CORRECTION: Why I Was Wrong About CABA - A Patent Agent's Analysis Changes Everything
When new information contradicts your thesis, you update it. Here's what I missed.
Editor’s Note I JUMPED THE GUN
I published an analysis of Cabaletta Bio (CABA) that raised concerns about their intellectual property position and recommended caution on the stock. After working with DK, a patent agent who conducted institutional-level IP due diligence, I need to issue a correction.
I was wrong. Not about the questions to ask, but about the conclusions I drew from incomplete information.
This is what happens when you dig deeper—sometimes you find out your initial thesis was flawed. Here’s what changed.
What I Got Wrong in My Original Analysis
Original Concern #1: “CABA’s IP is too early and weak”
What I said: CABA has no granted patents, only pending PCT applications. This creates significant risk for any potential acquirer and should discount the valuation by 30-40%.
What I missed: I didn’t understand that early-stage IP is actually preferred by acquirers in many cases. Here’s why:
DK’s correction:
“Early IP gives the acquirer the ability to shape prosecution strategy to maximize protection. They’d rather buy pending claims they can influence than granted patents with narrow scope they’re stuck with.”
The reality:
CABA’s PCTs cover platform protection (not just lupus—multiple autoimmune indications)
They have specific claims for no-chemo pretreatment (major competitive advantage)
Pending claims = optionality for acquirers to broaden scope during prosecution
What this actually means: Instead of being a 30-40% discount to valuation, early IP is a strategic advantage if you’re positioning for M&A. Acquirers pay for optionality, not certainty.
My original take: Bearish ❌
Corrected take: Neutral to Bullish ✅
Original Concern #2: “No granted patents until 2026 = deal-breaker”
What I said: If CABA is targeting a 2027 BLA but patents won’t grant until late 2026, there’s a dangerous window where they have regulatory approval but weak IP protection.
What I missed: Big Pharma doesn’t wait for granted patents to make acquisitions.
DK’s correction:
“Acquirers don’t care if patents aren’t granted yet. They care about: (1) pending claims, (2) freedom to operate, and (3) platform potential. CABA checks all three boxes.”
The reality: Look at recent biotech M&A:
BMS bought Karuna for $14B → patents still prosecuting
AbbVie bought Cerevel for $8.7B → patents still prosecuting
Merck bought Prometheus for $10.8B → patents still prosecuting
Acquirers buy before patent grants because:
They get the asset at a discount (uncertainty = lower price)
They can shape prosecution with their own IP teams
They avoid paying the “certainty premium” that comes after grants
What this actually means: The 2026-2027 timeline isn’t a bug—it’s a feature. That’s exactly when M&A happens in biotech (6-12 months before BLA approval, while patents are still prosecuting).
My original take: Bearish ❌
Corrected take: Bullish ✅ (This is actually the perfect M&A window)
Original Concern #3: “Long-lived plasma cell (LLPC) problem is a major risk”
What I said: CABA’s inability to address LLPCs (which can cause disease relapse) is a significant technical hurdle that could derail commercialization.
What I missed: This is an industry-wide problem, not a CABA-specific failure.
DK’s correction:
“This is a fairly common issue for these types of cell therapies; it has yet to be addressed. What does this mean? Well, I think this actually is good for the company since everyone is facing this challenge and the company won’t be docked if they can’t find a solution. Upside: if they find a solution—holy guacamole, this thing skyrockets!!”
The reality:
Every CAR-T company targeting autoimmune diseases faces the LLPC challenge
No one has solved it yet
Acquirers know this and price it into deals
What this actually means: CABA isn’t at a competitive disadvantage—they’re at competitive parity. And if they solve LLPC first, they become best-in-class overnight.
Valuation impact:
Without LLPC solution: $25-35/share (competitive parity)
With LLPC solution: $40-60/share (best-in-class platform)
My original take: Bearish ❌
Corrected take: Neutral with massive upside optionality ✅
What I Got Right (And Why It Matters More Now)
✅ The 2027 BLA Timeline is Aggressive but Achievable
DK confirmed:
“I think the FDA has shown that they are willing to accelerate the process for cell therapies that treat severely unmet needs. I think if the company can show the therapy is relatively safe and has at least marginal efficacy in the next round of trials, the company would be very likely to submit BLA in 2027.”
What this means: The regulatory catalyst is real. 2027 BLA submission = 2026 M&A window.
✅ Goodwin Procter as IP Counsel = M&A Signal
DK confirmed:
“They use Goodwin Procter for their IP counsel, so I have to assume their IP estate is at least ok. Goodwin has been generally viewed well for IP, especially from an M&A perspective.”
What this means: CABA isn’t building a standalone commercial company—they’re building an asset for acquisition. Goodwin doesn’t come cheap, and you hire them when you’re positioning for exit.
✅ Series B FTO Confirms Clean IP
DK confirmed:
“Investors wouldn’t have closed the Series B if the company didn’t have FTO. IPDD is a main assessment that’s done when someone decides to invest.”
What this means: No hidden patent landmines. Acquirers can move forward with confidence.
The New Information That Changed Everything
Discovery #1: Platform Protection, Not Just Lupus
What DK found: CABA’s PCT applications include platform claims that cover the CAAR-T technology broadly, not just lupus-specific applications.
Why this matters: This isn’t a one-drug company. It’s a technology platform applicable to:
Lupus (lead indication)
Myasthenia gravis
Pemphigus
Other B-cell mediated autoimmune diseases
Valuation impact: Platform companies command 2-3x higher valuations than single-asset companies.
Example:
Single-asset biotech: $1-2B acquisition
Platform biotech: $3-6B acquisition
Discovery #2: No-Chemo Pretreatment = Competitive Moat
What DK found: CABA has specific patent claims around avoiding chemotherapy conditioning before CAR-T infusion.
