CAPR - NASDAQ

Good day, ladies and gentlemen, and welcome to the Capricor Therapeutics, Inc. First Quarter 2022 Financial Earnings Call. [Operator Instructions]. At this time, I would like to turn the call over to Mr. Bergmann, Capricor Therapeutics' Chief Financial Officer. Please go ahead, sir.

Thank you. 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, 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. And with that, I'll turn the call over to Linda Marban, CEO.

Good afternoon, and thank you for joining us for our first quarter 2022 conference call. Today, I will provide updates on our lead product, CAP-1002, and as well as our exosomes platform technology. We have made significant progress this quarter, highlighted first and foremost, by securing a commercial partnership with Nippon Shinyaku for our Duchenne muscular dystrophy program, bringing in $30 million in upfront cash to fund our Phase III program. Further, we saw the publication of our Phase II HOPE-2 result in The Lancet, one of the most prestigious medical journals in the world. If you haven't read this publication, I encourage you to please do so as it will strengthen your understanding of the positive results demonstrated in the Phase II HOPE-2 trial of CAP-1002. The paper speaks to both the scientific and clinical rationale for our Phase III HOPE-3 clinical trial that I shall discuss in greater detail in a few minutes. We continue to prudently invest in the future of Capricor. The pillar of our near-term value is the CAP-1002 program for the treatment of older boys with Duchenne muscular dystrophy. We have a Nippon Shinyaku and its U.S. subsidiary, NS Pharma, and experienced, well-resourced commercial partner in the United States. We remain active in seeking further partnerships for our key markets around the world. Our goal is to partner with commercially talented companies to prepare us for global expansion of the DMD program. The second pillar of value is our bioengineered exosome program. We will have more detailed updates on this program in the future, but suffice it to say that we are extremely pleased by the progress being made in this platform technology program. We have assembled a world-class team in research, quality, manufacturing and clinical operations, yet we continue to maintain a lean organization in order to remain capital efficient. We are fortunate to have a strong balance sheet in these very turbulent equity markets and are also fortunate to have no near-term need to conduct an equity financing. Our summary financials announced prior to this call report over $58 million in cash, providing at least 2 years of runway to execute on our strategies. Turning to our DMD Phase III program. I would like to provide an update on the status of our HOPE-3 Phase III clinical trial. HOPE-3 is a randomized, double-blind, placebo-controlled clinical study designed to enroll approximately 70 patients in the United States. We will be treating patients who are largely non-ambulant and in the later stage of the disease process for whom very few therapeutic options exist. All of our patients are required to be on best medical therapy, which includes corticosteroids. This patient population comprises over 1/2 of the DMD market or about 10,000 boys and young men per year in the U.S.A. We are actively onboarding sites for HOPE-3 and are now actively screening patients at our first site. It is our objective to bring on board more than 20 sites in the next several months. Based on the strength of the HOPE-2 data, the publication in the Lancet and anecdotal reports of the patients, the enthusiasm for HOPE-3 runs strong in the patient community. As you know, Capricor's agreement with Nippon Shinyaku comes with potentially up to $705 million more in milestone payments, some of which, if achieved, will be paid during the course of HOPE-3. We also, upon FDA approval, will qualify for a rare pediatric coupon voucher for which Capricor retains the rights. In the past, these coupons have in and of themselves become very valuable assets for these companies that have had their products approved. If CAP-1002 is approved for the older boys, we believe that there will be a substantial opportunity to expand the indication to even younger patients with Duchenne muscular dystrophy. This population similarly has a material unmet need. Further, the existing exon-skipping drugs have well-described limitations, and the gene therapy space is moving much more slowly than many have hoped. There is nothing inconsistent with the concept of combining CAP-1002 and any of the multiple therapeutic options currently available or in clinical development. Lastly, I would like to reiterate that as additional data -- clinical data becomes available, our goal is to continue to discuss our path to registration with the FDA. Finally, I would like to give you an update on our exosome platform technology. We continue to advance this platform on multiple fronts. Let me remind you that exosomes are nature's communication devices. They are capable of delivering cargo directly into the cytoplasm and we believe that they should have a safety and efficacy profile far better than a manufactured lipid nanoparticle. The most important aspect of the exosome is that they can be targeted using extra vesicular receptors to which a targeting molecule can be attached. Our team is hard at work expanding the payloads and targeting capabilities of our platform. These include, but are not limited to, loading, siRNAs or small inhibitory RNAs, small molecules and proteins within or on the surface of the exosomes along with developing high affinity targeting capability and moving towards a scalable and cost-effective manufacturing paradigm. The options for both vaccine platform and therapeutics based on our bioengineered exosome platform are extensive. And I'll be providing more color on the development of the exosome platform at future meetings and in publications. As always, a partnering strategy essential to our business model, with the objective of finding excellent commercial and development partners as well as additional nonequity capital. In conclusion, stay tuned for further updates on our Phase III DMD program and the continued advancement of our exosome platform technology. I want to reinforce that over the last year, we have delivered on our goals. These include a partnership for DMD and the publication of our Phase II results in a highly respected medical journal and enhancement of our management team and manufacturing capabilities as well as the advancement of the exosome platform technology. While we currently are focused externally on DMD and HOPE-3, we also recognize the value and importance of the exosome platform. Through a careful management of capital, partnerships and strong clinical data, we approached the second quarter with tremendous energy and optimism. Over the next few months, we plan to present at various banking, scientific and advocacy conferences, including several high-profile RNA and nonviral delivery symposiums in Boston focused on our exosomes program. We will also be providing an update on our DMD program at the annual Parent Project for Muscular Dystrophy Meeting in Scottsdale in June of this year. I will now be turning the call over to A.J. Bergmann, our CFO, for a more detailed update on the financials. A.J.?

