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,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	103,418	$	76,911


Accounts receivable	2,006		5,870
Unbilled receivables	2,370		2,981
Prepaid expenses and other current assets	3,315		4,967
Total current assets	111,109		90,729
Non-current assets:
Property and equipment, net	2,402		2,113
Right-of-use asset, net	9,556		10,068
In-process research and development assets	150,600		150,600
Goodwill	48,163		48,163
Long-term restricted cash	1,377		1,377
Investments	2,000		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 liabilities	9,516		15,572

Lease liability	2,229		2,166

Deferred revenue	412		2,311

Warrant liabilities	597		720
Contingent value right liability	21,383		15,983
Forward contract liabilities	—		28,307
Total current liabilities	36,654		68,209
Non-current liabilities:


Lease liability, net of current portion	8,228		8,789
Deferred revenue, net of current portion	—		3,538
Warrant liabilities, net of current portion	4,755		5,674

Contingent value right liability, net of current portion	376,517		342,617
Deferred tax liabilities, net	15,853		15,853
Total liabilities	442,007		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, respectively	1		1
Additional paid-in capital	559,275		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

September 30,
2023

December 31,
2022

Assets

Current assets:

Cash and cash equivalents    $ 79,603 $ 106,438
Marketable securities    —   28,164
Accounts receivable    4,898 6,596
Unbilled receivables    1,875 3,162
Prepaid expenses and other current assets    3,493 3,778

Total current assets    89,869 148,138
Non-current
assets:

Property and equipment, net    2,421 2,794
Right-of-use
asset, net
   10,339 11,617
Long-term restricted cash    1,377 1,311
Investments    2,000 2,000
Other assets    28 26

Total assets    $ 106,034 $ 165,886

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable    $ 375 $ 316
Accrued expenses    13,637 14,084
Loan payable    —   8,476
Lease liability    1,787 1,608
Deferred revenue    4,140 593

Total current liabilities    19,939 25,077
Non-current
liabilities:

Loan payable, net of current portion    —   17,786
Lease liability    8,694 10,055
Deferred revenue    3,981 —
Warrant liabilities    13,091 19,140

Total liabilities    45,705 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 September 30, 2023 and December 31, 2022    —   —
Common stock, $0.0001 par value; 350,000,000 shares authorized; 154,854,032 and 153,042,435 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively    15 15
Additional
paid-in
capital
   501,919 493,308
Accumulated deficit    (436,989 ) (394,937 )
Accumulated other comprehensive loss    (4,616 ) (4,558 )

Total stockholders’ equity    60,329 93,828

Total liabilities and stockholders’ equity    $ 106,034 $ 165,886

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

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~~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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Collaboration and license revenue	$	6,551		$	20,710		$	17,738		$	93,982
Collaboration and license revenue
Collaboration and license revenue
Operating expenses:
Operating expenses:
Operating expenses:
Research and development		13,002			16,539			49,408			53,410
Research and development
Research and development
General and administrative		6,614			5,770			18,414			17,538
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		19,616			22,309			67,822			70,948
Foreign currency transaction, net

Operating (loss) income		(13,065	)		(1,599	)		(50,084	)		23,034
Investment income		1,299			710			4,024			932
Foreign currency transaction, net

Foreign currency transaction, net		(3	)		15			39			(61	)
Interest expense		(1,273	)		(802	)		(2,833	)		(2,224	)
Interest expense
Interest expense
Change in fair value of warrant liabilities		3,787			(6,539	)		6,049			7,329
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		253			1			753			155

Loss (income) before income taxes		(9,002	)		(8,214	)		(42,052	)		29,165
Income tax (expense) benefit		—			321			—			321

Net (loss) income		$ (9,002)			$ (7,893)			$ (42,052)		$	29,486
Net loss

Other comprehensive income (loss):

Net loss

Net loss

Other comprehensive (loss) income:

Other comprehensive (loss) income:

Other comprehensive (loss) income:
Foreign currency translation adjustment		(20)			(21)			(69	)		65
Unrealized gain on marketable securities		—			(29)			11			(29	)
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)		$ (9,022)			$ (7,943)			$ (42,110)		$	29,522

Net (loss) income per share:
Basic		$ (0.06)			$ (0.05)			$ (0.27)		$	0.21

Diluted		$ (0.06)			$ (0.05)			$ (0.27)		$	0.15
Net loss per share:

Net loss per share:

Net loss per share:
Basic and Diluted
Basic and Diluted
Basic and Diluted

Weighted-average common shares outstanding:
Basic		154,804,503			152,849,992			153,870,912			141,969,449

Diluted		154,804,503			152,849,992			153,870,912			143,792,060
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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~~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

Issuance of common stock under Employee Stock Purchase Plan    77,976    —      82    —   —   82
Issuance of vested restricted stock units    9,200    —      —      —   —   —
Issuance of common stock, license agreement    1,339,285    —      1,500    —   —   1,500
Stock-based compensation expense    —      —      2,321    —   —   2,321
Currency translation adjustment    —      —      —      —   (20) (20)
Net loss    —      —      —      (9,002) —   (9,002)

Balance at September 30, 2023    154,854,032    $ 15    $ 501,919    $ (436,989) $ (4,616) $ 60,329


				Options for Series A												Accumulated
	Series A			Preferred		Series A						Additional				other
	Preferred Stock			Stock		Preferred Stock			Common stock			paid-in		Accumulated		comprehensive		Stockholders’
	Shares	Amount		Amount		Shares	Amount		Shares	Amount		capital		deficit		loss		equity
Balance at December 31, 2023	435,120.513	$	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 contract	99,140.326	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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~~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	5,101,459	$	1	$	493,322	$	(394,937)	$	(4,558)	$	93,828
Issuance of common stock under Employee Stock Purchase Plan	3,584	—		149		—		—		149

Issuance of vested restricted stock units	9,226	—		—		—		—		—


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, 2023	5,114,269	$	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

Issuance of common stock under Employee Stock Purchase Plan    39,820    —      62    —      —      62
Issuance of common stock upon exercise of options    59,928    —      135    —      —      135
Issuance of vested restricted stock units    17,737    —      —      —      —      —
Issuance of common stock through
at-the-market
offering, net
   198,126    —      446    —      —      446
Stock-based compensation expense    —      —      2,601    —      —      2,601
Currency translation adjustment    —      —      —      —      (21)    (21)
Unrealized (losses) on marketable securities    —      —      —      —      (29)    (29)
Net loss    —      —      —      (7,893)    —      (7,893)

Balance at September 30, 2022    153,028,822    $ 15    $ 490,252    $ (400,830)    $ (4,530)    $ 84,907

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

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~~Selecta Biosciences,~~Cartesian Therapeutics, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Amounts in thousands)


	Three Months Ended March 31,
	2024		2023
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 amortization	183		206
Amortization of premiums and discounts on marketable securities	—		(79)
Non-cash lease expense	512		416
Loss on disposal of property and equipment	2		—
Stock-based compensation expense	1,431		2,276
Non-cash interest expense	—		398
Warrant liabilities revaluation	(1,042)		4,079
Contingent value right liability revaluation	39,300		—
Forward contract liabilities revaluation	6,890		—



Changes in operating assets and liabilities:
Accounts receivable	3,864		(243)
Unbilled receivable	611		1,319
Prepaid expenses, deposits and other assets	1,652		(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 warrants	2,877		—
Proceeds from issuance of Series A Preferred Stock, gross in private placement	40,000		—
Proceeds from exercise of stock options	154		—
Proceeds from issuance of common stock under Employee Stock Purchase Plan	—		149
Net cash provided by financing activities	43,031		149
Effect of exchange rate changes on cash	(5)		(21)
Net change in cash, cash equivalents, and restricted cash	26,507		19,487
Cash, cash equivalents, and restricted cash at beginning of period	78,288		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

Nine Months Ended

September 30,


2023

2022

Cash flows from operating activities

Net (loss) income    $ (42,052) $ 29,486
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization    571 1,046
Amortization of premiums and discounts on marketable securities    (79 ) (128 )
Non-cash
lease expense
   1,278 930
Gain on disposal of property and equipment    —   (147 )
Stock-based compensation expense    8,380 8,918
Non-cash
interest expense
   455 777
Warrant liabilities revaluation    (6,049 ) (7,329 )
Loss on extinguishment of debt    740 —
Changes in operating assets and liabilities:
Accounts receivable    1,698 2,989
Unbilled receivable    1,287 —
Prepaid expenses, deposits and other assets    (30 ) (304 )
Accounts payable    36 (10 )
Income taxes payable    —   (601 )
Deferred revenue    7,528 (56,044 )
Accrued expenses and other liabilities    (1,638 ) 635

Net cash used in operating activities    (27,875 ) (19,782 )
Cash flows from investing activities

Proceeds from maturities of marketable securities    28,254 14,000
Purchases of marketable securities    —   (33,501)
Purchases of property and equipment    (142) (990)

Net cash provided by investing activities    28,112 (20,491 )
Cash flows from financing activities

Repayments of principal, final payment fee, and prepayment penalty on debt    (27,457) —
Debt amendment fee included in debt discount    —   (110)
Net proceeds from issuance of common stock-
at-the-market
offering
   —   2,121
Net proceeds from issuance of common stock and common warrants    —   36,859
Proceeds from exercise of stock options    —   156
Proceeds from issuance of common stock under Employee Stock Purchase Plan    231 189

Net cash (used in) provided by financing activities    (27,226 ) 39,215

Effect of exchange rate changes on cash    (69) 65

Net change in cash, cash equivalents, and restricted cash    (27,058) (993)
Cash, cash equivalents, and restricted cash at beginning of period    108,038 115,436

Cash, cash equivalents, and restricted cash at end of period    $ 80,980 �� $ 114,443

Supplemental cash flow information

Cash paid for interest    $ 1,853 $ 1,616
Noncash investing and financing activities

Issuance of common stock, license agreement in stock-based compensation expense    $ 1,500 $ 1,000
Purchase of property and equipment not yet paid    $ 65 $ 145

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

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~~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 ~~based~~headquartered in ~~Watertown, Massachusetts.~~Gaithersburg, Maryland. The Company is a clinical-stage biotechnology company developing mRNA cell therapies for the treatment of autoimmune diseases leveraging ~~the Company’s ImmTOR~~

its proprietary technology and manufacturing platform to ~~develop tolerogenic therapies that selectively mitigate unwanted immune responses. With a proven ability~~introduce one or more mRNA molecules into cells to ~~induce tolerance to highly immunogenic proteins, the~~enhance their function. The Company believes ~~ImmTOR has~~its mRNA cell therapies have the potential to ~~amplify the efficacy~~deliver deep, durable clinical benefit to a broad group of ~~biologic therapies, including redosing~~patients with autoimmune diseases because they can be administered over a short period of ~~life-saving gene therapies, as well as restore the body’s natural self-tolerance~~time, in ~~autoimmune diseases. The Company has several proprietary~~an outpatient setting, and ~~partnered programs in its pipeline.~~without pre-treatment chemotherapy.

~~As discussed in further detail in Note 18 – Subsequent Events, on~~On November 13, 2023, the Company ~~entered into an~~acquired, in accordance with the terms of the Agreement and Plan of Merger, or the Merger Agreement, ~~dated~~the assets of the Delaware corporation which, immediately prior to the Merger (as defined below), was known as ~~of such date, by and among the Company,~~ Cartesian Therapeutics, Inc., or Old Cartesian, ~~Sakura Merger Sub I, Inc.,~~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 ~~First Merger Sub,~~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 ~~Sakura Merger Sub II, LLC, or Second Merger Sub, with respect transactions referred~~Series A Preferred Stock related to ~~as the Merger. In~~ the Merger ~~First~~were issued on December 5, 2023. For additional information, see Note 3.

In connection with the Merger, ~~Sub merged~~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 ~~and into Cartesian, followed by Cartesian merging~~the Investors (as defined below). The Securities Purchase Agreement provides for the issuance to the 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 ~~and into Second~~the Merger, ~~Sub, with Second Merger Sub being~~a contractual contingent value right, or CVR, was distributed to the ~~surviving entity~~holders of record of the ~~Merger.~~Company's common stock and 2022 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 the Company, if any, related to the disposition or monetization of the Company's legacy assets following the issuance of 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 the Charter, to effect a reverse stock split of the Company’s issued and outstanding common stock, at a ratio in the 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 effected 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 shares of the Company’s common stock (such as share amounts, per share amounts, and conversion 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 common stock to additional paid-in capital. Shares of common stock underlying outstanding stock options, restricted stock units and warrants were proportionately reduced and 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

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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 nine~~ months ended ~~September 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, ~~2022~~2023 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 ~~September 30, 2023,~~March 31, 2024, the consolidated results of operations for the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, and cash flows for the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024. Such adjustments are of a normal and recurring nature. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, ~~2023.~~2024.

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.

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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 ~~its~~a 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 agreements. The Company has devoted substantially all of its financial resources and ~~license agreements.~~efforts to developing its 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 product candidates.

As of ~~September 30, 2023,~~March 31, 2024, the Company’s cash, cash equivalents, and restricted cash were ~~$81.0~~$104.8 million, of which $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. The Company believes the cash, cash equivalents and restricted cash as of ~~September 30, 2023~~March 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.~~statements, though 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-term~~long 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 ~~continuing~~operating losses to ~~generate operating losses~~continue 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 ~~September 30, 2023,~~March 31,

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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 ~~nine~~three months ended ~~September 30, 2023, with the exception of the matters discussed in recent accounting pronouncements.~~March 31, 2024.

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,~~

~~Codification~~280): 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 based~~an 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 is~~guidance will be effective for ~~smaller reporting companies~~the annual periods beginning the year ended December 31, 2024, and for ~~fiscal years~~interim periods beginning ~~after December 15, 2022, with early~~January 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 ~~adopted~~does not expect the ~~new standard effective January 1, 2023, using~~adoption of this guidance to have a ~~modified retrospective transition method, and there was no~~material impact on its consolidated financial ~~statements~~statements.

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 ~~results~~retrospectively. 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

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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).

~~3. Marketable Securities~~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 held~~The 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 ~~September 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 Stock	155,308
Stock options allocated to consideration paid	10,444
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 ~~summarizes~~presents the ~~marketable securities held~~allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed as of ~~December 31, 2022~~the 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 assets	309
Property and equipment, net	215
Right-of-use asset, net	915
In-process research and development assets	150,600
Goodwill	48,163
	$	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 ~~September 30, 2023~~the 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 with~~disposition of the ~~Collaboration~~assets 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 to~~development 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.

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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 SLE	56,700
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) Income~~Loss Per Share

The following table sets forth the computation of basic and diluted net ~~(loss) income~~loss per share for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in thousands, except share and

per-share

data):


	Three Months Ended March 31,
	2024		2023
Numerator:


Net loss allocable to shares of common stock - basic and diluted	$	(56,824)	$	(21,663)
Denominator:


Weighted-average common shares outstanding - basic and diluted	5,414,020		5,111,518
Net loss per share:
Basic and Diluted	$	(10.50)	$	(4.24)

Three Months Ended

September 30,

Nine Months Ended

September 30,


2023

2022

2023

2022

Numerator:

Net (loss) income    $ (9,002 )    $ (7,893 )    $ (42,052 )    $ 29,486
Less: Change in fair value of liability warrants    —      —      —      (7,329 )

Adjusted net (loss) income    $ (9,002 )    $ (7,893 )    $ (42,052 )    $ 22,157

Denominator:

Weighted-average common shares outstanding—basic    154,804,503    152,849,992    153,870,912    141,969,449
Dilutive effect of employee equity incentive plans and outstanding warrants    —      —      —      1,822,611

Weighted-average common shares used in per share calculations—diluted    154,804,503    152,849,992    153,870,912    143,792,060

Net (loss) income per share:

Basic    $ (0.06 )    $ (0.05 )    $ (0.27 )    $ 0.21

Diluted    $ (0.06 )    $ (0.05 )    $ (0.27 )    $ 0.15

The following table represents the potential dilutive shares of common stock excluded from the computation of the diluted net ~~(loss) income~~loss per share for all periods presented, as the effect would have been anti-dilutive:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Options, RSUs and ESPP shares		22,037,652		16,147,192		22,037,652		16,960,983




Common stock options, restricted stock units and ESPP shares
Common stock options, restricted stock units and ESPP shares
Common stock options, restricted stock units and ESPP shares
Warrants to purchase common stock		31,224,703		31,228,279		31,224,703		213,339

Warrants to purchase common stock
Warrants to purchase common stock
Series A Preferred Stock
Series A Preferred Stock
Series A Preferred Stock
Series A Preferred Stock options
Series A Preferred Stock options
Series A Preferred Stock options
Total		53,262,355		47,375,471		53,262,355		17,174,322

Total
Total

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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 ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 (in thousands):


	March 31, 2024
	Total		Level 1		Level 2		Level 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

September 30, 2023


Total

Level 1

Level 2

Level 3

Assets:
Money market funds (included in cash equivalents)    $ 74,340    $ 74,340    $ —      $ —

Total assets    $ 74,340    $ 74,340    $ —      $ —

Liabilities:
Warrant liabilities    $ 13,091    $ —      $ —      $ 13,091

Total liabilities    $ 13,091    $ —      $ —      $ 13,091


	December 31, 2023											December 31, 2023
	Total									Total	Level 1	Level 2	Level 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 ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 or year ended December 31, ~~2022.~~2023.

Cash, Cash Equivalents, and Restricted Cash

As of ~~September 30, 2023~~March 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 ~~September 30, 2023,~~March 31, 2024, the Company had a restricted cash balance relating to a secured letter 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 ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in thousands):

September 30,


2023

2022

Cash and cash equivalents    $ 79,603    $ 112,843
Long-term restricted cash    1,377    1,600

Total cash, cash equivalents, and restricted cash    $ 80,980    $ 114,443

~~Marketable Securities~~


	March 31,
	2024		2023
Cash and cash equivalents	$	103,418	$	125,925
Short-term restricted cash	—		289
Long-term restricted cash	1,377		1,311
Total cash, cash equivalents, and restricted cash	$	104,795	$	127,525

No marketable securities were held as of September 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 discounts~~Warrants to ~~the earliest call date for premiums or to maturity for discounts.~~

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~~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 ~~were~~are 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 ~~our~~the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2022~~2023 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

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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.

