Linda Marbán - CEO AJ Bergmann - VP Finance.

Ted Tenthoff - Piper Jaffray Reni Benjamin - H.C. Wainwright.

Good afternoon and welcome to the Capricor Therapeutics 2014, Fourth Quarter Conference Call. At this all lines are in a listen-only and the floor will be open for questions and comments following the presentation.

[Operator Instructions] As a reminder, this presentation contains forward-looking statements and information that are based on the beliefs of the management of Capricor Therapeutics, Incorporated, as well as assumptions made by and information currently available to Capricor.

All statements other than statements of historical fact included in this presentation are forward-looking statements, including but not limited to statements identified by the words “anticipates,” “believes,” “estimates,” and “expects” and similar expressions.

Such forward-looking statements also include any expectation of or date for commencement of clinical trials, IND filings, similar plans or projections and other matters that do not relate strictly to historical facts.

These statements reflect Capricor’s current views with respect to future events, based on what we believe are reasonable assumptions; however, the statements are subject to a number of risks, uncertainties and assumptions.

There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements.

More information about these and other risks that may impact our business are set forth in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on March 16, 2015, and in our Registration Statement on Form S-1 as filed with the Securities and Exchange commission on March 06, 2015.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those in the forward-looking statements. Further, Capricor’s management does not intend to update these forward-looking statements and information after the date of this presentation.

It is now my pleasure to introduce your host Dr. Linda Marbán, CEO of Capricor Therapeutics, and AJ Bergmann Vice President of Finance. AJ you may begin..

Thank you and good afternoon everyone. I am AJ Bergmann the Vice President of Finance for Capricor Therapeutics. Thank you for joining today’s call. If you do not have a copy of the press release issued earlier this afternoon it’s available on the Capricor Web site at www.capricor.com. The call is expected to last approximately 30 minutes.

For the benefit of those who maybe listening to the replay this call is held and recorded on March 18, 2015 since then Capricor may have made announcements related to the topics discussed, so please refer to the company’s most SEC filings and press releases. With that I’ll turn the call over to Linda..

Good afternoon everyone, and thank you for joining. I look forward to updating you on the progress we've made over the last quarter. Slide 2, as mentioned a moment ago this presentation will include forward-looking statements. On Slide 3, I’m going to review today’s agenda.

Over the next two slides I’m going to review some of our upcoming milestones, then I’ll provide a financial update, a clinical update including a glimpse into our new program in DMD cardiomyopathy. And finally we’ll look at our 2015 plan deliverable. On Slide 4, I’ll highlight Capricor’s heart failure program.

Just to review we’re a clinical state company with a very diversified pipeline focusing on cardiovascular disease including orphan indication. Our first product is our regenerative medicine CDC, Cardiosphere-Derived Cell product.

Second in our pipeline and in the clinic now is Cenderitide, the class of drug called Natriuretic Peptide, which we’re developing for heart failure. And finally in preclinical development we’ve a microRNA delivery platforms based on Exosomes. Exosomes are nanoparticles which are microRNA deliver vehicle that perpetualite cell function.

This next Slide 5 reviews our recent milestones and accomplishments. On the financial side earlier this month we were pleased to have received approval to uplift to the NASDAQ exchange. As most of you know, in the early part of this year we completed two pipe transactions netting approximately $17 million of new capital.

These financings included investments from Cedars-Sinai Medical Center, CureDuchenne Ventures and two highlight respected institutions Broadfin Capital and Sabby Capital, as well as participations from members of our management team and Board of Directors.

Adjacently, the company has filed an S-1 Registration Statement for this year, and we hope that it will become effective soon. In addition, we’ve expanded our management team by adding an experienced Vice President of Regulatory Affair. With respect to our cell therapy programs we continue to make progress.

We presented positive one year safety results on the ALLSTAR Phase 1 clinical trial at ACC and AHA in 2014. That data is available on our Web site. We were pleased that the cell [growth] state and initial data showed reductions in [anti-oxides] and improvements in injection fashion in the state 2 eligible patient population.

Another important milestone was the initiation of the dynamic clinical trial for treating advanced heart failure patients. This is important for the company, in that it is the first time we are treating relatively sick advanced heart failure patients.

Additionally, we've recently announced that we’re developing a clinical program for Duchenne muscular dystrophy using our CDCs based on positive preclinical data showing that CDCs can improve cardiac function and exercise capacity in the cardiomyopathy associated with Duchenne muscular dystrophy.

Now let's talk about Cenderitide, our second therapeutic to treat heart failure. We are excited about the initiation of the Cenderitide program. As you may recall, Cenderitide is a very potent natriuretic peptide dual receptor agonist and we got access to it as part of the merger with Nile.

