Capricor Therapeutics, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Capricorn Therapeutics second quarter 2023 financial results and corporate update call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. As a reminder, this conference call is being recorded. I would now like to turn the conference over to our host, Mr. A.J. Bergman, Capicor's Chief Financial Officer.

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, plans to present or report additional data, our plans regarding regulatory filings, potential regulatory developments regarding our product candidates, manufacturing capabilities, potential milestone payments, and other 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 and 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.

Thank you, AJ. Good afternoon, and thank you for joining our second quarter 2023 conference call. Today, I would like to begin by reiterating our deep commitment to optimizing patient focused medicine and in the first half of 2023, we continue to make steady progress across our pipeline and are well positioned to deliver on important clinical and regulatory milestones for our Duchenne muscular dystrophy program, as well as continue to advance our Exosome platform technology. I am extremely pleased with the recent additions of two new members to our Board of Directors with the additions of Drs. Philip Gottwald and Paul Atwater. Dr. Gottwald most recently served as the Global Head Vice President of Business Development and Licensing at Novartis Institutes for Biomedical Research and has nearly 30 years of experience in drug development, research, corporate strategy, and business development. Dr. Atwater brings over 30 years of internal medicine and infectious disease experience as the Sherilyn and Ken Fisher Professor of Medicine at the Johns Hopkins University School of Medicine, serving as the Clinical Director for the Division of Infectious Diseases and the Director of the Sherilyn and Ken Fisher Center for Environmental Infectious Diseases. Both Dr. Gottwald and Atwater's deep industry experience will be invaluable as we continue to enhance our strategic and business development priorities across both of our programs. Our late stage clinical development program for CAP 1002 and patients with DMD continues to advance through development and key priorities, including enrollment of our phase three, hope three clinical trials, which I will give more details on in the next few minutes, as well as continuing discussions with the FDA regarding the proposed path towards submissions of a biologics license application. Building on this momentum, we believe we are well positioned to execute our corporate objectives throughout the remainder of the year. I will now dive into our programs and provide an update on recent activity. Let me provide you an update on our recent FDA interactions. Earlier this year, As part of our RMAT designation, we held a Type B CMC, or Chemistry, Manufacturing, and Controls-related meeting with FDA, where we outlined our plans for production of commercial-scale GMP Cap 10-02. The outcome of this meeting was positive in that FDA clearly outlined for us the deliverables necessary for the CMC portion of our BLA. As we previously have reported, there also was a discussion concerning the possible inclusion of additional patients who would need to be treated with product from our San Diego GMP facility in order to support commercial product manufacturing at this site. As this request would have likely extended the timeline for the completion of our pivotal trial and therefore the time to BLA, we requested a subsequent Type B clinical meeting with FDA to determine if there was a more efficient and expeditious path to BLA due to the great unmet medical need of this patient population. The advocacy community believes, as we do, that CAP 1002 attenuates disease progression and they have continued to raise awareness of our program within the FDA, and specifically CBER, and as the FDA continues to highlight the importance of patient perspective, they have continued to pay close attention to our program. To that end, the FDA granted our request to discuss our program in more detail, and this meeting occurred in July of this year. The goal was to further outline a plan for an expedited path to BLA for Cap 1002 for the treatment of later stage DMD. And I am happy to share that FDA seemed generally supportive of this plan. Currently, we are awaiting the final minutes from FDA, which we expect this month. We have already had another informal meeting with FDA to further define certain aspects of our program, and we are greatly appreciative of the FDA's guidance to optimize the HOPE III clinical trial design to support our path to potential approval. Next, I will provide an update on HOPE III, our Phase III clinical trial. I am very pleased to inform you that as of today, we have randomized 48 subjects across 17 active sites, and based on the currently designed sample size of 68 patients, we are on track to be fully enrolled early in the fourth quarter of this year. Furthermore, we remain on track to conduct an interim analysis on HOPE III in the fourth quarter of this year, which will primarily focus on a futility analysis. I am very enthusiastic about the rate of enrollment, which has been strong throughout the summer, and propelled by the positive feedback from patients and families, including the anecdotal reports of disease attenuation. Additionally, we are extremely pleased by the safety profile of CAP 1002 and the overall support of our investigators and families. Now, for an update on our most recent hope to open label extension or results presented at this year's parent project for muscular dystrophy annual conference. To remind you, we presented positive statistically significant two year follow up results from the study. As you may recall the hope to study. previously met its primary endpoint at the one-year time point on the pull version 2.0 scale. At the 24-month time point, the data continued to show statistically significant differences in the pull performance of the upper limb version 2.0 in the open label extension treatment group when compared to the original rate of decline of the placebo group from HOPE-2 after one year. Even more profound were the cardiac findings we observed. While the natural history of DMD cardiomyopathy suggests a steady decline in cardiac function as measured by ejection fraction, in HOPE2-OLE, we observed improvements in heart function in six of nine patients. Over time, we also observed an increase in correlation with the performance of the upper