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Item 1A. Risk Factors

2025-03-13 compared with 2024-03-07 · 89 added, 113 removed, 723 unchanged (22% of the section changed)

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Risks Related to the Development of our Product Candidates

We develop our mRNA-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 develop our mRNA-based product candidates by leveraging our proprietary technology and our manufacturing platform, 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 mRNA 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.

Our most advanced product candidate, Descartes-08, is in the initial phase of Phase 3 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 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.

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:

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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.

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• 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, or 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;

• we may experience delays in reaching, or fail to reach, agreement on acceptable terms with CROs or clinical trial sites;

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

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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 institutional review boards, or IRBs, for reexamination, which may impact the costs, timing or successful completion of a clinical trial.

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.

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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.

Opening and conducting clinical trials at 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, or GCPs, and the FDA must be able to validate the data from the trial through an onsite inspection, if necessary.

For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with 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.

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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.

For example, Descartes-08 has been granted Orphan Drug Designation and RMAT Designation by the FDA for the treatment of MG.

Descartes-08 also received Rare Pediatric Disease Designation by the FDA for the treatment of JDM.

We expect to seek one or more of these designations for our other current and future product candidates.

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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.

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.

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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.

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.

In November 2023, the FDA issued a statement that it is investigating serious risk of T-cell malignancy following BCMA-directed or CD19-directed autologous CAR-T cell immunotherapies.

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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.

Inadequate funding for the FDA and other government agencies and/or potentially shifting priorities under the new presidential administration could hinder the FDA’s and/or those other government agencies’ ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner, or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products, provide feedback on clinical trials and development programs, meet with sponsors and otherwise review regulatory submissions can be affected by a variety of factors, including government budget and funding levels;

ability to hire and retain key personnel and accept the payment of user fees;

and statutory, regulatory, and policy changes, among other factors.

Average review times at the FDA may fluctuate as a result.

In addition, government funding of other government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also increase the time necessary for new drugs to be reviewed and/or approved by necessary government agencies or to otherwise respond to regulatory submissions, which would adversely affect our business.

For example, the Trump Administration has discussed several changes to the reach and oversight of the FDA, which could affect its relationship with the pharmaceutical industry, transparency in decision making and ultimately the cost and availability of prescription drugs.

Additionally, over the last several years, the U.S.

government has shut down multiple times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees

and stop critical activities.

If funding for the FDA is reduced, FDA priorities change or a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions which could have a material adverse effect on our business.

Additionally, we have in the past received grant funding from the National Institutes of Health, or NIH, and under the terms of previously awarded grants we expect to continue to receive grant funding from the NIH.

Although we do not consider any of these grants material to our business, a prolonged impact on the availability of grant funding from government agencies could adversely impact our business.

Risks Related to Manufacturing and our Dependence on Third-Parties

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• 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 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.

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 1/2 clinical trial of Descartes-08.

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 planned Phase 3 clinical trials of Descartes-08.

We also expect to rely on other third-parties to store and distribute drug supplies for our clinical trials.

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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 Biologics Price Competition and Innovation Act of 2009, or 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 BPCIA was enacted as part of the ACA 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 biologics license application, or BLA.

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.

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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;

• the Health Insurance Portability and Accountability Act of 1996, or 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.

• 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;

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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;

◦ similar healthcare laws and regulations in the EU 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 EU (including health data);

◦ similar healthcare laws and regulations in the EU 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 GDPR, which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the EU (including health data);

in addition, the United Kingdom leaving the EU could also lead to further legislative and regulatory changes.

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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 Patient Protection and Affordable Care Act of 2010, or 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.

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.

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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.

We are a development-stage company, and 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.

We incurred a net loss of $219.7 million, had net income of $35.4 million, and incurred a net loss of $25.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.

We incurred a net loss of $77.4 million and $219.7 million for the years ended December 31, 2024, and 2023, respectively.

As of December 31, 2024, we had an accumulated deficit of $692.1 million.

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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, or the Closing, we expect to devote substantially all of our financial resources and efforts to developing our mRNA-based therapies for the treatment of autoimmune diseases, identifying potential product candidates and conducting preclinical studies and our clinical trials.

We expect to devote substantially all of our financial resources and efforts to developing our mRNA-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.

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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.

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 December 31, 2023, combined with net proceeds received subsequent to December 31, 2023 in connection with our November 2023 private placement, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months.

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 December 31, 2024, will enable us to fund our operating expenses and capital expenditure requirements into mid-2027.

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.

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

• the timing for stockholder approval of the conversion of our Series A Non-Voting Convertible Preferred Stock, par value $0.0001 per share, or Series A Preferred Stock, into shares of our common stock and any redemptions of Series A Preferred Stock for cash;

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

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

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 shares of Series A Preferred Stock beginning on the date that is 18 months following Closing;

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 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.

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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.

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.

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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, under Sections 382 and 383 of 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 IRS, challenges our analysis that existing NOLs will not expire before utilization due to previous ownership changes, or if we undergo an ownership change, our ability to use our NOLs could be limited by Section 382 of the Code.

