Business Overview and History

Capricor Therapeutics, a clinical-stage biotechnology company, has been at the forefront of developing transformative cell and exosome-based therapeutics for the treatment of rare diseases, with a primary focus on Duchenne muscular dystrophy (DMD). Over the past decade, the company has made significant strides in advancing its lead candidate, deramiocel (formerly known as CAP-1002), through various clinical trials, positioning it as a potential game-changer in the treatment of DMD-associated cardiomyopathy.

Capricor Therapeutics was founded in 2005 as a private company, Capricor, Inc., and later merged with Nile Therapeutics, a public company, in 2013, resulting in the current publicly traded entity, Capricor Therapeutics, Inc. The company's core technology revolves around the use of cardiosphere-derived cells (CDCs), a population of stromal cells isolated from donated heart tissue, and their secreted exosomes, which exhibit immunomodulatory, anti-inflammatory, pro-angiogenic, and anti-fibrotic properties.

In its early years, Capricor entered into exclusive license agreements for intellectual property rights related to cardiac-derived cells with various institutions such as Università Degli Studi Di Roma La Sapienza, Johns Hopkins University, and Cedars-Sinai Medical Center. These agreements have been crucial in building the company's intellectual property portfolio and advancing its cell therapy technology.

Since its inception, Capricor has faced significant challenges in advancing its product candidates through the development process. The company has incurred substantial operating losses as it has devoted considerable resources to research and development activities, manufacturing capabilities, and general and administrative support. To fund its operations, Capricor has relied on equity financings, government grants, and collaboration agreements, as it has not yet generated revenue from commercial product sales.

Despite these challenges, Capricor has achieved several key milestones, including completing multiple clinical trials investigating deramiocel for the treatment of DMD. The company has also expanded its pipeline to include an exosome-based platform technology called StealthX, which it is developing for potential therapeutic and vaccine applications.

Capricor's flagship program, deramiocel, has been the primary focus of the company's research and development efforts. The therapy is designed to slow the progression of DMD, a rare and devastating genetic disorder that leads to muscle degeneration and premature death, primarily through the impact on cardiac function. DMD is characterized by the progressive loss of functional dystrophin, a critical structural protein in muscle cells, leading to significant cell damage and ultimately, muscle cell death and fibrotic replacement.

The company has completed multiple clinical trials investigating deramiocel for the treatment of DMD, with promising results. In the Phase 2 HOPE-2 study, deramiocel met its primary efficacy endpoint, demonstrating a statistically significant improvement in the mid-level dimension of the Performance of the Upper Limb (PUL) v1.2 assessment. Additionally, the therapy showed positive effects on cardiac function, with improvements in left ventricular ejection fraction and other key cardiac measures.

Recognizing the significant unmet medical need and the potential of deramiocel to address the devastating cardiac manifestations of DMD, Capricor has recently taken a strategic approach to its regulatory path. The company has decided to file a Biologics License Application (BLA) for deramiocel based on the existing cardiac data from the HOPE-2 and HOPE-2 open-label extension studies, compared to a natural history data set. This decision comes after a collaborative effort with the FDA, during which the agency acknowledged the strength of Capricor's cardiac data and the lack of approved therapies for DMD-associated cardiomyopathy.

Financials and Liquidity

As of September 30, 2024, Capricor Therapeutics reported cash, cash equivalents, and marketable securities of approximately $85 million. Subsequent to the third quarter, the company completed a public offering of common stock, raising an additional $80.8 million in net proceeds. This brings the company's pro forma cash position to approximately $166 million, which management believes will fund operations through at least 2027.

For the third quarter of 2024, Capricor reported revenues of $2.3 million, compared to $6.2 million in the same period of 2023. The decrease in revenue is primarily attributable to the ratable recognition of the $40 million received from the company's U.S. exclusive commercialization and distribution agreement with Nippon Shinyaku. This represents a year-over-year revenue decline of 63.5% in Q3 2024 compared to Q3 2023.

Research and development expenses for the third quarter of 2024, excluding stock-based compensation, were approximately $11 million, compared to $9.5 million in the same period of 2023. The increase in R&D expenses is largely driven by the advancement of the company's DMD program, including the ongoing HOPE-3 Phase 3 study and the HOPE-2 open-label extension trial.

General and administrative expenses, excluding stock-based compensation, were approximately $2.2 million in the third quarter of 2024, compared to $1.8 million in the same period of 2023. The increase in G&A expenses is primarily due to the company's efforts to prepare for the potential commercialization of deramiocel.

Net loss for the third quarter of 2024 was approximately $12.6 million, compared to a net loss of $6.4 million in the same period of 2023. The wider net loss is largely attributable to the increase in R&D and G&A expenses, as well as the decrease in revenue.

For the full fiscal year 2023, Capricor reported revenue of $25.18 million, a net loss of $22.29 million, operating cash flow of -$25.60 million, and free cash flow of -$27.64 million. In comparison, for the third quarter of 2024, the company reported revenue of $2.26 million, a net loss of $12.56 million, operating cash flow of -$25.19 million, and free cash flow of -$25.86 million.

