Welcome to Capricor Therapeutics First Quarter 2019 Conference Call. My name is Chris and I'll be your operator for today's call. [Operator Instructions] As a reminder this call will be recorded. I would now like to turn the call over to Capricor CFO, AJ Bergmann. Please go ahead..

Thank you and good afternoon. 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 a report additional data, our plans regarding regulatory filings, potential regulatory developments involving our product candidates 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're cautioned not to place undue reliance on these forward-looking statements and we disclaim any obligation to update such statements. With that, I will turn the call over to Linda Marbán, CEO..

Good afternoon, and thank you for joining us for our first quarter update and conference call. Although this call will be brief, the first quarter had been a busy one as we continue to gather data and prepare for the interim analysis on the HOPE-2 clinical trial.

We along with the DMD community eagerly await the data from the interim analysis of HOPE-2, while in the background we are continuing the development of our exosome platform technology. I'm pleased to provide you with an update on both programs today.

We are actively working with our statisticians, steering committee and the rest of our teams to plan the types of data analysis we would like for the HOPE-2 clinical interim analysis.

As I mentioned in our call last quarter, we believe that the data from approximately 20 patients who have had more than one dose of safe will help inform us of the best path forward in terms of trial design and adjudication for HOPE-2.

We are on track to be able to share the results of the interim analysis during the early part of the third quarter of 2019.

Without going into too much detail, we will of course be looking carefully at the targeted primary efficacy endpoint the performance of the upper limb measure both 1.2 and 2.0 but also at many of the other secondary and exploratory endpoints to evaluate the impact of CAP-1002 on the pathogenesis of Duchenne muscular dystrophy.

Of course based on the data, we will decide the best path forward for CAP-1002 in the treatment of DMD.

Capricor believe their performing an interim analysis will enable us to determine the potential efficacy of CAP-1002 and DMD before continuing to enroll further this clinical trial, as well as provide us flexibility and resource conservation and management.

To remind you if the data appears promising, our plan is to attempt to raise the capital necessary to complete the trial. However, if the data does not suggest the path forward, we will likely allocate resources to other programs or pursue other strategic options. Now I would also like to update you on our current exosome program.

I have been saying for a while that these packets of cellular information may potentially become the next wave of therapeutic development for biotechnology, and now it appears that this is coming to fruition. We have come a long way from discovering the exosome that are made by CAP-1002.

Linking them directly to the benefit we see using a cells, making the exosome the effective API or active pharmaceutical ingredient of the cell therapy and realizing that just harnessing their power may not be all that there is to the story of the exosome.

This is why we and others are focusing efforts now on using exosome to deliver payloads to cells. Due to the endogenous ability of the exosome to cross the cell membrane, they are likely to become the delivery vehicle of choice whether the cargo is approaching a gene, RNA or small molecule.

The opportunities then become quite vast in terms of the potential biological utility. A few months ago we also announced a collaboration with the United States Army Institute of Surgical Research located in San Antonio, Texas to study our exosomes for use by the U.S. military for trauma related injuries.

That program continues to progress as there is now in vivo as well as in vitro data showing some very interesting observation which suggests that CDC exosomes could potentially be an important player in attenuating trauma related injuries.

As Capricor has relevant technology that allows for preparing exosomes that are field ready in other words do not require freezing it could be an ideal candidate for use on the battlefield of the future. Our colleagues of the U.S.

Army Institute are as intrigued by this data as we are and we are hoping to expand our collaboration as we investigate the utility of exosomes in treating radiation, burns, pain and other types of traumatic injury.

We have had early discussion with BARDA the branch of the military that fund biotechnology to see if we can potentially fund our work together. Recently Kodiak Biosciences announced plans for an IPO and we think this movement is a reflection on the positive energy from the investment community around exosome.

We've been watching Kodiak carefully over the past few years and we believe that the entire field is moving towards engineered exosomes. Those exosomes which have the power to enter a cell and change its behavior in a mechanistically controlled way. We believe that this is the future of exosome therapeutics.

Through that end we continue to explore the use of exosomes as delivery vehicles. Our work capitalizes on our experience in producing, characterizing and testing exosomes. We are looking at using the exosomes to carry RNAs or proteins with the specific payloads targeting inflammation.

While our DMD program of CAP-1002 has remained at the forefront of our thinking, we are also working towards developing the exosome as our pipeline product candidate to treat a variety of diseases.

I want to highlight as we have explained multiple avenues for clinical development of exosome as a next in classic biologic, addressing diseases of inflammation and fibrosis.

So in summary, we are eagerly waiting for the data from the HOPE-2interim analysis while also focusing on our exosome program and we look forward to providing you any update as they become available. Again, thank you for your time. I'll now turn this call back over to our CFO, Mr. AJ Bergmann, who will review our financials at this time.

Thank you, AJ?.

Thank you, Linda. This afternoon's press release provided a summary of our first quarter 2019 financials on a GAAP basis. You may also refer to our quarterly report on form 10-Q, which we expect to become available soon and will be accessible on the SEC website as well as the financial section of our company website.

As of March 31, 2019, the company's cash, cash equivalents and marketable securities totaled approximately $7.2 million compared to approximately $7.3 million on December 31, 2018.

