Company: RNAC
Filing Date: 2025-03-13
Form Type: 10-K
Source: 0001453687-25-000060
Chunk: 12

Company: Cartesian Therapeutics, Inc.
Filing Date: 2025-03-13
Form: 10-K
Item: Item 8
Chunk 12
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 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.

F-2

Valuation of contingent value rightDescription of the MatterAs 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.How We Addressed the Matter in Our AuditTo 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