Capricor Therapeutics, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Capricorn Therapeutics first quarter 2024 earnings call. At this time, all lines are in a lesson-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to get up for a question. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would now like to turn the conference over to AJ Bergman. 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, revenue and reimbursement estimates, manufacturing capabilities, potential milestone payments, our financial position, 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. Your caution 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 Marban, CEO.

Thanks, AJ. Good afternoon, and thank you for joining today's first quarter conference call. Twenty twenty four has started off with a tremendous amount of progress for capital core and I am delighted to provide updates on our to send muscular dystrophy program as well as providing update on our platform technology. As I articulated on our last call, we are focused as a company on four main areas as we work to bring our lead asset. Cap ten or two a cardiac cell therapy to market for the treatment of DMD. as expeditiously as possible.

These core areas are clinical, manufacturing, BLA readiness, and commercial preparations.

I will provide an overview of each today as well as provide some important context on some areas that we have not been able to expound upon until now. I would like to provide an update on our HOPE III phase III pivotal trial, treating late-stage ambulance and non-ambulance boys and young men with DMD across the United States. Responding to the recommendation of the FDA last year, we designed HOPE III with two independent cohorts, known as Cohort A and Cohort B, evaluating the safety and efficacy of CAP 1002 in subjects with DMD and impaired skeletal muscle function. Enrollment was completed in cohort A late last year in which 61 subjects were enrolled and randomized to receive either CAP 1002 or placebo in a one-to-one ratio. Patients in cohort A were 10 years of age or older with impaired upper limb function. which translates into an entry score between 2 and 5 on the performance of the upper limb or pole scale, which means they have attenuated upper limb function but still have room for improvement. This cohort is intended to support a biologics license application submission or BLA. To remind you, the performance of the upper limb is the primary efficacy endpoint of the HOPE III clinical trial. In December of 2023, we announced a positive, pre-specified interim futility analysis on the dataset from Cohort A. This analysis was based on an assessment by the Data Safety Monitoring Board, or DSMB, of 30 subjects who reached a six-month time point and assessed their performance of the upper limb or pull scores in a blinded fashion. This important milestone triggered our first milestone payment of $10 million from Nippon Shin'yaku, our distribution partner, and which we received in the first quarter of 2024. At this time, we expect top line data to be available from cohort A in late 2024. Now, turning to the second cohort of our HOPE III trial known as cohort B, initially designed to enroll approximately 44 subjects randomized to receive either CAP-10 or 2 or placebo, again, in a one-to-one ratio. Originally, the aim of Cohort B was to support the transition to our San Diego manufacturing site following initial product registration from our Los Angeles manufacturing facility. However, based on our latest CMC-focused meeting with FDA, The FDA is no longer requiring the data from this cohort to support the transition to our San Diego facility, which was an extremely important win for us. Let me explain now how this outcome benefits CAP report. First, We now can transition to our San Diego manufacturing facility on potential product approval without the need to provide additional manufacturing site specific clinical data to the FDA. This saves us a tremendous amount of time on our path to filing the BLA and preserves resources as we move through 2024. We are now looking at some options for cohort B, as we believe this data set may prove to be extremely valuable for us. But a second important achievement was our demonstration of non-clinical comparability using state-of-the-art, first-in-class potency assays, showing the CAP-100 tube manufactured at each of our two facilities is essentially the same. We did this using two distinct potency assays, one using RNA sequencing to look at the fingerprint of the cells using the known potent loss from our HOPE II clinical trial as the blueprint on which the comparison was made. The other assay capitalizes on a known mechanism of CAP-1002, which is antifibrosis, and this assay analyzes the reduction of collagen, which is a major component of scar or fibrosis. Each of these assays, using sophisticated bioinformatics and statistical analysis, demonstrate the effectiveness of these methods in quantifying the potential efficacy of each lot of CAP10O2. No other cell therapy to our knowledge has shown this type of rigor in developing potency and identity criteria. For a more detailed overview, our Chief Scientific Officer, Dr. Christy Elliott, provided an update on these methods on a call we hosted on April 29th, which is available on our website. Now turning to Cohort B more specifically and our plans moving forward for this cohort. Following our last meeting with FDA, we have spent the last several weeks discussing the best path forward. Enrollment has proceeded quite rapidly from its initiation in December of 2023 until today, where currently we are on track to enroll the 44 patients by the end of the second quarter. However, at this time, we're evaluating various options with one of such options to expand cohort B to include European patients. As we have been anticipating expansion into Europe for a while, either with a partner or independently, we have engaged with external advisors after the most expeditious path forward in Europe. And the next steps would be to discuss with the European Medicines Agency, also known