Why this matters: Competitors (Novartis, BMS, J&J) all require chemo pretreatment, which:
Limits patient eligibility (elderly, frail patients can’t tolerate chemo)
Increases side effects
Adds cost and complexity
If CABA’s no-chemo claims grant broadly, they have a defensible competitive advantage.
Discovery #3: Slower Patent Prosecution is Strategic, Not Negligent
What DK found: CABA is keeping their IP on a slower prosecution track relative to the BLA timeline.
Why this matters: This is intentional strategy, not incompetence:
Avoid early rejection: Rushing prosecution = higher risk of narrow claims
Keep optionality open: Slower track = more time to file continuations and broaden claims
Strategic timing: Grant patents right before BLA submission for maximum M&A leverage
What this means: CABA’s management knows what they’re doing. They’re optimizing for acquisition value, not speed.
Updated M&A Thesis
Before DK’s Analysis:
M&A Probability: 40-50% (downgraded from 60-70%)
Valuation Range: $15-20/share
Recommendation: Caution, wait for more clarity on IP
After DK’s Analysis:
M&A Probability: 70-80% (upgraded)
Valuation Range: $25-35/share (base case), $40-60/share (if LLPC solved)
Recommendation: Hold/Buy on weakness
What Changed My Mind
1. Goodwin Procter = M&A Intent
Top-tier M&A IP counsel signals management is building for exit, not independence.
2. Series B FTO = Clean IP Confirmed
Institutional investors validated freedom to operate in 2019. No hidden patent risks.
3. Platform Protection = Multiple Shots on Goal
This isn’t just lupus—it’s a technology platform for multiple autoimmune diseases.
4. LLPC is Industry-Wide = Not a CABA-Specific Risk
Everyone has this problem. CABA isn’t disadvantaged, and solving it creates massive upside.
5. Early IP = Acquirer Optionality
Pending claims give acquirers the ability to shape prosecution. This is a feature, not a bug.
6. 2027 BLA = 2026 M&A Window
Perfect timing. Acquirers move 6-12 months before approval, while patents are still prosecuting.
Updated Valuation Model
Conservative Case: $25/share ($2.8B)
Assumptions:
Phase 2/3 data replicates Phase 1 efficacy (93% ORR)
Patents prosecuting but not yet granted
LLPC unsolved (industry-standard risk)
Acquirer buys for platform potential + lupus indication
Comparable transactions:
Cerevel (CNS, Phase 3): $8.7B
Karuna (CNS, Phase 3): $14B
CABA (autoimmune, Phase 2/3): $2.8B = reasonable discount for earlier stage
Base Case: $30-35/share ($3.4B - $4B)
Assumptions:
Phase 2/3 data strong (safety + efficacy confirmed)
First patents grant in late 2026
BLA submission announced (2027)
Acquirer buys for platform + near-term approval
Comparable transactions:
Prometheus Biosciences (IBD, Phase 3): Merck paid $10.8B
CABA (autoimmune, Phase 3 equivalent): $3.4-4B = appropriate discount for smaller indication
Bull Case: $40-60/share ($4.5B - $6.8B)
Assumptions:
LLPC problem solved (best-in-class platform)
Multiple patents granted with broad claims
Expansion into additional indications announced
Competitive bidding between multiple acquirers
Comparable transactions:
Karuna (best-in-class CNS): $14B
CABA (best-in-class autoimmune): $4.5-6.8B = appropriate discount for smaller market
Catalysts to Watch
Late 2025/Early 2026: First Patent GrantsIf CABA accelerates prosecution, first patents could grant.
M&A Impact: Removes uncertainty, could trigger 20-30% revaluation.
2026: BLA Submission Announcement
This is the peak M&A window. Acquirers move when asset is de-risked but hasn’t captured full approval value.
Why I’m Publishing This Correction
I got it wrong because I didn’t have complete information. DK’s patent agent expertise revealed that my initial concerns were based on a misunderstanding of how biotech IP strategy works in the context of M&A.
What I learned:
Early IP isn’t a weakness—it’s strategic optionality for acquirers
Pending patents are normal for pre-approval M&A deals
Industry-wide technical challenges don’t discount individual companies
Slower prosecution can be intentional M&A positioning
Platform protection matters more than single-indication IP
The lesson: When you find information that contradicts your thesis, you update it. That’s how you avoid losing money on bad analysis.
Updated Recommendation
Previous: Caution, downgraded to 40-50% M&A probability
Current: Hold/Buy, upgraded to 70-80% M&A probabilityPrice Targets:
Conservative: $25/share (+79% from current $13.97)
Base case: $30-35/share (+115-150%)
Bull case: $40-60/share (+186-329%)
Strategy:
Current holders: Hold through 2025 for Phase 2/3 data
New buyers: Consider building position on weakness Now is a good entry
Exit strategy: Trim 25-50% if stock hits $25-30, hold remainder for M&A pop in 2026
Acknowledgment
Thank you to DK for the institutional-level IP analysis that corrected my initial thesis. This is exactly why collaboration with domain experts matters—it prevents costly mistakes based on incomplete information.
If you’re evaluating biotech M&A targets and don’t have patent expertise, you’re flying blind. IP strategy is as important as clinical data when determining acquisition value.
Bottom line: I was wrong about CABA’s IP being a weakness. It’s actually a strategic strength that positions them for M&A in 2026. New information changed my thesis, so I’m updating it publicly.
That’s how this works. If I mess up I own it.
⚔️
M&A Hunter
The fact you are covering CABA and RVPH + you are willing to be corrected.
I am subbing now!
P.S seems you scared off the pump and dump crowd, RVPH went to 0.64 down to 0.55....
Thanks!!