Capricor Therapeutics, Inc. (CAPR) Q2 2025 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the Capricor Therapeutics Second Quarter 2025 Conference Call. [Operator Instructions] This call is being recorded on Monday, August 11, 2025. I would now like to turn the conference over to CFO, A.J. Bergmann, for the forward-looking statements. Please go ahead.

Thank you, and good afternoon, everyone. 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 and development plans, including our anticipated conduct and timing of preclinical and clinical studies, our enrollment of patients in our clinical studies, our plans to present or report additional data, our plans regarding regulatory filings, potential regulatory developments involving our product candidates, potential regulatory inspections, revenue and reimbursement estimates, projected terms of definitive agreements, manufacturing capabilities, potential milestone payments and our financial position and possible uses of existing cash and investment resources. 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'll turn the call over to Linda Marban, CEO. Linda Marbán: Thank you, A.J. Good afternoon, everyone, and thank you for joining us on our second quarter conference call. At Capricor, our mission remains unchanged and clear to bring transformative therapies to patients with rare and life-limiting diseases. While this past quarter has presented us with some unique challenges, it has also reinforced our conviction that we have in Deramiocel for the treatment of DMD, the agility of our team and, of course, the promise of our pipeline. In particular, for the Duchenne community, we remain unwavering in our commitment to deliver the first approved therapy aimed at specifically treating the cardiomyopathy that affects nearly every patient with Duchenne muscular dystrophy and remains the leading cause of death in this devastating disease. Now for the latest update on our Biologics License Application or BLA. As previously disclosed, we received a complete response letter from the FDA in July. The CRL stated that the BLA in its current form does not meet the statutory requirements for substantial evidence of effectiveness and also referenced certain CMC items, most of which we had already responded to, which were not reviewed by the FDA due to the issuance of the CRL. As a reminder, approximately 1 year ago in our pre-BLA meeting with the FDA, we requested to switch the primary efficacy endpoint of our ongoing Phase III HOPE-3 study to left ventricular ejection fraction, or LVEF, and the agency responded by encouraging us to submit on currently available data from our HOPE-2 and HOPE-2 open-label extension trials matched to an external natural history comparator and then use the data from our HOPE-3 trial to support potential label expansion in the future. This became the plan that we implemented. While the FDA response contained in the CRL was certainly disappointing, we stand behind the strength of our submission and the substantial progress made throughout the review process. from a successful Pre-License Inspection or PLI, to completion of our mid- cycle review with no deficiencies noted and timely responses to more than 50 information requests from the FDA, we believe we consistently met the agency's expectations throughout the review process. The complete response letter was unexpected given the trajectory of positive interactions. While the FDA continues to evolve under new leadership and its approach to novel therapies to treat rare diseases, we remain focused on working constructively with the FDA to define the clearest and most efficient path forward for Deramiocel and the patients who need it. I would like to emphasize that our HOPE-3 trial is still blinded and will not be unblinded until we have clarity on the path to potential approval from FDA. Let me take a minute to remind you of the features of the HOPE-3 trial. The study is fully enrolled with the last patient last visit occurring in June of this year. HOPE-3 is a double-blind, placebo-controlled clinical trial with a 1:1 randomization, which enrolled 104 patients consisting of 2 arms, Cohort A and Cohort B. The combined power of this trial using both cohorts is greater than 90% with the original primary efficacy endpoint being the performance of the upper limb or the pull version 2.0. Based on a multitude of reasons, not the least of which is the tremendous unmet need of DMD cardiomyopathy. We have submitted a protocol amendment to designate left ventricular ejection fraction or LVEF, as the primary efficacy endpoint and the skeletal muscle endpoint, performance of the upper limb or PUL as a prespecified secondary endpoint. This change is based on multiple factors. One, the objectivity of LVEF as measured by cardiac MRI. Remember, there is no volition in cardiac function as measured by MRI as well as the relevance of left ventricular ejection fraction to the pathophysiology of DMG cardiomyopathy, which has only been recently elucidated by the work of Dr. Jonathan Soslow from Vanderbilt University and the DMD Cardiac Consortium in a study funded by the Office of Orphan Products of the FDA and the NHLBI. In addition, HOPE-3 is well powered to detect the treatment effect on cardiac function. I want to remind you that Capricor developed Deramiocel specifically to address heart disease, particularly the cardiomyopathy associated with DMD. However, until Dr. Soslow's study and its subsequent publication, there were no established efficacy benchmarks in DMD cardiomyopathy for the FDA to use in defining clinical benefit. Our entire regulatory path, including the current BLA, was built on the FDA's guidance on how efficacy should be defined in this patient population. We have always intended for ejection fraction to serve as our primary efficacy endpoint. So while this may appear to be a change in strategy, it is, in fact, a return to the original goals we set early in the development of Deramiocel. To that end, with our Type A meeting with the FDA now scheduled, we have submitted a comprehensive briefing package that addresses the concerns raised in the CRL and outlined several potential paths to approval. These include, first and foremost, the continued review of our previously filed BLA, which we believe meets the applicable regulatory requirements for approval as well as supplementing the current BLA with additional data