Thank you, Linda. This afternoon's press release provided a summary of our first quarter of 2022 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 31, 2022, the company's cash and cash equivalents totaled approximately $58.3 million compared to approximately $34.9 million on December 31, 2021. Turning quickly to the financials. In the first quarter of 2022, our net cash provided by operating activities was approximately $24 million, driven by the $30 million upfront payment from Nippon Shinyaku. For the first quarter of 2022, excluding stock-based compensation, our research and development expense was approximately $4.9 million compared to approximately $3.2 million in Q1 2021. And excluding stock-based compensation, our general and administrative expense was approximately $1.9 million in Q1 2022 and approximately $1.3 million in Q1 2021. Net loss for the first quarter 2022 was approximately $7.8 million compared to a net loss of approximately $5.2 million for the first quarter of 2021. We will now open the line up for questions.

[Operator Instructions]. We take our first question from Joe Pantginis with H.C. Wainwright.

Few, if you don't mind. So first, I guess just going back to your prepared comments, Linda. HOPE-3, you talked about even potentially expanding to younger patients non-advanced in the future. Just curious if this could be something that Nippon might be interested in funding and/or accelerating? And how we could think about broadening the market there?

Yes. Joe, so great to hear your voice. Thank you so much for joining us today. We haven't discussed the younger patients, specifically with Nippon Shinyaku. We're very busy launching HOPE-3 and getting that program up and running. I will say this, the relationship is very warm with them and we're very excited at all of the opportunities ahead of us, both for the non-ambulant and the ambulant patients.

Got it. Got it. So if we focus on HOPE-3 a little bit, obviously, you said you're screening patients at the moment. I'm going to make an assumption here. So let me know if I'm sort of right or wrong or going in the right direction that there might be a decent backlog of patients that are ready to be screened either patients that were ready for HOPE-2 or just the word that's gotten around from different advocacy groups or what have you so it seems like this could enroll relatively quickly?

Yes, that certainly is our thinking. We certainly get a lot of feedback from families, from the community, from physicians that there's a lot of words sort of in the community that CAP-1002 is delaying the progression of Duchenne muscular dystrophy, both. We hear this anecdotally and also, of course, the published data supports that. So yes, we're expecting that the trial will enroll well.

Okay. Got it. And then I know you sort of said we'll get more details on exosomes in the future. I don't know if you wanted to tease us with any potential favorite indications. But maybe a specific part of that question is, I guess, level of advancements so far, like do you have the relative models in hand -- the requisite models in hand, I should say?

Yes. So as you know, I'm really excited about the exosome platform. CAP-1002 has performed as we pretended that it would. It's showing efficacy in the treatment of DMD. And we believe that our exosomes will have as brighter or brighter future as drug delivery vehicles. What we've done has been laying the groundwork, building the foundation of the home, framing it in of learning how to manufacture these things to scale, getting the agreements in place to make large numbers of exosomes, working on targeting technologies. Can we send an exosome to the liver, to the kidney, to the muscle, to the brain and then ultimately, custom loading content either on the inside or on the outside for therapeutic opportunities. What I can tell you is that we're very far ahead in the development of these sort of core technologies now and are identifying indications which we're going to be coming forward with very soon. Very soon meaning in the next couple of quarters.

Got you. Got you. That's helpful. And then maybe just shifting gears a little bit, maybe for A.J. If I read the press release correctly, you got the $30 million. This -- was it in the first quarter or the second quarter that you received the $30 million? And just curious about how you're looking to account for it?

Yes. Thanks, Joe. The money came right at the end of the first quarter. So it's booked on the balance sheet as you'll see with our cash position going up substantially, likely be turning to the accounting concept of it, we'll be ratably recognizing this income really over the duration of our clinical development program, pretty standard recognition from an accounting concept. But the money is in the bank and gives us a nice runway of well over 2 years at this point. So it's good to have.

[Operator Instructions]. It appears there are no further questions at this time. I would like to turn the call back to Linda Marban for any additional closing remarks.

Thank you for joining us today. We look forward to seeing you at meetings as we are now finally able to be out and about in the community and stay healthy during these tumultuous times. Have a good day. Bye.