Cartesian Therapeutics Inc
For the period ended Dec 31, 2024. Filed Mar 13, 2025.
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FY2024 · Filed Mar 13, 2025
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Item 8. Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Cartesian Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cartesian Therapeutics, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Audit Committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| Valuation of contingent value right | |
| Description of the Matter | As described in Note 3, the Company estimates the fair value of the Contingent Value Right (“CVR”) using a Monte Carlo simulation to estimate future cash flows associated with the legacy assets, including the expected milestone and royalty payments under the Sobi License, net of deductions. Changes in the fair value of the liability are presented in the consolidated statements of operations and comprehensive loss. The liability value is calculated based on significant inputs that are not observable in the market such as estimated cash flows, estimated probabilities of success, and expected volatilities of revenues, which represent a Level 3 measurement within the fair value hierarchy. For the year ended December 31, 2024, the Company recorded the change in the fair value of the contingent value right liability of $(36.9 million). As of December 31, 2024, the Company recorded the contingent value right liability and the contingent value right liability, net of current portion of $7.8 million and $387.7 million, respectively. Auditing the fair value of the CVR liability was complex due to the significant judgment required in estimating the fair value. In particular, the fair value estimate required the use of valuation methodologies that were sensitive to significant assumptions including expected milestone and royalty payments and discount rate which are based on estimates of future market or economic conditions. |
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| How We Addressed the Matter in Our Audit | To test the fair value of the CVR liability, our audit procedures included, among others, assessing the appropriateness of the valuation methodology and testing the significant assumptions and the completeness and accuracy of the underlying data used by the Company. We compared the assumptions for expected milestone and royalty payments to projected industry revenue growth rates and other factors considered by management in developing the model. We involved our valuation specialist to assist in evaluating the valuation methodologies and discount rate used to value the CVR liability. We also performed sensitivity analyses to evaluate the changes in the fair value of the CVR liability that would result from changes in the significant assumptions. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2009.
Boston, Massachusetts
March 13, 2025
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