Good afternoon, ladies and gentlemen and welcome to the Capricor’s Third Quarter 2023 Financial Results and Corporate Update Call. This conference call is being recorded. I would now like to turn the conference call over to our host, Mr. AJ Bergmann, Capricor’s Chief Financial Officer. Please go ahead.

Thank you. Good afternoon, everyone. Before we start, I would like to state that we will be making certain forward-looking statements during today’s call and presentation. These statements may include statements regarding, among other things, the efficacy, safety and intended utilization of our product candidates, our future research and development plans, 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, manufacturing capabilities, potential milestone payments 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 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, and we disclaim any obligation to update such statements. With that, I will turn the call over to Linda Marbán, CEO. Linda Marbán: Thanks, AJ. Good afternoon. And thank you for joining us today. I’m extremely pleased with the progress we are making towards the development of our lead asset CAP-1002, for the treatment of Duchenne Muscular Dystrophy. As I begin the call today, I am delighted to inform you that we have reached our targeted enrollment goal for our HOPE-3 Phase 3 pivotal study, which is designed to enroll approximately 58 patients across the United States. Additionally, we are planning on announcing the outcome of our interim analysis from the study prior to the end of this year. The purpose of this important milestone will be to determine if the trial…

Thanks, Linda. This afternoon’s press release provided a summary of our third quarter 2023 financials on a GAAP basis, and you may also refer to our quarterly report on Form 10-Q, which we expect to become available shortly and will be accessible on the SEC website, as well as the financial section of our website. Turning to the financials, let me start with our cash position. We ended September 30, 2023 with cash, cash equivalents and marketable securities of approximately $28.5 million. This excludes the $23 million in gross proceeds from the registered direct offering we completed in October that bolstered our cash position. Based on our recent operating results and current projections, we now expect our cash runway to extend into 2025, an extension from our prior guidance. In the third quarter of 2023, our commercialization revenue was approximately $6.2 million. That compares to approximately $1.6 million for the third quarter of 2022. Turning quickly to the expenses, excluding stock-based compensation, our research and development expenses were approximately $9.5 million for the third quarter of 2023, compared to approximately $5.4 million for the third quarter of 2022. The increase in expenses of $4.1 million was primarily due to increased clinical and manufacturing costs associated with our Phase 3 HOPE-3 trial. Excluding stock-based compensation, our general and administrative expenses were approximately $1.8 million for the third quarter of 2023, as compared to approximately $1.6 million for the third quarter of 2022. The increase of $200,000 was primarily due to increased facility and personnel costs. And our net loss was approximately $6.4 million for the third quarter of 2023 and 2022. And with that, let me turn it back over to Linda -- actually, open up the line for questions first before we do that. Go ahead, operator.

[Operator Instructions] Your first question comes from Joe Pantginis from H.C. Wainwright. Please go ahead.

Hey, Linda and AJ. Thanks for taking the question. Good afternoon. My first question, I’m going to start at the back end of your comments regarding exosomes. So just wanted to get a sense of what potential news flow in preclinical data we might be getting over the next 6 to 12 months. And secondly, I know you said there’s ongoing discussions right now, so there might be some confidentiality, but can you disclose what kind of vaccines you might be going after? Linda Marbán: Yes. So, thanks, Joe. Thanks for your questions. So, we are excited about the exosome program. It’s been perking along in the background. We have devoted most of our time and effort to CAP-1002 as everybody knows. But the data from the exosomes has been very positive and very exciting, including the ability to target, which has not really been shown before and was presented recently, as I mentioned, at World Muscle. So, in terms of milestones coming up in 2024, we do plan on continuing to advance this program. We’ve had a vaccine for COVID that’s been in development for quite some time. I think, the world has come to realize that there’s a lot to be left to understand about the vaccinology using mRNA. And so, the concept of using a protein-based vaccine that is easy to make, easy to manufacture, can be manufactured in just several months of time using native proteins. And using a non-toxic molecule such as the exosome is indeed something to be of great interest and certainly gives proof of concept for the program. So, that’s the type of vaccine we’re working on, same one, just looking for other opportunities for partnering for the therapeutic options as well as for the vaccine. The vaccine conversations are the farthest along at this point.

Got it. That’s helpful. Thank you. And my main question has to do with the DMD program, obviously, and I guess there’s a few working parts here. But look, following your Type B meeting, you had very, very important visibility about the path forward to be able to file in Cohort A and Cohort B. So I guess my question is maybe a little bit of a scenario analysis of your comment about still further potentially being able to accelerate the programs. And I guess, I would also focus my question around the upcoming interim analysis with your disclosure to the public revolve around sort of continuous planned or any potential data and any potential stopping rules you might be able to share with us. Thanks. Linda Marbán: Yes. Thanks. So, let me just start with the interim analysis since it’s the most recent upcoming milestone, which would be -- before the end of the year. It is a futility analysis, so the DSMB gets the data, evaluates safety and efficacy and determines based on preset metrics which are not been disclosed whether or not the trial should continue as planned. We are looking forward to the results of that interim analysis. We, of course, based on all of our previous clinical work expect the trial to be not futile and to be continuous plan. And that’s how we’re building our story. But of course, it will be a great day for celebration once we get that word from the DSMB that the trial is not futile and we can continue. In terms of the actual metrics, we have not disclosed those. But we can say that as a standard futility analysis that gives a good confidence that the trial should proceed as planned. And that’s where we are with…

Thank you. [Operator Instructions] And your next question comes from Aydin Huseynov from Ladenburg Please go ahead.

