Linda Marbán - Chief Executive Officer Leland Gershell - Chief Financial Officer AJ Bergmann - Vice President of Finance.

Mark Breidenbach - H.C. Wainwright Ted Tenthoff - Piper Jaffray.

Good afternoon and welcome to the Capricor Therapeutics Fourth Quarter and Full Year 2015 Financial Results and Business Highlights Conference Call and Webcast.

Please note this presentation will include a slide presentation, which can be viewed through the webcast link or is also available on the company’s website in the Events and Presentations section.

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 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 statements regarding the efficacy, safety, and intended utilization of Capricor’s product candidates, expectation of or dates for commencement of clinical trials, IND filings, plans regarding current and future collaborative activities and the ownership of commercial rights, expectations with respect to the expected use of proceeds from offerings and the anticipated effect of offering, 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 Capricor’s business are set forth in Capricor’s 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 its Registration Statement on Form S-3 as filed with the Securities and Exchange commission on September 28, 2015 and in its quarterly report on Form 10-Q for the quarter ended September 30, 2015 as filed with the Securities and Exchange Commission on November 13, 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.

Capricor’s financial results press release for the year ended December 31, 2015 was issued earlier and can also be accessed on the company website at www.capricor.com. As a reminder, this teleconference is being recorded. For the benefit of those who maybe listening to the replay, this call was held and recorded on March 17, 2016.

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 Dr. Leland Gershell, CFO. I will now turn it over to Dr. Linda Marbán..

Thank you. Good afternoon and thank you for joining us for our fourth quarter update call. Joining me today is Leland Gershell, our Chief Financial Officer and AJ Bergmann, our Vice President of Finance. I will summarize some highlights of the fourth quarter and recent events. Leland will then review the financials.

Since our last update call held in November, Capricor has made significant progress in several of its research and development programs as well as in building an overall organization.

I would like to start this call by telling you that as confirmed just yesterday by the unanimous vote of the Independent Citizens Oversight Committee of the California Institute of Regenerative Medicine that Capricor has been awarded an approximate $3.4 million grant to support our HOPE-Duchenne clinical trial.

The specific term and disbursement schedule will be determined shortly, but we are very excited to have the support of CIRM in this very important clinical program.

We believe that this $3.4 million together with the $4 million in equity capital that we raised earlier this week will provide us enough financial runway to obtain 6 months data from the Phase 2 ALLSTAR trials as well as report top line results from HOPE-Duchenne.

As you can imagine, we are delighted to be able to focus on delivering on these milestones with our newly strengthened balance sheet. I am excited to now update you on the HOPE clinical trial.

In late February, we had announced the treatment of the first patient in our HOPE-Duchenne clinical trial that is studying the potential of CAP-1002 to treat the cardiomyopathy that is associated with Duchenne muscular dystrophy. We are gratified to be able to report today that we have completed enrollment of the first cohort of this trial.

As you can tell, enrollment is going extremely well. Data from these first patients will now be reviewed by the trials, D, S, M, B as planned in the trial protocol. The trial will resume its enrollments following the satisfactory completion of this review.

We are pleased that at this time we are unaware of the occurrence on any significant safety issue. Many people, particularly in the investment community are familiar with DMD today and its implications for the affected boys and their families. Fewer are aware of the heart disease that develops in people with DMD.

And I would just like to take a moment to touch on the nature of this problem. The deficiency of the protein in DMD, which is known as dystrophin plays an important role not only in the skeletal muscle, but also in the muscle of the heart.

Without a functional dystrophin protein, heart muscle cells are susceptible to damage and progressively deteriorate. This process triggers progressive scar tissue deposition and leads eventually to heart failure.

This almost inevitable cardiomyopathy has become the leading cause of death in patients with DMD as patients are living longer following improvement in the treatment of their respiratory function. No therapies are currently approved to treat the DMD cardiomyopathy.

We expect to enroll up to 24 patients in HOPE of whom half will receive CAP-1002 and half will serve as control subjects receiving optimal standard of care. For this trial, cells are infused into all three coronary arteries so as to restore broad, cardiac delivery.

