0001104659-23-058778 | 10-Q | XBRL Viewer

Three months ended March 31,

Research and development

General and administrative

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Summary of Significant Accounting Policies - Segment information (Details)	3 Months Ended
	Mar. 31, 2023 segment
Summary of Significant Accounting Policies
Number of operating segments	1

Unaudited Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) - USD ($) $ in Thousands	Common stock	Additional paid-in capital	Accumulated other comprehensive income (loss)	Accumulated deficit	Noncontrolling interests	Total
Beginning balance (in shares) at Dec. 31, 2021						8,700,885
Beginning balance at Dec. 31, 2021						$ 107,808
Ending balance (in shares) at Mar. 31, 2022						8,700,885
Ending balance at Mar. 31, 2022						$ 107,808
Beginning balance (in shares) at Dec. 31, 2021	2,059,072
Beginning balance at Dec. 31, 2021	$ 2	$ 816		$ (96,997)	$ 14,395	(81,784)
Stockholders' Equity (Deficit)
Exercise of stock options (in shares)	2,572
Stock-based compensation		89				89
Unrealized loss on marketable securities			$ (158)			(158)
Net loss				(11,312)		(11,312)
Ending balance (in shares) at Mar. 31, 2022	2,061,644
Ending balance at Mar. 31, 2022	$ 2	905	(158)	(108,309)	14,395	$ (93,165)
Beginning balance (in shares) at Dec. 31, 2022						8,700,885
Beginning balance at Dec. 31, 2022						$ 107,808
Convertible preferred stock
Conversion of convertible preferred stock and non-controlling interests to common stock (in shares)						(8,700,885)
Conversion of convertible preferred stock and non-controlling interests to common stock						$ (107,808)
Beginning balance (in shares) at Dec. 31, 2022	2,217,737
Beginning balance at Dec. 31, 2022	$ 2	1,197	(41)	(158,223)	14,395	(142,670)
Stockholders' Equity (Deficit)
Stock-based compensation		265				265
Unrealized loss on marketable securities			177			177
Issuance of common stock for cash in pre-closing financing (in shares)	3,730,608
Issuance of common stock for cash in pre-closing financing	$ 4	30,636				30,640
Issuance of common stock upon settlement of convertible promissory note, accrued interest, and related derivative liability (in shares)	5,059,338
Issuance of common stock upon settlement of convertible promissory note, accrued interest, and related derivative liability	$ 5	42,442				42,447
Issuance of common stock to Sesen Bio shareholders in reverse capitalization (in shares)	10,374,272
Issuance of common stock to Sesen Bio shareholders in reverse capitalization	$ 10	72,034				72,044
Conversion of convertible preferred stock and non-controlling interests to common stock (in shares)	18,872,711
Conversion of convertible preferred stock and non-controlling interests to common stock	$ 19	122,185			$ (14,395)	107,809
Net loss				(24,642)		(24,642)
Ending balance (in shares) at Mar. 31, 2023	40,254,666
Ending balance at Mar. 31, 2023	$ 40	$ 268,759	$ 136	$ (182,865)		$ 86,070

Moderna Collaboration and License Agreement (Details) $ in Millions	1 Months Ended	3 Months Ended
	Jan. 31, 2022 USD ($) item product	Mar. 31, 2023 USD ($)
Collaboration and License Agreement \| Research and development services
Moderna Collaboration and License Agreement
Upfront payment	$ 45.0
Variable consideration	$ 73.9
Term of contract	5 years
Collaboration revenues		$ 3.2
Noncurrent portion of deferred revenue	$ 45.0
Collaboration and License Agreement \| Minimum \| Research and development services
Moderna Collaboration and License Agreement
Amount receivable per product	$ 247.0
Collaboration and License Agreement \| Moderna
Moderna Collaboration and License Agreement
Maximum of Research Targets \| item	12
Number of representatives from each company in joint steering committee \| item	3
Collaboration and License Agreement \| Moderna \| Research and development services
Moderna Collaboration and License Agreement
Upfront non-refundable payment received	$ 45.0
Minimum commitment to reimburse research and development costs	$ 10.0
Period of reimbursement of research and development costs	3 years
Number of products developed and commercialized \| product	12
Collaboration and License Agreement \| Moderna \| Maximum
Moderna Collaboration and License Agreement
Amount receivable per product	$ 253.0
Moderna License Agreement
Moderna Collaboration and License Agreement
Collaboration revenues		$ 13.1

Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Stock-based Compensation

Summary of stock option activity


				Weighted
		Weighted		average	Aggregate
		average		remaining	Intrinsic
		exercise		contractual	Value (in
	Options	price		term (years)	thousands)
Outstanding as of December 31, 2022	3,356,937	$	1.01
Sesen Bio options assumed in the Merger	765,223		27.94
Exercised	—		—
Granted	144,352		5.64
Forfeited	(82,427)		1.46
Expired	(38)		1.46
Outstanding as of March 31, 2023	4,184,047	$	6.11	5.9	$	6,798
Exercisable as of March 31, 2023	3,015,084	$	5.58	3.6	$	5,057
Vested and expected to vest at March 31, 2023	4,184,047	$	6.11	5.9	$	6,798

Summary of estimated using the Black-Scholes option-pricing model


	Three Months Ended March 31,
	2023		2022
Risk-free interest rate	2.92% - 4.03%		2.40% - 2.41	%
Expected term	6 years		6 years
Expected volatility	57.77% - 62.65	%	54.54% - 54.58	%
Expected dividend yield	—		—

Summary of stock-based compensation expense

Moderna Collaboration and License Agreement (Tables)

3 Months Ended

Mar. 31, 2023

Moderna Collaboration and License Agreement

Schedule of estimated revenue expected to be recognized in the future related to performance obligations


	Transaction
	price unsatisfied
Performance obligations:
Research and development	$	61,376
Option rights		45,000
Total performance obligations	$	106,376

Summary of changes in deferred revenue


	Three months ended March 31,
	2023		2022
Balance at the beginning of the period	$	47,459	$	—
Deferral of revenue		2,920		46,441
Recognition of unearned revenue		(3,243)		(822)
Balance at the end of the period	$	47,136	$	45,619

Merger with Sesen Bio (Details) - USD ($) $ in Thousands	Mar. 07, 2023	Mar. 31, 2023	Dec. 31, 2022
Merger with Sesen Bio
Entity common stock, shares outstanding immediately after merger		40,254,666	2,217,737
Cash and cash equivalents	$ 37,873
Marketable securities	44,588
Prepaid expenses and other assets	1,316
Restricted cash	30
Accounts payable and accrued expenses	(3,499)
Total net assets acquired	80,308
Less: Transaction costs	(8,264)
Total net assets acquired less transaction costs	72,044
Carisma Therapeutics Inc.
Merger with Sesen Bio
Severance and personnel costs paid	$ 4,600
CARISMA Therapeutics Inc, Legacy, Stockholders \| Carisma Therapeutics Inc.
Merger with Sesen Bio
Business acquisition percentage of voting interests acquired	74.20%
Entity common stock, shares outstanding immediately after merger	40,254,666

