Welcome to Capricor Therapeutics Third Quarter 2019 Financial Results and Corporate Update Conference Call. My name is Charlie and I’ll be your operator for today’s call. At this time all participants are in a listen-only mode. [Operator Instructions] Note that this conference is being recorded.

I will now turn the call over to Capricor’s CFO, AJ Bergmann. Please go ahead..

Thank you, and good afternoon everyone. 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 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 Form 10-K we filed for our fiscal year 2018 included a detail discussion of the applicable risk factors.

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 third quarter update call. This has been a busy time for us, as we continue to move CAP-1002 towards the path to potential registration for DMD.

We now have data from two clinical trials showing the same basic results, improvements in skeletal muscle function as well as improvements in cardiac structure and function. As many of you know, we started working on DMD about seven years ago. First with studies in the mdx mouse and culminating now in two clinical trials.

We and our colleagues have published over 60 peer reviewed papers on CDCs, our self therapy for the foundation of CAP-1002, and four directly on Duchenne muscular dystrophy itself.

We believe that we have now elucidated the mechanism of action of the cells showing that not only do we believe the exosomes, which the cells that create to be meeting the – mediating the immunomodulatory and muscle repair pathways, but we have also drill deeper to find the microRNAs, which we believe are responsible for the biological effects we are seeing in the clinic.

We have carefully and strategically built a program around CAP-1002 to be used as a potential therapeutic for those most impacted by Duchenne, those who are struggling to retain their independence and privacy. These are the boys and young men who are no longer ambulatory, but have the same desire to lead a functioning life as their peers do.

Pat Furlong, the leader of Parent Project Muscular Dystrophy, the largest advocacy organization in DMD reminds us that as challenging as things become when one is no longer able to walk. The ability to retain the use of one’s arms and hands is of even greater importance. We eat, use our phones and computers with our hands and arms.

We brush our teeth and comb our hair with our hands. We can only hug if we have the use of our arm.

The bottom line is that few treatment options are available for those in the later stages of the disease because they are not currently eligible for the gene therapies and furthermore it may be too late in terms of salvaging muscle for these later stage patients.

We and others believe that CAP-1002 may be ideally positioned as a treatment in the toolbox that will be necessary to battle Duchenne muscular dystrophy. It is notable that over half of the patients currently living with DMD are non-ambulant and therefore potentially eligible for CAP-1002.

But what is even more important is that their lifespans are increasing primarily due to the use of steroids. So as a result the need for therapies for the later stage patients and the year in which they will need these treatments are also increasing.

We recently met with the FDA in a Type B End-of-Phase meeting to discuss the results of the pre-specified interim analysis of the HOPE-2 clinical trial. We show the FDA the latest data, which included the completion of the six month cohort on 20 patients.

That data which was shown in large part at the 2019 International Congress of the World Muscle Society in Copenhagen was also presented on a Capricor webinar call on October 6th.

The data showed that patients treated with CAP-1002 had improvements in the performance of the upper limb, often known as the PUL across the board, both the entire PUL, which includes the shoulder, mid level, which is the arm, and distal which is the hand, as well as in the subgroups of mid plus distal and even at the granular level of the mid level PUL, which was the original primary efficacy endpoint of the HOPE-2 clinical trial.

We also show the FDA that their recommendation of the PUL version 2.0 as a more powerful measurement tool was in fact true based on the HOPE-2 data. Our national PI, Dr.

Craig McDonald, Pat Furlong of PPMD, and Michelle Eagle of Atom International, who is also a co-creator of the performance of the upper limb measure accompanying us to the meeting with the FDA and provided significant support for CAP-1002. During the meeting, we propose the possibility of accelerated approval.

The FDA was not supportive of an accelerated approval pathway at this time. This is not withstanding, we intend to provide additional data from the HOPE-2 trial as it becomes available to the FDA to continue this discussion. The FDA did however indicated supportive a Phase III trial of CAP-1002 for the treatment of DMD.

Prior to the meeting we had submitted in our briefing book a draft protocols for the Phase III trials, which calls for up to 70 patients. Our further plans with respect to the clinical developments of CAP-1002 in DMD, will be based on the final guidance received from the FDA as well as other factors.

We are anticipating final minutes from the meeting before year end. In addition, the FDA reiterated that as part of our RMAT designation, they were willing to work closely with us to further the clinical development of the therapy.

Finally, we anticipate presenting the 12 months data from the HOPE-2 study in the second quarter of 2020, and we are hopeful that it will support the positive results that we saw at six months.

