UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
FORM
10-Q
☒
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023March 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
_______ to _______
to
Commission File Number:
001-37798
Selecta Biosciences,Cartesian Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Delaware26-1622110
26-1622110
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
65 Grove Street,
Watertown, MA
704 Quince Orchard Road, Gaithersburg, MD20878
02472
(Address of principal executive offices)
(Zip Code)
(617)
923-1400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)
Trading
Symbol(s)
Name of each exchange
on which registered
Common Stock, $0.0001 par value per share
RNAC
SELB
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Contingent Value Rights
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 ☒þ No ☐
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 ☒þ No ☐
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☐☐Accelerated filerþ☐
Non-accelerated filer☐☒Smaller reporting companyþ☒
Emerging growth company☐☐
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. ☐


Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2
of the Exchange Act). Yes ☐ No ☒þ
As of August 4, 2023,May 3, 2024, the registrant had 153,427,57117,796,053 shares of common stock, par value $0.0001 per share, outstanding.
2

TABLE OF CONTENTS

TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION

Item 1.

4
5
4
5
5
6
6
7
8
9
9
10

Item 2.

28
32

Item 3.

42
40

Item 4.

42
40
PART II. OTHER INFORMATION

Item 1.

43
42

Item 1A.

43
42

Item 2.

43
42

Item 3.

43
42

Item 4.

43
42

Item 5.

43
42
Item 6.
43

Item 6.

Exhibits44
45


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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or the Quarterly Report, contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, timing and likelihood of success, the plans and objectives of management for future operations and future results of anticipated products,the impact of the resurgence of the COVID-19 pandemic or emergence of another pandemic on our business and operations and our future financial results, and the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important 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 the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under the sections in this Quarterly Report titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as the following:

•any future payouts under the contingent value right, or CVR, issued to our holders of record as of the close of business on December 4, 2023;

•our ability to executeachieve the expected benefits or opportunities and related timing with respect to the Merger (as defined below) or to monetize any of our strategic initiative planslegacy assets;
•our future results of operations and manage operating expenses;

financial position, business strategy, and the length of time that we believe our existing cash resources will fund our operations;

•our market size and our potential growth opportunities;

•our preclinical and future clinical development activities;
•the efficacy and safety profile of our product candidates;
•the potential therapeutic benefits and economic value of our product candidates;
•the timing and results of preclinical studies and clinical trials;
•the expected impact of macroeconomic conditions, including inflation, increasing interest rates and volatile market conditions, current or potential bank failures;
•global events, including the ongoing conflicts between Russia and Ukraine and between Hamas and Israel and geopolitical tensions in China on our operations;
•the receipt and timing of potential regulatory designations, approvals and commercialization of product candidates;
•potential litigation related to the Merger (as defined below) instituted against us or our directors;
•our ability to prevent or minimize the effects of litigation and other contingencies;
•our status as a preclinical and development-stage company and our expectation to incur losses in the future;

future, and the possibility that we never achieve or maintain profitability;

•uncertainties with respect to our ability to access future capital needs and our need to raise additional funds;

capital;

•our ability to maximize the value of our pipeline of product candidates;

•our unproven approach to therapeutic intervention;

•our ability to enroll patients in clinical trials, timely and successfully complete those trials and receive necessary regulatory approvals;

•our ability to continue to grow our manufacturing capabilities and resources;

•our ability to manufacture our product candidates, which in some cases are manufactured on a patient-by-patient basis;
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•our ability to access manufacturing facilities and to receive or manufacture sufficient quantities of our product candidates;

•our ability to maintain our existing or future collaborations or licenses and to seek new collaborations, licenses or partnerships;

•

•the continuing impact of resurgence of the COVID-19 pandemic on our operations, the continuity of our business, including our preclinical studies and clinical trials, and general economic conditions;
•COVID-19 pandemic on our operations, the continuity of our business, including our preclinical studies and clinical trials, and general economic conditions;

our ability to protect and enforce our intellectual property rights;

•federal, state, and foreign regulatory requirements, including U.S. Food and Drug Administration, or FDA, regulation of our product candidates;

•our ability to obtain and retain key executives and attract and retain qualified personnel; and

•developments relating to our competitors and our industry, including the impact of government regulation.

Moreover, we operate in an evolving environment. New risks and uncertainties may emerge from time to time, and it is not possible for management to predict all risk and uncertainties.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

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4

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Selecta Biosciences,Cartesian Therapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except share data and par value)
 March 31,December 31,
 20242023
Assets  
Current assets:  
Cash and cash equivalents$103,418 $76,911 
Accounts receivable2,006 5,870 
Unbilled receivables2,370 2,981 
Prepaid expenses and other current assets3,315 4,967 
Total current assets111,109 90,729 
Non-current assets:
Property and equipment, net2,402 2,113 
Right-of-use asset, net9,556 10,068 
In-process research and development assets150,600 150,600 
Goodwill48,163 48,163 
Long-term restricted cash1,377 1,377 
Investments2,000 2,000 
Total assets$325,207 $305,050 
Liabilities, convertible preferred stock, and stockholders’ deficit  
Current liabilities:  
Accounts payable$2,517 $3,150 
Accrued expenses and other current liabilities9,516 15,572 
Lease liability2,229 2,166 
Deferred revenue412 2,311 
Warrant liabilities597 720 
Contingent value right liability21,383 15,983 
Forward contract liabilities— 28,307 
Total current liabilities36,654 68,209 
Non-current liabilities:
Lease liability, net of current portion8,228 8,789 
Deferred revenue, net of current portion— 3,538 
Warrant liabilities, net of current portion4,755 5,674 
Contingent value right liability, net of current portion376,517 342,617 
Deferred tax liabilities, net15,853 15,853 
Total liabilities442,007 444,680 
Commitments and contingencies (Note 18)
Series A Preferred Stock, $0.0001 par value; no and 548,375 shares authorized as of March 31, 2024 and December 31, 2023, respectively; no and 435,120.513 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively— 296,851 
Options for Series A Preferred Stock— 3,703 
Stockholders’ deficit:  
Series A Preferred Stock, $0.0001 par value; 548,375 and no shares authorized as of March 31, 2024 and December 31, 2023, respectively; 534,260.839 and no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively— — 
Preferred stock, $0.0001 par value; 9,451,625 shares authorized as of March 31, 2024 and December 31, 2023, respectively; no shares issued and outstanding as of March 31, 2024 and December 31, 2023— — 
Common stock, $0.0001 par value; 350,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 5,515,836 and 5,397,597 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively1 1 
Additional paid-in capital559,275 179,062 
Accumulated deficit(671,471)(614,647)
Accumulated other comprehensive loss(4,605)(4,600)
Total stockholders’ deficit(116,800)(440,184)
Total liabilities, convertible preferred stock, and stockholders’ deficit$325,207 $305,050 
   
June 30,
  
December 31,
 
   
2023
  
2022
 
Assets
   
Current assets:
   
Cash and cash equivalents
  $112,027  $106,438 
Marketable securities
   —   28,164 
Accounts receivable
   5,385   6,596 
Unbilled receivables
   1,055   3,162 
Prepaid expenses and other current assets
   4,258   3,778 
  
 
 
  
 
 
 
Total current assets
   122,725   148,138 
Non-current
assets:
   
Property and equipment, net
   2,593   2,794 
Right-of-use
asset, net
   10,775   11,617 
Long-term restricted cash
   1,377   1,311 
Investments
   2,000   2,000 
Other assets
   36   26 
  
 
 
  
 
 
 
Total assets
  $139,506  $165,886 
  
 
 
  
 
 
 
Liabilities and stockholders’ equity
   
Current liabilities:
   
Accounts payable
  $267  $316 
Accrued expenses
   12,902   14,084 
Loan payable
   10,235   8,476 
Lease liability
   1,729   1,608 
Deferred revenue
   4,234   593 
  
 
 
  
 
 
 
Total current liabilities
   29,367   25,077 
Non-current
liabilities:
   
Loan payable, net of current portion
   13,787   17,786 
Lease liability
   9,163   10,055 
Deferred revenue
   4,863   —   
Warrant liabilities
   16,878   19,140 
  
 
 
  
 
 
 
Total liabilities
   74,058   72,058 
  
 
 
  
 
 
 
Commitments and contingencies (Note 17)
   
Stockholders’ equity:
   
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2023 and December 31, 2022
   —     —   
Common stock, $0.0001 par value; 350,000,000 shares authorized; 153,427,571 and 153,042,435 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
   15   15 
Additional
paid-in
capital
   498,016   493,308 
Accumulated deficit
   (427,987)   (394,937) 
Accumulated other comprehensive loss
   (4,596)   (4,558) 
  
 
 
  
 
 
 
Total stockholders’ equity
   65,448   93,828 
  
 
 
  
 
 
 
Total liabilities and stockholders’ equity
  $139,506  $165,886 
  
 
 
  
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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5
Table of Contents

Selecta Biosciences,Cartesian Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Amounts in thousands, except share and per share data)


  
Three Months Ended

June 30,
 
Six Months Ended

June 30,
 
  
2023
 
2022
 
2023
 
2022
 
Collaboration and license revenue  $5,249  $39,273  $11,187  $73,272 
Collaboration and license revenue
Collaboration and license revenue
Operating expenses:
Operating expenses:
Operating expenses:     
Research and development   17,782   19,182   36,406   36,871 
Research and development
Research and development
General and administrative   6,105   6,231   11,800   11,768 
General and administrative
General and administrative
Total operating expenses
Total operating expenses
Total operating expenses
Operating loss
Operating loss
Operating loss
Investment income
Investment income
Investment income
             
Total operating expenses   23,887   25,413   48,206   48,639 
Foreign currency transaction, net
             
Operating (loss) income   (18,638)   13,860   (37,019)   24,633 
Investment income   1,394   207   2,725   222 
Foreign currency transaction, net
Foreign currency transaction, net   23   (104)   42   (76) 
Interest expense   (752)   (715)   (1,560)   (1,422) 
Interest expense
Interest expense
Change in fair value of warrant liabilities   6,341   (4,647)   2,262   13,868 
Change in fair value of warrant liabilities
Change in fair value of warrant liabilities
Change in fair value of contingent value right liability
Change in fair value of contingent value right liability
Change in fair value of contingent value right liability
Change in fair value of forward contract liabilities
Change in fair value of forward contract liabilities
Change in fair value of forward contract liabilities
Other income, net
Other income, net
Other income, net   245   —     500   154 
             
Net (loss) income  $(11,387)  $8,601  $(33,050)  $37,379 
             
Other comprehensive income (loss):     
Net loss
Net loss
Net loss
Other comprehensive (loss) income:
Other comprehensive (loss) income:
Other comprehensive (loss) income:
Foreign currency translation adjustment   (27)   118   (49)   86 
Unrealized gain on marketable securities   —     —     11   —   
Foreign currency translation adjustment
Foreign currency translation adjustment
Unrealized gain (loss) on marketable securities
Unrealized gain (loss) on marketable securities
Unrealized gain (loss) on marketable securities
Total comprehensive loss
Total comprehensive loss
Total comprehensive loss
             
Total comprehensive income (loss)  $(11,414)  $8,719  $(33,088)  $37,465 
             
Net (loss) income per share:     
Basic  $(0.07)  $0.06  $(0.22)  $0.27 
             
Diluted  $(0.07)  $0.06  $(0.22)  $0.17 
Net loss per share:
             
Weighted average common shares outstanding:     
Basic   153,442,413   148,505,729   153,396,380   136,436,316 
             
Diluted   153,442,413   148,505,729   153,396,380   136,966,312 
             
Net loss per share:
Net loss per share:
Basic and Diluted
Basic and Diluted
Basic and Diluted
Weighted-average common shares outstanding:
Weighted-average common shares outstanding:
Weighted-average common shares outstanding:
Basic and Diluted
Basic and Diluted
Basic and Diluted

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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6

Selecta Biosciences,Cartesian Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Amounts in thousands, except share data)

                  
Accumulated
    
           
Additional
      
other
    
   
Common stock
   
paid-in
   
Accumulated
  
comprehensive
  
Stockholders’
 
   
Shares
   
Amount
   
capital
   
deficit
  
loss
  
equity
 
Balance at December 31, 2022   153,042,435   $15   $493,308   $(394,937)  $(4,558)  $93,828 
                            
Issuance of common stock under Employee Stock Purchase Plan   108,068    —      149    —     —     149 
Issuance of vested restricted stock units   276,480    —      —      —     —     — 
Stock-based compensation expense   —  ��   —      2,276    —     —     2,276 
Currency translation adjustment   —      —      —      —     (22)   (22) 
Unrealized gain on marketable securities   —      —      —      —     11   11 
Net loss   —      —      —      (21,663)   —     (21,663) 
                            
Balance at March 31, 2023   153,426,983   $15   $495,733   $(416,600)  $(4,569)  $74,579 
                            
Issuance of vested restricted stock units   588    —      —      —     —     —   
Stock-based compensation expense   —      —      2,283    —     —     2,283 
Currency translation adjustment   —      —      —      —     (27)   (27) 
Net loss   —      —      —      (11,387)   —     (11,387) 
                            
Balance at June 30, 2023   153,427,571   $15   $498,016   $(427,987)  $(4,596)  $65,448 
                            
 Options for Series A    Accumulated
 Series APreferredSeries A  Additional other
 Preferred StockStockPreferred StockCommon stockpaid-inAccumulatedcomprehensiveStockholders’
 SharesAmountAmountSharesAmountSharesAmountcapitaldeficitlossequity
Balance at December 31, 2023435,120.513 $296,851 $3,703 — $— 5,397,597 $1 $179,062 $(614,647)$(4,600)$(440,184)
Issuance of Series A Preferred Stock in connection with private placement and settlement of related forward contract99,140.326 75,197 — — — — — — — — — 
Transfer of Series A Preferred Stock and options for series A Preferred Stock to permanent equity(534,260.839)(372,048)(3,703)534,260.839 — — — 375,751 — — 375,751 
Issuance of common stock upon exercise of options— — — — — 52,558 — 154 — — 154 
Issuance of common stock upon exercise of warrants— — — — — 65,681 — 2,877 — — 2,877 
Stock-based compensation expense— — — — — — — 1,431 — — 1,431 
Currency translation adjustment— — — — — — — — — (5)(5)
Net loss— — — — — — — — (56,824)— (56,824)
Balance at March 31, 2024— $— $— 534,260.839 $— 5,515,836 $1 $559,275 $(671,471)$(4,605)$(116,800)

On April 4, 2024, the Company effected a 1-for-30 reverse split of its issued and outstanding shares of common stock, or the Reverse Stock Split. As a result of the Reverse Stock Split, all figures in this Quarterly Report on Form 10-Q relating to shares of the Company’s common stock (such as share amounts, per share amounts, and conversion rates and prices), including but not limited to, the consolidated financial statements and footnotes included herein, have been adjusted to reflect the Reverse Stock Split for all periods presented.
The accompanying notes are an integral part of these unaudited consolidated financial statements.

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7
Selecta Biosciences,Cartesian Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Amounts in thousands, except share data)
     Accumulated 
   Additional other
 Common stockpaid-inAccumulatedcomprehensiveStockholders’
 SharesAmountcapitaldeficitlossequity
Balance at December 31, 20225,101,459 $1 $493,322 $(394,937)$(4,558)$93,828 
Issuance of common stock under Employee Stock Purchase Plan3,584 — 149 — — 149 
Issuance of vested restricted stock units9,226 — — — — — 
Stock-based compensation expense— — 2,276 — — 2,276 
Currency translation adjustment— — — — (22)(22)
Unrealized gain on marketable securities— — — — 11 11 
Net loss— — — (21,663)— (21,663)
Balance at March 31, 20235,114,269 $1 $495,747 $(416,600)$(4,569)$74,579 

                 
Accumulated
    
           
Additional
     
other
    
   
Common stock
   
paid-in
  
Accumulated
  
comprehensive
  
Stockholders’
 
   
Shares
   
Amount
   
capital
  
deficit
  
loss
  
equity
 
Balance at December 31, 2021   123,622,965   $12   $457,391  $(430,316)  $(4,566)  $22,521 
Issuance of common stock under Employee Stock Purchase Plan   81,057    —      127   —     —     127 
Issuance of common stock upon exercise of options   11,262    —      21   —     —     21 
Issuance of vested restricted stock units   89,142    —      —     —     —     —   
Issuance of common stock through
at-the-market
offering, net
   576,418    —      1,675   —     —     1,675 
Other financing fees   —      —      (79)   —     —     (79) 
Stock-based compensation expense   —      —      2,753   —     —     2,753 
Currency translation adjustment   —      —      —     —     (32)   (32) 
Net income   —      —      —     28,778   —     28,778 
                           
Balance at March 31, 2022   124,380,844   $12   $461,888  $(401,538)  $(4,598)  $55,764 
                           
Issuance of vested restricted stock units   10,938    —      —     —     —     —   
Issuance of common stock and common warrants   27,428,572    3    21,477   —     —     21,480 
Issuance of common stock, license agreement   892,857    —      1,000   —     —     1,000 
Other financing fees   —      —      79   —     —     79 
Stock-based compensation expense   —      —      2,564   —     —     2,564 
Currency translation adjustment   —      —      —     —     118   118 
Net income   —      —      —     8,601   —     8,601 
                           
Balance at June 30, 2022   152,713,211   $15   $487,008  $(392,937)  $(4,480)  $89,606 
                           
The accompanying notes are an integral part of these unaudited consolidated financial statements
.
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8
Selecta Biosciences,Cartesian Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Amounts in thousands)
 Three Months Ended
March 31,
20242023
Cash flows from operating activities
Net loss$(56,824)$(21,663)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization183 206 
Amortization of premiums and discounts on marketable securities— (79)
Non-cash lease expense512 416 
Loss on disposal of property and equipment2 — 
Stock-based compensation expense1,431 2,276 
Non-cash interest expense— 398 
Warrant liabilities revaluation(1,042)4,079 
Contingent value right liability revaluation39,300 — 
Forward contract liabilities revaluation6,890 — 
Changes in operating assets and liabilities:
Accounts receivable3,864 (243)
Unbilled receivable611 1,319 
Prepaid expenses, deposits and other assets1,652 (20)
Accounts payable(633)747 
Deferred revenue(5,437)9,158 
Accrued expenses and other liabilities(6,426)(5,359)
                    Net cash used in operating activities(15,917)(8,765)
Cash flows from investing activities
Proceeds from maturities of marketable securities— 28,254 
Purchases of property and equipment(602)(130)
                    Net cash (used in) provided by investing activities(602)28,124 
Cash flows from financing activities
Proceeds from exercise of common warrants2,877 — 
Proceeds from issuance of Series A Preferred Stock, gross in private placement40,000 — 
Proceeds from exercise of stock options154 — 
Proceeds from issuance of common stock under Employee Stock Purchase Plan— 149 
                    Net cash provided by financing activities43,031 149 
Effect of exchange rate changes on cash(5)(21)
Net change in cash, cash equivalents, and restricted cash26,507 19,487 
Cash, cash equivalents, and restricted cash at beginning of period78,288 108,038 
Cash, cash equivalents, and restricted cash at end of period$104,795 $127,525 
Supplemental cash flow information
Cash paid for interest$— $625 
Noncash investing and financing activities
Purchase of property and equipment not yet paid$— $48 
   
Six Months Ended

June 30,
 
   
2023
  
2022
 
Cash flows from operating activities
   
Net (loss) income  $(33,050)  $37,379 
Adjustments to reconcile net (loss) income to net cash used in operating activities:   
Depreciation and amortization   382   696 
Amortization of premiums and discounts on marketable securities   (79)   —   
Non-cash
lease expense
   842   591 
Gain on disposal of property and equipment   —     (147) 
Stock-based compensation expense   6,059   6,317 
Non-cash
interest expense
   533   579 
Warrant liabilities revaluation   (2,262)   (13,868) 
Changes in operating assets and liabilities:   
Accounts receivable   1,211   (14,080) 
Unbilled receivable   2,107   —   
Prepaid expenses, deposits and other assets   815   (374) 
Accounts payable   (49)   300 
Income taxes payable   —     (280) 
Deferred revenue   8,504   (42,213) 
Accrued expenses and other liabilities   (3,673)   965 
         
Net cash used in operating activities   (18,660)   (24,135) 
Cash flows from investing activities
   
Proceeds from maturities of marketable securities   28,254   10,000 
Purchases of property and equipment   (142)   (554) 
         
Net cash provided by investing activities   28,112   9,446 
Cash flows from financing activities
   
Repayments of principal on outstanding debt   (2,586)   —   
Debt amendment fee included in debt discount   —     (110) 
Net proceeds from issuance of common stock-
at-the-market
offering
   —     1,675 
Net proceeds from issuance of common stock and common warrants   —     36,890 
Proceeds from exercise of stock options   —     21 
Proceeds from issuance of common stock under Employee Stock Purchase Plan   149   127 
         
Net cash (used in) provided by financing activities   (2,437)   38,603 
         
Effect of exchange rate changes on cash   (49)   86 
         
Net change in cash, cash equivalents, and restricted cash   6,966   24,000 
Cash, cash equivalents, and restricted cash at beginning of period   108,038   115,436 
         
Cash, cash equivalents, and restricted cash at end of period  $115,004  $139,436 
         
Supplemental cash flow information
   
Cash paid for interest  $1,242  $1,014 
Noncash investing and financing activities
   
Issuance of common stock, license agreement in stock-based compensation expense  $—    $1,000 
Stock-based compensation expense in accrued liabilities  $1,500  $—   
Purchase of property and equipment not yet paid  $48  $320 
Equity offering costs in accrued liabilities  $—    $31 
The accompanying notes are an integral part of these unaudited consolidated financial statements
.
8
9
Selecta Biosciences,Cartesian Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