The primary efficacy analysis of this trial will examine the ability of CAP-1002 to improve cardiac structure as evaluated by MRI. We presently have two clinical sites actively enrolling in HOPE and our third site should be coming online in Q2 of this year.

We are targeting completion of enrollment in Q3 of this year and expect 6 months data to read out in the first quarter of 2017. As previously reported, CAP-1002 has been granted orphan drug designation by the FDA for the treatment of Duchenne muscular dystrophy. Okay.

So, now let’s turn our attention to the Phase 2 ALLSTAR clinical trial that is evaluating CAP-1002 in patients following a large heart attack. ALLSTAR as you remember is a randomized, placebo-controlled clinical trial enrolling patients between 30 days and 1 year following their heart attack.

These patients receive an infusion of 25 million cells or placebo into the single coronary vessel affected by the heart attack with MRI follow-up at 6 and 12 months.

In addition to safety data, the primary efficacy analysis relates to the ability of CAP-1002 to reduce infarct otherwise known as scar size in the heart muscle relative to control as assessed by MRIs.

To remind you, the reduction in scar size post heart attack has previously been demonstrated in both the autologous CADUCEUS trial as well as in the Phase 1 portion of ALLSTAR. As we have previously disclosed, ALLSTAR funded in part by a lone award received from the California Institute of Regenerative Medicine.

ALLSTAR is currently active at 33 centers around the United States. And today, I am pleased to provide an update on this progress. As you may recall, we have previously disclosed that this trial was enrolling slower than we had hoped and that we have revamped our clinical team with a verified addition of Dr.

Deborah Ascheim as Chief Medical Officer and Mr. Jeff Rudy as Head of Clinical Operations. I am pleased, very pleased to announce that the new team has been effective at stepping up the rate of enrollment and we are seeing nice pace in enrollment with March being our best month yet.

Further, we have now completed the typical modeling of the ALLSTAR trial design that incorporated the standard CAP-1002 data set and based on its results we have elected to decrease the enrollment goal of the trial to approximately 120 patients, a sample size that is expected to maintain sufficient statistical power to detect the reduction in infarct size as measured by MRI at 12 months.

This is a strong positive for Capricor. Just to remind you, ALLSTAR is a proof of concept study designed to read officially the previously published CADUCEUS autologous cell trial and to when validation for future studies in patients with advanced heart failure.

We have emended our clinical protocols to reflect these changes which has been approved by the DSMB and submitted to the FDA. We expect to complete enrollment for the end of Q3 of this year and to have six months data from ALLSTAR within the first quarter of 2017.

As a reminder, the primary end point of ALLSTAR is at 12 months, but under our agreement with the Janssen Biotech, Janssen will have until 60 days following our delivery to them of the six months ALLSTAR results to exercise this option to license the exclusive worldwide rights to this program.

In the event that option is exercised, Capricor would receive from the [indiscernible] an upfront license fee and additional milestone payments which could total up to $325 million in addition to royalties on potential sale.

I would now like to shift gears from our clinical activities and spend some time discussing our exosome program, including some exciting recent examples.

Exosome as a novel therapeutic class have been garnering increasing public attention in part due to efforts elsewhere in the industry and we believe our program at Capricor has tremendous potential to address a variety of diseases both cardiac and non-cardiac although our clinical focus now is on serious debilitating non-cardiac diseases.

Exosomes, our membrane enclosed vesicles that are about the same size as virus particle and serves to transport select bio-molecules such as protein and RNAs out of cells.

They provide regulatory functions for many cellular processes including inflammations angiogenesis that is a creation of new blood vessels, program cell death otherwise noted apoptosis and scaring and exosomes derived from cultured cells hasn’t shown to have therapeutic activities in preclinical models by directing or in some cases redirecting cellular activities.

