Capricor Therapeutics, Inc. (NASDAQ:CAPR) Q4 2022 Earnings Call Transcript

Capricor Therapeutics, Inc. (NASDAQ:CAPR) Q4 2022 Earnings Call Transcript March 15, 2023

Operator: Good afternoon, and welcome to Capricor Fourth Quarter and Full Year 2022 Financial Results and Corporate Update Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. AJ Bergmann, Capricor’s Chief Financial Officer. Mr. Bergmann, you may begin.

AJ Bergmann: Thank you and good afternoon, everyone. Before we start, I would like to state that we will be making certain forward looking statements during today’s call. 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, Chief Executive Officer.

Linda Marban: Thank you, AJ. Good afternoon and thank you for joining our fourth quarter and full year 2022 conference call today. We are pleased with the progress we have made over the past year and into the first few months of 2023. Today, I will provide important updates on our Duchenne Muscular Dystrophy program, our exosome platform, as well as corporate updates. These past 15 months for Capricor and our CAP-1002 Duchenne program have seen many highlights and we continue to execute on our three key priorities for our DMD program, which are as follows. First, advancing our HOPE-3 Phase 3 trial. Second, is continuing to engage with the FDA to bring CAP-1002 to patients as expeditiously as possible. And the third is securing commercial partnerships outside of the United States to ensure that CAP-1002 reaches patients with DMD around the world.

I will begin with an update on our Phase 3, HOPE-3 clinical trial, which continues to enroll very well. As of today, we have 11 active sites and have treated over 30% of the currently planned sample size of up to 68 patients. Our plan to conduct an interim analysis or sample size reestimation and analysis of conditional power remain unchanged and we anticipate that these results will be available in the fourth quarter of this year. In addition, we are continuing to bring on additional sites with the goal to have a majority of our targeted sites activated in the second quarter of this year. In parallel, we continue to treat patients in the open label extension or OLE portion of the HOPE-2 Phase 2 clinical study. These patients are going into their fifth year of follow-up and based on the positive results to date, at this time, we are continuing to dose these patients in a third year of OLE to further demonstrate the safety, and potential long term durability of the therapy.

We continue to see a significant slowing of the disease for patients treated with CAP-1002, including for these patients who were initially on placebo. The data presented at both 12 months and 18 months of HOPE-2, we plan to report the 24 month data in the second quarter of this year. The data presented at both 12 and 18 months continue to show an average of 65% slowing of disease, similar to the 70% slowing we saw in the randomized portion of HOPE-2. We plan to report the 24 month data of the HOPE-2 OLE study in the second quarter of this year. This data is fundamentally important in continuing to support the long term safety and efficacy of CAP-1002 in DMD patients. We are thankful to the patients and their families for their continuous commitment to working with us on demonstrating the benefits of CAP-1002.

To remind you, the 12 month data from the OLE was presented at the World Muscle Society last October and the continuation data at 18 months were recently presented with supporting videos last month on a PPMD or Parent Project for Muscular Dystrophy hosted webinar. Both were presented by our lead investigator, Dr. Craig McDonald. I’m also pleased to note that these 18 month results were recently accepted for a late breaking presentation at this year’s Muscular Dystrophy Association or MDA clinical and scientific conference being held in Dallas, Texas from March 19 to 22, 2023. Together with the long term efficacy, safety profile and the mechanistic effect of CAP-1002, we continue to believe that the therapy, if approved, can serve as a potential anchor therapy for the boys and young men impacted by this disease.

With regard to our second priority, as you know, since we have been granted RMAT or Regenerative Medicines Advanced Therapy designation, we have access to more intensive and frequent guidance from FDA. Under the RMAT designation, we recently met with the FDA in a productive Type-B CMC or Chemistry Manufacturing and Controls meeting to discuss our manufacturing plans for the HOPE-3 trial and production of commercial scale CAP-1002 in anticipation of a potential BLA application. The meeting was constructive. And while we are awaiting the meeting minutes, we believe that we will be in a position to meet FDA’s expectations or BLA with some adjustments to our planned clinical and manufacturing activities. We were able to outline our plans with FDA about our potency assay and other product release criteria to support commercialization.

This is a great accomplishment and facilitates our potential path to BLA. Based on our initial assessment of the meeting, we believe that we will need to treat patients in HOPE-3 with products manufactured from our new San Diego facility to support a potential BLA application. In anticipation of this potential requirement, we designed our San Diego facility to produce commercial scale GMP doses of CAP-1002 and we expect this facility to be functional in the third quarter of this year. We will provide more color on any potential impact to HOPE-3 as it becomes available. Furthermore, at the request of the FDA, we have submitted the interim results from our HOPE-2 open label extension study for their review as we continue to discuss our pathway towards potential registration.

