Greetings, and welcome to the Capricor Therapeutics Inc Third Quarter 2020 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now pleasure to introduce your host, CFO, A.J. Bergmann. Thank you, you may begin.

Thank you. 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 & Development plan, 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 our 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. You are cautioned not to place undue reliance on these forward-looking statements. We disclaim any obligation to update such statements. With that, I'll turn the call over to Linda Marbán, CEO. Linda Marbán: Good afternoon and thank you for joining our third quarter earnings call and corporate update. I'll begin my remarks with updates on our rapidly advancing engineered Exosomes platform which include our mRNA and VLP vaccine candidate. I'll then update you on CAP-1002, our self-therapy product for the treatment of patients later stage Duchenne Muscular Dystrophy and patients with COVID-19. Now let's about the next chapter for Capricor. This has been an exciting week for all of us with the announcement on Monday by Pfizer of a potentially effective vaccine for COVID-19. Most importantly, it is likely that humanity will benefit. But is also of great importance to Capricor and our Exosomes platform for drug delivery that we're building. Pfizer's vaccine…

Thanks Linda. This afternoon's press release provided a summary of our third quarter ended September 30, 2020 financials on a GAAP basis. And you may also refer to our quarterly report on Form 10-Q which we expect to become available very soon and it will be available on the Sec website as well as the financial section of our website. As of September 30, 2020 the company's cash, cash equivalents and marketable securities totaled approximately $35.3 million compared to approximately $9.9 million at December 31, 2019. Additionally in the third quarter of 2020 Capricor raised approximately $2 million in net proceeds in an average price of approximately $5.87 per share under our ATM program. Now turning quickly to the financials in the first nine months of 2020, our net cash used in operating activities was approximately $6.2 million. For the third quarter of 2020 excluding stock-based compensation, our research and development expense was approximately $2.6 million compared to approximately $800,000 in Q3, 2019 again excluding stock-based compensation our general and administrative expenses were approximately $885,000 in Q3, 2020 compared to approximately $750,000 in Q3, 2019. Net loss for the nine months ended September 30, 2020 was approximately $9.5 million compared to a net loss of approximately $6.2 million for the first nine months of 2019. In summary, as we move forward, we continue to focus our expenses but our company on the advancement of our core pipeline programs as Linda articulated. We'll now open the lineup for questions.

[Operator Instructions] our first question comes from the line of Joseph Pantginis of H.C. Wainwright. Please proceed with your question.

This is actually Emanuela calling for Joe. Congratulations on the progress across the pipeline. And my question regarding the Exosomes and mRNA vaccine. This is obviously very exciting and as you've mentioned Linda during your remarks also in with regards to the recent developments the mRNA vaccines. So in the industry also [ph] I'm just wondering what were the key elements that would make your vaccine one of the active [ph] choices moving forward? Linda Marbán: Yes, thank you for the question Emanuela and I do have Dr. Stephen Gould of Johns Hopkins also on the line to further answer the question. I think the thing that we're most excited about is the development of what appear to be a long-lasting cellular T cell-based immunity. This is due to some of the proprietary ways in which we're making the vaccine. It's little bit different using the Exosomes, we're able to utilize some techniques to drive cellular immunity that may not be possible with a lipid nanoparticle and so as we showed in the paper, we're able to see long lasting response even several months after the last boost which indicates long lasting immunity. We also the data while we're very exciting that we've seen so far is very short-term and in a relatively few patients. The nice thing about the Exosomes is that they're non-toxic. They should have absolutely no negative effects when delivered to people and so we believe that the Exosomes as a delivery vehicle of an mRNA vaccine is also beneficial and then finally of course using more of the viral protein, the four structural viral proteins focusing on the N and the S proteins. As I said in my prepared remarks, the N Protein is so prevalent and the virus, it's even what we look when we look for an antibody response. So thinking that will have a broader base ability to drive immunity. So in summary, more proteins, broader based immunity, longer lasting T cell or cellular immunity, safe and non-toxic, all the - what we think will be a very important Gen-2 [ph] vaccine.

Got it. You especially answered to this question already. But also related to potential comparison with other mRNA vaccines. How do you think your data compared to those the clinical data available for the other mRNA vaccines? Linda Marbán: Yes, so we don't have clinical data compare yet. We're gearing up to get into the clinic for sure, hoping to do a Phase 1 study in 2021. And we'll have apples-to-apples to comparison. But for now what we're focusing on is the fact that, we think that the vaccine will be an important vaccine for use in treatment of COVID or other types of viral disorders because how very rapidly mRNA can be shifted and changed for use in different vaccines.

No, I meant actually I meant the clinical data. Like if you can compare like the clinical data that had worked for other vaccines. Linda Marbán: You can't compare pre-clinical to clinical. What I can say is, we have a very clear path forward to the clinic. Dr. Gould do you want to answer?