- Details

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- Details

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Commitments and Contingencies - Future maturities of lease liabilities (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Operating Leases
2023 (remaining nine months)	$ 2,713
2024	213
2025	219
2026	226
2027	233
Thereafter	423
Total future minimum payments	4,027
Less imputed interest	(482)
Present value of lease liabilities	3,545
Finance Leases
2023 (remaining nine months)	1,150
2024	600
2025	338
Total future minimum payments	2,088
Less imputed interest	(160)
Present value of lease liabilities	$ 1,928

Commitments and Contingencies - Supplemental cash flow information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used in operating leases	$ 1,448	$ 461
Operating cash used in finance leases	45
Financing cash used in finance leases	$ 106

Summary of Significant Accounting Policies - Fair value hierarchy (Details) - Recurring - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Level 1
Assets:
Cash equivalents - money markets accounts	$ 7,002	$ 7,794
Marketable securities - U.S. Treasuries	$ 76,190	27,802
Level 3
Liability:
Derivative liability - redemption feature on convertible promissory note		$ 5,739

Moderna Collaboration and License Agreement - Changes in deferred revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Moderna Collaboration and License Agreement
Balance at the beginning of the period	$ 47,459
Deferral of revenue	2,920	$ 46,441
Recognition of unearned revenue	(3,243)	(822)
Balance at the ending of the period	$ 47,136	$ 45,619

Summary of Significant Accounting Policies - Net loss per share (Details) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Net loss per share
Anti-dilutive securities	4,184,047	16,747,587
Convertible preferred stock and exchangeable shares
Net loss per share
Anti-dilutive securities		9,936,148
Stock options
Net loss per share
Anti-dilutive securities	4,184,047	3,553,288
Conversion of convertible promissory note
Net loss per share
Anti-dilutive securities		3,258,151

Income Tax Provision (Details) $ in Millions	3 Months Ended
Income Tax Provision (Details) $ in Millions	Mar. 31, 2023 USD ($)
Income Tax Provision
Tax revenue related to Moderna cash received	$ 45.0

Stock-based Compensation - Plans (Details) shares in Millions	3 Months Ended
	Mar. 31, 2023 shares
Two Thousand Seventeen Stock Incentive Plan \| Stock options
Stock-based Compensation
Vesting period	4 years
Two Thousand Seventeen Stock Incentive Plan \| Stock options \| Maximum
Stock-based Compensation
Terms	10 years
Two Thousand Fourteen Stock Incentive Plan
Stock-based Compensation
Vesting period	4 years
Vesting on first anniversary (as a percent)	25.00%
Vesting at the end of each three-month period after first anniversary (as a percent)	6.25%
Shares available for issuance	6.2
Two Thousand Fourteen Stock Incentive Plan \| Stock options
Stock-based Compensation
Vesting period	10 years
Two Thousand Fourteen Employee Stock Purchase Plan
Stock-based Compensation
Shares available for issuance	0.2
Discount to the market price (as a percent)	15.00%

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Summary of Significant Accounting Policies

Schedule of fair value hierarchy of assets and liabilities measured on recurring basis


	Fair value measurement at reporting date using
(in thousands)	(Level 1)		(Level 2)		(Level 3)
March 31, 2023:
Assets:
Cash equivalents – money markets accounts	$	7,002	$	—	$	—
Marketable securities – U.S. Treasuries	$	76,190	$	—	$	—
December 31, 2022:
Assets:
Cash equivalents – money markets accounts	$	7,794	$	—	$	—
Marketable securities – U.S. Treasuries	$	27,802	$	—	$	—
Liability:
Derivative liability – redemption feature on convertible promissory note	$	—	$	—	$	5,739

Summary of marketable securities


			Gross
	Amortized		unrealized
	cost		gain		Fair value
Available-for-sale marketable securities
U.S. Treasury securities	$	76,054	$	136	$	76,190

Summary of the changes in fair value of derivative liability associated with the redemption feature of convertible promissory note


	Three Months Ended March 31,
(in thousands)	2023		2022
Balance at the beginning of the period	$	5,739	$	—
Balance at issuance		—		3,820
Change in fair value		84		557
Derecognition upon conversion of convertible promissory note		(5,823)		—
Balance at the end of the period	$	—	$	4,377

Schedule of anti-dilutive securities


	March 31,
	2023	2022
Convertible preferred stock and exchangeable shares	—	9,936,148
Stock options	4,184,047	3,553,288
Conversion of convertible promissory note	—	3,258,151
	4,184,047	16,747,587

Unaudited Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 62,777	$ 24,194
Marketable securities	76,190	27,802
Prepaid expenses and other assets	5,535	2,596
Total current assets	144,502	54,592
Property and equipment, net	8,107	8,628
Right of use assets - operating leases	3,493	4,822
Restricted cash	30	0
Deferred financing costs		4,111
Total assets	156,132	72,153
Current liabilities:
Accounts payable	4,614	1,728
Accrued expenses	10,187	10,361
Deferred revenue	2,136	2,459
Operating lease liabilities	2,597	3,437
Finance lease liabilities	1,188	1,162
Other current liabilities	755	523
Total current liabilities	21,477	19,670
Deferred revenues	45,000	45,000
Convertible promissory note		33,717
Derivative liability		5,739
Operating lease liabilities	948	976
Finance lease liabilities	740	872
Other long-term liabilities	1,897	1,041
Total liabilities	70,062	107,015
Commitments and contingencies
Convertible preferred stock		107,808
Stockholders' equity (deficit):
Common stock $0.001 par value, 100,000,000 shares authorized, 40,254,666 and 2,217,737 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	40	2
Additional paid-in capital	268,759	1,197
Accumulated other comprehensive income (loss)	136	(41)
Accumulated deficit	(182,865)	(158,223)
Total Carisma Therapeutics Inc. stockholders' equity (deficit)	86,070	(157,065)
Noncontrolling interests		14,395
Total stockholders' equity (deficit)	86,070	(142,670)
Total liabilities, convertible preferred stock and stockholders' equity (deficit)	$ 156,132	$ 72,153

Summary of Significant Accounting Policies - Changes in fair value of derivative liabilities (Details) - Derivative liability - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Changes in fair value of derivative liabilities
Balance at the beginning of the period	$ 5,739
Balance at issuance		$ 3,820
Change in fair value	84	557
Derecognition upon conversion of convertible promissory note	$ (5,823)
Balance at the end of the period		$ 4,377