We believe that exosomes may well represent a brand new technology – platform technology to the biotechnology industry. The exosomes that we are developing here at Capricor are isolated from our proprietary cardiosphere derived cells and since they are cell free material they may be handled more like a traditional biopharmaceutical.

We had even developed the method for [indiscernible] and reconstitution in solution. Our exosomes program had been making excellent progress. We now have positive preclinical data in three distinct disease models in at least two species of animals.

I will now provide a glimpse of hot of the press first of its kind data in an ophthalmic model of rabbit keratoconjunctivitis. We use this model as one of profound ocular inflammation. Ocular inflammations and injuries have been a major area of HS for pharmaceutical development.

Now I would like to call your attention to the slides to which I will be addressing in the next few slides. Forward-looking statement has already been read, please pay attention to that. Thank you.

Shown here on Slide 3, we show – we suggest that the ability of CAP-2003 exosomes to treat both ocular surface inflammation and injury and an 18 model, six day proof of concept study that was recently completed.

This study compare the safety and exit efficacies of CAP-2003 exosomes to placebo for the treatment of ocular surface inflammation and injury secondary to induced keratoconjunctivitis.

Over a 30 day – sorry three day period ocular wounds were created on one eye of rabbits followed each day by administrations of a pro-inflammatory agent derived from bacteria which is known as LPS or Lipopolysaccharide.

Once severe inflammation had developed on the eyes, the eyes were treated with CAP-2003 and then followed clinically for each day for three days. At the end of the study, the eyes were submitted for histopathology examination to quantify the level of remaining inflammation and injuries.

The next slide on Slide 4, we showed images that are representative pathology of corneas taken from eyes treated with placebo either low dose CAP-2003 exosomes or high dose CAP-2003 exosome. We showed on the left image that placebo treated corneas had moderate inflammation, injured epithelium and were severely swollen.

The center and right images demonstrate that corneas treated with just a single administration of low-dose or high-dose exosomes CAP-2003 had resolution of their corneal flowings and dose dependent improvements of their inflammations and corneal epithelial injuries.

In fact, complete resolutions of inflammation and injury were observed in the high dose group.

So turning your attention now to Slide 5, we look at the totality of the preclinical and histological data in the rabbit keratoconjunctivitis proof of concept study suggest the CAP-2003 made it capable of improving several relevant clinical and histopathological end points including; one, corneal wound healing, two, ocular surface inflammation, three, conjunctivitis, four, corneal edema.

I will take a moment to tell you that the inflammation slides of the eyes themselves are not showed here due to the rather physiologically evident nature of these slides. So this is only a sample of the work that we have done in this program. As highlighted by these slides, the focus of our exosome work is on orphan inflammatory disorder.

Additional preclinical studies to support a specific ophthalmic indication for CAP-2003 are currently underway or in preparation. We also have very significant preclinical data in a non-ophthalmic oncology related model. We shall provide further color on this in the future.

We anticipate meeting with the FDA to discuss the clinical developments of CAP-2003 in the coming months and to be in a position to announce the first indication for our CDC exosomes by the end of the year.

And finally, Cenderitide, our natriuretic peptide drug candidate continues to be evaluated in a small Phase 2 study to further assess the safety and efficacy of higher doses of Cenderitide in heart failure patients. Subject to data which will be available in the second quarter of this year, we will have further updates to provide.

As you can see, Capricor has a rich and diverse pipeline. We have two clinical trials that should read out early next year, our exciting exosome platform that is gaining momentum and move in support to clinic as well as the natriuretic peptide drug in a small Phase 2 trial that we will read out in Q2.

We have many opportunities and upcoming milestones. We are anxious to continue to develop value for our shareholders and to explore our pipeline opportunities.

Given all the technology in our portfolio we have recently stepped up our business development efforts with the addition of a consultant in this area to assist us with getting the Capricor story more widely known within the pharmaceutical and biotechnology industries.

So this wraps up my update on our R&D and clinical programs at Capricor and now I will ask Leland Gershell to provide a brief update on our financials. Leland joined Capricor last month as our CFO.