limb version 2.0 and ejection fraction results. The two-year results from this open-label study are tremendously impactful for DMD patients, showing cardiac and skeletal functional benefits, which underscores the potential long-term benefits of CAP-1002 treatment in DMD. The disease-modifying potential, together with the favorable safety and tolerability profile, further positions CAP-1002 as a potential anchor therapy for DMD patients. We are thankful. to the patients and their families for their continuous commitment to working with us on demonstrating the potential benefits of CAB 1002. Now, turning to our partnership strategy. Now that we have secured commercial and distribution rights in the US and Japan with our partner Nippon Shinnyaku, we continue to focus on securing additional partners in other markets around the world, with Europe being a key priority. and now have several companies evaluating the opportunity. Another focus I would like to briefly touch upon is the opportunity to evaluate new indications where CAP 1002 might provide benefits to additional patients. While we haven't committed any resources to this development area yet, this opportunity would provide another potential avenue for partnering, licensing, or even sole development leveraging on the capabilities we have built at Capricor for CAP 1002. Lastly, I would like to provide on our update on our GMP manufacturing facility. We have designed this GMP manufacturing facility to produce commercial-scale GMP CAP 1002 doses. We see this facility as a versatile and cost-effective way to bring CAP 1002 to market efficiently. In anticipation of CAP 1002 obtaining market approval, we built this facility because we believe having the ability to manufacture in-house will greatly increase our margins and will support the early launch of this product. I am pleased to report that the San Diego facility is up and running, engineering runs are underway, and we remain on track to be able to release clinical doses in the third quarter of this year. Overall, I am very pleased with the progress of our DMD program. We look forward to sharing further updates from our interactions with FDA, our progress with HOKE III, and the development of potential additional partnerships in new territories. We have two new additions to our senior leadership team, enhancing our regulatory and CMC internal expertise. Dr. Yuxi Feng has assumed his role as vice president of regulatory, overseeing all regulatory activities. Dr. Feng previously worked at the FDA, wave life sciences, and Kodiak Biosciences. Each of these companies have overlapping areas with overlap are overlapping with our areas of focus. Additionally, Jonathan Takeo has joined us as vice president of program management and business operations overseeing CMC development. Prior experience for Mr. Tako included Kite Pharma, where he played an integral role in the BLA approval of Yescarta, one of the first approved cell therapy treatments for large B-cell lymphoma. I am very pleased to welcome these two new members to our team. Now, turning to our ExaZone platform technology, which leverages the natural cell-to-cell communication of the body. We are harnessing exosomes to serve as a novel drug delivery system with broad therapeutic applications, and our proprietary StealthX expression platform is at the core of our exosome program, which is focused on the development of two broad modalities, infectious disease and precision therapeutic. As previously stated, we believe that exosomes are the future of drug delivery. They are able to deliver contents directly to the cell, avoid detection by the immune system, and can be targeted. However, one of the issues that the field has been grappling with is the ability to manufacture a large volume of a relatively homogeneous formulation similar to lipid nanoparticles. We have focused a significant amount of time and energy into manufacturing and targeting of exosomes, and I am delighted to share with you that we have made paradigm-shifting progress on these objectives. This development step allows for rapid and efficient development of future exosome products. To that end, I'm very pleased to report that we have recently begun work with an undisclosed pharma company looking at enhancing delivery of ASOs using exosomes as the delivery vehicle. I look forward to providing more details on this in the coming months as this is a very important step for Capricorn as we begin to leverage our platform StealthX. We look further to exploring the applications of our StealthX platform as we expand into a precision-based therapeutic and are working in targets primarily in neuromuscular diseases at this time. Additionally, we recently published data in BioRxiv, a journal featuring two vaccine candidates that were generated with StealthX. Exosomes were engineered to express influenza H3 or SARS-CoV-2 spikes. When administered individually, both StealthX H3 and StealthX Spike introduced a strong immunization with the production of a potent humoral and cellular immune response. These effects were obtained with administration of nanograms of protein and without adjuvant or lipid nanoparticles. To test the potential benefits of the bivalve vaccine, hemagglutinin H3 and SARS-CoV-2 spike proteins were individually engineered on the exosome surface and mixed before injection. This combination approach also induced a strong immune response in mice with both antibody and T-cell response. Additionally, there were no detectable immune competition between antigens. By combining multiple targets in a single vaccine formulation, these results support the potential therapeutic utility and versatility of our StealthX platform and addressing a broad range of infectious diseases. Our current plans continue to focus on leveraging business development and partnering strategies, as well as non-dilutive grant funding for our Exosome platform technology. In closing, we are pleased with the advancements across our organization, as we remain focused on becoming a commercial-scale company with CAP-1002 as our lead asset and development of our Exosome technology. We are entering the second half of the year in a position of strength. I look forward to working with our new board members and capitalizing on their deep industry experience and forward-looking vision, which we feel will be invaluable as we continue to execute on the key priorities for CAP 1002 and our ExaZone platform. Now, with that, I will turn the call over to our Chief Financial Officer, A.J. Bergman, to run through our financial results for the second quarter of 2023. Thank you, Linda.