands):


	Nine Months Ended September 30,
	2024		2023
CT-0508 (1)	$	4,397	$	8,680
CT-0525	7,217		6,108
CT-1119 (1)	420		763
Personnel costs, including stock-based compensation (2)	15,621		15,241
Other clinical and pre-clinical development expenses	3,327		4,403
Facilities and other expenses	13,113		19,515
Total research and development expenses	$	44,095	$	54,710

Research and development expenses for the nine months ended September 30, 2024 were $44.1 million, compared to $54.7 million for the nine months ended September 30, 2023. The decrease of $10.6 million was primarily due to implementation of our revised operating plan in the second quarter of 2024 in which we halted further development of CT-0508, paused development of CT-1119 and implemented a workforce reduction. As result of the revised operating plan, we experienced a decrease of $4.3 million related to halting development of CT-0508 and $0.3 million from pausing the development of CT-1119. In addition, the implementation of the revised operating plan resulted in a decrease in facilities and other expenses by $6.4 million due to less laboratory supplies and laboratory space needs and a decrease of $1.1 million in other clinical and pre-clinical development expenses resulting from the timing of certain studies in our in vivo collaboration with Moderna, partially offset by a $1.1 million increase in direct costs associated with pre-clinical development of CT-0525 due to the timing of the development program, and a $0.4 million increase in direct personnel costs which includes severance payments associated with the revised operating plan.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the nine months ended September 30, 2024 and 2023 (in thousands):


	Nine Months Ended September 30,
	2024		2023
Personnel costs, including stock-based compensation (1)	$	6,895	$	9,549
Professional fees	6,487		9,657
Facilities and supplies	1,342		847
Insurance, taxes, and fees	955		1,530
Other expenses	529		618
Total general and administrative expenses	$	16,208	$	22,201

General and administrative expenses for the nine months ended September 30, 2024 were $16.2 million, compared to $22.2 million for the nine months ended September 30, 2023. The decrease of $6.0 million was primarily due to our revised operating plan in which we recognized a $3.2 million decrease in professional fees as a result of non-recurring legal costs associated with the Merger, a $2.7 million decrease in personnel costs including severance and related costs resulting from the Merger in 2023 offset by an increase in salaries and headcount, stock-based compensation and severance costs associated with the revised operating plan, a $0.6 million decrease in taxes and insurance, partially offset by a $0.5 million increase in facilities and supplies due to a rise in office expenditures.

Interest Income, Net

We recognized $1.5 million in interest income, net for the nine months ended September 30, 2024, which was primarily attributable to interest earned on excess cash, partially offset by interest on our finance leases.

We recognized $0.6 million in interest income, net for the nine months ended September 30, 2023, which was attributable primarily to the accelerated amortization of the debt discount as a result of the settlement of the convertible promissory note at the closing of the Merger and interest expense on the outstanding principal balance associated with the convertible promissory note issued to Moderna through March 7, 2023, offset by interest income of $2.7 million.

Change in Fair Value of Derivative Liability

We recognized a $0.1 million non-cash charge for the nine months ended September 30, 2023, for the increase in fair value of the derivative liability associated with the redemption feature of the convertible promissory note with Moderna, which

was attributable to the timing in which we expected the accrued settlement event to occur. There was no change in fair value of derivative liability for the nine months ended September 30, 2024.

Income Tax Expense

We recorded $0.2 million of income tax expense for the nine months ended September 30, 2023 based on projected taxable income for the year ended December 31, 2023. We had no such income tax expense for the nine months ended September 30, 2024.

