Capricor Therapeutics, Inc. (NASDAQ:CAPR) Q1 2023 Earnings Call Transcript May 11, 2023

Capricor Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.31, expectations were $-0.32.

Operator: Good afternoon, ladies and gentlemen, this is the conference operator. Welcome to Capricor First Quarter 2023 Financial Results and Corporate Update Call. After the presentation there will be an opportunity to ask questions. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. AJ Bergmann, Capricor’s Chief Financial Officer.

AJ Bergmann: Thank you. And thank you for joining today’s call. Before we start, I would like to state that we will be making certain forward looking statements during today’s presentation. These statements may include statements regarding, among other things, the efficacy, safety and intended utilization of our product candidates, our future research and development plans, including our anticipated conduct and timing of preclinical and clinical studies, our plans to present or report additional data, our plans regarding regulatory filings, potential regulatory developments involving our product candidates, manufacturing capabilities, potential milestone payments and our possible uses of existing cash and investment resources.

These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the SEC, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, and we disclaim any obligation to update such statements. With that, I’ll turn the call over to Linda Marban, CEO.

Linda Marban: Thank you AJ. Good afternoon and thank you for joining our first quarter 2023 conference call. Today, I will provide important updates on our Phase 3 DMD programs as well our Exosome Platform. We are pleased with the progress that we had made in the first three months of 2023 and believe we are well positioned to execute on our key priorities and reach multiple milestones throughout this year which include continuing discussions with FDA regarding pathway towards the biologics license application for CAP-1002 and DMD presenting 24-month follow up data from our HOPE-2 open-label extension study in the second quarter of 2023, reporting the outcome of the interim analysis of HOPE-3 in the fourth quarter of 2023 as also exploring opportunities for additional strategic partnerships outside of the United States and Japan to support the potential commercialization of CAP-1002 and DMD.

We also are looking forward to the expansion of our exosome pipeline focussing on securing partnerships as well as other opportunities for non-dilutive funding. Now let me begin my remarks today by providing an update on our recent FDA interactions. Earlier this year, under our RMAT designation Type-B CMC or Chemistry Manufacturing and Controls meeting with the FDA where we outlined our plans for production of commercial scale GMP CAP-1002. We were also able to outline plans for our potency assay and other release criteria in order to support the filing of the BLA which is a great accomplishment. Although this meeting was focussed on CMC aspect of our development program there was a discussion about the possible need for some patients to be treated with product manufactured from our GMP San Diego site.

That discussion has not yet been finalized and is still on-going. I would like to reiterate that our goal is to work with FDA on the shortest path to filing a BLA and to that end we are currently working closely with them on this important issue and will provide updates on our clinical development plan as it becomes available. This now leads me to an update on our San Diego manufacturing facility for CAP-1002. As you know, we designed this facility within our R&D headquarters to be able to produce commercial scale GMP CAP-1002 doses. We see this facility as a versatile and cost-effective way to potentially bring CAP-1002 to the market. I am pleased to inform you that we are on track to release GMP CAP-1002 doses in the third quarter of this year.

Should CAP-1002 obtain market approval, we firmly believe that our ability to manufacture in-house will greatly increase our margins and support the early launch of this product. As this facility becomes fully operational, we will be able to provide more color on potential capabilities and production capacity for this site. Next, I would like to provide a clinical update on HOPE-3 our Phase 3 clinical trial continues to enroll well. As of today, we have 13 active sites and remain on track to enroll 68 patients by the second half of this year, which is a currently designed sample site. We are continuing to activate sites and plan to have additional targeted sites activated by the second quarter, which we believe is both a testament to the high level of engagement by our clinical trial sites, as well as our team’s strategic execution.

Our plans to conduct an interim analysis for sample size re-estimation and analysis of conditional power remains unchanged, and we are on track to have these results available in the fourth quarter of this year. As I mentioned previously, we are working closely with the FDA to optimize the HOPE-3 clinical trial design and will provide updates on any feedback, once available, should any changes be necessary. In parallel, we continue to treat patients in the Open Label Extension, or OLE, portion of the HOPE-2 Phase 2 study. These patients are going into their fifth year of follow-up and going into a third year of OLE treatment. Further, while we continue to see efficacy in these patients, as previously presented, the safety profile of CAP-1002 in the OLE study continues to be consistent with our Phase 2 results and is now supported by well over 100 IV infusions.

We continue to see a statistically significant, as well as clinically relevant, slowing down of disease progression for patients treated with CAP-1002, including for these patients who are initially on placebo, compared with the natural progression of the disease. The data presented at both the 12 and 18 months showed an average of 65% slowing of disease progression, and we plan to report the 24-month performance of the upper limb and cardiac function data at a medical conference in the second quarter of this year. We are thankful to the patients and their families for their continuous commitment to working with us on exploring the potential benefits of CAP-1002. We look forward to building on our body of positive data that further positions CAP-1002 as potential anchor therapy for DMD.