from HOPE-3, if needed. We believe the current handling of our submission is inconsistent with our interpretation of the FDA written guidances for cell and gene therapies as well as recent public statements addressing the approval of safe and effective therapies for rare disease populations. We are hopeful that FDA will exercise a patient-focused and science-driven approach and rare disease approvals in which they have been emphasizing in the media as well as highlighting in the FDA direct podcasts. Based on the comments of Secretary Kennedy and Commissioner Makary, approving Deramiocel for the treatment of DMD cardiomyopathy seems directly in line with their goals. In conclusion, about a year ago, we received FDA feedback that shaped our decision to submit the BLA based on cardiac endpoints. We provided the requested data and analysis and fully expected any differences in interpretation to be addressed at an advisory committee meeting, one that was ultimately canceled by the FDA without explanation. We are concerned with how our file has been managed because we believe there were opportunities during the review period for the agency to raise the specific issues cited in the CRL before issuing the letter. We have long worked aside the DMD community and understand their calls, both to continue treatment with Deramiocel and to gain access if it becomes commercially available. We will continue to urge the FDA to recognize that cardiomyopathy is a leading cause of death in DMD and a far more severe consequence than the loss of arm function. Deramiocel has demonstrated a strong safety profile and the data indicate it can help stabilize the inevitable decline in cardiac function for people living with DMD. With regard to the CMC and pre-commercial aspects of our program, I am pleased to announce that the FDA has now formally accepted all 483 items from our Pre-License Inspection. This milestone further validates the strength of our quality systems, manufacturing capabilities and overall commercial readiness. In addition, the CMC-related items noted in the CRL have either been addressed prior to the issuance of the CRL or have been internally addressed since. We have prepared formal responses, which we plan to submit with our response to the CRL. Our manufacturing facility in San Diego remains fully operational and in production, and we are being disciplined in our commercial manufacturing investments to ensure we are fully prepared while managing resources wisely. In parallel, we are diligently and strategically investing in launch readiness activities, including physician education, patient services, market access planning and reimbursement. We've also begun working closely with treating physicians across the field of neurology and cardiology who will ultimately collaborate in prescribing Deramiocel to patients with DMD cardiomyopathy, if approved. Many of these clinicians are already familiar with the therapy through their participation in the HOPE-2 and HOPE-3 studies, and we are committed to ensuring a smooth transition to commercial use if approved. At this time, we are focused on seeking approval for Deramiocel in the U.S. And with respect to our global expansion plans, we will provide updates as they become available. Now turning to our exosome program. To remind you, in 2024, we were selected to participate in Project NextGen, an initiative led by the U.S. Department of Health and Human Services aimed at advancing next-generation vaccines for COVID-19 and other potential infectious diseases. Under this program, the National Institutes of Allergy and Infectious Disease, NIAID, will be sponsoring the Phase I clinical trial of our StealthX vaccine. Within the last several weeks, we reached a significant milestone for this program, which was the clearance of the IND and initiation of the trial using StealthX, our exosome platform technology. The Phase I study is being conducted and overseen by NIAID's Division of Microbiology and Infectious Disease, DMID. And I am pleased to report we have already supplied them with our clinical material for use in the trial. The Phase I study is assessing our COVID-19 vaccine product. The trial is divided into 3 arms comprised of 3 escalating doses of the spice spike or S antigen and a combined high-dose S plus the nucleocapsid or N antigen, the multivalent vaccine we have been developing. NIAID is starting with the S first because previous COVID vaccines are mainly S-based, and they wanted to have a basis for comparison with our vaccine candidate using similar antigenic profiles. The end goal is for the adoption of the N+S, which is our multivalent vaccine, and we will provide more updates on this developing program as they become available. We believe that StealthX has the characteristics of a vaccine product that Secretary Kennedy would find acceptable. It contains no adjuvants. It is not mRNA-based, uses a native protein antigen and can be rapidly produced if needed. We have long believed that this type of vaccine checks all the boxes for a safe and effective platform as supported by multiple preclinical studies and upcoming clinical data will allow us to confirm or challenge that hypothesis. This platform also has the potential to address multiple disease areas, including influenza and RSV. While vaccines are not a core focus for us, if our candidate meets U.S. government criteria and demonstrates efficacy, it could potentially open meaningful business development opportunities. Just as importantly, it would serve as strategic proof for our exosome platform, which we hope to advance as a versatile therapeutic engine for rare diseases and beyond. While a majority of our efforts this year have been focused on securing approval for Deramiocel, an additional reason we recruited Dr. Michael Binks as our Chief Medical Officer was his expertise in translational science and medicine. He is now leading efforts to advance our exosome pipeline with the goal of forging strategic partnerships to expand the platform into and beyond vaccines. We believe the differentiated features of exosomes, including low immunogenicity, scalable manufacturing and targeted delivery position Capricor for unique potential opportunities in the therapeutic delivery space. We look forward to sharing updates as they become available. Thank you. And with that, I will now turn the call over to A.J. to run through our financials.