as EMA, the opportunity for a global trial to align on the path forward given the change in requirements by the FDA. We are delighted with the speed at which Cohort B has enrolled, and we are going to continue to provide treatment to those subjects enrolled, including the opportunity to participate in an open-label extension. I will provide more color on this program as we move forward. Now, for a regulatory update, we have had multiple meetings, both formal and informal, with FDA in 2024 as we prepare for our VLA submissions. The next one is a Type B meeting with FDA scheduled for late May, the purpose of which is to continue to align on our path to a BLA submission. This meeting will cover several important topics, including scheduling a pre-BLA meeting, request for an initial consensus on a rolling BLA schedule, and approval of our plan for final commercial manufacturing. As you may know, In order to file a biologics license application, you must have a pre-BLA meeting to align with FDA on the submission and the requirements necessary for potential approval. So, we view this milestone as critical. Underlying that request is the formal request for rolling BLA, which will allow us to submit certain modules of the BLA as they are completed to allow FDA to review and provide feedback on select areas of the BLA while other sections are still in progress. The rolling review would not only accelerate our timeline to approval, but will also modularly de-risk the VLA package. We will announce the outcome of this Type B meeting once we receive the final minutes from FDA, which we anticipate receiving in late Q2. As many of you know, FDA leadership has taken a great interest in helping move the field of treating DMD forward, and we are excited to continue working with FDA to move the CAP-1002 program towards potential approval in the most expeditious way possible. Now turning to another critical milestone for us, which is the three-year HOPE II open-label extension data, which we plan to share later this quarter. As we publicly stated, this data will be included in our proposal for a pre-BLA meeting and rolling BLA submission. We will continue to work with the FDA to discuss any opportunity for an accelerated BLA filing, and our current plan is to share this data publicly once fully available, and then again at a later conference. To remind you, the HOPE II Open Label Extension Study is already in its fourth year of continuous CAP 1002 treatment, and results will be shared on the three-year safety and efficacy data, which includes assessments of skeletal and cardiac function. We believe that the three-year results will continue to underscore the potential long-term benefits of CAP 1002 treatment in Duchenne muscular dystrophy. Now for an update on manufacturing and CMC preparation. As I mentioned a few minutes ago, the latest outcome with FDA will allow us to produce commercial product out of our San Diego manufacturing facility if approved. Currently, our San Diego manufacturing facility is fully operational, staffed, and producing doses for clinical use. Along with BLA readiness activities, we are also actively preparing for commercial runs. Currently, our internal estimates project us to be able to produce enough drug in the San Diego facility to meet projected market demand in year one of commercial sales. As we expect a rapid adoption of CAP 1002 by the DMG community, if approved, we are also now developing plans to expand our San Diego facility to support additional demand, should that be necessary. But further expansion and any material investment would be something we will consider based on assessment of market demand and resource availability. Our Los Angeles facility will continue to serve as a clinical facility for the time being, but it will no longer be needed to support commercial efforts, and we look to conserve resources with this plan. Now for a brief update on our commercial preparations. We have increased the frequency of our meetings with Nippon Shinnyaku and its U.S. subsidiary, NS Pharma, in order to actively prepare for the potential commercialization of CAP-1002. One of the reasons we selected Nippon Shinnyaku and NS Pharma as our commercial partner was their energy and enthusiasm for bringing CAP-1002 to market in the United States and Japan. However, With the aim of contributing to their potential success, we will continue to actively support NS in the plan for launch and commercial expansion of CAP 1002 in our first market, the United States. To that end, we have engaged consultants to conduct a gap analysis of our needs for commercial preparation. And in addition, we are in the process of identifying senior level executives to lead Capricor's commercial efforts in conjunction with NS Pharma. Please look for future updates on our preparations for potential launch as they become available. We recognize the importance of these milestones and are actively advancing this program internally. We are focused on multiple areas as we prepare for potential launch, and now I will spend the next few minutes outlining some of these areas and the efforts we are focused on. First is revenue share. Under the terms of our U.S. distribution agreement with Nippon Shinnyaku, we will receive a transfer price, which will reimburse us for the cost of each dose sold to NS Pharma, as well as meaningful mid-range double-digit share of product revenue. We understand that at this point, we haven't disclosed the specific percentage, but mid-range falls between 30% and 50%, which some will be offset by the amounts paid to us as the transfer price for the purchase of the product. As we envision CAP 1002 as a long-term, perhaps lifetime treatment option, we believe this will provide a strong revenue model for reimbursement. Second is reimbursement. As we stated on our April 29th call, our goal is for CAP 1002 to be priced at or above the price currently approved for exon skipping therapies in the United States. Our early interactions with payers give us confidence in the estimate of those ranges. The third is potential label expansion. Our