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Commitments and Contingencies
 9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Leases
The Company has operating leases for its laboratory and office space in Philadelphia, Pennsylvania. The Company’s operating leases have term end dates ranging from 2024 to 2029. The Company also has obligations under an arrangement for the use of certain laboratory equipment that are classified as finance leases that commenced in 2022 and have end dates ranging from 2024 to 2026. Effective February 2024, the Company renewed an existing operating lease with an end date through 2026. In April 2024, in connection with the revised operating plan, the Company notified the lessor that it would terminate the lease effective August 2024. In July 2024, the Company entered into an amendment extending the termination of the lease to June 2025 with an option to extend to December 2025.
In September 2024, the Company modified existing finance leases and failed sale-leaseback arrangements by assigning the rights and obligations of certain underlying assets to an unrelated third party. The modifications resulted in a reduction of its finance lease right of use (ROU) assets and related lease liability of $0.4 million. In addition, the Company recorded a reduction of its failed sale-leaseback liability and gain on the sale of the corresponding assets of $0.1 million.
The Company’s operating and finance lease 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 laboratory equipment from failed sale-leasebacks, as property and equipment, net on the accompanying unaudited interim consolidated balance sheets. The ongoing lease payments are recorded as reductions to the finance liability and interest expense. As of September 30, 2024, the Company had a $1.7 million financing liability recorded in other current liabilities and other long-term liabilities on the unaudited interim consolidated balance sheets.
The elements of the lease costs were as follows (in thousands):
Nine Months Ended September 30,
20242023
Operating lease cost$4,226 $4,322 
Finance lease cost:
Amortization of lease assets1,321 890 
Interest on lease liabilities192 117 
Total finance lease cost1,513 1,007 
Variable lease cost768 1,216 
Short term lease cost503 — 
Total lease cost$7,010 $6,545 
Lease term and discount rate information related to leases was as follows:
September 30,
20242023
Weighted-average remaining lease term (in years)
Operating leases2.43.6
Finance leases1.11.8
Weighted-average discount rate
Operating leases9.7 %10.0 %
Finance leases9.0 %9.0 %
Supplemental cash flow information was as follows (in thousands):
Nine Months Ended
September 30,
20242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used in operating leases$4,478 $4,028 
Operating cash used in finance leases$192 $117 
Financing cash used in finance leases$1,158 $1,151 
Future maturities of lease liabilities were as follows as of September 30, 2024 (in thousands):
Operating
Leases		Finance
Leases
Fiscal year ending:
2024 (remaining three months)$1,329 $271 
2025219 942 
2026226 20 
2027233 — 
2028240 — 
Thereafter184 — 
Total future minimum payments2,431 1,233 
Less imputed interest(284)(63)
Present value of lease liabilities$2,147 $1,170 
Manufacturing and Supply Agreement
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 paying to manufacture the product, the Company will also 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.
On June 26, 2024, in furtherance of its revised operating plan, the Company terminated the Novartis Agreement. Upon termination, the Company incurred a termination fee equal to $4.0 million, which was paid in the third quarter of 2024. A
prepaid asset was recorded as the Company has separately agreed with Novartis that if Novartis and the Company enter into an agreement for the tech transfer of another product to Novartis on or before December 31, 2024, then the $4.0 million termination fee shall be credited in full or in part against any amounts due from the Company to Novartis under such agreement relating to the substitute product. If an agreement is not entered into or the current agreement is not modified by December 31, 2024, the $4.0 million prepaid asset will be written-off to operating expenses.
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. No such loss contingencies were probable nor reasonably estimable as of September 30, 2024.