Linda Marbán - President, Chief Executive Officer and Director AJ Bergmann - Principal Financial Officer and Vice President, Finance.

Analysts:.

Good afternoon, and welcome to the Capricor Therapeutics 2015 second quarter conference call. [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 Inc.

as well as the 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 dates for commencement of the clinical trials, IND filings, similar plans or projections of 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, in our Registration Statement on Form S-1, as filed with the Securities and Exchange commission on March 06, 2015, and in our Form 10-Q for the quarter ended March 31, 2015, as filed with the Securities and Exchange Commission on May 12, 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.

If you do not have a copy of the press release issued earlier today, it is available on the Capricor website 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 was held and recorded on August 13, 2015, since then Capricor may have made announcements related to the topics discussed, so please reference the company's most recent SEC filings and press releases. It is now my pleasure to introduce your host, Dr.

Linda Marbán, CEO of Capricor Therapeutics; and AJ Bergmann, Vice President of Finance..

Good afternoon and thank you for joining us on our second quarter update. Joining me today is AJ Bergmann, our Vice President of Finance. I'll summarize highlights of the second quarter and recent events. AJ will then review the financials. The second quarter was one with continued progress and productivity at Capricor.

Our Duchenne's muscular dystrophy program reached two important milestones, which were, one, the receipt of orphan drug designation for CAP-1002 in Duchenne muscular dystrophy-related cardiomyopathy; and two, the receipt of clearance from the FDA for our HOPE-DUCHENNE Phase I/II trial.

While our other clinical programs, ALLSTAR, DYNAMIC and the natriuretic peptide continue to progress, we have taken the opportunity to strengthen our management team with a number of key executive appointments. Let me begin by discussing the management upgrade that we have undertaken. We recently announced the appointment of Dr.

Deborah Ascheim, as Capricor's Chief Medical Officer in this newly created position. We are delighted to have enabled to recruit Dr. Ascheim, with both an accomplished cardiologist and an accomplished clinical trialist. Dr.

Ascheim comes to us after a distinguished academic carrier at Columbia University, and most recently at the Mount Sinai School of Medicine in New York City. She is a board certified cardiologist with a specific expertise in heart failure.

Her primary responsibilities at both Columbia and Mount Sinai, was development, launching and operation of clinical research organization. In this capacity, Dr. Ascheim has been an investigator as well as an individual, responsible for the conduct of both strong and large clinical trial.

She is very well established within the clinical trial community, and has extensive experience working with regulatory organization, the National Institute of Health and the clinical sites around the world. We recruited Dr.

Ascheim, because we believe that as we grow and continue to evolve with the company, we need to continuously upgrade and enhance our management team. Given the breadth of clinical activities that we have both ongoing and planned, we believe that an individual of Dr. Ascheim's background and experience will prove to be invaluable.

We also recently announced the appointment of Dr. Houman Hemmati, M.D., Ph.D., as Vice President of Medical and Clinical Development for New Therapy. Houman earned his undergraduate degree at Stanford, his medical degree at UCLA and earned a Ph.D.

in cell biology from the California Institute of Technology, where he worked on neural stem cells and glioblastoma. Following his Ph.D., Houman completed an ophthalmology fellowship at Johns Hopkins University in Baltimore. Dr. Hemmati previously worked in the ophthalmology group at Allergan.

Given the potential commercial opportunity as well as the platform capability of our new exosome therapeutics program, we started bringing in a specially designated individual with relevant experience in clinical medicine and cell biology as well as drug development, to provide additional focus and expertise for us to enhance the trajectory at our program.

To remind you, exosomes are biologics produced by cells, and are responsible for cell-to-cell communication. They are made of cell membrane, and these nanoparticles are loaded with a variety of RNAs, including micro, messenger, Y and non-coding fragment that are critical in the regulation of cellular function.

Our exosomes are unique and proprietary and appear to be potentially useful as an agent to treat anti-inflammatory and fibrotic diseases. We are very excited about the potential of exosomes, and I will provide more details in a few moment. Our third critical hire has recently joined the company. Dr.

Luis Rodriguez-Borlado, Ph.D., has joined Capricor as Vice President of Regenerative Therapy. Luis is a unique individual and that he had worked at the status Spanish biotechnology, Coretherapix.