In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or 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 IRS, challenges our analysis that existing NOLs will not expire before

utilization due to previous ownership changes, or if we undergo an ownership change, 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.

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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.

We have recorded a material amount of goodwill and indefinite-lived intangible assets in connection with the Merger.

We may record impairment charges, which would adversely impact our financial position and results of operations.

We have recorded a material amount of goodwill and indefinite-lived intangible assets on our balance sheet in connection with the Merger.

We review our goodwill and intangible assets for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable, in accordance with Accounting Standards Codification Topic 350, Intangibles - Goodwill and Other.

One potential indicator of goodwill impairment is whether the fair value of our equity, as measured by our market capitalization, is below the net book value of our equity.

Whether our market capitalization triggers an impairment charge in any future period will depend on the underlying reasons for the decline in stock price, the significance of the decline and the length of time the stock price has been trading at such prices.

In addition, the determination as to whether our indefinite-lived intangible assets related to Descartes-08 are impaired is heavily dependent on the results of our ongoing clinical trials, as well as other factors, such as the potential market for Descartes-08, if approved.

In the event that we determine in a future period that impairment exists for any reason, we would record an impairment charge, which could be material and which would reduce the underlying asset’s value in the period such determination is made, which would adversely impact our financial position and results of operations.

We have incurred substantial expenses related to the integration of Old Cartesian.

We have incurred substantial expenses in connection with the Merger and the subsequent integration of Old 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 Old Cartesian have incurred significant transaction expenses in connection with the drafting and negotiation of the Merger Agreement and significant severance expenses as a result of the Merger.

While we and Old Cartesian have assumed that a certain level of expenses will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses.

Moreover, many of the expenses that have been and will be incurred are, by their nature, difficult to estimate accurately.

These integration expenses have resulted in our taking significant charges against earnings following the completion of the Merger, and the amount and timing of such charges are uncertain at present.

Risks Related to our Intellectual Property

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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.

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.

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Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

We may be subject to a third-party preissuance submission of prior art to the U.S.

We may be subject to a third-party pre-issuance submission of prior art to the U.S.

Patent 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.

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Furthermore, the laws 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.

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.

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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.

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.

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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.

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.

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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.

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.

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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.

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, clinical, and manufacturing teams.

Although we have entered into employment agreements or offer letters with Dr.

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This could result 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.

issue could adversely affect the trading price of our securities and our business.

Material weaknesses in our internal control over financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain.

This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2023, we identified a material weakness in our internal control over financial reporting and concluded that our internal control over financial reporting was not effective as of December 31, 2023.

There are no material accounting errors or omissions within the consolidated financial statements as a result of this material weakness.

We concluded that we 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.

In response to the identified material weakness above, we, with the oversight of the Audit Committee of the Board of Directors, or the Audit Committee, intend to take comprehensive actions to remediate the material weakness in internal control over financial reporting.

We expect to re-evaluate the scope and level of precision for conducting and documenting the reviews over significant acquisitions and contingent value rights including the review of prospective financial information used in valuation reports produced by third-party specialists supporting the accounting for business combinations and contingent value rights.

The remediation efforts are intended both to address the identified material weakness and to enhance our overall financial control environment.

This material weakness and any other failure to maintain effective internal control over financial reporting could result in a loss of confidence in the reliability of our financial statements which could have a negative impact on the trading price of our common stock and harm our ability to raise additional capital on acceptable terms or at all.

For example, in connection with the audit of our financial statements for the year ended December 31, 2023, we identified a material weakness in our internal control over financial reporting.

As of December 31, 2024, this material weakness has been remediated, but we may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

A variety of risks associated with maintaining our subsidiary in Russia or expanding operations internationally could adversely affect our business.

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• 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;

• natural disasters, political and economic instability, including wars, events of terrorism and political unrest, outbreak of disease, including pandemics, boycotts, curtailment of trade and other business restrictions, economic sanctions, and economic weakness, including inflation;

• changes in diplomatic and trade relationships;

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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.

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.

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 64.5% of our outstanding voting stock as of December 31, 2024 , assuming the conversion of all shares of all outstanding shares of Series A Non-Voting Convertible Preferred Stock, par value $0.0001 per share, or Series A Preferred Stock, and Series B Non-Voting Convertible Preferred Stock, par value $0.0001 per share, or Series B Preferred Stock, into common stock, or 68.4%, assuming no conversion of outstanding shares of Series A Preferred Stock and Series B Preferred Stock into common stock .

As a result, if some or all of 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 Old 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 is subject to a lockup on the sale or transfer of shares of our common stock held by each such stockholder, including those shares received by Old Cartesian securityholders in the Merger, for a period of 180 days from the Closing.

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 RRA, with holders of common stock and Series A Preferred Stock signatory thereto.

Pursuant to the RRA, we are obligated to prepare and file a resale registration statement with the SEC by the Filing Deadline (as defined therein).

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 of the Filing Deadline 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.

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These provisions include a prohibition on actions by written consent of our stockholders and the ability of our board of directors, or the 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 DGCL, which prohibits stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, 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.

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Furthermore, our Charter 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.

