Executive Summary / Key Takeaways

• Capricor Therapeutics is focused on developing transformative cell and exosome-based therapies, with lead candidate deramiocel targeting Duchenne muscular dystrophy (DMD), particularly the significant unmet need in cardiomyopathy.
• Despite receiving a Complete Response Letter (CRL) from the FDA for the deramiocel BLA, citing insufficient evidence of effectiveness and CMC items, the company plans to leverage data from its fully enrolled Phase 3 HOPE-3 trial to address the efficacy requirement.
• Deramiocel's differentiated mechanism, focusing on immunomodulation and anti-fibrosis, and its favorable safety profile distinguish it from gene and exon-skipping therapies, positioning it as a potential complementary treatment for DMD.
• The company maintains a solid financial position with cash and equivalents expected to fund operations into 2027, supported by potential non-dilutive funding from partnership milestones and the sale of a Priority Review Voucher upon eventual approval.
• Beyond deramiocel, Capricor is advancing its StealthX exosome platform for targeted drug delivery and vaccines, including a collaboration with Project NextGen, representing a significant long-term growth opportunity.

Setting the Scene: Addressing Unmet Needs with Differentiated Science

Capricor Therapeutics is a clinical-stage biotechnology company rooted in the discovery and harnessing of cardiosphere-derived cells (CDCs) from heart tissue, a journey that began over two decades ago in academic laboratories. This foundational science has evolved into deramiocel, the company's lead asset, which is now at a pivotal stage in its development for Duchenne muscular dystrophy (DMD). DMD is a devastating rare genetic disorder characterized by progressive muscle degeneration, with cardiomyopathy emerging as the leading cause of mortality. Capricor's strategic focus on addressing this critical unmet medical need with deramiocel forms the core of its near-term investment thesis.

The competitive landscape for DMD therapies is dynamic, featuring companies developing exon-skipping oligonucleotides and gene therapies aimed at restoring dystrophin expression. Key players include Sarepta Therapeutics (SRPT), a market leader with approved exon-skipping drugs, and larger pharmaceutical companies like Pfizer (PFE) and clinical-stage biotechs such as Solid Biosciences (SLDB) pursuing gene therapy approaches. While these therapies target the underlying genetic defect, deramiocel offers a differentiated mechanism of action. It functions through immunomodulatory and anti-fibrotic pathways, mediated by secreted exosomes, aiming to attenuate the secondary effects of the disease, including inflammation and fibrosis in both skeletal and cardiac muscle. This positions deramiocel not as a direct competitor to dystrophin-focused therapies, but potentially as a complementary treatment that can be used alongside them.

Capricor's technological differentiation extends beyond deramiocel to its StealthX exosome platform. This platform leverages the natural ability of exosomes to act as cellular messengers, aiming to create a next-generation drug delivery system. The company is developing methods for loading specific therapeutic cargoes and attaching targeting moieties to direct exosomes to specific tissues, such as skeletal muscle. This approach seeks to overcome limitations of current delivery methods like lipid nanoparticles, potentially offering enhanced targeting and delivery efficiency. Preclinical data has demonstrated successful targeted delivery to skeletal muscle and the ability to deliver payloads like antisense oligonucleotides and proteins, suggesting potential for improved efficacy and reduced systemic toxicity compared to untargeted approaches. While specific quantitative advantages like percentage improvements in delivery efficiency or cost reductions compared to LNPs are still emerging from preclinical work, the strategic intent is to create a more precise and potentially cost-effective delivery vehicle.

Deramiocel: Clinical Journey, Regulatory Setback, and the Path Forward

Capricor's journey with deramiocel for DMD has been marked by promising clinical data. The Phase 2 HOPE-2 trial and its open-label extension (OLE) provided the primary evidence base, demonstrating statistically significant benefits in skeletal muscle function, as measured by the Performance of the Upper Limb (PUL) scale, and improvements in cardiac function, including left ventricular ejection fraction (LVEF) and indexed volumes. Notably, the OLE data, now extending to four years, has shown sustained benefits and long-term stabilization in both cardiac and skeletal muscle function, particularly in patients with better baseline cardiac function (LVEF >45%). The company has also utilized patient-level natural history data from an FDA-funded consortium as an external comparator, which management believes provides a robust benchmark for evaluating deramiocel's impact, especially on objective measures like cardiac MRI.

Based on the strength of this data, particularly concerning cardiomyopathy, and following positive interactions with the FDA, Capricor submitted a Biologics License Application (BLA) seeking full approval for deramiocel for DMD cardiomyopathy. The BLA was accepted for Priority Review with a PDUFA target date of August 31, 2025. Regulatory interactions included a successful pre-licensing inspection (PLI) of the San Diego manufacturing facility, although a Form 483 with observations was issued, and a mid-cycle review meeting where the FDA stated no significant deficiencies had been identified by the review committee. An Advisory Committee (AdCom) meeting was also confirmed.

However, in July 2025, Capricor received a Complete Response Letter (CRL) from the FDA. The CRL stated that the BLA did not meet the statutory requirement for substantial evidence of effectiveness and requested additional clinical data. It also referenced certain outstanding CMC items. Management expressed surprise at the decision, noting the positive trajectory of the review process prior to the CRL.

In response to the CRL, Capricor plans to engage further with the FDA, including requesting a Type A meeting, to determine the appropriate next steps. Crucially, the company intends to submit data from its fully enrolled Phase 3 HOPE-3 clinical trial to provide the additional evidence of effectiveness requested by the FDA. The HOPE-3 trial's primary endpoint is focused on skeletal muscle function (PUL v2.0), but it also includes cardiac function assessments as secondary endpoints. While originally planned for future label expansion, the HOPE-3 data now becomes central to addressing the efficacy requirement for the initial BLA submission. The company remains confident in the potential of deramiocel, citing the consistency of positive results across multiple trials and the significant unmet need in DMD cardiomyopathy.