Unaudited Consolidated Statement of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net loss	$ (24,642)	$ (11,312)
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization expense	705	218
Stock-based compensation expense	265	89
Reduction in the operating right of use assets	1,329	381
Amortization of debt discount	1,283	623
Change in fair value of derivative liability	84	557
Accretion on marketable securities	(163)
Non-cash interest expense	41	59
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(1,623)	(1,607)
Accounts payable	2,823	2,612
Accrued expenses	(4,445)	(2,259)
Deferred revenue	(323)	45,619
Operating lease liabilities	(868)	(376)
Net cash (used in) provided by operating activities	(25,534)	34,604
Cash flows from investing activities:
Purchase of marketable securities	(34,460)	(63,244)
Proceeds from the sale of marketable securities	31,000
Purchases of property and equipment	(135)	(1,007)
Net cash used in investing activities	(3,595)	(64,251)
Cash flows from financing activities:
Cash, cash equivalents and restricted cash acquired in connection with the reverse recapitalization	37,903
Payment of reverse recapitalization finance costs	(1,742)
Proceeds from the issuance of common stock in pre-closing financing	30,640
Payment of principal related to finance lease liabilities	(106)
Proceeds from failed sale-leaseback arrangement	1,092
Payment of finance liability from failed sale-leaseback arrangement	(45)
Proceeds from issuance of convertible promissory note		35,000
Net cash provided by financing activities	67,742	35,000
Net increase in cash and cash equivalents	38,613	5,353
Cash, cash equivalents and restricted cash at beginning of the period	24,194	28,551
Cash, cash equivalents and restricted cash at end of the period	62,807	33,904
Supplemental disclosures of cash flow information
Cash paid for interest	45
Supplemental disclosure of non-cash financing and investing activities
Conversion of convertible preferred stock and non-controlling interests upon Merger	122,204
Conversion of convertible promissory note, accrued interest and derivative liability upon Merger	42,447
Reverse recapitalization costs in accrued expenses	4,071
Unrealized gain (loss) on marketable securities	177	(158)
Right-of-use assets obtained in exchange for new operating lease liabilities		3,072
Allocation of debt proceeds to derivative liability		3,820
Property and equipment in accounts payable	$ 49	$ 103

Merger with Sesen Bio

3 Months Ended

Mar. 31, 2023

Merger with Sesen Bio

Merger with Sesen Bio

(4)	Merger with Sesen Bio

On March 7, 2023, Legacy Carisma completed the Merger with Sesen Bio as discussed in Note 1. The Merger was accounted for as a reverse recapitalization under GAAP because the primary assets of Sesen Bio were cash, cash equivalents and marketable securities. For financial reporting purposes Legacy Carisma was determined to be the accounting acquirer based upon the terms of the Merger and other factors, including: (i) Legacy Carisma stockholders own approximately 74.2% of the Combined Company, (ii) Legacy Carisma holds the majority (six of seven) of board seats of the Combined Company and (iii) Legacy Carisma management holds all key positions of management. Accordingly, the Merger was treated as the equivalent of Legacy Carisma issuing stock to acquire the net assets of Sesen Bio. As a result of the Merger, the net assets of Sesen Bio were recorded at their acquisition-date fair value in the consolidated financial statements and the reported operating results prior to the Merger are those of Legacy Carisma. Immediately after the Merger, there were 40,254,666 shares of the Company’s common stock outstanding.

The following table shows the net assets acquired in the Merger (in thousands):


	March 7, 2023
Cash and cash equivalents	$	37,873
Marketable securities		44,588
Prepaid expenses and other assets		1,316
Restricted cash		30
Accounts payable and accrued expenses		(3,499)
Total net assets acquired		80,308
Less: Transaction costs		(8,264)
Total net assets acquired less transaction costs	$	72,044

Subsequent to March 7, 2023, the Company paid $4.6 million of severance and personnel costs related to Sesen Bio.

Stock-based Compensation - Stock option activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Options
Outstanding as of December 31, 2022	3,356,937
Sesen Bio options assumed in the Merger	765,223
Granted	144,352
Forfeited	(82,427)
Expired	(38)
Outstanding as of March 31, 2023	4,184,047
Exercisable as of March 31, 2023	3,015,084
Vested and expected to vest at March 31, 2023	4,184,047
Weighted average exercise price
Outstanding as of December 31, 2022 (in USD per share)	$ 1.01
Sesen Bio options assumed in the Merger (in USD per share)	27.94
Granted (in USD per share)	5.64
Forfeited (in USD per share)	1.46
Expired (in USD per share)	1.46
Outstanding as of March 31, 2023 (in USD per share)	6.11
Exercisable as of March 31, 2023 (in USD per share)	5.58
Vested and expected to vest at March 31, 2023 (in USD per share)	6.11
Share based compensation arrangement by share based payment award options grants in period weighted average grant date fair value	$ 2.64	$ 0.75
Weighted average remaining contractual term (years)
Outstanding as of March 31, 2023	5 years 10 months 24 days
Exercisable as of March 31, 2023	3 years 7 months 6 days
Vested and expected to vest at March 31, 2023	5 years 10 months 24 days
Aggregate Intrinsic Value
Outstanding as of March 31, 2023	$ 6,798
Exercisable as of March 31, 2023	5,057
Vested and expected to vest at March 31, 2023	$ 6,798

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2023	May 10, 2023
Document and Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2023
Entity File Number	001-36296
Entity Registrant Name	Carisma Therapeutics Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	26-2025616
Entity Address State Or Province	PA
Entity Address, Address Line One	3675 Market Street
Entity Address, Address Line Two	Suite 200
Entity Address, City or Town	Philadelphia
Entity Address, Postal Zip Code	19104
City Area Code	267
Local Phone Number	491-6422
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	CARM
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		40,254,666
Entity Central Index Key	0001485003
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

Moderna Collaboration and License Agreement

3 Months Ended

Mar. 31, 2023

Moderna Collaboration and License Agreement

Moderna Collaboration and License Agreement

(10) Moderna Collaboration and License Agreement

In January 2022, the Company entered into a Collaboration and License Agreement with Moderna (Moderna License Agreement), to develop and commercialize in vivo engineered CAR-M therapeutics for different forms of cancer. The Moderna License Agreement allows Moderna to develop and commercialize product candidates for up to twelve research targets. The Company is responsible for discovering and optimizing development candidates, and Moderna is responsible for the clinical development thereafter. Pursuant to the Moderna License Agreement, the Company and Moderna formed a joint steering committee (JSC) that is responsible for the coordination and oversight of all research activities to which the Company is responsible for providing. The JSC is comprised of three representatives each from the Company and Moderna and with Moderna having final decision-making authority, subject to customary exclusions.