Thanks, Linda. This afternoon's press release provided a summary of our second quarter 2025 financials on a GAAP basis. 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. Let me start with our cash position. As of June 30, 2025, our cash, cash equivalents and marketable securities totaled approximately $122.8 million. Turning into the financials. Revenues for the second quarter of 2025 were 0 compared to approximately $4 million for the second quarter of 2024. Additionally, revenues for the first half of 2025 were 0 compared to approximately $8.9 million for the first half of 2024. I'd like to point out that the source of revenue for 2024 was the ratable recognition of the $40 million we had received under our U.S. distribution agreement with Nippon Shinyaku, which has been fully recognized as of December 31, 2024. Moving to our operating expenses for the second quarter of 2025. Excluding stock-based compensation, our research and development expenses were approximately $20.1 million compared to approximately $11.7 million for Q2 2024. For the first half of 2025, excluding stock-based compensation, our research and development expenses were approximately $36.3 million compared to approximately $21.8 million for the first half of 2024. Moving into general and administrative expenses, excluding stock-based compensation, were approximately $4 million in Q2 2025 and approximately $1.8 million in Q2 2024. And for the first half of '25, also excluding stock-based compensation, our general and administrative expenses were approximately $7 million for the first half of '25 and $3.6 million for the first half of 2024. Net loss for the second quarter of '25 was approximately $25.9 million compared to a net loss of approximately $11 million for the second quarter of '24, and net loss for the first half of '25 was approximately $50.3 million compared to a net loss of approximately $20.8 million for the first half of 2024. I will now turn the call back over to Linda for some closing remarks. Linda Marbán: Again, thank you, A.J. Just to reinforce A.J.'s point on our financial position, with over $120 million in cash, we are well positioned to support operations into late 2026 and continue to advance our key pipeline objectives. Additionally, if we receive approval, we would still be eligible to receive a priority review voucher as well as a milestone payment of $80 million from Nippon Shinyaku, representing additional significant nondilutive capital opportunities to further strengthen our balance sheet. This is an important moment for Capricor. While we have faced recent regulatory headwinds, we are advancing deliberately, strategically and with confidence in our data, our team and our path forward. We continue to believe that Deramiocel represents a major step forward for patients with DMD cardiomyopathy and that our exosome platform is well positioned to deliver value through continued innovation and partnerships. To the Duchenne muscular dystrophy community, thank you for your ongoing trust and support. We remain grounded in the science on execution and committed to building a company that delivers meaningful and lasting impact for all DMD patients. I will now open up the line for questions.