No, I think you addressed it fine. I would just say, the only thing I would add was that, we're getting cellular immune responses two months out to the nucleocapsid protein and of course to spike only vaccines don't try to generate that type of immunity. So at that level, that's a major difference.

Got it, thank you for that. With regards to CAP-1002. Can you give us a little bit more color on what do you think could be an alternative thought forward as opposed to Phase 3 study? Linda Marbán: Yes, so we're talking to FDA. We would like to have them consider the concept of accelerated approval. We've been saying that for a while, we've been working towards that for a while. During the current stage of state of universe was the pandemic, although now things could be looking up. Clinical trials have been very difficult to enroll and we would feel a little remiss in our job in trying to protect and defend human life by bringing people out to do a clinical trial. Whereas as they could go to a for instance a local infusion center, we have great opportunity to treat a lot of the Duchenne patients that could quality for CAP-1002. So we're trying to see if the agency has some bandwidth to think about that type of program. We're very appreciate of the efforts that they've made to work with us and we are excited by the quality of the data, which is why I highlighted it again today. I think it's warranted to note that clinical data is really excellent and we hope that we'll be able to provide the therapeutics to the boys and young men with DMD with very soon.

Got it. Thank you. And just last question, if I can. With regard to the INSPIRE study, can you remind us how long do you expect the study to be and how many centers of clinical [ph] patients. Linda Marbán: So we haven't provided enrollment update as yet. What I can tell you is what the uptick in case is nationally and the amount of hospitalization that is following on from that. We're expecting little relatively rapidly. We have event site in Texas whereas we all know, they're just past a million cases yesterday so. We're going to be going for up to 10 sites in the United States and we expect that we'll have data on this trial fairly soon. But stay tuned. Fairly soon meaning into 2021 sometime.

Sure, thank you very much. I'll go back to the queue.

Thank you. Our next questions come from the line of Jason McCarthy with Maxim Group. Please proceed with your question.

Congratulations on all the progress. It seems like there's - for all the bad that COVID caused, it's like a serendipitous chance to get the Exosomes platform front and center. Can you talk just a little bit about the way you're delivering mRNA with the Exosomes because Pfizer not with Exosomes is there with mRNA? Obviously, they're having some challenges now with shipping in cold chain. The Exosomes platforms or the Exosomes amenable to not meeting minus 80 degrees? Linda Marbán: Yes, that's one of the things that we're working on. And is seeing if we can change the storage conditions. Currently we have been working with minus 80 just because everybody knows that RNA can degrade very quickly and so it's the safest way to transport RNA. But Steve I don't know if you want to comment a little bit on our efforts perhaps on this.

I don't have anything specific to add, other than to reinforce that this is a very active area of work that's ongoing in the company and we're hopeful that we can overcome the hurdle. We don't have enough data to make for any comment on that.

Okay, the Exosomes provide more stability to the mRNA molecule, even though it requires minus 80. Is it a little bit more stable than what they're currently using or is it differentiating factor that you can do this - you're going to make VLPs, you have Spike and N protein etc. so you can get this more robust kind of immune responses versus what the other groups might be getting? Linda Marbán: No, Exosomes are very stable. They're even stable at room temperature. They're really actually hard to degrade. Exosomes combined with mRNA are a little bit of different story and that's what we're working on and so we're aware of the conundrum faced with the cold storage, the stability, the shipping and that kind of thing. And so with our Gen-2 [ph] vaccine programs one of the things that we're working on, is this sort of chain of storage and shipping and stability and so stay tune for more updates on that. We're very excited of the opportunity.

Sure. And then on the INSPIRE trial, can you walk us through what the endpoints of that trial will be in severe patients with reduced mortality, time in hospital, days to ventilation? And can you help us understand a little bit more? Linda Marbán: Yes, we basically just hit on several of them. So it's of course mostly focusing on safety although it is Phase-2. We've built in composite endpoint where we're looking at hospitalization, mortality, time in ICU and then a variety of biomarkers and physiologic manifestations of the cytokine storm. So we're looking at all of those things with sort of primary focus on days of hospitalization.

Got you. And when do you expect an update on any potential partnering discussions around the DMD program? Linda Marbán: What I can say is we're in active discussions with several partners at this time. Obviously in my opinion anyway, a highly desirable assets to partner with us on and move very quickly towards registration and commercialization so we'll keep you updated as soon as we have any tangible news.

Got you. And then last just question, going back to the Exosomes platform. You'd mentioned using VLPs given that they're Exosomes s does that mitigate some of the extraction and purification steps that other groups making VLPs using and just hold cells line and just take from there, not specifically the Exosomes. Linda Marbán: Yes, so this is one of the programs I'm most excited about and we have some really interesting opportunities with that program because of how unique the Exosomes s are in becoming VLP and using them as a VLP. Steve, do you want to provide any more color on that program?

