Capricor Therapeutics Q3 2023 Earnings Call Transcript

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November 14, 2023

There are 5 speakers on the call.

Operator

Afternoon, ladies and gentlemen, and welcome to the Capricorn's Third Quarter 2023 Financial Results and Corporate Update Call. This conference call is being recorded. I would now like to turn the conference call over to our host, Mr. A. J.

Operator

Bergman, Capricor's Chief Financial Officer. Please go ahead.

Speaker 1

Thank you. Good afternoon, everyone. Before we start, I would like to state that we will be making certain forward looking statements during today's call and 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 are plans regarding uses of existing cash and investment resources. These forward looking statements are based on current information, assumptions and expectations that are subject may involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward looking statements.

Speaker 1

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.

Speaker 2

Thanks, A. J. Good afternoon and thank you for joining us today. I'm extremely pleased with the progress we are making towards the development of our lead asset, CAP-one thousand and two for the treatment of Duchenne muscular dystrophy. As I begin the call today, I am delighted to inform you that we have reached our targeted enrollment goal for our HOPE-three Phase 3 pivotal study, will be to determine if the trial is futile or should continue as planned.

Speaker 2

The analysis is based on the 6 month results. Reminder, our primary endpoint is based on 1 year. This blinded data will be presented to our DSMB, will evaluate safety and efficacy and give us their decision as to whether the trial should continue as planned. Should the trial be determined not to be futile. This will trigger our 1st milestone payment under our U.

Speaker 2

S. Agreement with Nippon Shinyaku. There are also other potential milestone payments leading up to an approval of a BLA that will continue to support our balance sheet should we achieve them. As I have previously announced, the top line results from Cohort A will be available in Q4 2024 and a subsequent BLA would be based on the full dataset. However, we are now planning to reinvigorate our discussion with FDA to determine if there is an opportunity to speed up the approval pathway for CAPTENNA 2 now that our enrollment target for HOPE-three cohort A has been reached.

Speaker 2

We owe it to the patients and the community to move CAP-one thousand and two towards approval as quickly as possible as everyone knows that time is muscle. Once a pull point is lost, it cannot be recovered. Now this brings me to an overview of our recent Type B clinical meeting with the FDA, which was announced in late Q3 and why we believe the outcome was important for the program. As you may recall, earlier in 2023, FDA indicated that they wanted us to treat additional patients and the HOPE-three study with the product manufactured at our San Diego GMP facility. There were 2 main outcomes from this meeting.

Speaker 2

Number 1, the results of the HOPE-three Cohort A will support the filing of a BLA And number 2, FDA approved the design of an additional cohort of patients, now referred to as Cohort B, to support the inclusion of our new San Diego facility for commercial manufacturing and enrollment is planned to begin imminently. It is very important to keep in mind that Cohort B and the data that we generate from it will not be required for initial registration of CAP-one thousand and two for DMD. Over the last several years, Capricor has carefully and diligently invested resources in this program, bringing CAP-one thousand and two through 3 successful clinical trials, building 2 manufacturing facilities, securing RMAT, Orphan Drug and rare pediatric designations from FDA, in addition to securing commercialization partnerships for the U. S. And Japan markets.

Speaker 2

These strategic deals were carefully negotiated and potentially bring in over $700,000,000 in additional cash to Capricor, which would fuel future product, potential expansion of PAP-one thousand and two and allow us to strategically invest in the further development of our exosome pipeline. This is the vision that I have for Capricor, which would transform our organization from a development stage therapeutics company into a world class commercial and R and D operation. I realize much has to be done and accomplished before that time. But now that we have completed our target enrollment in the Phase 3, we are moving closer to that vision. To this point in our history, we have remained disciplined across the organization, not only in the management of cash and resources, but also with respect to our priorities As we have developed CAP-one hundred and two, we made the early decision to invest in the clinical development of CAP-one hundred and two, will be recorded in the Q4 of 2019.