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,
	2024		2023
Risk-free interest rate	5.38	%	4.79	%
Dividend yield	—		—
Expected life (in years)	0.73		0.98
Expected volatility	96.03	%	83.67	%

September 30,
2023

December 31,
2022

Risk-free interest rate    5.46 % 4.74 %
Dividend yield    —   —
Expected life (in years)    1.23 1.98
Expected volatility    70.10 % 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:

September 30,
2023

December 31,
2022

Risk-free interest rate    4.80 % 4.22 %
Dividend yield    —   —
Expected life (in years)    3.53 4.28
Expected volatility    81.78 % 98.05 %

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~~Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis~~


	March 31,		December 31,
	2024		2023
Risk-free interest rate	4.40	%	4.01	%
Dividend yield	—		—
Expected life (in years)	3.03		3.28
Expected volatility	82.72	%	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 ~~nine~~three months ended ~~September 30, 2023~~March 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    (6,049 )

Fair value as of September 30, 2023    $ 13,091

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.

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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 dates	2024-2038
Estimated probability of success	95.0	%
Expected volatility of future revenues	25.0	%


	December 31,
	2023
Estimated cash flow dates	2024 - 2038
Estimated probability of success	95.0	%

Risk-adjusted discount rate	13.7	%

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 value	39,300
Fair value as of March 31, 2024	$	397,900

Forward Contract Liabilities

Merger Consideration

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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 value	6,890
Fair value as of March 31, 2024	$	—

6. Property and Equipment

Property and equipment consists of the following (in thousands):


	March 31,		December 31,
	2024		2023
Laboratory equipment	$	6,662	$	6,280
Computer equipment and software	620		702
Leasehold improvements	61		61
Furniture and fixtures	452		452
Office equipment	196		196
Construction in process	241		150
Total property and equipment	8,232		7,841
Less: Accumulated depreciation	(5,830)		(5,728)
Property and equipment, net	$	2,402	$	2,113

September 30,
2023

December 31,
2022

Laboratory equipment    $ 6,732    $ 6,001
Computer equipment and software    701    697
Leasehold improvements    61    57
Furniture and fixtures    452    453
Office equipment    196    192
Construction in process    22    599

Total property and equipment    8,164    7,999
Less: Accumulated depreciation    (5,743 )    (5,205 )

Property and equipment, net    $ 2,421    $ 2,794

Depreciation expense was ~~$0.1 million and~~ $0.2 ~~million for the three months ended September 30,~~

~~023 and 2022, respectively and $0.5~~ million for each of the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

7. Accrued Expenses

Accrued expenses consist of the following (in thousands):


	March 31,		December 31,
	2024		2023
Payroll and employee related expenses	$	1,701	$	4,390

Accrued patent fees	1,177		472
Accrued external research and development costs	2,614		4,896
Accrued professional and consulting services	3,055		4,331

Other	380		644
Accrued expenses	$	8,927	$	14,733

September 30,
2023

December 31,
2022

Payroll and employee related expenses    $ 4,774    $ 4,242
Accrued patent fees    561    696
Accrued external research and development costs    5,655    7,274
Accrued professional and consulting services    2,287    985
Accrued interest    —      222
Other    360    665

Accrued expenses    $ 13,637    $ 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 ~~Headquarters~~Watertown 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 headquarters~~laboratory 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 ~~Headquarters~~Watertown 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.

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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 ~~Headquarters~~Watertown 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 ~~September 30,~~March 31, 2024 and December 31, 2023, and renews automatically each year. The $1.6 million letter of credit with SVB was released from restriction 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 which Sobi paid $1.0 million upfront 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 of 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 Company’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 Frederick Lease Agreement is expected to commence once the Landlord has obtained legal possession of 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.

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For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the components of lease costs were as follows (in thousands):


	Three Months Ended March 31,
	2024		2023
Operating lease cost	$	775	$	696
Variable lease cost	397		142
Short-term lease cost	3		3
Less: Sublease income	(510)		(255)
Total lease cost	$	665	$	586

Three Months Ended

September 30,

Nine Months Ended

September 30,


2023

2022

2023

2022

Operating lease cost    $ 696    $ 569    $ 2,088    $ 1,580
Variable lease cost    271    205    683    630
Short-term lease cost    1    3    6    8
Less: Sublease income    (250 )    —      (756 )    —

Total lease cost    $ 718    $ 777    $ 2,021    $ 2,218

The maturity of the Company’s operating lease liabilities as of ~~September 30, 2023~~March 31, 2024 were as follows (in thousands):


	March 31,
	2024
2024 (remainder)	$	2,316
2025	3,164
2026	3,248
2027	3,017
2028	946
Thereafter	—
Total future minimum lease payments	12,691
Less: Imputed interest	2,234
Total operating lease liabilities	$	10,457

September 30,
2023

2023 (remainder)    $ 677
2024    2,740
2025    2,818
2026    2,902
2027    2,990
Thereafter    946

Total future minimum lease payments    13,073
Less: Imputed interest    2,592

Total operating lease liabilities    $ 10,481

The supplemental disclosure for the statement of cash flows related to operating leases was as follows (in thousands):


	Three Months Ended March 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:	$	761	$	653

Nine Months Ended

September 30,


2023

2022

Cash paid for amounts included in the measurement of lease liabilities:    $ 1,991    $ 1,395

~~Other than the initial recording of the~~

~~right-of-use~~

~~asset and lease liability for the Lease Agreement Amendment in 2022, which were~~

~~non-cash,~~

~~the~~The changes in the Company’s

right-of-use

assets and lease liabilities for the ~~nine~~three months ended ~~September 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,
	2024		2023
Weighted-average remaining lease term	4.0 years		5.1 years
Weighted-average discount rate	9.9	%	9.7	%

September 30,


2023

2022

Weighted-average remaining lease term    4.7 years 5.6 years
Weighted-average discount rate    9.7 % 9.6 %

9. Debt

2020 Term Loan

On August 31, 2020, the Company entered into a Loan and Security Agreement with Oxford Finance LLC, or Oxford, and Silicon Valley 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

~~Table of Contents~~

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 2020 Term Loan.

On September 11, 2023, the Company entered into a payoff letter with Oxford and SVB, pursuant to which the Company paid all outstanding amounts 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 $22.3 million, consisting of the remaining

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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.

During the ~~three and nine months ended September 30,~~third quarter of 2023, the 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, which was included within interest expense in the consolidated statements of operations and comprehensive income (loss).~~fee.

As of ~~September 30,~~March 31, 2024 and December 31, 2023, the Company had no outstanding ~~borrowings,~~borrowings.

10. Series A Preferred Stock

The Certificate of Designation of Preferences, Rights, and asLimitations 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 ~~31, 2022,~~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 ~~outstanding principal balance under~~first tranche, (ii) 49,570.163 shares of Series A Preferred Stock were issued to Dr. Timothy A. Springer in the ~~2020 Term Loan was $25.0~~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 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).

~~10.~~On December 5, 2023, the Company issued 384,930.724 shares of Series A Preferred Stock as part of its consideration transferred in connection with the Merger which settled the related forward contract liability (see Note 5).

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.

On 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.

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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.

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, ~~will~~if any, would be issued and sold pursuant to ~~the Company’s shelf~~a 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 nine months ended September 30,~~ 2023, the Company sold no shares of its common stock pursuant to the 2021 Sales Agreement.

Warrants

The following is a summary of warrant activity for the three ~~and nine~~ months ended ~~September 30, 2023:~~March 31, 2024:


	Number of Warrants
	Equity classified	Liability classified	Total	Weighted-average exercise price
Outstanding at December 31, 2023	74,420	966,393	1,040,813	$	45.98

Exercises	(65,681)	—	(65,681)	43.80

Outstanding at March 31, 2024	8,739	966,393	975,132	$	46.12

Number of Warrants


Equity

classified

Liability
classified

Total

Weighted-
average

exercise price

Outstanding at December 31, 2022    2,236,326    28,991,953    31,228,279    $ 1.53
Canceled    (3,576 )    —      (3,576 )    16.77

Outstanding at September 30, 2023    2,232,750    28,991,953    31,224,703    $ 1.53

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See Note 1014 for further discussion on the exercise of the 65,681 warrants. See Note 12 to the consolidated financial statements included in the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2022~~2023 for further discussion of the terms related to the Company’s warrants.

Reserved Shares

The Company has authorized shares of common stock for future issuance as of ~~September 30, 2023~~March 31, 2024 as follows:

Exercise of warrants

975,132

~~31,224,703~~

Shares available for future stock incentive awards

202,875

~~8,142,893~~

~~RSUs reserved for issuance~~

~~349,750~~

Unvested restricted stock units

464,018

~~2,052,967~~

Outstanding common stock options

1,347,618

~~19,966,999~~

Series A Preferred Stock

17,808,670

~~Total~~Outstanding Series A Preferred Stock options

470,403

~~61,737,312~~

Total

21,268,716

~~11.~~

12. Stock Incentive Plans

The Company ~~maintains~~maintained 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 ~~1,210,256~~40,341 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 ~~remain~~remained subject to the terms of the 2008 Plan. Awards granted under the 2008 Plan that ~~expire, lapse~~expired, lapsed or ~~terminate become~~terminated 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

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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 ~~September 30, 2023, 2,734,937~~March 31, 2024, 19,446 shares remain available for future issuance under the 2016 Plan.

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 ~~1,175,000~~39,166 shares of its common stock for issuance. In March 2019, the Board of Directors approved ~~the~~an amendment and restatement of the 2018 Inducement Incentive Award Plan to reserve an additional ~~2,000,000~~66,667 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 ~~September 30, 2023,~~March 31, 2024, there are ~~425,858~~113,927 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 nine months ended September 30, 2023 and $1.0 million recognized as stock-based compensation expense upon the issuance of common stock to Ginkgo during the nine months ended September 30, 2022 as described in Note 14, was as follows (in thousands):






	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Research and development	$	1,189	$	954	$	5,058	$	3,993
Research and development
Research and development
General and administrative		1,132		1,647		3,322		4,925

General and administrative
General and administrative
Total stock-based compensation expense	$	2,321	$	2,601	$	8,380	$	8,918

Total stock-based compensation expense
Total stock-based compensation expense

~~Table of Contents~~

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 in the following table. No stock options were granted during the three months ended September 30, 2023.~~assumptions:


	Three Months Ended March 31,
	2024			2023
Risk-free interest rate	3.95		%	3.95		%
Dividend yield	—			—
Expected term (in years)	6.20			5.94
Expected volatility	95.37		%	94.64		%
Weighted-average fair value of common stock	$	19.78		$	34.50

Three Months Ended

September 30,

Nine Months Ended

September 30,


2022

2023

2022

Risk-free interest rate    3.86 % 3.95 % 1.79 %
Dividend yield    —   —   —
Expected term    5.93 5.94 6.03
Expected volatility    93.37 % 94.64 % 91.97 %
Weighted-average fair value of common stock    $ 1.69 $ 1.15 $ 2.99

The expected term of the ~~Company’s~~Company'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-average grant date fair value of stock options granted ~~to employees~~ was ~~$1.31~~$15.79 and $26.87 during the three months ended ~~September 30, 2022~~March 31, 2024 and ~~$0.90 and $2.26 during the nine months ended September 30,~~ 2023, ~~and 2022,~~ respectively.

As of ~~September 30, 2023,~~March 31, 2024, total unrecognized compensation expense related to unvested ~~employee~~common stock options and Series A Preferred Stock options was ~~$11.6~~$8.3 million and $0.8 million, respectively, which is expected to be recognized over a ~~weighted-average~~weighted average period of ~~2.5 years.~~3.4 years and 1.4 years, respectively.

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 of			remaining	Aggregate
	common stock	Weighted-average		contractual term	intrinsic value
	options	exercise price ($)		(in years)	(in thousands)









Outstanding at December 31, 2023	776,865	$	2.97	6.50	$	13,760
Granted	641,089	$	19.78
Exercised	(52,558)	$	2.93
Forfeited	(17,778)	$	11.46
Outstanding at March 31, 2024	1,347,618	$	10.86	7.88	$	11,827

Vested at March 31, 2024	583,183	$	2.98	5.90	$	9,633
Vested and expected to vest at March 31, 2024	1,200,826	$	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    (1,354,852 )    $ 2.98

Outstanding at September 30, 2023    19,700,760    $ 2.84    7.73    $ —

Vested at September 30, 2023    9,374,463    $ 3.87    6.60    $ —
Vested and expected to vest at September 30, 2023    18,644,435    $ 2.90    7.66    $ —
Non-employee
consultants

Outstanding at December 31, 2022    266,239    $ 8.05    5.08    $ —

Outstanding at September 30, 2023    266,239    $ 8.05    4.33    $ —

Vested at September 30, 2023    266,239    $ 8.05    4.33    $ —
Vested and expected to vest at September 30, 2023    266,239    $ 8.05    4.33    $ —

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 A			remaining	Aggregate
	Preferred Stock	Weighted-average		contractual term	intrinsic value
	options	exercise price ($)		(in years)	(in thousands)









Outstanding at December 31, 2023	14,112.299	$	79.94	5.91	$	8,601





Outstanding at March 31, 2024	14,112.299	$	79.94	5.65	$	8,043

Vested at March 31, 2024	11,323.762	$	73.14	5.05	$	6,530
Vested and expected to vest at March 31, 2024	14,112.299	$	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 ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, the Company granted ~~1,054,600~~471,104 restricted stock unit awards with a weighted-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 ~~will~~generally 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.

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Unrecognized compensation expense ~~for all~~related to the restricted stock units was ~~$2.7~~$6.5 million as of ~~September 30, 2023,~~March 31, 2024, which is expected to be recognized over a weighted-average period of ~~2.5~~3.7 years.

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The following table summarizes the Company’s restricted stock units under the 2016 Plan, ~~and~~the 2018 Inducement Incentive Award Plan, and the Old Cartesian Plan:


	Number of shares	Weighted-average grant date fair value ($)
Unvested at December 31, 2023	—	$	—
Granted	471,104	19.80


Forfeited	(7,086)	19.80
Unvested at March 31, 2024	464,018	$	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    (636,018 )    2.40
Forfeited    (71,173 )    1.99

Unvested at September 30, 2023    2,052,967    $ 1.95

Employee Stock Purchase Plan

In June 2016, the Company approved the 2016 Employee Stock Purchase Plan, or the ESPP, which authorized ~~173,076~~5,769 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 nine months ended September 30, 2023, the Company issued 186,044 shares of common stock under the ESPP. As of ~~September 30, 2023, 4,982,098~~March 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.

The Company recognized no and less than $0.1 million stock-based compensation expense under the ESPP ~~of less than $0.1 million~~ for ~~each of~~ the three months ended ~~September 30,~~March 31, 2024 and March 31, 2023, ~~and 2022 and $0.1 million for each of the nine months ended September 30, 2023 and 2022.~~respectively.

~~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. 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. 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.

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~~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 ~~September 30,~~March 31, 2024 and December 31, 2023, the Company recorded ~~$4.1~~$0.4 million and $2.3 million as a short-term contract liability, respectively, and ~~$4.0~~no and $3.5 million ~~as a~~ long-term contract liability, respectively, representing deferred revenue associated with the Astellas Agreement. As of ~~September 30,~~March 31, 2024 and December 31, 2023, the Company recorded a receivable of ~~$0.5~~$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 ~~$1.5~~$5.8 million and ~~$2.9~~$0.6 million related to the Astellas Agreement was recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~respectively.~~respectively, inclusive of $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 was 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 Company was also eligible for tiered royalties on future commercial sales of any licensed products. A more detailed

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description of the Takeda Agreement and the ~~Company’s~~Company's evaluation of this agreement under ASC 606 can be found in Note 1214 to the consolidated financial statements in ~~our~~the 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.

The Takeda Agreement was terminated effective July 25, 2023, following Takeda’s decision to discontinue discovery and

pre-clinical

activities in adeno-associated virus, or AAV, gene therapy.

As of ~~September 30, 2023~~both 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 with~~related to the Takeda Agreement. No revenue ~~and revenue~~related to the Takeda Agreement was recognized during the three months ended March 31, 2024. Revenue of ~~$0.6~~$0.5 million related to the Takeda Agreement was recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, ~~respectively. No revenue and revenue of $1.0 million~~all from performance obligations related to prior periods as a result of the ~~Takeda Agreement was recognized during the three and nine months ended September 30, 2022, respectively.~~change in transaction price.

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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’s~~Company's evaluation of this agreement under ASC 606 can be found in Note 1214 to the consolidated financial statements in ~~our~~the 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 ~~Sobi~~ License and ~~is transferring~~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 ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the Company recorded a total outstanding receivable of ~~$4.2~~$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 ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the Company recorded a total unbilled receivable of ~~$1.9~~$2.4 million and ~~$3.2~~$3.0 million, respectively, representing revenue earned but not yet billed for the Phase 3 DISSOLVE program. ~~Revenue~~No revenue and revenue of ~~$5.0 million and $13.7~~$4.4 million related to the Sobi License was recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, respectively. ~~Revenue of $20.7 million and $73.6 million related to the Sobi License was recognized during the three and nine months ended September 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 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’s~~Company's evaluation of this agreement under ASC 606 can be found in Note 1214 to the consolidated financial statements in ~~our~~the 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

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recognized as revenue during the ~~nine~~three months ended ~~September 30,~~March 31, 2023. No revenue related to the Sarepta Agreement was recognized during the three months ended ~~September 30, 2023. No revenue and revenue of $10.2 million was recognized during the three and nine months ended September 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.

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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 nine months ended September 30, 2022. No revenue was recognized during the three months ended September 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 ~~September 30, 2023,~~March 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$8.1~~$0.4 million.

Contract Balances from Contracts with Customers

The following table presents changes in the Company’s contract liabilities during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 (in thousands):


	Balance at						Balance at
	beginning of period		Additions		Deductions		end 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

Nine Months Ended September 30, 2023

Balance at
beginning of period

Additions

Deductions

Balance at
end of period

Contract liabilities:
Deferred revenue    $ 593    $ 10,500    $ (2,972 )    $ 8,121

Total contract liabilities    $ 593    $ 10,500    $ (2,972 )    $ 8,121

~~13.~~

14. Related-Party Transactions

November 2023 Securities Purchase Agreement

~~April 2022 Offering~~

~~During~~On November 13, 2023, the ~~nine~~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 months ended ~~September 30, 2022,~~March 31, 2024.


Name	Shares of Series A Preferred Stock purchased	Total 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 described~~per-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 fo~~

~~th the number~~an 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 nine~~ months ended ~~September 30,~~March 31, 2023, there were no related party transactions.

~~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.

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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 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

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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.

