Capricor Therapeutics, Inc.

Greetings and welcome to the Capricorn Therapeutics Inc. Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, CFO A.J. Bergman. 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 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, 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, and we disclaim any obligation to update such statements. With that, I'll turn the call over to Linda Marban, CEO.

Good afternoon, and thank you for joining our third quarter earnings call and corporate update. I will begin my remarks with updates on our rapidly advancing engineered exosomes platform, which include our mRNA and VLP vaccine candidates. I will then update you on CAP 1002, our self-therapy product for the treatment of patients with later stage Duchenne muscular dystrophy and patients with COVID-19. Now let's talk about the next chapter for Capricorn. 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 it is also of great importance to Capricorn and our exosome platform for drug delivery that we are building. Pfizer's vaccine is an mRNA vaccine, and demonstration of its effectiveness could change vaccinology and, in fact, even therapeutics permanently. We have anticipated this outcome and believe that the best delivery partner for mRNA is an engineered exosome, and that is exactly what we have been working on for the better part of 2020. We are now ready to develop RNAs for therapeutic delivery and are excited to be part of this new wave of opportunities in biotechnology. The success of the vaccine candidate is validating for our platform and paves the way for our potential Gen 2 vaccines that could confer greater cellular immunity as well as generate antibodies. Our vaccine candidates express more viral proteins to elicit potentially broader coverage. More importantly, the recent success of an mRNA vaccine candidate presents many important opportunities for Capricorn as we build our RNA exosome delivery platform, which includes an expanded focus of engineered exosomes to treat or prevent a variety of different diseases and disorders. We have been working on exosomes for the last two years and realized they could potentially revolutionize biotechnology very much like antibody therapy did over two decades ago. Now, earlier this week, we announced the publication of what we consider to be our most important publication since our founding. We have shown that exosomes made from a standard commercially available cell line and loaded with mRNA for four viral proteins induce a long-lasting cellular and humoral immunity in mice, potentially setting the stage for clinical trials. Our current thinking is that the mRNA vaccine we have in development could be an important and necessary stepping stone towards Gen 2 vaccines that elicit broader immune protections and or display enhanced delivery and expression. The paper, which can be found on BioArchiveIX, establishes the first fruits of our new exosome-oriented research program. Earlier this year, we began rebuilding our research team focused on the development of a novel engineered exosome platform. Our goal is to develop exosome products by harnessing the natural features that exosomes possess. Exosomes are the body's own drug delivery vehicle, produced by all cells, abundant in all biofluids, and demonstrated to be safe by decades of transfusion and transplantation medicine. They are safe and non-toxic, unlike lipid nanoparticles, which can have toxic side effects. Additionally, they can be directed to the cell type that we would like to treat and are readily able to deliver payload to the cell, directing protein expression. These are goals of drug delivery that have been hanging in the balance for many years, and now we believe that the exosomes can provide the answer to that biological conundrum. To that end, and as you have heard us talk about extensively, our first strategic step was to begin working with a world expert in exosomes, Dr. Steven Gould, professor of biological chemistry at Johns Hopkins University. Dr. Gould has worked in the exosome field for nearly two decades and works with Capricorn both as an executive consultant and scientific collaborator. Dr. Gould has helped accelerate the exosome program within Capricorn, bringing new ideas, innovative technology, and valuable know-how, while also helping us assemble a team of scientists in our Los Angeles labs to work on product development, quality control, and manufacturing. To support this work, we have entered into a sponsored research agreement with Johns Hopkins University. The result is a dynamic, exosome-focused research team with approximately 10 PhDs working to build exosome technologies in collaboration with Dr. Gould. With a focus on exosome-mediated therapeutics, The COVID-19 pandemic presented us with an immediate opportunity to determine whether exosomes might offer advantages relative to mRNA vaccines in development. Currently, results from Pfizer, Moderna, and others appear to justify the inclusion of spike-expressing mRNAs as the primary component of an infective vaccine, at least for short-term protection. Our work has been designed to extend these advances by developing a two-component vaccine, one with mRNA-driving expression of spike, while the second mRNA drives long-lasting, protective cellular immune responses to other viral proteins. We have especially targeted the nucleocapsid, or N-protein, which is a major target of the immune response in COVID-19 patients and the basis impact of many commercial antibody tests. The results of our initial study, posted on BioRxiv last Friday, demonstrate the general validity of this approach by documenting the induction of immune responses to both spike and nucleocapsin, including antigen-specific immune responses of CD4-positive and CD8-positive T-cells nearly two months following the final injection. Furthermore, we used this initial study to explore the effect of delivering mRNAs via exosomes, which are normal biological constituents of human bodies, non-toxic and well-tolerated. Unlike certain lipid delivery vehicles that are themselves inflammatory and at high doses toxic, we detected no adverse reactions upon administration of exosome-delivered mRNAs in mice. In fact, Certain observations raise the possibility that inclusion of exosomes into our formulation may even enhance functional mRNA delivery, which, if true, may offer an avenue for increased potency for a wide array of mRNA-based products. We will be submitting this data to a peer-reviewed journal shortly. In a parallel, yet independent series of experiments, We have also developed a platform for producing SARS-CoV-2 virus-like particles that contain high levels of spike, membrane, and envelope within an exosome-sized vesicle. Originally developed for research purposes as a non-infectious mimic of a mature virus particle, we have found that SARS-CoV-2 VLPs elicit potent anti-spike immune responses, Produced in a human cell line that has been long ago adapted for the production of biologics, our VLP technology is not based on production of a single protein, but rather on the inducible, coordinated expression of multiple viral proteins. This work relates directly to our efforts to generate engineered exosomes, as the same basic