Now, turning to our commercial partnership strategy. In early 2022, we entered into a commercialization and distribution agreement with Nippon Shinyaku, a leader in the field of Duchenne Muscular Dystrophy. With one of the few therapeutics or DMD approved in the United States. This agreement provided a significant upfront payment of $30 million and there are potentially additional milestone payments of up to $705 million built into the agreement. As I have noted before, it is possible that we may start to trigger these milestones in 2023 should we continue to execute according to our plan. Also, as announced in February, I am very pleased to highlight that we have entered into a second agreement with Nippon Shinyaku for the distribution rights to CAP-1002 for Duchenne Muscular Dystrophy in Japan, pursuant to which we expect to receive 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.

As with the U.S. agreement, these milestones are based on clinical, regulatory and sales based achievements. This agreement is similar to the U.S. agreement with Nippon Shinyaku. In that Capricor will be responsible for the clinical development and manufacturing of CAP-1002. And Nippon Shinyaku will be responsible for the distribution of cap CAP-1002 in Japan if the product is approved. This has the potential to reach the estimated 3,500 patients that suffer from DMD in that region. In addition, Capricorn will hold the marketing authorization in Japan if the product is approved in that territory. Nippon Shinyaku will be able to leverage the expertise and infrastructure already established for , which is their exon skipping drug that is already approved in Japan.

Our plan is to engage Pharmaceuticals and Medical Device Agency in Japan, otherwise known as the PMDA to gain an understanding of the regulatory process for approval of CAP-1002 for DMD in Japan. We will provide updates on this program as they become available. Lastly, we remain committed to securing additional partners in other markets around the world with Europe being the main focus for us at this time. In addition, we are very proud to announce the results of HOPE-2, our Phase 2 trial and its publication in The Lancet was recently selected as one of 2022 top 10 clinical studies in the world by the Clinical Research Forum. As you recall, the paper highlights the safety and efficacy of CAP-1002 and slowing the progression of both the skeletal and cardiac muscle myopathy in DMD.

Overall, we are very pleased with the progress of our DMD program, and we look forward to sharing further updates from our interaction with FDA, our progress with HOPE-3 and the development of potential additional partnerships in new territory. Now let me turn to our exosome platform technology, which leverages the natural cell signaling communication system of the body. We are harnessing exosomes to serve as a novel drug delivery system with broad therapeutic applications. We continue to make progress on the manufacturing and production of exosomes with an emphasis on ensuring scalability, reproducibility and quality control. Building on expertise and learnings from our core program for CAP-1002, for which the mechanism of action is mediated via exosomes, we have developed an extensive body of evidence and know how on these three fronts.

Our strong foundation has supported 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 we are focused on the development of two broad modalities: vaccinology and precision therapeutics. In January of this year, we published data on the online server, BioRxiv, on our most advanced application of StealthX, which generated two vaccine candidates that independently and in combination induce a strong immune response against two SARS-CoV-2 proteins, spike and nucleocapsid. Results show that this multivalent protein based vaccine candidate has the potential to achieve potent, longer lasting immunization, broader reactivity and improve T-cell responses with only nanograms of protein necessary without any added adjuvant.

The data from the study suggests that StealthX to deliver a more potent vaccine with broader immunity that is currently available, all with an efficient development cycle that is competitive to the mRNA platform. The reason this data is so important is twofold. First, it allows us to use tiny amounts as in nanograms of protein to drive an immune response, suggesting that could be the case with any vaccine candidate. And second, it also highlights the ability to use a multivalent strategy. This technology opens the door for combination vaccines, and most importantly, pierce the strength of a recombinant protein vaccine with the ease of development of an mRNA vaccine. To that end, it takes approximately 12 weeks for our team to go from antigen characterization to vaccine candidate.

Our current strategy is focused on securing partners who will provide capital and additional resources to bring this program into the clinic should we decide to do so. The other potential application of our StealthX platform is to develop precision therapeutics. The objective here is to more effectively deliver a payload to targeted cells or tissues, thus decreasing the overall systemic exposure to the payload, while enhancing higher concentrations at the targeted site. We are targeting three tissues of interest for which we believe our exosome can deliver a differentiated platform and potentially improve clinical outcomes for patients. To clarify, the exosome technology, primarily StealthX, is a platform, but we are currently planning on internally developing the technology for specific indications using both of these approaches, vaccines and targeted therapeutics.

We also remain open and in fact have initiated external discussions with potential partners to deliver therapeutic payloads from their portfolio for already established clinical programs. This approach allows us to optimize the clinical benefits of potential partners’ compounds with a preference for characterized therapeutic entities. We continue to diligently invest in the future of Capricorn. We have assembled a world class team and continue to meet a lean profile that is capital efficient. With the 74 employees we have today across the organization, our hiring plan is nearly complete for 2023. Our financials announced prior to this call report over $41 million in cash, not including the addition of our $12 million upfront payment, which we expect to receive this quarter from Nippon Shinyaku and provides us with a runway to execute on our strategy.