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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~~

~~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 ~~892,857~~29,761 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 payment of $1.0 million and issuance of ~~1,339,285~~44,642 shares of the Company’s common stock then-valued at $1.5 million to Ginkgo during the ~~three and nine months~~year ended ~~September 30,~~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, or~~the 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 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,

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 ~~total~~have 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 expense~~expensed costs related to the Cyrus Agreement as incurred until regulatory approval is received in accordance with ASC 730. The Company ~~will assess~~assessed the capitalization of costs incurred after the receipt of regulatory approval and, if applicable, ~~will amortize~~would 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 be~~would have been expensed as ~~the~~ commercial sales occur.

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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

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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.

As of ~~September 30, 2023,~~

March 31, 2024, no

impairment indicators ~~are~~were present and ~~therefore~~there 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

t 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.

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 ~~AskBio~~it 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.

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The Company and AskBio ~~will share~~shared responsibility for the research, development and commercialization of products developed under the

SEL-399

program collaboration. The parties ~~will~~ also ~~share~~shared 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 longer~~not be required to share costs for such products. Each party ~~will receive~~would 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 exposed~~mutually agreed to the ~~risks and rewards of the collaborative activity. The Company evaluated the terms~~termination of the AskBio Collaboration Agreement, ~~and has identified the following promises in the arrangement (1) conducting research and development activities to develop and commercialize products~~effective 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.

~~During~~during the three ~~and nine~~ months ended ~~September 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 nine months ended September 30, 2022, the Company recognized $0.2 million and $0.8 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 November 2023, the Company entered into a Sixth Amendment, or the Sixth Amendment, to the MIT License. Pursuant to the Sixth Amendment, the Company will be obligated to use commercially reasonable efforts to further enable the development of a licensed product thereunder.

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As of September 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 September 30, 2023. The Company made no additional payments during the three and nine months ended September 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 ~~September 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 provides~~As 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 assets~~net losses we have incurred or our earned research and ~~liabilities for~~orphan drug credits, due to the ~~expected future tax consequences~~uncertainty 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 effect~~realizing a benefit from those items in the ~~years in which the differences are expected to reverse.~~future.

~~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 September 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.

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

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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 in~~As 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 ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, and $0.3 million during each of the nine months ended September 30, 2023 and 2022.~~

respectively.

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~~17.~~18. Commitments and Contingencies

As of ~~September 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 indemnify~~indemnifies 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. Subsequent Events~~

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 ~~October 30,~~August 17, 2023, the Company ~~notified Cyrus~~announced additional steps to extend cash runway and maximize value for stockholders by continuing to prioritize development of SEL-212 and support of its ~~termination~~collaboration with Astellas for Xork, and pausing further development of ~~the Cyrus Agreement, effective December 29, 2023.~~

On October 31, 2023, the Company and Sobi entered into Amendment No. 1 to the Sobi License, or the Amendment, 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 Sobi License and is transferring certain contracts and manufacturing equipment to Sobi. Additionally, in connection with entry into the Amendment, Sobi agreed to make employment offers to certainall of the Company’s ~~employees engaged in ImmTOR manufacturing activities on or prior to~~other clinical and preclinical product candidates that it was no longer actively advancing.

As a ~~specified date, and~~result of these measures, the Company ~~agreed not~~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 ~~terminate~~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 ~~employment~~three months ended March 31, 2024, the Company recorded restructuring expenses consisting of ~~such employees prior~~one-time cash severance payments and other employee-related costs of $0.3 million, with $0.2 million and $0.1 million recorded to ~~such specified date.~~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 Balance						Ending Balance
	December 31, 2023		Charges		Payments		March 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 ~~Amendment,~~Reverse Stock Split, every 30 shares of common stock outstanding were combined, automatically and without any action on the part of the Company ~~maintains no responsibilities~~or its stockholders, into one share of common stock. Stockholders entitled to ~~Sobi to manufacture, or supply Sobi with, ImmTOR under the Sobi License.~~

~~On November 13, 2023, the Company merged with Cartesian pursuant to the Merger Agreement. Under the terms~~fractional shares as a result of the ~~Merger Agreement, at~~Reverse Stock Split received a cash payment in lieu of receiving fractional shares. The Reverse Stock Split did not change the ~~closing~~number of ~~the Merger, the Company acquired all of Cartesian’s assets, and the Company agreed to issue to the holders of Cartesian capital stock an aggregate of 6,723,662~~authorized shares or par value of the Company’s common ~~stock, par value $0.0001 per share,~~ or ~~the common stock, and 384,930.725 shares~~preferred stock.

Table of ~~Series A~~

Contents

~~Non-Voting~~

~~Preferred Stock, par value $0.0001 per share, or the Series A Preferred Stock. The~~ Series A Preferred Stock ~~is convertible into the Company’s common stock upon stockholder approval of such conversion.~~
Automatic Conversion

The ~~Certificate of Designation of Preferences, Rights and Limitations of the Series A~~

~~Non-Voting~~

~~Convertible Preferred Stock, or the Certificate of Designation, contains a provision granting each holder~~Automatic Conversion of the Series A Preferred Stock occurred on April 8, 2024 at 5:00 p.m. Eastern Time pursuant to the ~~option to require the Company to redeem any or all of such holder’s preferred shares if the Company’s stockholders have not voted to~~

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~~approve the conversion~~terms of the ~~Series A Preferred Stock to common stock within 18 months~~Certificate of ~~the Closing Date; provided, however, that no holder will have the right to seek redemption of any~~Designation, as amended. As a result, 367,919.247 shares of Series A Preferred Stock ~~to the extent that such holder would otherwise be unable to convert such~~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 ~~the 19.9% common stock~~ beneficial ownership ~~limitation contained in the Certificate of Designation.~~limitations. The

~~per-share~~

redemption price is the average closing trading price of the common stock for the ten preceding trading days ending on, and including, the trading day immediately prior to the date a notice of conversion is delivered to the Company. The Company could be required to use a significant amount of its cash resources on hand to satisfy this redemption obligation, particularly if holders of Series A Preferred Stock exercise their redemption right with respect to a significant number of166,341.592 shares of Series A Preferred Stock ~~or at a time when~~that did not automatically convert are convertible into 5,544,719 shares of common stock. Based on the ~~trading price~~17,779,787 shares of ~~the Company’s~~ common stock ~~is elevated. Further, in the event that the Company does not have sufficient cash~~outstanding on ~~hand to satisfy its redemption obligations, the Company may need to raise additional capital to satisfy these potential obligations. Any redemption payments could materially limit the amount~~April 8, 2024, there would be 23,324,506 shares of ~~cash the Company has available to fund its operations.~~

Concurrently with the closing of the Merger, the Company entered into a securities purchase agreement with certain investors in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, or the Financing. In the Financing, the Company agreed to issue 149,330.115common stock outstanding if all shares of Series A Preferred Stock ~~in exchange for aggregate gross proceeds of $60.25 million. The Company granted customary registration rights to investors in the Financing.~~converted into common stock on such date.

~~Additionally, on November 13, 2023,~~7495 New Horizon Way Lease Amendment

Effective May 7, 2024, the Company ~~announced~~and the Landlord entered into a ~~dividend of one contingent value right~~First Amendment to ~~be issued to each holder~~the Frederick Lease Agreement, or the Amendment, providing for the expansion of the ~~Company’s common stock as~~premises leased pursuant to the Frederick Lease Agreement by approximately 7,842 square feet. In connection with the expansion of the ~~close of business on December 4, 2023. When issued, a contingent value right will entitle its holder to a portion of royalties and other payments received by~~leased premises, the Company ~~with respect~~will be obligated to ~~its legacy assets, net~~pay $0.3 million in additional annual base rent for the first year of ~~certain deductions.~~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, ~~2022~~2023 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

~~Following the closing of the Merger described below, we~~

We are a clinical-stage biotechnology company ~~pioneering RNA~~developing mRNA cell therapies for the treatment of autoimmune diseases. ~~Our~~We leverage our proprietary technology and manufacturing platform to introduce one or more mRNA molecules into cells to enhance their function. Unlike DNA, mRNA degrades naturally over time without integrating into the cell’s genetic material. Therefore, our mRNA 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 chronic autoimmune disease that causes disabling muscle weakness and fatigue, we observed that our lead product candidate, Descartes-08, generated a deep and durable clinical benefit.

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 cell. The CAR redirects the T-cells to target and destroy pathogenic self-reactive cells. Our mRNA MSC modality is an allogeneic approach that introduces 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 banked and are designed to be administered off-the-shelf to any patient. Our mRNA in situ modality is designed to ~~enable precision control~~deliver mRNA into a patient’s lymph node to generate CAR-T cells and optimization of engineered cells for diverse cell therapies leveraging multiple modalities, including autologous, allogeneic, and in vivo transfection. We believe our RNA approach has the potential to expand the reach of cell therapy to treatother proteins that target autoimmunity ~~with safer, potent, and less expensive therapies compared a DNA approach, and potentially in the outpatient setting.~~

~~Our wholly owned pipeline includes:~~

•

~~Descartes-08: Descartes-08~~. ~~is an autologous anti-BCMA~~ ~~RNA-engineered~~ ~~chimeric antigen receptor~~ ~~T-cell~~ ~~therapy, or~~ ~~rCAR-T.~~ ~~Compared to conventional~~ ~~DNA-based~~ ~~CAR~~ ~~T-cell~~ ~~therapies, we believe~~ ~~rCAR-T~~ ~~does not require preconditioning chemotherapy, has predictable and controllable pharmacokinetics, and avoids the risk of genomic integration.~~ ~~Descartes-08~~ ~~is currently in clinical development for autoimmune diseases and generalized myasthenia gravis, or MG, a chronic autoimmune disorder that causes disabling muscle weakness and fatigue.~~ ~~Descartes-08~~ ~~has been granted Orphan Drug Designation by the U.S. Food and Drug Administration for the treatment of MG.~~

Merger

~~Cartesian previously reported positive data from the Phase 2a study of 14 patients with MG who received six weekly infusions of~~ ~~Descartes-08~~ ~~in the outpatient setting without preconditioning chemotherapy. In the trial, the results of which were published in The Lancet Neurology,~~ ~~Descartes-08~~ was observed to be safe and well-tolerated, and to induce deep and durable responses. Enrollment is currently ongoing in a Phase 2b randomized, double-blind, placebo-controlled trial (NCT04146051) in patients with MG, with topline results expected in ~~mid-2024.~~

~~Beyond MG, initiation of a Phase 2 study of~~ ~~Descartes-08~~ in patients with systemic lupus erythematosus, a chronic autoimmune disease that causes systemic inflammation which affects multiple organ systems, is expected in the first half of 2024. In addition, initiations of a Phase 2 ocular autoimmune basket trial and a Phase 2 vasculitic autoimmune basket trial are planned for ~~mid-2024~~ ~~and the second half of 2024, respectively.~~

~~Descartes-15: Descartes-15~~ ~~is designed to be a next-generation autologous anti-BCMA~~ ~~rCAR-T.~~ ~~In preclinical studies,~~ ~~Descartes-15~~ ~~was observed to be significantly more potent than~~ ~~Descartes-08.~~ ~~We intend to leverage its clinical observations to date from its~~ ~~Descartes-08~~ ~~clinical program to inform the clinical strategy for~~ ~~Descartes-15~~ ~~for the treatment of autoantibody-associated autoimmune diseases, or AAAD.~~

•

~~Descartes-33: Descartes-33~~ ~~is designed to be an~~ ~~off-the-shelf~~ ~~(“allogeneic”) mesenchymal stem cell therapy, or rMSC, for the treatment of AAAD. In in vitro studies,~~ ~~Descartes-33~~ ~~was observed to induce potent degradation of neutrophil extracellular traps.~~

~~Recent Developments~~

~~Merger~~

On November 13, 2023, the Company (formerly known as Selecta Biosciences, Inc., or Selecta) merged with the private Delaware corporation which, immediately prior to the Merger (as defined below), was known as Cartesian Therapeutics, Inc., ~~pursuant to the Merger Agreement. Under~~or Old Cartesian, in accordance with the terms of an Agreement and Plan of Merger, or the Merger Agreement, ~~at the closing~~by and among

Selecta, Sakura Merger Sub I, Inc., a wholly owned subsidiary of ~~the~~Selecta, or First Merger ~~we acquired all~~Sub, Sakura Merger Sub II, LLC, a wholly owned subsidiary of ~~Cartesian’s assets,~~Selecta, or Second Merger Sub, and we agreed to issue the holders of Cartesian capital stock a total of 6,723,662 shares of Selecta’s common stock and 384,930.725 shares of Selecta’s Series A Preferred Stock. Also at the closing of the Merger, each option to purchase shares of Cartesian capital stock that was outstanding and unexercised, whether or not vested, was converted into and became an option to purchase our common stock or Series A ~~Non-Voting~~ ~~Convertible Preferred Stock, or the Series A Preferred Stock, and we assumed Cartesian’s 2016 Stock Incentive Plan.~~

The Series A Preferred Stock to be issued in the Merger is convertible into our common stock upon stockholder approval of such conversion. The proposal to approve such conversion is referred to as the conversion proposal.Old Cartesian. Pursuant to the Merger Agreement, ~~we are required to seek stockholder approval of the conversion proposal as promptly as reasonably practicable following the~~First Merger ~~at a special meeting of stockholders,~~Sub merged with and ~~if such approval is not obtained at that meeting, to seek to obtain such approval at an annual or special meeting to be held at least every six months thereafter until such approval is obtained.~~

In accordance with the Merger Agreement, each of Peter Traber, Kei Kishimoto and Lloyd Johnston resigned as Chief Medical Officer, Chief Scientific Officer and Chief Operations Officer, respectively, following which Drs. Traber, Kishimoto, and Johnston will serve as Senior Clinical Advisor, Senior Scientific Advisor, and Senior Operations Advisor, respectively, to the Company. The Board subsequently appointed Metin Kurtoglu as the Company’s Chief Operating Officer, Milos Miljkovic as Chief Medical Officer, and Chris Jewell as Chief Scientific Officer.

Immediately following the completion of the Merger, Selecta securityholders owned approximately 27% of our outstanding shares of common stock on a fully diluted basis and Cartesian securityholders owned approximately 73% of our outstanding shares on a fully diluted basis.

~~Support Agreements~~

~~Also on November 13, 2023, certain of our officers, directors and stockholders, collectively referred to as the Supporting Stockholders, entered~~ into Support Agreements with us, or the Support Agreements. Under the terms of the Support Agreements, each Supporting Stockholder has agreed, among other things, to vote all shares of common stock held by such person in favor of the conversion proposal and a proposal to amend our restated certificate of incorporation, as amended, to increase our authorized share capital, until the expiration of the Support Agreements. As of November 13, 2023, the Supporting Stockholders beneficially owned an aggregate of approximately 25% of the outstanding shares of Selecta’s common stock.

~~Lock-up~~ ~~Agreements~~

Concurrently and in connection with the execution of the Merger Agreement, certain Cartesian stockholders as of immediately prior to the Merger, and certain of the directors and officers of Selecta as of immediately prior to the Merger entered into ~~lock-up~~ ~~agreements, or the~~ ~~Lock-up~~ ~~Agreements, with the Company and~~Old Cartesian, pursuant to which ~~each such stockholder will be subject to~~Old Cartesian was the surviving corporation and became a ~~180-day lock-up~~ ~~on the sale or transfer~~wholly owned subsidiary of shares of Common Stock held by each such stockholder at the closing of the Merger, including those shares of common stock and Series A Preferred Stock (including the shares of common stock into which such Series A Preferred Stock is convertible) received by Cartesian stockholders in the Merger.

~~CVR~~

~~Additionally, on November 13, 2023, we announced that we expected to enter into a contingent value rights agreement,~~Selecta, or the ~~CVR Agreement,~~First Merger. Immediately following the First Merger, Old Cartesian merged with ~~Equiniti Trust Company, LLC,~~and into Second Merger Sub, pursuant to which Second Merger Sub was the surviving entity, or the ~~Trustee, within 30 days of~~Second Merger and, together with the First Merger, the Merger. In connection with ~~announcement of~~ the ~~CVR Agreement, we also announced that we declared a dividend of one contingent value right, or a CVR,~~Second Merger, Old Cartesian changed its name to be issued to each holder of our common stock as of December 4, 2023, the record date. When issued, each CVR will entitle its holder, which is referred to as a Holder, to, during the period ending on the date on which the Royalty Term (as defined in our License and Development Agreement, as amended, with Swedish Orphan Biovitrum AB (publ.), or the Sobi License, ends, or the Termination Date:

~~(i)~~

100% of all milestone payments, royalties and other amounts paid to the Company or its controlled affiliates, or the Company Entities, prior to the Termination Date, 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,~~ ~~or a New Applicable Agreement; and~~

~~(ii)~~

~~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 between a Company Entity and any person who is not a Company Entity relating to a sale, license, transfer or other disposition of any transferable asset of the Company Entities existing as of immediately prior to the Merger, or a Disposition, other than those exclusively licensed under the Sobi License or which the Company Entities are required to continue to ownCartesian Bio, LLC. In ~~order to comply with the Sobi License, or a Disposition Agreement.~~

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 (A) certain taxes, (B) certain ~~out-of-pocket~~ expenses incurred by the Company Entities including audit and accounting fees incurred in connection with reporting obligations relating to the CVRs, in respect of its performance of the Sobi License or any New Applicable Agreement, in connection with the ~~entry into a Disposition Agreement,~~Merger and under any Disposition Agreement and performance of the Company Entities’ related obligations thereunder, (C) a fixed amount of $750,000 for each Distribution Period (as defined below) to account for general and administrative overhead incurred by the Company Entities, (D) in the case of a distribution that includes payments for certain milestones under clause (ii) above and for the upfront portion, if any, of the consideration payable under a Disposition Agreement, or a Trigger Distribution, the sum of payments made under any liabilities of the Company Entities arising under real property leases in effect as of immediately prior to Closing, or Lease Liabilities after the Closing and the aggregate remaining payment obligations under the Lease Liabilities outstanding as of the applicable date of measurement (but subject to a positive adjustment in case amounts held back under this clause (D) exceed the liabilities actually incurred under the Lease Liabilities at the time such a lease expires or is terminated, assigned or subleased), and (E) in the case of a Trigger Distribution, the sum of payments made after Closing under certain liabilities relating to the Company’s Xork product candidate, or Xork Liabilities, after the Closing and the aggregate remaining payment obligations under Xork Liabilities outstanding as of the applicable date of measurement but subject to a positive adjustment in case amounts held back under this clause (E) exceed the liabilities actually incurred under the Xork Liabilities at such time as the development activities with respect to Xork are terminated, transferred or assigned by the Company Entities or otherwise completed in accordance with the development plan set forth in the Company’s License and Development Agreement with Audentes Therapeutics, Inc., or the Astellas Agreement, when such termination, transfer, assignment or completion occurs.