Recently, we initiated a Phase 2 study first in its kind combining the Cenderitide drug with the Insulet delivery system in patients with heart failure. This is in essence of early proof-of-concept study to look at the pharmacokinetics and pharmacodynamics of longer subcutaneous delivery via the Insulet patch pump.

Further you may recall that we've acquired IP rights to the combination of natriuretic peptide and their use by subcutaneous pumps by Medtronic. This represents a potentially critical piece of intellectual property that is as yet a work in progress. On Slide 6, I'm going to review our financial highlights -- our annual financial highlights.

We ended 2014 with $11 million in cash on our balance sheet. February this quarter, as you know and I just stated, we added another $17 million in cash. Our year-end 2014 numbers include revenue of $4.8 million, which is a combination of grant revenue and the ratable recognition of the Janssen option fee which you may recall was $12.5 million.

Our R&D expenses were approximately $7.8 million, mostly related to the expansion of our clinical activities. Our G&A expenses were approximately $3 million and our total operating expenses were approximately $10.8 million realizing a net loss per share of $0.53.

Please be advised that these numbers do not include the expected funding from the CIRM loan program slated to fund the ALLSTAR trial which should include approximately another $10 million. Okay, now I'm going to provide a clinical program update. Moving to Slide 8, I'd like to review the status of our CDC program.

As you know the ALLSTAR trial which is designed to determine if our CDCs can reduce the size of a scar caused by myocardial infarction in patients 30 days to one year following moderate to large heart attack, is currently enrolling in the Phase 2 randomized portion.

We continue to expect data release on that trial at the end of 2016 or the beginning of 2017. The DYNAMIC clinical trial as I mentioned before, is enrolling relatively sick patients including Class III or ambulatory Class IV patients that have heart failure from a variety of causes.

They've almost completed the enrollment of the first 14 patients in that study. Just to reiterate the purpose of this trial is to demonstrate the safety and feasibility of triple vessel direct coronary infusion of CDC and is a dose escalation trial with up to 25 million cells infused into each coronary artery.

We believe that triple vessel delivery will be beneficial to deliver cells globally for all areas of myocardium which is hugely damaged in later stage of the heart failure and patients with the generalized left ventricular dysfunction. We anticipate reporting top-line results late in 2015.

Finally, we're going to update you on our Duchenne Muscular Dystrophy cardiomyopathy program. We are extremely excited about this program directed at boys and young men with this beta orphan disease. To remind you cardiomyopathy is a ubiquitous finding in these boys with DMD.

Especially as they enter their teens and early adulthood and is marked by progressive cardiac fibrosis and frank heart failure. At present there are no great therapeutic options for these patients and it is now considered to be the number one cause of death in these young men.

Earlier this month we had a pre-IND meeting with the FDA and we are targeting to submit our IND exhibit indications in the first half of this year. Slide number 9 reviews the rationale for use of CDCs in Duchenne Cardiomyopathy.

To remind they are the well-established literature from multiple sources that demonstrate CDC to be anti-oxidator, anti-inflammatory, anti-apoptotic which means programmed cell death anti-remodeling and pro-regenerative.

The pathophysiology of DMD Cardiomyopathy is known to be related to excess oxidative and nitrosis [indiscernible] increased inflammation, progressive apoptosis and adverse cardiac remodeling. The thesis is that CDC administration will be beneficial in retarding and reversing the cardiac dysfunction caused by DMD.

And this has been tested and validated in the standard mdx mouse model which is considered to be a good model to study DMD prior to human clinical trial. Slide 10 demonstrates some of the important global cardiac function improvements seen after treating the mdx mouse with the CDC.

Moving from left to right let's look at the indices of cardiac function. First we’ll project with respect to ejection fraction and blue we have the controlled healthy mice. And yellow we have the mdx mice treated only with the vehicle that is the basic delivery solution. In red, we have the mdx mice treated with the single infusion of our CDC.

We see that there is a dramatic improvement in the ejection fraction which persist but draws out towards month three. Remember that and it mice everything is dramatically accelerated and the life span of these mice is actually only approximately two years.

The middle panel shows the effect on diaphragm volumes and the panel on the right shows the effect on systolic volume demonstrating that in the mdx mice that were treated with CDCs, the volume reverts after three months somewhere between the normal mice and the sick mice that received no treatment other than vehicle.

Slide 11, this slide shows some very interesting data. An increased maximum exercise capacity in the CDC treated mice. The mice represented in the blue line, again are normal mice, they are able to exercise on the treadmill and run approximately 700 meters, week-after-week.