Speaker 2

Now that we have shown promising data in multiple clinical trials, We are focusing on scaling up and out our manufacturing capabilities to produce larger quantities of CAP-one thousand and two to meet FDA requirements and market demand if approved. Our GMP manufacturing facility in San Diego has approximately $3,000,000 to build and equip. As is the case with all companies, launching a complex biologic such as CAP-one thousand and two requires us to expand operations to include experts in cell manufacturing, quality, compliance and regulatory affairs, which is reflected in the current structure of the organization. Capricor has raised approximately $145,000,000 in equity capital in totality throughout our company's history, both private and public over the past 15 years. And with approximately $15,000,000 in cash resources factoring in our most recent financing and Q3 financials, This gives us a runway into 2025.

Speaker 2

The dollars invested in CAP-one thousand and two for DMD have strengthened many aspects of our program, most notably the ability to understand the mechanism of action of CAP-one thousand and two, recognizing that one of the hindrances to the approval of cell therapies has been an inadequate potency asset. We are pleased that the FDA supports our potency program, which is an important step towards approval. With the path paved by DMD, we are now planning product expansion into diseases with similar pathophysiology. We believe in CAP-one thousand and two's potential to be a transformational treatment for patients with diseases of inflammation and fibrosis. Second to that, we are judiciously building our Exosome platform technology to become a next generation drug delivery platform.

Speaker 2

Now with that said, let's quickly turn to an update on our exosome technology. While our primary focus has been on advancing the development of CAP-ten zero two. We remain committed to our exosome technology as part of next generation drug delivery platform. Currently we are pursuing 2 avenues of opportunity. 1 is our vaccine program using Stealth X, is our proprietary platform that is useful for engineering select proteins either inside or on the surface of the exosome.

Speaker 2

For our vaccine program, one of our aims is to secure either a partnership or a non dilutive source of funding to speed clinical development. Currently there is significant interest in this exosome based vaccine platform and we are in active discussions with several parties. We remain focused on that mission. The other aspect of our platform uses Stealth X to develop therapeutics by harnessing exosomes as the delivery vehicle. The program requires loading of specific cargoes into exosomes with targeting moieties on the outside of the exosome essentially to tell it where to go.

Speaker 2

Is currently in collaboration with an undisclosed pharma company. We are investigating the therapeutic perspective of this platform. The foundational work has the potential to set the stage for future therapeutic options with exosome. Initial data from this ongoing study was presented recently at this year's World Muscle Society Conference. Proof of concept results demonstrate that a muscle targeting warranty can be engineered on the surface of exosomes is demonstrated by the presence of a labeled ASO, which is antisense oligonucleotide end users' representative cargo in the lower limbs of mice post intravenous injection.

Speaker 2

Repeated doses of the loaded exosome show enhanced targeting based on the initial PK study. This suggests that repeat dosing using our engineered exosomes has the potential to effectively enhance delivery, further differentiating our therapeutic approach from Lipid Nanoparticle. I look forward to providing more color on this important program as it becomes available. Now finally, on the corporate side, we raised approximately $23,000,000 this quarter to support our balance sheet into 2025. This strategic financing was anchored by Nippon Shinyasu, further cementing our strong relationship and their commitment to Capricor.

Speaker 2

Part of the reason for the fundraise was we had to expand our team in order to prepare for the submission of a BLA. The work required to prepare a late stage clinical asset is significant and we are fortunate to have found a team that has experience in driving programs for approval in the biologics space. Finally, in our effort to expand Capricor's team of experts, we are pleased to announce the appointment of Michael Kelleher to our Board of Directors. Most recently, Michael served as Group Vice President of M and A and Business Development at Horizon Therapeutics, is now part of Amgen. He brings to Capricor expertise in business and strategic development.

Speaker 2

We look forward to Mike's contributions to our team. Overall, I want to thank you for your support for our program and our company. We are very much looking forward to the next several months as we will be announcing the outcome from the interim analysis as well as continuing our interactions with FDA. I will now turn the call over to A. J.