~~We will calculate the amount of any payment due on the CVRs for each six-month period from January 1 through June 30 and each~~ ~~six-month~~ period from July 1 through December 31 of each year (each such period is referred to as a Distribution Period), except that the initial Distribution Period will commence on the date of the CVR Agreement and run through June 30, 2024.

Payments on the CVRs will be cumulative and will be payable no later than the close of business on each March 15 (for Distribution Periods that end on December 31) and September 15 (for Distribution Periods that end on June 30), commencing on September 15, 2024, with each such date referred to as a Distribution Payment Date, to holders of record as of the close of business on the first day of the month of the applicable Distribution Payment Date. If a Distribution Payment Date is not a business day, payment will be made on the immediately succeeding business day, without the accumulation of additional distributions. If the amount of any ~~per-CVR~~ ~~distribution is less than $0.02, we may elect to defer such distribution until the next Distribution Payment Date when the aggregate~~ ~~per-CVR~~ ~~distribution would be $0.02 or greater.~~

Under the CVR Agreement, as long as any CVRs are outstanding, we will not, (i) without the affirmative vote of the Holders of at least 66 and 2/3% of the then-outstanding CVRs: (i) modify in a manner adverse to the Holders any provision contained in the CVR Agreement with respect to the termination of the CVR Agreement or the CVRs, or the time for payment and amount of any distribution, or modify in any manner any provision of the CVR Agreement if such modification would reduce the amounts payable in respect of the CVRs or modify any other payment term or payment date, (ii) without the consent of each Holder of each outstanding CVR affected thereby, reduce the number of CVRs, (iii) without the consent of the affirmative vote of the Holders of a majority of the then-outstanding CVRs modify any of the foregoing provisions summarized in this paragraph, except to increase the percentage of Holders from whom consent or approval is required or to provide that certain other provisions of the CVR Agreement cannot be modified or waived without the consent of the Holders protected thereby, or alter, change, amend, or modify, in each case in any material respect or in any manner adverse to the Holders, the Sobi License, our License and Development Agreement with Astellas Gene Therapies, or the Astellas Agreement, or the Exclusive License Agreement with Genovis AB (publ.), or the Genovis Agreement, terminate the Sobi License, or sell, license, assign, transfer, enter into any monetization transaction, or otherwise dispose of or otherwise grant or suffer to exist a mortgage, pledge, lien, encumbrance or other security interest on all or a portion of (A) the patents or patent applications licensed under the Sobi License or (B) the Sobi License or any rights to receive any milestone payments, royalties or other amounts under the Sobi License, and (iv) subject to limited exceptions, will not issue CVRs, other than pursuant to the Merger Agreement, ~~and except~~the Company changed its corporate name to ~~holders of outstanding warrants to purchase shares of common stock.~~

~~Additionally, in the event of certain terminations~~Cartesian Therapeutics, Inc. See Note 3 of the Sobi License at a time when any CVRs are outstanding, we will, and will cause our applicable related entities to, exercise our rights to obtain a “reversion license” and enforce any of our rights under the terminated Sobi License that survive the termination or expiration thereof. Further, in the event that following entry into a reversion license, we or any of such entities enter into an agreement for any sale, license, transfer or other disposition with a third party that provides for the development and commercialization of ~~SEL-212,~~ ~~we will, and will cause our applicable related entities to, comply with the provisions of the CVR Agreement in connection with such new agreement.~~

Under the CVR Agreement, the Trustee has, and Holders of at least 20% of the CVRs then-outstanding may also instruct the Trustee to exercise, certain rights to inspection, audit, and enforcement on behalf of all Holders of the CVRs.

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

~~PIPE Financing~~

Concurrently with the closing of the Merger, we entered into a securities purchase agreement with certain investors in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, or the Financing. In the Financing, we agreed to issue 149,330.115 shares of Series A Preferred Stock in exchange for aggregate gross proceeds of $60.25 million. We granted customary registration rights to investors in the Financing.

~~The foregoing summaries of the Merger Agreement, form of Support Agreement, form of~~ ~~lock-up~~ ~~agreement, form of CVR Agreement, and form of securities purchase agreement are not complete and are qualified in their entirety by reference~~accompanying notes to the ~~full texts~~unaudited consolidated financial statements appearing elsewhere in this Quarterly Report for additional information regarding the Merger.

Table of ~~the Merger Agreement, form of Support Agreement, form of~~ ~~lock-up~~Contents agreement, form of CVR Agreement, and form of securities purchase agreement, copies of which are incorporated by reference as Exhibits 2.1, 10.1, 10.2, 4.1, and 10.3, respectively, to this Quarterly Report on Form ~~10-Q.~~

~~Components of Results of~~

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 ~~our~~a credit facility. We do not have any products approved for sale and have not generated any product sales.

Except for the year ended December 31, 2022, we have incurred significant operating losses since our inception. We incurred a net loss of ~~$42.1~~$56.8 million and ~~had net income of $29.5~~$21.7 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. As of ~~September 30, 2023,~~March 31, 2024, we had an accumulated deficit of ~~$437.0~~$671.5 million.

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;

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

continue to develop our preclinical and clinical-stage product 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, ~~relating~~or the Securities Purchase Agreement, pursuant to ~~the PIPE Financing. In the Financing,~~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.~~million, or the November 2023 Private Placement. We granted customary registration rights to investors in connection with the ~~Financing.~~

November 2023 Private Placement.

We believe that our existing cash, cash equivalents, and restricted cash as of ~~September 30, 2023, combined with net proceeds from the Financing~~March 31, 2024 will enable us to fund our operating expenses and capital expenditure requirements ~~for at least~~into the ~~next 12 months.~~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 ~~for the nine months ended September 30, 2023 and 2022~~ 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.

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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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 be~~for SEL-212, were reimbursed by Sobi. These costs, when reimbursed, ~~will be~~were 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 ~~are~~were related to the ImmTOR platform and ~~that are~~were 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 ~~will~~agreed 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 and loss on extinguishment of debt.~~

facilities.

Other income, net

Other income, net consists primarily of sublease ~~income during the three and nine months ended September 30, 2023 and was de minimis during the three and nine months ended September 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 subsidiary~~Selecta (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 September 30, 2023~~both March 31, 2024 and December 31, ~~2022,~~2023, we maintained cash of $0.2 million in Russian ~~banks~~bank 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.

Results of Operations

Comparison of the Three Months Ended ~~September 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 ~~September 30,~~March 31, 2023, ~~and 2022 (in thousands, except percentages):~~

   Three Months Ended
September 30,    Increase
(decrease)
   2023    2022
Collaboration and license revenue
   $ 6,551    $ 20,710    $ (14,159 )    (68 )%

~~During the three months ended September 30, 2023, collaboration and license~~a decrease of $0.1 million, or 2%. The decrease was primarily due to a decrease of revenue ~~was $6.6 million, compared to $20.7 million in 2022. During the three months ended September 30, 2023 and 2022, we~~ recognized ~~$5.0 million and $20.7 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, during~~program offset by an increase in revenue recognized under the Astellas Agreement.

Research and development expenses

For the three months ended ~~September 30, 2023, $1.5 million was recognized under the Astellas Agreement.~~

~~Research and development expenses~~

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

   Three Months Ended
September 30,    Increase
(decrease)
   2023    2022
Research and development
   $ 13,002    $ 16,539    $ (3,537 )    (21 )%

~~During the three months ended September 30, 2023,~~March 31, 2024, our research and development expenses ~~decreased by $3.5~~were $9.7 million compared to $18.6 million for the three months ended March 31, 2023, a decrease of $8.9 million, or ~~21%, as compared~~48%. 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 ~~September 30, 2022. The decrease in cost was primarily the result of the strategic reprioritization.~~

~~General and administrative expenses~~

~~The following is a comparison of~~ March 31, 2024, our general and administrative expenses were $9.5 million compared to $5.7 million for the three months ended ~~September 30,~~March 31, 2023, ~~and 2022 (in thousands, except percentages):~~

   Three Months Ended
September 30,    Increase
(decrease)
   2023    2022
General and administrative
   $ 6,614    $ 5,770    $ 844    15 %

~~During the three months ended September 30, 2023, our general and administrative expenses increased by $0.8~~an increase of $3.8 million, or ~~15%, as compared to the three months ended September 30, 2022.~~66%. The increase in ~~costs~~cost was primarily the result of an increase in ~~expenses~~professional fees incurred ~~for professional fees.~~

in connection with the Merger.

Investment income

Investment income for the three months ended March 31, 2024 was ~~$1.3~~$1.2 million, ~~and $0.7~~compared to $1.3 million for the three months ended ~~September 30, 2023 and 2022, respectively.~~March 31, 2023. The ~~increase~~decrease in investment income was due to ~~increased~~decreased 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 ~~September 30, 2023~~March 31, 2024 and ~~2022.~~

2023.

Interest expense

~~Interest~~

We recognized no interest expense ~~was $1.3 million and~~for the three months ended March 31, 2024, compared to $0.8 million for the three months ended ~~September 30,~~March 31, 2023, ~~and 2022, respectively,~~ representing interest expense and amortization of the carrying costs of our credit facilities ~~and loss on extinguishment of debt~~that were extinguished during the ~~three months~~year ended ~~September 30,~~December 31, 2023.

Change in fair value of warrant liabilities

For the three months ended ~~September 30, 2023,~~March 31, 2024, we recognized ~~$3.8~~$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 by~~compared to a ~~driven by a decrease in the remaining expected life of the warrants and a decrease in the price of our common stock. For the three months ended September 30, 2022, we recognized a $6.5~~$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 ~~September 30,~~March 31, 2023, ~~and was de minimis for the three months ended September 30, 2022.~~

~~Income taxes~~

For the three months ended September 30, 2023, we recognized no income tax expense. For the three months ended September 30, 2022, we recognized $0.3 million in income tax benefit primarily related to the abatementa decrease of ~~penalties and interest.~~

~~Net (loss) income~~

~~Net loss for the three months ended September 30, 2023 was $9.0 million compared to net loss of $7.9 million for the three months ended September 30, 2022.~~

~~Comparison of the Nine Months Ended September 30, 2023 and 2022~~

~~Collaboration and license revenue~~

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

   Nine Months Ended
September 30,    Increase
(decrease)
   2023    2022
Collaboration and license revenue
   $ 17,738    $ 93,982    $ (76,244 )    (81 )%

During the nine months ended September 30, 2023 and 2022, we recognized $13.7 million and $73.6 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 nine months ended September 30, 2023, $2.9 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 nine months ended September 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 nine months ended September 30, 2023 and 2022 (in thousands, except percentages):~~

   Nine Months Ended
September 30,    Increase
(decrease)
   2023    2022
Research and development
   $ 49,408    $ 53,410    $ (4,002 )    (7 )%

~~During the nine months ended September 30, 2023, our research and development expenses decreased by $4.0~~$5.1 million, or 7%, as compared to the nine months ended September 30, 2022. The decrease in cost was primarily the result of the strategic reprioritization, 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.~~

~~General and administrative expenses~~

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

   Nine Months Ended
September 30,    Increase
(decrease)
   2023    2022
General and administrative
   $ 18,414    $ 17,538    $ 876    5 %

During the nine months ended September 30, 2023, our general and administrative expenses increased by $0.9 million, or 5%, as compared to the nine months ended September 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 and an increase in expenses incurred for professional fees partially offset by a reduction in expenses incurred for stock compensation.

~~Investment income~~

Investment income was $4.0 million and $0.9 million, for the nine months ended September 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 nine months ended September 30, 2023 and 2022, respectively.~~

~~Interest expense~~

Interest expense was $2.8 million and $2.2 million for the nine months ended September 30, 2023 and 2022, respectively, representing interest expense and amortization of the carrying costs of our credit facilities and loss on extinguishment of debt during the nine months ended September 30, 2023.

~~Change in fair~~126%. Fair value of warrant liabilities

~~For~~ was determined utilizing the ~~nine months ended September 30, 2023, we recognized $6.0 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 life of the warrants and a decrease in the~~per-share price of our common stock.

Change in fair value of contingent value right liability

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2024, we recognized ~~$7.3~~$39.3 million of ~~income for~~expense associated with the ~~decrease~~increase in the fair value of ~~warrant liabilities~~the 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 decrease~~the 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)~~

~~Other~~net

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During the three months ended March 31, 2024, we recognized other income, ~~was $0.8~~net of $0.5 million, ~~and $0.2~~compared to $0.3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023, ~~and 2022, respectively.~~an increase of $0.2 million, or 99%. The increase was primarily driven by sublease income.

~~Income taxes~~

For the nine months ended September 30, 2023, we recognized no income tax expense. For the nine months ended September 30, 2022, we recognized $0.3 million in income tax benefit primarily related to the abatement of penalties and interest.

Net ~~(loss) income~~

loss

Net loss for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was ~~$42.1~~$56.8 million as compared to net ~~income~~loss of ~~$29.5~~$21.7 million for the ~~nine~~three months ended ~~September 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 financed~~will need additional capital to fund our operations, ~~with~~which we may raise through a combination of ~~issuance of preferred~~equity offerings, debt financings, third-party funding, potential royalty and/or milestone monetization transactions and ~~common stock, government grant funding, borrowings under credit facilities~~other collaborations and ~~proceeds from our collaboration and license agreements.~~

strategic alliances.

As of ~~September 30, 2023,~~March 31, 2024, our cash, cash equivalents, and restricted cash were ~~$81.0~~$104.8 million, of which $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 connection with the Sobi Amendment, certain of our employees agreed to transfer their employment to Sobi. Additionally, we have informed certain employees that we intend to terminate their employment later in 2023. As a result of such terminations, we expect to incur $3.0 million of cash charges related to severance and benefit costs in 2023.

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.

~~Indebtedness~~

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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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 of~~which $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 would have matured on August 1, 2025. The second draw period expired on~~2020. In September ~~30, 2021.~~

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 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 September 11,~~ 2023, we entered into a payoff letter with Oxford Finance 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 SVBB (as successor to Silicon Valley Bank)), the lenders under the term loan, pursuant to which we paid all outstanding amounts under ~~the 2020 Term Loan,~~such term loan, together with accrued interest and a prepayment penalty, resulting in the full extinguishment of ~~the 2020 Term Loan.~~such term loan. The total payoff amount was $22.3 million, consisting of the remaining 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 future we seek debt financing, the terms of such debt could restrict our operating and financial 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, 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.

The Certificate of Designation of Preferences, Rights and Limitations of the Series A Non-Voting Convertible Preferred Stock, or the Certificate of Designation, contains a provision granting each holder of the Series A Preferred Stock the option to require us to redeem any or all of such holder’s preferred shares if the our stockholders have not voted to approve the conversion of the Series A Preferred Stock to common stock within 18 months of the Closing Date; provided, however, that no holder will have the right to seek redemption of any shares of Series A Preferred Stock to the extent that such holder would otherwise be unable to convert such shares of Series A Preferred Stock due to the 19.9% common stock beneficial ownership limitation contained in the Certificate of Designation. The per-share redemption price is the average closing trading price of the common stock for the ten preceding trading days ending on, and including, the trading day immediately prior to the date a notice of conversion is delivered to us. We could be required to use a significant amount of its cash resources on hand to satisfy this redemption obligation, particularly if holders of Series A Preferred Stock exercise their redemption right with respect to a significant number of shares of Series A Preferred Stock or at a time when the trading price of our common stock is elevated. Further, in the event that we do not have sufficient cash on hand to satisfy its redemption obligations, we may need to raise additional capital to satisfy these potential obligations. Any redemption payments could materially limit the amount of cash we have available to fund our operations.

As of ~~September 30, 2023,~~March 31, 2024, we had an accumulated deficit of ~~$437.0~~$671.5 million. 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 regularly 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 our existing cash, cash equivalents, and restricted cash as of September 30, 2023, combined with net proceeds from the Financing will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. 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 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:~~

~~the timing for stockholder approval of the conversion of our Series A Preferred Stock into common stock and the amount of any associated redemptions;~~

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

~~the manufacturability and cost of manufacturing clinical supplies of our product candidates;~~

~~the size of our headcount and associated costs;~~

~~the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our other product candidates;~~

~~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;~~

~~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.~~

~~Summary of Cash Flows~~

~~The following table summarizes our cash flows for the nine months ended September 30, 2023 and 2022:~~

Nine Months Ended
September 30,

(In thousands)    2023    2022
Cash (used in) and provided by:

Operating activities
   $ (27,875 )    $ (19,782 )
Investing activities
   28,112    (20,491 )
Financing activities
   (27,226 )    39,215
Effect of exchange rate changes on cash
   (69 )    65




Net change in cash, cash equivalents, and restricted cash
   $ (27,058 )    $ (993)

~~Operating activities~~

~~Net cash used in operating activities of $27.9 million for the nine months ended September 30, 2023 included approximately $36.8 million of net loss, adjusted for~~ ~~non-cash~~ ~~items, and approximately $8.9 million cash provided by changes in operating assets and liabilities.~~

~~Net cash used in operating activities of $19.8 million for the nine months ended September 30, 2022 included approximately $33.6 million of net income, adjusted for~~ ~~non-cash~~ ~~items, and uses of cash of approximately $53.4 million for changes in operating assets and liabilities.~~

~~Investing activities~~

Net cash provided by investing activities for the nine months ended September 30, 2023 was $28.1 million compared to net cash used in investing activities of $20.5 million in the same period in 2022. The net cash provided by investing activities for the nine months ended September 30, 2023 was primarily proceeds from the maturities of marketable securities offset by purchases of property and equipment. The net cash used in investing activities for the nine months ended September 30, 2022 was primarily purchases of marketable securities offset by proceeds from maturities of marketable securities.

~~Financing activities~~

Net cash used in financing activities for the nine months ended September 30, 2023 was $27.2 million compared to net cash provided by financing activities of $39.2 million in the same period in 2022. The net cash used in financing activities in the nine months ended September 30, 2023 was primarily the result of repayments of principal on outstanding debt offset by proceeds from issuance of common stock under the Employee Stock Purchase Plan and in the nine months ended September 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~~

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

~~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 nine months ended September 30, 2023, 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~~March 31, ~~2022.~~

~~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 September 30, 2023 and December 31, 2022, we had cash, cash equivalents, restricted cash and marketable securities of $81.0 million and $136.2 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 effective at the reasonable assurance level as of September 30, 2023.