As of September 30, 2024, Capricor's debt-to-equity ratio stood at 0.024, with cash and cash equivalents of $68.38 million. The company's current ratio and quick ratio were both 4.19, indicating a strong liquidity position. Capricor currently does not have any disclosed available credit lines.

Regulatory and Commercial Developments

The key regulatory and commercial milestone for Capricor Therapeutics in 2024 has been the decision to file a BLA for deramiocel to treat DMD-associated cardiomyopathy. This move comes after a collaborative effort with the FDA, during which the agency acknowledged the strength of Capricor's cardiac data and the lack of approved therapies for this devastating aspect of the disease.

The company has already initiated the rolling BLA submission process, with the full BLA package expected to be completed by the end of 2024. Capricor anticipates hearing from the FDA by the end of Q1 2025 regarding the status of the BLA application. Assuming a positive review and a priority review designation, which is expected due to the therapy's Regenerative Medicine Advanced Therapy (RMAT) status, the company anticipates a potential Prescription Drug User Fee Act (PDUFA) date for deramiocel in the second half of 2025.

Capricor estimates that approximately 50-60% of the overall DMD population in the U.S., or around 8,000 people, would be eligible for treatment with deramiocel if approved. The company is actively preparing for commercial manufacturing, including building a small commercial manufacturing plant in San Diego to mirror the clinical one in Los Angeles. Capricor plans to have another facility online within a year of launch to meet anticipated demand.

Capricor's exclusive commercialization and distribution agreements with Nippon Shinyaku in the United States and Japan, as well as the recently signed binding term sheet for the European region, have further strengthened the company's commercial positioning. These partnerships provide Capricor with significant milestone and revenue-sharing opportunities, with the potential for over $1.5 billion in total milestone payments from the combined agreements.

Exosome Platform and Pipeline Expansion

In addition to the advancements in its lead DMD program, Capricor Therapeutics continues to develop its engineered exosome technology platform, known as StealthX. This platform focuses on the development of precision-engineered exosomes capable of delivering defined sets of effector molecules to targeted areas, with the potential to address a diverse array of diseases.

The company's StealthX vaccine candidate is currently in the manufacturing phase, with plans to deliver it to the National Institute of Allergy and Infectious Diseases (NIAID) in the first quarter of 2025. NIAID will then conduct a fully funded Phase 1 clinical trial to evaluate the vaccine's safety and efficacy. If the data meets NIAID's criteria, the agency may consider further support for a Phase 2 study, providing a significant opportunity to showcase the capabilities of Capricor's exosome platform.

Capricor expects to spend approximately $3-5 million in 2024 on development expenses related to its exosomes platform. The company has been selected to be part of Project NextGen, an initiative by the U.S. Department of Health and Human Services to advance a pipeline of new, innovative COVID-19 vaccines, and plans to initiate a Phase 1 clinical study of its StealthX vaccine candidate in the first quarter of 2025, subject to regulatory approval.

Additionally, Capricor is exploring the potential expansion of deramiocel's label to include the treatment of Becker muscular dystrophy, which shares similar cardiac manifestations with DMD. The company is currently working with key opinion leaders and regulatory authorities to design the most appropriate clinical trial to pursue this opportunity.

Risks and Challenges

As with any clinical-stage biotechnology company, Capricor Therapeutics faces several risks and challenges that investors should be aware of. These include the inherent risks associated with the development and regulatory approval of novel therapies, potential manufacturing and scaling challenges, competition from other DMD-focused therapies, and the company's reliance on key partnerships and collaborations for commercialization and funding.

The success of deramiocel's BLA submission and subsequent regulatory approval is crucial to Capricor's future prospects. Any unforeseen delays or setbacks in the regulatory process could significantly impact the company's timeline and commercial potential. Additionally, the company's ability to effectively scale up manufacturing to meet anticipated demand will be a critical factor in its commercial success.

Conclusion

Capricor Therapeutics has positioned itself as a leader in the development of transformative cell and exosome-based therapies for rare diseases, with a strong focus on addressing the devastating cardiac manifestations of Duchenne muscular dystrophy. The company's decision to pursue a BLA for deramiocel based on its existing cardiac data represents a strategic and promising approach, potentially offering the first approved treatment for DMD-associated cardiomyopathy.

With a robust cash position of approximately $166 million, providing runway into 2027, a collaborative relationship with the FDA, and a growing pipeline of exosome-based therapeutics, Capricor appears well-positioned to navigate the challenges of the biotechnology industry and deliver innovative solutions for patients in need. The company's focus on the rare disease and cell/gene therapy market, which is expected to grow at a CAGR of around 15-20% over the next 5 years, aligns well with industry trends driven by increased rare disease diagnosis and continued innovation in advanced therapies.

As Capricor continues to execute on its regulatory and commercial plans, including the potential approval and launch of deramiocel, investors will closely monitor its progress and the potential transformative impact of its therapies on the lives of those affected by Duchenne muscular dystrophy and other rare diseases. The company's strategic partnerships, ongoing clinical trials, and expansion into new therapeutic areas provide multiple avenues for growth and value creation in the coming years.