During the research term of the Moderna License Agreement, the Company has granted Moderna an exclusive worldwide royalty free license to the Company’s intellectual property associated with the product candidates that permits Moderna to conduct its research and development activities. Upon Moderna’s election of a development target (and payment of a related development target designation milestone) for commencement of pre-clinical development of a product candidate, the Company will grant Moderna an exclusive worldwide, sublicensable royalty bearing license to develop, manufacture and commercialize the product candidate.

Upon execution of the Moderna License Agreement, Moderna made an upfront non-refundable payment of $45.0 million to the Company. Moderna also will reimburse the Company for all costs incurred by the Company in connection with its research and development activities under the Moderna License Agreement plus a reasonable margin for the respective services performed (with a minimum commitment to reimburse $10.0 million in research and development costs over the first three years from execution of the Moderna License Agreement). In addition, assuming Moderna develops and commercializes 12 products, each directed to a different development target, the Company is eligible to receive up to between $247.0 million and $253.0 million per product in development target designation, development, regulatory and commercial milestone payments. The Company is also eligible to receive tiered mid-to-high single digit royalties of net product sales, subject to adjustment. In addition, Moderna will repay the Company for certain development, regulatory and commercial milestone payments and certain royalty payments pursuant to the Company’s license agreement with the University of Pennsylvania. The Moderna License Agreement terminates on a product-by-product basis upon the latest of expiration of the applicable product patents, expiration of regulatory exclusivity and the tenth anniversary of first commercial sale, unless terminated earlier by the Company or Moderna.

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

For the research and development services, the stand-alone selling price was determined considering the expected passthrough costs and cost of the research and development services and a reasonable margin for the respective services. The material rights from the option rights were valued based on the estimated discount at which the option is priced and the Company’s estimated probability of the options’ exercise as of the time of the agreement. The transaction price allocated to research and development services is recognized as collaboration revenues as the research and development services are provided to satisfy the underlying obligation related to the research

and development target. The transfer of control occurs over this period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.

The transaction price allocated to the options rights, which are considered material rights, will be recognized in the period that Moderna elects to exercise or elects to not exercise its option right to license and commercialize the underlying research and development target.

The Company included the $45.0 million upfront payment and $73.9 million of variable consideration for expected research and development services to be performed during the five-year contract term, inclusive of passthrough costs, in the transaction price as of the outset of the arrangement. During the three months ended March 31, 2023, the Company recognized $3.2 million of research and development services as collaboration revenues as the Company is the principal in providing such services. The Company recognized $13.1 million of collaboration revenues since inception of the Moderna License Agreement through March 31, 2023. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of March 31, 2023 (in thousands):


	Transaction
	price unsatisfied
Performance obligations:
Research and development	$	61,376
Option rights		45,000
Total performance obligations	$	106,376

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

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


	Three months ended March 31,
	2023		2022
Balance at the beginning of the period	$	47,459	$	—
Deferral of revenue		2,920		46,441
Recognition of unearned revenue		(3,243)		(822)
Balance at the end of the period	$	47,136	$	45,619

The current portion of deferred revenue represents advanced payments received from Moderna for costs expected to be incurred by the Company within the next twelve months. The noncurrent portion of deferred revenue represents the $45.0 million upfront, non-refundable and non-creditable payment allocated to customer option right which is not expected to be recognized within the next 12 months.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045

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+ Details

Subsequent Events

3 Months Ended

Mar. 31, 2023

Subsequent Events

Subsequent Events

(11)	Subsequent Events

The Company has evaluated subsequent events from the balance sheet date through May 11, 2023, the issuance date of these unaudited interim consolidated financial statements and has not identified any requiring disclosure.

Unaudited Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Unaudited Consolidated Balance Sheets
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	40,254,666	2,217,737
Common stock, shares outstanding	40,254,666	2,217,737

Stockholders' Equity

3 Months Ended

Mar. 31, 2023

Stockholders' Equity

Stockholders' Equity

(6)	Stockholders’ Equity

On March 7, 2023 in connection with the closing of the Merger, the following is reflected on the consolidated statements of convertible preferred stock and stockholders’ equity (deficit) for the three months ended March 31, 2023 and 2022: (i) the sale of 3,730,608 shares of common stock in a pre-closing funding at $8.21 per share for total proceeds of $30.6 million, (ii) the issuance of 5,059,338 shares of common stock upon the settlement of the Company’s $35.0 million convertible promissory note, accrued interest and related derivative liability, (iii) the conversion of convertible preferred stock and exchangeable shares previously presented as noncontrolling interests into 18,872,711 shares of common stock, (iv) the issuance of 10,374,272 shares of common stock to Sesen Bio stockholders as consideration for the Merger.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-URI https://asc.fasb.org/topic&trid=2208762

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+ Details

Related-Party Transactions

3 Months Ended

Mar. 31, 2023

Related-Party Transactions

Related-Party Transactions

(9)	Related-Party Transactions

The Company has outstanding licensing and scientific research agreements with Penn, a significant shareholder (Note 5). The Company recognized $0.4 million and $0.2 million of research and development expense for the three months ended March 31, 2023 and 2022, respectively, related to the Penn License Agreement.

The Company’s collaboration and license agreement is with Moderna, a significant shareholder (Note 10). The Company recognized revenue of $3.2 million and $0.8 million for the three months ended March 31, 2023 and 2022, respectively, related to the Moderna License Agreement.

Moderna Collaboration and License Agreement - Performance obligations (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Performance obligations:
Research and development	$ 61,376
Option rights	45,000
Total performance obligations	$ 106,376

Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
	Mar. 07, 2023	Mar. 31, 2023
Stockholders' Equity
Shares issued in a pre-closing funding	3,730,608
Issue price per share	$ 8.21
Value of shares issued in a pre-closing funding	$ 30,600
Issuance of common stock upon settlement of convertible promissory note, accrued interest, and related derivative liability (in shares)	5,059,338
Issuance of common stock upon settlement of convertible promissory note, accrued interest, and related derivative liability	$ 35,000	$ 42,447
Issuance of common stock to Sesen Bio shareholders in reverse capitalization (in shares)	10,374,272
Issuance of common stock to Sesen Bio shareholders in reverse capitalization		$ 72,044
Shares issued upon conversion of convertible preferred stock and exchangeable shares previously presented as noncontrolling interests	18,872,711

Background

3 Months Ended

Mar. 31, 2023

Background

Background

(1)	Background

Carisma Therapeutics Inc., a Delaware Corporation (collectively with its subsidiaries, the Company), is a clinical-stage cell therapy company focused on utilizing the Company’s proprietary macrophage and monocyte cell engineering platform to develop transformative immunotherapies to treat cancer and other serious diseases. The Company has created a comprehensive cell therapy platform to enable the therapeutic use of engineered macrophages and monocytes, which belong to a subgroup of white blood cells called myeloid cells. The Company’s initial focus is its proprietary Chimeric Antigen Receptor Macrophage (CAR-M) cell therapy platform, which redirects macrophages against specific tumor associated antigens and enables targeted anti-tumor immunity by utilizing genetically modifying myeloid cells (macrophages and monocytes) to express chimeric antigen receptors (CARs), enabling the potent innate immune cells to recognize specific tumor associated antigens on the surface of tumor cells. The Company’s initial product candidates, CT-0508 and CT-0525 are ex vivo autologous cell therapy product candidates, wherein immune cells from blood drawn from a patient are engineered outside of the body and reinfused into the same patient. The Company also has research programs to develop in vivo cell therapy macrophage products.