Yes, even a more general comment about what people refer to as a VLP, the definition of that term is quite loose. I would simply say our VLPs are distinct from anybody else's that out there and at least any of the leading candidates that have considered VLPs in that. We're making our VLPs using multiple viral proteins, the same proteins that make up the structure of the infectious variant. So they have the same type of vascular structure, the same protein structure. They don't have any viral RNA and so they're completely safe. But they're designed to really mimic the structure of viral particles. In that sense, they're about the closest thing you can come to and in activated viral vaccine. Of course there's a very effective types of vaccines. But they're dangerous, they're dangerous to make and there's always a risk of incomplete killing and then giving some vaccinated people disease during the vaccine process. So are they a bit different than others? And as Linda said, we're very excited by our preliminary results in small animals studies and we think it's going to be quite successful.

Is there an opportunity to get non-dilutive funding, grants from NIH or some other source for this program given the unmet need?

There's always a possibility of getting non-dilutive funding. Linda Marbán: So I'm going to actually take this Jason. So again you're relatively pressing. Yes there's great opportunity especially for that program, it's unique in the space and so we're actively pursuing some opportunities and we'll keep you guys updated as that becomes clear, if we successfully compete for some. Sorry.

Got it. Thank you.

Thank you. Our next question has come from the line of Alan Leong with BioWatch News. Please proceed with your questions.

I'm going to ask a little bit more about the additional utility of working on N protein. You've mentioned some of the additional benefits it confers. And I recognized this might be theoretical. But is it a little bit of risk in your case is that, that invoking Spike protein immunity may not help and sometimes may even hurt having target a vaccine that would work for the N protein helps to provide an additional margin of protection or safety or efficacy? Linda Marbán: So I'm going to ask, Steve. Who is my guru on all things vaccine related to answer that one?

Yes, I think the easiest way to start answering that question is just call your attention to a number of studies by groups across in various different countries that have established quite clearly in non-human primate models and then more recently in retrospective studies of patients. There's quite good immunity that builds up as a consequence of viral infection. When people or animals are infected with SARS-CoV-2 they're going to be generating antibodies and cellular immune responses to large number of viral proteins, not just Spike. And so given the empirical evidence that infection leads to protective immunity. It would be ideal to have a vaccine that mimic the natural immune responses to some extent. Now there's practical limitations on this. There's really good rationale reasons to start with a Spike focused vaccine and we knew that this would be the primary focus in the early stages and that's why we started off by presuming the Spike mRNA would be one component of the vaccine and then to try to see whether we could simultaneously induce immunity to other proteins. So that's what your question is, sort of anticipating is that yes, generating vaccines that raise immune responses to a broad array of key viral proteins. As our priority a better chance of providing protection to a large percentage of population, that's long lasting and that's why we've taken the strategies we have.

And just maybe, just slightly just [indiscernible] I'm a little bit slow. You caught my attention when you said about - best trying to give the natural immunity within an inactivated form. The things I remember with the old live virus vaccine, which are really naïve [ph] so the durability of response, the efficacy response and also the correct antigen specificity. And with that context, I almost want to re-ask the question, can you walk me through a little bit more about the mRNA approach for the presentation using Exosomes and what you hope to achieve and I think I may have covered it. Correct me and say, what Alan those aims are wrong. But that's what I've extrapolated from the discussion.

Okay, no you didn't anything wrong and I'll try to make it concise as possible. So the traditional old non-recombinant vaccine well either be an attenuated as a live virus or a killed or inactivated virus particle. So if you immunize within attenuated live virus, you will generate immune responses to every single protein encoded by the virus give or take. Killed virus particles are not as broad based because they're only composed of the structural proteins of the virus in the case of SARS-CoV-2. You've got more than two dozen proteins encoded by the virus. If there were attenuated live virus vaccine, you would potentially be generating immune responses to all those proteins, whereas a killed SARS-CoV-2. But primarily only be generating antibody responses to spike nucleocapsid and membrane possibly envelope. And that's the two old types of vaccines. Our approach is to try to generate immune responses to a large number of viral proteins focusing primarily on the structural proteins that are not published. But in our latest iterations, we're actually incorporating some additional proteins in our antigen structure. And that's why we hope to get a better immune response.

I want to congratulate you, my scientific colleagues were excited by the paper. Well thank you. Linda Marbán: Thank you so much, Alan and thank you again, Steve.

[Operator Instructions] there are no further questions at this time. I would like to turn the floor back over to Linda Marbán for closing comment. Linda Marbán: In closing we continue to build on our recent progress and we expect 2021 to be a transformational year for Capricor. We're committed to becoming a leading company in the development of cellular and Exosomes-based therapeutics for diseases. We're focusing on advancing our products and delivering on our milestones. I would like thank Dr. Gould, our clinical investigators and my colleagues at Capricor for their dedication and outstanding efforts this quarter. Thank you and please stay well.

Thank you, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great evening.