Manufacturing, Commercialization, and Financial Strength

Capricor has strategically invested in its in-house manufacturing capabilities to support both clinical development and potential commercialization. The San Diego GMP facility is operational and producing deramiocel doses. This facility was designed with commercial production in mind, offering an initial capacity sufficient for early market demand (estimated 250-500 patients per year). Recognizing the potential for rapid adoption and global expansion, the company is undertaking a significant manufacturing expansion within the same San Diego facility, leasing an additional 25,000 square feet to build more clean rooms. This expansion is projected to increase capacity substantially (2,000-3,000 patients per year) and is expected to be operational by mid-to-late 2026. The modular nature of the manufacturing process is seen as a key operational advantage, facilitating scalable production.

Commercialization efforts in the United States and Japan are being advanced through an exclusive distribution partnership with Nippon Shinyaku. Under these agreements, Capricor is responsible for clinical development and manufacturing, while Nippon Shinyaku and its U.S. subsidiary, NS Pharma, handle distribution, sales, and marketing. Nippon Shinyaku has a dedicated team preparing for the potential launch, focusing on critical areas like market access and reimbursement. Initial discussions with U.S. payers have reportedly been positive, with expectations for reimbursement consistent with other approved DMD therapies. Upon potential FDA approval, Capricor anticipates an initial transition of approximately 100 patients from its clinical trials to commercial product.

Financially, Capricor has strengthened its balance sheet through recent funding activities, including a private placement and an oversubscribed public offering in late 2024. As of March 31, 2025, the company held approximately $144.8 million in cash, cash equivalents, and marketable securities. While cash used in operating activities increased in Q1 2025 ($6.4 million) compared to Q1 2024 ($1.3 million), reflecting increased R&D and G&A expenses associated with clinical trials, manufacturing scale-up, and pre-commercial activities,

the company estimates its current cash runway extends into 2027. This projection is significantly bolstered by potential non-dilutive funding tied to regulatory milestones.

The U.S. distribution agreement with Nippon Shinyaku includes potential development and sales-based milestones totaling up to $700 million, with $80 million specifically tied to FDA marketing approval. Furthermore, upon approval, Capricor is eligible to receive a Priority Review Voucher (PRV) based on its rare pediatric disease designation, which it retains full rights to and plans to sell. These potential inflows, totaling well over $200 million, represent a crucial financial cushion and provide resources for future strategic initiatives, including pipeline expansion.

Exosome Platform and Future Growth Opportunities

Beyond deramiocel, Capricor is actively developing its StealthX exosome platform as a potential engine for future growth. This preclinical-stage platform is designed to create precision-engineered exosomes capable of targeted delivery of various therapeutic cargoes, including RNA, proteins, and small molecules. The company is focused on developing efficient and cost-effective manufacturing methods for these engineered exosomes.

A notable application of the StealthX platform is a vaccine candidate being developed in collaboration with the U.S. government's Project NextGen initiative. This collaboration aims to test vaccine candidates for COVID-19 prevention and future pandemic preparedness. The StealthX vaccine utilizes native proteins loaded into or coated on exosomes and notably contains no adjuvants, aligning with stated preferences for future vaccine technology. NIAID is funding and conducting a Phase 1 clinical trial, with manufacturing underway and regulatory approval and trial initiation anticipated in Q3 2025. This collaboration provides a valuable opportunity to generate first-in-human data for the StealthX platform and showcase its potential.

Capricor is also exploring therapeutic applications of the exosome platform, particularly for targeted delivery in monogenic diseases. Preclinical data has demonstrated successful targeted delivery to skeletal muscle and the ability to deliver payloads like antisense oligonucleotides and proteins for enzyme replacement. The company is planning to file an IND for a therapeutic exosome program based on this data.

Strategically, Capricor is also evaluating opportunities to expand the deramiocel program into other indications with similar underlying pathology, specifically mentioning Becker muscular dystrophy (BMD). BMD cardiomyopathy shares similarities with DMD cardiomyopathy, and Capricor has received Orphan Drug Designation for deramiocel for BMD, signaling a potential future clinical development path. These pipeline initiatives, leveraging both the deramiocel asset and the exosome platform, represent significant potential drivers of long-term value.

Conclusion

Capricor Therapeutics stands at a critical juncture, transitioning towards potential commercialization while simultaneously building a pipeline of innovative cell and exosome-based therapies. The recent Complete Response Letter for deramiocel's BLA for DMD cardiomyopathy presents a challenge, but the company's plan to submit data from the Phase 3 HOPE-3 trial offers a clear path forward to address the FDA's request for additional efficacy evidence. Deramiocel's unique mechanism and safety profile continue to highlight its potential value for DMD patients, particularly in addressing the life-limiting cardiac manifestations.

Supported by a strong balance sheet, bolstered by recent financings and the potential for significant non-dilutive funding upon eventual regulatory success, Capricor is investing in manufacturing scale-up and commercial readiness. The partnership with Nippon Shinyaku provides established infrastructure for market entry. Beyond deramiocel, the StealthX exosome platform and the exploration of new indications like Becker muscular dystrophy underscore the company's commitment to leveraging its core technologies for broader therapeutic impact. The investment thesis hinges on the successful resubmission and approval of deramiocel based on the HOPE-3 data, the effective execution of commercialization plans, and the realization of the long-term potential of the exosome platform. Investors will be closely watching regulatory interactions, the timeline for HOPE-3 data submission, and progress on pipeline expansion initiatives.