The Company’s lead product candidate, CT-0508, is the first CAR-M to be evaluated in a human clinical trial and is intended to treat solid tumors that overexpress HER2. CT-0508 is currently being studied in a multi-center open label Phase 1 clinical trial in the U.S. This ongoing first-in-human study evaluates the safety, tolerability and manufacturing feasibility of CT-0508. The Company has completed enrollment of the first group of patients in this trial, with nine patients having been successfully dosed over a five-day dosing schedule. In November 2022, the Company presented preliminary clinical results from the first group of patients. CT-0508 was successfully manufactured using macrophages obtained from heavily pre-treated, advanced solid tumor patients and has shown high CAR expression, viability, and purity. In addition, CT-0508 has been generally well-tolerated after infusion with no dose-limiting toxicities reported to date from the nine patients enrolled in the first group. While the results from this early clinical trial data are both preliminary and limited, the Company believes the results indicate that CT-0508 can be detected within the tumor microenvironment (TME), lead to remodeling and activation of the TME, and potentially induce anti-tumor adaptive immunity. In addition to the first group of patients in this study, the Company initiated a second group to evaluate bolus dosing of patients and anticipate data from this group in the second half of 2023. The Company has also initiated several additional sub studies evaluating CT-0508 in the clinical setting. In addition to monotherapy treatment, the Company has observed synergistic potential of CT-0508 with a PD1 blocking T-cell checkpoint inhibitor in multiple preclinical models. As a result of those studies and the preliminary results from group 1 in the Company’s clinical trial, the Company initiated a sub study to evaluate at least nine patients with the co-administration of CT-0508 and pembrolizumab in the first quarter of 2023. The Company anticipates the initial data from this sub study in the second half of 2023.

The Company’s second product candidate, CT-0525, is also intended to treat solid tumors that overexpress HER2, is in preclinical development and is advancing to an IND filing. CT-0525 utilizes a novel approach to CAR-M therapy to accelerate the manufacturing process, increase the cell yield, and improve upon the potential anti-tumor effect by engineering patients’ monocytes directly, without ex vivo differentiation into macrophages, as the Company currently does for CT-0508. The Company refers to this CAR-Monocyte approach as CAR-Mono. By increasing the cell yield, the CAR-Mono approach enables a larger potential dose and improved trafficking, which may improve tumor control. The CAR-Mono approach reduces manufacturing time and leverages an automated, closed-system manufacturing process. CT-0525 is the Company’s first CAR-Mono product candidate and is currently in the pre-clinical process development stage. The Company expects to submit an IND to the U.S. Food and Drug Administration (FDA) for CT-0525 in the second half of 2023, initiate clinical development shortly thereafter, and treat the Company’s first patient in the first half of 2024.

Beyond CT-0508 and CT-0525, the Company has a broad pipeline of cell therapy assets in various stages of pre-clinical development. In addition to the development of ex vivo CAR-M cell therapies, the Company is developing in vivo CAR-M gene therapies, wherein immune cells are directly engineered within the patient’s body. To advance the Company’s in vivo CAR-M therapeutics, the Company established a strategic collaboration with ModernaTX Inc. (Moderna) (Note 10).

Reverse Merger with Sesen Bio

On March 7, 2023, the Company (formerly publicly-held Sesen Bio, Inc.) consummated a merger with CTx Operations, Inc. (formerly privately-held CARISMA Therapeutics Inc.) (Legacy Carisma) pursuant to an Agreement and Plan of Merger and Reorganization, as amended (the Merger Agreement), by and among the Company, Legacy Carisma and Seahawk Merger Sub, Inc. (Merger Sub), a Delaware corporation and wholly-owned subsidiary of the Company. The Merger Agreement provided for the merger of Merger Sub with and into Legacy Carisma, with Legacy Carisma continuing as a wholly-owned subsidiary of the Company and the surviving

corporation of the merger (the Merger). Pursuant to the Merger Agreement, the Company changed its name from “Sesen Bio, Inc.” to “Carisma Therapeutics Inc.” At the closing of the Merger, (a) each then outstanding share of Legacy Carisma common stock and convertible preferred stock (including shares of Legacy Carisma common stock issued in connection with the pre-closing financing transaction described below) were converted into shares of Sesen Bio common stock at an exchange ratio of 1.8994 shares of Sesen Bio for each share of Legacy Carisma (the Exchange Ratio), and (b) each then outstanding stock option to purchase Legacy Carisma common stock was assumed by Sesen Bio, with necessary adjustments to reflect the Exchange Ratio.

Except as otherwise indicated, references herein to “Carisma,” the “Company,” or the “Combined Company,” refer to Carisma Therapeutics Inc. on a post-Merger basis, and references to “Legacy Carisma” refer to the business of privately-held CARISMA Therapeutics Inc. prior to the completion of the Merger. References to “Sesen Bio” refer to Sesen Bio, Inc. prior to the completion of the Merger.

Following the Merger, the shareholders of Legacy Carisma held 74.2% of the Combined Company, and the shareholders of Sesen Bio held 25.8% of the Combined Company.

Basis of Presentation and Exchange Ratio

As discussed in Note 3, the Merger was accounted for as reverse capitalization under which the historical financial statements of the Company prior to the Merger are Legacy Carisma. All common stock, per share and related information presented in the consolidated financial statements and notes prior to the Merger has been retroactively adjusted to reflect the Exchange Ratio.