This provision of our Charter applies to actions arising under the Securities Act and the Exchange Act.

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 note that there is uncertainty as to whether a court would enforce these provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Section 22 of the Securities Act generally creates concurrent jurisdiction for state and federal courts over suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

We have been in the past and may in the future be subject to stockholder litigation.

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Cartesian Therapeutics, Inc., et al., No.

The complaint alleges that the defendants violated Sections 14(a) and 20(a) of the Exchange Act by failing to disclose purportedly material information to our stockholders in our Preliminary and Definitive Proxy Statements filed on January 31, 2024, and February 14, 2024, respectively, in connection with the solicitation of stockholder approval of a proposal to convert our Series A Preferred Stock into our common stock, subject to certain beneficial ownership limitations, or the Conversion Proposal.

The complaint seeks injunctive relief enjoining or rescinding the Merger, issuance of an amended proxy statement, and attorneys' fees and costs.

The complaint alleged that the defendants violated Sections 14(a) and 20(a) of the Exchange Act by failing to disclose purportedly material information to our stockholders in our Preliminary and Definitive Proxy Statements filed on January 31, 2024, and February 14, 2024, respectively, in connection with the solicitation of stockholder approval of a proposal to convert our Series A Preferred Stock into our common stock, subject to certain beneficial ownership limitations, or the Series A Conversion Proposal.

The complaint sought injunctive relief enjoining or rescinding the Merger, issuance of an amended proxy statement, and attorneys’ fees and costs.

Additional similar lawsuits may be filed.

We believe this lawsuit is without merit and intend to vigorously defend against this plaintiff’s claims.

This action was subsequently dismissed on March 11, 2024.

On February 7, 2024, Justin Sloan, a purported stockholder of our Company, filed a putative class action on behalf of himself and similarly situated stockholders of the Company against our Company and members of our Board of Directors in the Court of Chancery of the State of Delaware, titled Sloan v.

Barabe, et al., No.

The complaint alleges that the individual defendants breached their fiduciary duties by failing to disclose purportedly material information to our Company’s stockholders in our Preliminary Proxy Statement filed on January 31, 2024 in connection with the solicitation of stockholder approval of the Conversion Proposal.

The complaint seeks a temporary injunction against the stockholder vote on the Conversion Proposal, compensatory damages, pre-and post-judgment interest, and attorneys’ fees and costs.

The complaint alleged that the

individual defendants breached their fiduciary duties by failing to disclose purportedly material information to our Company’s stockholders in our Preliminary Proxy Statement filed on January 31, 2024 in connection with the solicitation of stockholder approval of the Series A Conversion Proposal.

The complaint seeks a temporary injunction against the stockholder vote on the Series A Conversion Proposal, compensatory damages, pre-and post-judgment interest, and attorneys’ fees and costs.

At a telephonic hearing on February 28, 2024, the Court denied the Plaintiff’s motion to expedite the proceedings, rejecting Plaintiff’s argument that the lawsuit raised colorable disclosure claims warranting expedited treatment.

Additional similar lawsuits may be filed.

We believe this lawsuit is without merit and intend to vigorously defend against this plaintiff’s claims.

This action was subsequently dismissed on March 13, 2024.

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 v.

Barabe, et al.

The complaint alleges that the individual defendants breached their fiduciary duties and committed corporate waste when they authorized a private placement transaction, announced on December 19, 2019, at a price allegedly below fair value.

The complaint alleged that the individual defendants breached their fiduciary duties and committed corporate waste when they authorized a private placement transaction, announced 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 in connection with the transaction.

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Unfavorable outcomes in 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.

Risks Related to the Merger

There is no guarantee that the Merger will increase stockholder value.

In November 2023 we merged with Old Cartesian.

We cannot guarantee that implementing the Merger 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 value of the Merger to our stockholders.

Pursuant to the terms of the Merger Agreement, we are required to recommend that our stockholders approve the conversion of 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 shares of Series A Preferred Stock into shares of our common stock, 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, beginning on the date that is 18 months from the date of the Closing, the holders of our then-outstanding shares of Series A Preferred Stock will be entitled to elect to have such 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 and Old Cartesian in the expected timeframe would adversely affect our future results.

Our ability to successfully integrate the operations of Selecta and Old Cartesian will depend, in part, on our ability to realize the anticipated benefits and cost savings from the Merger.

If we are not able to achieve these objectives, 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 stock may be adversely affected.

In addition, the integration of Selecta's and Old 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 our operations.

It is possible that the integration process could result in the loss of key employees, the disruption of our business or the identification of inconsistencies in standards, controls, procedures and policies that adversely affect our 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 our operating results and financial condition, including the value of its common stock.

We have incurred substantial expenses related to the integration of Old Cartesian.

We have incurred substantial expenses in connection with the Merger and the subsequent integration of Old Cartesian with Selecta.

Moreover, many of the expenses that have been and will be incurred are, by their nature, difficult to estimate accurately.

These integration expenses have resulted in our taking significant charges against earnings following the completion of the Merger, and the amount and timing of such charges are uncertain at present.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors