" In a surprising twist, AlloVir, best known for its immunotherapy work, has decided that eye diseases are the new goldmine. Merging with Kalaris Therapeutics, the new company will take on the heavyweight retinal market, pinning its hopes on Kalaris' TH103—a therapy boasting longer-acting anti-VEGF activity. Trading under "KLRS," the duo plans to shake up ophthalmology with plenty of cash and a dash of ambition. "

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Overview of the Merger Announcement On November 8, 2024, AlloVir, Inc. (Nasdaq: ALVR) and Kalaris Therapeutics announced a definitive merger agreement in an all-stock transaction aimed at forming a new combined entity focused primarily on treating diseases of the retina. The merger is a strategic pivot for AlloVir, transitioning from its previous focus on immunotherapy into ophthalmology, driven by Kalaris' lead asset, TH103. The combined company will retain the name Kalaris Therapeutics, Inc. and trade under the ticker symbol "KLRS" on Nasdaq.

Strategic Rationale Behind the Merger The merger represents a transformational move for both companies, leveraging complementary strengths:

• AlloVir’s Financial Resources: AlloVir contributes approximately $100 million in cash reserves, ensuring a robust financial runway for the development of TH103 until Q4 2026.
• Kalaris’ Clinical Asset: The key driver of the merger is Kalaris’ promising clinical asset, TH103, an innovative anti-VEGF therapy developed by Dr. Napoleone Ferrara. TH103 has demonstrated superior preclinical performance compared to aflibercept (Eylea), with longer-acting and enhanced anti-VEGF activity.
• Market Opportunity: The merger positions the new entity to disrupt the $14 billion global market for branded anti-VEGF retinal therapies, targeting unmet needs in neovascular age-related macular degeneration (nAMD), diabetic macular edema (DME), and retinal vein occlusion (RVO).

Financial and Shareholder Implications The all-stock transaction will result in the following ownership structure:

• Pre-Merger Kalaris Stockholders: 74.95% of the combined entity
• Pre-Merger AlloVir Stockholders: 25.05% of the combined entity

This significant equity distribution underscores the value attributed to Kalaris’ TH103 program and highlights a strategic shift by AlloVir towards a high-potential ophthalmology asset.

TH103: A Differentiated Anti-VEGF Therapy TH103, a novel recombinant fusion protein targeting VEGF, is at the core of the merger's strategic vision. Key attributes of TH103 include:

• Mechanism of Action: TH103 acts as a decoy receptor with a fully humanized design, specifically engineered to enhance VEGF inhibition and extend ocular retention time.
• Preclinical Data: Head-to-head preclinical studies have shown TH103 to outperform aflibercept in terms of both efficacy and duration of action.
• Phase 1 Clinical Trial: The ongoing Phase 1 trial is targeting treatment-naïve patients with nAMD, with data expected in Q3 2025. The trial will assess safety, pharmacokinetics (PK), pharmacodynamics (PD), and preliminary efficacy.

Market Analysis: Addressing a Key Unmet Need in Retinal Diseases The anti-VEGF market is highly lucrative, driven by the widespread prevalence of retinal diseases like nAMD, DME, and RVO. Despite the success of current therapies like Eylea and Lucentis, real-world patient outcomes often fall short of clinical trial results, largely due to suboptimal compliance and frequent dosing requirements. TH103 aims to address this gap by offering:

• Extended Dosing Intervals: Potential for reduced treatment burden through longer-lasting VEGF inhibition, enhancing patient compliance and visual outcomes.
• Broader Disease Coverage: Beyond nAMD, TH103 has potential applications in other neovascular and exudative retinal conditions, expanding its market scope.

Leadership and Governance Post-merger, the combined entity will benefit from a leadership team with deep expertise in ophthalmology and drug development:

• CEO: Andrew Oxtoby (Current CEO of Kalaris Therapeutics)
• COO: Jeffrey Nau, PhD, MMS
• Medical Lead: Matthew Feinsod, MD
• Board Chair: David Hallal (Chairman of AlloVir)
• Notable Board Members: Dr. Napoleone Ferrara, a pioneer in anti-VEGF therapies, along with experienced figures like Dr. Srini Akkaraju and Dr. Anthony Adamis.

The strong governance structure, combined with seasoned leadership, is expected to drive the strategic execution of TH103’s clinical development and commercialization.

Timeline and Closing Conditions The merger is projected to close in Q1 2025, subject to:

• Shareholder approvals from both companies
• Regulatory approvals under the U.S. Hart-Scott-Rodino Antitrust Improvements Act
• AlloVir maintaining a minimum of $95 million in net cash at closing

The robust approval process and committed shareholder support indicate a high probability of successful transaction closure.

Potential Risks and Challenges While the merger offers significant strategic benefits, there are inherent risks:

• Clinical Development Risk: TH103 is still in Phase 1 trials, and clinical setbacks could delay or impact the program’s success.
• Market Competition: The anti-VEGF market is highly competitive, dominated by established players like Regeneron (Eylea) and Roche (Lucentis). Differentiating TH103 and gaining market share will require compelling clinical data and effective commercialization strategies.
• Financial Sustainability: The combined company’s cash balance is expected to provide a runway until Q4 2026. Any delays in clinical development or market entry could strain financial resources.

Strategic Outlook and Conclusion The merger between AlloVir and Kalaris Therapeutics represents a strategic shift towards addressing significant unmet needs in retinal diseases. By leveraging the financial strength of AlloVir and the innovative clinical asset from Kalaris, the combined company aims to introduce a potentially disruptive therapy in a growing market. TH103’s unique mechanism and promising preclinical data position it as a strong contender in the anti-VEGF space, with the potential to enhance patient outcomes and reduce treatment burdens.

The combined company, Kalaris Therapeutics, is well-positioned to capitalize on emerging trends in ophthalmology, driven by an experienced leadership team and strong scientific backing. However, the next key milestone—Phase 1 trial data expected in Q3 2025—will be critical in determining the future trajectory of the new entity.

Recommendation: Investors and stakeholders should closely monitor upcoming clinical updates on TH103 and the strategic integration process, as these will provide valuable insights into the merged company’s potential to disrupt the retinal disease market.

PS : This analysis report provides a comprehensive view of the merger’s strategic rationale, clinical focus, and market implications, offering stakeholders a clear understanding of the potential impact and outlook for the combined entity.

ankit.kankar@mmactiv.com