However, we do not expect it to be a full dataset due to several delayed or missed infusions that resulted from the involuntary – the voluntary infusion hold that occurred in late 2018, which was subsequently lifted after we instituted a pre-medication regimen.

Lastly, on the access on CAP-2003 front, we remained committed to this program as exosomes continue to be an exciting field that is continuing to grow. In the third quarter, we have attended and presented at numerous conferences and medical symposia.

We remain engaged in the preclinical development of the exosomes technology and believe in them as a potentially powerful therapeutic agent that will someday be as relevant to biotechnology and antibodies. Our collaboration with the U.S. Army continues to generate interesting and positive data and we look forward to discussing that in 2020.

Finally, one of our goals is to hopefully be able to bring them into the clinic in 2020. That’s all for now. I will turn the call over to AJ Bergmann, our CFO to update you on our financials..

Thank you, Linda. This afternoon’s press release provided a summary of our third 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 in the next few days will be accessible on the SEC website as well as the financial section of the company website.

As of September 30, 2019, the company’s cash, cash equivalents and marketable securities totaled approximately $6.8 million compared to approximately $7.3 million on December 31, 2018.

Based on our current plans and projections, Capricor expects that its cash, cash equivalent will fund its research and development programs and other operations through at least the second quarter of 2020.

In the first nine months of 2019, our net cash used in operating activities was approximately $5 million excluding stock-based compensation, our research and development expense was approximately $800,000 in Q3 2019 compared to approximately $3 million in Q3 2018.

Again, excluding stock-based compensation, our general and administrative expense was approximately $750,000 in Q3 2019 compared to approximately $1 million in Q3 2018. We continue to manage our expenses and direct our focus on our DMD and exosome programs. With that, I’ll turn it back over to Linda and then we’ll open the line up for questions..

Thank you. Thank you, AJ, thank you for joining the call today. We will now open up the line for Q&A..

Hi, this is Joanne Lee on the call for Jason McCarthy. Thanks for taking the question and congratulations on the progress this quarter.

So regarding the potential Phase III trial, could you provide a bit more clarity on the trial design? Would you have any positive data from HOPE-2 could you potentially accelerate your enrollment for Phase III?.

Yes. So at this point we’re not ready to talk about the design of the trial. We’re still finalizing the protocol. The preliminary draft that we presented to the FDA showed a potential patient enrollment of about 70 patients that’s based on calculations from the HOPE-2 data as you suggested. We are also continuing conversations with the FDA.

We’ll be taking data from HOPE-2 to them as it becomes available and continue the conversation we’re not ruling out the possibility of accelerated approval based on that..

Okay. Thank you for that.

And I understand that you won’t be able to disclose too much information, but could you give us some sense of if there are ongoing discussions for potential partnerships or perhaps like other opportunities for non-dilutive funding such as CIRM funding or are you waiting to release more data?.

Yes. So of course, we’re an active conversations with partners at this time. As you can imagine, the data from HOPE-2 is very exciting, as I mentioned and have been speaking about for a while. This is a therapeutic that’s targeting acute unmet need in a orphan disease.

So there’s a lot of interest in this therapeutic and we are very busily sharing that information with those to help us drive it forward more quickly and more efficiently..

Okay. Thank you.

And lastly, just briefly, do you mind giving us a bit more color on the next steps for CAP-2003, when can we potentially start to see some early stage data?.

Yes. So, we’ve been working on the exosomes for awhile. We really have been focusing all of our efforts lately on CAP-1002 as we are driving it towards registration and Duchenne.

But that does not – that does not reduce our interest or confidence in the exosomes CAP-2003 to be the pipeline product is a platform therapy that has implications for many diseases of inflammation and fibrosis.

We recent public – recently published a paper and nature of biomedical engineering, using our exosomes to treat DMD and showing that they are very efficacious and so it’s likely that that would be a frontline program, and we’ll be providing more color as we define our programs the exosomes in the next few months..

Okay. Thank you very much again, and congrats again..

Thank you..

[Operator Instructions] We have no further question at this time. I will now turn the call over back to Linda Marbán, our CEO for closing remarks..

Thank you for joining us today, and thank you for your time. We look forward to providing updates on the HOPE-2 data as it becomes available and further plans on CAP-1002 on the exosome program. Thank you for your time today..

Ladies and gentlemen, this concludes today’s conference. Thank you for participation. You may disconnect..