There is the sick mice that received no therapy other than the vehicle have limited functional capacity and are able to exercise just over 200 meters on average. The treated mice in fact are able to exercise between 400 and 500 meters, more than doubling their exercise capacity and this effect persist for weeks on end.

This is quite a remarkable finding and whether it is strictly related to an increasing cardiac functioning capacity or if in addition to this there is some systemic effect. We do not yet know.

Slide 12, in summary our data on the use of CDCs and MDX cardiomyopathy in mice shows improved global functions, increased by inflammation fibrosis, amount of scar on the heart and improved exercise capacity.

There is data that we do not show here that suggest that we can reverse some of the negative oxidation effect that are going to on these hearts as well as reversal of abnormalities in mitochondrial abundance, structure and function.

Remember that the mitochondria are the power generators of the cells and so therefore responsible for making the energy that the cells consume and drive the heart and muscles to work. Finally, the data has shown increases in cardiomyopathy proliferation and activation as well as improvement of endogenous repair mechanism.

There is a fairly large body of detailed scientific information but I don’t have time to present that on this call, but I encourage you to go to our website where this data is fully available for your review.

On Slide 13, I want to talk a little bit about our recently initiated enrollment in our Cenderitide trial for outpatient and ambulatory heart failure.

Just to reiterate we’re doing -- what we’re doing is taking our natriuretic peptides, which is again a dual receptor agonist, the only one currently in the clinic and we’re combining it with the insulin patch pump and we’re going to use it in ambulatory patients.

Our target indication our patients who have recently been hospitalized with either recent or acute heart failure, including potentially the very problematic group of heart failure with persevered left-ventricular dysfunction, as well as other potential indications. The goal of this clinical program will be to keep people out of the hospital.

I want to highlight that we’re particularly bullish on treating the subgroup of patients who have heart failure with preserved left-ventricular dysfunction otherwise known as [indiscernible] for which there are no established therapeutic guidelines.

These patients represent approximately one-half of all hospital admissions for heart failure therefore they represent a huge unmet clinical need opportunity. Our current Phase 2 trial is enrolling up to 14 patients with chronic heart failure using a dose escalation paradigm in each individual patient via the insulin patch pump.

This study is primarily designed as a pharmacodynamic and pharmacokinetic study, and we expect the results of this study to lead to the design and execution of a subsequent Phase 2 study using Cenderitide. We anticipate providing top-line results during the second half of 2015.

Just to try and guide you with the little [premier] on the role of natriuretic peptides. Natriuretic peptides are extremely important molecules. They act both on the kidney, the blood vessels in the heart.

They have previously been used only in decompetitive heart failure that is upon or thoroughly after the admission to the hospital where they have been proven to be relatively effective and safe. For this indication there are number of therapeutic options.

What we’re doing is we’re moving this very important class of molecules into the outpatient chronic therapeutic settings. Just to remind you recent data from the Novartis, LCZ 696 drug showed a dramatic reduction in hospitalization and even mortality in patients who had mostly Class I and Class II heart failure.

The Novartis drug works in part by inhibiting the enzyme that raises the local endogenous level natriuretic peptide at the cell.

Therefore we’re hopeful that providing the actual agonist with the patch pump and then having the ability to very precisely control the dosage and administration has optimize the effect on patients, that -- we have a very new powerful therapeutic approach to chronic heart failure in a variety of causes.

On slide 14, we talk about our pipeline programs using Exosomes as a therapeutic. We are excited about Exosomes. The endogenous microRNA delivery system. But they remain summered off in the future.

These are the partials that are released by cells at a responsive in part for cell-to-cell communication and are in fact in some major measure -- potentially large major impact responsible for the potency of our CDC cell. Our goal here to eventually develop a biologic, but non-cell based therapeutic that could have many salutatory effects.

This work remains in progress and we’ll have more color for you in the next several quarter. On Slide 15, we present some of our upcoming expected milestones. In the first half of the year we intent to submit the IND for DMD associated cardiomyopathy.

We will anticipate completing the first phase of the DYNAMIC trial, and we’ll complete enrollment in the 14 patients Phase 2 Cenderitide trial. In the second half of this year we would expect to have initial results on the DYNAMIC trial.

Again to reiterate this is primarily a proof-of-concept and safety trial in a small number of patients that’ll hopefully allow us to move to the next level.

We’ll report the initial results on the Cenderitide type cohort is currently enrolling and if all goes well, we will initiate therapy on the Duchenne Cardiomyopathy trial with the CDCs that we’re calling HOPE-DUCHENNE. First time we’re having four clinical programs and three products in our pipeline are now in IFS, NASDAQ up-listed company.

We’re looking forward to a productive 2015. And with that, I finish up my summary and we open up the line for Q&A. Thank you for your time today..

