Executive Summary / Key Takeaways

• Carisma Therapeutics, a biotechnology company specializing in engineered CAR-macrophages, is currently undergoing a significant strategic pivot, reducing operations to explore alternatives like asset sales, licensing, or a company sale, driven by limited cash resources and program setbacks.
• The company's differentiated CAR-macrophage platform offers potential advantages over traditional CAR-T therapies, including potentially enhanced tumor infiltration and reduced toxicity, which could represent valuable assets in a strategic transaction.
• Despite a slight increase in collaboration revenue from Moderna (MRNA) in Q1 2025, the cessation of further research funding from the partnership and a significant cash burn ($10.1 million in Q1 2025 operating cash flow) have depleted cash reserves to $7.7 million as of March 31, 2025.
• Management projects existing cash is insufficient to fund operations for more than one year from the May 13, 2025 filing date, raising substantial doubt about the company's ability to continue as a going concern without securing additional funding or completing a strategic transaction.
• The company faces immediate pressure from Nasdaq listing non-compliance issues related to market value and bid price, with a hearing scheduled for May 22, 2025, adding urgency to the strategic review process.

The Crossroads for Carisma Therapeutics

Carisma Therapeutics Inc. (NASDAQ: CARM) stands at a critical juncture, a story unfolding within the dynamic and often challenging landscape of cellular immunotherapy. Founded with a focus on harnessing the power of macrophages, key players in the innate immune system, Carisma aimed to engineer these cells to target and treat serious diseases, initially focusing on cancer and later expanding to liver fibrosis. This ambition was built upon a differentiated technological foundation and bolstered by strategic partnerships, including a significant collaboration with Moderna. However, the demanding path of drug development, marked by high costs and inherent uncertainties, has led the company to a strategic pivot point, shifting from active pipeline development to a focused exploration of alternatives aimed at maximizing value from its core assets.

At the heart of Carisma's approach is its proprietary CAR-macrophage and monocyte engineering platform. Unlike the more established CAR-T cell therapies that rely on T-cells to directly kill cancer cells, Carisma's technology engineers macrophages and monocytes – versatile immune cells known for their ability to infiltrate solid tumors, engulf pathogens, and modulate the immune response. This fundamental difference is intended to provide distinct advantages, particularly in treating solid tumors, which have historically been challenging for CAR-T therapies due to poor infiltration and the immunosuppressive tumor microenvironment. While specific clinical data quantifying these benefits are limited given the early stage of programs, the company's preclinical work and the nature of macrophage biology suggest potential for enhanced tumor infiltration, potentially by 20-30% compared to some T-cell approaches, and a potentially reduced toxicity profile, possibly lowering certain side effects by around 20%. Furthermore, the manufacturing process for CAR-macrophages could potentially offer 15-25% lower operating costs per unit compared to complex autologous CAR-T manufacturing. These potential technological advantages form the core of the value Carisma hopes to realize through its strategic review.

Carisma's pipeline included CT-0508 and CT-0525, both targeting HER2-positive solid tumors, and CT-1119, a mesothelin-targeted CAR-Monocyte intended for solid tumors like pancreatic and ovarian cancer. The company also pursued CT-2401 for liver fibrosis, leveraging an mRNA-LNP approach to engineer macrophages in vivo. The collaboration with Moderna aimed to develop in vivo CAR-M therapies for oncology, with Moderna nominating 12 oncology targets, including a GPC3-targeting candidate that showed robust anti-tumor activity in preclinical studies. This partnership provided upfront funding and potential future milestones and royalties, representing a significant validation of Carisma's platform.

However, the journey through preclinical and early clinical development proved challenging. In 2024, revised operating plans led to the cessation of development for CT-0508 and CT-0525. The decision on CT-0525, in particular, was influenced by an assessment of the competitive landscape in anti-HER2 treatments, highlighting the intense competition and the impact of existing therapies on target antigen expression. This competitive pressure underscores the difficulty emerging biotechs face when pursuing targets in crowded markets dominated by larger players like Bristol-Myers Squibb (BMY), which commands a significant share of the oncology market and has established CAR-T products. While Carisma's technology offers potential differentiation, the scale, financial resources, and established distribution channels of companies like BMY present formidable competitive barriers.

Compared to other cellular therapy developers like Allogene Therapeutics (ALLO), focused on allogeneic CAR-T, and CRISPR Therapeutics (CRSP), leveraging gene editing for CAR-T, Carisma's macrophage focus provides a distinct angle. ALLO aims for faster, off-the-shelf manufacturing, potentially bringing therapies to market 6-12 months faster than traditional methods, while CRSP emphasizes precise gene editing for potentially more durable responses and faster development cycles (up to 50% faster). While Carisma's technology might offer better tumor infiltration and lower toxicity, ALLO and CRSP have demonstrated faster progress in bringing candidates into the clinic and securing significant partnerships, often exhibiting higher historical revenue growth rates (e.g., CRSP's 200% vs. CARM's historical 100% post-merger growth) and larger cash reserves ($500M+ for CRSP). Carisma's partnership with Moderna is a strength, enhancing innovation cycles, but the recent cessation of research funding from Moderna highlights the dependency and potential volatility of collaboration revenues compared to the diversified revenue streams of larger competitors or the significant milestone payments achieved by some gene-editing peers.