~~Inherent Limitations on Effectiveness of Controls~~

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 September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~

~~PART II. OTHER INFORMATION~~

~~Item 1. Legal Proceedings~~

~~None.~~

~~Item 1A. Risk Factors~~

~~RISK FACTORS SUMMARY~~

Investing in our common stock involves various risks. You should carefully read and consider the matters discussed in this Quarterly Report under the heading “Risk Factors,” which include the following risks:

~~We are a clinical-stage company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.~~

~~We will need substantial additional funding in order to complete development of our product candidates and commercialize our products, if approved.~~

•

~~Our product candidates are based on our~~ ~~rCAR-T~~ ~~and rMSC therapies, which are unproven approaches to the treatment of disease.~~

~~Regulatory authorities in the United States and European Union have limited experience in reviewing and approving cell therapy products for autoimmune disease.~~

~~Clinical drug development involves a lengthy and expensive process, with an uncertain outcome.~~

~~Geopolitical events, instability and wars can adversely affect both our clinical operations and supply chains that we rely on to advance our drug candidates.~~

•

~~Manufacturing our products is complex and involves new or unproven technology. Some of our products are made on a~~ ~~patient-by-patient~~ ~~basis, rendering them less predictable and requiring more demanding logistics.~~

~~We expect to continue to grow our manufacturing capabilities and resources and we must incur significant costs to develop this expertise and/or rely on third parties to manufacture our products.~~

We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including by failing to meet deadlines for the completion of such trials.

If we or our licensors are unable to adequately protect our proprietary technology, or obtain and maintain issued patents that are sufficient to protect our product candidates, others could compete against us more directly, which would negatively impact our business.

~~We may suffer from effects of macroeconomic instability and inflation.~~

~~We have been in the past and may in the future be subject to securities class action lawsuits.~~

~~The failure to successfully integrate the businesses of Cartesian would adversely affect the Company’s future results.~~

~~Our Company’s future results will suffer if the combined Company does not effectively manage its expanded operations.~~

~~Item 1A. Risk Factors~~

Investing in our common stock involves a high degree of risk. You should consider carefully the risks described below, together with the other information included or incorporated by reference in this Quarterly Report. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common stock could decline. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

~~Risks Related to the Development of our Product Candidates~~

~~We develop our~~ ~~RNA-based~~ ~~product candidates by leveraging our proprietary technology and our manufacturing platform, RNA Armory~~^®, which is an unproven approach to the treatment of autoimmune disease. We are early in most of our clinical development efforts and may not be successful in our efforts to build a pipeline of product candidates and develop marketable drugs.

~~Our RNA approach to develop product candidates for the treatment of autoimmune diseases is an unproven approach. Our most advanced product candidate,~~ ~~Descartes-08~~ is in Phase 2 clinical development. We have not demonstrated the ability to successfully complete any Phase 3 or other pivotal clinical trials, obtain regulatory approvals, manufacture a commercial product, or arrange for a third party to do so on our behalf, or conduct other sales and marketing activities necessary for successful product commercialization. We may have problems identifying new product candidates and applying our technologies to these other areas. Even if we are successful in identifying new product candidates, they may not be suitable for

clinical development, including as a result of manufacturing difficulties, harmful side effects, limited efficacy or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. The success of our product candidates will depend on several factors, including the following:

~~design, initiation and completion of preclinical studies and clinical trials with positive results;~~

~~reliance on third parties, including but not limited to collaborators, licensees, clinical research organizations and contract manufacturing organizations;~~

~~receipt of marketing approvals from applicable regulatory authorities;~~

��

obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates and not infringing or violating patents or other intellectual property of third parties;

~~manufacturability, manufacturing, logistics, and stability of our cell therapies, including autologous cell therapies;~~

~~growing our internal current Good Manufacturing Practice (cGMP) manufacturing capabilities to support commercial manufacturing or making arrangements with third-party manufacturers;~~

~~launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;~~

~~acceptance of our products, if and when approved, by patients and the medical community;~~

~~effectively competing with other therapies;~~

~~obtaining and maintaining coverage and adequate reimbursement by third-party payors, including government payors, for our products, if approved;~~

~~maintaining an acceptable safety profile of our products following approval; and~~

~~maintaining and growing an organization of scientists and businesspeople who can develop and commercialize our product candidates and technology.~~

~~Our failure to successfully execute on of any of the foregoing for any reason would effectively prevent or delay approval of our lead and other product candidates.~~

Clinical drug development is inherently risky and involves a lengthy and expensive process which is subject to a number of factors, many of which are outside of our control. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

Clinical development is expensive, time consuming and involves significant risk. It is impossible to predict when or if any of our product candidates will prove effective and safe in humans or will receive regulatory approval, and the risk of failure through the development process is high. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete manufacturing and preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Manufacturing cell therapies, particularly those modified with RNA, is a new field. Preclinical development is costly and inherently uncertain. Early preclinical results may not be predictive of future results, however, if our technology proves to be ineffective or unsafe as a result of, among other things, adverse side effects, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the clinical development and commercialization of our product candidates.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidate for its intended indications. Clinical testing is expensive, difficult to design and implement, can take many years to complete and its outcome is inherently uncertain. A failed clinical trial can occur at any stage of testing. Moreover, the outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, we may not be able to complete, or may be required to deviate from the current clinical trial protocol for a variety of reasons.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical trials after achieving positive results in preclinical development or early-stage clinical trials, and we cannot be certain that we will not face similar setbacks. Serious adverse events (SAEs) caused by, or other unexpected properties of, any product candidates that we may choose to develop could cause us, an institutional review board or regulatory authority to interrupt, delay or halt clinical trials of one or more of such product candidates and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable ~~non-U.S.~~ regulatory authorities. If any product candidate that we may choose to develop is associated with SAEs or other unexpected properties, we may need to abandon development or limit development of that product candidate to certain uses or subpopulations in which those undesirable characteristics would be expected to be less prevalent, less severe or more tolerable from a risk-benefit perspective. Moreover, preclinical and clinical data is often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA or other regulatory authority approval. If we fail to produce positive results in clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects for our product candidates, and, correspondingly, our business and financial prospects, would be negatively impacted.

In addition, we cannot be certain as to what type and how many clinical trials the FDA will require us to conduct before we may gain regulatory approval to market any of our product candidates in the United States or other countries, if any. Prior to approving a new therapeutic product, the FDA generally requires that safety and efficacy be demonstrated in two adequate and well-controlled clinical trials.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval for, or commercialize, our product candidates, including:

~~clinical trials of our product candidates may produce unfavorable, incomplete or inconclusive results;~~

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~~we may be unable to manufacture our product candidates, which in some cases such as~~ ~~rCAR-T,~~ ~~are manufactured on a~~ ~~patient-by-basis~~ ~~basis;~~

regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or may place a clinical hold on existing clinical trials;

~~we may experience delays in reaching, or fail to reach, agreement on acceptable terms with contract research organizations (CROs), or clinical trial sites;~~

we may be unable to recruit suitable patients to participate in a clinical trial, the number of patients required for clinical trials of our product candidates may be larger than we expect, enrollment in these clinical trials may be slower than we expect or participants may drop out of these clinical trials at a higher rate than we expect, or enrollment could be affected by the ongoing conflicts in Ukraine and the Middle East;

~~the number of clinical trial sites required for clinical trials of our product candidates may be larger than we expect;~~

~~our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;~~

~~we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;~~

investigators, regulators, data safety monitoring boards or institutional review boards may require that we or our investigators suspend or terminate clinical research, or we may decide to do so ourselves;

~~investigators may deviate from the trial protocol, fail to conduct the trial in accordance with regulatory requirements or misreport study data;~~

the cost of clinical trials of our product candidates may be greater than we expect or we may have insufficient resources to pursue or complete certain aspects of our clinical trial programs or to do so within the timeframe we planned;

the supply or quality of raw materials or manufactured product candidates (whether provided by us or third parties) or other materials necessary to conduct clinical trials of our product candidates may be insufficient, inadequate or not available at an acceptable cost, or in a timely manner, or we may experience interruptions in supply;

~~laboratories that we rely upon to perform certain quality control tests may become unavailable, or their services could be delayed;~~

~~regulators may revise the requirements for approving our product candidates, or such requirements may not be as we expect;~~

the FDA or comparable foreign regulatory authorities may disagree with our clinical trial design or our interpretation of data from preclinical studies and clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design of our clinical trials;

regarding trials managed by our existing or any future collaborators, our collaborators may face any of the above issues, and may conduct clinical trials in ways they view as advantageous to them but potentially suboptimal for us; and

~~geopolitical events may affect international and overseas trial sites in ways beyond our control.~~

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, or if we are forced to delay or abandon certain clinical trials or other testing in order to conserve capital resources, we may:

~~be delayed in obtaining marketing approval for our product candidates, if at all;~~

~~obtain marketing approval in some countries and not in others;~~

~~obtain approval for indications or patient populations that are not as broad as intended or desired;~~

~~obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;~~

~~be subject to additional post-marketing testing requirements; or~~

~~have a product removed from the market after obtaining marketing approval.~~

We could also encounter delays if a clinical trial is suspended or terminated. Authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial.

Our product development costs will increase if we experience delays in clinical testing or in obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business and results of operations.

~~If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.~~

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. In addition, from time to time our competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which could cause the value of our common stock to decline and limit our ability to obtain additional financing.

We may conduct clinical trials for product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in such locations or the complexity of regulatory burdens may otherwise adversely impact us.

Opening trial sites outside the United States may involve additional regulatory, administrative and financial burdens, including compliance with foreign and local requirements relating to regulatory submission and clinical trial practices. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with good clinical practices (GCPs), and the FDA must be able to validate the data from the trial through an onsite inspection, if necessary. Generally, the patient population for any clinical trials conducted outside the United States must be representative of the population for which we intend to seek approval in the United States. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations. Nonetheless, there can be no assurance that the FDA will accept data from trials conducted outside the United States. If the FDA does not accept the data from any trial that we conduct outside the United States, it would likely result in the need for additional clinical trials, which would be costly and time-consuming and delay or permanently halt our development of any applicable product candidates.

~~Additional risks inherent in conducting international clinical trials include:~~

~~foreign regulatory requirements that could burden or limit our ability to conduct our clinical trials;~~

increased costs and heightened supply constraints associated with the acquisition of standard of care drugs and/or combination or comparator agents for which we may bear responsibility in certain jurisdictions;

~~administrative burdens of conducting clinical trials under multiple foreign regulatory schema;~~

~~foreign exchange fluctuations;~~

~~more burdensome manufacturing, customs, shipment and storage requirements;~~

~~cultural differences in medical practice and clinical research;~~

~~lack of consistency in standard of care from country to country;~~

~~diminished protection of intellectual property in some countries; and~~

~~changes in country or regional regulatory requirements; and~~

~~geopolitical instability or wars in regions outside of the United States where we conduct clinical trials may impact ongoing clinical trials.~~

We may not be able to qualify for or obtain various designations from regulators that would have the potential to expedite the review process of one or more of our product candidates and even if we do receive one or more such designations there is no guarantee that they will ultimately expedite the process, or aid in our obtaining marketing approval or provide market exclusivity.

There exist several designations that we can apply for from the FDA and other regulators that would provide us with various combinations of the potential for expedited regulatory review, certain financial incentives as well as the potential for post-approval exclusivity for a period of time. These designations include but are not limited to orphan drug designation, breakthrough therapy designation, accelerated approval, fast track status and priority review for our product candidates. For

~~example,~~ ~~Descartes-08~~ has been granted Orphan Drug Designation by the FDA for the treatment of MG. We expect to seek one or more of these designations for our other current and future product candidates. There can be no assurance that any of our other product candidates will qualify for any of these designations. There can also be no assurance that any of our product candidates that do qualify for these designations will be granted such designations or that the FDA will not revoke a designation it grants at a later date, or that Congress will not change the law about a designation. Further, there can be no assurance that any of our product candidates that are granted such designations, including ~~Descartes-08,~~ will ever benefit from such designations or that the FDA would not withdraw such designations once granted. Were we to receive a designation that promised a period of market exclusivity, such as orphan drug exclusivity, such exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. In particular, the scope of exclusivity afforded for ~~RNA-modified~~ cell therapy products may not be well defined. Further with respect to orphan drug status, even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior if it is shown to be safer, more effective or makes a major contribution to patient care.

~~Interim,~~ ~~top-line~~ and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

~~From time to time, we may publish interim,~~ ~~top-line~~ or preliminary data from our clinical studies, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analyses of all data related to the particular trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the ~~top-line~~ results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Preliminary or ~~top-line~~ data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. Interim data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Interim, ~~top-line~~ ~~or preliminary data may not be representative of final data. If final data is not as positive as earlier interim,~~ ~~top-line~~ ~~or preliminary we have released, our business prospects would be significantly harmed.~~

In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure. Any information we determine not to disclose may ultimately be deemed significant by you or others with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. As a result, preliminary and ~~top-line~~ ~~data should not be relied upon in making an investment decision in our securities.~~

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials, could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities and could result in decreased market acceptance of any of our product candidates, if approved. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects. In such an event, our trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications.

Any drug-related side effects observed in our clinical trials could also affect patient enrollment in our clinical trials or the ability of any enrolled patients to complete such trials or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:

~~regulatory authorities may withdraw approvals of such product;~~

~~regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;~~

~~regulatory authorities may impose additional restrictions on the marketing of, or the manufacturing processes for, the particular product;~~

~~we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;~~

~~we could be sued and held liable for harm caused to patients, or become subject to fines, injunctions or the imposition of civil or criminal penalties;~~

~~our reputation may suffer; and~~

we could be required to develop a REMS plan to prevent, monitor and/or manage a specific serious risk by informing, educating and/or reinforcing actions to reduce the frequency and/or severity of the event.

Any of these events could prevent us from achieving or maintaining market acceptance of a particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

~~Risks Related to Manufacturing and our Dependence on Third Parties~~

~~We expect to continue to grow our manufacturing capabilities and resources and we must incur significant costs to develop this expertise and/or rely on third parties to manufacture our products.~~

We have growing manufacturing capabilities, and in order to continue to develop our current product candidates, apply for regulatory approvals and, if approved, commercialize future products, we will need to continue to develop, contract for, or otherwise arrange for any necessary external manufacturing capabilities.

We manufacture our product candidates internally. There are risks inherent in biological manufacturing and we may not meet our delivery time requirements or provide adequate amounts of material to meet our needs, and we may make errors in manufacturing, any of which could delay our clinical trials and result in additional expense to us.

~~Our autologous cell therapy products, including~~ ~~Descartes-08,~~ ~~are made on a~~ ~~patient-by-patient~~ ~~basis, rendering their manufacture less predictable and requiring more demanding logistics.~~

~~We rely on one or more third-party laboratories to perform certain quality control tests. These laboratories could become unavailable, or provision of their services could be delayed.~~

Additionally, as we scale up our manufacturing, we may encounter further challenges. Furthermore, competition for supply from our manufacturers from other companies, a breach or violation by such manufacturers of their contractual or regulatory obligations or a dispute with such manufacturers would cause delays in our discovery and development efforts, as well as additional expense to us.

In developing manufacturing capabilities by building our own manufacturing facilities, we have incurred substantial expenditures, and expect to incur significant additional expenditures in the future. Also, we have had to, and will likely need to continue to recruit, hire, and train qualified employees to staff our facilities. If we are unable to manufacture sufficient quantities of material or if we encounter problems with our facilities in the future, we may also need to secure alternative suppliers, and such alternative suppliers may not be available, or we may be unable to enter into agreements with them on reasonable terms and in a timely manner. In addition, to the extent we or our partners rely on contract manufacturing organizations, or CMOs, to supply our product candidates, any delays or disruptions in supply could have a material adverse impact on the research and development activities and potential commercialization of our or our partners’ product candidates.

The manufacturing process for any products that we may develop is subject to the FDA and foreign regulatory authority approval process and we will need to meet, or will need to contract with CMOs who can meet, all applicable FDA and foreign regulatory authority requirements on an ongoing basis. Our failure or the failure of any CMO to meet required regulatory authority requirements could result in the delayed submission of regulatory applications, or delays in receiving regulatory approval for any of our or our current or future collaborator’ product candidates.

To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we depend, and will depend in the future, on these third parties to perform their obligations in a timely manner and consistent with contractual and regulatory requirements, including those related to quality control and quality assurance. The failure of any CMO to perform its obligations as expected, or, to the extent we manufacture all or a portion of our product candidates ourselves, our failure to execute on our manufacturing requirements, could adversely affect our business in a number of ways, including:

~~we or our current or future collaborators may not be able to initiate or continue clinical trials of product candidates that are under development;~~

~~we or our current or future collaborators may be delayed in submitting regulatory applications, or receiving regulatory approvals, for our product candidates;~~

~~we may lose the cooperation of our collaborators;~~

~~our facilities and those of our CMOs, and our products could be the subject of inspections by regulatory authorities that could have a negative outcome and result in delays in supply;~~

~~we may be required to cease distribution or recall some or all batches of our products or take action to recover clinical trial material from clinical trial sites; and~~

~~ultimately, we may not be able to meet the clinical and commercial demands for our products.~~

~~If we are unable to enter into future collaborations and licensing arrangements, our business could be adversely affected.~~

We intend to explore licenses and other strategic collaborations with pharmaceutical and biotechnology companies for development and potential commercialization of therapeutic products. However, we face significant competition in seeking appropriate collaborators. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our programs, and our business may be materially and adversely affected.

We rely, and expect to continue to rely, on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct and manage our clinical trials, including our ongoing Phase 2 clinical program ~~Descartes-08.~~ ~~We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials.~~

While we rely on these third parties for research and development activities, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with GCP regulations, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, safety and welfare of trial participants are protected. Other countries’ regulatory agencies also have requirements for clinical trials. If we or any of our CROs or third-party contractors fail to comply with applicable GCPs, the data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ~~www.ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions.~~

Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, do not comply with confidentiality obligations, do not meet expected deadlines, experience work stoppages, terminate their agreements with us or need to be replaced, or do not conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we may need to enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be extended, delayed or terminated, or may need to be repeated. If any of the foregoing occur, we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates or in commercializing our product candidates.

~~Risks Related to Commercialization of our Product Candidates and Legal Compliance Matters~~

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

If any of our product candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on several factors, including:

~~the efficacy, safety and potential advantages compared to alternative treatments;~~

~~our ability to manufacture and distribute cell therapies in a timely and secure manner;~~

~~our ability to offer our products for sale at competitive prices;~~

~~the convenience and ease of administration compared to alternative treatments;~~

product labeling or product insert requirements of the FDA or foreign regulatory authorities, including any limitations or warnings contained in a product’s approved labeling, including any black box warning or REMS;

~~the willingness of the target patient population to try new treatments and of physicians to prescribe these treatments;~~

~~our ability to hire and retain a sales force;~~

~~the strength of marketing and distribution support;~~

~~the availability of third-party coverage and adequate reimbursement for our product candidates, once approved;~~

~~the prevalence and severity of any side effects; and~~

~~any restrictions on the use of our products together with other medications.~~

We currently have no sales organization . If we are unable to establish effective sales, marketing and distribution capabilities, or enter into agreements with third parties with such capabilities, we may not be successful in commercializing our product candidates if and when they are approved.

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any product candidate for which we obtain marketing approval, we will need to establish a sales and marketing organization or make arrangements with third parties to perform sales and marketing functions and we may not be successful in doing so. We expect to build a focused sales and marketing infrastructure to market or ~~co-promote~~ our product candidates in the United States and potentially elsewhere, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

~~We face substantial competition, including from biosimilars, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.~~

The development and commercialization of new drug and biologic products and technologies is highly competitive and is characterized by rapid and substantial technological development and product innovations. We are aware that pharmaceutical and biotechnology companies, offer or are pursuing the development of pharmaceutical products or technologies that may address one or more indications that our product candidates target, as well as smaller, early-stage companies, that offer or are pursuing the development of pharmaceutical products or technologies that may address one or more indications that our product candidates target. We face competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources, established presence in the market and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and reimbursement for product candidates and in marketing approved products than we do.

These third parties compete with us in recruiting and retaining qualified scientific, sales and marketing and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market, especially for any competitor developing a competing immunomodulating therapeutic that will likely share our same regulatory approval requirements. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic or biosimilar products.

~~We expect the product candidates we develop will be regulated as biological products, or biologics, and therefore they may be subject to competition sooner than anticipated.~~

The BPCIA was enacted as part of the Affordable Care Act to establish an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an approved biologic. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the reference product was approved under a BLA. The law is still being interpreted and implemented by the FDA, and as a result, its ultimate impact, implementation, and meaning are subject to uncertainty. However, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

~~We believe that any product candidate approved in the United States as a biological product under a BLA should qualify for the~~ ~~12-year~~ period of exclusivity. However, there is a risk that this exclusivity could be shortened due to Congressional action or otherwise, or that the FDA will not consider the subject product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of the reference products in a way that is similar to traditional generic substitution for ~~non-biological~~ ~~products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.~~

Even if we are able to commercialize any of our product candidates, the products may become subject to unfavorable pricing regulations or third-party coverage or reimbursement policies, any of which would have a material adverse effect on our business.

Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval, especially novel products like our cell therapy product candidates, and may be particularly difficult because of the higher prices associated with such product candidates. Our ability to commercialize any product candidates successfully will depend, in part, on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.

Obtaining and maintaining adequate reimbursement for our products may be difficult. We cannot be certain if we will obtain an adequate level of reimbursement for our products by third-party payors. Even if we do obtain adequate levels of reimbursement, third-party payors, such as government or private healthcare insurers, carefully review and question the coverage of, and challenge the prices charged for, products. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Third-party payors often require that pharmaceutical companies provide them with predetermined discounts from list prices and are challenging the prices charged for products. We may also be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. Some third-party payors may require ~~pre-approval~~ of coverage for new and innovative therapies, such as our product candidates, before they will provide reimbursement. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

There may be significant delays in obtaining reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or similar regulatory authorities outside of the United States. Moreover, eligibility for reimbursement does not imply that a product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost products and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control, including possible price reductions, even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval. There can be no assurance that our product candidates, if they are approved for sale in the United States or in other countries, will be considered medically necessary for a specific indication or cost-effective, or that coverage or an adequate level of reimbursement will be available.

Moreover, there is heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. There can be no assurance that our product candidates, will not be subject to heightened governmental scrutiny, unfavorable regulatory inquiry or action, or Congressional inquiry.

~~Product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.~~

We face an inherent risk of product liability exposure related to the testing of our product candidates in clinical trials and will face an even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

~~regulatory investigations, product recalls or withdrawals, or labeling, marketing or promotional restrictions;~~

~~decreased demand for any product candidates or products that we may develop;~~

~~injury to our reputation and significant negative media attention;~~

~~loss of clinical trial participants or increased difficulty in enrolling future participants;~~

~~significant costs to defend the related litigation or to reach a settlement;~~

~~substantial payments to trial participants or patients;~~

~~loss of revenue;~~

~~reduced resources of our management to pursue our business strategy;~~

~~the inability to commercialize any products that we may develop;~~

~~distraction of management’s attention from our primary business; and~~

~~substantial monetary awards to patients or other claimants.~~

We maintain general liability, product liability and umbrella liability insurance. Our existing insurance coverage may not fully cover potential liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. A product liability claim or series of claims brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business, including preventing or limiting the commercialization of any product candidates we develop.

Our relationships with healthcare providers, customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminished profits and future earnings.

Arrangements with physicians, others who may be in a position to generate business for us, and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that constrain the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

the federal False Claims Act, which impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the federal government claims for payment that are false or fraudulent. Private individuals (e.g., whistleblowers) can bring these actions on behalf of the government; in addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

HIPAA which imposes criminal and civil liability for, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

HIPAA, as amended by HITECH and its implementing regulations, which also imposes obligations, including mandatory contractual terms, on certain types of people and entities with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

the federal Physician Payments Sunshine Act, which requires applicable manufacturers of certain products for which payment is available under a federal healthcare program to report annually to the government information related to certain payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care professionals beginning in 2022, and teaching hospitals, as well as ownership and investment interests held by the physicians and their immediate family members;

analogous state laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by third-party payors, including private insurers; and requirements to comply with federal and pharmaceutical industry compliance guidelines;

state data privacy and price transparency laws, many of which differ from each other in significant ways and often are broader than and not preempted by HIPAA or the Sunshine Act, thus complicating compliance efforts; by way of example, the California Consumer Privacy Act, or CCPA, which went into effect January 1, 2020, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. Although the law includes limited exceptions, including for “protected health information” maintained by a covered entity or business associate, it may regulate or impact our processing of personal information depending on the context; and

similar healthcare laws and regulations in the European Union and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of certain protected information, such as the General Data Protection Regulation, or GDPR, which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the European Union (including health data); in addition, the United Kingdom leaving the EU could also lead to further legislative and regulatory changes. It remains unclear how the United Kingdom data protection laws or regulations will develop in the medium to longer term and how data transfer to the United Kingdom from the E.U. will be regulated. However, the United Kingdom has transposed the GDPR into domestic law with the Data Protection Act 2018, which remains in force following the United Kingdom’s departure from the EU.

Efforts to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices, including our relationships with physicians and other healthcare providers, some of whom may recommend, purchase and/or prescribe our product candidates, if approved, may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental laws and regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations.

~~Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.~~

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

For example, the ACA, is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA. We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA to review and or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. If a prolonged government shutdown occurs, or if global health concerns were to again prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal liability and other serious consequences for violations, which can have a material adverse effect on our business.

We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations administered by the U.S. Commerce Department’s Bureau of Industry and Security, U.S. customs regulations, various economic and trade sanctions regulations including those administered or enforced by relevant government authorities, such as by the U.S. Treasury Department’s Office of Foreign Assets Control or the U.S. Department of State, the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. U.S. sanctions laws and regulations may govern or restrict our business and activities in certain countries and with certain persons. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other partners from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may engage third parties for clinical trials outside of the United States, to sell our product candidates abroad once we enter a commercialization phase, and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors and other partners, even if we do not explicitly authorize or have actual knowledge of such activities. Our violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

If we or third parties we rely upon fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.

We and our contract manufacturers and other third parties with whom we do business are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including biological materials and chemicals. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. The failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

~~Risks Related to our Financial Position and Need for Additional Capital~~

~~We are a development-stage company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.~~

Except for the year ended December 31, 2022, we have incurred significant operating losses since our inception. Our net income was $35.4 million for the year ended December 31, 2022, and net losses were $25.7 million and $68.9 million for each of the years ended December 31, 2021 and 2020, respectively, and were $9.0 million for the quarter ended September 30, 2023. As of September 30, 2023, we had an accumulated deficit of $437.0 million. To date, we have financed our operations primarily through public offerings and private placements of our securities, funding received from collaboration and license arrangements and our credit facility. We currently have no source of product revenue, and we do not expect to generate product revenue for the foreseeable future. Historically we devoted substantially all of our financial resources and efforts to developing our ImmTOR platform and following the closing of the Merger we expect to devote substantially all of our financial resources and efforts to developing our ~~RNA-based~~ therapies for the treatment of autoimmune diseases, identifying potential product candidates and conducting preclinical studies and our clinical trials. We are in the early stages of clinical development of most of our product candidates. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We expect that our expenses will increase substantially as we:

~~continue the research and development of our product candidates;~~

~~increase and develop our manufacturing and distribution capacities;~~

~~discover and develop additional product candidates;~~

~~seek to maintain and enter into collaboration, licensing and other agreements, including, but not limited to research and development, and/or commercialization agreements;~~

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

~~potentially establish a sales, marketing and distribution infrastructure and scale up internal manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;~~

~~maintain, expand and protect our intellectual property portfolio, including through licensing arrangements;~~

add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts;

•

~~experience any delays or encounter any issues with any of the above, including, but not limited to, failed studies, complex results, safety issues or other regulatory, manufacturing or~~ ~~scale-up~~ ~~challenges; and~~

~~are exposed to broad macroeconomic conditions including inflation and supply chain tightness which could result in us paying more, or being unable, to access goods and services.~~

To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval and securing reimbursement for these product candidates, manufacturing, marketing and selling any products for which we may obtain regulatory approval, and establishing and managing our collaborations at various stages of a product candidate’s development. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.

Because of the numerous risks and uncertainties associated with pharmaceutical and biological product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the FDA or other regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase and product revenue could be further delayed.

We may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to remain profitable would depress our value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or continue our operations.

We will need substantial additional funding in order to complete development of our product candidates and commercialize our products, if approved. If we are unable to raise capital when needed and on terms favorable to us, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue research and development for other product candidates. Additionally, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Accordingly, we will need to obtain substantial additional funding to continue operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our clinical trials, our other research and development programs or any future commercialization efforts.

~~We believe that our existing cash, cash equivalents, and restricted cash as of September 30, 2023, combined with net proceeds from the Financing~~2024 will enable us to fund our operating expenses and capital expenditure requirements for at least the next 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 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 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:

~~the timing for stockholder approval of the conversion of our Series A Preferred Stock into our common stock and any associated redemptions;~~

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

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

•our 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;

•the revenue, if any, 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;

•the effect of competing technological and market 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

The ~~Certificate~~following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:


	Three Months Ended March 31,
(In thousands)		2024		2023
Cash (used in) and provided by:
Operating activities		$	(15,917)	$	(8,765)
Investing activities		(602)		28,124
Financing activities		43,031		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 for the three months ended March 31, 2024 was $15.9 million compared to $8.8 million for the three months ended March 31, 2023. The increase in net cash used in operating activities of ~~Designation contains~~$7.1 million was primarily due to $9.5 million of net loss, adjusted for non-cash items, and approximately $6.4 million cash used in changes in operating assets and liabilities.

Investing activities

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

Financing activities

Net cash provided by financing activities for the three months ended March 31, 2024 was $43.0 million compared to net cash provided by financing activities of $0.1 million for the three months ended March 31, 2023, an increase of $42.9 million. The net cash provided by financing activities in the three months ended March 31, 2024 was primarily the result of proceeds of the ~~Series A Preferred~~November 2023 Private Placement. The net cash provided by financing activities in the three months ended March 31, 2023 was primarily the result of proceeds from issuance of common stock under the 2016 Employee Stock Purchase Plan

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 March 31, 2024, we did not have any off-balance sheet arrangements as defined in the ~~option to require us to redeem any or all of such holder’s preferred shares if our stockholders have not voted to approve the conversion~~rules and regulations of the ~~Series A Preferred Stock to common stock within 18 months~~SEC.

Critical Accounting Policies and Use of ~~the Closing Date; provided, however, that no holder will have the right to seek redemption~~Estimates

Our management’s discussion and analysis of any shares of Series A Preferred Stock to the extent that such holder would otherwise be unable to convert such shares of Series A Preferred Stock due to the 19.9% common stock beneficial ownership limitation contained in the Certificate of Designation. The per-share redemption price is the average closing trading price of the common stock for the ten preceding trading days ending on, and including, the trading day immediately prior to the date a notice of conversion is delivered to us. We could be required to use a significant amount of our cash resources on hand to satisfy this redemption obligation, particularly if holders of Series A Preferred Stock exercise their redemption right with respect to a significant number of shares of Series A Preferred Stock or at a time when the trading price of our common stock is elevated. Further, in the event that we do not have sufficient cash on hand to satisfy our redemption obligations, we may need to raise additional capital to satisfy these potential obligations. Any redemption payments could materially limit the amount of cash we have available to fund our operations.

~~Any additional fundraising efforts may divert our management from their~~ ~~day-to-day~~ activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Market volatility resulting from the ongoing conflicts in Ukraine and the Middle East and current global macroeconomic conditions or other factors could also adversely impact our ability to access capital as and when needed. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders, and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness could result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborators or others at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs, including our clinical trial programs, or the commercialization of any product candidates, or be unable to sustain or expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of ~~operations.~~

~~Our ability~~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 ~~use~~make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in our ~~net operating loss and research and development tax credit carryforwards~~consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions. During the three months ended March 31, 2024, there were no material changes to ~~offset future taxable income may be subject to certain limitations.~~

our critical accounting policies from those described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Smaller Reporting Company

We ~~have net operating loss carryforwards, or NOLs, for federal and state income tax purposes that may be available to offset our future taxable income, if any. In general,~~qualify as a “smaller reporting company” under ~~Sections 382 and 383~~the rules of the ~~U.S. Internal Revenue Code of 1986, as amended, or~~Securities Act and the ~~Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its~~ ~~pre-change~~ NOLs to offset future taxable income. If the U.S. Internal Revenue Service, or IRS, challenges our analysis that existing NOLs will not expire before utilization due to previous ownership changes, or if we undergo an ownership change in connection with or after a public offering, our ability to use our NOLs could be limited by Section 382 of the Code. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Furthermore, our ability to use NOLs of companies that we may acquire in the future may be subject to limitations.Exchange Act. As a result, we may ~~not be able~~choose to ~~use~~take advantage of certain scaled disclosure requirements available specifically to smaller reporting companies. We will remain a ~~material portion~~smaller reporting company until the last day of the ~~NOLs reflected on~~fiscal year in which the aggregate market value of our ~~balance sheet, even if we attain profitability. The reduction~~common stock held by non-affiliated persons and entities, or our public float, is more than $700 million as of the ~~corporate tax~~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 March 31, 2024 and December 31, 2023, we had cash, cash equivalents, and restricted cash of $104.8 million and $78.3 million, respectively, consisting of non-interest and interest-bearing money market accounts. Our primary exposure to market risk is interest rate ~~under the TCJA may cause a reduction~~sensitivity, which is affected by changes in the ~~economic benefit~~general level of U.S. interest rates. Due to the short-term and the low risk profile of our ~~NOLs~~money market accounts and ~~other deferred tax assets available~~marketable securities, and our current policy to ~~us. Under current law, NOLs that arose before January 1, 2018 may be carried forward up~~hold marketable securities to ~~20 years. NOLs that arose after 2017 may be used to offset at most 80% of our taxable income to the extent~~maturity, an immediate 100 basis point change in interest rates would not ~~offset by~~ ~~pre-2018~~ NOLs and such NOLs can be carried forward indefinitely. As a result, we may become required to pay federal income taxes in future years despite having generated losses for federal income tax purposes in prior years.

~~Risks Related to our Intellectual Property~~

Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and product candidates. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost, in a timely manner or in all jurisdictions. As we reach the statutory deadlines for deciding whether and where to initiate prosecution in specific foreign jurisdictions by filing national stage applications based on our Patent Cooperation Treaty, or PCT, applications, we will have to decide whether and where to pursue patent protection for the various inventions claimed in our patent portfolio, and we will only have the opportunity to obtain patents in those jurisdictions where we pursue protection. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, such as, with respect to proper priority claims, inventorship, claim scope or patent term adjustments. If there are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and unenforceable. Moreover, our competitors may independently develop equivalent knowledge, methods and ~~know-how.~~ Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business. We also cannot guarantee that any of our patent searches or analyses, including but not limited to the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete and thorough, nor can we be certain that we have identified each and every patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction.

In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents covering technology that we license from third parties. We may also require the cooperation of our licensors to enforce any licensed patent rights, and such cooperation may not be provided. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. Moreover, we have obligations under our licenses, and any failure to satisfy those obligations could give our licensor the right to terminate the license. Termination of a necessary license could have a material ~~adverse impact~~effect on ~~our business.~~

~~Some of our patent licenses are~~ ~~non-exclusive.~~ ~~In those cases, a competitor could obtain a license to~~ the same or similar technology from the licensor. We have at least one exclusive patent license that is restricted to a particular field of use. A competitor could obtain a license to a similar technology outside of that field of use.

We cannot provide any assurances that the issued patents we currently own, or any future patents, include claims with a scope sufficient to protect our product candidates or otherwise provide any competitive advantage. Further, it is possible that a patent claim may provide coverage for some but not all parts of a product candidate or third-party product. These and other factors may provide opportunities for our competitors to design around our patents.

Moreover, other parties may have developed technologies that may be related or competitive to our approach, and may have filed or may file patent applications, and may have received or may receive patents that may overlap or conflict with our patent applications, either by claiming similar methods or by claiming subject matter that could dominate our patent position. In addition, it may be some time before we understand how the patent office reacts to our patent claims and whether they identify prior art of relevance that we have not already considered.

Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in any owned patents or pending patent applications, or that we were the first to file for patent protection of such inventions, nor can we know whether those from whom we may license patents were the first to make the inventions claimed or were the first to file. For these and other reasons, the issuance, scope, validity, enforceability and commercialfair market value of our ~~patent rights are subject to a level~~cash equivalents or short-term marketable securities.

Item 4. Controls and Procedures

Evaluation of ~~uncertainty.~~ Disclosure Controls and Procedures

Our ~~pending~~management, with the participation of our Chief Executive Officer and future patent applications may not result in patents being issued that protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretationChief Financial Officer, evaluated, as of the ~~patent laws in~~end of the ~~United States and other countries may diminish~~period covered by this Quarterly Report, the ~~value~~effectiveness of our ~~patents or narrow~~disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~scope of~~Exchange Act). Based on that evaluation, our ~~patent protection.~~

~~We may be subject to a third-party preissuance submission of prior art to the U.S. Patent~~Chief Executive Officer and Trademark Office, or USPTO or other patent office, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize product candidates without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to develop, market or otherwise commercialize our product candidates. The issuance, scope, validity, enforceability and commercial value of our patents are subject to a level of uncertainty.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. Due to legal standards relating to patentability, validity, enforceability and claim scope of patents covering biotechnological and pharmaceutical inventions, our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Even if issued, a patent’s validity, inventorship, ownership or enforceability is not conclusive. Accordingly, rights under any existing patent or any patents we might obtain or license may not cover our product candidates, or may not provide us with sufficient protection for our product candidates to afford a commercial advantage against competitive products or processes, including those from branded and generic pharmaceutical companies.

~~In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary~~ ~~know-how,~~ information, or technology that is not covered by our patents. Although our agreements require all of our employees to assign their inventions to us, and we require all of our employees, consultants, advisors and any other third parties who have access to our trade secrets, proprietary ~~know-how~~ ~~and other confidential information and technology to enter into appropriate confidentiality agreements, we cannot be certain~~Chief Financial Officer concluded that our ~~trade secrets, proprietary~~ ~~know-how,~~disclosure controls and ~~other confidential information and technology will~~procedures were not ~~be subject to unauthorized disclosure or that our competitors will not otherwise gain access to or independently develop substantially equivalent trade secrets, proprietary~~ ~~know-how,~~ ~~and other information and technology. Furthermore,~~effective at the ~~laws~~reasonable assurance level as of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property globally. If we are unable to prevent unauthorized disclosure of our intellectual property related to our product candidates and technology to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could adversely affect our business and operations.

Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful. Even if we are successful, domestic or foreign litigation, or USPTO or foreign patent office proceedings, may result in substantial costs and distraction to our management. We may not be able, alone or with our licensors or potential collaborators, to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States. Furthermore,March 31, 2024 because of the ~~substantial amount of discovery required~~material weakness in connection with intellectual property litigation or other proceedings, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation or other proceedings. In addition, during the course of this kind of litigation or proceedings, there could be public announcements of the results of hearings, motions or other interim proceedings or developments or public access to related documents. If investors perceive these results to be negative, the market price for our common stock could be adversely affected.

~~If we are unable to protect the confidentiality of our trade secrets and~~ ~~know-how,~~ ~~our business and competitive position would be harmed.~~

~~In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented~~ ~~know-how,~~ ~~technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into~~ ~~non-disclosure~~ and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also seek to enter into confidentiality and invention or patent assignment agreements with our employees, advisors and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties by other means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Moreover, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to, or independently developed by, a competitor, our competitive position would be harmed.

~~Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.~~

As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. In addition, recent patent reform legislation could further increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith Act America Invents Act, or the Leahy-Smith Act, included provisions that affect the way patent applications are prosecuted and may also affect patent litigation, including ~~first-to-file~~ provisions. A third party that files a patent application in the USPTO before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. This requires us to be cognizant of the time from invention to filing of a patent application. Thus, for our U.S. patent applications containing a priority claim after March 16, 2013, the date such provisions became effective, there is a greater level of uncertainty in the patent law. Moreover, some of the patent applications in our portfolio will be subject to examination under the ~~pre-Leahy-Smith~~ Act law and regulations, while other patents applications in our portfolio will be subject to examination under the law and regulations, as amended by the Leahy-Smith Act. This introduces additional complexities into the prosecution and management of our portfolio.

In addition, the Leahy-Smith Act limits where a patentee may file a patent infringement suit and provides opportunities for third parties to challenge any issued patent in the USPTO. These provisions apply to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a federal court action.

Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims because it may be easier for them to do so relative to challenging the patent in a federal court action. It is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

In addition, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. From time to time, the U.S. Supreme Court, other federal courts, the U.S. Congress or the USPTO may change the standards of patentability, and any such changes could have a negative impact on our business.

Depending on these and other decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change or be interpreted in unpredictable ways that would weaken our ability to obtain new patents or to enforce any patents that may issue to us in the future. In addition, these events may adversely affect our ability to defend any patents that may issue in procedures in the USPTO or in courts.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. While no such litigation has been brought against us and we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that our technology, product candidates or use of our product candidates do not infringe third-party patents.

We are aware of numerous patents and pending applications owned by third parties, and we monitor patents and patent applications in the fields in which we are developing product candidates, both in the United States and elsewhere. However, we may have failed to identify relevant third-party patents or applications. For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Moreover, it is difficult for industry participants, including us, to identify all third-party patent rights that may be relevant to our product candidates and technologies because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. We may fail to identify relevant patents or patent applications or may identify pending patent applications of potential interest but incorrectly predict the likelihood that such patent applications may issue with claims of relevance to our technology. In addition, we may be unaware of one or more issued patents that would be infringed by the manufacture, sale or use of a current or future product candidate, or we may incorrectly conclude that a third-party patent is invalid, unenforceable or not infringed by our activities. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, our product candidates or the use of our product candidates.

The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that our product candidates or the use of our technologies infringes patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates and technology, including interference or derivation proceedings before the USPTO and similar bodies in other countries. Third parties may assert infringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted in the future.

Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. If we are found, or believe there is a risk we may be found, to infringe a third party’s intellectual property rights, we could be required or may choose to obtain a license from such third party to continue developing and marketing our product candidates and technology. However, we may not be able to obtain any such license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be ~~non-exclusive,~~ thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

Even if we are successful in such proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us. Patent litigation is costly and time-consuming. We may not have sufficient resources to bring these actions to a successful conclusion. There could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

~~Any of these risks coming to fruition could have a material adverse impact on our business.~~

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, and our issued patents covering our product candidates could be found invalid or unenforceable or could be interpreted narrowly if challenged in court.

Competitors may infringe our intellectual property, including our patents or the patents of our licensors. As a result, we may be required to file infringement claims to stop third-party infringement or unauthorized use. This can be expensive, particularly for a company of our size, and time-consuming. If we initiated legal proceedings against a third party to enforce a patent, if and when issued, covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness or ~~non-enablement,~~ or failure to claim patent-eligible subject matter. Grounds for unenforceability assertions include allegations that someone connected with the prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include ~~re-examination,~~ post-grant review, inter partes review, interference proceedings and equivalent proceedings in foreign jurisdictions, such as opposition proceedings. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover our product candidates or competitive products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Moreover, even if not found invalid or unenforceable, the claims of our patents could be construed narrowly or in a manner that does not cover the allegedly infringing technology in question. Such a loss of patent protection would have a material adverse impact on our business.

~~The lives of our patents may not be sufficient to effectively protect our products and business.~~

~~Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first effective~~ ~~non-provisional~~ filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates, proprietary technologies and their uses are obtained, once the patent life has expired, we may be open to competition. In addition, although upon issuance in the United States a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. If we do not have sufficient patent life to protect our product candidates, proprietary technologies and their uses, our business and results of operations will be adversely affected.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent and, in some jurisdictions, during the pendency of a patent application. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, ~~non-payment~~ ~~of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have an adverse effect on our business.~~

~~We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and~~ ~~in-licenses.~~

We currently have rights to certain intellectual property, through licenses from third parties and under patents and patent applications that we own, to develop our product candidates. Because we may find that our programs require the use of proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire, ~~in-license~~ ~~or use these proprietary rights. We may be unable to acquire or~~ ~~in-license~~ compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify as necessary for our product candidates. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, financial resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment.

If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of that program and our business and financial condition could suffer.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may also engage advisors and consultants who are concurrently employed at universities or other organizations or who perform services for other entities. Although we try to ensure that our employees, advisors and consultants do not use the proprietary information or ~~know-how~~ of others in their work for us, we may be subject to claims that we or our employees, advisors or consultants have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such party’s former or current employer or in violation of an agreement with another party. Although we have no knowledge of any such claims being alleged to date, if such claims were to arise, litigation may be necessary to defend against any such claims.

In addition, while it is our policy to require our employees, consultants, advisors and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property. Similarly, we may be subject to claims that an employee, advisor or consultant performed work for us that conflicts with that person’s obligations to a third party, such as an employer, and thus, that the third party has an ownership interest in the intellectual property arising out of work performed for us. Litigation may be necessary to defend against these claims. Although we have no knowledge of any such claims being alleged to date, if such claims were to arise, litigation may be necessary to defend against any such claims.

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.

We will not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing, prosecuting and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than in the United States, assuming that rights are obtained in the United States and assuming that rights are pursued outside the United States. In this regard, in addition to the United States, we also seek to protect our intellectual property rights in other countries. The statutory deadlines for pursuing patent protection in individual foreign jurisdictions are based on the priority date of each of our patent applications. For all of the patent families in our portfolio, including the families that may provide coverage for our lead product candidate, the relevant statutory deadlines have not yet expired. Therefore, for each of the patent families that we believe provide coverage for our lead product candidate, we will need to decide whether and where to pursue additional protection outside the United States. In addition, the laws of some foreign countries, do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, for our existing patent rights outside the United States and any foreign patent rights we may decide to pursue in the future, we may not be able to obtain relevant claims and/or we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as in the United States. These products may compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.

~~If we do not obtain additional protection under the Hatch-Waxman Act and similar foreign legislation extending the terms of our patents for our product candidates, our business may be harmed.~~

Depending upon the timing, duration and specifics of FDA regulatory approval for our product candidates, one or more of our U.S. patents may be eligible for limited patent term restoration under the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. Patent term restorations, however, are limited to a maximum of five years and cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval by the FDA.

The application for patent term extension is subject to approval by the USPTO, in conjunction with the FDA. It takes at least six months to obtain approval of the application for patent term extension. We may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened, our competitors may obtain earlier approval of competing products and our ability to generate revenues could be materially adversely affected.

~~Risks Related to our Operations~~

~~Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.~~

We are highly dependent on Carsten Brunn, Ph.D., our President and Chief Executive Officer, as well as the other principal members of our management, scientific and clinical teams. Although we have entered into employment agreements or offer letters with Dr. Brunn and other executive officers, each of them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees.

Recruiting and retaining qualified scientific, clinical, manufacturing, technology and sales and marketing personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize product candidates. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

We have incurred increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance initiatives and corporate governance practices.

~~As a public company, we have incurred and expect to continue to incur significant legal, accounting and other expenses. If we are unable to maintain effective~~ 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, ~~may not have adequate, accurate or timely~~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 wecontingent 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

Table of Contents

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 ~~unable to meet our reporting obligations as a public company~~inadequate because of changes in conditions and the risk that the degree of compliance with policies or ~~comply with the requirements of the SEC or Section 404. This could result~~procedures may deteriorate over time.

Changes in a restatement of our financial statements, the imposition of sanctions, including the inability of registered broker dealers to make a market in our common stock, or investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely affect the trading price of our securities and our business. Material weaknessesInternal Control over Financial Reporting

There were no changes in our internal control over financial reporting ~~could also reduce~~(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our ~~ability to obtain financing or could increase the cost~~internal control over financial reporting.

Table of ~~any financing we obtain. This could result in an adverse reaction in the financial markets due to~~Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On February 7, 2024, Justin Sloan, a ~~loss of confidence in the reliability~~purported stockholder of our ~~financial statements.~~

~~A variety~~Company, filed a putative class action on behalf of ~~risks associated with maintaining our subsidiary in Russia or expanding operations internationally could adversely affect our business.~~

In addition to our U.S. operations, we maintain a wholly owned subsidiary in Russia, Selecta (RUS). However, we are in the process of winding down these operations. We may face risks associated with winding down the operationshimself and similarly situated stockholders of our subsidiary in Russia, or with any international operations, including possible unfavorable regulatory, pricing and reimbursement, legal, political, tax and labor conditions, and risks associated with our compliance with evolving international sanctions, which could harm our business. We may also rely on collaborators to commercialize any approved product candidates outside of the United States. Doing business internationally involves a number of risks, including but not limited to:

multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

~~failure by us to obtain and maintain regulatory approvals for the use of our product candidates in various countries;~~

~~additional potentially relevant third-party patent rights;~~

~~complexities and difficulties in obtaining protection of and enforcing our intellectual property rights; difficulties in staffing and managing foreign operations;~~

•

~~complexities associated with managing multiple-payor reimbursement regimes, government payors or patient~~ ~~self-pay~~ ~~systems;~~

limits on our ability to penetrate international markets; financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our product candidates and exposure to foreign currency exchange rate fluctuations, which could result in increased operating expenses and reduced revenues;

•

~~natural disasters, political and economic instability, including wars, events of terrorism and political unrest, outbreak of disease, including the~~ ~~COVID-19~~ ~~pandemic, boycotts, curtailment of trade and other business restrictions, economic sanctions, and economic weakness, including inflation;~~

changes in diplomatic and trade relationships; challenges in enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;

~~restriction on cross-border investment, including enhanced oversight by the Committee on Foreign Investment in the United States and substantial restrictions on investment from China;~~

~~certain expenses including, among others, expenses for travel, translation and insurance;~~

~~legal risks, including use of the legal system by the government to benefit itself or affiliated entities at our expense, including expropriation of property;~~

regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the FCPA its books and records provisions, or its anti-bribery provisions; and

~~risks that we may suffer reputational harm as a result of our operations in Russia.~~

~~Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.~~

Our business and operations, including our development programs, could be materially disrupted in the event of system failures, security breaches, violations of data protection laws or data loss or damage by us or third parties on which we rely, including our CROs or other contractors or consultants.

Our internal computer systems and those of third parties on which we rely, including our CROs and other contractors and consultants, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could have a material adverse effect on our business operations, including a material disruption of our development programs. Unauthorized disclosure of sensitive or confidential patient or employee data, including personally identifiable information, whether through breach of computer systems, systems failure, employee negligence, fraud or misappropriation, or otherwise, or unauthorized access to or through our information systems and networks, whether by our employees or third parties, could result in negative publicity, legal liability and damage to our reputation. Unauthorized disclosure of personally identifiable information could also expose us to sanctions for violations of data privacy laws and regulations around the world. To the extent that any disruption or security breach resulted in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed. For example, the loss of or damage to clinical trial data, such as from completed or ongoing clinical trials, for any of our product candidates would likely result in delays in our marketing approval efforts and significantly increased costs in an effort to recover or reproduce the data.

We have previously been, and expect to remain, the target of cyber-attacks. As we become more dependent on information technologies to conduct our operations, cyber incidents, including deliberate attacks, such as ransomware attacks, and attempts to gain unauthorized access to computer systems and networks, may increase in frequency and sophistication. These incidents pose a risk to the security of our systems and networks, the confidentiality and the availability and integrity of our data and these risks apply both toCompany against us and to third parties on whose systems we rely for the conduct of our business. While we do not believe the effect of these incidents has historically been material to our results of operations, financial condition or prospects, cyber threats are persistent and constantly evolving. Such threats have increased in frequency, scope and potential impact in recent years, which increases the difficulty of detecting and successfully defending against them. As cyber threats continue to evolve, we may be required to incur additional expenses in order to enhance our protective measures or to remediate any information security vulnerability. There can be no assurance that we or our third-party providers will be successful in preventing cyber-attacks or mitigating their effects. Similarly, there can be no assurance that our collaborators, CROs, third-party logistics providers, distributors and other contractors and consultants will be successful in protecting our clinical and other data that is stored on their systems. Any cyber-attack or destruction or loss of data could have a material adverse effect on our business and prospects. In addition, we may suffer reputational harm or face litigation or adverse regulatory action as a result of cyber-attacks or destruction or loss of data and may incur significant additional expense to implement further data protection measures. It is also possible that unauthorized access to data may be obtained through inadequate use of security controls by our suppliers or other vendors.

Although we have general liability insurance coverage, our insurance may not cover all claims, continue to be available on reasonable terms or be sufficient in amount to cover one or more large claims. Additionally, the insurer may disclaim coverage as to any claim. The successful assertion of one or more large claims against us that exceed or are not covered by our insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or ~~co-insurance~~ ~~requirements, could have a material adverse effect on our business, prospects, operating results and financial condition.~~

~~Acquisitions or joint ventures could disrupt our business, cause dilution to our stockholders and otherwise harm our business.~~

We may acquire other businesses, product candidates or technologies as well as pursue strategic alliances, joint ventures, technology licenses or investments in complementary businesses. We have not made any acquisitions to date, and our ability to do so successfully is unproven. Any of these transactions could be material to our financial condition and operating results and expose us to many risks, including:

~~disruption in our relationships with future customers or with current or future distributors or suppliers as a result of such a transaction;~~

~~unexpected liabilities related to acquired companies;~~

~~difficulties integrating acquired personnel, technologies and operations into our existing business;~~

~~diversion of management time and focus from operating our business to acquisition integration challenges;~~

~~increases in our expenses and reductions in our cash available for operations and other uses;~~

~~possible write-offs or impairment charges relating to acquired businesses; and~~

~~inability to develop a sales force for any additional product candidates.~~

Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.

Also, the expected benefit of any acquisition may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition. We cannot predict the number, timing or size of future joint ventures or acquisitions, or the effect that any such transactions might have on our operating results.

~~Risks Related to our Common Stock~~

~~The market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock.~~

The trading price of our common stock is likely to be volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the price at which you purchased. The market price for our common stock may be influenced by many factors, including:

~~the success of competitive products or technologies;~~

~~results or progress, or changes in approach or timelines, of clinical trials of our product candidates or those of our competitors;~~

~~failure or discontinuation of any of our development programs;~~

~~commencement of, termination of, or any development related to any collaboration or licensing arrangement;~~

~~regulatory or legal developments in the United States and other countries;~~

~~development of new product candidates that may address our markets and make our product candidates less attractive;~~

~~changes in physician, hospital or healthcare provider practices that may make our product candidates less useful;~~

~~announcements by us, our collaborators or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;~~

~~announcement or market expectation of additional financing efforts;~~

~~developments or disputes concerning patent applications, issued patents or other proprietary rights;~~

~~the recruitment or departure of key personnel;~~

~~the level of expenses related to any of our product candidates or clinical development programs;~~

~~failure to meet or exceed financial estimates, projections or development timelines of the investment community or that we provide to the public;~~

•

~~the results of our efforts to discover, develop, acquire or~~ ~~in-license~~ ~~additional product candidates or products;~~

~~actual or expected changes in estimates as to financial results, development timelines or recommendations by securities analysts;~~

~~variations in our financial results or those of companies that are perceived to be similar to us;~~

~~changes in the structure of healthcare payment systems;~~

~~sale of common stock by us or our stockholders in the future as well as the overall trading volume of our common stock; changes in the composition of our stockholder base;~~

~~activity in the options market for shares of our common stock;~~

~~market conditions in the pharmaceutical and biotechnology sectors;~~

~~general economic, industry and market conditions; and~~

~~the other factors described in this “Risk Factors” section.~~

Our executive officers, directors, and principal stockholders, if they choose to act together, will continue to have the ability to control or significantly influence all matters submitted to stockholders for approval.