[Operator Instructions] Your first question comes from Ted Tenthoff from Piper Sandler.

And I appreciate all of your hard work to keep fighting for these boys and get them a therapy that's going to help them with their heart function. I wanted to get a sense for sort of the plan for next steps in terms of unblinding HOPE-3. Is the plan to sort of get confirmation from the FDA on that first? Just maybe sort of reiterating what the plan is. Linda Marbán: Thanks, Ted. Always a pleasure even during these crazy, crazy times. Yes. So we are waiting for adjudication from FDA as to what their requirements will be for HOPE-3, and then we will submit a statistical analysis plan and proceed with unblinding only after that has been accepted. We just don't want to muddy or cloud the waters with any thoughts that we had unblinded early. So our plan is to stay quiet until we have plans from them.

Great. And when do you expect to hear back from the FDA or get that clarity? Linda Marbán: Well, obviously, from the rescheduling of our earnings call today, our Type A meeting is this week. We anticipate to have a really good conversation with the FDA. We're looking forward very much to meeting with them. We certainly -- August is our month. August of 2024 was when this whole plan was put in place. So I'm very excited for this meeting. And in terms of providing clarity and updates to the markets, that probably won't be until I get the official feedback in writing, especially with the liability of our current situation and times. So hopefully, Adam First won't report on it before I do.

Your next question comes from Leland Gershell from Oppenheimer.

Just a couple here. So just maybe further from Ted's inquiry. So if you go with the plan to not unblind HOPE-3, but continue with the current BLA as it is, would there then be supplemental OLE data that could go into what the FDA has on file versus what had been submitted? I guess if you could share just what incremental data ex HOPE-3 that could become available to them that would be different from what they had reviewed previously. Linda Marbán: Yes, Leland. So actually, I don't haven't really thought about submitting supplemental OLE data, though, of course, it continues to support our safety profile and the efficacy. If you look at the long-term efficacy of Deramiocel, it's actually quite extraordinary, and we're very proud of that record in our OLE patients. And I don't know of another clinical effort in DMD that has as long of a record post study as we do. Having said that, I think the meeting with FDA will define what they will want for data for either the reopening and resubmission of this BLA. And so I don't have an answer on that. My current plan is to have everything ready, then they have an opportunity to select what they think would be most efficient in determining efficacy for approval.

Okay. And I guess I have to ask with Vinay Prasad now back at CBR, how does that inform your thinking? Are the people who you're interacting with the FDA, is there a different team now with Nicole Verdun out of the picture since the last few weeks? How should we think about kind of who your kind of counterparties are at FDA at this point? Linda Marbán: Thanks, Leland. It's interesting. I think the last few years, I've been thinking about this a lot. People have become much more focused on who the review team is and exercising political capital and regulatory flexibility and all of this lingo that has become very popular. I'm going back to old school. We have good clinical data. We have great safety data. We have guidance from the agency in writing as to what they wanted. We provided it. And now really, I think it's up to them to decide who is best suited within that agency to make the decision of adjudication and all of the factors that go into it. So I tell my team, I'll tell the market, we are proud of our data. We see it in terms of the long-term efficacy in our patients and safety, and we sincerely hope that the agency gives us a good path forward to get this to those patients as quickly as possible.

The next question comes from Joe Pantginis from H.C. Wainwright.