Liquidity and Capital Resources

Sources of Liquidity

As of September 30, 2024, we had $26.9 million in cash and cash equivalents and an accumulated deficit of $287.9 million. To date, we have not yet commercialized any products or generated any revenue from product sales and have financed operations primarily with proceeds from sales of preferred stock, proceeds from our collaboration with Moderna, research tax credits and convertible debt financing. Under the Moderna License Agreement we anticipate receiving $73.9 million over the term of the contract for expected research and development services to be performed by us, inclusive of pass-through costs, to be billed quarterly. Through September 30, 2024, we have generated $40.7 million of collaboration revenues related to research and development services, option rights, and milestone payments. Under the terms of the Moderna License Agreement, assuming Moderna develops and commercializes 12 products, each directed to a different development target, we are eligible to receive up to between $247.0 million and $253.0 million per product in development target designation, development, regulatory and commercial milestone payments.

On April 17, 2023, we filed a universal shelf registration statement on Form S-3, which was declared effective on May 2, 2023, or the Registration Statement. Under the Registration Statement, we may offer and sell up to $300.0 million of a variety of securities, including debt securities, common stock, preferred stock, depositary shares, subscription rights, warrants and units from time to time in one or more offerings at prices and on terms to be determined at the time of the offering. On May 12, 2023, we entered into an Amended and Restated Open Market Sale AgreementSM, or the Sale Agreement, with Jefferies LLC, as sales agent, pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $100.0 million under an “at-the-market" offering program. As of September 30, 2024, we have sold 1,362,917 shares for gross proceeds of $3.2 million.

Cash Flows

The following table shows a summary of our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):


	Nine Months Ended September 30,
	2024		2023
Cash (used in) provided by
Operating activities	$	(51,565)	$	(65,080)
Investing activities	(123)		61,969
Financing activities	964		62,079
Net change in cash, cash equivalents and restricted cash	$	(50,724)	$	58,968

Cash Flows from Operating Activities

During the nine months ended September 30, 2024, we used $51.6 million of net cash in operating activities. Cash used in operating activities reflected our net loss of $42.8 million that was offset by $11.2 million of non-cash charges primarily related to depreciation and amortization expense, stock-based compensation, reductions in the operating right of use, or ROU assets, and a $20.0 million net change in our operating assets and liabilities attributable to the timing in which we pay our vendors for research and development activities.

During the nine months ended September 30, 2023, we used $65.1 million of net cash in operating activities. Cash used in operating activities reflected our net loss of $65.9 million that was offset by $8.4 million of non-cash charges primarily

related to depreciation and amortization expense, stock-based compensation, reductions in the operating ROU assets, and accretion on marketable securities, and a $7.5 million net change in our operating assets and liabilities attributable to the timing in which we pay our vendors for research and development activities.

Cash Flows from Investing Activities

During the nine months ended September 30, 2024, cash used in investing activities reflected purchases of property and equipment.

During the nine months ended September 30, 2023, we received $62.0 million of net cash from investing activities. Cash provided by investing activities reflected $97.0 million of proceeds from the sale of marketable securities, partially offset by purchases of marketable securities of $34.5 million and the purchase of property and equipment of $0.6 million.

Cash Flows from Financing Activities

During the nine months ended September 30, 2024, we received $1.0 million of net cash from financing activities, primarily attributable to $2.4 million from the sale of common stock in connection with the Sale Agreement, net of issuance costs, and $0.7 million in proceeds from failed-sale leaseback arrangements, partially offset by $1.2 million in payments of principal related to finance lease liabilities, and $0.9 million in payments of finance liability from failed-sale leaseback arrangements.

During the nine months ended September 30, 2023, we received $62.1 million of net cash from financing activities, primarily attributable to the $37.9 million in the cash and cash equivalents acquired in connection with the Merger and $30.6 million in proceeds from the issuance of common stock in pre-closing financing, partially offset by $5.8 million in payments of financing costs.

Funding Requirements

We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct our planned clinical trial of CT-0525, advance our discovery programs and continue our product development efforts. As of September 30, 2024, we had cash and cash equivalents of $26.9 million. We believe that the revised operating plan approved in March 2024 by our board of directors will reduce our spending such that our liquidity is sufficient to sustain our operating expenses and capital expenditure requirements into the third quarter of 2025. As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. We have based our estimate regarding the sufficiency of our cash resources on assumptions that may prove to be wrong, and our revised operating plan may change as a result of many factors currently unknown to us.