Our executive officers, directors and stockholders who own more than 5% of our outstanding common stock and their respective affiliates, in the aggregate, hold shares representing approximately 41.6% of our outstanding voting stock as of November 13, 2023, and assuming the conversion of all shares of Series A Preferred Stock into common stock and the completion of the Financing. As a result, if these stockholders choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors, the composition of our management and approval of any merger, consolidation or sale of all or substantially all of our assets.

Future sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

Concurrently and in connection with the execution of the Merger Agreement, certain former Cartesian securityholders, as of immediately prior to the Merger, and certain of our directors and officers as of immediately prior to the Merger entered into ~~lock-up~~ ~~agreements with us, pursuant to which each such stockholder, will be subject to a~~ ~~180-day~~ lockup on the sale or transfer of shares of our common stock held by each such stockholder, at the closing of the Merger, including those shares received by former Cartesian securityholders in the Merger. Upon expiration of this ~~180-day~~ ~~lockup period, these shares will become eligible for sale in the public market.~~

On November 13, 2023, we also entered into a registration rights agreement, or the Registration Rights Agreement, with certain parties thereto. Pursuant to the Registration Rights Agreement, we are obligated to prepare and file a resale registration statement with the SEC within 90 calendar days following the closing of the Financing, or the Filing Deadline. We agreed to use our reasonable best efforts to cause this registration statement to be declared effective by the SEC within 45 calendar days of the Filing Deadline (or within 90 calendar days if the SEC reviews the registration statement). Once such registration statement is declared effective, the shares to which the registration statement relates will no longer constitute restricted securities and may be sold freely in the public markets, subject to lapse on any related contractual restrictions related thereto of any holder party thereto, and subject to any restrictions that may be applicable to any control securities.

If our stockholders sell, indicate an intention to sell, or it is perceived that they will sell substantial amounts of our common stock in the public market after legal restrictions on resale lapse, the trading price of our common stock could decline. In addition, shares of our common stock that are subject to our outstanding options will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements and Rules 144 and 701 under the Securities Act.

Anti-takeover provisions in our charter documents and under Delaware law and the terms of some of our contracts could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our management.

Provisions in our Certificate of Incorporation and Bylaws may delay or prevent an acquisition or a change in management. These provisions include a prohibition on actions by written consent of our stockholders and the abilitymembers of our Board of Directors to issue preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibits stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us. Although we believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our Board of Directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the Board of Directors, which is responsible for appointing the members of management.

Furthermore, our restated certificate of incorporation specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving claims brought against us by stockholders. We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it may limit any stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers, employees or agents.

In addition, the Certificate of Designation relating to our Series A Preferred Stock may delay or prevent a change in control of our company. At any time while at least 30% of the originally issued Series A Preferred Stock remains issued and outstanding, we may not consummate a Fundamental Transaction (as defined in the Certificate of Designation) or any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock. This provision of the Certificate of Designation may make it more difficult for us to enter into any of the aforementioned transactions.

~~We have been in the past and may in the future be subject to securities class action lawsuits.~~

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. Involvement in such litigation, could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

On August 3, 2020, a stockholder of Selecta filed a stockholder derivative action, purportedly on behalf of Selecta and against certain current and former members of the Company’s Board of Directors, as well as one affiliated company owned by a current board member, in the Court of Chancery of the State of Delaware, ~~namely Franchi~~titled Sloan v. Barabe, et al., No. 2024-0105. The complaint alleges that the individual defendants breached their fiduciary duties ~~and committed corporate waste when they authorized a private placement transaction, announced~~by failing to disclose purportedly material information to our stockholders in our Preliminary Proxy Statement filed on ~~December 19, 2019, at a price allegedly below fair value. The complaint further alleges that the four defendant directors who participated in the private placement were unjustly enriched~~January 31, 2024 in connection with the transaction. On September 25, 2020, the defendants filed a motion to dismiss the lawsuit. On November 6, 2020, the plaintiff filed an amended complaint, and the defendants filed a second motion to dismiss on January 8, 2021. On December 31, 2020, we received a litigation demand letter from two other putative stockholders relating to the same private placement transaction. On April 12, 2021, the Courtsolicitation of Chancery in the State of Delaware granted a motion to stay the litigation pending a review by a Special Committee appointed by the Company’s Board of Directors. While the litigation was stayed, the parties reached an agreement in principle to settle the matter, and on March 18, 2022, they submitted a Stipulation and Agreement of Settlement and other documentation to the Court for itsstockholder approval of the ~~settlement. On July 21, 2022,~~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 ~~held a settlement hearing, at which~~denied the ~~settlement was approved. On August 1, 2022,~~Plaintiff’s motion to expedite the Court entered an Order and Final Judgment which dismissed the action, and all claims contained therein, with prejudice. We could receive other demands or be subject to other litigation. While we intend to vigorously defend against any demands which we believe to be without merit, there can be no assurance as to the outcome of any stockholder litigation. Unfavorable outcomes in securities class action litigation could require us to pay extensive damages, which could delay or prevent our ability to develop our product candidates and harm our operations.

~~Risk Factors Relating to the Merger~~

~~There is no guarantee~~proceedings, rejecting Plaintiff's argument that the ~~Merger will increase~~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 ~~value.~~

~~In November 2023 we merged with Cartesian. We cannot guarantee~~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 ~~implementing~~ the ~~Merger~~defendants violated Sections 14(a) and related transactions will not impair stockholder value or otherwise adversely affect our business. The Merger poses significant integration challenges between our businesses and management teams which could result in management and business disruptions, any of which could harm our results of operation, business prospects, and impair the value20(a) of the ~~Merger~~Exchange Act by failing to disclose purportedly material information to our ~~stockholders.~~

~~Pursuant to the terms of the Merger Agreement, we are required to recommend that our~~ stockholders approve the conversion of all outstanding shares of our Series A Preferred Stock into shares of our common stock. We cannot guarantee that our stockholders will approve this matter, and if they fail to do so we may be required to settle such shares in cash and our operations may be materially harmed.

Under the terms of the Merger Agreement, we agreed to call and hold a meeting of our stockholders to obtain the requisite approvals for the conversion of all outstanding shares of Series A Preferred Stock to be issued in the Merger and Financing into shares of our common stock, as required by the Nasdaq Stock Market LLC listing rules, and, if such approval is not obtained at that meeting, to seek to obtain such approvals at an annual or special stockholders meeting to be held at least every six months thereafter until such approval is obtained, which would be time consuming and costly. Additionally, if our stockholders do not approve the conversion of our Series A Preferred Stock within 18 months from the date of the closing of the Merger, then the holders of our Series A Preferred Stock will be entitled to elect to have their shares of Series A Preferred Stock redeemed for cash at a price per share equal to the ~~ten-day~~ ~~trailing average closing trading price of the common stock at such time, as described~~ in our Certificate of Designation relating to the Series A Preferred Stock. If we are forced to cash settle a significant amount of the Series A Preferred Stock, it could materially affect our results of operations.

~~The failure to successfully integrate the businesses of Selecta~~Preliminary and ~~Cartesian in the expected timeframe would adversely affect the combined Company’s future results.~~

~~Our ability to successfully integrate the operations of Selecta~~Definitive Proxy Statements filed on January 31, 2024, and Cartesian will depend, in part, on the combined Company’s ability to realize the anticipated benefits and cost savings from the Merger. If the combined Company is not able to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits and cost savings of the Merger may not be realized fully, or at all, or may take longer to realize than expected, and the value of our common shares may be adversely affected. In addition, the integration of our and Cartesian’s respective businesses will be a time-consuming and expensive process. Proper planning and effective and timely implementation will be critical to avoid any significant disruption to the combined Company’s operations. It is possible that the integration process could result in the loss of key employees, the disruption of its ongoing business or the identification of inconsistencies in standards, controls, procedures and policies that adversely affect its ability to maintain relationships with customers, suppliers, distributors, creditors, lessors, clinical trial investigators or managers or to achieve the anticipated benefits of the Merger. Delays encountered in the integration process could have a material adverse effect on the combined Company’s revenues, expenses, operating results and financial condition, including the value of its common shares.

~~Our future results will suffer if the combined Company does not effectively manage its expanded operations.~~

As a result of the Merger, we will become a larger company and our business will become more complex. There can be no assurance that we will effectively manage the increased complexity without experiencing operating inefficiencies or control deficiencies. Significant management time and effort is required to effectively manage the increased complexity of the combined Company and our failure to successfully do so could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition, as a result of the Merger, our financial statements and results of operations in prior years may not provide meaningful guidance to form an assessment of the prospects or potential success of the combined Company’s future business operations.

~~We expect to incur substantial expenses related to the integration of Cartesian.~~

~~We expect to incur substantial expenses~~February 14, 2024, respectively, in connection with the ~~Merger and the subsequent integration~~solicitation of Cartesian with Selecta. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including purchasing, accounting and finance, sales, billing, payroll, research and development, marketing and benefits. Both we and Cartesian have incurred significant transaction expenses in connection with the drafting and negotiationstockholder approval of the Merger Agreement and may potentially incur significant severance expenses as a result of the Merger. While we and Cartesian have assumed that a certain level of expenses will be incurred, there are many factors beyond their control that could affect the total amountConversion Proposal. The complaint seeks injunctive relief enjoining or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These integration expenses likely will result in our taking significant charges against earnings following the completion ofrescinding 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 ~~amount and timing~~risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes from the risk factors previously disclosed in such ~~charges are uncertain at present.~~

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.~~

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
    2.1 Agreement and Plan of Merger, dated November 13, 2023, by and among Selecta Biosciences, Inc. Sakura Merger Sub I, Inc., Sakura Merger Sub II, LLC and Cartesian Therapeutics, Inc.    8-K    001-37798    2.1    11/13/2023
    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
    3.1(c) Certificate of Amendment to the Restated Certificate of Incorporation of Selecta Biosciences, Inc., dated November 13, 2023    8-K    001-37798    3.3    11/13/2023
    3.2 Amended and Restated By-laws of Cartesian Therapeutics, Inc.             Filed
herewith
    4.1 Form of Contingent Value Rights Agreement    8-K    001-37798    2.1    11/13/2023
  10.1* Form of Retention Bonus Letter    8-K    001-37798    10.3    11/13/2023
  10.2 Form of Support Agreement    8-K    001-37798    2.1    11/13/2023
  10.3 Form of Lock-up Agreement    8-K    001-37798    2.1    11/13/2023
  10.4 Securities Purchase Agreement, dated as of November 13, 2023, by and among Selecta Biosciences, Inc. and each purchaser identified on Annex A thereto    8-K    001-37798    10.1    11/13/2023
  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


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
2.1*	Agreement and Plan of Merger, dated November 13, 2023, by and among Selecta Biosciences, Inc., Sakura Merger Sub I, Inc., Sakura Merger Sub II, LLC, and Cartesian Therapeutics, Inc.	8-K	001-37798	2.1	11/13/2023
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
3.1(c)	Certificate of Amendment to the Restated Certificate of Incorporation of Selecta Biosciences, Inc., dated November 13, 2023	8-K	001-37798	3.3	11/13/2023
3.1(d)	Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Cartesian Therapeutics, Inc., dated March 28, 2024.	8-K	001-37798	3.2	3/28/2024
3.2	Amended and Restated By-laws of Cartesian Therapeutics, Inc.	8-K	001-37798	3.2	11/13/2023
4.1(a)	Certificate of Designation of Preferences, Rights and Limitations of Series A Non-Voting Convertible Preferred Stock	8-K	001-37798	3.4	11/13/2023
4.1(b)	Certificate of Amendment to the Certificate of Designation of Series A Non-Voting Convertible Preferred Stock, dated March 26, 2024.	8-K	001-37798	3.1	3/28/2024

10.1#	Employment Agreement, dated as of March 26, 2024, by and between the Registrant and Christopher Jewell, Ph.D.	8-K	001-37798	10.1	4/1/2024
10.2#	Employment Agreement, dated as of March 28, 2024, by and between the Registrant and Metin Kurtoglu, M.D., Ph.D.	8-K	001-37798	10.2	4/1/2024
10.3(a)†	Lease Agreement by and between 7495 RP, LLC and Cartesian Therapeutics, Inc. dated February 28, 2024	10-K	001-37798	10.12	3/7/2024
10.3(b)†	First Amendment to Lease Agreement by and between 7495 RP, LLC and Cartesian Therapeutics, Inc. dated May 7, 2024	-	-	-	Filed herewith
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

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*
101.LAB	~~Management contract or compensatory plan or arrangement.~~	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

* 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: ~~November 13, 2023~~May 8, 2024

By:

~~By:~~

/s/ Carsten Brunn, Ph.D.

Carsten Brunn, Ph.D.

President and Chief Executive Officer, and Director

(Principal Executive Officer)

Date: ~~November 13, 2023~~May 8, 2024

By:

~~By:~~

/s/ Blaine Davis

Blaine Davis

Chief Financial Officer

(Principal Financial Officer)


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

Title of each class		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

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


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


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PART I. FINANCIAL INFORMATION

Item 1.				Financial Statements (unaudited)					6	5

	Consolidated Balance Sheets as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023				6	5

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three ~~and Nine~~ Months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~				7	6

	Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three Months ended March 31, ~~June 30,~~ 202 4 and ~~September 30, 2023 and 2022~~20 23				8	7

	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~				10	9

	Notes to Consolidated Financial Statements				11	10

Item 2.			~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations				31	32

Item 3.			Quantitative and Qualitative Disclosures About Market Risk				42	40

Item 4.			Controls and Procedures				42	40

PART II. OTHER INFORMATION

Item 1.				Legal Proceedings					43	42

Item 1A.			Risk Factors				43	42

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds				68	42

Item 3.			Defaults Upon Senior Securities				68	42

Item 4.			Mine Safety Disclosures				68	42

Item 5.			Other Information				68	42
Item 6.		Exhibits		43
~~Item 6.~~				~~Exhibits~~			69

	Signatures				70


	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	79,603		$	106,438
Marketable securities		—			28,164
Accounts receivable		4,898			6,596
Unbilled receivables		1,875			3,162
Prepaid expenses and other current assets		3,493			3,778

Total current assets		89,869			148,138
Non-current assets:
Property and equipment, net		2,421			2,794
Right-of-use asset, net		10,339			11,617
Long-term restricted cash		1,377			1,311
Investments		2,000			2,000
Other assets		28			26

Total assets	$	106,034		$	165,886

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	375		$	316
Accrued expenses		13,637			14,084
Loan payable		—			8,476
Lease liability		1,787			1,608
Deferred revenue		4,140			593

Total current liabilities		19,939			25,077
Non-current liabilities:
Loan payable, net of current portion		—			17,786
Lease liability		8,694			10,055
Deferred revenue		3,981			—
Warrant liabilities		13,091			19,140

Total liabilities		45,705			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 September 30, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value; 350,000,000 shares authorized; 154,854,032 and 153,042,435 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		15			15
Additional paid-in capital		501,919			493,308
Accumulated deficit		(436,989	)		(394,937	)
Accumulated other comprehensive loss		(4,616	)		(4,558	)

Total stockholders’ equity		60,329			93,828

Total liabilities and stockholders’ equity	$	106,034		$	165,886


	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


	September 30, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds (included in cash equivalents)	$	74,340	$	74,340	$	—	$	—

Total assets	$	74,340	$	74,340	$	—	$	—

Liabilities:
Warrant liabilities	$	13,091	$	—	$	—	$	13,091

Total liabilities	$	13,091	$	—	$	—	$	13,091


	September 30,
	2023		2022
Cash and cash equivalents	$	79,603	$	112,843
Long-term restricted cash		1,377		1,600

Total cash, cash equivalents, and restricted cash	$	80,980	$	114,443


	Warrant liabilities
Fair value as of December 31, 2022	$	19,140
Change in fair value		(6,049	)

Fair value as of September 30, 2023	$	13,091


	September 30, 2023
2023 (remainder)	$	677
2024		2,740
2025		2,818
2026		2,902
2027		2,990
Thereafter		946

Total future minimum lease payments		13,073
Less: Imputed interest		2,592

Total operating lease liabilities	$	10,481


	Number of Warrants
	Equity classified			Liability classified		Total			Weighted- average exercise price
Outstanding at December 31, 2022		2,236,326			28,991,953		31,228,279		$	1.53
Canceled		(3,576	)		—		(3,576	)		16.77

Outstanding at September 30, 2023		2,232,750			28,991,953		31,224,703		$	1.53


	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		(1,354,852	)	$	2.98

Outstanding at September 30, 2023		19,700,760		$	2.84		7.73	$	—

Vested at September 30, 2023		9,374,463		$	3.87		6.60	$	—
Vested and expected to vest at September 30, 2023		18,644,435		$	2.90		7.66	$	—
Non-employee consultants
Outstanding at December 31, 2022		266,239		$	8.05		5.08	$	—

Outstanding at September 30, 2023		266,239		$	8.05		4.33	$	—

Vested at September 30, 2023		266,239		$	8.05		4.33	$	—
Vested and expected to vest at September 30, 2023		266,239		$	8.05		4.33	$	—


	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		(636,018	)		2.40
Forfeited		(71,173	)		1.99

Unvested at September 30, 2023		2,052,967		$	1.95


Nine Months Ended September 30, 2023	Balance at beginning of period		Additions		Deductions			Balance at end of period
Contract liabilities:
Deferred revenue	$	593	$	10,500	$	(2,972	)	$	8,121

Total contract liabilities	$	593	$	10,500	$	(2,972	)	$	8,121


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


	Three Months Ended September 30,				Increase (decrease)
	2023		2022		Increase (decrease)
Collaboration and license revenue	$	6,551	$	20,710	$	(14,159	)	(68	)%


	Nine Months Ended September 30,				Increase (decrease)
	2023		2022		Increase (decrease)
Collaboration and license revenue	$	17,738	$	93,982	$	(76,244	)	(81	)%