Good afternoon, Linda, AJ. Congratulations with the progress this quarter and congratulations with completing the enrollment in Cohort A. I have a couple of questions. First, I want to start from milestone, potential milestone payment from Nippon Shinyaku. So your total potential sort of receivable from Nippon for the next several years, if the drug gets approved, is $705 million. So, can you give us a sense how much from that total amount Nippon may pay by the end of the year, if the DSMB decision will be positive? Is it $10 million, $20 million or $30 million? Can you give us overall just a sense of it? Linda Marbán: AJ?

Yes. Thanks, Aydin. Right now, we are not at liberty to state the exact dollar figure affixed to that interim futility analysis. Of course, as it hopefully is achieved, we will put more granular details out. So, stay tuned for that. And so, that’s kind of where we are at now. In terms of, the building milestones as we move forward towards approval, what we haven’t disclosed up to this point, but we are now at liberty to say is that, up to and including the time of approval is $100 million in potential milestones to Capricor. So, we are going to look to that to fuel, obviously, the expansion of CAP-1002 to Duchenne, as well as other efforts, in terms of product expansion. So, that will -- those milestones hopefully come due will total $100 million. Hopefully, that’s helpful.

Yes. This is super helpful. I appreciate that, AJ. Just to clarify, it’s $100 million including approval milestone? So, I imagine that you get the approval…

That’s correct. Yes, exactly. And look for our 10-Q to become available shortly, which will articulate this basically the same way I am saying it, but that should be put out there shortly.

Okay. I appreciate that. All right. Another question is on cohorts. So Cohort A completed enrollment 58 patients. It seems like you’re going to be starting Cohort B enrollment within weeks from now, I think you mentioned by the end of the year. So given the holidays, do you think it is still realistic to sort of enroll -- actually enroll patients in Cohort B by the end of the year, between now and January 1st? Linda Marbán: So Aydin, were you on my team call yesterday, because this is what I asked my clinical team and they said that enrollment is going to be pretty robust before the end of the year. There’s nothing else in clinical trial right now for these later stage boys and young men with DMD, nothing with recent failures in the space and some of the other companies pulling back. And so, there’s a line out the door to get into Cohort B, and we’ll be delighted to welcome them and treat them even with the holidays coming up.

This is great to hear. I mean, so given there’s nothing, no other trials, it is feasible that you will enroll. Okay, understood. So, given the DMD landscape is changing, obviously with different treatments, different approvals, so do you think the Cohort B will be somehow different from Cohort A, given that these are -- this will be different patients? So, do you think any variability between two cohorts in the future? Linda Marbán: That’s a really interesting and provocative question, again, one we’ve debated a lot internally. And I think the short answer is no. We have the same inclusion exclusion criteria, the same requirements in terms of their meds and all of that. The only potential differences with the approval of the new deflazacort were also open up to taking patients on that regimen, because many of them are switching due to a better safety profile. So, that’s really the only difference. We don’t think that’s going to mediate any difference in sort of the potential efficacy. We’ve talked at length to our KOLs, and sort of a steroid is a steroid is a steroid in terms of what it does to physiologically. So, we’re very hopeful that the enrollment criteria will be virtually the same and Cohort B will very rapidly allow us to transition from sort of clinical scale manufacturing to commercial scale manufacturing.

Appreciate that. This is very helpful. So another question I have is about expansion of potential label of CAP-1002. So, other DMD companies may have certain limitations to expand into other stages of DMD or other dystrophies or other types of DMD patients. So, you have a nice slide on your corporate presentation describing potential expansion into early stage DMD patients and do -- and then into Becker muscular dystrophy or BMD. So, could you help us understand how the potential endpoints with early-stage patients may look like with CAP-1002? So, this likely won’t be pulled, because these patients are more active and more mobile. So just give us a little bit of an idea how these endpoints may look like. Linda Marbán: Yes. So, it’s interesting. All of these patient reported outcome measures are -- have their strengths and have their weaknesses. I think everybody really believed very strongly in the NSAA, but very recently with the Sarepta data, there’s been a little question around the veracity of that measure. There’s time to rise, which is an interesting one. We haven’t designed that trial yet. Frankly, we’re going to talk to FDA about label expansion potentially without more clinical work and then evaluate from there and use the advice of our key opinion leaders, who are used to working with these younger boys to help find the one that’s most effective in demonstrating the efficacy of CAP-1002 in these younger kids.

And the last question is regarding Becker dystrophy. So for Becker dystrophy, cardiomyopathy is obviously one of the major causes of death. And it would make sense sort of starting from the late stage patients. So could you share with us how or why Capricor is more advantageous -- is in more advantageous position compared to other DMD -- other dystrophy companies when it comes to Becker dystrophy? Linda Marbán: In terms of Becker dystrophy, one of the major manifestations of Becker muscular dystrophy are the cardiac implications. And of course, as you know, one of our major advantages over almost any other therapeutic that’s in investigation or approved for DMD is that we have cardiac benefits. So we are highly enthusiastic, if you can sort of use that terminology when you’re talking about treating a dread disease, about the opportunity for CAT-1002 in Becker muscular dystrophy and its cardiac implications.

Thanks so much Linda and AJ. Congratulations again with the progress. Linda Marbán: Thank you so much.

Thank you. [Operator Instructions] There are no further questions at this time. I will be turning the call back over to Capricor’s management for final remarks. Please go ahead. Linda Marbán: Thank you so much. Thank you so much. And thank you AJ. Before we conclude today’s call, I want to extend my sincere appreciation to the clinicians, patients, and their families who are working with us to bring CAP-1002 closer to potential approval. I also just want to take a minute to thank our clinical operations team for doing an extraordinary job, for getting this trial fully enrolled. And hopefully, once we continue to follow these patients and get the data, we’ll be able to have an approved therapeutic for these later stage Duchenne patients. And I know that will be a day of celebration for the community as well as for us. We look forward to seeing you at upcoming meetings and hopefully, you’ll have a happy and healthy holiday season. Thank you so much.

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a great day.