Capricor Therapeutics, Inc. (CAPR) Q1 2016 Earnings Report, Transcript and Summary

Good afternoon and welcome to the Capricor Therapeutics First Quarter 2016 Financial Results and Business Highlights Conference Call. As a reminder, this presentation contains Forward-looking statements and information that are based on the belief of the management of Capricor Therapeutics Inc. as well as assumptions made by and information currently available to Capricor. All statements other than statements of historical facts 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 statements regarding the efficiency, safety, and intended utilization of Capricor’s product candidates, expectation of or dates for commencement of clinical trials, IND filings, plans regarding current and future collaborative activities and the ownership of commercial rights, expectations with respect to the expected use of proceeds from offerings and the anticipated effect of offering, 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 Capricor’s business are set forth in Capricor’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission on March 30, 2016 and in its Registration Statement on Form S-3 as filed with the Securities and Exchange commission on September 28, 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. As a reminder, this teleconference is being recorded. For the benefit of those who maybe listening to the replay, this call was held and recorded on May 12, 2016. Since then, Capricor may have made announcements related to the topics discussed. So, please reference the company’s most recent SEC filings and press releases. It is now my pleasure to introduce your host Dr. Linda Marbán, CEO of Capricor Therapeutics. Linda Marbán: Good afternoon and thank you for joining us. With me today is Leland Gershell, our Chief Financial Officer and AJ Bergmann, our VP of Finance. I will review some recent corporate highlights and then Leland will summarize our financials. I’d like to begin by providing an update of our ongoing clinical trial with our lead therapeutic candidate CAP-1002. As a reminder, CAP-1002 is our allogeneic, cardiosphere-derived cell product also known as CDCs and is currently being evaluated for potential dystrophin [ph] heart disease associated with Duchenne muscular dystrophy or DMD as well as heart disease in adults who have recovered from a large heart attack and also those who have advanced heart failure. To remind you, the FDA has granted orphan drug designation to CAP-1002 for the treatment of DMD. Capricor continues to make excellent progress in all of these programs. As we have discussed on our last update call in March, our randomized Phase I/II trial in boys with DMD-associated cardiomyopathy called HOPE-Duchenne was rolling ahead of our expectations, and that trend has continued. We recruited our first patients and hope to send in late February and just six weeks following that announcement we reported that the power of Data Safety Monitoring Board or DSMB had completed its brand safety review of the first six patients and had issued its approval to continue patient recruitment. I am very pleased to say that we are now just shy of being halfway forward on our enrolment goal of 24 patients. Its enrolment continues at the current pace. We expect to fully enrol this trial in the third quarter of this year. Currently, the HOPE trial is up and running at three clinical trial phase. In HOPE-Duchenne, boys with cardiomyopathy, secondary to DMD, our randomized either received one treatment of CAP-1002 or usual care only. CAP-1002 is delivering to each of the three major coronary arteries in their hearts of these patients, so as to provide broad exposure to the heart muscle. If you will recall, before coronary infusion has been safe for use in our DYNAMIC trial and is also ADVANCED HEART FAILURE. In addition to following them for safety, the participants and HOPE will be evaluated at several interviews, intervals to assess the efficacy of CAP-1002 according to a variety of structural, functional and quality of life measures. We remain on track to report six months top line data from HOPE-Duchenne in the first quarter of 2017. Additionally, we have been approved for an approximate $3.4 million grant award from the California Institute of Regenerative Medicine to report in part our HOPE-Duchenne clinical trial, in conjuction with our clinical development program in DMD. We have been [Indiscernible] relationships within the Duchenne patient community including families and patients advocates with whom we are gaining significant visibility. Not only has it become more widely known, that the inevitable cardiomyopathy associated with CMD is a leading cause of death in this population. But it is also becoming more clear that the progression of the heart disease is independent of the age of the patient. Therefore, CAP-1002 may be as important to a child of 8 years of age as it is to a young man in his early 20s if Duchenne - just before. Now, I’d like to turn our attention to our randomized placebo controlled Phase II ALLSTAR clinical trial of CAP-1002. This trial is making very good headway for the modified enrolment goal of approximately a 120 patients as we had announced in our last quarterly update. As you may recall, this modification was supported by statistical modeling that incorporated the expanded data set from other clinical studies of our CDC, which shows that 120 patients amplifies is expected to provide sufficient, specifically power to detect a 15% reduction in inpart ALLSTAR size as measured by MRI at 12 months, which was the original primary efficacy endpoint of ALLSTAR. ALLSTAR closely follows the design of the previously published CADUCEUS trials, which demonstrated a statistically significant reduction infarct size with an important difference being that while CADUCEUS required tissues to be taken from patients own heart otherwise known as autologous. ALLSTAR uses cells prepared from donor heart with a frozen and ready for use at any time and allogeneic paradigm. The pickup in the rate of enrolment we have begun to see earlier this year as a result of our clinical team readouts [ph] has continued. We have 33 active sites in the United States and I am very pleased to say we expect to complete enrolment in the third quarter of this year. Therefore we expect to have six months data from ALLSTAR available to us in the first quarter of 2017. And as per our agreement with Janssen Biotech, they will have until 60 days following the delivery of these six months data to them to exercise their option to license the exclusive worldwide development and commercialize to CAP-1002 for use in cardiology indications. In the event they exercise the options; Capricor was [Indiscernible] and initial licensing and then be eligible to receive additional milestone payments as well as royalty on global sale. In total, Capricor can receive upto $325 million in milestone under this potential license agreement. Also, as we have previously disclosed, ALLSTAR is funded in part by a loan award received from the California Institute for Regenerative Medicine. Now a brief update on DYNAMIC. The open-label trial of CAP-1002 that we conducted in 14 patients with advanced heart failure. This trial involved patients with New York Heart Association Class III Heart Failure, a severity at which their physical activity is markedly limited. As we have presented at the American Heart Association’s Annual Meeting last November, 11 of the 12 patients through a valuable six months had improved by at least one New York Heart Association or NYHA Class, and measure of the severity of the heart failure. In DYNAMIC, we also saw improvement in both cardiac structured functions indicative of reverse new modelling, which is almost unheard of in this patient population. We look forward to reporting the 12-months data from DYNAMIC next quarter and we have submitted an abstract to be considered for presentation at the annual meeting of the European Society of Cardiology which will be held in late August. We've highlight the DYNAMIC data because we believe that the greatest market opportunity for CAP-1002 will be for the treatment of heart failure, which is associated with high rates of mortality and morbidity. This major public health problem affects approximately 5 million people in the United States and figure which continues to grow as people are living longer and the life of the cardiac patients are prolonged by advances and therapies. The economics of heart failure in terms across the U.S. is a staggering $32 billion each year. Undeniably, there was a clear and present need for new treatment for these patients. And I'd like to turn your attention to our exosomes program, and we're seeing it is making terrific progress this year. As you remember, we are planning to announce our first indication in mid-2016. Exosomes are made by cells and provide a means to get benefits from cells therapy without having used the cells themselves. As you can imagine a cell free material as a therapeutic is much less complicated to make, store, distribute and deliver. So exosomes can be had on much more like a traditional pharmaceutical although still regulated as a biologics. As many of you are aware exosomes as a class of biologics have been garnering a great deal of attention, both in the Biotech industry as well as among investors. The exosomes we are developing at Capricor come from our cardiosphere derived cells. We refer to our exosomes as CDC exosomes or CAP 2003. On our last call in March, we had presented some striking data from an ocular inflammatory model, which shows the ability of CAP 2003 to dose dependently, improve experimentally induce inflammation of the eye. We have generated similarly impressive results in other three clinical models that together suggest the broad treatment potentials of CDC exosomes and disease for inflammation and subsequent fibrosis are prominent. Beside our exosomes program being the earliest candidate in our pipeline, our CDC exosomes program is generating considerable excitement among physicians thought leaders in relevant disease areas with whom we have shared our timing. We are working for the selection of our first clinical indication for CAP 2003, which we expect to announce as soon as we have completed the preclinical data analysis. Okay. So that concludes my update on our R&D program. And now I'd like to ask Leland Gershell to provide a brief update on our financials. Leland?