So just to sort of press the envelope a little bit. Obviously, things could change incrementally or dramatically this week and about a month after that when you provide the details from the minutes to the Street. But with language in the press release and what you talked about today, you're talking about resubmitting in its current form. You're saying maybe not really having any incremental data from the OLE that you just discussed in the last question. So what would you expect that could be potentially different? Linda Marbán: Well, again, we have given the FDA a variety of opportunities in our briefing document. We remain open to resubmission of the BLA as it is. We didn't feel that the CRL was founded. The data that we submitted was exactly what they asked for and they grafts themselves are interpretable as statistically and clinically significant. So that's, of course, our #1 goal is explaining to them why perhaps their interpretation was wrong. There's then everything that follows from that accelerated approval with the submission of HOPE-3 data in support of that and a variety of other opportunities that they can help us adjudicate, and that's why we're looking forward to this Type A meeting. So with that in mind, we go in with open hearts to meet with the agency and look forward to having them understand that developing and approving therapeutics for rare diseases, especially pediatrics one does require looking at the data in a more holistic fashion, and we're hoping that, that is exactly what happens this week.

All right. So that's fair. And so maybe just another question starting at the -- or from the back end of your comments around StealthX. So it's great that it's getting into the clinic now. Any visibility with regard to what might be next with regard to an indication? Obviously, you mentioned influenza as a potential. And how would you describe the early talks, maturity levels of potential BD around StealthX? Linda Marbán: Yes. Thanks, Joe. So our StealthX program is sort of our little engine that could. We just kept on moving it forward. Our vaccine program is really exciting in the sense that, as I mentioned in my remarks, this type of vaccine, which we've always believed in is exactly what Secretary Kennedy has advocated as would be a much better vaccine candidate, neoadjuvant, native proteins, rapidly produced, no mRNA, that kind of thing. So we're very excited about that. We're looking forward to the NIA data. They're very excited about it because it's a program that does fit that criteria, and we'll see where that goes. In terms of Capricor's interest in developing vaccine technology, that's something that I've always said would be a business development opportunity. We think it's wiper than ever based on the criteria I just put forth. In terms of therapeutic indications, we haven't disclosed some of the ones that we've been working on internally. As I've mentioned many times, we've focused most of our efforts and our capital on Deramiocel and look forward to providing updates on where we're going to be taking the exosome program as we further develop that therapeutic pipeline.

Got it. Looking forward to more visibility out of the program and good luck with the meeting this week.

Your next question comes from Kristen Kluska from Cantor.

Linda and A.J., also sending you best wishes for your meeting this week. A few questions from me. First, I was pleasantly surprised to see that you received the acceptances of responses related to the Form 483 observations. I guess, can you just comment on that? Because typically, after we see CRLs, the FDA isn't so much as engaged in responding to those things until you resubmit. So can you kind of explain that time line for us? Linda Marbán: Yes. So this has been an unorthodox review process, as I've mentioned in my remarks, as we've talked about in our disclosures and other companies have gone through similar situations. So we passed our PLI. They issued the 483s. We responded to the 483s and that review team, independent of the CRL provided feedback that we had cleared our 483s, and we are on path for approval of our CMC and our manufacturing plant for GMP use. So that is where that situation is. As I mentioned in the CRL, there were several CRL issues related to CMC. Many of those had already been addressed in information request responses that we provided prior to the issuance of the CRL, but they had stopped reviewing in anticipation of issuing the CRL. The rest of them have already been addressed, and we look forward to providing those in our response to the CRL.

Okay. And just want to confirm that the new time line guidance 4Q versus 3Q for HOPE-3 is just solely driven by the fact that you haven't started the unblinding yet because, again, you're waiting for this meeting and that clarity? Linda Marbán: Absolutely. Yes. Yes. Everything is on time with HOPE-3, and we just are waiting for feedback from FDA.

Okay. And then just lastly, I guess, in a nutshell, what are the key things that you hope to align from after this meeting takes place this week? Is it just understanding specifically what's required? If it is HOPE-3, do you expect to have full understanding of what that primary endpoint will be? And then even they're kind of blessing that if HOPE-3 is successful on that endpoint, that could potentially be sufficient enough to support an approval? Linda Marbán: Yes. So exactly what you hypothesized. So we're looking for feedback on exactly what it's going to take to get this approved, as I mentioned in a previous question. We believed in the data that we submitted. We believe that the CRL was unfounded. We were going towards the PDUFA very directly. Because there were no issues raised in the mid-cycle review meeting, we thought we were in a pretty good position. When the AdCom was canceled, I didn't really take too much issue with that because I felt like in the late-stage meeting, we would be able to address any concerns they might have. So my first plan is to try and understand what their resistance is to the currently available data. And if that is maintained, then what it will take to get to approval.