Stock-based Compensation - Stock-based compensation expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stock-based Compensation
Stock-based compensation expense	$ 265	$ 89
Future compensation cost for awards not vested	$ 1,100
Weighted-average period compensation cost of unvested awards to be expensed	2 years 3 months 18 days
Sesen Bio, Inc.
Stock-based Compensation
Stock-based compensation expense	$ 200
Research and development
Stock-based Compensation
Stock-based compensation expense	10	41
General and administrative
Stock-based Compensation
Stock-based compensation expense	$ 255	$ 48

Income Tax Provision

3 Months Ended

Mar. 31, 2023

Income Tax Provision

Income Tax Provision

(8)	Income Taxes

Based on taxable income projections for 2023, the Company expects to have federal and state income tax liabilities for the year. For tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminates the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the U.S. and 15 years for research activities performed outside the U.S. pursuant to Internal Revenue Code Section 174. In addition, the Company is required to recognize tax revenue of $45.0 million in 2023, related to cash received under the collaboration and license agreement with Moderna in 2022, for tax purposes in advance of GAAP recognition. The Company also expects limitations on utilization of net operating losses and tax credits under TCJA and/or IRC Sections 382 and 383. These requirements temporarily increase the Company’s U.S. federal and state cash tax payments and reduces cash flows in 2023.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
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+ Details

Summary of Significant Accounting Policies - Marketable securities (Details) - U.S. Treasury securities $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Available-for-sale marketable securities
Amortized cost	$ 76,054
Gross unrealized gain	136
Fair value	$ 76,190

Stock-based Compensation - Option-pricing model (Details) - Stock options	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stock-based Compensation
Expected term	6 years	6 years
Minimum
Stock-based Compensation
Risk-free interest rate	2.92%	2.40%
Expected volatility	57.77%	54.54%
Maximum
Stock-based Compensation
Risk-free interest rate	4.03%	2.41%
Expected volatility	62.65%	54.58%

Unaudited Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Unaudited Consolidated Statements of Operations and Comprehensive Loss
Collaboration revenues	$ 3,243	$ 822
Operating expenses:
Research and development	16,641	8,767
General and administrative	9,574	2,211
Total operating expenses	26,215	10,978
Operating loss	(22,972)	(10,156)
Change in fair value of derivative liability	(84)	(557)
Interest (expense) income, net	(1,477)	(599)
Pre-tax loss	(24,533)	(11,312)
Income tax expense	(109)	0
Net loss	$ (24,642)	$ (11,312)
Share information:
Net loss per share of common stock, basic	$ (1.93)	$ (5.49)
Net loss per share of common stock, diluted	$ (1.93)	$ (5.49)
Weighted-average shares of common stock outstanding, basic	12,783,523	2,059,986
Weighted-average shares of common stock outstanding, diluted	12,783,523	2,059,986
Comprehensive loss
Net loss	$ (24,642)	$ (11,312)
Unrealized gain (loss) on marketable securities	177	(158)
Comprehensive loss	$ (24,465)	$ (11,470)

Background (Details)	Mar. 07, 2023
CARISMA Therapeutics Inc, Legacy, Stockholders \| Carisma Therapeutics Inc.
Background
Exchange ratio of shares of Sesen Bio for each share of Legacy Carisma	74.2
CARISMA Therapeutics Inc, Legacy, Stockholders \| Sesen Bio, Inc. \| Carisma Therapeutics Inc.
Background
Common stock at an exchange ratio	1.8994
Sesen Bio Stockholders \| Sesen Bio, Inc.
Background
Ownership interest held after the merge	25.80%

Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies.

Commitments and Contingencies

(5)	Commitments and Contingencies

Leases

The Company has operating leases for its lab and office space in Philadelphia, Pennsylvania. The Company’s operating leases have term end dates ranging from 2023 to 2029. The Company also has obligations under an arrangement for the use of certain lab equipment that are classified as finance leases that commenced in 2022 and have end dates ranging from 2024 to 2025.

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

The Company carries lab equipment from failed sale leasebacks, as property and equipment, net on the accompanying consolidated balance sheets. The ongoing lease payments are recorded as reductions to the finance liability and interest expense. As of March 31, 2023, the Company had a $2.7 million financing liability recorded in other current liabilities and other long-term liabilities on the unaudited consolidated balance sheet.

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


	Three months ended March 31,
	2023		2022
Operating lease cost	$	1,433	$	465
Finance lease cost:
Amortization of lease assets		297		—
Interest on lease liabilities		45		—
Total finance lease cost		342		—
Total lease cost	$	1,775	$	465

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


	March 31,
	2023		2022
Weighted-average remaining lease term (in years)
Operating leases	2.2		2.2
Finance leases	1.9		—

Weighted-average discount rate
Operating leases	9.5	%	9.4	%
Finance leases	9.0	%	—	%

Supplemental cash flow information (in thousands):


	Three Months Ended
	March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used in operating leases	$	1,448	$	461
Operating cash used in finance leases	$	45	$	—
Financing cash used in finance leases	$	106	$	—

Future maturities of lease liabilities were as follows as of March 31, 2023 (in thousands):


	Operating		Finance
	Leases		Leases
Fiscal year ending:
2023 (remaining nine months)	$	2,713	$	1,150
2024		213		600
2025		219		338
2026		226		—
2027		233		—
Thereafter		423		—
Total future minimum payments		4,027		2,088
Less imputed interest		(482)		(160)
Present value of lease liabilities	$	3,545	$	1,928

Licensing and Sponsored Research Agreements

Under a license agreement (Penn License Agreement) with The Trustees of the University of Pennsylvania (Penn), the Company is required to make annual payments of $10,000 through 2021 and $25,000 in annual payments thereafter. Penn is eligible to receive up to $10.9 million per product in development upon the achievement of certain clinical, regulatory and commercial milestone events. There are additional milestone payments required to be paid of up to $30.0 million per product in commercial milestones, and up to an additional $1.7 million in development and regulatory milestone payments for the first CAR-M product directed to mesothelin. Additionally, the Company is obligated to pay Penn single-digit royalties based on its net sales.

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

Contingencies

Liabilities for loss contingencies, arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

On February 3, 2023, a purported stockholder filed a complaint in the United States District Court for the District of Delaware against Sesen Bio and its board of directors, captioned Plumley v. Sesen Bio, Inc., et al., Case No. 1:23-cv-00131 (D. Del.) (“the Plumley Complaint”). The Plumley Complaint asserts claims under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder for allegedly false and misleading statements in the proxy statement/prospectus filed as part of the Registration Statement in connection with the Merger and under Section 20(a) of the Exchange Act for alleged “control person” liability with respect to such allegedly false and misleading statements and seeks, among other relief, an order enjoining the Merger and an award for plaintiffs’ fees and costs. On February 7, 2023, another purported stockholder filed a complaint in the United States District Court for the Southern District of New York against Sesen Bio and its board of directors, captioned Franchi v. Sesen Bio, Inc., et al., 1:23-cv-01041 (S.D.N.Y.) (“the Franchi Complaint”). The Franchi Complaint contains substantially similar allegations and claims and seeks substantially similar relief as the Plumley Complaint. Additionally, on February 9, 2023, another purported stockholder filed a complaint in the United States District Court for the Southern District of New York against Sesen Bio and its board of directors, captioned Menzer v. Sesen Bio, Inc., et al., 23-cv-01119 (S.D.N.Y.) (“the Menzer Complaint”). The Menzer Complaint contains substantially similar allegations and claims and seeks substantially similar relief as the Plumley Complaint and the Franchi Complaint. In April 2023, the Company executed a confidential fee agreement to resolve the stockholders’ claim for attorney’s fees and expenses in connection with the Plumley Complaint, Franchi Complaint, and Menzer Complaint. The amount of the confidential fee agreement was reasonably estimated and probable to be incurred as of March 31, 2023, resulting in a $0.2 million accrued settlement as of March 31, 2023.