Thank you, Linda. This afternoon's press release provides financial details for the first quarter ended March 31, 2016. The press release is available on the company’s website at capricor.com. In the first quarter of 2016, excluding the effect of stock-based compensation, we spent approximately $4.3 million in research and development activities and $0.9 million in general and administrative. As of March 31, 2016 we had approximately $14.3 million in cash, cash equivalents and marketable securities. This figure reflects the approximately $3.9 million in net proceeds from the operations completed in March. The participants in that financing considered primarily as member of Capicor's management team and boards of directors, legacy investors and Cedars-Sinai Medical Center. We currently expected our cash balance will fund our operations through at least the first quarter of 2017. And with that, I will turn it back over to Linda. Linda Marbán: Thank you, Leland. In closing, I would like to say that we are energized by the potential of clinical program to deliver new cells that may be transformational for Capricor less than 12 months from now. In the near term, we will announce the completion of enrolment in both the HOPE-Duchenne and ALLSTAR clinical trials those expected to occur next quarter. And by mid-year you should hear about our first clinical indication for the development of our CDC exosomes. Early next month we'll report to seeing some of you in San Francisco at the BIO International Convention I will now turn the call back over to the operator who will open the call up for questions. Operator?

Thank you. [Operator Instructions] And we'll go ahead and take our first question from Ted Tenthoff. Please go ahead. Your line is open.