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Ted Tenthoff with Piper Jaffray. Please proceed..

Thank you very much for the thorough update Linda. It's really exciting the progress and also the expansion of the opportunity with the CDC. I guess kind of looking at delivery you started to talk about Exosome.

Can you tell us a little bit more about sort of how these cells are -- what’s happening when the cells look like in the heart and what’s happening as they get there and how broadly are they able to get either through the heart picture or is it really just this type of injury, how do you think about delivery there?.

So the Exosomes are really exciting to have because they are first therapeutic that we really truly consider our platform therapeutic.

We are by no means limiting the indications that we’ll go after to the heart itself and so one of the things we’re working on in the lab is understanding delivery of Exosome and not only for the heart, but other places as well and you look we’ll provide more color on that probably over the next year or so..

And then in terms of the cells actually through the myocardium, how do they distribute over there?.

Yes so, of course we don’t really know in humans, but we’ve published extensively in animals and what happens is the process called extravagation and that’s why we’re sticking very closely to the intracoronary delivery method.

There is a little bit of magic that happens when the cells probably lodge in the micro vessels somewhere and then they're taken up into the issue in a natural way, the way that any other molecule would get into the myocardium and we feel that this is the powerful way that the cell should work even in small number..

Thank you. Our next question comes from the line of Reni Benjamin with H.C. Wainwright. Please proceed..

Just a couple of questions, I guess one on enrolment update on I guess both DYNAMIC and ALLSTAR. I think you mentioned Linda that ALLSTAR is expected to complete enrolment by the second half of 2016, maybe early 2017.

Can you give us any additional color on the enrolment of ALLSTAR?.

Yes, so we tend to stay away a little bit from enrolment numbers, we just kind of get caught in that and there's slow periods and fast periods in all of these trials. We’re expecting data out in late 2016, early 2017 for ALLSTAR and that the top-line data that we’ll be passing onto [Janssen].

And then in terms of DYNAMIC, I think we've said that we’re going to complete enrolment in the first-half of 2015 and we are definitely on track to do that..

And in terms of data presentation this year, could we be targeting something like ASA or do you have a sense as to how either preclinical or clinical data might come out here and at was constant?.

Yes, so we always target the major meetings. We like to have a presence at them, both with the preclinical and the clinical data and we're strategizing now how and when to release the data and where to go with that. And so, we’ll let you know at the time where we're presenting and what we're presenting..

Just shifting gears real quick to DMD, can you give us any color on for that there was a pre Phase 1 or pre-IND meeting that you had with the FDA? And has there been any changes to the whole trial design and can you just review with us the whole trial design?.

Well I don’t -- we’re not talking about the trial design as yet. We’re very excited about it. We had a good meeting with the FDA and what I can tell you is the strategy that we went in with is pretty much the strategy we walked out with. And we’ll be announcing that trial soon.

We don’t want to compromise our information that was given to us by the FDA which was given in confidence and so we’re -- suffice to say that we have enough data to prepare an IND which we’re actively doing at this time..

And just one final question kind of piggybacking off of that regarding the Exosomes.

As a platform technology, can you -- I know it's very early and hopefully we’ll see some preclinical data later this year, but could you expand about how this might be used as a platform more than just something specific to look very cardiovascular indication?.

Well so basically what we’re looking at are indications where some of presentations would be inflammation fibrosis in other words scar, apoptosis which is programmed cell death, so the types of injuries that you’d see for sure in the heart -- in the damaged heart but -- and you can think about many of those types of diseases in the [indiscernible] we're also targeting orphan indications.

We feel like that there is a real opportunity here for us to take what we know and we have these cells that are making these Exosomes both of which are powerful therapeutic and we’ll likely be able to use them in different types of injuries and different types of healing processes..

Is there a potential to generate -- I don’t know call them designer Exosomes where maybe you're working in collaboration with other biotechnology companies in order to use gene therapy or some other type of technologies that make it more custom designs or is that not really in the cards?.

One of the strengths of Capricor is our really strong connection to the academic labs of Eduardo and at [Peter Stine] and so a lot of these questions are under investigation in the lab right now.

It's certainly something that everybody is looking at, is designer Exosomes and whether we can pack them full of things that we want to deliver and how to get them there. So it's something we’re actively working on and we’ll be able to provide more information on that as we learn more about them ourselves, they are very exciting to us..

Thank you. And we have no further questions in queue at this time. I would like to turn the floor back over to Dr. Marbán for closing remarks..

Thank you very much for attending our call this afternoon. I look forward to updating you on our progress in the next quarter. And we look forward to continuing to deliver on our milestones. Thank you..

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. And thank you for your participation..