We are pleased with the advancements of our late stage clinical development pipeline and the growing body of work with our exosome platform technology. We look forward to continuing and accelerating this momentum and to executing towards our upcoming milestone. Now with that, I will turn the call over to our Chief Financial Officer, AJ Bergmann, to run through our financial results for the fourth quarter and full year 2022. AJ?

AJ Bergmann: Thank you, Linda. This afternoon’s press release provided a summary of our fourth quarter and full year 2022 financials on a GAAP basis. You may also refer to our annual report on Form 10-K, which we expect to become available shortly and be accessible at the SEC website, as well as the financial section of our company website. As of December 31, 2022, company’s cash, cash, cash equivalents, marketable securities totaled approximately $41.4 million compared to approximately $34.9 million on December 31, 2021. 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. Turning now to the financials. In the fourth quarter of 2022, our net cash used in operating activities was approximately $6.9 million.

For the fourth quarter of 2022, excluding stock based compensation, our research and development expense was approximately $6 million compared to approximately $4.1 million in Q4 2021. Again, excluding stock based compensation, our general and administrative expense was approximately $1.9 million in Q4 2022 and approximately $1.5 million in Q4 2021. Net loss for the fourth quarter 2022 was approximately $7.7 million compared to a net loss of approximately $6.2 million for the fourth quarter of 2021. Net loss for the full year 2022 was approximately $29 million compared to a net loss of approximately $20 million for the full year 2021. I would also like to note briefly in light of the recent FDIC action and market volatility, Capricor holds no deposits at Silicon Valley Bank at this time.

We will now open the line for questions.

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Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session. Our first question comes from Joe Pantginis with H.C. Wainwright. Please go ahead.

Joseph Pantginis: Hey, Linda and AJ. Good afternoon. Thanks for taking a question. A few questions if you don’t mind. First, I guess a two-parter with regard to your recent FDA interaction. So, I know you don’t have the minutes as of yet, so I know some of your comments might be a little more or might have less comments because of that. But anything you can talk to regarding the outstanding punch list, key things that the FDA have been looking at. And also with regard to the potency assay, can you talk to, say, the simplicity of that or is anything outstanding to be able to be in agreement with the potency assays? And then I’ll go to part two.

Linda Marban: Yes. Thanks, Joe. That was two parts already, but you have as many questions as you like. So first of all, let me just start off by saying one of the big hurdles for any cell therapy company is to develop a potency assay that is reliable, repeatable and can be validated by quality measurements, QA and QC, and we have done that. And we’ve now presented the plan to FDA. We think it is probably one of the most innovative ways of looking at potency and a cell therapy because it actually takes advantage of looking at positive clinical data and then relating it back to what was actually active in the cells at the time. This is a giant hurdle to overcome. We have some things to even out in terms of making sure that it’s appropriately qualified and validated.

But we’re on the right path and we have good interactions with the FDA and on the CMC. So that’s a very big win. We also had a big win in terms of identity criteria and some of the other supportive assays. So really effective and very collaborative meeting with FDA and the CMC. And as you know, this really paves the way for commercialization of CAP-1002. One of the big hurdles that all the companies have had to jump over. In terms of some of the other sort of tidbits and takeaways from the FDA meeting. They did mention that they’d like to see doses from our San Diego facility, which is our planned commercial launch facility, to be used in patients prior to the BLA. And so, we’re waiting for feedback on that in terms of how that’s going to be manifest and then we’re working with our our own regulatory team and our FDA consultants to make sure that that path to commercialization is as smooth and easy as possible.

Joseph Pantginis: Got it. So actually that’s a good segue to the last part of the FDA. So with regard to — including samples or doses from the new facility, how does that apply — does that apply only to new patients? Or will you be able to then change the doses to patients that have currently been enrolled or is there a fixed number of patients or a ratio that has to be treated by the new doses coming out of the San Diego facility?

Linda Marban: Yes. Thanks. So, one of my real benefits has been our good working relationship with FDA, especially with the CMC Group. And we’ve been working with the same group since we really started a long time ago with (ph), so they followed our entire trajectory. And what they cautioned us about a while ago was not to mix doses from both facilities that they are actually considered separate products and that they need to be validated independently. So there will be new patients that will be treated with doses from San Diego and then those will be analyzed together and separately. We don’t know the implications as of yet. We obviously are going to plan further conversations with FDA. We’re going to be reaching out to schedule a clinical meeting very soon so that we can get further clarity.