Your next question comes from Madison El-Saadi from B. Riley Securities.

I was just curious, has there been any informal agency communication? I believe post CRL, you noted there was an opportunity for an informal teleconference. And just wondering what the takeaways were there and if that kind of contributed to your decision to resubmit. Linda Marbán: Yes. So we did have a short informal meeting with them based on their guidance from their leadership. It was primarily to align on time lines of this Type A meeting and what would potentially be submitted and then to clarify the CMC-related issues, neither clinical nor stats were part of that meeting. So this Type A meeting is very important because it allows us to meet with the agency and really flesh it out. In terms of our decision to reply or respond to the CRL, that's always been our intent. We'd like feedback from them so that we can keep it smooth and steady and work our way to the quickest date of a PDUFA as possible, but we will see what happens this week.

Got it. And then do you expect to get an answer on the primary endpoint change at the August meeting? I believe you said you were expecting an answer on that. Linda Marbán: Yes. So that's been one of our primary questions. We are looking to get that worked out during this meeting.

Your next question comes from Aydin Huseynov from Ladenburg Thalmann.

I appreciate all the work you're doing. A couple from us. So first, I want to clarify, and apologies if this has been addressed, but I want to clarify the time line of the upcoming events. So the fourth quarter, you're going to read out HOPE-3, resubmit the BLA. And how do we treat this BLA? Is it -- if it is the same BLA, what is the review process typical for these kind of reapplications? Is it 2 months sort of acceptance then review sort of months? Just curious your thoughts on the time line. Linda Marbán: Yes. So that's one of the issues that we're going to be taking on with the agency during this meeting. Obviously, there's a lot of time line issues that were predicated on how they want to update the BLA, whether or not they would require a new BLA, what that does to priority review. We are still eligible for the PRV, the voucher that comes with approval for a pediatric indication independent of time line. But -- and our RMAT allows us certain benefits in terms of submission and also return on feedback, but we'll have to figure that out during this meeting with them, and we'll disclose that as soon as it becomes available to us.

Okay. I appreciate that. And regarding the left ventricular ejection fraction as the primary efficacy endpoint for HOPE-3. Could you walk us through your thought process as to why you chose this endpoint? I think HOPE-2 had multiple cardiac endpoints, I think 21 cardiac measures. And could you also remind us any prior successful or unsuccessful left ventricular ejection fraction primary endpoint submissions so that we can model based on those precedents? Linda Marbán: Yes, really, really important question. So left ventricular ejection fraction is obviously one of the most important indicators of cardiac function. And clinicians, cardiologists use it all the time to sort of define where their patients sit in terms of cardiac function and also what their likely outcomes are going to be. So cardiologists know that below and above certain points, you're either at greater risk for morbidity and mortality or in a reasonable position for stabilization of your cardiac function. We've known that for a long time. The reason that ejection fraction, and this answers your last question along with your first one, has not been used as a primary efficacy endpoint in clinical studies is because up until recently, it's really been considered a surrogate. It has not been directly tied to clinically relevant events such as mortality, hospitalization, exercise performance, those types of things. The most amazing thing, and this is why the change in our submission occurred from a clinical endpoint of skeletal muscle to cardiac ejection fraction was in collaboration with the agency because while everybody knew that cardiomyopathy was the leading cause of death currently for Duchenne muscular dystrophy, up until John Soslow's study with the cardiac consortium, there really were not general evidence of what would be the predicting facts for mortality, hospitalization, those kinds of things. And in Duchenne, it's super hard. You're dealing with a rare disease with a small patient population and a pediatric disease. So in order to do a mortality study, you probably have to do like a 20-year study globally in order to be able to gather enough information. So the Office of Orphan Products understood this paradigm or paradox as did the NHLBI, National Heart, Lung and Blood Institute. So they funded John study, which allowed them to look at what would be the predictive factors of either morbidity or mortality in Duchenne muscular dystrophy cardiomyopathy. And along with what our data suggested, ejection fraction was the most important feature. So there's also left ventricular end systolic and end diastolic volumes. We're measuring those. Those are secondary endpoints as well as some biomarkers that John had, which was like BNP and 1 or 2 other paradigms or 1 or 2 other endpoints that would suggest the paradigm of morbidity and mortality. And what we actually were able to demonstrate with the presentation of this data is that Deramiocel attenuated and may have even reversed the path of that decline in ejection fraction, therefore, predicting morbidity and mortality. Because, again, highlighting what I just said, it's a pediatric disease and it's rare, doing those types of large studies that sometimes require thousands of patients to look at mortality risk this is good for rare disease. And so the agency at the time and hopefully still is willing to understand that ejection fraction is probably the best way of predicting where this patient population could go should it not be stabilized.

