Capricor Therapeutics, Inc. (CAPR) Q3 2015 Earnings Report, Transcript and Summary

Good day everyone. This presentation contains forward-looking statements and information that are based on the beliefs of the management of Capricor Therapeutics Incorporated as well as the 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 expectation of or dates for commencement of the clinical trials, IND filings, 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 our business are set forth in our 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 our Registration Statement on Form S-3, as filed with the Securities and Exchange commission on September 28, 2015, and in our quarterly report on Form 10-Q for the quarter ended June 30, 2015, as filed with the Securities and Exchange Commission on August 14, 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. It is now my pleasure to turn the program over to Dr. Linda Marbán, CEO of Capricor Therapeutics. Linda Marbán: Thank you and good afternoon. Thank you for joining us for our third quarter update call. Joining me today is AJ Bergmann, our Vice President of Finance. I am going to summarize some highlights of the third quarter and recent events, AJ will then review the financials. This past quarter has been a very productive and an exciting one for Capricor. On Monday of this week, for the first time, at the American Heart Association, we presented a six month results of our DYNAMIC clinical trial studying the use of cardiosphere derived cells or CDCs in patients with advanced heart failure. Specifically we used multi-vessel intracoronary infusion of CDCs in patients with Class III congestive heart failure. The DYNAMIC trial represents an important milestone for Capricor and that for the first time we treated very sick patients with advanced heart failure. Let me remind you of the trial design. This trial was intended to be primarily a safety trial, though we did evaluate a large number of both clinical and physiologic endpoints in order to determine a signal of efficacy. In this phase, the trial included 14 patients with Class III New York Heart Association heart failure. They were all very symptomatic, meaning that they are limited in their ability to perform activities of daily living. The causes of the heart failure in the DYNAMIC patients were both ischemic and non-ischemic in origin with seven patients being ischemic and seven being non-ischemic. Again, this patient cohort typifies a group of patients who are all highly limited by their heart disease and the natural history is not one of spontaneous recovery or improvement of symptoms. It is commonly known that the five year mortality rate for patients with Class III heart failure is greater than 50%, worse than many cancers. And with over $30 billion spent annually on treatment of patients with heart failure, these patients clearly represent a significant unmet medical need and a huge market opportunity. In the study design we use four escalating doses of our cells to CDCs. 37.5, 50, 62.5 for 75 million cells and they were infused into the patients using a non-occlusive catheter which means that we did not use the balloon to stop blood flow, we just ejected the cells directly into the coronary artery. A quick reminder of cardiac anatomy. There are three main coronary arteries feeding the heart, the left anterior descending, the right coronary artery and the left circumflex. We use a maximum of 25 million cells per artery based on our previous work that showed that to be the maximum base dose we could infuse down a single vessel. In other words, also delivered using triple vessel infusion which allowed us to bath the entire heart and cell. The rationale for this type of delivery is that these patients have globally injured hearts, and therefore, delivery of cells in a widespread manner might be more efficacious. This type of delivery is however novel, as is delivering cells to the whole heart. So our primary goal was to determine if this could all be done [basely] in these very sick patients. Now that I’ve painted a picture of the rationale for the trials I would like to state that we were extremely pleased by the findings of this trial of six months. I am going to take a few minutes to review the data. First and foremost as I have mentioned DYNAMIC was design primarily as a safety trial. We are delighted to report that none of the patients experienced the primary safety endpoint at any point during the trail up to the six months follow up time point. The primary safety endpoints were any of the following; new [indiscernible] flow, zero to two which is reduced coronary blood flow after infusion of the cells or sluggish blood flow in the coronary artery. We didn’t see that, acute myocarditis which is inflammation in the heart within one month post infusion; we didn’t see any of that. Episodes of Ventricular tachycardia or ventricular fibrillation again we didn’t have any such episodes, sudden unexpected death following in through coronary infusion, no we didn’t see that either. And this is major adverse cardiac event within 72 hours we didn’t have any of those. We’re delighted therefore that this preliminary study data supports the safety of multi-vessel infusions up to 75 million cells. This is extremely important as we intent to move forward with further trials in heart failure in various populations using this dose and offering this delivery method. I will be discussing these opportunities in greater details in a few minutes. We believe this is safety data from the DYNAMIC study of promising and as I mentioned before we’re the primary objective of conducting this study. However, now I would like to discuss the primary efficacy data, preliminary efficacy data. Despite the small number of patients we did see clinically and physiologically meaningful improvements in our patients in six months which reads statistical significance in post [host] analysis for several parameters. First, let me state that the six months physiologic data are extremely encouraging. As measured by echocardiogram, the median left ventricular injection fraction went from 24% to 28% and the median percent change from base link was 14.3%. The median left ventricular end systolic volume was 169 milliliters of base line and decreased premedian of 131 milliliters at six months. The median absolute decrease was 33 milliliters and the median percent decrease was 24.4%. The median base line left ventricular end diastolic volume value was 208 ml and decrease to 175 ml in six months. The median absolute reduction was 30 ml and the median percent reduction was 15.2. Fractional shortening and index of left ventricular contractility in this case measured by echocardiogram increased by a median of 14%. The physiologic data that I just presented was also entirely congruent with the clinical data. With respect to the New York Heart Association Class, 92 of patients increased one or more classes. Additional the six minute walk test increased from a median base line of 375 meters to 400 meters which could be clinically significant if this improvement is seen in larger placebo controlled clinical trials. All the tests of quality of life demonstrated improvement overtime. The Minnesota Living with Heart Failure questionnaire score decreased from a median base line of 48 to a median of 18 at six months. A decrease in the score indicates improvement and it also potentially represents a clinically significant improvement. With each patient’s baseline assessment serving as their own control, the statistical analysis for ejection fraction diastolic and end diastolic volume as well as quality of life and New York Heart Association Class all achieved statistical significance. If you’d like to see the complete data set either in tabular or graphical form, it is available on our website. Please allow me a moment to contextualize this important dataset. First I want to state upfront that this represents a small non-randomized open label study and as such all conclusions of [cohort] need to be taken a total encouraging but not definitive. As you recall a few years back Capricor made a major transition from autologous cell therapies to allergenic cell therapies as our therapeutic candidate. We did this because we felt that from the commercial point of view it will be highly impractical to generate autologous cells on a patient by patient basis and therefore products were to become commercially successful they would need to be standardized office shelf products that can be infused relatively simply. In addition an off the shelf product can be quality controlled in terms of release criteria as well as potency so we know that each patient is getting the best possible product. In order to ensure that the cells remain efficacious and do not evoke an immune reaction in our cell therapies