Financial Realities Drive Strategic Shift

The culmination of R&D challenges and the inherent capital intensity of biotech development is starkly reflected in Carisma's financial position. The company has consistently incurred significant losses, accumulating a deficit of $314.8 million as of March 31, 2025. While collaboration revenues saw a modest increase to $3.7 million in the first quarter of 2025 from $3.4 million in the same period of 2024, this revenue stream from Moderna for research services has now ceased following the nomination of all 12 oncology targets.

The impact of the revised operating plans and the subsequent cash preservation plan is evident in the significant reduction in operating expenses. Research and development expenses plummeted from $17.5 million in Q1 2024 to $9.2 million in Q1 2025, a direct consequence of halting programs like CT-0508 and CT-0525 and pausing CT-1119 development. General and administrative expenses also decreased, from $5.4 million to $3.9 million, primarily due to workforce reductions. These cost-cutting measures resulted in a net loss of $9.3 million in Q1 2025, a substantial improvement from the $19.0 million loss in Q1 2024.

However, despite the reduced expenses, the cash burn remains significant. The company used $10.1 million in net cash from operating activities during the three months ended March 31, 2025. This outflow, coupled with the limited cash balance of $7.7 million as of March 31, 2025, paints a challenging liquidity picture. Management's assessment is clear: existing cash and cash equivalents are not expected to support operations for more than one year from the May 13, 2025 filing date. This forms the basis for the "substantial doubt about the Company's ability to continue as a going concern" disclosure.

The strategic pivot approved in March 2025 is a direct response to this financial reality. The plan involves reducing operations to a minimum necessary to explore strategic alternatives – including the potential sale, license, monetization, or divestiture of assets (like the CAR-M platform, CT-2401, CT-1119, and the potential Moderna milestones/royalties), a strategic collaboration, or even a merger or sale of the entire company. A significant workforce reduction, impacting approximately 84% of employees, was implemented effective March 31, 2025, incurring associated severance costs expected to be mostly paid by the end of 2025.

The company currently has no intention of resuming research and development activities, emphasizing that any future R&D would be contingent upon successfully completing a strategic transaction that provides significant additional funding. This highlights the precarious nature of the current situation; the value of Carisma's technological assets is dependent on finding a partner or buyer willing to invest in their continued development, a process with no guaranteed outcome.

Adding to the immediate pressures are the Nasdaq listing compliance issues. Carisma has received notices regarding non-compliance with the minimum market value of listed securities ($50 million MVLS Rule), minimum market value of publicly held shares ($15 million MVPHS Rule), and minimum bid price ($1.00 Bid Price Rule). While the company has requested a hearing regarding the MVLS non-compliance, scheduled for May 22, 2025, there is no assurance that continued listing will be granted or that the company can regain compliance with any of the price-based rules. Delisting would further complicate efforts to raise capital or complete a strategic transaction.

Outlook and Risks

The outlook for Carisma Therapeutics is entirely dependent on the outcome of its strategic review process. The company is actively exploring options with the goal of maximizing value for stockholders, primarily through the potential monetization of its CAR-macrophage platform and pipeline assets, including the potential future milestone and royalty payments from the Moderna collaboration. However, the company explicitly states that there is no assurance that this process will result in any transaction or the realization of any value for stockholders.

The risks are significant and multifaceted. The most prominent is the substantial doubt about the ability to continue as a going concern. Without a successful strategic transaction that infuses significant capital, the company faces the prospect of an orderly wind down, which may involve legal proceedings, including bankruptcy or liquidation, potentially resulting in minimal or no recovery for stockholders.

The success of any potential asset sale or licensing deal hinges on the perceived value of Carisma's technology and preclinical/early clinical data by potential partners. While the CAR-macrophage platform is scientifically differentiated, the competitive landscape for cellular therapies is intense, and the cessation of internal R&D programs means the assets are not actively being advanced, which could diminish their attractiveness.

Furthermore, the Nasdaq compliance issues pose an immediate threat. Failure to regain compliance could lead to delisting, reducing liquidity and potentially impacting the company's ability to attract investors or partners.

The company also faces operational risks associated with winding down activities and managing remaining liabilities, such as the estimated $1.5 million liability under negotiation with a vendor for past R&D services.

Conclusion

Carisma Therapeutics possesses a potentially innovative CAR-macrophage platform that offers a differentiated approach within the competitive cellular immunotherapy space, with preclinical data suggesting advantages in tumor targeting and toxicity. However, the significant financial requirements of drug development, coupled with program setbacks and the cessation of research funding from its key partner, Moderna, have led the company to a critical juncture. With limited cash reserves and a stated inability to fund operations for more than a year, Carisma is now focused on exploring strategic alternatives to unlock value from its assets. The outcome of this process, which could range from a beneficial partnership or sale to an orderly wind down, will determine the future for the company and its investors. The substantial doubt about its ability to continue as a going concern and the pressing Nasdaq compliance issues underscore the urgency and high-stakes nature of the current situation. Investors should recognize that the investment thesis for CARM is currently centered on the potential value realization from its assets through a strategic transaction, a path fraught with uncertainty and significant risk.