1. Description of the Business
Cartesian Therapeutics, Inc., or the Company, (formerly known as Selecta Biosciences, Inc., or the Company,Selecta) was incorporated in Delaware on December 10, 2007, and is basedheadquartered in Watertown, Massachusetts.
T
heGaithersburg, Maryland. The Company is a clinical-stage biotechnology company leveraging the Company’s ImmTOR
®
platform to develop tolerogenicdeveloping mRNA cell therapies that selectively mitigate unwanted immune responses. With a proven ability to induce tolerance to highly immunogenic proteins, the Company believes ImmTOR has the potential to amplify the efficacy of biologic therapies, including redosing of life-saving gene therapies, as well as restore the body’s natural self-tolerance in autoimmune diseases. The Company has several proprietary and partnered programs in its pipeline focused on enzyme therapies, gene therapies, and autoimmune diseases.
In April 2023, in light of current market conditions, the Company’s Board of Directors, or the Board, took steps to extend cash runway by pausing further development of
SEL-302
for the treatment of methylmalonic acidemia,autoimmune diseases leveraging its proprietary technology and manufacturing platform to introduce one or MMA,more mRNA molecules into cells to enhance their function. The Company believes its mRNA cell therapies have the potential to deliver deep, durable clinical benefit to a broad group of patients with autoimmune diseases because they can be administered over a short period of time, in an outpatient setting, and conducting a targeted headcount reduction of approximately 25%. without pre-treatment chemotherapy.
On August 1
7
,November 13, 2023, the Company announcedacquired, in accordance with the terms of the Agreement and Plan of Merger, or the Merger Agreement, the assets of the Delaware corporation which, immediately prior to the Merger (as defined below), was known as Cartesian Therapeutics, Inc., or Old Cartesian, as disclosed in Note 3. The transaction was structured as a stock-for-stock transaction pursuant to which all of Old Cartesian’s outstanding shares of capital stock were exchanged based on a fixed exchange ratio for consideration of 224,099 shares of the common stock, par value $0.0001 per share, of the Company and 384,930.724 shares of the newly designated Series A Non-Voting Convertible Preferred Stock, par value $0.0001 per share, or the Series A Preferred Stock. The Series A Preferred Stock is intended to have economic rights similar to the common stock, but with only limited voting rights. Additionally, the Company assumed all outstanding stock options of Old Cartesian. The common stock and Series A Preferred Stock related to the Merger were issued on December 5, 2023. For additional stepsinformation, see Note 3.
In connection with the Merger, the Company entered into a definitive agreement, or the Securities Purchase Agreement, for a private investment in public equity transaction, or the November 2023 Private Placement, with the Investors (as defined below). The Securities Purchase Agreement provides for the issuance to extend cash runwaythe Investors of an aggregate of 149,330.115 shares of Series A Preferred Stock for an aggregate purchase price of approximately $60.25 million. For additional information, see Note 10.
In connection with the Merger, a contractual contingent value right, or CVR, was distributed to the holders of record of the Company's common stock and maximize value for2022 Warrants (as defined below) as of the close of business on December 4, 2023, but was not distributed to holders of shares of common stock or Series A Preferred Stock issued to stockholders of Old Cartesian or the Investors in the transactions. Holders of the CVRs will be entitled to receive certain payments from proceeds received by continuingthe Company, if any, related to prioritize developmentthe disposition or monetization of SEL-212 and supportthe Company's legacy assets following the issuance of its collaboration with Astellas Gene Therapies,the CVRs. For additional information, see Note 5.
On March 27, 2024, the Company's stockholders approved the Conversion Proposal (as defined below). For additional information, see Note 10.
Additionally, on March 27, 2024, the Company’s stockholders approved an amendment to the Company’s restated certificate of incorporation, as amended, or Astellas, for Xork, and pausing further development of allthe Charter, to effect a reverse stock split of the Company’s other clinicalissued and preclinical product candidates that it is no longer actively advancing. The Company intends to seek collaboration partners for the assetsoutstanding common stock, at a ratio in the development programs that it is no longer actively advancing.
Since inception,range of 1-for-20 and 1-for-30, with such ratio to be determined at the discretion of the Company’s board of directors, or the Board of Directors. The Board of Directors subsequently approved a final reverse stock split ratio of 1-for-30, and the Company has devoted its efforts principallyeffected the Reverse Stock Split on April 4, 2024. As a result of the Reverse Stock Split, all figures in this Quarterly Report on Form 10-Q relating to researchshares of the Company’s common stock (such as share amounts, per share amounts, and developmentconversion rates and prices), have been adjusted to reflect the Reverse Stock Split for all periods presented, including reclassifying an amount equal to the reduction in par value of its technologycommon stock to additional paid-in capital. Shares of common stock underlying outstanding stock options, restricted stock units and product candidates, recruiting managementwarrants were proportionately reduced and technical staff, acquiring operating assets, and raising capital. the respective exercise prices, if applicable, were proportionately increased in accordance with their terms. Additionally, the conversion ratio of the Company’s Series A Preferred Stock was proportionally adjusted. Stockholders entitled to fractional shares as a result of the Reverse Stock Split received a cash payment in lieu of receiving fractional shares.
The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.
The Company’s product candidates are in pre-clinical and clinical development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it
10
is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.
Unaudited Interim Financial Information
The accompanying unaudited consolidated financial statements for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 20222023 included in the Company’s Annual Report on Form
10-K
that was filed with the SEC on March 2, 2023.7, 2024. The unaudited interim financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments that are necessary for a fair statement of the Company’s financial position as of June 30, 2023,March 31, 2024, the consolidated results of operations for the three and six months ended June 30, 2023,March 31, 2024, and cash flows for the sixthree months ended June 30, 2023.March 31, 2024. Such adjustments are of a normal and recurring nature. The results of operations for the three and six months ended June 30, 2023March 31, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023.2024.
9
Table of Contents
Liquidity and Management’s Plan
The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain and sustain profitable operations. The Company is subject to a number of risks similar to other early-stage life science companies, including, but not limited to, successful development of its product candidates, raising additional capital with favorable terms, protection of proprietary technology and market acceptance of any approved future products. The successful development of product candidates requires substantial working capital, which may not be available to the Company on favorable terms or at all.
To date, the Company has financed its operations primarily through public offerings and private placements of its securities, funding received from research grants, collaboration and license arrangements and itsa credit facility. The Company currently has no source of product revenue, and it does not expect to generate product revenue for the foreseeable future. To date, the Company’s revenue has primarily been from collaboration and license agreements. The Company has devoted substantially all of its financial resources and efforts to developing its ImmTOR platform,existing product candidates, identifying potential product candidates and conducting preclinical studies and clinical trials. The Company is in the early stages of development of its product candidates, and it has not completed development of any ImmTOR-enabled therapies.product candidates.
As of June 30, 2023,March 31, 2024, the Company’s cash, cash equivalents, and restricted cash were $115.0$104.8 million, of which $3.0$1.4 million was restricted cash related to lease commitments and $0.2 million was held by its Russian subsidiary designated solely for use in its operations. In April 2023, in light of current market conditions, the Board took steps to extend cash runway by pausing further development of
SEL-302
for the treatment of MMA and conducting a targeted headcount reduction of approximately 25%.
On August 1
7
, 2023, the Company announced additional steps to extend cash runway and maximize value for stockholders by continuing to prioritize development of SEL-212 and support of its collaboration with Astellas for Xork, and pausing further development of all of the Company’s other clinical and preclinical product candidates that it is no longer actively advancing. The Company intends to seek collaboration partners for the assets in the development programs that it is no longer actively advancing.
The Company believes the cash, cash equivalents and restricted cash as of June 30, 2023March 31, 2024 will enable it to fund its current planned operations for at least the next twelve months from the date of issuance of these financial statements, though it may realize additional cash resources upon the achievement of certain contingent collaboration milestones or it may pursue additional cash resources through public or private equity or debt financings or by establishing collaborations with other companies. Management’s expectations with respect to its ability to fund current and long-termlong term planned operations are based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. However, there is no guarantee that any collaboration milestones will be achieved or that any of these strategic or financing opportunities will be executed on favorable terms, and some could be dilutive to existing stockholders. Further, the liability associated with the CVR Agreement (as defined below) will be settled solely through cash flow received under the Company's License and Development Agreement, or as so amended, the Sobi License, with Swedish Orphan Biovitrum AB (publ.), or Sobi, and any other Gross Proceeds (as defined in the CVR Agreement) net of certain agreed deductions. Under the CVR Agreement, 100% of all milestone payments, royalties and other amounts paid to the Company or controlled entities under the Sobi License, and any other Gross Proceeds will be distributed, net of specified deductions, to holders of the CVRs. There is no obligation to the Company to fund any amount related to the CVR liability. See Note 5.
If the Company is unable to obtain additional funding on a timely basis, it may be forced to significantly curtail, delay, or discontinue one or more of its planned research or development programs or be unable to expand or maintain its operations or otherwise capitalize on its commercialization of its product candidates. As of March 31, 2024, the Company had an accumulated deficit of $671.5 million. The Company anticipates continuingoperating losses to generate operating lossescontinue for the foreseeable future due to, among other things, costs related to research and development of its product candidates and its administrative organization.
Guarantees and Indemnifications
As permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees for certain events or occurrences that happen by reason of the relationship with, or position held at the Company. Through June 30, 2023,March 31,
11
2024, the Company had not experienced any losses related to these indemnification obligations, and no claims were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

2. Summary of Significant Accounting Policies
The Company disclosed its significant accounting policies in Note 2 – Summary of Significant Accounting Policies included in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2022.2023. There have been no material changes to the Company’s significant accounting policies during the three or six months ended June 30, 2023, with the exception of the matters discussed in recent accounting pronouncements.March 31, 2024.
10
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Recent Accounting Pronouncements
Not Yet Adopted
Recently Adopted
In June 2016,November 2023, the FASB issued ASU
2016-13,
Financial Instruments-Credit Losses 2023-07, Segment Reporting (Topic 326), Measurement of Credit Losses on Financial Instruments
. Subsequently, in November 2018, the FASB issued ASU
2018-19,
Codification280): Improvements to Topic 326, Financial Instruments-Credit Losses
. Reportable Segment Disclosures (ASU
2016-13
2023-07), which requires entities to measure all expected credit losses for most financial assets held at the reporting date basedan enhanced disclosure of significant segment expenses on an expected loss model which includes historical experience, current conditions,annual and reasonable and supportable forecasts. ASU
2016-13
also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses.interim basis. This ASU isguidance will be effective for smaller reporting companiesthe annual periods beginning the year ended December 31, 2024, and for fiscal yearsinterim periods beginning after December 15, 2022, with earlyJanuary 1, 2025. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company adopteddoes not expect the new standard effective January 1, 2023, usingadoption of this guidance to have a modified retrospective transition method, and there was nomaterial impact on its consolidated financial statementsstatements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or resultsretrospectively. The Company does not expect the adoption of operations upon adoption.this guidance to have a material impact on its consolidated financial statements.
3. Merger
On November 13, 2023, the Company merged with Old Cartesian in accordance with the terms of the Merger Agreement, by and among Selecta, Sakura Merger Sub I, Inc., a wholly owned subsidiary of Selecta, or First Merger Sub, Sakura Merger Sub II, LLC, a wholly owned subsidiary of Selecta, or Second Merger Sub, and Old Cartesian. Pursuant to the Merger Agreement, First Merger Sub merged with and into Old Cartesian, pursuant to which Old Cartesian was the surviving corporation and became a wholly owned subsidiary of Selecta, or the First Merger. Immediately following the First Merger, Old Cartesian merged with and into Second Merger Sub, pursuant to which Second Merger Sub was the surviving entity, or the Second Merger and, together with the First Merger, the Merger. In connection with the Second Merger, Old Cartesian changed its name to Cartesian Bio, LLC.
The Merger was intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. As a result of the Merger, Selecta changed its corporate name to Cartesian Therapeutics, Inc. and its common stock began trading on the Nasdaq Global Market under the new trading symbol “RNAC” beginning on November 14, 2023.
The Merger Agreement was unanimously approved by the board of directors of Selecta and the board of directors of Old Cartesian. The Merger was consummated substantially concurrently with the entry into the Merger Agreement and was not subject to approval of the Company's stockholders.
Under the terms of the Merger Agreement, following the consummation of the Merger on November 13, 2023, or the Closing Date, in exchange for 100% of the outstanding shares of capital stock of Old Cartesian immediately prior to the effective time of the First Merger, the Company agreed to issue to the stockholders of Old Cartesian (i) 224,099 shares of the Company’s common stock and (ii) 384,930.724 shares of Series A Preferred Stock. The issuance of the shares of common stock and Series A Preferred Stock occurred on December 5, 2023 which was after the December 4, 2023 record date for the distribution of the CVRs (see Note 5); as such, the Old Cartesian stockholders did not have rights as holders of common stock or holders of Series A Preferred Stock until such issuance on December 5, 2023. In addition, all outstanding stock options to purchase Old Cartesian common stock were assumed by the Company and converted into stock options to purchase (i) shares of the Company’s common stock or (ii) shares of the Company’s Series A Preferred Stock on terms substantially identical to those in effect prior to Merger Agreement, except for adjustments to the underlying number of shares and the exercise price based on the Merger Agreement exchange ratio.
Pursuant to the Merger Agreement, the Company agreed to hold a stockholders’ meeting, or the Special Meeting, to submit the following proposals to a vote of its stockholders: (i) the approval of the conversion of shares of Series A Preferred Stock into shares of common stock, or the Conversion Proposal, and (ii) either or both of (A) the approval of an amendment to the Company’s Charter to increase the number of shares of common stock authorized under the Charter and (B) the approval of an
3. Marketable Securities
12
amendment to the Charter to effect a reverse stock split of all outstanding shares of common stock, in either case (A) or (B) by a number of authorized shares or at a stock split ratio, as the case may be, sufficient to allow the conversion of all shares of Series A Preferred Stock issued in the Merger. The Special Meeting was held on March 27, 2024 in which the Company’s stockholders approved the Conversion Proposal, among other matters (see Note 10).
The Company concluded the acquisition resulted in the Company obtaining a controlling financial interest in a variable interest entity, or VIE, in accordance with ASC 810, Consolidation, or ASC 810. The Company determined that Old Cartesian was considered to be a VIE as it did not have sufficient equity to finance its activities without additional subordinated financial support. Prior to the Closing Date, the primary source of funding for Old Cartesian had been preferred stock financings. The Company acquired all of the outstanding shares of Old Cartesian and, Investments
therefore, is the sole equity holder and primary beneficiary. The Company has the obligation to the absorb the losses and right to receive the benefits of Old Cartesian, and the power to direct the activities that most significantly affect the economic performance of Old Cartesian which the Company considers to be its development activities. Therefore, the Company is the primary beneficiary. Further, the Company concluded the VIE qualified as a business and accounted for the transaction as the acquisition of a business in accordance with ASC 805, Business Combinations, or ASC 805. As the primary beneficiary, the Company was the acquirer in the transaction.
No marketable securities were heldThe Company exchanged the right to receive shares of common stock and Series A Preferred Stock for all of the outstanding equity of Old Cartesian. The Company determined the rights to receive shares exchanged in the Merger represent a forward contract. The fair value of the forward contracts was determined based on the fair value of shares of common stock and Series A Preferred Stock underlying the forward contracts as of June 30, 2023.the acquisition date. The total purchase price consists of the fair value of the forward contracts in addition to a portion of the fair value of options exchanged in the transaction related to prior service. Under the acquisition method, the total purchase price of the acquisition was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the date of the acquisition.
The total fair value of the consideration of $168.5 million as of the Closing Date is summarized as follows (in thousands):
Forward contract to issue common stock$2,713 
Forward contract to issue Series A Preferred Stock155,308 
Stock options allocated to consideration paid10,444 
Total consideration$168,465 
The Company recorded the assets acquired and liabilities assumed as of the Closing Date based on the information available at that date. The following table summarizespresents the marketable securities heldallocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed as of December 31, 2022the Closing Date (in thousands):
   
Amortized

cost
   
Unrealized
losses
   
Fair

value
 
December 31, 2022
      
U.S. government agency securities and treasuries  $13,566   $(9)   $13,557 
Corporate bonds  $1,953   $(2)   $1,951 
Commercial paper   12,656    —      12,656 
               
Total  $28,175   $(11)   $28,164 
               
Investments

Assets acquired:As of November 13, 2023
Cash and cash equivalents$6,561 
Prepaid expenses and other current assets309 
Property and equipment, net215 
Right-of-use asset, net915 
In-process research and development assets150,600 
Goodwill48,163 
$206,763 
Liabilities assumed
Accrued expenses and other current liabilities$2,530 
Lease liability$292 
Lease liability, net of current portion$623 
Deferred tax liability$34,853 
$38,298 
Net assets acquired$168,465 
The fair value of June 30, 2023the in-process research and December 31, 2022,development, or IPR&D, assets were capitalized as of the Company has a $2.0 million investment in Cyrus Biotechnology, Inc.,Closing Date and will be accounted for as indefinite-lived intangible assets until completion or Cyrus, pursuant to an investment agreement entered into in connection withdisposition of the Collaborationassets or abandonment of the associated research and License Agreement with Cyrus. The Company’s maximum exposure to loss related to this variable interest entity is limited todevelopment efforts. Upon successful completion of the development efforts, the carrying value of each respective IPR&D asset will be amortized over its estimated useful life. Until that time, the investment.IPR&D assets will be subject to impairment testing and will not be amortized. The goodwill recorded related to the Merger is the excess of the fair value of the consideration transferred by the acquirer over the fair value of tangible assets, identifiable intangible assets and assumed liabilities as of the Closing Date and is not deductible for tax purposes. The goodwill balance is primarily attributable to the value of the assembled workforce and deferred tax liabilities associated with the transaction.
13
The following summarizes the Company’s intangible assets acquired in the Merger (in thousands):

Acquisition Date
Fair Value
Descartes-08 for MG$93,900 
Descartes-08 for SLE56,700 
Total in-process research and development assets$150,600 
The fair value of the intangible assets was estimated using the income approach in which the after-tax cash flows were discounted to present value. The cash flows are based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted average cost of capital.
The forward contract related to the common stock was recorded as additional paid-in capital as the instrument is indexed to the Company’s common stock. The forward contract related to the Series A Preferred Stock was recorded as a liability as the underlying Series A Preferred Stock has a redemption feature that may require the Company to settle the instrument by transferring an asset.The forward contract was measured at fair value through the date of settlement through the issuance of the shares of Series A Preferred Stock on December 5, 2023.
4. Net (Loss) IncomeLoss Per Share
The following table sets forth the computation of basic and diluted net (loss) incomeloss per share for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 (in thousands, except share and
per-share
data):
   
Three Months Ended

June 30,
   
Six Months Ended

June 30,
 
   
2023
   
2022
   
2023
   
2022
 
Numerator:
        
Net (loss) income  $(11,387)   $8,601   $(33,050)   $37,379 
Less: Change in fair value of liability warrants   —      —      —      (13,868) 
                    
Adjusted net (loss) income  $(11,387)   $8,601   $(33,050)   $23,511 
                    
Denominator:
        
Weighted-average common shares outstanding - basic   153,442,413    148,505,729    153,396,380    136,436,316 
Dilutive effect of employee equity incentive plans and outstanding warrants   —      —      —      529,996 
                    
Weighted-average common shares used in per share calculations - diluted   153,442,413    148,505,729    153,396,380    136,966,312 
                    
Net (loss) income per share:
        
Basic  $(0.07)   $0.06   $(0.22)   $0.27 
                    
Diluted  $(0.07)   $0.06   $(0.22)   $0.17 
                    
 Three Months Ended
March 31,
 20242023
Numerator:
     Net loss allocable to shares of common stock - basic and diluted$(56,824)$(21,663)
Denominator:
     Weighted-average common shares outstanding - basic and diluted5,414,020 5,111,518 
Net loss per share:
     Basic and Diluted$(10.50)$(4.24)
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Table of Contents
The following table represents the potential dilutive shares of common stock excluded from the computation of the diluted net (loss) incomeloss per share for all periods presented, as the effect would have been anti-dilutive:
 Three Months Ended
March 31,
 20242023
Common stock options, restricted stock units and ESPP shares1,811,636 773,488 
Warrants to purchase common stock975,132 1,040,942 
Series A Preferred Stock17,808,670 — 
Series A Preferred Stock options470,403 — 
Total21,065,841 1,814,430 
   
Three Months Ended

June 30,
   
Six Months Ended

June 30,
 
   
2023
   
2022
   
2023
   
2022
 
Options, RSUs and ESPP shares   22,607,689    16,422,488    22,607,689    16,660,700 
Warrants to purchase common stock   31,228,279    31,307,409    31,228,279    20,863,898 
                    
Total   53,835,968    47,729,897    53,835,968    37,524,598 
                    

14
5. Fair Value Measurements
The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2023March 31, 2024 and December 31, 20222023 (in thousands):
March 31, 2024
TotalLevel 1Level 2Level 3
Assets:
     Money market funds (included in cash equivalents)$38,672 $38,672 $— $— 
Total assets$38,672 $38,672 $— $— 
Liabilities:
     Warrant liabilities$5,352 $— $— $5,352 
     Contingent value right liability$397,900 $— $— $397,900 
Total liabilities$403,252 $— $— $403,252 
   
June 30, 2023
 
   
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:        
Money market funds (included in cash equivalents)  $73,384   $73,384   $—     $—   
                    
Total assets  $73,384   $73,384   $—     $—   
                    
Liabilities:        
Warrant liabilities  $16,878   $—     $—     $16,878 
                    
Total liabilities  $16,878   $—     $—     $16,878 
                    
 
December 31, 2023December 31, 2023
TotalTotalLevel 1Level 2Level 3
Assets:
Money market funds (included in cash equivalents)
Money market funds (included in cash equivalents)
Money market funds (included in cash equivalents)
  
December 31, 2022
 
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:        
Money market funds (included in cash equivalents)  $53,552   $53,552   $—     $—   
Marketable securities:        
U.S. government agency securities and treasuries   13,557    —      13,557    —   
Corporate bonds   1,951    —      1,951    —   
Commercial paper   12,656    —      12,656    —   
Total assets
Total assets
                
Total assets  $81,716   $53,552   $28,164   $—   
                
Liabilities:        
Liabilities:
Liabilities:
Warrant liabilities  $19,140   $—     $—     $19,140 
                
Warrant liabilities
Warrant liabilities
Contingent value right liability
Forward contract liabilities
Total liabilities  $19,140   $—     $—     $19,140 
                

There were no transfers within the fair value hierarchy during the sixthree months ended June 30, 2023March 31, 2024 or year ended December 31, 2022.2023.
Cash, Cash Equivalents, and Restricted Cash
As of June 30, 2023March 31, 2024 and December 31, 2022,2023, money market funds were classified as cash and cash equivalents on the accompanying consolidated balance sheets as they mature within 90 days from the date of purchase.
As of June 30, 2023,March 31, 2024, the Company had a restricted cash balancesbalance relating to a secured lettersletter of credit in connection with its lease for the Company’s prior headquarters. Short-term restricted cash is included within prepaid expenses and other current assets in the consolidated balance sheets. The Company’s consolidated statements of cash flows include the following as of June 30,March 31, 2024 and 2023 and 2022 (in thousands):
  
June 30,
 
  
2023
   
2022
 
March 31,
March 31,
March 31,
2024
2024
2024
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents  $112,027   $138,057 
Short-term restricted cash   1,600    —   
Short-term restricted cash
Short-term restricted cash
Long-term restricted cash   1,377    1,379 
        
Long-term restricted cash
Long-term restricted cash
Total cash, cash equivalents, and restricted cash  $115,004   $139,436 
        
Total cash, cash equivalents, and restricted cash
Total cash, cash equivalents, and restricted cash
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Marketable Securities
No marketable securities were held as of June 30, 2023. As of December 31, 2022, marketable securities classified as Level 2 within the valuation hierarchy consist of U.S. government agency securities and treasuries, corporate bonds and commercial paper which are
available-for-sale
securities in accordance with the Company’s investment policy. The Company estimates the fair value of these marketable securities by taking into consideration valuations that include market pricing based on real-time trade data for the same or similar securities, and other observable inputs. The amortized cost of
available-for-sale
debt securities is adjusted for amortization of premiums and accretion of discountsWarrants to the earliest call date for premiums or to maturity for discounts.
Loans Payable
At June 30, 2023, in light of the issuance of the first tranche under the Company’s term loan pursuant the Loan and Security Agreement, dated August 31, 2020, as amended, among the Company, Oxford Finance LLC, or Oxford, as Collateral Agent and a Lender, and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank)), or SVB, as a Lender, or the Loan and Security Agreement, the Company believes the carrying value approximates the fair value of the loan.
Warrants
Purchase Common Stock
In December 2019, the Company issued warrants to purchase common stock in connection with a private placement, of shares of common stock, or the 2019 Warrants. Pursuant to the terms of the 2019 Warrants, the Company could be required to settle the 2019 Warrants in cash in the event of certain acquisitions of the Company and, as a result, the 2019 Warrants wereare required to be measured at fair value and reported as a liability on the balance sheet. On December 20, 2022, the Company amended the terms of the outstanding 2019 Warrants held by certain members of the Board of Directors, or the Amended 2019 Warrants, to remove the cash settlement provision. As a result, the Amended 2019 Warrants were remeasured at fair value on December 20, 2022 and reclassified from a liability to equity on the balance sheet. See Note 1012 to the consolidated financial statements included in ourthe Company’s Annual Report on Form
10-K
for the year ended December 31, 20222023 for further discussion on the equity-classified Amended 2019 Warrants.
In April 2022, the Company issued warrants in connection with an underwritten offering, of shares of common stock and warrants to purchase shares of common stock, or the 2022 Warrants. Pursuant to the terms of the 2022 Warrants, the Company could be required to settle the 2022 Warrants in cash in the event of an
15
acquisition of the Company under certain circumstances and, as a result, the 2022 Warrants are required to be measured at fair value and reported as a liability on the balance sheet.
The Company recorded the fair value of the 2019 Warrants and the 2022 Warrants upon issuance using the Black-Scholes valuation model and is required to revalue the 2019 Warrants and the 2022 Warrants at each reporting date, with any changes in fair value recorded in the statement of operations and comprehensive income (loss). The valuations of the 2019 Warrants and the 2022 Warrants are classified as Level 3 of the fair value hierarchy due to the need to use assumptions in the valuations that are both significant to the fair value measurement and unobservable, including the stock price volatility and the expected life of the 2019 Warrants and the 2022 Warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement.
The estimated fair values of the 2019 Warrants and the 2022 Warrants were determined using the following inputs to the Black-Scholes simulation valuation:
Estimated fair value of the underlying stock
.
The Company estimates the fair value of the common stock based on the closing stock price at the end of each reporting period.
Risk-free interest rate
. The risk-free interest rate is based on the U.S. Treasury at the valuation date commensurate with the expected remaining life assumption.
Dividend rate
. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.
Expected life
. The expected life of the 2019 Warrants and the 2022 Warrants is assumed to be equivalent to their remaining contractual terms which expire on December 23, 2024 and April 11, 2027, respectively.
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Volatility
. The Company estimates stock price volatility based on the Company’s historical volatility for a period of time commensurate with the expected remaining life of the warrants.
A summary of the Black-Scholes pricing model assumptions used to record the fair value of the 2019 Warrants liability is as follows:
March 31,December 31,
 20242023
Risk-free interest rate5.38 %4.79 %
Dividend yield— — 
Expected life (in years)0.730.98
Expected volatility96.03 %83.67 %
   
June 30,
  
December 31,
 
   
2023
  
2022
 
Risk-free interest rate   5.40%   4.74% 
Dividend yield   —     —   
Expected life (in years)   1.48   1.98 
Expected volatility   82.80%   79.92% 
A summary of the Black-Scholes pricing model assumptions used to record the fair value of the 2022 Warrants liability is as follows:
   
June 30,
  
December 31,
 
   
2023
  
2022
 
Risk-free interest rate   4.49%   4.22% 
Dividend yield   —     —   
Expected life (in years)   3.78   4.28 
Expected volatility   91.59%   98.05% 
Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis
March 31,December 31,
 20242023
Risk-free interest rate4.40 %4.01 %
Dividend yield— — 
Expected life (in years)3.033.28
Expected volatility82.72 %84.09 %
The following table reflects a roll-forward of fair value for the Company’s Level 3 warrant liabilities (see Note 1011 to these unaudited consolidated financial statements), for the sixthree months ended June 30, 2023March 31, 2024 (in thousands):
Warrant liabilities
Fair value as of December 31, 2023$6,394 
     Change in fair value(1,042)
Fair value as of March 31, 2024$5,352 
   
Warrant
liabilities
 
Fair value as of December 31, 2022  $19,140 
Change in fair value   (2,262) 
     
Fair value as of June 30, 2023  $16,878 
     

Contingent Value Right
On December 6, 2023, as contemplated by the Merger Agreement, the Company entered into a contingent value rights agreement, or the CVR Agreement, pursuant to which each holder of common stock or a 2022 Warrant as of December 4, 2023 was distributed a CVR, issued by the Company for each share of common stock held directly or underlying a 2022 Warrant held by such holder as of December 4, 2023. Holders of warrants other than the 2022 Warrants will be entitled to receive, upon exercise of such warrants and in accordance with the terms of the warrants, one CVR per each share of common stock underlying such warrants.
16
Each CVR entitles its holder to distributions of the following, pro-rated on a per-CVR basis, during the period ending on the date on which the Royalty Term (as defined in the Sobi License) ends, or the Termination Date:
•100% of all milestone payments, royalties and other amounts paid to the Company or its controlled affiliates, or the Company Entities, under the Sobi License or, following certain terminations of the Sobi License, any agreement a Company Entity enters into that provides for the development and commercialization of SEL-212; and
•100% of all cash consideration and the actual liquidation value of any and all non-cash consideration of any kind that is paid to or is actually received by any Company Entity prior to the Termination Date pursuant to an agreement relating to a sale, license, transfer or other disposition of any transferable asset of the Company existing as of immediately prior to the Merger, other than those exclusively licensed under the Sobi License or which the Company Entities are required to continue to own in order to comply with the Sobi License.
The distributions in respect of the CVRs will be made on a semi-annual basis, and will be subject to a number of deductions, subject to certain exceptions or limitations, including for (i) certain taxes payable on the proceeds subject to the CVR distribution, (ii) certain out of pocket costs incurred by the Company Entities, including audit and accounting fees incurred in connection with reporting obligations relating to the CVRs and other expenses incurred in the performance of their obligations and other actions under the CVR Agreement, (iii) a fixed semi-annual amount of $0.75 million for general and administrative overhead, (iv) payments made and remaining obligations on lease liabilities of Selecta immediately prior to the Merger and (v) amounts paid and remaining obligations with regard to the Xork product candidate. Each of the deductions described in (iv) and (v) will be made only if certain milestone payments under the Sobi License are made and are also subject to certain adjustments as contemplated in the CVR Agreement.
The CVRs represent financial instruments that are accounted for under the fair value option election in ASC 825, Financial Instruments. Under the fair value option election, the CVRs are initially measured at the aggregate estimated fair value of the CVRs and will be subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The liability was recorded at the date of approval, November 13, 2023, as a dividend. The estimated fair value of the CVR liability was determined using a discounted cash flow methodology as of December 31, 2023 and a Monte Carlo simulation model as of March 31, 2024 to estimate future cash flows associated with the legacy assets, including the expected milestone and royalty payments under the Sobi License, net of deductions. Changes in fair value of the CVR liability are presented in the consolidated statements of operations and comprehensive income (loss). The liability value is based on significant inputs not observable in the market such as estimated cash flows, estimated probabilities of success, expected volatility of future revenues (Monte Carlo simulation model) and risk-adjustment discount rates (discounted cash flow methodology), which represent a Level 3 measurement within the fair value hierarchy. The significant inputs used to estimate the fair value of the CVR liability, which represented a financial instrument being accounted for under the fair value option, were as follows:
March 31,
2024
Estimated cash flow dates2024-2038
Estimated probability of success95.0 %
Expected volatility of future revenues25.0 %

December 31,
2023
Estimated cash flow dates2024 - 2038
Estimated probability of success95.0 %
Risk-adjusted discount rate13.7 %
The following table reflects a roll-forward of fair value for the Company's Level 3 CVR liability for the three months ended March 31, 2024 (in thousands):
CVR liability
Fair value as of December 31, 2023$358,600 
     Change in fair value39,300 
Fair value as of March 31, 2024$397,900 
Forward Contract Liabilities
Merger Consideration
17
In connection with the Merger, the Company entered into a contract for the issuance of 384,930.724 shares of Series A Preferred Stock as part of the consideration transferred. The fair value of the forward contract at the Closing Date was $155.3 million. The non-cash settlement of this liability occurred on December 5, 2023 with the issuance of the Series A Preferred Stock for $261.8 million.
November 2023 Private Placement
The Company entered into a contract for the issuance of 149,330.115 shares of Series A Preferred Stock as part of the November 2023 Private Placement which was settled in multiple tranches. The Company determined the obligation to issue 148,710.488 shares of Series A Preferred Stock to Dr. Timothy A. Springer, a member of the Company’s Board of Directors, and TAS Partners LLC, an affiliate of Dr. Springer, represented a forward contract. See Note 10. The initial fair value of the forward contract liability on November 13, 2023 was insignificant as the fair value of the underlying Series A Preferred Stock was equal to the purchase price of the Series A Preferred Stock as agreed upon in the November 2023 Private Placement. Subsequent measurement of the fair value of the forward contract liability was based on the market price of the Company’s common stock, which represented the redemption and conversion value of the Series A Preferred Stock, less the purchase price, on an as-converted basis. The non-cash settlement of a portion of the liability occurred on December 13, 2023 with the issuance of the first tranche of the Series A Preferred Stock for $14.8 million. The non-cash settlement of the remaining second and third tranches occurred on January 12, 2024 and February 11, 2024, respectively, for a total of $35.2 million.
The following table presents changes in the forward contract liabilities for the periods presented (in thousands):
Forward contract liabilities
Fair value as of December 31, 2023$28,307 
     Settlements(35,197)
Change in fair value6,890 
Fair value as of March 31, 2024$— 
6. Property and Equipment
Property and equipment consists of the following (in thousands):
 March 31,December 31,
 20242023
Laboratory equipment$6,662 $6,280 
Computer equipment and software620 702 
Leasehold improvements61 61 
Furniture and fixtures452 452 
Office equipment196 196 
Construction in process241 150 
Total property and equipment8,232 7,841 
Less: Accumulated depreciation(5,830)(5,728)
Property and equipment, net$2,402 $2,113 
   
June 30,
   
December 31,
 
   
2023
   
2022
 
Laboratory equipment  $6,263   $6,001 
Computer equipment and software   702    697 
Leasehold improvements   61    57 
Furniture and fixtures   453    453 
Office equipment   196    192 
Construction in process   492    599 
          
Total property and equipment   8,167    7,999 
Less: Accumulated depreciation   (5,574)    (5,205) 
          
Property and equipment, net  $2,593   $2,794 
          

Depreciation expense was $0.2 million for each of the three months ended June 30, 2023March 31, 2024 and 2022 and $0.4 million and $0.3 million for the six months ended June 30, 2023 and 2022, respectively.
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7. Accrued Expenses
Accrued expenses consist of the following (in thousands):
 March 31,December 31,
 20242023
Payroll and employee related expenses$1,701 $4,390 
Accrued patent fees1,177 472 
Accrued external research and development costs2,614 4,896 
Accrued professional and consulting services3,055 4,331 
Other380 644 
Accrued expenses$8,927 $14,733 
   
June 30,
   
December 31,
 
   
2023
   
2022
 
Payroll and employee related expenses  $2,978   $4,242 
Collaboration and licensing   2,523    —   
Accrued patent fees   471    696 
Accrued external research and development costs   5,094    7,274 
Accrued professional and consulting services   1,257    985 
Accrued interest   187    222 
Other   392    665 
          
Accrued expenses  $12,902   $14,084 
          

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8. Leases
65 Grove Street Lease
In July 2019, the Company entered into a lease with
BRE-BMR
Grove LLC for 25,078 square feet of laboratory and office space located at
65
Grove Street, Watertown, Massachusetts, or the HeadquartersWatertown Lease. On September 1, 2022, the Company entered into an amendment to the Watertown Lease, or the Lease Agreement Amendment, to the Headquarters Lease, to expand the Company’s corporate headquarterslaboratory and office space located at 65 Grove Street, Watertown, Massachusetts by approximately 7,216 square feet. In connection with the Lease Agreement Amendment, the Company secured a letter of credit for the HeadquartersWatertown Lease from Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank)), or SVB, for $1.6 million as of December 31, 2022.
In May 2023, the Company received notice from
BRE-BMR
Grove LLC that the requirements to reduce the amount of the letter of credit for the HeadquartersWatertown Lease had been met. In connection therewith, in June 2023, the Company secured a letter of credit from JPMorgan Chase Bank, N.A. for $1.4 million, which is recognized as long-term restricted cash as of June 30,March 31, 2024 and December 31, 2023, and renews automatically each year. As of June 30, 2023, the existingThe $1.6 million letter of credit with SVB was released from SVBrestriction and returned to the Company on July 17, 2023, and therefore was reclassified into cash and cash equivalents in the consolidated balance sheets.
On October 6, 2022, the Company entered into a sublease agreement to sublease 7,216 square feet of space currently rented by the Company at 65 Grove Street, Watertown, Massachusetts. The sublease commenced on October 24, 2022, and the term expired on March 31, 2024. On October 31, 2023, in connection with entering into Amendment No. 1 to the Sobi License as described in Note 13, the Company entered into a sublease agreement with Sobi to sublease approximately 5,600 square feet of space currently rented by the Company at 65 Grove Street, Watertown, Massachusetts for $1.6which Sobi paid $1.0 million has been classifiedupfront rental payment. The sublease commenced on November 6, 2023, when the Company, Sobi, and BRE-BMR Grove LLC, executed a Consent to Sublease. The term of the sublease expires on November 5, 2024 with no option to extend the sublease term. As of March 31, 2024 and December 31, 2023, deferred rent of $0.6 million and $0.8 million is included within accrued expenses and other current liabilities in the consolidated balance sheets. Sublease income is included within other income, net in the consolidated statements of operations and comprehensive income (loss).
During the year ended December 31, 2023, the Company determined that the right-of-use asset related to the operating lease for approximately 7,216 square feet at 65 Grove Street was partially impaired as currentof November 30, 2023. As a result, the Company recognized a $0.7 million right-of-use asset impairment charge in the fourth quarter of 2023.
704 Quince Orchard Road Leases
In connection with the Merger, the Company acquired two operating leases for office and laboratory space in Gaithersburg, Maryland. The leases expire in January 2027 and do not contain any renewal rights. The discount rate of 11.5% was determined based on the anticipated release dateCompany’s incremental borrowing rate adjusted for the lease term.
7495 New Horizon Way Lease
On February 28, 2024, the Company entered into a lease agreement with 7495 RP, LLC, or the Landlord, pursuant to which it agreed to lease from the Landlord the manufacturing space located at 7495 New Horizon Way, Frederick, Maryland, or the Frederick Lease Agreement. The space consists of 19,199 leasable square feet of integrated manufacturing and office space. The initial term of the restrictionsFrederick Lease Agreement is expected to commence once the Landlord has obtained legal possession of this cash.the premises free of the existing tenant and delivered full possession of the premises to the Company, or the Commencement Date, which had not occurred as of March 31, 2024. Upon the Commencement Date, which was determined to be May 1, 2024, the Company will assess the classification of the lease and measure the right-of-use asset and lease liability. The Frederick Lease Agreement will terminate approximately seven years following the Commencement Date. The Company will have one option to extend the term of the Frederick Lease Agreement for a period of five years at a cost of 100% of the then-fair market value, not to exceed 103% of the then-current base rent. The base rent for the initial term is $0.1 million per month. The Company paid first month’s rent of $0.1 million upon execution of the Frederick Lease Agreement and paid a cash security deposit of $0.3 million, both of which are classified as prepaid expenses and other current assets on the consolidated balance sheet.
19
For the three and six months ended June 30,March 31, 2024 and 2023, and 2022, the components of lease costs were as follows (in thousands):
Three Months Ended
March 31,
20242023
Operating lease cost$775 $696 
Variable lease cost397 142 
Short-term lease cost3 3 
Less: Sublease income(510)(255)
Total lease cost$665 $586 
   
Three Months Ended

June 30,
   
Six Months Ended

June 30,
 
   
2023
   
2022
   
2023
   
2022
 
Operating lease cost  $696   $505   $1,392   $1,011 
Variable lease cost   270    205    412    425 
Short-term lease cost   2    2    5    5 
Less: Sublease income   (251)    —      (506)    —   
                    
Total lease cost  $717   $712   $1,303   $1,441 
                    

The maturity of the Company’s operating lease liabilities as of June 30, 2023March 31, 2024 were as follows (in thousands):
  
June 30,
 
  
2023
 
2023 (remainder)  $1,349 
March 31,
March 31,
March 31,
2024   2,740 
2024
2024
2024 (remainder)
2024 (remainder)
2024 (remainder)
2025
2025
2025   2,818 
2026   2,902 
2026
2026
2027   2,990 
2027
2027
2028
2028
2028
Thereafter   946 
    
Thereafter
Thereafter
Total future minimum lease payments
Total future minimum lease payments
Total future minimum lease payments   13,745 
Less: Imputed interest   2,853 
    
Less: Imputed interest
Less: Imputed interest
Total operating lease liabilities  $10,892 
    
Total operating lease liabilities
Total operating lease liabilities
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The supplemental disclosure for the statement of cash flows related to operating leases was as follows (in thousands):
Three Months Ended
March 31,
20242023
Cash paid for amounts included in the measurement of lease liabilities:$761 $653 
   
Six Months Ended

June 30,
 
   
2023
   
2022
 
Cash paid for amounts included in the measurement of lease liabilities:  $1,319   $924 

The changes in the Company’s
right-of-use
assets and lease liabilities for the sixthree months ended June 30,March 31, 2024 and 2023 and 2022 are reflected in the
non-cash
lease expense and accrued expenses and other liabilities, respectively, in the consolidated statements of cash flows.
The following summarizes additional information related to operating leases:
March 31,
20242023
Weighted-average remaining lease term4.0 years5.1 years
Weighted-average discount rate9.9 %9.7 %
   
June 30,
 
   
2023
  
2022
 
Weighted-average remaining lease term   4.9 years   5.9 years 
Weighted-average discount rate   9.7%   8.9% 

9. Debt
2020 Term Loan
On August 31, 2020, the Company entered into thea Loan and Security Agreement with Oxford Finance LLC, or Oxford, and Silicon Valley Bank.Bank, or the Loan and Security Agreement, and such facility, the 2020 Term Loan. On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation, or the FDIC, was appointed as receiver. On March 13, 2023, the FDIC announced that all of Silicon Valley Bank’s deposits and substantially all of its assets had been transferred to a newly created, full-service, FDIC-operated bridge bank, Silicon Valley Bridge Bank, N.A., or SVBB. SVBB assumed all loans that were previously held by Silicon Valley Bank. On March 27, 2023, First-Citizens Bank & Trust Company assumed all of SVBB’s customer deposits and certain other liabilities and acquired substantially all of SVBB’s loans and certain other assets from the FDIC, including the Loan and Security Agreement.2020 Term Loan.
On March 31,September 11, 2023, the Company entered into a Fourth Amendment to Loan and Security Agreement or the Fourth Amendment,payoff letter with Oxford as Collateral Agent and a Lender and SVB. The Fourth Amendment relievedSVB, pursuant to which the Company of the requirement to maintainpaid all Collateral Accounts (as such term is defined in the Loan and Security Agreement) with SVB and instead requires the Company to hold an amount equal to the lesser of (i) 100% of our consolidated cash and (ii) 150% of the then-outstanding Obligations (as such term is defined in the Loan and Security Agreement) in Collateral Accounts with SVB that are subject to a Control Agreement (as such term is defined in the Loan and Security Agreement) in favor of SVB.
As of June 30, 2023 and December 31, 2022, the outstanding principal balanceamounts under the 2020 Term Loan, together with accrued interest and a prepayment penalty, resulting in the full extinguishment of the 2020 Term Loan. The total payoff amount was $22.4$22.3 million, consisting of the remaining
20
principal amount due of $19.8 million, the final payment fee of $2.3 million, the prepayment penalty of $0.2 million, and $25.0less than $0.1 million respectively.of accrued interest.
Total 2020 Term Loan and unamortized debt discount balances asDuring the third quarter of June 30, 2023, are as follows (in thousands):
Outstanding principal  $22,414 
Venture debt termination fee   2,250 
Less: Debt discount   (642) 
Less: Current portion of loan payable   (10,235) 
     
Loan payable, net of current portion  $13,787 
     
Future minimum principal paymentsthe Company recorded a loss of $0.7 million on the extinguishment of the 2020 Term Loan, consisting of the prepayment penalty of $0.2 million and the write-off of $0.5 million of unamortized debt issuance costs and venture debt termination fee.
As of March 31, 2024 and December 31, 2023, the Company had no outstanding borrowings.

10. Series A Preferred Stock
The Certificate of Designation of Preferences, Rights, and Limitations of the Series A Non-Voting Convertible Preferred Stock, or the Certificate of Designation, was filed on November 13, 2023, which provided for the designation of shares of the Series A Preferred Stock and authorized the issuance of 548,375 shares of Series A Preferred Stock.
Additionally on November 13, 2023, the Company entered into the Securities Purchase Agreement with (i) Dr. Timothy A. Springer, a member of the Company’s Board of Directors; (ii) TAS Partners LLC, an affiliate of Dr. Springer, and (iii) Seven One Eight Three Four Irrevocable Trust, a trust associated with Dr. Murat Kalayoglu, a co-founder and the former chief executive officer of Old Cartesian, who joined the Company’s Board of Directors effective immediately after the effective time of the Merger, or the Investors. Pursuant to the Securities Purchase Agreement, the Company agreed to issue and sell an aggregate of 149,330.115 shares of Series A Preferred Stock for an aggregate purchase price of $60.25 million in the November 2023 Private Placement.
In the November 2023 Private Placement, Dr. Timothy A. Springer agreed to settle his purchases in three tranches of shares of Series A Preferred Stock, the first for a purchase price of $10.0 million and each thereafter for a purchase price of approximately $20.0 million, with the three tranches settling 30, 60, and 90 days, respectively, following the Closing Date. TAS Partners LLC agreed to settle its purchase for approximately $10.0 million within 30 days following the Closing Date. The first, second and third tranches were settled on December 13, 2023, January 12, 2024 and February 11, 2024, respectively, under which (i) 24,785.081 shares of Series A Preferred Stock were issued to each of TAS Partners LLC and Dr. Timothy A. Springer in the first tranche, (ii) 49,570.163 shares of Series A Preferred Stock were issued to Dr. Timothy A. Springer in the second tranche, and (iii) 49,570.163 shares of Series A Preferred Stock were issued to Dr. Timothy A. Springer in the third tranche. On November 15, 2023, the Company issued 619.627 shares of Series A Preferred Stock to Seven One Eight Three Four Irrevocable Trust for $0.25 million.
The Company determined the obligation to issue 148,710.488 shares of Series A Preferred Stock to Dr. Springer and TAS Partners LLC represented a forward contract and was accounted for as a liability with changes in fair value recorded in earnings. A portion of June 30,the liability was settled with the initial issuance of 49,570.162 shares of Series A Preferred Stock on December 13, 2023. The remaining portion of the forward contract liability was settled upon the issuance of 49,570.163 shares of Series A Preferred Stock each on January 12, 2024 and February 11, 2024, respectively (see Note 5).
On December 5, 2023, arethe Company issued 384,930.724 shares of Series A Preferred Stock as follows (in thousands):part of its consideration transferred in connection with the Merger which settled the related forward contract liability (see Note 5).
Year ended:
  
2023 (remainder)  $5,173 
2024   10,345 
2025   6,896 
     
Total minimum principal payments  $22,414 
     
On March 26, 2024, the Company, with the consent of the requisite holders of Series A Preferred Stock, amended the Certificate of Designation such that the automatic conversion of the Series A Preferred Stock into common stock, or the Automatic Conversion, will occur eight business days following stockholder approval of the Conversion Proposal. Upon such date, each share of Series A Preferred Stock will automatically convert into 33.333 shares of common stock, subject to certain limitations, including that a holder of Series A Preferred Stock is prohibited from converting shares of Series A Preferred Stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be established by the holder between 0% and 19.9%) of the total number of shares of common stock issued and outstanding immediately after giving effect to such conversion; provided, however, that such beneficial ownership limitation does not apply to Dr. Springer, TAS Partners LLC, or any of their respective affiliates. Each share of Series A Preferred Stock outstanding that is not otherwise automatically converted into common stock as a result of the beneficial ownership limitation shall be convertible at any time at the option of the holder following stockholder approval of the Conversion Proposal, only to the extent the beneficial ownership limitation does not apply to the shares of Series A Preferred Stock to be converted.
16On March 27, 2024, the Company's stockholders approved the Conversion Proposal, among other matters, at the Special Meeting. As a result of the approval of the Conversion Proposal, all conditions that could have required cash redemption of the Series A Preferred Stock were satisfied. Since the Series A Preferred Stock is no longer redeemable, the associated balances of the Series A Preferred Stock were reclassified from mezzanine equity to permanent equity during the first quarter of 2024.
As of March 31, 2024, the Company had 534,260.839 shares of Series A Preferred Stock issued and outstanding.
21
On April 8, 2024, pursuant to the terms of the Certificate of Designation, as amended, 367,919.247 shares of Series A Preferred Stock automatically converted into 12,263,951 shares of common stock; 166,341.592 shares of Series A Preferred Stock did not automatically convert due to beneficial ownership limitations. The166,341.592 shares of Series A Preferred Stock that did not automatically convert are convertible into 5,544,719 shares of common stock. Based on the 17,779,787 shares of common stock outstanding on April 8, 2024, there would be 23,324,506 shares of common stock outstanding if all shares of Series A Preferred Stock converted into common stock on such date.
10.11. Equity
Equity Financings
“At-the-Market”
Offerings
On October 25, 2021, the Company entered into a Sales Agreement,sales agreement, or the 2021 Sales Agreement, with SVB Leerink Partners LLC (now(then known as SVB Leerink Partners LLC), or Leerink Partners, pursuant to which the Company may sell shares of the Company’s common stock, from time to time, through an “at the market” equity offering program under which Leerink Partners will act as sales agent. The shares of common stock sold pursuant to the 2021 Sales Agreement, willif any, would be issued and sold pursuant to the Company’s shelfa registration statement on Form
S-3
(File
No. 333-241692),
to be filed by the Company with the SEC, for aggregate remaining gross sales proceeds of up to $75.0$51.0 million.
During the three months ended March 31, 2024 and the year ended December 31, 2022, the Company sold 774,544 shares of its common stock pursuant to the 2021 Sales Agreement for aggregate net proceeds of $2.1 million, after deducting commissions and other transaction costs.
During the six months ended June 30, 2023, the Company sold no shares of its common stock pursuant to the 2021 Sales Agreement.
Warrants
DuringThe following is a summary of warrant activity for the three and six months ended June 30, 2023, there were no warrants issued, exercised, or canceled. March 31, 2024:
Number of Warrants
Equity
 classified		Liability classifiedTotalWeighted-average
exercise price
Outstanding at December 31, 202374,420 966,393 1,040,813 $45.98 
Exercises(65,681)— (65,681)43.80 
Outstanding at March 31, 20248,739 966,393 975,132 $46.12 
See Note 1014 for further discussion on the exercise of the 65,681 warrants. See Note 12 to the consolidated financial statements included in ourthe Company’s Annual Report on Form
10-K
for the year ended December 31, 20222023 for further discussion of the terms related to the Company’s warrants.
   
Number of Warrants
     
   
Equity

classified
   
Liability
classified
   
Total
   
Weighted
average

exercise price
 
Outstanding at June 30, 2023   2,236,326    28,991,953    31,228,279   $1.53 
                    
Reserved Shares
The Company has authorized shares of common stock for future issuance as of June 30, 2023March 31, 2024 as follows:
Exercise of warrants975,132 31,228,279
Shares available for future stock incentive awards202,875 8,073,729
RSUs reserved for issuance125
Unvested restricted stock units464,018 2,411,792
Outstanding common stock options1,347,618 20,114,139
Accrued Ginkgo Bioworks Holdings, Inc. milestone awardSeries A Preferred Stock17,808,670 1,339,285
Outstanding Series A Preferred Stock options470,403 
Total21,268,716 63,167,349
11.
12. Stock Incentive Plans
The Company maintainsmaintained the 2008 Stock Incentive Plan, or the 2008 Plan, for employees, consultants, advisors, and directors. The 2008 Plan provided for the granting of incentive and
non-qualified
stock option and restricted stock awards as determined by the Board.Board of Directors. In connection with the Merger, all outstanding awards issued under the 2008 Plan were cancelled, and the Board of Directors formally terminated the 2008 Plan.
In June 2016, the Company’s stockholders approved the 2016 Incentive Award Plan, or the 2016 Plan, which authorized 1,210,25640,341 shares of common stock for future issuance under the 2016 Plan and the Company ceased granting awards under the 2008 Plan. Upon the effective date of the 2016 Plan, awards issued under the 2008 Plan remainremained subject to the terms of the 2008 Plan. Awards granted under the 2008 Plan that expire, lapseexpired, lapsed or terminate becometerminated became available under the 2016 Plan as shares available for future grants.
Additionally, pursuant to the terms of the 2016 Plan, the Board of Directors is authorized to grant awards with respect to common stock, and may delegate to a committee of one or more members of the Board of Directors or executive officers of the
22
Company the authority to grant options and restricted stock units. On December 9, 2020, the Board of Directors established a Stock Option Committee authorized to grant awards to certain employees and consultants subject to conditions and limitations within the 2016 Plan. In January 2023,2024, the number of shares of common stock that may be issued under the 2016 Plan was increased by 6,121,697 shares.215,903. As of June 30, 2023, 2,587,797March 31, 2024, 19,446 shares remain available for future issuance under the 2016 Plan.
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Table of Contents
In September 2018, the Company’s 2018 Employment Inducement Incentive Award Plan, or the 2018 Inducement Incentive Award Plan, was adopted by the Board of Directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules, which authorized 1,175,00039,166 shares of its common stock for issuance. In March 2019, the Board of Directors approved thean amendment and restatement of the 2018 Inducement Incentive Award Plan to reserve an additional 2,000,00066,667 shares of the Company’s common stock for issuance thereunder. In December 2023, the Board of Directors approved an amendment and restatement of the 2018 Inducement Incentive Award Plan to reserve an additional 60,833 shares of the Company’s common stock for issuance thereunder. As of June 30, 2023,March 31, 2024, there are 425,858113,927 shares available for future grant under the 2018 Inducement Incentive Award Plan.
In accordance with the Merger Agreement, the Company assumed Old Cartesian’s 2016 Stock Incentive Plan, or the Old Cartesian Plan. The Old Cartesian Plan permits the granting of options or restricted stock to employees, officers, directors, consultants and advisors to the Company. The unvested common stock options and Series A Preferred Stock options assumed by the Company in connection with the Merger generally vest over a four-year period. Additionally, the stock options granted have a contractual term of ten years and only full shares can be exercised as per the individual award agreements. As of March 31, 2024, there are 23,707 shares available for future grant under the Old Cartesian Plan.
In connection with the Merger, the outstanding stock options to purchase Old Cartesian common stock were converted into stock options to purchase 776,865 shares of common stock and 14,112.299 shares of Series A Preferred Stock of the Company. These replacement awards were revalued at their acquisition-date fair value and then attributed to pre and post-combination service. This resulted in $2.6 million attributed to post-combination service to be recognized as stock-based compensation expense over the remaining terms of the replacement awards, of which $0.4 million was recognized as research and development expense in the consolidated statements of operations and comprehensive income (loss) during the three months ended March 31, 2024. Following the Automatic Conversion, the options exercisable for shares of Series A Preferred Stock became exercisable for shares of common stock.
Stock-Based Compensation Expense
Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive income (loss), including $1.5 million recognized as stock-based compensation expense upon the achievement of a technical milestone by Ginkgo Bioworks Holdings, Inc., or Ginkgo, during the three and six months ended June 30, 2023 and $1.0 million recognized as stock-based compensation expense upon the issuance of common stock to Ginkgo during the three and six months ended June 30, 2022 as described in Note 14, was as follows (in thousands):
 Three Months Ended
March 31,
 20242023
Research and development$712 $1,192 
General and administrative719 1,084 
Total stock-based compensation expense$1,431 $2,276 
   
Three Months Ended

June 30,
   
Six Months Ended

June 30,
 
   
2023
   
2022
   
2023
   
2022
 
Research and development  $2,677   $2,021   $3,869   $3,039 
General and administrative   1,106    1,543    2,190    3,278 
                    
Total stock-based compensation expense  $3,783   $3,564   $6,059   $6,317 
                    

Stock Options
The estimated grant date fair values of employee stock option awards granted under the 2016 Plan and the 2018 Inducement Incentive Award Plan were calculated using the Black-Scholes option pricing model based on the following weighted-average assumptions:
Three Months Ended
March 31,
 20242023
Risk-free interest rate3.95 %3.95 %
Dividend yield— — 
Expected term (in years)6.205.94
Expected volatility95.37 %94.64 %
Weighted-average fair value of common stock$19.78 $34.50 
   
Three Months Ended

June 30,
  
Six Months Ended

June 30,
 
   
2023
  
2022
  
2023
  
2022
 
Risk-free interest rate   3.38%   3.26%   3.95%   1.63% 
Dividend yield   —     —     —     —   
Expected term   6.00   6.05   5.94   6.03 
Expected volatility   94.40%   92.03%   94.64%   91.85% 
Weighted-average fair value of common stock  $1.31  $1.29  $1.15  $3.10 
The expected term of the Company’sCompany's stock options granted to employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. Under the simplified method, the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term. The Company utilizes this method due to lack of historical exercise data and the plain nature of its stock-based awards.
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The weighted averageweighted-average grant date fair value of stock options granted to employees was $1.02$15.79 and $0.99$26.87 during the three months ended June 30,March 31, 2024 and 2023, and 2022, respectively, and $0.90 and $2.33 during the six months ended June 30, 2023 and 2022, respectively.
As of June 30, 2023,March 31, 2024, total unrecognized compensation expense related to unvested employeecommon stock options and Series A Preferred Stock options was $13.2$8.3 million and $0.8 million, respectively, which is expected to be recognized over a weighted average period of 2.7 years.3.4 years and 1.4 years, respectively.

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The following table summarizes the stock option activity under the 2008 Plan, the 2016 Plan, and the 2018 Inducement Incentive Award Plan:Plan, and Old Cartesian Plan for options for common stock:
   Weighted-average 
 Number ofremainingAggregate
 common stockWeighted-averagecontractual termintrinsic value
 optionsexercise price ($)(in years)(in thousands)
Outstanding at December 31, 2023776,865 $2.97 6.50$13,760 
Granted641,089 $19.78   
Exercised(52,558)$2.93   
Forfeited(17,778)$11.46   
Outstanding at March 31, 20241,347,618 $10.86 7.88$11,827 
Vested at March 31, 2024583,183 $2.98 5.90$9,633 
Vested and expected to vest at March 31, 20241,200,826 $9.77 7.72$11,827 
   
Number of

options
   
Weighted-average

exercise price ($)
   
Weighted-average

remaining

contractual term

(in years)
   
Aggregate

intrinsic value

(in thousands)
 
Employees
        
Outstanding at December 31, 2022   15,578,412   $3.44    7.57   $4 
Granted   5,477,200   $1.15     
Forfeited   (1,207,712)   $2.84     
           
Outstanding at June 30, 2023   19,847,900   $2.85    7.93   $1 
           
Vested at June 30, 2023   8,956,975   $3.92    6.68   $1 
Vested and expected to vest at June 30, 2023   18,564,837   $2.93    7.84   $1 
Non-employee
consultants
        
Outstanding at December 31, 2022   266,239   $8.05    5.08   $—   
           
Outstanding at June 30, 2023   266,239   $8.05    4.58   $—   
           
Vested at June 30, 2023   266,239   $8.05    4.58   $—   
Vested and expected to vest at June 30, 2023   266,239   $8.05    4.58   $—   

The following table summarizes the stock option activity under the Old Cartesian Plan for options for Series A Preferred Stock:
 Number of Weighted-average 
 Series AremainingAggregate
 Preferred StockWeighted-averagecontractual termintrinsic value
 optionsexercise price ($)(in years)(in thousands)
Outstanding at December 31, 202314,112.299 $79.94 5.91$8,601 
Outstanding at March 31, 202414,112.299 $79.94 5.65$8,043 
Vested at March 31, 202411,323.762 $73.14 5.05$6,530 
Vested and expected to vest at March 31, 202414,112.299 $79.94 5.65$8,043 
As a result of the approval of the Conversion Proposal on March 27, 2024, all conditions that could have required cash redemption of the Series A Preferred Stock underlying the stock options were satisfied. Since the Series A Preferred Stock is no longer redeemable, the associated balances of the stock options to purchase Series A Preferred Stock were reclassified from mezzanine equity to additional paid-in capital during the first quarter of 2024.
Restricted Stock Units
During the sixthree months ended June 30, 2023,March 31, 2024, the Company granted 1,054,600471,104 restricted stock unit awards with a weighted averageweighted-average fair value of $1.13$19.80 per share based on the closing price of the Company’s common stock on the date of grant to employees under the 2016 Plan and the Old Cartesian Plan, which willgenerally vest over a four-year term. Forfeitures are estimated at the time of grant and are adjusted, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has estimated a forfeiture rate of 10% for restricted stock unit awards to employees based on historical experience.
Unrecognized compensation expense for allrelated to the restricted stock units was $3.1$6.5 million as of June 30, 2023,March 31, 2024, which is expected to be recognized over a weighted averageweighted-average period of 2.53.7 years.
24
The following table summarizes the Company’s restricted stock units under the 2016 Plan, andthe 2018 Inducement Incentive Award Plan, and the Old Cartesian Plan:
 Number of sharesWeighted-average
grant date
fair value ($)
Unvested at December 31, 2023— $— 
Granted471,104 19.80 
Forfeited(7,086)19.80 
Unvested at March 31, 2024464,018 $19.80 
   
Number of shares
   
Weighted average

grant date

fair value ($)
 
Unvested at December 31, 2022   1,705,558   $2.62 
Granted   1,054,600    1.13 
Vested   (277,193)    3.22 
Forfeited   (71,173)    1.99 
          
Unvested at June 30, 2023   2,411,792   $1.92 
          

Employee Stock Purchase Plan
In June 2016, the Company approved the 2016 Employee Stock Purchase Plan, or the ESPP, which authorized 173,0765,769 shares of common stock for future issuance under the ESPP to participating employees. In January 2023, the number of shares of common stock authorized for issuance under the ESPP was increased by 1,530,424 shares. During the six months ended June 30, 2023, the Company issued 108,068 shares of common stock under the ESPP. As of June 30, 2023, 5,060,074March 31, 2024, 45,795 shares remain available for future issuance under the ESPP. In connection with the Merger, the Board of Directors suspended the offerings under the ESPP.
For each of the three and six months ended June 30, 2023 and 2022, theThe Company recognized no and less than $0.1 million of stock-based compensation expense under the ESPP.ESPP for the three months ended March 31, 2024 and March 31, 2023, respectively.
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12.13. Revenue Arrangements
Astellas Gene Therapies
In January 2023, the Company entered into a License and Development Agreement, or the Astellas Agreement, with Audentes Therapeutics, Inc., doing business as Astellas Gene Therapies, or Astellas. Under the Astellas Agreement, the Company granted Astellas an exclusive license to the Company’s IdeXork technology arising from Xork (defined below), to develop and commercialize Xork for use in Pompe disease in combination with an Astellas gene therapy investigational or authorized product. Xork, Genovis’ IgG Protease, is licensed by the Genovis Agreement, as described in Note 1415 to these consolidated financial statements,statements. Astellas paid a $10.0 million upfront payment to the Company upon signing of the Astellas Agreement, and the Company is entitled to receive up to $340.0 million in future additional payments over the course of the partnership that are contingent on the achievement of various development and regulatory milestones and, if commercialized, sales thresholds for annual net sales where Xork is used as a
pre-treatment
for an Astellas investigational or authorized product, andproduct. The Company is also eligible for tiered royalty payments ranging from low to high single digits.
Pursuant Any proceeds received from milestone payments or royalties relating to Xork would be required to be distributed to holders of CVRs, net of certain deductions. A more detailed description of the Astellas Agreement and the Company's evaluation of this agreement under ASC 606 can be found in Note 14 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
In March 2024, the Company will have the exclusive right and responsibility to complete research and development of Xork products and to conduct all preclinical studies and clinical trials for Xork for use in Pompe disease with anwas notified by Astellas gene therapy investigational or authorized product, or the Xork Development Services. Astellas will reimburse the Company for 25% of all budgeted costs incurred to complete the development of Xork for use in Pompe disease with an Astellas gene therapy investigational or authorized product. The Company will have control and responsibility over regulatory filings, including any investigational drug applications, biologics license applications, and marketing authorization applications relating to the licensed product. Astellas will have the exclusive right and responsibility to research, develop, and commercialize Astellas products used in combination with Xork and will have control and responsibility over all regulatory filings, including any investigational drug applications, biologics license applications, and marketing authorization applications, relating to Astellas products and Astellas products used in combination with Xork.
The Company determined the Astellas Agreement represents a service arrangement under the scope of ASC 606. The Company determined that the sublicense of Xork to Astellas, the licensed
know-how,
and the Xork Development Services represent a single promise and performance obligation to be transferred to Astellas over time due to the nature of the promises in the contract. As such, the Company will recognize the transaction price as revenue utilizing the input method to measure the progress of satisfying the single performance obligation to Astellas.
In determining the transaction price, the Company concluded the upfront payment of $10.0 million and development cost reimbursements of $5.5 million will be included in the initial transaction price. All other development milestones will be fully constrained and will only be included in the transaction price when the applicable milestone is deemed probable of achievement. Each of these variable consideration items were evaluated under the most likely amount method to determine whether such amounts were probable of occurrence, or whether such amounts should be constrained until they become probable. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt and timing of such development milestones is outside the control of the Company and probability of success criteria is estimated. The Company will
re-evaluate
the transaction price in each reporting period, as uncertain events are resolved, or as other changes in circumstances occur. In accordance with ASC 606, the Company will only recognize revenue associated with sales-based milestones and royalties when the subsequent sales thresholds are reached and underlying sales occur, respectively. The Company determined that a significant financing component does not exist in its arrangement with Astellas. The Company also determined the options to negotiate additional fields, enter into a clinical supply agreement, and enter into a commercial supply agreement do not represent material rights under the Astellas Agreement. Astellas has the rightintention to terminate the Astellas Agreement, in its entirety or on a
field-by-field
basis, upon 90 days’ written notice to the Company.effective June 6, 2024.
As of June 30,March 31, 2024 and December 31, 2023, the Company recorded $4.2$0.4 million and $2.3 million as a short-term contract liability, respectively, and $4.9no and $3.5 million as a long-term contract liability, respectively, representing deferred revenue associated with the Astellas Agreement. As of June 30,March 31, 2024 and December 31, 2023, the Company recorded a receivable of $0.4 million and $0.3 million, respectively, representing billings for the Xork Development Services (as defined in the Astellas Agreement) that are subject to reimbursement by Astellas. Revenue of $0.8��$5.8 million and $1.4$0.6 million related to the Astellas Agreement was recognized during the three and six months ended June 30,March 31, 2024 and 2023, respectively.
20
Tablerespectively, inclusive of Contents$3.2 million of revenue recognized from performance obligations related to prior periods as a result of the change in transaction price during the three months ended March 31, 2024.
Takeda Pharmaceuticals USA, Inc.
License and Development Agreement
In October 2021, the Company entered into a License Agreement, or the Takeda Agreement, with Takeda Pharmaceuticals USA, Inc., or Takeda. Under the Takeda Agreement, the Company granted Takeda an exclusive license to the Company’s ImmTOR technology initially for two specified disease indications within the field of lysosomal storage disorders. Takeda paid a $3.0 million upfront payment to the Company upon signing of the Takeda Agreement, and the Company iswas entitled to receive up to $1.124 billion in future additional payments over the course of the partnership that arewere contingent on the achievement of development or commercial milestones or Takeda’s election to continue its activities at specified development stages. The Company iswas also eligible for tiered royalties on future commercial sales of any licensed products. A more detailed
25
description of the Takeda Agreement and the Company’sCompany's evaluation of this agreement under ASC 606 can be found in Note 1214 to the consolidated financial statements in ourthe Company’s Annual Report on Form
10-K
for the year ended December 31, 2022.2023.
On March 9, 2023, the Company was notified by Takeda of the achievement of the milestone event related to the completion of a
non-clinical
milestone for one of the specified disease indications within the field of lysosomal storage disorders under the Takeda Agreement. Accordingly, the Company received a milestone payment of $0.5 million during the three months ended June 30, 2023.
In April 2023, the CompanyThe Takeda Agreement was notified by Takeda of its intention to terminate the Takeda Agreementterminated effective July 25, 2023.2023, following Takeda’s decision to discontinue discovery and pre-clinical activities in adeno-associated virus, or AAV, gene therapy.
As of June 30, 2023both March 31, 2024 and December 31, 2022,2023, the Company recorded no short-term contract liability and $0.1 million as a short-term contract liability, respectively, representing deferred revenue associated withrelated to the Takeda Agreement. No revenue related to the Takeda Agreement was recognized during the three months ended March 31, 2024. Revenue of $0.1 million and $0.6$0.5 million related to the Takeda Agreement was recognized during the three and six months ended June 30,March 31, 2023, respectively. No revenue was recognized during the three months ended June 30, 2022, and revenue of $1.0 millionall from performance obligations related to prior periods as a result of the Takeda Agreement was recognized during the six months ended June 30, 2022.change in transaction price.
Swedish Orphan Biovitrum AB (publ.)
License and Development Agreement
In June 2020, the Company and Sobi entered into a License and Development Agreement, or the Sobi License.License, which was subsequently amended. Pursuant to the Sobi License, the Company agreed to grant Sobi an exclusive, worldwide (except as to Greater China) license to develop, manufacture and commercialize the Company’s
SEL-212
drug candidate, which is currently in development for the treatment of chronic refractory gout. The
SEL-212
drug candidate is a pharmaceutical composition containing a combination of pegadricase,SEL-037, or the Compound, and ImmTOR. Pursuant to the Sobi License, in consideration of the license, Sobi agreed to pay the Company a
one-time,
upfront payment of $75.0 million. Sobi has also agreed to make milestone payments totaling up to $630.0 million to the Company upon the achievement of various development and regulatory milestones and, if commercialized, sales thresholds for annual net sales of
SEL-212,
and tiered royalty payments ranging from the low double digits on the lowest sales tier to the high teens on the highest sales tier. A more detailed description of the Sobi License and the Company’sCompany's evaluation of this agreement under ASC 606 can be found in Note 1214 to the consolidated financial statements in ourthe Company’s Annual Report on Form
10-K
for the year ended December 31, 2022.2023.
On October 31, 2023, the Company and Sobi entered into Amendment No. 1 to the Sobi License, pursuant to which the Company granted Sobi an exclusive license to manufacture ImmTOR solely in connection with Sobi’s development of SEL-212 under the License and Development Agreement and transferred certain contracts and manufacturing equipment to Sobi. Additionally, in connection with entry into the amendment, Sobi agreed to make employment offers to certain of the Company’s employees engaged in ImmTOR manufacturing activities on or prior to a specified date, and the Company agreed not to terminate the employment of such employees prior to such specified date. The Company maintains no responsibilities to Sobi to manufacture, or supply Sobi with, ImmTOR under the Sobi License.
As of June 30, 2023March 31, 2024 and December 31, 2022,2023, the Company recorded a total outstanding receivable of $5.1$0.6 million and $5.0$4.6 million, respectively, representing billings for the Phase 3 DISSOLVE program that are subject to reimbursement by Sobi. Additionally, as of June 30, 2023March 31, 2024 and December 31, 2022,2023, the Company recorded a total unbilled receivable of $1.1$2.4 million and $3.2$3.0 million, respectively, representing revenue earned but not yet billed for the Phase 3 DISSOLVE program. RevenueNo revenue and revenue of $4.3 million and $8.7$4.4 million related to the Sobi License was recognized during the three and six months ended June 30,March 31, 2024 and 2023, respectively. Revenue of $29.2 million and $52.9 million related to the Sobi License was recognized during the three and six months ended June 30, 2022, respectively.
Sarepta Therapeutics, Inc.
Research License and Option Agreement
In June 2020, the Company and Sarepta Therapeutics, Inc., or Sarepta, entered into a Research License and Option Agreement, or the Sarepta Agreement. Pursuant to the Sarepta Agreement, the Company agreed to grant Sarepta a license under the Company’s intellectual property rights covering the Company’s antigen-specific biodegradable nanoparticle encapsulating ImmTOR to research and evaluate ImmTOR in combination with Sarepta’s adeno-associated virus gene therapy technology, or gene editing technology, using viral or
non-viral
delivery, to treat Duchenne Muscular Dystrophy and certain Limb-Girdle
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Muscular Dystrophy subtypes, or the Indications. Sarepta initially had an option term of 24 months during which it could
opt-in
to obtain an exclusive license to further develop and commercialize the product to treat at least one indication, with a potential to extend the option term for an additional fee. The Company agreed to supply ImmTOR to Sarepta for clinical supply on a cost-plus basis under the Sarepta Agreement. A more detailed description of the Sarepta Agreement and the Company’sCompany's evaluation of this agreement under ASC 606 can be found in Note 1214 to the consolidated financial statements in ourthe Company’s Annual Report on Form
10-K
for the year ended December 31, 2022.2023.
On March 13, 2023, the Company was notified by Sarepta that Sarepta would not be exercising its exclusive option under the Sarepta Agreement. Therefore, the remaining deferred revenue balance as of December 31, 2022 of $0.5 million was
26
recognized as revenue during the sixthree months ended June 30,March 31, 2023. No revenue related to the Sarepta Agreement was recognized during the three months ended June 30, 2023. Revenue of $10.1 million and $10.2 million was recognized during the three and six months ended June 30, 2022, respectively.March 31, 2024.
Spark Therapeutics, Inc.
Spark License Agreement
In December 2016, the Company entered into a License and Option Agreement, or the Spark License Agreement, with Spark Therapeutics, Inc., or Spark, pursuant to which the Company and Spark agreed to collaborate on the development of gene therapies for certain targets utilizing the ImmTOR platform. The Spark License Agreement provides Spark with certain exclusive, worldwide, royalty bearing licenses to the Company’s intellectual property, allowing Spark to develop and commercialize gene therapies in combination with ImmTOR for Factor VIII, an essential blood clotting protein relevant to the treatment of hemophilia A, the initial target.
On January 18, 2022, both parties agreed to mutually terminate the Spark License Agreement. Therefore, the short-term contract liability of $9.2 million as of December 31, 2021 was recognized as revenue during the six months ended June 30, 2022. No revenue was recognized during the three months ended June 30, 2022.
Transaction Price Allocated to Future Performance Obligations
Remaining performance obligations represent the transaction price of contracts for which work has not been performed, or has been partially performed. As of June 30, 2023,March 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $9.1$0.4 million.
Contract Balances from Contracts with Customers
The following table presents changes in the Company’s contract liabilities during the sixthree months ended June 30, 2023March 31, 2024 (in thousands):
Balance atBalance at
beginning of periodAdditionsDeductionsend of period
Three Months Ended March 31, 2024
Contract liabilities:
     Deferred revenue$5,849 $— $(5,437)$412 
Total contract liabilities$5,849 $— $(5,437)$412 
   
Balance at
           
Balance at
 
   
beginning of period
   
Additions
   
Deductions
   
end of period
 
Six Months Ended June 30, 2023
        
Contract liabilities:        
Deferred revenue  $593   $10,500   $(1,996)   $9,097 
                    
Total contract liabilities  $593   $10,500   $(1,996)   $9,097 
                    

13.
14. Related-Party Transactions
November 2023 Securities Purchase Agreement
April 2022 Offering
DuringOn November 13, 2023, the Company entered into the Securities Purchase Agreement with (i) Dr. Timothy A. Springer, (ii) TAS Partners LLC, an affiliate of Dr. Springer, and (iii) Seven One Eight Three Four Irrevocable Trust, a trust associated with Dr. Murat Kalayoglu, in which the Company agreed to issue and sell an aggregate of 149,330.115 shares of Series A Preferred Stock for an aggregate purchase price of $60.25 million (see Note 10). The November 2023 Private Placement includes a delayed settlement mechanism, and as a result, the below issuances and sales to related parties of the Company were made during the three and six months ended June 30, 2022,March 31, 2024.
NameShares of Series A Preferred Stock purchasedTotal aggregate purchase price
Timothy A. Springer, Ph.D.99,140.326 $40,000,000 
Exercise of Amended 2019 Warrants
On March 26, 2024, TAS Partners LLC, an affiliate of Dr. Springer, exercised 65,681 Amended 2019 Warrants, paid the Company completed the underwritten offering as describedper-share exercise price of $43.80 in Note 10 to the consolidated financial statements within the Company’s Annual Report on Form
10-K
cash for the year ended December 31, 2022. The following table sets forth the numberan aggregate exercise price of $2.9 million, and received 65,681 shares of common stock and 2022 Warrants purchased in such offering by directors and executive officers, as of the time of such offering, and related parties thereto:1,970,443 CVRs.
Name
  
Shares of common

stock purchased
   
2022 Warrants

purchased
   
Total aggregate

purchase price
 
TAS Partners, LLC (affiliate of Timothy A. Springer, Ph.D.)   6,681,600    5,011,200   $9,421,056 
During the three and six months ended June 30,March 31, 2023, there were no related party transactions.
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14.15. Collaboration and License Agreements
Biogen MA, Inc.
On September 8, 2023, the Company entered into a non-exclusive, sublicensable, worldwide, perpetual patent license agreement, or the Biogen Agreement, with Biogen MA, Inc., or Biogen, to research, develop, make, use, offer, sell and import products or processes containing or using an engineering T-cell modified with an mRNA comprising, or encoding a protein comprising, certain sequences licensed under the Biogen Agreement for the prevention, treatment, palliation and management of autoimmune diseases and disorders, excluding cancers, neoplastic disorders, and paraneoplastic disorders. The Company is not obligated to pay Biogen any expenses, fees, or royalties.
The Company may terminate the Biogen Agreement for any reason or no reason, and Biogen may terminate the agreement after a notice-and-cure period of 30 days if the Company fails to pay a fee owed to Biogen or for any other material breach of the agreement. The Biogen Agreement will otherwise expire when all claims of all issued patents within the patents and patent applications licensed to the Company under the Biogen Agreement have expired or been finally rendered revoked, invalid or unenforceable by a decision of a court or government agency.
27
National Cancer Institute of the National Institutes of Health
Effective September 16, 2019, the Company entered into a nonexclusive, worldwide license agreement, or the NCI Agreement, with the U.S. Department of Health and Human Services, represented by the National Cancer Institute of the National Institutes of Health, or NCI.
Under the NCI Agreement, the Company was granted a license under certain NCI patents and patent applications designated in the agreement, to make, use, sell, offer and import products and processes within the scope of the patents and applications licensed under the NCI Agreement when developing and manufacturing anti-BCMA CAR-T cell products for the treatment of myasthenia gravis, pemphigus vulgaris, and immune thrombocytopenic purpura according to methods designated in the NCI Agreement.
In connection with the Company's entry into the NCI Agreement, Old Cartesian paid to NCI a one-time $0.1 million license royalty payment. Under the NCI Agreement, the Company is further required to pay NCI a low five-digit annual royalty. The Company must also pay earned royalties on net sales in a low single-digit percentage and pay up to $0.8 million in benchmark royalties upon the Company's achievement of designated benchmarks that are based on the commercial development plan agreed between the parties.
Under the NCI Agreement, the Company must use reasonable commercial efforts to bring licensed products and licensed processes to the point of Practical Application (as defined in the NCI Agreement). Upon the Company's first commercial sale, the Company must use reasonable commercial efforts to make licensed products and licensed processes reasonably accessible to the United States public. After the Company's first commercial sale, the Company must make reasonable quantities of licensed products or materials produced via licensed processes available to patient assistance programs and develop educational materials detailing the licensed products. Unless the Company obtains a waiver from NCI, the Company must have licensed products and licensed processes manufactured substantially in the United States. Prior to the first commercial sale, upon NCI’s request, the Company is obligated to provide NCI with commercially reasonable quantities of licensed products made through licensed processes to be used for in vitro research.
Additionally, the Company must use reasonable commercial efforts to initiate a Phase 3 clinical trial of a licensed product by the fourth quarter of 2024, submit a BLA with respect to a licensed product by the fourth quarter of 2026, and make a first commercial sale of a licensed product by the fourth quarter of 2028.
The NCI Agreement terminates upon the expiration of the last to expire of the patent rights licensed thereunder, if not sooner terminated. NCI has the right to terminate this agreement, after giving written notice and providing a cure period in accordance with its terms, if the Company is in default of a material obligation. The Company has the unilateral right to terminate the agreement in any country or territory by giving NCI 60 days’ written notice. The Company agreed to indemnify NCI against any liability arising out of the Company's, sublicensees’ or third parties’ use of the licensed patent rights and licensed products or licensed processes developed in connection with the licensed patent rights.
Ginkgo Bioworks Holdings, Inc.
Collaboration and License Agreements
On October 25, 2021, the Company entered into a Collaboration and License Agreement, or the First Ginkgo Agreement, with Ginkgo Bioworks Holdings, Inc., or Ginkgo. Under the First Ginkgo Agreement, Ginkgo will design next generation IgA proteases with potentially transformative therapeutic potential. In return, Ginkgo is eligible to earn both upfront research and development fees and milestone payments, including certain milestone payments for fixed fair values in the form of the Company's common stock, clinical and commercial milestone payments of up to $85.0 million in cash. The First Ginkgo Agreement was assessed for collaboration components and was determined not to be within the scope of ASC 808, Collaborative Arrangements, or ASC 808, as the risk and rewards are not shared by both parties. The Company will expense costs related to the First Ginkgo Agreement as incurred until regulatory approval is received in accordance with ASC 730, Research and Development, or ASC 730. The Company is accounting for the contingently issuable shares to be issued in exchange for the license obtained from Ginkgo as a liability classified stock-based compensation arrangement with a non-employee which will be recognized when achievement of the milestones is probable. The Company will assess the capitalization of costs incurred after the receipt of regulatory approval and, if applicable, will amortize these payments based on the expected useful life of each asset, typically based on the expected commercial exclusivity period. The Company is also obligated to pay Ginkgo tiered royalties ranging from low-single digit to high-single digit percentages of annual net sales of collaboration products which will be expensed as the commercial sales occur.
On January 3, 2022, the Company entered into a Collaboration and License Agreement, or the Second Ginkgo Agreement, with Ginkgo Bioworks Holdings, Inc., or Ginkgo. Under this agreement, the Company will engage with Ginkgo to develop adeno-associated virus, or AAV capsids designed to enhance transduction efficiency and transgene expression. In return, Ginkgo is eligible to earn both upfront research and development fees and milestone payments, including certain milestone payments in the form of shares of the Company’s common stock, clinical and commercial milestone payments of up to $207 million in cash. The Second Ginkgo Agreement was assessed for collaboration components and was determined not to be within the scope of ASC 808 as the risk and rewards are not shared by
28
both parties. The Company will expense costs related to the Second Ginkgo Agreement as incurred until regulatory approval is received in accordance with ASC 730. The Company is accounting for the contingently issuable shares of common stock to be issued in exchange for the license obtained from Ginkgo as a liability-classified, stock-based compensation arrangement with a
non-employee
which will be recognized when achievement of the milestones is probable. The Company will assess the capitalization of costs incurred after the receipt of regulatory approval and, if applicable, will amortize these payments based on the expected useful life of each asset, typically based on the expected commercial exclusivity period. The Company is also obligated to pay Ginkgo tiered royalties ranging from
low-single
digit to high-single digit percentages of annual net sales of collaboration products which will be expensed as the commercial sales occur.
In October 2021, the Company entered into a Collaboration and License Agreement, or the First Ginkgo Agreement, with Ginkgo. Under the First Ginkgo Agreement, Ginkgo will design next generation IgA proteases with potentially transformative therapeutic potential. In return, Ginkgo is eligible to earn research and development fees, clinical and commercial milestone payments of up to $85.0 million in cash, as well as certain milestone payments for fixed fair values in the form of shares of the Company’s common stock. The First Ginkgo Agreement was assessed for collaboration components and was determined not to be within the scope of ASC 808 as the risk and rewards are not shared by both parties. The Company will expense costs related to the First Ginkgo Agreement as incurred until regulatory approval is received in accordance with ASC 730. The Company is accounting for the contingently issuable shares of common stock to be issued in exchange for the license obtained from Ginkgo as a liability-classified, stock-based compensation arrangement with a
non-employee
which will be recognized when achievement of the milestones is probable. The Company will assess the capitalization of costs incurred after the receipt of regulatory approval and, if applicable, will amortize these payments based on the expected useful life of each asset, typically based on the expected commercial exclusivity period. The Company is also obligated to pay Ginkgo tiered royalties ranging from
low-single
digit to high-single digit percentages of annual net sales of collaboration products which will be expensed as the commercial sales occur.
On June 13, 2022, the Company was notified of the achievement of the midpoint of the technical development plan under the First Ginkgo Agreement by Ginkgo.This milestone resulted in the payment of $0.5 million and issuance of 892,85729,761 shares of the Company’s common stock then-valued at $1.0 million to Ginkgo during the year ended December 31, 2022.
On July 19, 2023, the Company and Ginkgo mutually agreed that the completion of the technical development plan’s midpoint task under the Second Ginkgo Agreement had been achieved as of June 30, 2023. This milestone resulted in the accrual of $2.5 million as of June 30, 2023 expected to be settled through a payment of $1.0 million and future issuance of 1,339,28544,642 shares of the Company’s common stock then-valued at $1.5 million to Ginkgo.Ginkgo during the year ended December 31, 2023.
Genovis AB (publ.)
License Agreement
In October 2021, the Company entered into an Exclusive License Agreement, or the Genovis Agreement, with Genovis AB (publ.), or Genovis. Under the Genovis Agreement, the Company paid to Genovis an upfront payment in exchange for an exclusive license to Genovis’ IgG Protease, orthe Xork enzyme technology across all therapeutic uses in humans, excluding research, preclinical, diagnostic and other potential
non-therapeutic
applications of the enzyme. Genovis is eligible to earn from the Company development and sales-based milestones and sublicensing fees. The Genovis Agreement was assessed for
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collaboration components and was determined not to be within the scope of ASC 808 as the risk and rewards are not shared by both parties. The Company will expense costs related to the Genovis Agreement as incurred until regulatory approval is received in accordance with ASC 730. The Company will assess the capitalization of costs incurred after the receipt of regulatory approval and, if applicable, will amortize these payments based on the expected useful life of each asset, typically based on the expected commercial exclusivity period. The Company is also obligated to pay Genovis tiered royalties of low double digit percentages of worldwide annual net sales of collaboration products which will be expensed as the commercial sales occur.
In February 2023, the Company made a $4.0 million payment to Genovis as a result of the sublicense of Xork to Astellas. See Note 1213 to these unaudited consolidated financial statements for further discussion on the Astellas Agreement.
In March 2024, the Company notified Genovis of its intention to terminate the Genovis Agreement effective September 13, 2024.
Cyrus Biotechnology, Inc.
Collaboration and License Agreement
In September 2021, the Company and Cyrus Biotechnology, Inc., or Cyrus, entered into a collaboration and license agreement, or the Cyrus Agreement. Pursuant to the Cyrus Agreement, Cyrus agreed to grant the Company an exclusive, worldwide license to certain intellectual property to form a protein engineering collaboration combining the Company’s ImmTOR platform with Cyrus’ ability to redesign protein therapeutics. The lead program iswas a proprietary
interleukin-2,
or
IL-2,
protein agonist designed to selectively promote expansion of regulatory T cells for treatment of patients with autoimmune diseases and other deleterious immune conditions. In return for the licensed intellectual property, the Company made an upfront payment and iswas obligated to pay certain discovery, development, and sales-based milestones which could totalhave potentially totaled up to approximately $1.5 billion across multiple programs. The Cyrus Agreement was assessed for collaboration components and was determined not to be within the scope of ASC 808 as the risk and rewards are not shared by both parties. The Company will expenseexpensed costs related to the Cyrus Agreement as incurred until regulatory approval is received in accordance with ASC 730. The Company will assessassessed the capitalization of costs incurred after the receipt of regulatory approval and, if applicable, will amortizewould have amortized these payments based on the expected useful life of each asset, typically based on the expected commercial exclusivity period. The Company iswas also obligated to pay Cyrus tiered royalties ranging from
mid-single
digit to
low-double
digit percentages of annual net sales of collaboration products which will bewould have been expensed as the commercial sales occur.
On June 13, 2022, the Company and Cyrus mutually agreed that the preclinical key in-vitro success milestone had been achieved.
In October 2023, the Company notified Cyrus of its termination of the Cyrus Agreement effective December 29, 2023.

Stock Purchase Agreement
29
Additionally, on September 7, 2021, the Company entered into a stock purchase agreement, or the Series B Preferred Stock Purchase Agreement, in connection with the Cyrus Agreement. Pursuant to the Series B Preferred Stock Purchase Agreement, the Company purchased 2,326,934 shares of Cyrus’ Series B Preferred Stock, par value $0.0001 per share, at a purchase price of $0.8595 per share, for $2.0 million.
In accordance with ASC 810, the Company has a variable interest in Cyrus resulting from its equity investment. The Company will share in Cyrus’ expected losses or receive a portion of its expected returns and absorb the variability associated with changes in the entity’s net assets. However, the Company is not the primary beneficiary as it does not have the power to direct the activities most significant to Cyrus, and therefore it is not required to consolidate Cyrus. The Company has recognized the $2.0 million investment of Cyrus’ Series B Preferred Stock at cost on the purchase date.
On June 13, 2022, the Company and Cyrus mutually agreed that the preclinical key
in-vitro
success milestone had been achieved.
As of June 30, 2023,March 31, 2024, no impairment indicators arewere present and thereforethere were no observable price changes. Therefore, the carrying value of the investment in Cyrus is $2.0 million on the accompanying consolidated balance sheet.sheets. The Company’s maximum exposure to loss related to this variable interest entity is limited to the carrying value of the investment. The Company has not provided financing to Cyrus other than the amount contractually required by the Series B Preferred Stock Purchase Agreement.
Asklepios Biopharmaceutical, Inc.
Feasibility Study and License Agreement
In August 2019, the Company entered into a feasibility study and license agreement, or the AskBio Collaboration Agreement, with Asklepios Biopharmaceutical, Inc., or AskBio. Pursuant to the AskBio Collaboration Agreement, the Company and AskBio agreed to license intellectual property rights to each other as part of a collaboration to research, develop, and commercialize certain AAV gene therapy products utilizing the Company’s ImmTOR platform to enable
re-dosing
of such AAV gene therapy products to treat serious rare and orphan genetic diseases for which there is a significant unmet medical need.
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Pursuant to the AskBio Collaboration Agreement, the Company and AskBio agreed to conduct proof of concept studies to potentially validate the use of ImmTOR in conjunction with AskBio’s AAV gene therapy, or
SEL-302,
(previously (previously disclosed as
MMA-101,
in combination with ImmTOR), for the treatment of methylmalonic acidemia, or MMA, to mitigate the formation of neutralizing
anti-AAV
capsid antibodies, or the POC Studies.antibodies. On April 29, 2021, the Company was notified by AskBio that AskBioit intended to
opt-out
of development of the MMA indication. The AskBio Collaboration Agreement otherwise remains in effect. Consequently, the Company has assumed all rights to the MMA program. The Company filed an investigational new drug application, or IND, to conduct a Phase 1/2 clinical trial of its
SEL-302
product candidate in pediatric patients with MMA in the third quarter of 2021. In December 2022, the Company initiated ReiMMAgine, the Phase 1/2 clinical trial of
SEL-302,
however, the Company has since paused further development of
SEL-302
for the treatment of MMA.
The
SEL-399
program combined an empty AAV capsid
(EMC-101),
which is an AAV capsid containing no transgene, with ImmTOR and is being conducted in partnership with AskBio. Building on the preclinical data the Company has generated showing ImmTOR’s effect on mitigating or reducing the formation of neutralizing antibodies to AAV gene therapies, the Company completed a clinical trial of
SEL-399
in healthy adult volunteers in Belgium. The goal of the
SEL-399
clinical trial was to demonstrate the appropriate dose of ImmTOR in humans to mitigate the formation of antibodies to AAV capsids used in gene therapies. The Company believes this promising study in healthy volunteers provides support for the potential use of ImmTOR for the inhibition of neutralizing antibodies to AAV8 in gene therapy clinical trials.
The Company and AskBio will shareshared responsibility for the research, development and commercialization of products developed under the
SEL-399
program collaboration. The parties will also shareshared research, development, and commercialization costs equally for all collaboration products, but with a right of either party to opt out of certain products, and thereby no longernot be required to share costs for such products. Each party will receivewould have received a percentage of net profits under the collaboration equal to the percentage of shared costs borne by such party in the development of such product. Pursuant to the AskBio Collaboration Agreement, AskBio iswas responsible for manufacturing the AAV capsids and AAV vectors and the Company iswas responsible for manufacturing ImmTOR.
The Company and AskBio Collaboration Agreement is considered to be within the scope of ASC 808, as both parties are active participants and exposedmutually agreed to the risks and rewards of the collaborative activity. The Company evaluated the termstermination of the AskBio Collaboration Agreement, and has identified the following promises in the arrangement (1) conducting research and development activities to develop and commercialize productseffective December 13, 2023.
No collaboration expense under the collaboration, or the R&D Services, (2) granting a
non-exclusive,
non-transferable,
royalty-free, fully paid up, worldwide license to certain intellectual property of the Company, or the IP Rights, for the purpose of performing the POC Studies, or the Research License, (3) granting an exclusive, nontransferable, worldwide license to the IP Rights for use in certain indications, or theAskBio Collaboration License, (4) providing manufactured supply of preclinical and clinical ImmTOR, or the Manufactured Supply, (5) participation on identified steering committees responsible for the oversight of the collaboration, or the JSC Participation, and (6) granting an exclusive option to obtain a license under the IP Rights to research, develop and commercialize licensed products. The Company determined that the R&D Services, Research License, Collaboration License, Manufactured Supply, and JSC Participation were not capable of being distinct, and therefore must be combined into a single performance obligation. Therefore, promises (1) through (5) identified above were combined into a single performance obligation. Furthermore, the Company evaluated the related option agreement and determined that it does not provide AskBio with a material right under ASC 606 as the optionAgreement was not priced at a discount. The Company noted that AskBio did not meet the definition of a customer within the scope of ASC 606 for any distinct performance obligations as the Company concluded that such items were not an output of the Company’s ordinary activities. As such, the Company determined that the entire arrangement would be accounted for within the scope of ASC 808. In accordance with ASC 808, collaboration expenses are recognized within research and development expense and selling, general and administrative expense on the Company’s condensed consolidated statements of operations and comprehensive income (loss).
Under certain collaborative arrangements, the Company is entitled to reimbursement of certain research and development expense. Activities under collaborative arrangements for which the Company is entitled to reimbursement are considered to be collaborative activities under the scope of ASC 808. For these units of account, the Company does not analogize to ASC 606 or recognize revenue. Rather, the Company analogizes to the guidance in ASC 730, which requires that reimbursements from counterparties be recognized as an offset to the related costs. In accordance with ASC 730, the Company records reimbursement payments received from collaborators as reductions to research and development expense.
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Duringduring the three and six months ended June 30,March 31, 2024. For the three months ended March 31, 2023, the Company recognized less than $0.1 million and $0.1 million, respectively, of collaboration expense under the AskBio Collaboration Agreement in which actual costs incurred by both parties approximate a 50% cost share. During the three and six months ended June 30, 2022, the Company recognized $0.2 million and $0.6 million, respectively, of collaboration expense under the AskBio Collaboration Agreement.
Massachusetts Institute of Technology
In November 2008, the Company entered into an Exclusive Patent License Agreement, or the MIT License, with the Massachusetts Institute of Technology, or MIT, under which the Company received an exclusive royalty-bearing license to utilize patents held by MIT in exchange for upfront consideration and annual license maintenance fees. Such fees are expensed as incurred and have not been material to any period presented.
In June 2020, the Company entered into a Fifth Amendment, or the MIT Amendment, to the MIT License, which is effective as of May 15, 2020. Pursuant to the MIT Amendment, certain of the Company’s diligence obligations were extended. The extension included the obligation to commence a Phase 3 trial for a licensed product by the second quarter of 2021 or to file an IND (or equivalent) with the FDA or comparable European regulatory agency for a licensed product by the second quarter of 2023. Additionally, certain of the Company’s development and regulatory milestones and payments upon achievement of such milestones were adjusted.
As of June 30, 2023, and in connection with the execution of the Spark License Agreement, the Company has made contractual payments pursuant to the MIT License totaling $2.2 million. In connection with the Spark Purchase Agreement and the calculated premium paid by Spark for the equity investments made as described in Note 12 to the consolidated financial statements within the Company’s Annual Report on Form
10-K
for the year ended December 31, 2022, the Company has made additional contractual payments pursuant to the MIT License which totaled $0.4 million as of June 30, 2023. The Company made no additional payments during the three and six months ended June 30, 2023.
Shenyang Sunshine Pharmaceutical Co., Ltd
In May 2014, the Company entered into a license agreement, or the 3SBio License, with Shenyang Sunshine Pharmaceutical Co., Ltd., or 3SBio. The Company has paid to 3SBio an aggregate of $7.0 million in upfront and milestone-based payments under the 3SBio License as of June 30, 2023.March 31, 2024. The Company is required to make future payments to 3SBio contingent upon the occurrence of events related to the achievement of clinical and regulatory approval milestones of up to an aggregate of $15.0 million for products containing the Company’s ImmTOR platform.
15.16. Income Taxes
The Company providesAs of March 31, 2024, we have not recorded any U.S. federal or state income tax benefits for income taxes under ASC 740. Under ASC 740,either the Company provides deferred tax assetsnet losses we have incurred or our earned research and liabilities fororphan drug credits, due to the expected future tax consequencesuncertainty of temporary differences between the Company’s financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates expected to be in effectrealizing a benefit from those items in the years in which the differences are expected to reverse.
The Company has provided a full valuation allowance against its net deferred tax assets, as the Company believes that it is more likely than not that the deferred tax assets will not be realized.
Effective for tax years beginning on or after January 1, 2022, research and experimental expenditures under IRC Section 174 must be capitalized over five years when performed in the U.S. and 15 years for research and experimental expenditures performed outside of the U.S. As of June 30, 2023, the Company has performed a high-level analysis of the impact of this legislation enactment and determined the projected taxable loss position for 2023 does not result in income tax due. As of December 31, 2022, the Company has $62.4 million of federal net operating losses available, subject to an 80% limitation. The Company also has $2.3 million of federal tax credits, subject to a 75% limitation. The Company maintains its full valuation allowance.
26
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Utilization of the net operating loss and research and development credit carryforwards may be subject to a substantial annual limitation under Section 382 and 383 of the Internal Revenue Code due to ownership change limitations that have occurred previously, or that could occur in the future. These ownership changes may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. As of December 31, 2021, the Company completed both a Section 382 and research and development tax credit study through December 31, 2020. The Company generated research credits for the years ended December 31, 2022 and 2021, but has not conducted a formal study to document its qualified activities.
The statute of limitations for assessment by the Internal Revenue Service and Massachusetts tax authorities is open for tax years since inception as the Company claimed research tax credits on its 2020 tax return which remains open for examination for the 2020 year as well as for any year in which a credit has been claimed. The Company files income tax returns in the United States and Massachusetts. There are currently no federal, state or foreign audits in progress.
16.17. Defined Contribution Plan
The Company maintains a defined contribution plan, or the 401(k) Plan, under Section 401(k) of the Internal Revenue Code. The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants
30
to defer a portion of their annual compensation on a pretax basis. The 401(k) Plan provides for matching contributions on a portion of participant contributions pursuant to the 401(k) Plan’s matching formula. Commencing inAs of January 2022, all matching contributions vest ratably over two years and participant contributions vest immediately. Contributions by the Company totaled less than $0.1 million and $0.1 million during each of the three months ended June 30,March 31, 2024 and 2023, and 2022, and $0.2 million during each of the six months ended June 30, 2023 and 2022.respectively.
17.18. Commitments and Contingencies
As of June 30, 2023,March 31, 2024, the Company was not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
Other
As permitted under Delaware law, the Company has agreed to indemnifyindemnifies its directors and officers for certain events or occurrences while the director or officer is, or was, serving at the Company’s request in such capacity. The term of the indemnification is for the director’s or officer’s lifetime. The maximum potential amount of future payments the Company could be required to make is unlimited; however, the Company has directors’ and officers’ insurance coverage that limits its exposure and enables it to recover a portion of any future amounts paid. The Company also has indemnification arrangements under certain of its facility leases that require it to indemnify the landlord against certain costs, expenses, fines, suits, claims, demands, liabilities, and actions directly resulting from certain breaches, violations, or
non-performance
of any covenant or condition of the Company’s lease. The term of the indemnification is for the term of the related lease agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. To date, the Company had not experienced any material losses related to any of its indemnification obligations, and no material claims with respect thereto were outstanding.
The Company is a party in various other contractual disputes and potential claims arising in the ordinary course of business. The Company does not believe that the resolution of these matters will have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