programs including DYNAMIC, we matched the recipients with respect to their HLA antibodies to the donor HLA type. This is quite as simple and inexpensive process similar to blood typing. We felt that this is critical, not so much for safety because the amount of absolute cells being infused is small and unlikely to cause immune response, but rather for efficacy and then the acute immune typical of a memory response could eliminate potency by compromising the viability of our cells. DYNAMIC, though small, very validates the decision we made some years ago to switch to the allogeneic cell model. Specifically as I have noted earlier we had no evidence of myocarditis. I should also say that we had no clinically relevant increase in donor specific antibodies in any of the recipients. This could explain the potency of our cells and the consistency of the data. Hence we have appeared to achieve the ability to create an off the shelf product from a number of cell banks that can be used in a wide variety of patients and a population comprising both ischemic and non-ischemic heart failure. We have shown preliminary strong efficacy signals, in fact specifically significant efficacy signals. And there were no safety signals or signs of immunological reaction. We could not be more pleased. Okay, so now let me turn to another of our clinical programs. We have previously discussed our program Duchenne Cardiomyopathy. We have an approved IND and I am happy to report that our HOPE-Duchenne file is now open for enrollment. Allow me to remind you of the rationale for our HOPE trial. Based on data from our preclinical and clinical studies to-date, our CDC cells are shown to be anti-fibrotic, anti-apoptotic, anti-inflammatory and pro regenerative. The pathophysiology of Duchenne Cardiomyopathy is at the genetic abnormality in the dystrophin gene results in perturbations in cellular functions which ultimately lead to a generalized and diffuse scarring of fibrosis of the heart leading to clinical congestive heart failure which is in a fact the number one cause of death in these young men. The cardiomyopathy associated with Duchenne, although the most common cause of death in these patients is actually an element of the disease which has not been addressed by the other companies that are developing a variety of therapeutics to enhance cellular muscle functions. Indeed the therapeutics on the cusp of being disapproved, are not known to be efficacious for Duchenne Cardiomyopathy. Such a therapy that we’ll also investigate as highly complementary to any of the other therapy that may prove to be efficacious in the skeletal muscle disease associated with Duchenne Muscular Dystrophy. Data from our preclinical work as well as from our prior clinical studies including CADUCEUS and also Phase I as well as just presented DYNAMIC data, make it optimistic that we are on the right track. Permit me to explain. Our preclinical work in the mdx mouse has clearly demonstrated that CDC is capable of reversing scar, improving left ventricular function, improving exercise performance and indeed reversing some of the biochemical abnormalities associated with Duchenne Muscular Dystrophy. We also know that repeat dosing can recapitulate the effect, should begin to wear off in patients. We know from our preclinical work as well as from CADUCEUS and also our Phase I that we are able to reverse scar in both the animal and the human heart. All of this data taken together lead us to believe that the scientific and clinical rationale for the HOPE trial is very solid. As I mentioned a few moments ago, scarring of fibrosis is the dominant pathologic abnormality seen in Duchenne Cardiomyopathy. The scars caused by the cells as it occurs from the dystrophin mutation. Scar solely aggregates in the heart leading to a time when the heart can no longer compensate for the increase in fibrosis and the boys and the boys and the young men plunge off the cliff into decompensated heart failure. Their heart disease now resembles that of the DYNAMIC patient population. Scarred, remodeled and functionally compromised. Remember the data from DYNAMIC and low ejection fraction heart failure patients has demonstrated at least in the small number of patients that treatment with CDCs can improve indices of left ventricular performance including ejection fraction and the cells appear to promote reverse remodeling in the heart. Diminished ejection fraction is a hallmark of advanced Duchenne Cardiomyopathy. Based on all these data, both preclinical and clinical we entered the Duchenne Cardiomyopathy trial very optimistically. We anticipate having top-line data in the first quarter of 2017. We have selected several centers nationally to participate in this trial which includes Cedars-Sinai Medical Center in Los Angeles, Children’s Hospital Cincinnati and the Children’s Hospital Philadelphia. As you can imagine there is a lot of needy patients. So if the opportunity presents itself, we may include one to two more sites. Our national PI for this trial is John Jefferies of Cincinnati Children, one of the leaders in diagnosing and treating Duchenne cardiomyopathy. To remind you of the 24 patients randomized trial with half the patients to receive CDC infusion and the other half to continue on with routine standard of care. The primary endpoint of this trial is a core safety but we will also look for scar size reduction and ventricular functional improvement as well as the performance of the upper limb test and assessments for respiratory function. Similar to DYNAMIC we will look carefully for indicators of physiologic improvement while focusing on safety. In the whole trial we've been infusing between 50 and 75 million cells in to each of the patient using the same delivery method that was using DYNAMIC, triple vessel non-inclusive infusion. So now let me turn to the ongoing ALLSTAR Phase II clinical trial. If you recall, ALLSTAR is randomized placebo controlled clinical trial involving patients between 30 days and one year after a heart attack. The patients receive single vessel infusion so the purpose of demonstrating the potential for reduction of in fact or scar size in the heart muscle. This trial was and is intended to a proof of concept trial with respect to the safety of an allogeneic product and extensively efficacy signals on scar size reduction which we’ve previously shown in the autologous cell CADUCEUS trial. The ALLSTAR trial continues to [enroll] centers around the United States and we expect to have the six months data by the first quarter of 2017. Interestingly by virtue of DYNAMIC we now have proof of concept both with respect to safety and preliminary efficacy in the actual target population of patients with advanced clinical heart failure. So now I would like to say just a couple of words about our exosome program I’ve spend a fair amount of time discussing it during our last earnings call. We believe the exosomes are a platform technologies that could become a transformational therapeutics opportunity in many diverse indications. To remind you exosomes are nanometer size, lipid biolayer particles secreted by cells and they are chockfull of all type of RNA and proteins. They have profound cellular regulatory functions and are responsible for cell to cell communication. Based on preclinical data, we know them to be ASA apoptotic, anti-fibrotic, anti-inflammatory and flow-regenerative. We have learned how to extract, [indiscernible] them and turn them into a more standard non-cell based biologics. Our preclinical program remains extremely active and we are driving towards delineation of our first clinical target and the description of the possible clinical trials over the next several quarters. And finally let me turn my attention to our natriuretic peptide drug candidates and their types. Preclinical and clinical data have shown that the natriuretic peptide class can act on multiple disease proxies to play a role in negative outcomes associated with heart failure. A Phase II clinical study of Cenderitide was initiated in patients with heart failure in January 2015 and completed enrollment in March 2015. The drug was well tolerated and there were no significant adverse events. Capricor decided to conduct some additional small studies to further assess the safety and efficacy of higher dose levels of Cenderitide. This study will access not only safety and tolerability but pharmacokinetics and pharmacodynamics responsive to increasing dose levels of Cenderitide. Following these studies Capricor will determine whether to conduct additional clinical studies to further assess the safety and efficacy of this product candidate. So that’s a rundown of our clinical and preclinical programs. I am going to turn the microphone over to AJ to provide a brief update on our financials. Here is AJ.