Merger with Sesen Bio (Tables)

3 Months Ended

Mar. 31, 2023

Merger with Sesen Bio

Schedule of net assets acquired in the Merger


	March 7, 2023
Cash and cash equivalents	$	37,873
Marketable securities		44,588
Prepaid expenses and other assets		1,316
Restricted cash		30
Accounts payable and accrued expenses		(3,499)
Total net assets acquired		80,308
Less: Transaction costs		(8,264)
Total net assets acquired less transaction costs	$	72,044

Stock-based Compensation

3 Months Ended

Mar. 31, 2023

Stock-based Compensation

Stock-based Compensation

(7)	Stock-based Compensation

2017 Stock Incentive Plan

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

2014 Stock Incentive Plan

The Sesen Bio, Inc. Amended and Restated 2014 Stock Incentive Plan, as amended (the Sesen Bio 2014 Plan), provides for the grant of incentive and non-qualified stock options, restricted stock awards and restricted stock units, stock appreciation rights and other stock-based awards to the Company’s employees, officers, directors, consultants, and advisors, with amounts and terms of grants determined by the Company’s board of directors at the time of grant.

Stock options outstanding under the Sesen Bio 2014 Plan generally vest over a four-year period at the rate of 25% of the grant vesting on the first anniversary of the date of grant and 6.25% of the grant vesting at the end of each successive three-month period thereafter. Stock options granted under the Sesen Bio 2014 Plan are exercisable for a period of ten years from the date of grant.

On March 7, 2023, the Company amended and restated the Sesen Bio 2014 Plan to (i) change the name of the plan to the Carisma Therapeutics Inc. 2014 Amended and Restated Stock Incentive Plan (the 2014 Plan) and (ii) adopt a new form of stock option agreement and a new form of restricted stock unit agreement for the grant of options and restricted stock units under the 2014 Plan. As of March 31, 2023, approximately 6.2 million shares of common stock remained available for issuance.

2014 Employee Stock Purchase Plan

The Sesen Bio 2014 Employee Stock Purchase Plan (the Sesen Bio 2014 ESPP) provides employees with the opportunity to purchase shares of common stock at a 15% discount to the market price through payroll deductions or lump sum cash investments. The purpose of the Sesen Bio 2014 ESPP is to enhance employee interest in the success and progress of the Company by encouraging employee ownership of common stock. On March 7, 2023, the Company amended and restated the Sesen Bio 2014 ESPP to (i) change the name of the plan to Carisma Therapeutics Inc. 2014 Employee Stock Purchase Plan (the 2014 ESPP) and (ii) restate and integrate all prior amendments thereto. As of March 31, 2023, 0.2 million shares of common stock remained available for issuance.

The following is a summarizes of stock option activity for the three months ended March 31, 2023:


				Weighted
		Weighted		average	Aggregate
		average		remaining	Intrinsic
		exercise		contractual	Value (in
	Options	price		term (years)	thousands)
Outstanding as of December 31, 2022	3,356,937	$	1.01
Sesen Bio options assumed in the Merger	765,223		27.94
Exercised	—		—
Granted	144,352		5.64
Forfeited	(82,427)		1.46
Expired	(38)		1.46
Outstanding as of March 31, 2023	4,184,047	$	6.11	5.9	$	6,798
Exercisable as of March 31, 2023	3,015,084	$	5.58	3.6	$	5,057
Vested and expected to vest at March 31, 2023	4,184,047	$	6.11	5.9	$	6,798

The weighted-average grant-date per share fair values of options granted during the three months ended March 31, 2023 and 2022 were $2.64 and $0.75, respectively. The fair values in the three months ended March 31, 2023 and 2022 were estimated using the Black-Scholes option-pricing model based on the following assumptions:


	Three Months Ended March 31,
	2023		2022
Risk-free interest rate	2.92% - 4.03%		2.40% - 2.41	%
Expected term	6 years		6 years
Expected volatility	57.77% - 62.65	%	54.54% - 54.58	%
Expected dividend yield	—		—

Stock-Based Compensation Expense

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

The Company recognized stock-based compensation expense of $0.2 million related to the modification of Sesen Bio options assumed in connection with the Merger. Compensation cost for awards not vested as of March 31, 2023 was $1.1 million and will be expensed over a weighted-average period of 2.3 years.

Commitments and Contingencies - Lease term and discount rate information (Details)	Mar. 31, 2023	Mar. 31, 2022
Weighted-average remaining lease term (in years)
Operating leases	2 years 2 months 12 days	2 years 2 months 12 days
Finance leases	1 year 10 months 24 days	0 years
Weighted-average discount rate
Operating leases	9.50%	9.40%
Finance leases	9.00%

Development-Stage Risks and Liquidity

3 Months Ended

Mar. 31, 2023

Development-Stage Risks and Liquidity

Development-Stage Risks and Liquidity

(2)	Development-Stage Risks and Liquidity

The Company has incurred losses since inception and has an accumulated deficit of $182.9 million as of March 31, 2023. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales from its product candidates currently in development. Management believes that cash, cash equivalents and marketable securities of $139.0 million as of March 31, 2023 are sufficient to sustain planned operations through the end of 2024.

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

Commitments and Contingencies (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Commitments and Contingencies.
Operating lease cost	$ 1,433	$ 465
Finance lease cost:
Amortization of lease assets	297
Interest on lease liabilities	45
Total finance lease cost	342
Total lease cost	$ 1,775	$ 465

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies.

Schedule of lease costs


	Three months ended March 31,
	2023		2022
Operating lease cost	$	1,433	$	465
Finance lease cost:
Amortization of lease assets		297		—
Interest on lease liabilities		45		—
Total finance lease cost		342		—
Total lease cost	$	1,775	$	465

Schedule of lease term and discount rate information


	March 31,
	2023		2022
Weighted-average remaining lease term (in years)
Operating leases	2.2		2.2
Finance leases	1.9		—

Weighted-average discount rate
Operating leases	9.5	%	9.4	%
Finance leases	9.0	%	—	%

Schedule of supplemental cash flow information


	Three Months Ended
	March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used in operating leases	$	1,448	$	461
Operating cash used in finance leases	$	45	$	—
Financing cash used in finance leases	$	106	$	—

Schedule of future maturities of lease liabilities


	Operating		Finance
	Leases		Leases
Fiscal year ending:
2023 (remaining nine months)	$	2,713	$	1,150
2024		213		600
2025		219		338
2026		226		—
2027		233		—
Thereafter		423		—
Total future minimum payments		4,027		2,088
Less imputed interest		(482)		(160)
Present value of lease liabilities	$	3,545	$	1,928

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(3)	Summary of Significant Accounting Policies

Interim Financial Statements

The summary of significant accounting policies included in the Company’s audited consolidated financial statements and related notes as of and for the year ended December 31, 2022 filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K/A filed with the SEC on April 4, 2023.