18.
19. Restructuring
In April 2023, in light of current market conditions, the Board of Directors took steps to extend the Company's cash runway by pausing further development of SEL-302 for the treatment of MMA, and conducting a targeted headcount reduction. On August 17, 2023, the Company announced additional steps to extend cash runway and maximize value for stockholders by continuing to prioritize development of SEL-212 and support of its collaboration with Astellas for Xork, and pausing further development of all of the Company’s other clinical and preclinical product candidates that it was no longer actively advancing.
As a result of these measures, the Company implemented a restructuring plan resulting in an approximate 79% reduction of the Company's existing headcount by March 31, 2024. The Company recognized restructuring expenses consisting of one-time cash severance payments and other employee-related costs of $6.4 million for the year ended December 31, 2023 with $5.6 million and $0.8 million recorded to research and development and general and administrative operating expense categories, respectively, on its consolidated statements of operations and comprehensive income (loss) based on each employee's role. Cash payments for employee related restructuring charges of $2.5 million were paid as of December 31, 2023.
For the three months ended March 31, 2024, the Company recorded restructuring expenses consisting of one-time cash severance payments and other employee-related costs of $0.3 million, with $0.2 million and $0.1 million recorded to research and development and general and administrative operating expense categories, respectively, on its consolidated statements of operations and comprehensive income (loss) based on each employee's role. Cash payments for employee related restructuring charges of $3.3 million were paid during the three months ended March 31, 2024.
The following table summarizes the change in the Company's accrued restructuring balance (in thousands):
Beginning BalanceEnding Balance
December 31, 2023ChargesPaymentsMarch 31, 2024
Severance liability$3,896 $292 $(3,320)$868 
20. Subsequent Events
Reverse Stock Split
On April 4, 2024, the Company implemented the Reverse Stock Split. The Reverse Stock Split became effective at 4:30 p.m. Eastern Time on April 4, 2024. On April 5, 2024, the Company’s common stock began trading on The Nasdaq Global Market on a split-adjusted basis under the symbol “RNAC” with a new CUSIP number, 816212302. As a result of the Reverse Stock Split, every 30 shares of common stock outstanding were combined, automatically and without any action on the part of the Company has evaluated subsequent events throughor its stockholders, into one share of common stock. Stockholders entitled to fractional shares as a result of the date on whichReverse Stock Split received a cash payment in lieu of receiving fractional shares. The Reverse Stock Split did not change the consolidated financial statements were issued. The Company has concluded that no subsequent events have occurred that require disclosure, except as disclosed within these consolidated financial statements.number of authorized shares or par value of the Company’s common or preferred stock.
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Series A Preferred Stock Automatic Conversion
The Automatic Conversion of the Series A Preferred Stock occurred on April 8, 2024 at 5:00 p.m. Eastern Time pursuant to the terms of the Certificate of Designation, as amended. As a result, 367,919.247 shares of Series A Preferred Stock automatically converted into 12,263,951 shares of common stock; 166,341.592 shares of Series A Preferred Stock did not automatically convert due to beneficial ownership limitations. The166,341.592 shares of Series A Preferred Stock that did not automatically convert are convertible into 5,544,719 shares of common stock. Based on the 17,779,787 shares of common stock outstanding on April 8, 2024, there would be 23,324,506 shares of common stock outstanding if all shares of Series A Preferred Stock converted into common stock on such date.
7495 New Horizon Way Lease Amendment
Effective May 7, 2024, the Company and the Landlord entered into a First Amendment to the Frederick Lease Agreement, or the Amendment, providing for the expansion of the premises leased pursuant to the Frederick Lease Agreement by approximately 7,842 square feet. In connection with the expansion of the leased premises, the Company will be obligated to pay $0.3 million in additional annual base rent for the first year of the term, which is subject to an annual upward adjustment of 3% of the then-current rental rate.

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 in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, which we filed with the SEC on March 2, 2023.7, 2024. In addition, you should read the “Risk Factors” and “Information Regarding Forward-Looking Statements” sections of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 20222023 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biotechnology company leveraging our ImmTOR® platform to develop tolerogenicdeveloping mRNA cell therapies designed to selectively mitigate unwanted immune responses. With a proven ability to induce tolerance to highly immunogenic proteins, ImmTOR has the potential to amplify the efficacy of biologic therapies, including redosing of life-saving gene therapies, as well as restore the body’s natural self-tolerance in autoimmune diseases. We have several proprietary and partnered programs in our pipeline focused on enzyme therapies, gene therapies, and autoimmune diseases.

In April 2023, in light of current market conditions, our Board of Directors, or the Board, took steps to extend cash runway by pausing further development of SEL-302 for the treatment of methylmalonic acidemia,autoimmune diseases. We leverage our proprietary technology and manufacturing platform to introduce one or MMA, and conducting a targeted headcount reduction of approximately 25%. On August 17, 2023, we announced additional stepsmore mRNA molecules into cells to extend cash runway and maximize value for stockholders by continuing to prioritize development of SEL-212 and support ofenhance their function. Unlike DNA, mRNA degrades naturally over time without integrating into the cell’s genetic material. Therefore, our collaboration with Astellas Gene Therapies, or Astellas, for Xork, and pausing further development of all of our other clinical and preclinical product candidates that we are no longer actively advancing. We intend to seek collaboration partners for the assets in the development programs that we are no longer actively advancing.

Our Product Candidates

Our ImmTOR platform has a broad range of potential applications. Our product development strategy has historically been built on the following three distinct pillars.

Biologic therapies. BiologicmRNA cell therapies are distinguished by their capacity to be dosed repeatedly like conventional drugs, administered in an outpatient setting, and given without pre-treatment chemotherapy required with many conventional cell therapies. In an open-label Phase 2 clinical trial in patients with myasthenia gravis, or MG, a class of biologic drugs frequently used to treat rare diseases. Through our analysis of biologic drugs, including in our preclinical studies,chronic autoimmune disease that causes disabling muscle weakness and fatigue, we have observed that enzymes foreign to the human body, such as enzymes derived from microbes or replacement enzymes in the case of patients that are deficient in the specific enzyme, are especially prone to causing undesired immune responses. Our partneredour lead product candidate, Descartes-08, generated a deep and durable clinical benefit.SEL-212, which announced positive topline results from

We are leveraging our proprietary technology and manufacturing platform, RNA Armory®, to develop mRNA cell therapies for autoimmune diseases across three modalities. Our mRNA CAR-T modality is a personalized approach that collects a patient’s T-cells and uses mRNA to introduce a CAR into the Phase 3 DISSOLVE Icell. The CAR redirects the T-cells to target and DISSOLVE II clinical trials in March 2023, consists of ImmTOR co-administered with pegadricase, a pegylated uricase enzyme of fungal origin. Thisdestroy pathogenic self-reactive cells. Our mRNA MSC modality is an example of an immunogenic enzymeallogeneic approach that weintroduces one or more mRNAs into donor-sourced mesenchymal stem cells, enabling them to produce proteins that target key pathways involved in autoimmunity. These cells are combining with ImmTOR with the intention of improving the enzyme’s efficacybanked and safety. We believe that ImmTOR has the potentialare designed to enable and expand the use of enzymes derived from microbial sources, such as bacterial immunoglobulin A, or IgA, protease for the treatment of IgA nephropathy and bacterial immunoglobulin G, or IgG, protease, called Xork, for the treatment of IgG-mediated autoimmune disease flares.

Gene therapies. We believe gene therapies have the potentialbe administered off-the-shelf to address key unmet medical needs for many rare genetic diseases, but undesired immune responses to the viral vectors used for gene replacement, augmentation and editing may be restricting their broader use. AAV immunogenicity and AAV toxicity represent two major challenges for the gene therapy field; any patient. Our mRNA in many cases these two issues are inextricably linked. Immunogenicity of AAV vectors is thought to cause or exacerbate many of the adverse events associated with AAV gene therapy. Induction of acute inflammation and capsid-specific CD8 T cells by

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AAV gene therapy is thought to contribute to observations of hepatotoxicity, which has been associated with loss of transgene expression. The formation of neutralizing antibodies against AAV after initial treatment with AAV mediated gene therapies effectively prevents the possibility of re-dosing in patients who may benefit from additional doses due to either the failure to achieve therapeutic benefit or loss of transgene expression over time. Additionally, a significant number of patients who would benefit from treatment by gene therapies are ineligible due to pre-existing immunity to the AAV vectors from a natural infection. This preexisting immunity could potentially be addressed through an IgG protease pre-treatment to open a dosing window for AAV gene therapies. We believe that the combination of ImmTOR and Xork could simultaneously address the two key issues facing the AAV gene therapy modality and make them more accessible while also making them safer and more durable.

Tolerogenic Therapies for Autoimmune Diseasesitu : Autoimmune diseases are caused by a breakdown in natural tolerance to our own self-antigens. With over 24 million Americans afflicted with autoimmune diseases, there is a large unmet medical need. As the ImmTOR platformmodality is designed to inducedeliver mRNA into a patient’s lymph node to generate CAR-T cells and other proteins that target autoimmunity.

Merger
On November 13, 2023, the Company (formerly known as Selecta Biosciences, Inc., or expand antigen specific T regulatory cells, we believeSelecta) merged with the ImmTOR platform has the potential to treat autoimmune diseases by restoring self-tolerance to auto-antigens.

In our preclinical studies, we observed that ImmTOR combined with a Treg-selective IL-2 molecule exhibited substantial synergistic activity in increasing the percentage and durability of total Treg expansion in the spleen. We believe that this combination has the potential to be a best-in-class therapy in diseases where expansion of total Treg may prove beneficial. This antigen specificity differentiates ImmTOR-IL from other IL-2 molecule approachesprivate Delaware corporation which, do not show an antigen specific T-cell expansion. Thus, we believe that not only is ImmTOR-IL a potentially best in class IL-2 where generalized T cell expansion can be beneficial, but also a “first in class” antigen specific IL-2 therapy.

Biologic Therapies – Chronic Refractory Gout

SEL-212 consists of ImmTOR co-administered with pegadricase. Our pegadricase consists of a yeast-derived uricase modified with polyethylene glycol moieties. Uricase is an enzyme endogenous to all mammals, except for humans and certain primates, which converts serum urateimmediately prior to the more soluble metabolite, allantoin. There is a natural limit to the amount of serum urate that can be excreted by the kidneys, which decreases with age and can be reduced by some medications. By converting serum urate to allantoin, uricase provides an additional way for the body to reduce serum urate.

On March 21, 2023, we announced top-line data from the Phase 3 DISSOLVE I and II trials. Top-line results include:

•

During month six, 56% and 48% of DISSOLVE I patients randomized to receive SEL-212 at the high dose of 0.15 mg/kg of ImmTOR (p<0.0001) and the low dose of 0.1 mg/kg of ImmTOR (p<0.0001), respectively, reached the primary endpoint of serum urate (SU) levels < 6 mg/dL for 80% of the time in month six, compared to 4% of patients randomized to receive placebo. During month six, 47% and 41% of DISSOLVE II patients randomized to receive SEL-212 at the high dose (p=0.0002) and the low dose (p=0.0015) of ImmTOR, respectively, reached the primary endpoint, compared to 12% of patients randomized to receive placebo.

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•

65% and 47% of DISSOLVE I patients 50 years and older randomized to receive SEL-212 at the high dose (p<0.0001) and the low dose (p<0.0001) of ImmTOR, respectively, reached the primary endpoint, compared to 5% of patients randomized to receive placebo; 48% and 45% of DISSOLVE II patients 50 years and older randomized to receive SEL-212 the high dose (p=0.0017) and the low dose (p=0.0044) of ImmTOR, respectively, reached the primary endpoint, compared to 14% of patients randomized to receive placebo.

•

In DISSOLVE I, a significant and clinically meaningful overall reduction of 69% in mean SU levels at month six was observed in patients randomized to receive SEL-212 at the high dose, as compared with placebo.

•

Adverse events (AEs) identified in the trials were expected, including mild to moderate stomatitis which was observed in 3.4% of the low dose group and 9.2% of the high dose group compared to 0% in placebo across both trials, and a greater number of infusion reactions were observed at 24 hours and 1 hour after drug administration in both treatment groups compared to placebo. Treatment-related serious AEs were observed in six patients, including two cases of anaphylaxis and one gout flare in both the high and low dose treatment groups. Only 4.5% of patients receiving the low dose of SEL-212 and 3.4% at the high dose of SEL-212 had infusion reactions, across both trials, evaluated one hour post-dose. All infusion reactions occurred within the first three infusions, and each occurred during infusions and completely resolved with infusion halt and symptomatic treatment. There was one death in the six-month extension phase of the DISSOLVE I trial, which was caused by a motor vehicle accident unrelated to the study drug. There was no difference in gout flares when both treatment groups were compared to placebo.

•

In the six-month extension period for the DISSOLVE I trial, 75% of patients who completed six months of SEL-212 treatment as responders were observed to continue to be successfully treated through 12 months with no infusion reactions or safety signals.

On July 10, 2023,Merger (as defined below), was known as required under the Sobi License, we transferred control and ownership of the investigational new drug applications, or INDs, associated with SEL-212 to Sobi.

We estimate that peak sales of SEL-212, if approved, could reach over $700 million.

Gene Therapies – Methylmalonic Acidemia

Our lead therapeutic gene therapy program, SEL-302, is intended to use ImmTOR to enhance the treatment of methylmalonic acidemia, or MMA, an inherited disorder in which the body is unable to process certain proteins and fats (lipids) properly. This program was previously being conducted under our collaboration with Asklepios Biopharmaceutical,Cartesian Therapeutics, Inc., or AskBio. In October and November 2020, we received rare pediatric disease designation and orphan drug designation, respectively, from the Food and Drug Administration, or the FDA, for SEL-302, for the treatment of MMA due to methylmalonyl-CoA mutase, or MMUT gene mutations. See “—Licenses and Collaborations — Asklepios Biopharmaceutical, Inc.” for more information. In April 2021, we were notified by AskBio that it intended to opt-out of development of the MMA indication. The feasibility study and license agreement with AskBio, or AskBio Collaboration Agreement, otherwise remains in effect. We filed an IND to conduct a Phase 1/2 clinical trial of our SEL-302 product candidate in pediatric patients with methylmalonic acidemia in the third quarter of 2021. ImmTOR manufacturing, controlled by us, continues to proceedOld Cartesian, in accordance with our expectationsthe terms of an Agreement and we have not observed any impact to anyPlan of our ImmTOR programs. In December 2022, we initiated ReiMMAgine,Merger, or the Phase 1/2 clinical trialMerger Agreement, by and among

Selecta, Sakura Merger Sub I, Inc., a wholly owned subsidiary of SEL-302, however, we have since paused further developmentSelecta, or First Merger Sub, Sakura Merger Sub II, LLC, a wholly owned subsidiary of SEL-302 for the treatment of MMA.

Gene Therapies – IgG Protease (Xork)

We have exclusively licensed Xork, an IgG-specific protease from Genovis AB (publ.),Selecta, or Genovis, an enzyme technology company. We plan to develop Xork, either alone or in combination with our ImmTOR platform, with the goal of enabling the dosing of transformative gene therapies in patients with pre-existing AAV immunity due to natural exposures to AAV viruses. Currently, significant proportions of the potential patient populations for many gene therapy trials are ineligible for treatment by AAV mediated gene therapies due to pre-existing antibodies which limits transduction efficiency of the therapySecond Merger Sub, and could trigger potentially dangerous immune responses. IgG proteases are derived from bacteria. Xork exhibits low cross-reactivity to antibodies in normal human serum and is differentiated from IgG proteases derived from Streptococcus pyogenes, a common human pathogen.

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In January 2023, we entered into an exclusive licensing and development agreement for Xork to be developed for use with AT845, Astellas’ investigational AAV-based treatment for Pompe disease in adults. We are responsible for the early development activities and manufacturing of Xork and will maintain the rights for the development of additional indications beyond Pompe disease. We intend to work to satisfy our remaining contractual obligations in connection with our partnership with Astellas.

Tolerogenic Therapies for Autoimmune Disease – ImmTOR & ImmTOR-IL

We believe our ImmTOR platform shows potential to treat autoimmune diseases. In preclinical studies, we have observed ImmTOR’s ability to induce antigen-specific T regulatory cells. We believe that ImmTOR, in combination with an autoantigen of interest, could create self-tolerance to auto-antigens and thus be a novel approachOld Cartesian. Pursuant to the treatmentMerger Agreement, First Merger Sub merged with and into Old Cartesian, pursuant to which Old Cartesian was the surviving corporation and became a wholly owned subsidiary of autoimmune diseases.

Additionally, in preclinical studies we have observed ImmTOR, in combination with IL-2 molecules, expanding T-regulatory cells beyond IL-2 alone and we intend to pursue a combination of ImmTOR and IL-2, which we refer to as ImmTOR-IL, in diseases for which general T cell expansion has shown a therapeutic benefit. Additionally, we have observed in preclinical studies that the combination of ImmTOR, a Treg-selective IL-2 molecule and an antigen, exhibited substantial synergistic activity in inducing and expanding antigen specific regulatory T cells when ImmTOR and IL-2 is combined with an antigen of interest. We have paused further development of ImmTOR-IL product candidates.

Cyrus Biotechnology, Inc., or Cyrus, is engineering a proprietary IL-2 protein to combine with the ImmTOR platform to potentially mitigate unwanted immune responses by reducing the inherent immunogenicity of the protein while also promoting immune tolerance. The IL-2 pathway influences critical aspects of both immune stimulation and immune regulation, through the development and expansion of Treg cells. These Treg cells are a specialized subpopulation of T cells involved in suppressing certain immune responses and maintaining the body’s self-tolerance. In preclinical studies investigating the effects of ImmTOR in combination with a Treg-selective IL-2 molecule we have observed a substantial synergistic activity in increasing the percentage and durability of Treg expansion in the spleen.

Licenses and Collaborations

In-licenses

Ginkgo Bioworks Holdings, Inc.

In October 2021, we entered into a Collaboration and License Agreement,Selecta, or the First Ginkgo Agreement, with Ginkgo Bioworks Holdings, Inc., or Ginkgo. UnderMerger. Immediately following the First Ginkgo Agreement, Ginkgo will design next generation IgA proteasesMerger, Old Cartesian merged with potentially transformative therapeutic potential. In return, Ginkgo is eligibleand into Second Merger Sub, pursuant to earn both upfront research and development fees and milestone payments, including certain milestone payments inwhich Second Merger Sub was the form of our common stock, clinical and commercial milestone payments of up to $85 million in cash, as well as downstream value in the form of royalties on sales.

In January 2022, we entered into a Collaboration and License Agreement,surviving entity, or the Second Ginkgo Agreement,Merger and, together with Ginkgo. Under the Second Ginkgo Agreement, we and Ginkgo collaborate to design novel AAV capsids with potentially improved transduction, enhanced tissue tropism and reduced immunogenicity. In return, Ginkgo is eligible to earn both upfront research and development fees and milestone payments, including certain milestone payments in the form of our common stock, clinical and commercial milestone payments of up to $207 million in cash for each of a specified number of products which have the potential to total, in the aggregate, up to $1.1 billion. Ginkgo is also entitled to potential further downstream value in the form of royalties on sales.

In June 2022, we were notified of the achievement of the midpoint of the technical development plan under the First Ginkgo Agreement by Ginkgo. In July 2023, we mutually agreed with Ginkgo thatMerger, the completion of the technical development plan’s midpoint task under the Second Ginkgo Agreement had been achieved as of June 2023.

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Genovis AB (publ.)

In October 2021, we entered into a strategic licensing agreement with Genovis, or the Genovis Agreement. Under the Genovis Agreement, we paid to Genovis an upfront payment in exchange for an exclusive license to Genovis’ Xork enzyme technology for all therapeutic uses in humans, excluding research, preclinical, diagnostic, and other potential non-therapeutic applications of the enzyme. Genovis is eligible to earn development and sales-based milestones and sub-licensing fees, as well as tiered royalties on worldwide sales in the low double digits. Outside of the remaining contractual obligations under our partnership with Astellas, we have paused further development of Xork product candidates.

Cyrus Biotechnology, Inc.

In September 2021, we entered into a Collaboration and License Agreement with Cyrus, or the Cyrus Agreement, pursuant to which Cyrus agreed to grant us an exclusive, worldwide license to certain intellectual property in order to form a protein engineering collaboration combining the ImmTOR platform with Cyrus’ engineered protein therapeutics. We expect that novel engineered protein therapeutic candidates from the partnership will be used to expand our proprietary pipeline and further bolster the ImmTOR platform. In return for the licensed intellectual property, we made an upfront payment and will pay certain discovery, development, and sales-based milestones which could potentially total up to approximately $1.5 billion across multiple programs.

In June 2022, we mutually agreed with Cyrus that the preclinical key in-vitro success milestone had been achieved. We intend to pause further development of product candidates involving Cyrus’ engineered protein therapeutics.

Out-licenses

Astellas Gene Therapies

In January 2023, we entered into a License and Development Agreement with Astellas. Under this agreement, Astellas obtained the sole and exclusive right to commercialize Xork for use in Pompe disease in combination with an Astellas gene therapy investigational or authorized product, with a current focus on AT845.Merger. In connection with entry into this agreement, we received a $10 million upfront paymentthe Second Merger, Old Cartesian changed its name to Cartesian Bio, LLC. In connection with the Merger and are eligible to receive $340.0 million for certain additional development and commercial milestones plus royalties on any potential commercial sales where Xork is used as a pre-treatment for AT845. As a result of the sublicense of Xork to Astellas, we made a $4.0 million payment to Genovis in February 2023.

Takeda Pharmaceuticals USA, Inc.

In October 2021, we entered into a strategic licensing agreement, or the Takeda Agreement, with Takeda Pharmaceuticals USA, Inc., or Takeda. Under the Takeda Agreement, we granted Takeda an exclusive license to our ImmTOR technology initially for two specified disease indications within the field of lysosomal storage disorders. Under the terms of the Takeda Agreement, we received an upfront payment and are entitled to receive up to $1.124 billion in future additional payments over the course of the partnership that are contingent on the achievement of development or commercial milestones or Takeda’s election to continue its activities at specified development stages. We are also eligible for tiered royalties on future commercial sales of any licensed products. In June 2023, we received a payment of $0.5 million for the achievement of a certain non-clinical milestone. In April 2023, we were notified by Takeda of its intention to terminate the Takeda Agreement effective July 25, 2023.

Swedish Orphan Biovitrum AB (publ.)

In June 2020, we announced that we had entered into a License and Development Agreement, or the Sobi License, with Sobi pursuant to which we agreed to grant Sobi an exclusive, worldwide (except as to Greater China) license to develop, manufacture and commercialize SEL-212, which is currently in development for the treatment of chronic refractory gout. In September 2020, pursuant to the Sobi License, Sobi paid us a one-time, upfront paymentMerger Agreement, the Company changed its corporate name to Cartesian Therapeutics, Inc. See Note 3 of $75 million. Sobi has also agreed to make milestone payments totaling up to $630 million to us upon the achievement of various development and regulatory milestones and sales thresholds for annual net sales of SEL-212, and tiered royalty payments ranging from the low double digits on the lowest sales tieraccompanying notes to the high teens onunaudited consolidated financial statements appearing elsewhere in this Quarterly Report for additional information regarding the highest sales tier. In July 2022, we received $10.0 million for the completionMerger.