Based on our current plans and projections, Capricor expects that its cash, cash equivalents and marketable securities will fund its research and development programs and other operations into the fourth quarter of 2019.

In the first quarter of 2019, our net cash used in operating activities was approximately $1.6 million, excluding stock-based compensation, our research and development expense was approximately $1.8 million in Q1 2019 compared to approximately $2.6 million in Q1 2018.

Again excluding stock-based compensation, our general and administrative expense was approximately $800,000 in Q1 2019 compared to approximately $1.1 million in Q1 2018.We continued to manage our expenses and direct our focus on our DMD and exosome program. With that, I'll turn the call back over to Linda and then open up the line for questions..

Thank you, AJ. Thank you all for joining this call and we look forward to seeing you out there at meetings and also to continue to update you on the progress of Capricor as we move through 2019. Thank you..

[Operator Instructions] And our first question comes from the line of Joe Pantginis with H.C. Wainwright. Your line is now open..

Linda, I know in your prepared comments you said maybe you're not go into too much detail just yet, but I was wondering if you can start to set up some perspective around the interim outcomes.

You're obviously looking out a lot of endpoints like you said would be a primary focus on the primary endpoint of the poll 1.2 and 2.0, so I guess maybe some perspective on these endpoint outcomes that you think would give you confidence to enroll more patients and even go back to the FDA to leverage your RMAT status. Thanks..

So your comments are well timed and appropriate.

So what we've been doing, looking at what we think to we need to have to show to the FDA, should we want to register the product? So let me reemphasize that the data that we have from the interim, we don't anticipate being able to register with but what we'd like to do is see movement in those direction.

So what that does actually mean? It means that we want to look at the 1.2 performance of the upper limb and the 2.0 performance of the upper limb to 2 version on the measurement of the upper limb function in patients that are losing have lost modulation.

To see how they compare with their data we've got from HOPE-1, as you recall and I've talked about the fact that FDA would like the primary efficacy endpoint for registration potentially be the 2.0. We feel that the data that we all gather looking at both of those measures will be very valuable in preparing a potential path forward.

Additionally we're going to be looking for collaboration all of the potential improvement in HOPE with other measures of skeletal, respiratory and cardiac function of parameters, looking at different outcomes, looking at whether there is a correlation and relationship between them because this is again what the FDA asked us to do as part of our RMAT meeting in December of 2018.

So again, we're building those analysis plants now. We're really seeing are things that will build the story of systemic improvement in some way or another and [indiscernible] whether it'd be skeletal muscle, respiratory muscle, cardiac function and structure and or quality of life based on some of the questionnaires that we've built in..

And our next question comes from the line of Jason McCarthy with Maxim Group. Your line is now open..

As you guys actually, you touched on this before, we've been watching the access the exosome space and this coming to a focus a bit with the IPO news on Kodiak and now even companies like Brainstorm adding new exosome program.

So do you think you can give us a bit more color on the next steps for that program and when we could start to see some early stage data?.

So we are really excited about the exosomes and have been for a while and what the fun part of this journey is that there's many companies that are sort of following along the same general trajectory.

And as I mentioned in my prepared comments that also have talked about in many other venues, we started off by discovering that the exosomes were produced by the cells and we were able to define the mechanism of action with cells by the bioactivity of the exosomes.

But now what we and others are coming to find out is that the exosomes also have sort of preferred biologic access we'll call it. They can cross everything from the blood vein barrier to intercellular communication mode to intracellular communication, so they can actually cost cell membrane and deliver payloads five cells.

And so now we are exploring ways of targeting the exosomes and taking advantage of natural tropic properties or deriving tropism by adding something on the outside and then there's also the ability to custom design the contents in other words gets approaching our RNA or a micro RNA or something even to drive with small molecule inside the exosome that could be delivered intracellular.

We do have data, so we have data that we have collected and are making some decisions as to past forwards and as that becomes more clear in our own mind, so we will definitely be sharing it with you in the public arena..

And then actually could touch a bit more on the custom payload exosomes and using them as drug delivery.

Would this possibly be a way to look at it as a way to leverage the platform for partnerships and collaborations that could possibly open up non-dilutive funding sources?.

Yes, so, we've been talking to partners for a while and what I can say is that number of meetings that we've had at everything from JPMorgan to some of the bio meetings, indicates that note they are colloquial big pharma, big biotech is really starting to pay attention, ARP starts to pay attention to exosomes and in many different scenarios and settings.

We are known in the space, we've been talking about it for a while, so we definitely out there talking to people and are excited for that as a potential opportunity.

I will also say, we have been actively engaging our key opinion leaders in the space not divulging who at this point but we're going to the top the senior head, the people that have made some of those are basic biology discoveries and getting some of their feedback on the development of our program so that we can definitely be razor-sharp in our ability to move forward with this therapeutics..

[Operator Instructions] And that does conclude today's question-and-answer session. I would now like to turn the call back to Linda Marbán, CEO for any further remarks..

Thank you for listening to the call today. Thank you for the questions that were asked and we look forward to providing an update in the next quarter. Have a nice day..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect and everyone have a great day..