We expect our expenses to increase substantially over time in connection with our ongoing activities, particularly as we advance our pre-clinical activities and clinical trials. In addition, if we obtain marketing approval for CT-0525 or any other product candidate we are developing or develop in the future, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution. In addition, we expect to continue to incur costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise additional capital or obtain adequate funds when needed or on acceptable terms, we may be required to further delay, limit, reduce or terminate our discovery and product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market on our own. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and distract us from discovery and product development efforts. As a result of the Merger, we acquired Vicineum, a product in development by Sesen Bio for the treatment of non-muscle invasive bladder cancer. On July 15, 2022, Sesen Bio made the strategic decision to voluntarily pause further development of Vicineum in the United States and we have not pursued further development of Vicineum. We have completed the process of unwinding all contractual relationships related to Vicineum.

Our future capital requirements will depend on many factors, including:

•the progress, costs and results of our ongoing clinical trial of CT-0525 and other planned and future clinical trials;

•the scope, progress, costs and results of pre-clinical testing and clinical trials of CT-0525 for additional combinations, targets and indications;

•the number of and development requirements for additional indications for CT-0525 or for any other product candidates;

•the success of our collaborations with Moderna or others;

•our ability to scale up our manufacturing processes and capabilities to support clinical trials of CT-0525 and other product candidates we are developing and develop in the future;

•the costs, timing and outcome of regulatory review of CT-0525 and other product candidates we are developing and may develop in the future;

•potential changes in the regulatory environment and enforcement rules;

•our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;

•the payment of license fees and other costs of our technology license arrangements;

•the costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for CT-0525 and other product candidates we are developing and may develop in the future for which we may receive marketing approval;

•our ability to obtain and maintain acceptance of any approved products by patients, the medical community and third-party payors;

•the amount and timing of revenue, if any, received from commercial sales of CT-0525 and any other product candidates we are developing or develop in the future for which we receive marketing approval;

•potential changes in pharmaceutical pricing and reimbursement infrastructure;

•the availability of raw materials for use in production of our product candidates;

•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property-related claims; and

•the extent to which we in-license or acquire additional technologies or product candidates.

Identifying potential product candidates and conducting pre-clinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. We will not generate commercial revenues unless and until we can achieve sales of products, which we do not anticipate for a number of years, if at all. Accordingly, we will need to obtain substantial additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all, and may be impacted by the economic climate and market conditions. For example, market volatility resulting from general U.S. or global economic or market conditions, including related to any health epidemics, pandemics or other contagious outbreaks, could also adversely impact our ability to access capital as and when needed.

Alternatively, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

Until such time, if ever, we can generate substantial revenues from product sales, we expect to finance our cash needs through a combination of public and private equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of those securities may include liquidation or other preferences that adversely affect your rights as a holder of our common stock. Debt financing and preferred equity financing, if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our operations and ability to take specific actions, such as incurring additional debt, making acquisitions, engaging in acquisition, merger or collaboration transactions, selling or licensing our assets, making capital expenditures, redeeming our stock, making certain investments, declaring dividends or other operating restrictions that could adversely impact our ability to conduct business.

If we raise funds through additional collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, future revenue streams, discovery programs or product candidates, grant licenses on terms that may not be favorable to us or grant rights to develop and market product candidates that we would otherwise prefer to develop and market on our own, any of which may have a material adverse effect on our business, operating results and prospects. If we are unable to raise capital or obtain adequate funds when needed or on acceptable terms, we may be required to further delay, limit, reduce or terminate our discovery and product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market on our own.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments at September 30, 2024 (in thousands):


	Total		Less than 1 Year		1 to 3 Years		4 to 5 Years		More than 5 Years
Contractual obligations:
Operating lease commitments(1)	$	2,431	$	1,493	$	455	$	483	$	—
Finance lease commitments	1,233		1,136		97		—		—
Total contractual obligations	$	3,664	$	2,629	$	552	$	483	$	—

(1)Reflects obligations pursuant to our office and laboratory leases in Philadelphia, Pennsylvania.