Leland is known to many of you from his prior work as an analyst and a CFO, but also owns both an MD and PhD degree and as such was a perfect match for Capricor given our deep science pedigree.

We are delighted to have Leland on our team as he brings significant public company’s financial leadership and experience as related to capital markets on both the buy and sell side..

Thank you, Linda. This afternoon’s press release provided details for the fourth quarter and full year ending December 31, 2015. The press release is available on the company’s website at capricor.com. As of December 31, 2015, we had approximately $13.6 million in cash, cash equivalents and marketable securities.

In the fourth quarter of 2015, excluding the effect of stock-based compensation, we spent approximately $3.2 million in research and development activities and $0.8 million in general and administrative, with the approximate $3.9 million in net proceeds from the offering we announced this past Tuesday and the approximate $3.4 million in grant award from CIRM as confirmed yesterday.

We currently expect our cash balance to fund our operations to release the first quarter of 2017. And with that, I will turn it back over to Linda..

Thank you, Leland. In closing, we see enormous potential value in our pipeline program and we look forward to updating you as we continue to make progress.

The last potential milestones that I would like to reiterate are one, the announcement of the first potential indications for clinical development in our exosome therapeutics program; two, the data from [indiscernible] type Phase 2 towards midyear 2016; three, the enrollments of completion of enrollment in our HOPE-Duchenne and ALLSTAR trials of CAP-1002, which we expect to occur in the third quarter of this year and our report of the top line data from the HOPE trial in the first quarter of 2017.

We also expect to have the 6-month ALLSTAR data available in the first quarter of next year. I will now turn the call over to the operator who will open the call up for questions.

Operator?.

[Operator Instructions] Our first question comes from Mark Breidenbach with H.C. Wainwright. Please go ahead..

Hey, guys. Congrats on all the exciting recent developments and thanks for taking the questions. I think I have to start with the ALLSTAR Phase 2 resizing. Obviously, this is a really terrific bit of news for the company.

And it sounds like the delta between the two study arms may actually be a bit larger than you had originally anticipated when the protocol was first designed.

Can you clarify for me a little bit how the physical assessment was made for the resizing? Was this actually based on a blinded interim analysis of the ALLSTAR Phase 2 data or is this more of an extrapolation from some of the other trials involving CAP-1002 like the ALLSTAR Phase 1 and DYNAMIC trial results?.

Yes, Mark, thank you very much for that question. Your latter assumption was the correct one. The statistical stimulations are done using the CADUCEUS data, the ALLSTAR Phase 1 data and some of the other datasets that we have..

Okay, that’s what I thought. I just wanted to make sure.

And I was also curious if we are going to see any longer term follow-up data from the Phase 1 DYNAMIC trial, we saw some really nice data presented last year, but I am wondering if we did see additional follow-up and more to the point, I am wondering if we might see any sort of MACE analysis from this trial or if that’s something that’s off the table for 2016?.

Yes. Mark thanks for reminding me about that. We are now collecting the final bit of data from the 12 month portion of DYNAMIC. We expect to report that out at some point once we finished the data analysis, look forward to one of the major cardiology meeting sometime later this year..

Okay, great, great.

And maybe too early to talk about what sort of endpoint readouts might be included in that or is it pretty much going to be the same types of metrics we saw at the ACA scientific sessions or AHA scientific sessions, I should say?.

Yes. So, what you saw in the 6 months data at the AHA and what we had previously reported will be the metrics by which we are now analyzing the 12 months data as well. So, you are likely to see much the same reports and readouts. We, of course, will look at all the data that comes in and I am pleased to gather the story of DYNAMIC as we get in..

Okay, great. Let me also follow-up with a few exosome questions if I may. So, obviously, exosomes have some similar properties to cell therapies, but since they are not really alive they can be viewed as entirely different animals.

With the cell therapies we can measure parameters like secretion profiles and things like that to accept batch to batch consistency during manufacturing process and kind of guess how potent they might be? How that work with an exosome based drug?.