It is very helpful. Appreciate it, Linda. Just to summarize this maybe, essentially, LVEF was a surrogate endpoint, and it requires a little bit of sort of innovative thinking on the FDA side to make it like a primary endpoint going forward. Would that be sort of a fair summarization here? Linda Marbán: I don't agree because, again, with the understanding of the new data that has come forth and the, again, rare disease population, there really is no other opportunity for adjudication of a primary efficacy endpoint. So if you really want to hear -- I'm passionate about this, as you can probably tell from my voice. But if you really want to understand the risk and benefit here, please listen to our Parent Project Muscular Dystrophy webinar that we did about a week ago. Dr. Chet Villa talked about the unmet need in cardiomyopathy. And what Dr. Villa, who sees these patients all day, every day at Cincinnati Children's talks about is there is no other way of measuring efficacy in this particular patient population that would be fair and safe for human beings.

Very helpful. And one final question on Becker's muscular dystrophy, my favorite one because part of our modeling is based on that. So -- but all these discussions, what kind of takeaways it has for BMD? I mean would you have to run sort of another sort of HOPE-3 style large trial in BMD to get a similar potential sort of label as in DMD? And would left ventricular ejection fraction sort of also sort of a primary endpoint for BMD? Linda Marbán: So sideways answer to that because I don't know directly at this point what the agency will require is. It's very early in this administration to understand what they're actually going to do in moving rare disease approvals forward. Our plan previously, which I have discussed with you, and discussed publicly as well is that we were going to try and use the Duchenne data to build the Becker program because the pathophysiology of the cardiomyopathy is identical, just somewhat slower progressing in the Becker patients. And in fact, as the Becker patients get older, it becomes more and more of a risk factor for morbidity and mortality. I don't know my current plan with Becker because I need to get understanding from the agency of how they're going to view the current Duchenne data, and then I'll be able to make more educated comments on it as I achieve clarity there.

Your next question comes from Boobalan Pachaiyappan from ROTH Capital.

I'm Manasa, dialing in for Boobalan. So we have a couple of questions. The first question is, so do you regard the upcoming Type A meeting as an opportunity for the FDA to clarify the change of stance with respect to Deramiocel BLA or a bellwether for investors in predicting the future outcomes of potential resubmission with the HOPE-3 data. Also, we are curious to know whether you'll be open to sharing the Type A meeting minutes to investors to the extent you can to be comprehensive and elaborate. Linda Marbán: Yes. In terms of your first question, yes, we expect share the data as it becomes available and the information as it becomes available. In terms of providing meeting minutes to investors, that becomes a little bit of an as-needed basis. I can tell you right now, as you heard, our cash position is very strong. We're not out raising money. We don't anticipate needing to raise money. We're focusing on approval of Deramiocel and DMD. And so we'll see if the situation calls for it, we would definitely discuss it directly with that investor.

Okay. Another question. So some investors are wondering about the scope and the pragmatic value of the early and the mid-cycle FDA review processes in relation with the overall review process. So what are your general thoughts on that? Linda Marbán: I'm sorry, could you ask that question again? I'm not sure I understood the question.