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Table of the enrollment of the DISSOLVE II trial.

Additionally, in 2020, Sobi purchased an aggregate of 5,416,390 shares of our common stock at a purchase price of $4.6156 per share for aggregate gross proceeds of $25 million, which we refer to as the Sobi Private Placement.

Under the Sobi License, we have operational oversight of the Phase 3 DISSOLVE clinical program of SEL-212Contents (DISSOLVE I and DISSOLVE II) that commenced in September 2020, at Sobi’s expense. In March 2023, we announced positive topline results from the Phase 3 DISSOLVE I and DISSOLVE II clinical trials.

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Sarepta Therapeutics, Inc.

In June 2020, we entered into a research license and option agreement, or the Sarepta Agreement, with Sarepta Therapeutics, Inc., or Sarepta. Pursuant to the Sarepta Agreement, we granted Sarepta a license to research and evaluate ImmTOR in combination with Sarepta’s AAV gene therapy or gene editing technology, using viral or non-viral delivery, or the Sarepta Product, to treat Duchenne Muscular Dystrophy and certain Limb-Girdle Muscular Dystrophy subtypes, or the Sarepta Indications. Sarepta had an option term of 24 months during which it was permitted to opt-in to obtain an exclusive license to further develop and commercialize the Sarepta Product to treat at least one Sarepta Indication, with a potential to extend the option term if Sarepta paid an additional fee to us. Sarepta made an upfront payment to us upon signing of the Sarepta Agreement, and we were eligible to receive additional payments under the option term. If Sarepta opted-in to an exclusive license agreement, we could have received option exercise payments per indication and we would have been entitled to significant development and commercial milestone payments and tiered royalties ranging from the mid-to-high single digits based on net sales.

In June 2021, we received a payment of $3.0 million for the achievement of certain preclinical milestones. In August 2022, we received a payment of $2.0 million in exchange for a nine-month extension to Sarepta’s options to both Sarepta Indications and a payment of $4.0 million for the achievement of certain non-clinical milestones. In March 2023, we were notified by Sarepta that Sarepta would not be exercising its exclusive option under the Sarepta Agreement.

Asklepios Biopharmaceutical, Inc.

Feasibility Study and License Agreement

In August 2019, we entered into the AskBio Collaboration Agreement. The initial product candidate being developed under this collaboration is gene therapy for MMA, which is a disease that can cause severe developmental defects and premature death as a result of an accumulation of toxic metabolites. We previously conducted preclinical studies for this product candidate and will leverage that previous work within the collaboration. In April 2021, we were notified by AskBio that it intended to opt-out of development of the MMA indication. The AskBio Collaboration Agreement otherwise remains in effect, although we have paused further development of SEL-302 for the treatment of MMA.

Impact of Global Events

COVID-19

We continue to closely monitor how the COVID-19 pandemic is affecting our employees, business, preclinical studies and clinical trials. Disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials, and the incurrence of unforeseen costs as a result of supply chain, preclinical study or clinical trial delays.

While the COVID-19 pandemic has not had a material impact on our clinical programs as of the date of this Quarterly Report, it could have an impact on our ability to commence and conduct preclinical studies and clinical trials of our IgA nephropathy, gene therapy, and autoimmune disease programs, and our ability to obtain supply of both active drug substances and finished drug product as well as efficient execution of the overall supply chain for SEL-212 and our other programs.

At this time, any impact of COVID-19 on our business, revenues, results of operations and financial condition will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, the emergence of new virus variants, travel restrictions and social distancing in the United States and other countries, business closures, disruptions, mandated stay at home orders or lockdowns, supply chain disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

Financial Operations

To date, we have financed our operations primarily through public offerings and private placements of our securities, funding received from research grants, collaboration and license arrangements and oura credit facility. We do not have any products approved for sale and have not generated any product sales.

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Except for the year ended December 31, 2022, we have incurred significant operating losses since our inception. We incurred a net loss of $33.1$56.8 million and had net income of $37.4$21.7 million for the sixthree months ended June 30,March 31, 2024 and 2023, and 2022, respectively. As of June 30, 2023,March 31, 2024, we had an accumulated deficit of $428.0$671.5 million.

In April 2023, in light of current market conditions, our Board took steps to extend cash runway by pausing further development of SEL-302 for the treatment of MMA and conducting a targeted headcount reduction of approximately 25%. On August 17, 2023, we announced additional steps to extend cash runway and maximize value for stockholders by continuing to prioritize development of SEL-212 and support of our collaboration with Astellas for Xork, and pausing further development of all of our other clinical and preclinical product candidates that we are no longer actively advancing. We intend to seek collaboration partners for the assets in the development programs that we are no longer actively advancing. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we:

•advance Descartes-08 for MG into Phase 3 development;

•continue to support the development of SEL-212develop our preclinical and satisfy our contractual obligations under our collaboration with Astellas for Xork;

assess ways to maximize value and support further development of ourclinical-stage product candidates, other than SEL-212 and Xork, through potential partnerships;

candidates;

•seek regulatory approvals for any product candidates that successfully complete clinical trials; and

•maintain, expand and protect our intellectual property portfolio, including through licensing arrangements.

Until we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, and license and collaboration agreements. We may be unable to raise capital when needed or on reasonable terms, if at all, which would force us to delay, limit, reduce or terminate our product development or future commercialization efforts. We will need to generate significant revenues to achieve profitability, and we may never do so.
Concurrently with the closing of the Merger, we entered into a securities purchase agreement, or the Securities Purchase Agreement, pursuant to which we agreed to issue 149,330.115 shares of Series A Non-Voting Convertible Preferred Stock, par value $0.0001 per share, or the Series A Preferred Stock, in exchange for aggregate gross proceeds of $60.25 million, or the November 2023 Private Placement. We granted customary registration rights to investors in connection with the November 2023 Private Placement.
We believe that following the capital efficiencies expected to be realized through our strategic reprioritization, our existing cash, cash equivalents, and restricted cash as of June 30, 2023, combined with the next anticipated milestone payment related to SEL-212 development activities,March 31, 2024 will enable us to fund our operating expenses and capital expenditure requirements into 2027.the second half of 2026. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

We intend to seek collaboration partners for the assets in the development programs that we are no longer actively advancing.
The consolidated financial information presented below includes the accounts of Selecta Biosciences,Cartesian Therapeutics, Inc. and our wholly owned subsidiaries, Selecta (RUS) LLC, a Russian limited liability company, or Selecta (RUS), and Selecta Biosciences Security Corporation, a Massachusetts securities corporation.corporation, and Cartesian Bio, LLC, a Delaware limited liability company, which is a variable interest entity for which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated.

Collaboration and license revenue

To date, we have not generated any revenue from product sales. Our revenue consists primarily of collaboration and license revenue, which includes amounts recognized related to upfront and milestone payments for research and development funding under collaboration and license agreements. We expect that any revenue we generate will fluctuate from quarter to quarter because of the timing and amounts of fees, research and development reimbursements and other payments from collaborators. We do not expect to generate revenue from product sales for at least the next several years. If we or our collaborators fail to complete the development of our product candidates in a timely manner or fail to obtain regulatory approval as needed, our ability to generate future revenue will be harmed, and will affect the results of our operations and financial position. For further description of the agreements underlying our collaboration and license revenue, see Note 1213 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.

Research and development expenses

Our research and development expenses consist of external research and development costs, which we track on a program-by-program basis and primarily include contract manufacturing organization related costs and fees paid to contract research organizations, and internal research and development costs, which are primarily compensation expenses for our research and development employees, lab supplies, analytical testing, allocated overhead costs and other related expenses. Our internal research and development costs are often devoted to expanding our programs and are not necessarily allocable to a specific target.

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We expense research and development costs as incurred. Conducting a significant amount of research and development is central to our business model. Product candidates in clinical development generally have higher development costs than those in earlier stages of development, primarily due to the size, duration and cost of clinical trials. The successful development of

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Table of Contents
our clinical and preclinical product candidates is highly uncertain. Clinical development timelines, the probability of success and development costs can differ materially from our expectations. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those which we currently expect will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time to complete any clinical development.

In June 2020, we and Swedish Orphan Biovitrum AB, or Sobi, entered into a License and Development Agreement, which was amended in October 2023, or, as so amended, the Sobi License. Pursuant to the Sobi License, clinical trial costs incurred to complete development of the product candidate SEL-212, including but not limited to costs incurred while conducting and completing the Phase 3 DISSOLVE trials will befor SEL-212, were reimbursed by Sobi. These costs, when reimbursed, will bewere recognized as revenue consistent with the revenue recognition methodology disclosed in Note 1213 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report. The reimbursable costs exclude any costs of additional development activities required that arewere related to the ImmTOR platform and that arewere unrelated to SEL-212.

In January 2023, we and Audentes Therapeutics, Inc., or Astellas, entered into a License and Development Agreement, or the Astellas Agreement. Pursuant to the Astellas Agreement, Astellas willagreed to reimburse us for 25% of all budgeted costs incurred to complete the development of Xork, a bacterial IgG protease licensed from Genovis AB (publ.), or Genovis, for use in Pompe disease with an Astellas gene therapy investigational or authorized product. These costs, when reimbursed, will be recognized as revenue consistent with the revenue recognition methodology disclosed in Note 1213 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.

In March 2024, we were notified by Astellas of its intention to terminate the Astellas Agreement, effective June 6, 2024.

General and administrative expenses

General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, business development and support functions. Other general and administrative expenses include facility-related costs not otherwise allocated to research and development expenses, travel expenses for our general and administrative personnel and professional fees for auditing, tax and corporate legal services, including intellectual property-related legal services.

Investment income

Investment income consists primarily of interest income earned on our cash, cash equivalents and marketable securities.

Interest expense

Interest expense consists of interest expense on amounts borrowed under our credit facilities.

Other income, net

Other income, net consists primarily of sublease income during the three and six months ended June 30, 2023 and was de minimis during the three and six months ended June 30, 2022.

income.

Change in fair value of warrant liabilities

Common warrants classified as liabilities are remeasured quarterly at fair value, utilizing a Black-Scholes valuation methodology, quarterly with the change in fair value recognized as a component of earnings.

Change in fair value of contingent value right liability
The contingent value right, or CVR, liability is remeasured quarterly at fair value, utilizing a Monte Carlo simulation, with the change in fair value recognized as a component of earnings.
Change in fair value of Series A Preferred Stock forward contract liabilities
The forward contract liability associated with the delayed issuance of the Series A Preferred Stock related to the November 2023 Private Placement is remeasured quarterly at fair value, utilizing the market price of our common stock, with the change in fair value recognized as a component of earnings.
Foreign currency transaction gain (loss)

The functional currency of our Russian subsidiarySelecta (RUS) is the Russian ruble. In addition to holding cash denominated in Russian rubles, our Russian bank accounts also hold cash balances denominated in U.S. dollars to facilitate payments to be settled in U.S. dollars or other currencies. As of each of June 30, 2023both March 31, 2024 and December 31, 2022,2023, we maintained cash of $0.2 million in Russian banksbank accounts in denominations of both Russian rubles and U.S. dollars. The amounts denominated in U.S. dollars and used in
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transacting the day-to-day operations of our Russian subsidiary are subject to transaction gains and losses, which are reported as incurred.

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Results of Operations

Comparison of the Three Months Ended June 30,March 31, 2024 and 2023 and 2022

Collaboration and license revenue

The following is a comparison

During the three months ended March 31, 2024, we recognized $5.8 million of collaboration and license revenue, compared to $5.9 million for the three months ended June 30,March 31, 2023, and 2022 (in thousands, except percentages):

   Three Months Ended
June 30,		   Increase 
   2023   2022   (decrease) 

Collaboration and license revenue

  $5,249   $39,273   $(34,024)    (87)% 

During the three months ended June 30, 2023, collaboration and licensea decrease of $0.1 million, or 2%. The decrease was primarily due to a decrease of revenue was $5.2 million, compared to $39.3 million in 2022. During the three months ended June 30, 2023 and 2022, we recognized $4.3 million and $29.2 million, respectively, under the license agreement with Sobi License resulting from both the shipment of clinical supply and the reimbursement of costs incurred for the Phase 3 DISSOLVE clinical program. Additionally, duringprogram offset by an increase in revenue recognized under the Astellas Agreement.

Research and development expenses
For the three months ended June 30, 2023, $0.8 million was recognized under the Astellas Agreement and $0.1 million was recognized under the Takeda Agreement. During the three months ended June 30, 2022, $10.1 million was recognized under the Sarepta Agreement.

Research and development expenses

The following is a comparison of research and development expenses for the three months ended June 30, 2023 and 2022 (in thousands, except percentages):

   Three Months Ended
June 30,		   Increase 
   2023   2022   (decrease) 

Research and development

  $17,782   $19,182   $(1,400)    (7%) 

During the three months ended June 30, 2023,March 31, 2024, our research and development expenses decreased by $1.4were $9.7 million compared to $18.6 million for the three months ended March 31, 2023, a decrease of $8.9 million, or 7%, as compared48%. The decrease in cost primarily resulted from reductions in expenses incurred for preclinical and clinical programs due to the strategic reprioritization.

General and administrative expenses
For the three months ended June 30, 2022.March 31, 2024, our general and administrative expenses were $9.5 million compared to $5.7 million for the three months ended March 31, 2023, an increase of $3.8 million, or 66%. The decreaseincrease in cost was primarily the result of an increase in professional fees incurred in connection with the strategic reprioritization in April 2023, partially offset by a one-timeMerger. cash charge to salaries and benefits as a result of our headcount reduction in April 2023 and increased contract license and milestone payments.

General and administrative expenses

The following is a comparison of general and administrative expenses

Investment income
Investment income for the three months ended June 30, 2023 and 2022 (in thousands, except percentages):

   Three Months Ended
June 30,		   Increase 
   2023   2022   (decrease) 

General and administrative

  $6,105   $6,231   $(126)    (2%) 

During the three months ended June 30, 2023, our general and administrative expenses decreased by $0.1March 31, 2024 was $1.2 million, or 2%, as compared to the three months ended June 30, 2022. The decrease in costs was primarily the result of a reduction in expenses incurred for stock compensation, partially offset by a one-time cash charge to salaries and benefits as a result of our headcount reduction in April 2023.

Investment income

Investment income was $1.4 million and $0.2$1.3 million for the three months ended June 30, 2023 and 2022, respectively.March 31, 2023. The increasedecrease in investment income was due to increaseddecreased investment and higher interest rates.

balance.

Foreign currency transaction gain (loss)

We recognized de minimis foreign currency fluctuations during each of the three months ended June 30, 2023March 31, 2024 and 2022.

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2023.

Interest expense

Interest

We recognized no interest expense wasfor the three months ended March 31, 2024, compared to $0.8 million and $0.7 million for the three months ended June 30,March 31, 2023, and 2022, respectively, representing interest expense and amortization of the carrying costs of our credit facilities.

facilities that were extinguished during the year ended December 31, 2023.

Change in fair value of warrant liabilities

For the three months ended June 30, 2023,March 31, 2024, we recognized $6.3$1.0 million of income from the decrease in the fair value of warrant liabilities, utilizing the Black-Scholes valuation methodology. The decrease in value was primarily driven bycompared to a decrease in the price of our common stock. For the three months ended June 30, 2022, we recognized a $4.6$4.1 million charge from the increase in the fair value of warrant liabilities primarily driven by an increase in the price of our common stock.

Other income, net

Other income, net consists primarily of sublease income for the three months ended June 30,March 31, 2023, and was de minimis for the three months ended June 30, 2022.

Net (loss) income

Net loss for the three months ended June 30, 2023 was $11.4 million compared to net incomea decrease of $8.6 million for the three months ended June 30, 2022.

Comparison of the Six Months Ended June 30, 2023 and 2022

Collaboration and license revenue

The following is a comparison of collaboration and licenserevenue for the six months ended June 30, 2023 and 2022 (in thousands, except percentages):

   Six Months Ended
June 30,		   Increase 
   2023   2022   (decrease) 

Collaboration and license revenue

  $11,187   $73,272   $(62,085)    (85)% 

During the six months ended June 30, 2023 and 2022, we recognized $8.7 million and $52.9 million under the Sobi License resulting from the shipment of clinical supply and the reimbursement of costs incurred for the Phase 3 DISSOLVE clinical program. Additionally, during the six months ended June 30, 2023, $1.4 million was recognized under the Astellas Agreement and $0.6 million was recognized under the Takeda Agreement, and $0.5 million was recognized under the Sarepta Agreement. During the six months ended June 30, 2022, $10.2 million was recognized under the Sarepta Agreement, $9.2 million was recognized upon the mutual termination of the Spark License Agreement, and $1.0 million was recognized under the Takeda Agreement.

Research and development expenses

The following is a comparison of research and development expenses for the six months ended June 30, 2023 and 2022 (in thousands, except percentages):

   Six Months Ended
June 30,		   Increase 
   2023   2022   (decrease) 

Research and development

  $36,406   $36,871   $(465)    (1)% 

During the six months ended June 30, 2023, our research and development expenses decreased by $0.5$5.1 million, or 1%, as compared to the six months ended June 30, 2022. The decrease in cost was primarily the result of the strategic reprioritization in April 2023, partially offset by increased contract license and milestone payments and a one-time cash charge to salaries and benefits as a result of our headcount reduction in April 2023.

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General and administrative expenses

The following is a comparison of general and administrative expenses for the six months ended June 30, 2023 and 2022 (in thousands, except percentages):

   Six Months Ended
June 30,		   Increase 
   2023   2022   (decrease) 

General and administrative

  $11,800   $11,768   $32    —% 

During the six months ended June 30, 2023, our general and administrative expenses increased by less than $0.1 million as compared to the six months ended June 30, 2022. The increase in costs was primarily driven by a one-time cash charge to salaries and benefits as a result of our headcount reduction in April 2023 partially offset by a reduction in expenses incurred for stock compensation.

Investment income

Investment income was $2.7 million and $0.2 million, for the six months ended June 30, 2023 and 2022, respectively. The increase in investment income was due to increased investments and higher interest rates.

Foreign currency transaction gain (loss)

We recognized de minimis foreign currency fluctuations during the six months ended June 30, 2023 and 2022, respectively.

Interest expense

Interest expense was $1.6 million and $1.4 million for the six months ended June 30, 2023 and 2022, respectively, representing interest expense and amortization of the carrying costs of our credit facilities.

Change in fair126%. Fair value of warrant liabilities

For was determined utilizing the six months ended June 30, 2023, we recognized $2.3 million of income for the decrease in the fair value of warrant liabilities utilizing a Black-Scholes valuation methodology. The decrease in warrant value was primarily driven by a decrease in the remaining expected lifeper-share price of the warrants. our common stock.

Change in fair value of contingent value right liability
For the sixthree months ended June 30, 2022,March 31, 2024, we recognized $13.9$39.3 million of income forexpense associated with the decreaseincrease in the fair value of warrant liabilitiesthe CVR liability. The fair value of the CVR liability as of March 31, 2024 was determined utilizing a Monte Carlo simulation model. The increase in the fair value of CVR liability was primarily driven by a decreasethe passage of time since December 31, 2023. There was no CVR liability prior to the Merger and as such, no change in the fair value of the CVR liability is reflected in our unaudited consolidated financial statements for the three months ended March 31, 2023.
Change in fair value of Series A Preferred Stock forward contract liabilities
For the three months ended March 31, 2024, we recognized $6.9 million of expense associated with the increase in the fair value of Series A Preferred Stock forward contract liabilities. The increase in Series A Preferred Stock value was primarily driven by an increase in the per-share price of our common stock.

stock since December 31, 2023 through settlement. The remaining Series A Preferred Stock forward contract liability was settled during the three months ended March 31, 2024. There was no Series A Preferred Stock forward contract liability prior to the Merger and as such, no change in the fair value of the Series A Preferred Stock forward contract liability is reflected in our unaudited consolidated financial statements for the three months ended March 31, 2023.

Other income, (expense)

Othernet

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During the three months ended March 31, 2024, we recognized other income, wasnet of $0.5 million, and $0.2compared to $0.3 million for the sixthree months ended June 30,March 31, 2023, and 2022, respectively.an increase of $0.2 million, or 99%. The increase was primarily driven by sublease income.

Net income (loss)

loss

Net loss for the sixthree months ended June 30, 2023March 31, 2024 was $33.1$56.8 million as compared to net incomeloss of $37.4$21.7 million for the sixthree months ended June 30, 2022.

March 31, 2023, a decrease of $35.1 million or 162%. The change was primarily due to expenses associated with the change in the fair value of the CVR liability and Series A Preferred Stock forward contract liability and increased general and administrative expenses, partially offset by decreased research and development expenses and income associated with the change in the fair value of the warrant liabilities.


Liquidity and Capital Resources

Except for net income of $35.4 million for the year ended December 31, 2022, in which we had net income of $35.4 million, we have incurred recurring net losses since our inception. We expect that we will continue to incur losses and that such cumulative losses will increase for the foreseeable future.

Since inception, We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we have financedwill need additional capital to fund our operations, withwhich we may raise through a combination of issuance of preferredequity offerings, debt financings, third-party funding, potential royalty and/or milestone monetization transactions and common stock, government grant funding, borrowings under credit facilitiesother collaborations and proceeds from our collaboration and license agreements.

strategic alliances.

As of June 30, 2023,March 31, 2024, our cash, cash equivalents, and restricted cash were $115.0$104.8 million, of which $3.0$1.4 million was restricted cash related to lease commitments and $0.2 million was held by our Russian subsidiary designated solely for use in its operations.

In addition to our existing cash equivalents, we have from time to time have received and may receive in the future receive research and development funding pursuant to our collaboration and license agreements. Currently, funding from payments under our collaboration agreements represent our only source of committed external funds.