Yes, that’s one of the most exciting parts of the exosome that we can quantify that even more tightly. So, we started talking about our licensing in the exosome technology a while ago and then we have sort of been saying its coming and its coming.

The reason for that is that we have a pretty deep bench working on process and product development of the exosome turning it from a very exciting scientific study to a product that can be used to treat a variety of inflammatory and fibrotic disorders and part of that work has been really delving into what’s inside those exosomes and what they do physiologically.

So, we think we are going to have a pretty good handle on it. We are certainly going to run what we think by the FDA before we come out with it and hope that they concur, but then we should be able to fine tune that and get this product into patients very soon..

Okay. And I am just curious is the activity of the exosomes that you are seeing, is it driven more by nucleic acid or by protein or a small molecule metabolite.

I am thinking can you kill the activity of an exosome or what’s your thinking thus far?.

So, a lot of the mechanistic work is done by the academic lab at Cedars-Sinai directed by Eduardo Marbán. And they publish regularly on sort of what’s in the exosomes and what they do and so stay tuned to those papers as they come out.

What I can tell you is that there is a significant portion of novel things that have been discovered inside those exosomes that seemed to mediate a very significant biologic effect and repair..

Okay, got it.

And then in the rapid model data that you showed, is it a topically delivered drug or is it actually injected into the cornea or into the eye?.

So, we are not going to go into too many details on that right now. What I can say is that we have worked in a dose-dependent way and we have a really good delivery method that we feel will be good at mediating the biologic effect..

Okay, great. I will wait for future updates to as more detailed questions, but thanks very much for taking the questions today and congrats again..

It’s a pleasure, Mark. Have a nice day..

Thank you. We will go next to Ted Tenthoff with Piper Jaffray. Please go ahead..

Great. Thank you for taking the question and for this update.

My question is with DMD, can you give us a sense I know it’s so early and congratulations on giving that study of enrolling, can you tell us how enrollments going and when we may guess some data from that trial?.

Yes. So, Ted, hi how are you? Good to talk to you always even in this venue. Yes, the trial is starting to enroll like gangbusters. The word is getting out. We are enrolling at Cincinnati Children’s under the direction of our principal investigator, John Jefferies and at Cedars-Sinai Medical Center.

We have a third very, very credible site coming on soon. And what I can tell you is that all of inside screening is robust..

Great. So, well I look forward to an update. I think that’s a really important study..

And sorry, just to answer your second question, we anticipate enrolling this trial, fully enrolling by the third quarter of this year with the 6-month preliminary data, your top line data end of the first quarter of 2017..

Great. I look forward to that. Thanks, Linda..

Me too..

Thank you. [Operator Instructions] We will go next to [indiscernible] with Chardan. Please go ahead..

Yes, thank you. I have two questions for Dr. Marbán.

The first with respect to ALLSTAR having reduced the enrollment size, can you tell us what your hypothesized treatment effect is that you are expecting in terms of the reduction in infarct size?.

We are looking for a 15% reduction in infarct size at one year..

Okay, great.

And then also with respect to ALLSTAR are there other secondary efficacy measurements you will be taking physiological measurements like the LVEF systolic diastolic volume, those sorts of things?.

Yes. So we have a rather large plethora of secondary efficacy endpoints that we have built in based on cardiac function, cardiac structure and then of course the standard quality of life and other measures of those kinds of things. So yes it’s a well designed trial with a lot of potential guidance for our future clinical trial design..

Okay, very good. Thanks. That’s all I have..

Thank you very much..

Thank you. [Operator Instructions] It appears we have no further questions at this time. I will turn it back to our speakers for any final or additional remarks..

Well, thank you for joining us on the call today. We hope to see many of you in New York City next week at the ARM Cell & Gene Therapy Investor Day which will be held on Tuesday, March 22. Again, thank you. Operator, you may now disconnect and happy Saint Patrick’s Day everybody..

Thank you. This does conclude today’s conference. We do appreciate your participation and you may disconnect at any time. Have a great day..