In his role of Scientific Director there, he gained a wealth of experience with respect to product development, manufacturing, scaling and marshaling cell therapy programs through the clinic and beyond.

Louis will become an integral member of our cell manufacturing, as well as our exosomes development team building on his prior experience in taking a cell therapy from concept to clinic.

We are very pleased with these management upgrades and are confident that we will have a critical mass of talented and experienced individuals to move both our cell and exosomes platforms forward with full vigor. At this time, I would like to go through some of our ongoing clinical program.

We remain extremely excited about to soon to begin trial for Duchenne muscular dystrophy associated cardiomyopathy. This trial called the HOPE-DUCHENNE trial will be the first ever cell therapy trial designated for the treatment of young men with Duchenne cardiomyopathy.

As we have previously announced, this therapy received orphan drug designation from the U.S. Food and Drug Administration for the specific indication and we have an improved IND and are clear to begin the trial. To remind you, Duchenne muscular dystrophy involves all muscles in the body.

Most of the therapies that have received press during the last few years are directed at the skeletal muscle pathology of Duchenne. Capricor is focused on the cardiomyopathy associated with this genetic muscle wasting disorder. The prevalence of cardiomyopathy in boys and young men with Duchenne is 100% or close to that.

Virtually all the boys become effective with the cardiomyopathy as they age. The first signs of cardiomyopathy are often seen in the pre-teen and seniors and for those boys who are able to live past that time period, they often run into trouble with congestive heart failure.

The pathophysiology of Duchenne cardiomyopathy is the same as that of skeletal muscle, in that the genetic mutation responsible for the abnormal dystrophin protein results in excess accumulation of calcium in the mitochondria, the power generator of the cell.

Mitochondrial swelling impairs cellular metabolism and energetics, which leads ultimately to cellular and tissue damage. From the clinical point of view, the first signs of Duchenne cardiomyopathy are the appearance of patchy fibrotic areas within the heart.

These can be relatively defused or scattered and we know scar increases over time to a high level of fibrosis in the heart, which ultimately leads to significant impairment in cardiac function. Heart failure is the most common cause of death for patients affected with DMD.

The extensive body of preclinical work that we have previously presented in the mdx mouse model has demonstrated that CDCs are capable of reversing cardiac fibrosis and improving cardiac function, as well as improving exercised tolerance in mice. As such, we are very excited about the potentials to treat these very needy young men.

I'll remind you that the treatment is an intracoronary infusion of the cell into each of the three coronary arteries in boys and young men with scar beginning to accumulate in the heart.

HOPE-DUCHENNE is a Phase I/II clinical trial of which the first clinical experience will be to treat 24 patients in a one-to-one randomization design where inclusion will be based on a minimum amount of scar in the heart as measured by MRI. Patients will either get cells or standard of care.

Safety and potential efficacy data will be reviewed at several time points, the most relevant of which will be scar size reduction in the heart at six-month post-treatment.

We are currently finalizing paperwork and IRB requirements at three sites in the United States, and we hope to begin dosing this trial later this quarter or early in the fourth quarter of 2015. Next, I wanted to discuss both the DYNAMIC and ALLSTAR clinical trials.

As you recall, the DYNAMIC trial was a triple vessel infusion Phase I trial funded by the NIH that completed enrollment in the second quarter of this year in patients with Class III and ambulatory Class IV heart failure.

We treated a total of 14 patients, and as this is primarily a dose escalation safety trial, infusing cells on all three coronary artery. The follow-up period is ongoing and we should have data available to present and discuss in the fourth quarter. Our Phase II clinical trial ALLSTAR continues to enroll. We continue to open new sites in the U.S.

and most recently received approval from the Canadian Ministry of Health to expand the trial into Canada. It is our aim to include a number of international sites in addition to the U.S. sites to further expedite enrollment for this trial. I remain optimistic about the ALLSTAR Phase II clinical trial.

Next, I would like to mention a few words about the ongoing Cenderitide clinical development plan. We have completed the first set of 14 patients and it's a IIa clinical trial. And we will next initiate a second group of patients at higher doses to determine tolerance, as well as pharmacodynamic in a higher dose infusion paradigm.