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The liability associated with the contingent value rights agreement, or CVR Agreement, entered into on December 6, 2023, will be settled solely through cash flow received under the Sobi License and any other Gross Proceeds (as such term is defined in the CVR Agreement) net of certain agreed deductions. Under the CVR Agreement, 100% of all milestone payments, royalties, and other amounts paid to us or our controlled entities under the Sobi License, and any other Gross Proceeds, in each case net of certain agreed deductions, will be distributed to holders of the CVRs. There is no contractual obligation for us to fund any amount related to the CVR liability.
Collaboration and License Agreements
In-licenses
In September 2023, we entered into a non-exclusive, sublicensable, worldwide, perpetual patent license agreement, or the Biogen Agreement, with Biogen MA, Inc., or Biogen, to research, develop, make, use, offer, sell and import products or processes containing or using an engineering T-cell modified with an mRNA comprising, or encoding a protein comprising, certain sequences licensed under the Biogen Agreement for the prevention, treatment, palliation and management of autoimmune diseases and disorders, excluding cancers, neoplastic disorders, and paraneoplastic disorders. We are not obligated to pay Biogen any expenses, fees, or royalties. For further description of the Biogen Agreement, see Note 15 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
Effective September 2019, we entered into a nonexclusive, worldwide license agreement, or the NCI Agreement, with the U.S. Department of Health and Human Services, represented by the National Cancer Institute of the National Institutes of Health, or NCI. Under the NCI Agreement, we were granted a license under certain NCI patents and patent applications designated in the agreement, to make, use, sell, offer and import products and processes within the scope of the patents and applications licensed under the NCI Agreement when developing and manufacturing anti-BCMA CAR-T cell products for the treatment of MG, pemphigus vulgaris, and immune thrombocytopenic purpura according to methods designated in the NCI Agreement. In connection with our entry into the NCI Agreement, we paid to NCI a one-time $0.1 million license royalty payment. Under the NCI Agreement, we are further required to pay NCI a low five-digit annual royalty. We must also pay earned royalties on net sales in a low single-digit percentage and pay up to $0.8 million in benchmark royalties upon our achievement of designated benchmarks that are based on the commercial development plan agreed between the parties. For further description of the NCI Agreement, see Note 15 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
In October 2021, we and Ginkgo Bioworks Holdings, Inc., or Ginkgo, entered into a Collaboration and License Agreement, or the First Ginkgo Agreement, and paid Ginkgo a $0.5 million one-time upfront payment. In June 2022, we paid $0.5 million
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Indebtedness

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and issued 29,761 shares of our common stock then-valued at $1.0 million to Ginkgo for the achievement of certain preclinical milestones under the First Ginkgo Agreement. In January 2022, we entered into a Collaboration and License Agreement, or the Second Ginkgo Agreement, and paid Ginkgo a $1.5 million one-time upfront payment. In July 2023, we paid $1.0 million and issued 44,642 shares of our common stock then-valued at $1.5 million to Ginkgo for the achievement of certain preclinical milestones under the Second Ginkgo Agreement. For further description of the First Ginkgo Agreement and the Second Ginkgo Agreement, see Note 15 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
Additionally, in October 2021, we entered into an Exclusive License Agreement with Genovis, or the Genovis Agreement, and paid Genovis a $4.0 million one-time upfront payment. In February 2023, as a result of the sublicense of Xork to Astellas, we made a $4.0 million payment to Genovis. In March 2024, we informed Genovis of our intent to terminate the Genovis Agreement, effective September 13, 2024. For further description of the Genovis Agreement, see Note 15 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
On August 31,September 7, 2021, we entered into a Collaboration and License Agreement, or the Cyrus Agreement, with Cyrus Biotechnology, Inc., or Cyrus, and purchased 2,326,934 shares of Cyrus’ Series B Preferred Stock, par value $0.0001 per share at a purchase price of $0.8595 per share for an aggregate purchase price of $2.0 million. In October 2023, we notified Cyrus of our termination of the Cyrus Agreement, effective December 29, 2023. For further description of the Cyrus Agreement, see Note 15 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
Out-licenses
In January 2023, we entered into the Astellas Agreement with Astellas. Under this agreement, Astellas obtained the sole and exclusive right to commercialize Xork for use in Pompe disease in combination with an Astellas gene therapy investigational or authorized product, with a current focus on AT845. In connection with entry into this agreement, we received a $10 million upfront payment and are eligible to receive $340.0 million for certain additional development and commercial milestones plus royalties on any potential commercial sales where Xork is used as a pre-treatment for AT845. As a result of the sublicense of Xork to Astellas, we made a $4.0 million payment to Genovis in February 2023. In March 2024, we were notified by Astellas of their intention to terminate the Astellas Agreement, effective June 6, 2024. For further description of the Astellas Agreement, see Note 13 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
On October 1, 2021, we entered into a License Agreement, or the Takeda Agreement, with Takeda Pharmaceuticals USA, Inc., or Takeda. We received a $3.0 million upfront payment and were entitled to receive up to $1.124 billion in future additional payments over the course of the partnership that were contingent on the achievement of development or commercial milestones or Takeda’s election to continue its activities at specified development stages. The Takeda Agreement was terminated effective July 25, 2023. For further description of the Takeda Agreement, see Note 13 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
In June 2020, we entered into the Sobi License. Sobi paid us a one-time, upfront payment of $75 million, and upon the closing of a private placement of our common stock to Sobi at a price of $138.468 per share, we received an additional $25 million from Sobi. We are eligible to receive $630 million in milestone payments upon the achievement of various development and regulatory milestones and sales thresholds for annual net sales of SEL-212, and tiered royalty payments ranging from the low double digits on the lowest sales tier to the high teens on the highest sales tier. Sobi has agreed to fund the Phase 3 clinical program of SEL-212, which commenced in September 2020. In July 2022, we received $10.0 million for the completion of the enrollment of the DISSOLVE II trial. Proceeds from milestone payments and royalties on sales of SEL-212, if any, are required to be distributed, net of certain agreed deductions, to holders of the CVRs. For further description of the Sobi License, see Note 13 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
Additionally, in June 2020, we and Sarepta Therapeutics, Inc., or Sarepta, entered into a Research License and Option Agreement, or the Sarepta Agreement. Sarepta paid us a $2.0 million upfront payment upon closing and $3.0 million for the achievement of certain pre-clinical milestones in June 2021. In August 2022, we received a payment of $2.0 million in exchange for a nine-month extension to Sarepta's options to both Duchenne muscular dystrophy and certain limb-girdle muscular dystrophies and a payment of $4.0 million for the achievement of certain non-clinical milestones. In March 2023, we were notified by Sarepta that Sarepta would not be exercising its exclusive option under the Sarepta Agreement. The Sarepta Agreement terminated upon the expiration of the option in March 2023. For further description of the Sarepta Agreement, see Note 13 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
Financings
On October 25, 2021, we entered into a Sales Agreement, or the 2021 Sales Agreement, with Leerink Partners LLC, or Leerink Partners (and then known as SVB Leerink LLC), to sell shares of our common stock, from time to time, through an “at the market” equity offering program under which Leerink Partners will act as sales agent. The shares of common stock sold pursuant to the 2021 Sales Agreement, if any, would be issued and sold pursuant to a registration statement filed with the Securities and Exchange Commission, or SEC, for remaining aggregate gross sales proceeds of up to $51.0 million.
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During the three months ended March 31, 2024 and the year ended December 31, 2023, we sold no shares of our common stock pursuant to the 2021 Sales Agreement. During the year ended December 31, 2022, we sold 25,818 shares of our common stock pursuant to the 2021 Sales Agreement for aggregate net proceeds of $2.1 million, after deducting commissions and other transaction costs.
On November 13, 2023, we entered into the Securities Purchase Agreement with (i) Dr. Timothy A. Springer, a member of our Board of Directors; (ii) TAS Partners LLC, an affiliate of Dr. Springer, and (iii) Seven One Eight Three Four Irrevocable Trust, a trust associated with Dr. Murat Kalayoglu, a co-founder and the former chief executive officer of Old Cartesian, who joined our Board of Directors effective immediately after the effective time of the Merger, providing for the November 2023 Private Placement. In the November 2023 Private Placement, we issued and sold an aggregate of 149,330.115 shares of Series A Preferred Stock for an aggregate purchase price of $60.25 million, of which 50,189.789 shares of Series A Preferred Stock were issued and sold in the year ended December 31, 2023 for gross proceeds of $20.25 million, and 99,140.326 shares of Series A Preferred Stock were issued and sold during the three months ended March 31, 2024 for gross proceeds of $40.0 million.
Indebtedness
We previously maintained a term loan of up to $35.0 million, or the 2020 Term Loan, consisting of term loans in an aggregate amount ofwhich $25.0 million or the Term A Loan, and term loans in an aggregate amount of $10.0 million, or the Term B Loan, governed by a loan and security agreement among us and Oxford Finance LLC, or Oxford, as collateral agent and a lender, and Silicon Valley Bank, as a lender. The Term A Loan was funded in full on August 31, 2020, or the Funding Date, and will mature on August 1, 2025. The second draw period expired on2020. In September 30, 2021 and the Term B Loan is no longer available to be drawn by the Company.

On March 21, 2022, we entered into a Second Amendment to Loan and Security Agreement, or the Second Amendment. The Second Amendment extends the date on which amortization payments in respect of the 2020 Term Loan will commence to April 1, 2023. Thereafter, amortization payments will be paid monthly in equal installments of principal and interest to fully amortize the outstanding principal over the remaining term of the 2020 Term Loan, subject to recalculation upon a change in the prime rate. The Second Amendment was determined to be a loan modification, and the $0.1 million fee was recorded as an addition to the debt discount on the effective date.

On September 20, 2022, we entered into a Third Amendment to the Loan and Security Agreement or the Third Amendment. The Third Amendment was entered into in connection with the expansion of our corporate headquarters to provide for an increase of $0.2 million in the letter of credit for a total of $1.6 million which renews automatically each year.

On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation, or the FDIC, was appointed as receiver. On March 13, 2023, the FDIC announced that all of Silicon Valley Bank’s deposits and substantially all of its assets had been transferred to a newly created, full-service FDIC-operated bridge bank, Silicon Valley Bridge Bank, N.A., or SVBB. SVBB assumed all loans that were previously held by Silicon Valley Bank. On March 27, 2023, First-Citizens Bank & Trust Company assumed all of SVBB’s customer deposits and certain other liabilities and acquired substantially all of SVBB’s loans and certain other assets from the FDIC.

On March 31, 2023, we entered into a Fourth Amendment to Loan and Security Agreement or the Fourth Amendment,payoff letter with Oxford as collateral agent and a lenderFinance LLC and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as Receiver for Silicon Valley Bridge Bank, N.A.SVBB (as successor to Silicon Valley Bank)), or SVB.the lenders under the term loan, pursuant to which we paid all outstanding amounts under such term loan, together with accrued interest and a prepayment penalty, resulting in the full extinguishment of such term loan. The Fourth Amendment relieved ustotal payoff amount was $22.3 million, consisting of the requirement to maintain all Collateral Accounts (as such term is definedremaining principal amount due of $19.8 million, the final payment fee of $2.3 million, the prepayment penalty of $0.2 million, and less than $0.1 million of accrued interest.

If in the Loan and Security Agreement) with SVB and instead requires us to hold an amount equal to the lesser of (i) 100% of our consolidated cash and (ii) 150% of the then-outstanding Obligations (as such term is defined in the Loan and Security Agreement) in Collateral Accounts with SVB that are subject to a Control Agreement (as such term is defined in the Loan and Security Agreement) in favor of SVB.

The 2020 Term Loan is secured by a lien on substantially all of our assets, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property. We also granted Oxford a negative pledge with respect to our intellectual property.

The 2020 Term Loan contains customary covenants and representations, including but not limited to financial reporting obligations and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. The 2020 Term Loan also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rights.

The events of default under the 2020 Term Loan include, but are not limited to, our failure to make any payments of principal or interest under the 2020 Term Loan or other transaction documents, our breach or default in the performance of any covenant under the 2020 Term Loan or other transaction documents, the occurrence of a material adverse event, making a false or misleading representation or warranty in any material respect under the 2020 Term Loan, our insolvency or bankruptcy, any attachment or judgment on our assets of at least approximately $0.5 million, or the occurrence of any default under any of our agreements or obligations involving indebtedness in excess of approximately $0.5 million. If an event of default occurs, Oxford is entitled to take enforcement action, including acceleration of amounts due under the 2020 Term Loan. Iffuture we raise any additionalseek debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

flexibility by imposing liens on our assets and covenants on the operation of our business.

Future funding requirements

As of the date of this Quarterly Report, we have not generated any revenue from product sales. We do not know when, or if, we will generate revenue from product sales. We will not generate significant revenue from product sales unless and until we obtain regulatory approval and commercialize one of our current or future product candidates. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses, milestone and royalty payments for in-licenses, and general overhead costs. We expect that we will continue to generate losses for the foreseeable future.

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future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subject to risks in the development of our products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We expect that we will need substantial additional funding to support our continuing operations.

As of June 30, 2023,March 31, 2024, we had an accumulated deficit of $428.0$671.5 million. In April 2023, in light of current market conditions, our Board took steps to extend cash runway by pausing further development of SEL-302 for the treatment of MMA and conducting a targeted headcount reduction of approximately 25%. On August 17, 2023, we announced additional steps to extend cash runway and maximize value for stockholders by continuing to prioritize development of SEL-212 and support of our collaboration with Astellas for Xork, and pausing further development of all of our other clinical and preclinical product candidates that we are no longer actively advancing. We intend to seek collaboration partners for the assets in the development programs that we are no longer actively advancing. We intend to continue evaluating our development programs and operating expenses on an ongoing basis. We anticipate operating losses to continue for the foreseeable future due to, among other things, costs related to research, development of our product candidates, conducting preclinical studies and clinical trials, and our administrative organization. We will require substantial additional financing to fund our operations and to continue to execute our strategy, and we will pursue a range of options to secure additional capital.

We are continually evaluatingregularly evaluate various potential sources of additional funding such as strategic collaborations, license agreements, debt issuance, potential royalty and/or milestone monetization transactions and the issuance of equity instruments to fund our operations. If we raise additional funds through strategic collaborations and alliances, which may include existing collaboration partners, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us. To the extent that we raise additional capital through the sale of equity instruments, the ownership interest of our existing stockholders will be diluted, and other preferences may be necessary that adversely affect the rights of existing stockholders.

We believe that following the capital efficiencies expected to be realized through our strategic reprioritization, our existing cash, cash equivalents, and restricted cash as of June 30, 2023, combined with the next anticipated milestone payment related to SEL-212 development activities,March 31, 2024 will enable us to fund our current planned operations into 2027, though we may realize additional cash resources uponoperating expenses and capital expenditure requirements for at least the achievement of certain contingent collaboration milestones and wenext 12 months. We may pursue additional cash resources through public or private equity or debt financings, by establishing collaborations with other companies or through the monetization of potential royalty and/or milestone payments pursuant to our existing collaboration and license arrangements. Management’s expectations with respect to our ability to fund current and long-term planned operations are based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, we may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. However, there is no guarantee that any collaboration milestones will be achieved or that any of these strategic or financing opportunities will be executed on favorable terms, and some could be dilutive to existing stockholders. If we are unable to obtain additional funding on a timely basis, we may be forced to further significantly
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curtail, delay, or discontinue one or more of our planned research or development programs or be unable to expand our operations, meet long-term obligations or otherwise capitalize on our commercialization of our product candidates. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

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

our collaboration agreements remaining in effect, our entering into additional collaboration agreements and our ability to achieve milestones under these agreements;

the cost of manufacturing clinical supplies of our product candidates;

the size of our headcount and associated costs;

•the scope, progress, results and costs of our clinical trials, preclinical development, manufacturing, laboratory testing and clinical trials for logistics;

•the number of product candidates that we pursue and the speed with which we pursue development;
•our other product candidates;

headcount growth and associated costs;

•the costs, timing and outcome of regulatory review of our product candidates;

•the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

40

•the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

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

•the effect of competing technological and market developments..

developments; and

•the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates.
Summary of Cash Flows

   Six Months Ended
June 30,		 
(In thousands)  2023   2022 

Cash (used in) and provided by:

    

Operating activities

  $(18,660)   $(24,135) 

Investing activities

   28,112    9,446 

Financing activities

   (2,437)    38,603 

Effect of exchange rate changes on cash

   (49)    86 
  

 

 

   

 

 

 

Net change in cash, cash equivalents, and restricted cash

  $6,966   $24,000 
  

 

 

   

 

 

 

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:
 Three Months Ended
March 31,
(In thousands)20242023
Cash (used in) and provided by:
Operating activities$(15,917)$(8,765)
Investing activities(602)28,124 
Financing activities43,031 149 
Effect of exchange rate changes on cash(5)(21)
Net change in cash, cash equivalents, and restricted cash$26,507 $19,487 
Operating activities

Net cash used in operating activities of $18.7for the three months ended March 31, 2024 was $15.9 million compared to $8.8 million for the sixthree months ended June 30, 2023 included approximately $27.6March 31, 2023. The increase in net cash used in operating activities of $7.1 million was primarily due to $9.5 million of net loss, adjusted for non-cash items, and approximately $8.9$6.4 million cash provided byused in changes in operating assets and liabilities.

Investing activities
Net cash used in operating activities of $24.1 million for the six months ended June 30, 2022 included approximately $31.6 million of net income, adjusted for non-cash items, and uses of cash of approximately $55.7 million for changes in operating assets and liabilities.

Investing activities

Net cash provided by investing activities for the sixthree months ended June 30, 2023March 31, 2024 was $28.1$0.6 million compared to net cash provided by investing activities of $9.4$28.1 million for the three months ended March 31, 2023, a decrease of $28.7 million. The net cash used in investing activities for the same period in 2022.three months ended March 31, 2024 consisted primarily of purchases of property and equipment. The net cash provided by investing activities for each of the sixthree months ended June 30,March 31, 2023 and 2022 was primarily proceeds from the maturities of marketable securities offset by purchases of property and equipment.

Financing activities

Net cash used inprovided by financing activities for the sixthree months ended June 30, 2023March 31, 2024 was $2.4$43.0 million compared to net cash provided by financing activities of $38.6$0.1 million infor the same period in 2022.three months ended March 31, 2023, an increase of $42.9 million. The net cash used inprovided by financing activities in the sixthree months ended June 30,March 31, 2024 was primarily the result of proceeds of the November 2023 Private Placement. The net cash provided by financing activities in the three months ended March 31, 2023 was primarily the result of repayments of principal on outstanding debt offset by proceeds from issuance of common stock under the 2016 Employee Stock Purchase Plan and in the six months ended June 30, 2022 was primarily the result of net proceeds from underwritten and “at-the-market” offerings.

Recent Accounting Pronouncements

For a discussion of recently adopted or issued accounting pronouncements please see Note 2 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.

Off-Balance Sheet Arrangements

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As of June 30, 2023,March 31, 2024, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the Securities and Exchange Commission.

41

SEC.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in our consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions. During the three and six months ended June 30, 2023,March 31, 2024, there were no material changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the year ended December 31, 2022.

2023.

Smaller Reporting Company

We qualify as a “smaller reporting company” under the rules of the Securities Act and the Exchange Act. As a result, we may choose to take advantage of certain scaled disclosure requirements available specifically to smaller reporting companies. We will remain a smaller reporting company until the last day of the fiscal year in which the aggregate market value of our common stock held by non-affiliated persons and entities, or our public float, is more than $700 million as of the last business day of our most recently completed second fiscal quarter, or until the fiscal year following the year in which we have at least $100 million in revenue and at least $250 million in public float as of the last business day of our most recently completed second fiscal quarter.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, we had cash, cash equivalents, and restricted cash and marketable securities of $115.0$104.8 million and $136.2$78.3 million, respectively, consisting of non-interest and interest-bearing money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term and the low risk profile of our money market accounts and marketable securities, and our current policy to hold marketable securities to maturity, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents or short-term marketable securities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2023.

March 31, 2024 because of the material weakness in internal control over financial reporting discussed below.

Material Weakness
As a result of its review of the internal control procedures for the year ended December 31, 2023, management identified a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis. There are no material accounting errors or omissions within the consolidated financial statements as a result of this material weakness. Management concluded that it did not design and implement effective internal controls specifically related to the documentation of the assumptions supporting the valuation of the in-process intangible assets in connection with the Old Cartesian material business combination and the initial and ongoing contingent value right obligation issued at the time to legacy Selecta stockholders. This includes a lack of sufficient documentation to provide evidence of the associated management review controls.
Remediation Plans for Material Weakness in Internal Control over Financial Reporting
We are committed to maintaining a strong internal control environment. In response to the identified material weakness above, we, with the oversight of the Audit Committee, intend to take comprehensive actions to remediate the material weakness in internal control over financial reporting. We expect to re-evaluate the scope and level of precision for conducting and documenting the reviews over significant acquisitions and contingent value rights including the review of prospective financial information used in valuation reports produced by third-party specialists supporting the accounting for business combinations and contingent value rights. The remediation efforts are intended both to address the identified material weakness and to enhance our overall financial control environment.
Inherent Limitations on Effectiveness of Controls

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There are inherent limitations to the effectiveness of any system of internal control over financial reporting. Accordingly, even an effective system of internal control over financial reporting can only provide reasonable assurance with respect to financial statement preparation and presentation in accordance with U.S. GAAP. Our internal controls over financial reporting are subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may be inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2023March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

On February 7, 2024, Justin Sloan, a purported stockholder of our Company, filed a putative class action on behalf of himself and similarly situated stockholders of our Company against us and members of our Board of Directors in the Court of Chancery of the State of Delaware, titled Sloan v. Barabe, et al., No. 2024-0105. The complaint alleges that the individual defendants breached their fiduciary duties by failing to disclose purportedly material information to our stockholders in our Preliminary Proxy Statement filed on January 31, 2024 in connection with the solicitation of stockholder approval of the Conversion Proposal. The complaint seeks a temporary injunction against the stockholder vote on the Conversion Proposal, compensatory damages, pre- and post-judgment interest, and attorneys’ fees and costs. At a telephonic hearing on February 28, 2024, the Court denied the Plaintiff’s motion to expedite the proceedings, rejecting Plaintiff's argument that the lawsuit raised colorable disclosure claims warranting expedited treatment. The action was subsequently dismissed on March 13, 2024.
On February 21, 2024, Paul Wymer, a purported stockholder of our Company, filed an action against us and members of our Board of Directors in the U.S. District Court for the Southern District of New York, titled Wymer v. Cartesian Therapeutics, Inc., et al., No. 24-cv-01288. The complaint alleges that the defendants violated Sections 14(a) and 20(a) of the Exchange Act by failing to disclose purportedly material information to our stockholders in our Preliminary and Definitive Proxy Statements filed on January 31, 2024, and February 14, 2024, respectively, in connection with the solicitation of stockholder approval of the Conversion Proposal. The complaint seeks injunctive relief enjoining or rescinding the Merger, issuance of an amended proxy statement, and attorneys' fees and costs. This action was voluntarily dismissed on March 11, 2024.

Item 1A. Risk Factors

See the risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.2023. There have been no material changes from the risk factors previously disclosed in such filings.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.


Item 3. Defaults Upon Senior Securities

None.


Item 4. Mine Safety Disclosures

None.


Item 5. Other Information

None.

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During the quarter ended March 31, 2024, no director or officer adopted or terminated any contract, instrument or written plan for the purchase or sale of Cartesian securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any non-Rule 10b5-1 trading arrangement as defined in Item 408(c) of Regulation S-K.
Effective May 7, 2024, the Company and the Landlord entered into the Amendment providing for the expansion of the premises leased pursuant to the Frederick Lease Agreement by approximately 7,842 square feet. In connection with the expansion of the leased premises, the Company will be obligated to pay $0.3 million in additional annual base rent for the first year of the term, which is subject to an annual upward adjustment of 3% of the then-current rental rate.
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Item 6.  Exhibits

EXHIBIT INDEX

     Incorporated by Reference

Exhibit

Number

 

Exhibit Description

  

Form

  

File No.

  

Exhibit

  

Filing

Date

3.1(a) Restated Certificate of Incorporation of Selecta Biosciences, Inc.  8-K  001-37798  3.1  6/29/2016
3.1(b) Certificate of Amendment to the Restated Certificate of Incorporation of Selecta Biosciences, Inc., dated June 21, 2022  8-K  001-37798  3.1  6/21/2022
3.2 Amended and Restated By-laws of Selecta Biosciences, Inc.  8-K  001-37798  3.2  8/22/2022
31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  —    —    —    Filed herewith
31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  —    —    —    Filed herewith
32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  —    —    —    Furnished herewith
101.INS Inline XBRL Instance Document (the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document)  —    —    —    Filed herewith
101.SCH Inline XBRL Taxonomy Extension Schema Document  —    —    —    Filed herewith
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document  —    —    —    Filed herewith
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document  —    —    —    Filed herewith
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document  —    —    —    Filed herewith
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document  —    —    —    Filed herewith
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)  —    —    —    Filed herewith

44

  Incorporated by Reference
Exhibit
Number		Exhibit DescriptionFormFile No.ExhibitFiling
Date
2.1*
8-K001-377982.111/13/2023
3.1(a)
8-K001-377983.16/29/2016
3.1(b)
8-K001-377983.16/21/2022
3.1(c)
8-K001-377983.311/13/2023
3.1(d)
8-K001-377983.23/28/2024
3.2
8-K001-377983.211/13/2023
4.1(a)
8-K001-377983.411/13/2023
4.1(b)
8-K001-377983.13/28/2024
10.1#
8-K001-3779810.14/1/2024
10.2#
8-K001-3779810.24/1/2024
10.3(a)†
10-K001-3779810.123/7/2024
10.3(b)†
---Filed herewith
31.1
---Filed herewith
31.2
---Filed herewith
32.1
---Furnished herewith
101.INSInline XBRL Instance Document (the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document)---Filed herewith
101.SCHInline XBRL Taxonomy Extension Schema Document---Filed herewith
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document---Filed herewith
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document---Filed herewith
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101.LABInline XBRL Taxonomy Extension Label Linkbase Document---Filed herewith
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document---Filed herewith
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)---Filed herewith
* Certain annexes, schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted attachment to the SEC on a confidential basis upon request.
# Management contract or compensatory plan or arrangement.        
† Certain confidential information contained in this exhibit, marked by brackets and asterisks, has been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because the information (i) is not material and (ii) is the type of information that the Company both customarily and actually treats as private and confidential.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.



SELECTA BIOSCIENCES,CARTESIAN THERAPEUTICS, INC.
Date: August 17, 2023May 8, 2024By:By:

/s/ Carsten Brunn, Ph.D.

Carsten Brunn, Ph.D.
President and Chief Executive Officer, and Director
(Principal Executive Officer)
Date: August 17, 2023May 8, 2024By:By:

/s/ Blaine Davis

Blaine Davis
Chief Financial Officer
(Principal Financial Officer)

45