Furthermore, we believe that combination therapies may be necessary for the long-term to delay disease progression in DMD. Most likely patients requiring a dystrophin replacement therapy will also need additional therapies that can attenuate inflammation, promote healthy muscle growth and preserve cardiac function. We believe that CAP-1002 can potentially be paired with any of the approved therapies and will likely be necessary to get the greatest benefit from the gene or exon skipping therapies. We stand with all of the patients with DMD whose only wish is that their disease does not get worse. Now turning to our commercial partnership strategy, as announced in February, we entered into a second agreement with Nippon Shinyaku for the distribution rights to CAP-1002 for DMD in Japan, where we received a $12 million upfront payment and will potentially receive additional milestone payments of up to approximately $89 million and a meaningful double-digit share of net product revenue.

We continue to work with Nippon Shinyaku and look forward to continuing to leverage their expertise and infrastructure already established for Viltepso, their exon skipping drug that is already approved in the U.S. and Japan. We are now focused on securing additional partners and other markets around the world with Europe being a key priority. Overall, we are delighted with the progress of our DMD program and we look forward to further sharing updates from our interaction with FDA, our progress with HOPE-3 and the development of potential, additional partnerships in new territories. Now briefly turning to our Exosome platform technology, which leverages the natural cell signaling communication of the body. We are harnessing exosomes to serve as a novel drug delivery system with broad therapeutic applications.

Our strong scientific foundation is supportive of further downstream efforts for innovative therapeutic payload loading methods and tissue specific targeting. Our proprietary StealthX expression platform is at the core of our exosome program and is focused on the development of two broad modalities: vaccinology and precision therapeutics. We recently published in Microbiology Spectrum, a peer reviewed journal of the American Society of Microbiology on StealthX, which in preclinical studies generated two potential vaccine candidates that independently and in combination induced a strong immune response against two SARS-CoV-2 proteins, spike and nucleocapsid. Using the StealthX platform, we have successfully developed a targeting strategy which will allow us to potentially expand our exosome program into precision based therapeutics.

While we are exploring many different therapeutic applications, we are currently working on targets in neuromuscular disease, which is an area of core strength for Capricor. With our small team of experts working on exosomes, our current plans are to explore business development and partnering strategies as well as non-dilutive grant funding. We look forward to leveraging our exosome platform to support the advancement of next generation vaccines and innovative targeted therapeutics, and will provide updates on this program as they become available. In closing, we are pleased with the advancements across our DMD program and the growing body of data within our exosome platform technology. We look forward to executing on our upcoming milestones.

With that, I will turn the call over to Chief Financial Officer AJ Bergman to run through our financial results page. AJ?

AJ Bergmann: Thank you, Linda. This afternoon’s press release provided a summary of our first quarter 2023 financials on a GAAP basis. You may also refer to our quarterly report on Form 10-Q, which we expect to become available shortly and will be accessible on the SEC website as well as the financial section of the company website. As of March 31st, 2023, the company’s cash, cash equivalents and marketable securities totaled approximately $45.2 million, compared to approximately $41.4 million on December 31st, 2022. Based on our current operating plan, the company’s cash position is expected to be sufficient to support operations into the fourth quarter of 2024. I would also like to note that this expectation excludes any potential milestone payments under exclusive commercialization and distribution agreements with Nippon Shinyaku that may become due.

Turning briefly to the financials, in the first quarter of 2023, our net cash provided by operating activities was approximately $4.2 million for the first quarter of 2023. Excluding stock-based compensation, our research and development expense was approximately $7.2 million compared to approximately $4.9 million in Q1 2022. Again, excluding stock-based compensation, our general and administrative expenses were approximately $1.8 million in Q1 2023 and approximately $1.9 million in Q1 2022. Net loss for both the first quarter of 2023 and 2022 was approximately $7.8 million. And with that, we will now open the line-up for questions. Thank you.

Linda Marban: Thank you, AJ.

Q&A Session

Operator: Thank you. [Operator Instructions] The first question is from Joe Pantginis from H.C. Wainwright. Please go ahead.

Operator: [Operator Instructions] The next question is from Aydin Huseynov from Ladenburg. Please go ahead.

Operator: [Operator Instructions] This concludes the question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Linda Marban: Thank you, operator. And thank you for all who joined us this afternoon and also those who listen later on or read the transcript. We thank all of our patients, all of the families, all of the advocacy groups, and everybody out there who’s trying to deal with the Duchenne muscular dystrophy. And we look forward to providing updates on our attendance at meetings as well as information regarding our progress in the future. Thank you.

Operator: This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.