Speaker 2

To go through our financials. Thank you.

Speaker 1

Thanks, Linda. This afternoon's press release provided a summary of our Q3 2023 financials on a GAAP basis. And 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 our website. Turning to the financials, let me start with our cash position. We ended September 30, 2023 with cash, cash equivalents and marketable securities of approximately $28,500,000 This excludes the $23,000,000 in gross proceeds from the registered direct offering we completed in October that bolstered our cash position.

Speaker 1

Based on our recent operating results and current projections, we now excludes stock based compensation, our research and development expenses were approximately $9,500,000 for the Q3 of 2023 compared to approximately $5,400,000 for the Q3 of 2022. The increase in expenses of $4,100,000 was primarily due to increased compensation or general and administrative expenses were approximately $1,800,000 for the Q3 of 2023 as compared to approximately $1,600,000 for the Q3 of 2022. The increase of $200,000 was primarily due to increased facility and personnel costs. And our net loss was approximately $6,400,000 for the Q3 of 2023 2022. And with that, let me turn it back over to Linda, actually open up the line for questions first before we do that.

Speaker 1

Go ahead, operator.

Operator

Thank you. Ladies and gentlemen, we'll now begin the question and answer session. You will then hear a 3 tone prompt acknowledging your request. Questions will be taken in the order that they are received. And should you wish one moment please for your first question.

Operator

And your first question comes from Joe Pantgini from H. C. Wainwright, please go ahead.

Speaker 3

Hey, Linda and A. J, thanks for taking the question. Good afternoon. My first question, I'm going to start at the back end of your comments Regarding exosomes. So just wanted to get a sense of what potential news flow in preclinical data we might be getting over the next 6 to 12 months?

Speaker 3

And secondly, I know you said there's ongoing discussions right now, so there might be some confidentiality. But can you disclose what Kind of vaccines you might be going after?

Speaker 2

Yes. So thanks, Joe. Thanks for your questions. And we are excited about the program, it's been perking along in the background. We have devoted most of our time and effort to CAP-one thousand and two as everybody knows.

Speaker 2

But the data from the exosome has been very positive and very exciting, including the ability to target, which has not really been shown before and was presented recently, as I mentioned at World Muscle. So in terms of milestones coming up in 2024, we do plan on continuing to advance this program. We've had a vaccine for COVID that's been in development for quite some time. I think the world has come to realize that there's a lot to be left to understand about the vaccinology using mRNA. And so the concept of using a protein based vaccine that is easy to make, easy to manufacture, can be manufactured in just several months certainly gives proof of concept for the program.

Speaker 2

So that's the type of vaccine we're working on, same one, just Looking for other opportunities for partnering for the therapeutic options as well as for the vaccine. The vaccine conversations are the farthest along at this point.

Speaker 3

Got it. That's helpful. Thank you. And my main question has to do with the DMD visibility about the path forward to be able to file in Cohort A and Cohort B. So I guess my question is Maybe a little bit of a scenario analysis of your comment about still further potentially being able to accelerate the programs.

Speaker 3

And I guess I would also Focus my question around the upcoming interim analysis. Would your disclosure to the public revolve around sort of continue planned or any potential data and any potential stopping rules you might be able to share with us? Thanks.

Speaker 2

Yes, thanks. So let me just start with the interim analysis since it's the most recent upcoming milestone, which would be before the end of the year. It is a futility analysis. So the DSMB gets the data evaluate safety and efficacy is determined based on preset metrics, which are not been disclosed, whether or not the trial should continue as planned. We are looking forward to the results of that interim analysis.