Okay. So some investors are wondering about the scope and the pragmatic value of the early and the mid-cycle FDA review processes in relation with the overall review process. So what are your general thoughts on that? Linda Marbán: Well, we had -- BLA was accepted and we had a very successful mid-cycle review. So I guess the takeaway for investors is in our situation anyway, it wasn't predictive of what was coming next.

Okay. And one last question. So in terms of the ex-U.S. clinical pathway for development and for approval, particularly in the U.K., we were wondering if Capricor could be eligible to take advantage of the IRP to seek U.K. authorization at some point, provided the future FDA decision was favorable. So... Linda Marbán: What decision?

So we were wondering if in terms of the ex-U.S. clinical pathway, whether Capricor could be eligible to take the IRP, which is the International Recognition Procedure to seek the U.K. authorization at some point, given that the future FDA decision is going to be favorable? Linda Marbán: Yes. Thanks. So as I mentioned in my prepared remarks, we're focusing on U.S. approval right now. Our global strategy is emerging. A lot of it will be based on some of the feedback we received from FDA and what our path forward is. And please stay tuned. We'll provide updates on our ex-U.S. strategies as they become available.

Your next question comes from Catherine Novack from Jones.

So one question was when the FDA responded to your request for a Type A meeting, gave you the date, did they give any substantive replies to your meeting request, particularly around positive or negative wording around the LVS? Linda Marbán: No. So typically, when they accept a meeting request, they just say, accept your meeting request and then they send over a date. We submitted a briefing package, and we're awaiting feedback on that. And we'll discuss the ramifications of what we asked for and what they respond in the meeting.

Got it. And then the R&D expense for 2Q, what accounts for the increase? Is this buildup of product inventory ahead of potential launch? Or is this due to ongoing clinical studies that we should expect to see continued growth on that line?

Yes. Thanks, Catherine. I mean -- it encompasses a little bit of both of what you said. We're obviously in the end stages of HOPE-3, but those patients, 104 of them are ongoing in that clinical development expense line item. We're also obviously preparing for the CMC endeavor. So that's where it's at. Obviously, when we get more clarity and feedback from FDA and announce more plans, I think we'll have more granular items on the burn rate moving forward. But it really encapsulates both of those areas. That's the main areas of spend.

[Operator Instructions] Your next question comes from Matthew Venezia from AGP.

So just looking for a little clarity on the FDA review process to date. Has -- obviously, there's been turnover since the new administration, but has there been any turnover since Prasad's leaving the FDA and then him coming back? And has the team that you've been engaging with at the FDA changed at all in that time? Linda Marbán: We don't know. We'll know more this week. So the big change was Dr. Prasad leaving and now Dr. Prasad returning. We don't know the ramifications of his exit or return on our program. But what I can say for sure is that we're looking forward to working directly with him and with the team. And we do not think that the data should be interpreted differently by any teammate that are different.

Got it. And just a little bit on the run rate. Do you expect it to taper off in 2026 once you kind of get clarity regulatory-wise and potential launch-wise as HOPE-3 winds down and should R&D come down and maybe G&A go up a little bit?

Yes, I think that's fair. Thanks, Matt. I mean, obviously, again, as I articulated, the next steps in HOPE-3 is a big aspect to that. But should we achieve approval, we'll have some pretty serious capital injections around the potential sale of the PRV and $80 million from Nippon Shinyaku. That will allow us, of course, to invest in CMC expansion and everything we want to do around the launch for commercial endeavors. So that's kind of how we're looking at it. Obviously, more granular level can be discussed in the future, but we expect the capital to go right where it needs to be, which is preparing for the launch.

Your next question comes from Chris Lemos from [indiscernible].

[Technical Difficulty] The Type A meeting? Linda Marbán: Sorry. All right. Well, thank you so much. I guess we lost the question. I want to thank you for joining today's call. We look forward to updating you on our progress over the coming months, although this is a big week for us. So we will update as soon as we get feedback from the FDA and look forward to a positive review of Deramiocel. Thank you so much, and have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.