Thank you, Linda. This afternoon’s press release provided details for the third quarter of 2015. The press release is available on the Company’s website at capricor.com. For the third quarter of 2015, the Company reported a net loss of approximately 2.9 million or $0.18 per share compared to a net loss of approximately 1.5 million of $0.13 per share for the same period in the prior year. Research and development expenses increased to approximately 3.2 million in the quarter ended September 30, 2015 compared to approximately 2.2 million for the same period in the prior year. The increase was primarily due to increased clinical and operational expenses related to our ongoing clinical trials including ALLSTAR Phase II and DYNAMIC. General and administrative expenses increased to approximately 1 million in the quarter ended September 30, 2015 compared to approximately 800,000 for the same period in the prior year. The increase was primarily due to increases in compensation expenses related to increased headcount and non-cash stock based compensation cost. At quarter end, we had roughly 17.2 million in cash and marketable securities on hand. In addition there is approximately 11 million -- that is yet to be disbursed to us under the terms of our CIRM loan award which will be attributable to expenses incurred in the ongoing Phase II study. We believe this cash will be sufficient to take us to the fall of 2016. And with that I will turn the line back over to Linda. Linda Marbán: Thanks Ed. In summary, Capricor has had a very busy and productive third quarter. We presented positive data from the DYNAMIC clinical trial confirming the bioactivity of our CDCs. Over the coming year we look forward to completing enrollment in the HOPE-Duchenne trial and having data from that trial by the first quarter of 2017, announcing the first indication for our exosome program and having a pre-IND meeting with the FDA early next year, and also announcing our plan to the Natriuretic Peptides also early next year. We are hopeful that we would be able to deliver meaningful results on our various programs. And with that, I will now turn the call over the operator who will open up the call for questions. Thanks.

Thank you, doctor. [Operator Instructions]. And we will go ahead and take our first question from Mark with H.C. Wainwright. Please go ahead. Your line is open.

Great, great. I just have a few questions mostly focusing on the DYNAMIC data. First of all, something we could talk a little bit more about dosing since we did use a range of doses in the 14 patients that we saw a readout from. I am wondering if you saw anything resembling dose effect in early data and maybe should we be thinking of going higher than 75 million cells or is the concept of a maximum tolerated dose normally applicable as long as you are operating above a certain therapeutic threshold? Linda Marbán: Yes, Mark thank you for your question. So in terms of dose responses, let me just say that it was a total trial of 14 patients, 12 reporting out in terms of data right now. So it’s early days in trying to determine a dose effect. However, we are keeping a careful eye on the highest dose. The data looks like -- if we continue to aggregate in the way that we did in this trial, we would see potential dose effect in the future. So we are confident that 75 million is a good dose to move forward and that’s the one that we are taking forward into HOPE-Duchenne somewhere between 50 million and 75 million depending upon the anatomy and the boys’ heart. In terms of the maximal dosing of 75 million cells, it certainly raises the question as to whether higher doses lead to better responses. We really believe strongly in the triple vessel infusion being able to get the cells to all areas of the injured heart. Some of the early work we did, and let me just take a minute to plug the enormous amount of mechanistic and preclinical work that went to get this company going and continues to fuel its research and development engine, funded largely by more academic colleges to do that work. We found that the maximum safe per vessel in a pig would be analogous to about 25 million cells in human. So we are not ready to push that envelope right now. We think that we are at the point at which we are able to safely deliver this number of cells and they seem to be working. So we might in the future look towards getting higher doses. But right now we feel pretty confident where we are.

Got it, okay. Sounds reasonable. Another thing we saw in this early data work was quite a few endpoints included in the readout. Look curious on your thoughts on which of the functional endpoints in particular are the best surrogates for MACE, presumably MACE would be an important endpoint in a future registration or anti-trial. We have seen some heart failure trials ENP levels that predict cardiovascular morbidity and mortality. In this case would you say that [LDF] improvements might be a more relevant surrogate for this population of heart failure patients. Linda Marbán: Yes, another interesting topic to discuss sort of in great detail. What I can tell you is we're reviewing all the data. The reason that we collected so many endpoints was so that we could take a look at those, look back at the literature and correlate the potential surrogate endpoints with [data that could] be predictors of MACE downstream. Our team is in the process of doing that now and we'll start to think about what a larger DYNAMIC would look like in terms of how the endpoint would be delineated and what surrogates you would wrap in with MACE to get the full picture of how the patient has done.