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. Our contracts with CMOs, CROs and other third parties for the manufacture of our product candidates and to support pre-clinical research studies and clinical testing are generally cancellable by us upon prior notice and do not contain any minimum purchase commitments. Payments due upon cancellation consisting only of payments for services provided or expenses incurred, including noncancellable obligations of our service providers, up to the date of cancellation are not included in the table above as the amount and timing of such payments are not known.

The table above does not include any potential milestone or royalty payments that we may be required to make under our license agreement with Penn and under licensing agreements with other third parties not considered material. We excluded these milestone and royalty payments given that the timing and likelihood of any such payments cannot be reasonably estimated at this time.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited interim consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our unaudited interim consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited interim consolidated financial statements. We base our estimates on our limited historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

During the nine months ended September 30, 2024, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on April 1, 2024.

Recent Accounting Pronouncements

See Note 3 to our unaudited interim consolidated financial statements found in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. Our interest-earning assets consist of cash, cash equivalents and marketable securities. Interest income earned on these assets was $1.9 million and $2.7 million for the nine months ended September 30, 2024 and 2023, respectively. Our interest income is sensitive to changes in the general level of interest rates, primarily U.S. interest rates.

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended September 30, 2024 and 2023.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer have evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of September 30, 2024. The term “disclosure controls and procedures,” as defined in the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of September 30, 2024, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. As of the date of this Quarterly Report on Form 10-Q, we were not a party to any material legal matters or claims.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth below, as well as the other information in this Quarterly Report on Form 10-Q, including our financial statements and the related notes and the section of this Quarterly Report on Form 10-Q titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before deciding whether to purchase our securities. The risks and uncertainties we describe below and in the filings mentioned above are not the only ones we face. Additional risks and uncertainties not presently known to us could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our securities, and the occurrence of any of these risks might cause you to lose all or part of your investment.

Summary of Risk Factors

•We have incurred significant losses since our inception. We expect to continue to incur significant expenses and operating losses for the foreseeable future and may never achieve or maintain profitability.

•We will need substantial additional funding for our continuing operations. Attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and distract from our discovery and product development efforts. If we are unable to raise additional capital when needed or on acceptable terms, we could be forced to further delay, reduce or eliminate some or all of our discovery or product development programs or commercialization efforts.

•We have never generated revenue from product sales and may never achieve or maintain profitability.

•Our reduction in force undertaken to extend our cash runway and focus our resources on our prioritized research and development programs might not achieve our intended outcome.

•We are heavily dependent on the success of our lead product candidate, CT-0525, which will require significant clinical testing before we can seek marketing approval and potentially generate commercial sales. If CT-0525 does not receive marketing approval or is not successfully commercialized, or if there is significant delay in doing so, our business will be harmed.

•Cell therapy is a rapidly evolving area of science, and the approach we are taking to discover and develop product candidates by utilizing genetically modified macrophages is novel and may never lead to approved or marketable products.

•We have and may in the future curtail, pause, delay or cease development of a product candidate at any stage of pre-clinical or clinical development based on a variety of factors, including our judgments regarding costs or timing of further development, probability of success of clinical development (including because of a decrease in the pool of available patients), regulatory requirements, commercial potential, relative benefits and costs compared to other product candidates in our portfolio, and our overall corporate strategy.

•Even if any of our product candidates receives marketing approval, we may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, and the market opportunity for any of our product candidates, if approved, may be smaller than we estimate.

•We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, which may prevent or delay our ability to seek or obtain marketing approval for or commercialize our product candidates or otherwise harm our business. If we are not able to maintain these third-party relationships or if these arrangements are terminated, we may have to alter our development and commercialization plans and our business could be adversely affected.