Speaker 2

We, of course, based on all of our previous clinical work, expect the trial to be not futile and to be continuous plan and that's how we're building our story. But of course, it will be a great day for celebration once we get that is a word from the DSMB that the trial is not futile and we can continue. In terms of the actual metrics, we have not disclosed those, But we can say that it's a standard futility analysis that gives the good confidence that the trial should proceed as planned And that's where we are with that. In terms of the FDA, it's funny as you were asking your question, I was sort of thinking about how to respond. And I guess it's not unfair to say that dealing with FDA these days, not for Capricor, but for everybody is sort of like dealing with the Wild, Wild West, We never really know what's coming, what the opportunities are, what they are going to see is appropriate for making something available for approval or registration versus what they're going to hold back on.

Speaker 2

So what I can tell you and what FDA knows is we have 3 positive clinical trials, all showing improvement in the performance of the upper limb And young men with later stage Duchenne muscular dystrophy. We have families that are clamoring to receive CAT-ten zero two because anecdotally, they say their sons are feeling and functioning better. We have a fully enrolled Phase 3 trial, which FDA has been absolutely strong in the fact that they want to see the fully enrolled confirmatory trial before they would ever consider accelerated approval. So we consider that we check that box now. And we also have the ear of FDA with our RMED designation and also with the families from the community really speaking up to FDA.

Speaker 2

So the conversation gets much more, involved as you get to this point in development. It's been a long time coming for us. So I am delighted. There's many opportunities and touch points. And so at each of those touch points with FDA, we will continue to broach the idea that there may be a path to approval.

Speaker 2

But really at this point with a fully enrolled Cohort A of top line data in just one year, we feel that we are poised for every level of success should the trial be positive.

Speaker 3

Appreciate the color. Thanks, Linda.

Operator

Thanks, Joe. Thank you. And your next question comes from Aden Houssiena from Ladenburg. Please go ahead.

Speaker 4

Good afternoon, Linda, A. J. Congratulations with the progress this quarter and congratulations with completing the enrollment in Cohort A. I have a couple of questions. First, I want to start from milestone potential milestone payment from Nippon Shinyaku.

Speaker 4

So your total Potential sort of receivable from Nippon for the next several years if the drug gets approved, it's 705,000,000 So can you give us a sense how much from that total amount Nippon may pay by the end of the year if the DSMB decision will be positive. Is it $10,000,000 $20,000,000 $30,000,000 Can you give us overall just a sense of it?

Speaker 2

A. J?

Speaker 1

Yes. Thanks, Aidan. Right now, we're not at liberty to state the exact dollar figure affixed to that interim futility analysis. Of course, as it hopefully is achieved, we will put more granular details out. So stay tuned for that.

Speaker 1

And so that's kind of where we're at now. In terms of the building milestones as we move forward towards approval, What we haven't disclosed up to this point, but we're now at liberty to say is that up to and including the time of approval is $100,000,000 in potential milestones to Capricor. So we're going to look to that to fuel, Obviously, the expansion of CAP-one thousand and two into Duchenne as well as other efforts in terms of product expansion. So that will Those milestones hopefully come due will total $100,000,000 Hopefully that's helpful.

Speaker 4

Yes, this is super helpful. Appreciate that, Ajay. Just to clarify, so 100,000,000 Including approval milestone, so imagine that you get approval.

Speaker 1

Yes. And look for our 10 Q to become available shortly, which will articulate this basically the same way I'm saying it, but that should be put out there shortly.

Speaker 4

Okay. I appreciate that. All right. Another question is on cohorts. So cohort A completed enrollment, 58 patients.

Speaker 4

It seems like you're going to be starting Cohort B enrollment within weeks from now. I think you mentioned by the end of the year. So given the holidays, do you think it is Still realistic to sort of enroll actually enroll patients in Cohort B by the end of the year between now and January 1.

Speaker 2

So, Aidan, were you on my team call yesterday because this is what I asked my clinical team and they said that enrollment is going to be pretty robust before the end of the year, there's nothing else in clinical trial right now for these later stage boys and young men with DMD, Nothing with recent failures in the space and some of the other companies pulling back. And so, there's a line out the door to get into And we'll be delighted to welcome them and treat them even with the holidays coming up.