Okay, fair enough. More generally can you comment on how the DYNAMIC readout is maybe reshaping your thoughts about the developmental strategy for 10 and 2, I am curious if we are still going to see that randomized Phase Ib trial in advanced heart failure, or are we going to maybe see next trial encompass a broader full patient for the ischemic and non-ischemic with varying degrees of relief ejection traction and can you offer any thoughts on what we might see next in terms of trials? Linda Marbán: Yes. So this data is hot out the press. We literally just presented a few days ago. We are very excited. I can’t emphasize that enough what we’ve seen in this very small dataset. And so now we are sitting back reevaluating the clinical development plans. Some of the first steps will be meeting with the FDA and talking to our data with them and seeing sort of where they think this program can go. And then putting our heads together with our [KOLs] and the rest of the team and deciding what’s next and stay tuned for that. I am sure we’re going to be excited as excited to tell you as you will be able to excited to hear us.

Okay, looking forward to that. I think on the last quarter call, we talked about 100 patient readout from ALLSTAR II, and it’s an interim readout. Is that coming in 2016 or is that way you were referring to us first quarter 2017? Linda Marbán: So we are spending a lot of time these days with our statisticians trying to work out the next step for ALLSTAR. I presented the details I think it was last quarter, or quarter before of the interim analysis plan. We’re getting close to the point at which we can do those evaluations. Our statisticians have been hard at work with data that we’ve already had in hand and we’re going to be presenting some of our thoughts regard where we’d like to see this go to our DSMB in January. And so stay tuned for or next earnings call to hear an update on the outcome of ALLSTAR. What we can tell you now is that we full anticipate having data readout in the early part of ’17 for ALLSTAR Phase II.

I'll kind of finish with one question on Cenderitide earlier this week we saw an analysis come out from Novartis on their drug Entresto looking at 30 day readmission rates following discharge from hospitalization. And it looked, at first light quite impressive dropped readmission rate fairly sharply relative to patients on each inhibitors. Should we be thinking about Cenderitide as complementing or benefit in terms of reducing possible readmissions in the selling of post-acute decompensate of heart failure? Linda Marbán: So I actually haven’t seen this slate that announced by Novartis so I can’t really comment on the implications of and [indiscernible] their type but what I can say is that we’re very carefully reviewing Cenderitide that’s why we’re taking it slowly doing a couple of small clinical trials see where the therapeutic window of the drug and also where it will fit in the clinical development paradigm now that Entresto is on the market. And once we have that figured out then we can decide what to do with Cenderitide.

And then we might see some efficacy data coming out either later this quarter of in early 2016? Linda Marbán: Yes, look for early 2016 for the Cenderitide I don’t know if we’d want to call it efficacy data but we can definitely continuing to caller in the picture or the story of Cenderitide.

Thank you. And we’ll go next to Jason Kolbert with Maxim Group. Please go ahead your line is open.

This is actually Diane taking the call for Kolbert. First I just want to say congratulations on your exciting clinical programs. And can you just review with our team the data the [coalitions] from your early data that shows the effect between reduction in scar tissue, muscle mass and impacts on cardiac knees? Linda Marbán: So I assume you’re referring to the data that was presented in [caduceus] the proof of concept trial in patients with large heart attacks. So I think what we can say here is this is a much sicker patient population, so to look at scars is not probably going to give you as much information. Ultimately what we’re looking to do is look at these functional and quality of life and physiologic endpoints in patients that are very sick with heart failure to see if we can make that better to move towards a commercial product. And so we were able to do in DYNAMIC and in the earlier studies ALLSTAR and caduceus patients are still feeling well even though they’re very high risk for the development of heart failure. So scar size reduction is a great metric for determining if we can potentially take them back from that process, but functional endpoints are not usually as reliable because they’re still pretty healthy. So we don’t see a direct correlation in these two studies because we don’t have prior measurement at this point in the DYNAMIC patient population so we can say that we’re very excited that we have functional improvement in these very sick patients.

And can you focus with me on the first half of 2016 events that you think are the most important for us to focus on? Linda Marbán: So we will be really ramping up in treating patients in HOPE-Duchenne muscular dystrophy trial of cardiomyopathy. We’ll be announcing the clinical development plan for Cenderitide, the natriuretic peptide that we’ve had in our wheelhouse for a while and the new [indiscernible] advanced heart failure decompensated heart failure. We also will be announcing an exosome clinical development program which is very exciting, it’s our new product I mentioned it for a few moments in the actual call in the update and what I did not mention and have said before is that this will be Capricor’s introduction to new product indication which will be something outside the heart and we are very much looking for to the opportunity to take this therapeutic of information in fibrosis.

And it does appear that we have no further questions at this time. I will now hand it back over to Dr. Marbán for any additional or closing remarks.