•We rely, and expect to continue to rely, on third parties to manufacture our drug substance and drug product, and those third parties may not perform satisfactorily, including failing to meet deadlines to provide adequate drug product for our clinical trials. This may prevent or delay our ability to complete our clinical trials and to seek or obtain marketing approval for or commercialize our product candidates or otherwise harm our business. If we are not able to maintain these third-party relationships or if these arrangements are terminated, we may have to alter our development and commercialization plans and our business could be adversely affected.

•We currently, and may in the future, rely on single-source suppliers for certain materials and components used in the manufacturing of our product candidates. Any disruption in supply from these single-source suppliers could lead to supply delays or interruptions which would materially adversely affect our business, financial condition and results of operations.

•If we are unable to obtain, maintain and enforce patent protection for our technology and product candidates or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected and we may not be able to compete effectively in our market.

•The regulatory approval process of the FDA is lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain marketing approval for our product candidates, our business will be substantially harmed.

•The market price of our common stock may be volatile, and the market price of our common stock may drop in the future.

•We incur and will continue to incur additional costs and increased demands upon management as a result of complying with the laws and regulations affecting public companies.

•If at some point we are no longer a “smaller reporting company” or otherwise no longer qualify for applicable exemptions, we will be subject to additional laws and regulations affecting public companies that will increase our costs and the demands on management and could harm our operating results.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant losses since our inception. We expect to continue to incur significant expenses and operating losses for the foreseeable future and may never achieve or maintain profitability.

Since inception, we have incurred significant operating losses. Our net losses were $12.7 million and $21.4 million for the three months ended September 30, 2024 and 2023, respectively. To date, we have not yet commercialized any products or generated any revenue from product sales and have financed our operations primarily with proceeds from sales of our preferred stock, proceeds from our collaboration with Moderna, research tax credits and convertible debt financing. We have devoted substantially all of our financial resources and efforts to pursuing discovery, research and early clinical development of our product candidates. We are in the early stages of development of our lead product candidate, CT-0525. We treated the first patient in the Phase 1 clinical trial of CT-0525 in May 2024 and received Fast Track designation from the FDA in June 2024.

We expect to continue to incur significant expenses and operating losses for the foreseeable future, including costs associated with operating as a public company. We anticipate that our expenses will increase substantially if and as we:

•enhance the capabilities of our CAR-M platform;

•continue to conduct a clinical trial of CT-0525 for solid tumors that overexpress HER2;

•conduct discovery and pre-clinical testing of the development of in vivo CAR-M therapeutics for up to twelve research targets, as well as multiple other targets and indications;

•conduct discovery and pre-clinical testing of our autologous cell therapy pipeline to gather information to apply to the development of off-the-shelf engineered macrophage therapeutics;

•develop iPSC-derived CAR-M, and other macrophage therapies;

•develop in vivo reprogrammed mRNA/LNP CAR-M therapies for cancer;

•develop viral vectors to effectively engineer human monocytes and macrophages, including the Vpx lentiviral vector and our Ad5f35 vector;

•conduct discovery and pre-clinical testing of our other product candidates, including those in our fibrosis program;

•seek marketing approval for CT-0525 or any other product candidate if we successfully complete clinical trials;

•scale up our external manufacturing capabilities and capabilities to support clinical trials of CT-0525 or any other of our product candidates and for commercialization of any product candidate for which we may obtain marketing approval;

•establish a sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval;

•in-license or acquire additional technologies or product candidates;

•make any payments under our existing or future strategic collaboration agreements, global exclusive rights licensing agreements or sponsored research agreements, including with Moderna;

•maintain, expand, enforce and protect our intellectual property portfolio;

•hire additional clinical, regulatory, manufacturing, quality control, development and scientific personnel; and

•add operational, financial and management information systems and personnel, including personnel to support our discovery, product development and planned future commercialization efforts and our operations as a public company.

•we are required by regulatory authorities in the United States, Europe, or other jurisdictions to perform trials or studies in addition to, or different than, those that we currently expect;

•there are any delays in establishing appropriate manufacturing arrangements for or completing the development of any of our product candidates; or

•there are any third-party challenges to our intellectual property or our needs to defend against any intellectual property-related claim.