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

The accompanying unaudited interim consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. In the opinion of management, the accompanying interim consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the consolidated financial statements) considered necessary to present fairly the Company’s financial position as of March 31, 2023 and its results of operations for the three months ended March 31, 2023 and 2022. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The interim consolidated financial statements, presented herein,

do not contain all of the required disclosures under GAAP for annual financial statements. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes as of and for the year ended December 31, 2022 filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K/A filed with the SEC on April 4, 2023.

Use of Estimates

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

Significant areas that require management’s estimates include the fair value of the Company’s common stock and the derivative liability prior to the Merger, stock-based compensation assumptions, the estimated useful lives of property and equipment, and accrued research and development expenses.

Fair Value of Financial Instruments

Management believes that the carrying amounts of the Company’s financial instruments, including cash equivalents and accounts payable, approximate fair value due to the short-term nature of those instruments. The Company considered the carrying value of its convertible promissory note (Note 6) as of December 31, 2022 to approximate fair value due to its short-term nature. The derivative liability was recorded at its estimated fair value prior to its derecognition in March 2023 upon conversion of the associated convertible promissory notes.

Fair Value Measurements

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

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

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

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

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


	Fair value measurement at reporting date using
(in thousands)	(Level 1)		(Level 2)		(Level 3)
March 31, 2023:
Assets:
Cash equivalents – money markets accounts	$	7,002	$	—	$	—
Marketable securities – U.S. Treasuries	$	76,190	$	—	$	—
December 31, 2022:
Assets:
Cash equivalents – money markets accounts	$	7,794	$	—	$	—
Marketable securities – U.S. Treasuries	$	27,802	$	—	$	—
Liability:
Derivative liability – redemption feature on convertible promissory note	$	—	$	—	$	5,739

The following is a summary of the Company’s marketable securities as of March 31, 2023:


			Gross
	Amortized		unrealized
	cost		gain		Fair value
Available-for-sale marketable securities
U.S. Treasury securities	$	76,054	$	136	$	76,190

The table presented below is a summary of the changes in fair value of the Company’s derivative liability associated with the redemption feature of the Company’s convertible promissory note (Level 3 measurement):


	Three Months Ended March 31,
(in thousands)	2023		2022
Balance at the beginning of the period	$	5,739	$	—
Balance at issuance		—		3,820
Change in fair value		84		557
Derecognition upon conversion of convertible promissory note		(5,823)		—
Balance at the end of the period	$	—	$	4,377

During the three months ended March 31, 2023 and 2022, there were no transfers between Level 1, Level 2 and Level 3.

Concentration of credit risk

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

Segment information

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

Net loss per share

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise or

conversion of securities, such as convertible preferred stock and stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, potentially dilutive securities are not included in the calculation as their impact is anti-dilutive.

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


	March 31,
	2023	2022
Convertible preferred stock and exchangeable shares	—	9,936,148
Stock options	4,184,047	3,553,288
Conversion of convertible promissory note	—	3,258,151
	4,184,047	16,747,587

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses, which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2022. The Company adopted the guidance using a modified retrospective approach as of January 1, 2023 which resulted in no cumulative-effect adjustment to accumulated deficit and did not have a material impact on the Company’s consolidated financial statements.

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Summary of Significant Accounting Policies

Interim Financial Statements

Use of Estimates

Fair Value of Financial Instruments

Fair Value Measurements

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

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


	Fair value measurement at reporting date using
(in thousands)	(Level 1)		(Level 2)		(Level 3)
March 31, 2023:
Assets:
Cash equivalents – money markets accounts	$	7,002	$	—	$	—
Marketable securities – U.S. Treasuries	$	76,190	$	—	$	—
December 31, 2022:
Assets:
Cash equivalents – money markets accounts	$	7,794	$	—	$	—
Marketable securities – U.S. Treasuries	$	27,802	$	—	$	—
Liability:
Derivative liability – redemption feature on convertible promissory note	$	—	$	—	$	5,739

The following is a summary of the Company’s marketable securities as of March 31, 2023:


			Gross
	Amortized		unrealized
	cost		gain		Fair value
Available-for-sale marketable securities
U.S. Treasury securities	$	76,054	$	136	$	76,190


	Three Months Ended March 31,
(in thousands)	2023		2022
Balance at the beginning of the period	$	5,739	$	—
Balance at issuance		—		3,820
Change in fair value		84		557
Derecognition upon conversion of convertible promissory note		(5,823)		—
Balance at the end of the period	$	—	$	4,377

During the three months ended March 31, 2023 and 2022, there were no transfers between Level 1, Level 2 and Level 3.

Concentration of credit risk

Segment information

Net loss per share

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


	March 31,
	2023	2022
Convertible preferred stock and exchangeable shares	—	9,936,148
Stock options	4,184,047	3,553,288
Conversion of convertible promissory note	—	3,258,151
	4,184,047	16,747,587

Recently adopted accounting pronouncements

Commitments and Contingencies - Additional information (Details) - USD ($)		3 Months Ended	12 Months Ended
	Mar. 01, 2023	Mar. 31, 2023	Dec. 31, 2021
Commitments and Contingencies
Financing liability		$ 1,928,000
Accrued settlement		200,000
Penn License Agreement \| Penn
Commitments and Contingencies
Annual payments to be made		25,000	$ 10,000
Additional milestone payments for first CAR-M product		1,700,000
Penn License Agreement \| Penn \| Maximum
Commitments and Contingencies
Milestone payments		10,900,000
Additional milestone payments		30,000,000.0
Novartis Agreement
Commitments and Contingencies
Agreement term	5 years
Renewal term	1 year
Amount payable per calendar year for reserved capacity	$ 1,000,000.0
Termination fee payable	$ 4,000,000.0
Lab equipment
Commitments and Contingencies
Financing liability		$ 2,700,000

Development-Stage Risks and Liquidity (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Development-Stage Risks and Liquidity
Accumulated deficit	$ (182,865)	$ (158,223)
Cash, cash equivalents and marketable securities	$ 139,000

Related-Party Transactions (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Penn
Related-Party Transactions
Research and development expenses, related party transactions	$ 0.4	$ 0.2
Moderna
Related-Party Transactions
Revenues, related party transactions	$ 3.2	$ 0.8