Great. Thanks and thanks for the update Linda. I apologize if there's any background noise. Just following up with respect to first, the cardiac program, kind of planning for success here, what would be next step if we get a positive data read that out at ALLSTART? Linda Marbán: Yes. So, thanks Ted. It's always great to hear your voice. So, positive data readout out of ALLSTAR, the first thing that happens obviously is that [Indiscernible] decided to whether it’s license in that therapy CAP 1002 and take it forward in this clinical development as well as commercial development program that’s something that we've been working with them and thinking about for a long time. If for some reason that doesn't happen and we certainly are not planning for that or thinking about it even. We would evaluate the opportunity if its positive data I'm sure we will have many suitors at the ball and we will take one that is locally the best opportunity for the company.

Thanks and that's helpful. And if I may just the second one DMD, obviously this basis and tricky with respect to some of the recent regulatory interactions with the exosome shipping drugs, can you just really again kind of underscore how different you mechanism of action is? And why you think DMD is still an important area to invest? Linda Marbán: Yes. So, on that, Ted I want to think that we're most excited about in Capricor and that is the fact that on therapy CAP 1002 core [ph] the treatment of Duchenne muscular dystrophy associated cardiomyopathy is available to any and all of the boys and young men afflicted with Duchenne muscular dystrophy And as I said, I briefly highlighted this in the statements that I made is becoming more evidence that cardiomyopathy progresses at its own pace, which is independent of the skeletal musclemyopathy and such that we may see boys with really bad heart disease at age 8 and when they still ambulatory or boys that are still on wheel chairs at 22 with -- heart. So we'll be able to treat all of those boys and young men as their heart disease progresses. Additionally, we are mutation agnostic, so any type of Duchenne muscular dystrophy can be treated with our therapeutic and potentially have the same results that we have seen in CADUCEUS, which is the reduction in the amount of scar driving the boys back potentially from that decompensated heart failure which is the most common cause of death in these boys and young men.

Great. Thank you very much. Linda Marbán: Thank you.

Thank you. [Operator Instructions] Our next question comes from Swayampakula Ramakanth. Please go ahead, your line is open.

Thank you. Hi, this is RK from HCW. So, couple of quick questions. Continuing with the DMD indication, so if the HOPE study, the data from study is favourable, do you need a pivotal study or can you use this data for an accelerated approval? Linda Marbán: So thank you, RK nice to meet you, bodes [ph] well of course to getting to know you better. We have been working with Food and Drug Administration since we filed two file in our IND for HOPE-Duchenne. We plan on keeping that conversation active, when the data comes in we'll of course go to the Food and Drug Administration and to tell them and map out the plan for what next steps are, what should be everything from, the application of NDA to next trial, we will have to how it will plays out. And still we're open to any in our possibility.

Okay. And then on the DYNAMIC study for the heart failure indication, do you plan to seek out the partner to develop for this indication or you want to do this independently, what's the current strategy for that? Linda Marbán: Thank you for that. Currently, DYNAMIC will be held under the umbrella of the exclusive license options held by Johnson, the city area of J&J. If they licensed it in, then they will have the rights to develop the therapeutic and for any and all indications and what we're thinking to be as a cardiology at this time and so we look forward to working with them on the development of that clinical program.

Great. Thank you very much.

Thank you. [Operator Instructions] We'll go and take our next question from Ted Tenthoff. Please go ahead. Your line is open.

Great. Thanks for taking my follow-up question. Just with respect to exosomes, maybe you can give me a little color in terms what to expect? Is this something where you're going to primarily be targeting orphan diseases? Is this going to be a therapy that all we intended for larger broader diseases or the kind in their core area of cardiology, just give us a little bit of sense of what we're expecting for that? Linda Marbán: Thanks Ted. So exosomes are these nanometer-sized lipid-bilayer about the goals that are packed with nucleic acid primarily the RNAs and proteins. And what they do is, they go into cells and they literally change the behaviour of the cell and encouraging it to do everything from live which we'll be calling anti-fibrosis to other types of repair strategy. Our exosome seem to be very powerful healers in many of the indications that we're going after and thinking about. And so, what we're doing is looking at any opportunities in which those conversions of clinical relevance available patients, reimbursement, orphan diseases and indications that we can take to commercialization ourselves. One of the important things we're looking at in addition to the eye and skin diseases that we've been talking are treatments for oncology-based therapeutics, I can't go further than that, but I will hopefully [Indiscernible] you to stay tuned as we begin to talk about the programs that were going into developing, that are going to be related to oncology indication.

Great. And just one last quick question if I may, is there is something where you’ll be seeking for great [ph] opportunities as well? Linda Marbán: Yes. I mean we are always looking and interested in meeting anybody who is potentially interested in talking with us and getting to know our programs, and if we can find the right balance of partner and opportunity we certainly will jump on that.

Great. Thanks, Linda. Linda Marbán: Thanks Ted.

Thank you. [Operator Instructions] And it does appear that we have no further questions at this time. I will now hand it back over to our speakers for additional or closing remarks. Linda Marbán: Thank you very much for joining us today. We look forward to sharing news review as it comes out over the next several quarters. And we look forward to meeting you very soon at the BIO Convention in San Francisco. Thank you.

And that does conclude today's program. We'd like to thank you for your participation. Have a wonderful day. And you may disconnect at any time.