Even if we obtain marketing approval for and are successful in commercializing one or more of our product candidates, we expect to incur substantial additional discovery and product development and other expenditures to develop and market additional product candidates or to expand the approved indications of any marketed product. We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.

We have never generated revenue from product sales and may never achieve or maintain profitability.

We recently initiated clinical development of our lead product candidate, CT-0525 and have completed all remaining clinical activities under our Phase 1 clinical trial of CT-0508, which we do not plan to develop further at this time. We are in the pre-clinical testing stages for our other product candidates. We expect that it will be a number of years, if ever, before we have a product candidate ready for commercialization. To become and remain profitable, we must succeed in completing development of, obtaining marketing approval for and eventually commercializing, one or more products that generate significant revenue. The ability to achieve this success will require us to be effective in a range of challenging activities, including completing clinical development of CT-0525, completing discovery, pre-clinical testing and clinical development of CT-0525 in the combination setting and for potential additional indications, timely filing and receiving acceptance of our IND applications, in order to commence our planned or future clinical trials, successfully enrolling subjects in, and completing, our ongoing and planned clinical trials, scaling up our manufacturing processes and capabilities to support clinical trials of CT-0525 or of other product candidates, obtaining marketing approval for CT-0525 or any other product candidates, manufacturing, marketing and selling any products for which we may obtain marketing approval and maintaining a continued acceptable safety profile of our products following approval. We may never succeed in these activities and, even if we do, we may never generate revenues that are significant enough to achieve profitability.

Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our discovery and product development efforts, diversify our pipeline of product candidates or even continue our operations.

We are heavily dependent on the success of our lead product candidate, CT-0525, which will require significant clinical testing before we can seek marketing approval and potentially generate commercial sales. If CT-0525 does not receive marketing approval or is not successfully commercialized, or if there is significant delay in doing so, our business will be harmed.

We initiated our first clinical trial in 2020, have no products that are approved for commercial sale and may never be able to develop marketable products. We expect that a substantial portion of our efforts and expenditures for the foreseeable future will be devoted to CT-0525 and related combination sub-studies, including CT-0525 in combination with pembrolizumab or another checkpoint inhibitor. Our business currently depends heavily on the successful development, marketing approval and commercialization of CT-0525, and the success of related combination sub-studies. We cannot be certain that CT-0525 or any combination therapy involving CT-0525 will achieve success in ongoing or future clinical trials, receive marketing approval or be successfully commercialized.

If we were required to discontinue development of CT-0525, or if CT-0525 does not receive marketing approval for one or more of the indications we pursue, fail to achieve significant market acceptance, or fail to receive adequate reimbursement,

we may be delayed by many years in our ability to achieve profitability, if ever, and may not be able to generate sufficient revenue to continue our business.

We will need substantial additional funding for our continuing operations. If we are unable to raise additional capital on acceptable terms, we could be forced to further delay, reduce or eliminate our discovery or product development programs or commercialization efforts.

We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct our ongoing clinical trial of CT-0525 and pursue related combination strategies, prepare for, initiate and conduct clinical trials of other product candidates, advance our discovery programs and continue our product development efforts. We expect our expenses to increase substantially over time in connection with our ongoing activities, particularly as we advance our pre-clinical activities and clinical trials. In addition, if we obtain marketing approval for CT-0525 or any other product candidate we are developing or develop in the future, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution. Furthermore, we will incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise additional capital or obtain adequate funds on acceptable terms, we may be required to further delay, limit, reduce or terminate our discovery and product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and distract from our discovery and product development efforts.

Our future capital requirements will depend on many factors, including:

•the progress, costs and results of our clinical trials of CT-0525 and other planned and future clinical trials;

•the scope, progress, costs and results of pre-clinical testing and clinical trials of CT-0525 for additional combinations, targets and indications;

•the scope, progress, costs and results of pre-clinical testing of product candidates in our fibrosis program;