Speaker 4

This is great I mean, so given there's nothing no other trials, it is feasible that you will enroll. Okay, understood. So given the DMD landscape, it's changing, obviously, with different treatments, different approvals. So do you think the Cohort B will be somehow different from Cohort A, given that these are this will be Different patients. So do you think any variability between 2 cohorts in the future?

Speaker 2

Yes. It's a really interesting and provocative question, again, one we've Debated a lot internally and I think the short answer is no. We have the same inclusion exclusion criteria, the same requirements in terms of their meds and all of that, the only potential differences with the approval of the new diflazacort, we're also open up to taking patients on that regimen because many of them are switching due to a better safety profile. So that's really the only difference. We don't think that's going to mediate any difference in sort of the potential efficacy.

Speaker 2

We've talked at length to our KOLs and Sort of a steroid is a steroid is a steroid in terms of what it does physiologically. So, we're very hopeful that enrollment pressure will be virtually the same and Cohort B will very rapidly allow us to transition from is sort of clinical scale manufacturing to commercial scale manufacturing.

Speaker 4

Appreciate that. This is very helpful. So another question I have is about expansion of potential label of CAP-ten-two. So other DMD companies may have certain limitations to expand into other stages of DMD or other dystrophies or other types of DMD patients. So you have a nice slide on your corporate presentation describing potential expansion into early stage DMD patients and then into Becker Muscular Dystrophy or BMD.

Speaker 4

So could you help us understand how the potential endpoints with early stage Patients may look like with CAP-one thousand and two. So this likely won't be pool because these patients are more active and more mobile. So just Give us a little bit of idea how these endpoints may look like.

Speaker 2

Yes. So it's interesting. All of these patient reported outcome measures are have their strengths and have their weaknesses. I think everybody really believed very strongly in the NFAA, But very recently with the Sarepta data, there's been a little question around the veracity of that measure. There's time to rise, which is an interesting one.

Speaker 2

We haven't designed that trial yet. Frankly, we're going to talk to FDA about label expansion potentially without more clinical work and then evaluate from there and use the advice of our key opinion leaders, who are used to working with these younger boys to help find the one that's most effective in demonstrating the efficacy of CAP-ten-two in these younger kids.

Speaker 4

Understood. Understood. Thank you, Linda. And the last question is regarding better dystrophy. So Becker dystrophin cardiomyopathy is obviously one of the major causes of death.

Speaker 4

And it would make sense sort of starting from the late stage patients. So Could you share with us how or why Capricor is more advantageous is in more advantageous position compared to other DMD, other dystrophy companies when it comes to Becker dystrophy.

Speaker 2

In terms of Becker dystrophy, one of the major any other therapeutic that's an investigation or proof for DMD is that we have cardiac benefit. So we are highly enthusiastic, if you can sort of use that terminology when you're talking about treating the dread disease, about the opportunity for CAT-one thousand and two in Becker muscular dystrophy and its cardiac implications.

Speaker 4

Understood. Understood. Thanks so much,

Operator

There are no further questions at this time. I will be turning the call back over to Capricorn's management for final remarks. Please go ahead.

Speaker 2

Thank you so much. Thank you so much and thank you, A. J. Before we conclude today's call, I want to extend my sincere appreciation to the clinicians, patients and their families for working with us to bring CAPTAINO2 closer to potential approval. I also just want to take a minute to thank our clinical operations team for doing an extraordinary job for getting this trial fully enrolled.

Speaker 2

And hopefully once we continue to follow these patients and get the data, will be able to have an approved therapeutic for these later stage Duchenne patients. And I know that will be a day of celebration for the community as well as for us. We look forward to seeing you at upcoming meetings and hopefully you'll have a happy and healthy holiday season. Thank you so much.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a great day.

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Earnings Conference Call
Capricor Therapeutics Q3 2023
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