The goal of this Phase IIa trial is to determine the ability to deliver Cenderitide by using the Insulet's OmniPod infusion pump and to maintain predictable and controllable blood levels, as well as meaningful hemodynamic, as well as neurohumoral effect.

What we can say from the first group of patients is that there was no significant safety issues and that the Insulet pump prove to be an excellent vehicle for delivery of the drug. It was well-tolerated and we were able to control the blood levels of the drug by augmenting the infusion rate through the Insulet pump.

We should have results to present when the trial is completed, some time towards the end of the fourth quarter of this year or the first quarter of next year. I would now like to provide a little bit of more color of our exosome platform technology.

We believe that the exosome platform presents a very logical and important next generation expansion of our cell therapy platform. At present, we have no plans to expand our cell therapy programs beyond the cardiac indications.

That said, exosome, as I mentioned earlier in this call our nanoparticles that are secreted by cells, they are full of RNAs and proteins. And they interact with adjacent cell as one of the principle cell signaling modality. Preclinical data have demonstrated that we can replicate the effect of CDCs by using the exosome they produce.

Specifically we now know the CDC exosomes are anti-inflammatory, anti-apoptotic, anti-fibrotic and flow-regenerative. As such, they represent what we believe to be an important next-generation platform in the use of biologics for the treatment of disease. Indeed, the field of exosome technology is progressing very rapidly.

And based on the number of publications recently, interest in exosome is growing at an exponential pace. I am proud to say that Capricor is at the forefront of this exosome field.

We are developing enhanced techniques for the production of exosomes of larger pre-commercial scale, as well as the lyophilization and delivery, but we have not disclosed the various areas in which we intend to deploy our exosome therapeutic, as we might be able to glean from the recruitment of Dr.

Hemmati we are focusing in part on ophthalmologic diseases. We will have more color, as we move forward on our exosomes program and we remain hopeful that we can enter the clinic in 2016 with the unique exosome therapeutic.

In summary, Capricor has had a very busy first half of the year, and we remain confident that we can deliver a meaningful result on our various programs. I am now going ask AJ Bergmann to provide a brief update on our financials..

Thank you, Linda. This afternoon's press release provided details for the second quarter of 2015. The press release is available on the company's website.

For the second quarter of 2015, the company reported a net loss of approximately $3.1 million or $0.19 per share compared to a net loss of approximately $1.5 million or $0.13 per share for the same period in the prior year.

Research and development expenses increased to approximately $3.4 million in the quarter ended June 30, 2015, compared to approximately $1.9 million for the same period in the prior year.

The increase was primarily due to increased clinical expenses relating to our products, including the DYNAMIC and Cenderitide trials as well as the ongoing ALLSTAR Phase II clinical trial.

General and administrative expenses increased to approximately $900,000 in the quarter ended June 30, 2015, compared to approximately $700,000 million for the same period in the prior year. The increase was primarily due to increases in compensation expenses related to increased headcount and non-cash stock-based compensation cost.

At quarter end, we had over $20 million in cash and marketable securities available. In addition, there is approximately $11 million that is yet to be disbursed to us under the terms of our CIRM loan award, which will be attributable to expenses incurred in the ongoing Phase II ALLSTAR's trial.

We believe this cash will be sufficient to take us to the fall of 2016. And with that, I will turn it back over to Linda..

Thank you, AJ. I want to thank everyone for being part of today's call, and also apologize for the ambient construction noise that inadvertently occurred outside of our office just in time for this call, but I hope that you were all able to hear, despite the sound of the trucks moving on around outside.

With that in mind, and with my most sincere interest, I will open the line for questions..

[Operator Instructions] And there appear to be no questions at this time. I'd like to turn the floor back to Linda Marbán for closing comments..

:.

End of Q&A.

Well, noting that there were no questions, I'm guessing that that means that everybody enjoyed the presentation this afternoon. And feel free to follow-up with me individually, if you have any questions as you review the information presented or any of the other information regarding the company.

And with that, I'll say, thank you for joining and looking forward to talking to you next quarter..

This concludes our teleconference. You may disconnect your lines at this time. Thank you for your participation..