technologies underlie both approaches. In fact, all of our work in the fight against SARS-CoV-2 otherwise known as COVID-19, is merely a prelude to our development of exosome-based vaccines and therapeutics, with the ultimate goal of generating formulations of engineered exosomes and synthetic mRNAs to prevent and treat human disease. It should also be noted our two vaccine programs are rapidly adaptable. If mutant viruses emerge that escape the limits of our current formulations, we can redesign the vaccines to drive immunity to these novel forms. We realize there are various vaccines in advanced clinical development, but what we have established by our initial studies are the potential exosomes as mRNA delivery vehicles. The fact that tandem mRNA vaccination can elicit a broader immune response to multiple viral proteins, and that the principles of exosome engineering can be applied to the production of safe, non-infectious VLPs that mimic virus structure, and induce potent immune reactions. As we continue to refine our technologies and products in the fight against COVID-19, we are extending our work to the production of therapeutics with monogenic, metabolic, and or neurologic diseases as potential prime targets. There are many opportunities to explore. Let me elaborate for a moment. Using this platform, we can load RNAs or proteins, or even small molecules into the exosomes and target them therapeutically. Our vision is that we will expand our platform using the exosomes with a variety of RNAs, as in messenger RNA, microRNA, or silencing RNA, to drive protein expression in the direction necessary to treat the disease process. For instance, it could potentially be a way to replace broken proteins while we wait for gene therapies to provide lifelong cures. We have an exciting technology that we envision may, via periodic infusion, lead to replacement proteins in monogenic diseases or those metabolic diseases where lack of a certain protein can be fatal. With both products, our plan is to continue to build the platform by partnering, licensing, and developing some indications for internal development. These are indeed exciting times. Please stay tuned for more updates on our vaccine candidates and continued platform expansion. I would also like to provide you with an update on our Duchenne muscular dystrophy program. While we are laser focused, as you can see, on building the exosome platform technology, we are still hard at work on our DMD program. As you recall, we have had very positive data from the HOPE II clinical trial which was a randomized, double-blind, placebo-controlled trial of CAP-1002 in non-ambulant boys and young men with advanced DMD. The treated subjects had, on average, a 2.4-point improvement over placebo patients on their performance of the upper limb, or POLL score. This was on top of steroids, which is standard of care in DMD. Many products in clinical development for DMD have failed because they test their product in steroid-naive subjects. The fact that our patients improved while receiving optimal steroid treatment is very important. The FDA and published work suggest that a one-point improvement in the poll could be clinically relevant, and we saw a 2.4-point change, again demonstrating the likelihood that CAP-1002 improves upper limb function in DMD in a way that could delay disease and improve quality of life. We also saw improvements in the hearts of patients as measured by ejection fraction, the most important measure of cardiac function. There have been no products to date that lead to the type of improvements in cardiac function in DMD that we have shown with CAP-1002. As you may know, cardiomyopathy is the number one cause of death in patients with DMD. So anything that can delay or prevent that decline is highly desirable. The DMD community, along with us at CapriCar, are extremely encouraged by this data. At this time, as we have previously stated, the FDA has recommended that we do a phase 3 clinical trial, which we believe will delay this important therapy from getting to those with DMD. We are committed to boys and young men who are in later stages of this disease, and will continue our efforts towards making CAP-1002 available to all DMD patients. We are in discussions with the FDA, with respect to the size of a potential Phase III study, while our statisticians estimate a clinical trial size of approximately 50 to 70 patients. However, at this time, Capricorn is working with FDA to explore alternative ways to move this program forward. We also are having active discussions with several potential strategic partners for this program, and we will keep you updated as to our progress. Finally, I want to update you on our COVID-19 clinical program using CAP-1002. This program is testing CAP-1002 and treating severe patients with COVID-19. Severe means those that are hospitalized and needing oxygen supplementation, but who are not completely ventilator dependent. We initiated an emergency use authorization program in the spring when COVID-19 was first peaking and had results that suggested CAP-1002 was acting as expected, which was an immunomodulator, and seemed effective at reducing the impact of the cytokine storm that is the part of COVID-19 that often ravages patients. These results were not unexpected. Based on this important program, we realized that CAP-1002 could potentially be very important in treating the later stages of COVID-19. Based on a series of patients treated under the Emergency Use Authorization Protocol, We published that patients treated with CAP-1002 demonstrated some improvements in biomarkers of cytokine storm, such as white blood cell count IL-6, C-reactive protein, otherwise known as CRP, and in some cases a reduced reliance on supplemental oxygen. The data from these patients informed the design of a larger Phase II clinical program to treat COVID-19 with CAP-1002. Today I am delighted to share that we now have an active clinical trial called INSPIRE, and are actively screening patients in this study of up to 60 patients. With the current uptick in cases nationally and hospitalizations increasing, we believe we have a product candidate that is potentially poised to treat a group of patients, those with severe disease, for which very little has proven effective. Now as I have mentioned in the past, we have worked closely with the United States Army Institute of Surgical Research, and other collaborators to investigate the use of CDC exosomes, the potentially active ingredient of the cells to treat trauma, which has similar physiologic consequences of the cytokine storm associated with COVID-19, such as hypercoagulability, elevation of inflammatory biomarkers, renal dysfunction, and other sequelae. The preclinical data from this important study should be published soon. Please stay tuned for updates on trial progress and data analysis on this important program. Now, I would like to thank you for your time and attention today. I am proud to be at the helm of this company during these exciting times, and look forward to seeing the Exosome platform technology continue to evolve, along with continuing to move CAP-1002 further along in clinical development. I will now turn the call over to AJ for a brief update on the financials. AJ?