current clinical studies include DMD patients 10 years of age and older with impaired upper limb function and are either late-stage ambulance or non-ambulance. To remind you, over half of the population with DMD is non-ambulance. So as a first estimate, that gives us approximately 7,500 to 10,000 potential addressable DMD patients who would be eligible receive CAP-1002 in the United States. We are in the process of discussing the potential label for CAP-1002 with the FDA, and the goal is to make the label as broad as possible, of course, based on the data. Fourth, initial commercial patients from our OLE studies. We believe that by the time of a potential DLA acceptance, we would expect to have approximately 120 patients already on CAP-1002 on an ongoing basis through our open label extension studies. We expect that these patients would likely become our first commercial patients. This potential revenue stream will be very supportive of a strong launch and will provide an initial commercial market for the product. Fifth are opportunities for global growth expansion. On the partnering front, we remain in active discussions with several parties looking at the European rights for CAP 1002 for DMD. We continue to believe that CAP 1002 would be a highly valuable asset in this market, as well as other regions around the world. Additionally, as we have discussed before, the product expansion opportunity for CAP 1002 is very tangible. Our KOLs and thought leaders are working with us now on possible other indications, such as Becker muscular dystrophy. Importantly, a critical facet to this expansion is the ability to replicate our manufacturing processes and modules for the expansion to other potential indications by leveraging our already internally developed processes, facilities, and CMC. Please stay tuned for further updates on this front. And finally, CAP-1002 may provide a backbone therapy opportunity for DMD patients. We believe captain into as well positioned as a complimentary therapy for DMD as a stated mechanism of action is immunomodulatory and anti fibrotic. Cap ten or two has a strong safety profile and is a once a quarter infusion that has been shown to be well tolerated to date. If CAP-1002 delays disease progression, which multiple clinical trials have demonstrated today, it is our hope that CAP-1002 would be the preferred treatment partner, either on its own or with gene-modifying or exon-skipping therapies. Before I move to an update on our exosome program, I want to reiterate our commitment to bringing this therapy to market as expeditiously as possible. The majority of the investment into our team, operations, and facilities has gone into preparations for this endeavor, and I feel confident that we can deliver according to the plans we have set forth. Now, turning to an update on our Exadome platform technology. While the development of our Exadome platform has taken a backseat to our lead asset, Cap 1002 in D&D, we have made remarkable progress over the last year. with the invention of our StealthX engineered exosome delivery platform, as well as building out a scalable manufacturing paradigm. These accomplishments have kept us on target for having an exosome-based product in the clinic by the end of 2024. I remind you that our approach is to use the exosomes as intended by nature, as a delivery vehicle. We use a standard exosome isolated from HEK293 cells And then we build them to do the work by targeting on the outside and storing payload on the inside. Our approach in building the exosomes as drug delivery vehicles has been strategic and stepwise. First, we wanted to de-risk the concept that an exosome could deliver a high fidelity payload, which we have done pre-clinically with our StealthX vaccine. Details of this program will follow. Then, to further pressure test the technology, we advanced the program to preclinical evaluation of enzyme replacement, which, in addition to the requirement of transition of a payload, it also requires bioactivity that is physiologically relevant. This work has been exemplified by our R21 work, the subject of a talk presented last week at the American Society for Cell and Gene Therapy in Baltimore, Maryland. The next frontier is both targeting on the outside, similar to the vaccine, with payload on the inside, similar to ARG1. These studies are underway pre-clinically as well. We will provide more color on that program as it becomes available, but our current strategy is to utilize our knowledge and understanding of the DMD space to move our StealthX platform forward. Now, for a few details on the vaccine side, we are underway with a collaboration with the United States government's project NextGen, which is slated to text vaccine candidates for potential use in preventing COVID-19 as well as prepare for future pandemics. The structure of the collaboration with NIAID, the National Institutes of Allergy and Infectious Disease, is that Capricorn will provide manufactured doses of our vaccine the campaign for which is well underway now and aiming to meet the NIAID timelines for the end of 2024 for planned trial initiation. NIAID will conduct and fully fund the phase one clinical trial. As a reminder, the power of this technology is that it combines the speed of an mRNA vaccine with the potential efficacy of a recombinant protein-based vaccine. I will provide more specific guidance on this program as it moves forward. To our knowledge, this will be the only multivalent candidate tested, and we have high hopes for its success in terms of potential safety and efficacy. If NIAID finds that our vaccine meets its criteria for safety and efficacy, they may consider it for a fully funded phase two. This opportunity is very important for us, and while we are not aiming to become a vaccine-focused company, this roadmap should support us for further partnering opportunities across the pharma industry, as we would have completed major achievements in the development of a biological platform, including regulatory IND approval and CMC scale-up efforts. Turning to the therapeutic side of the exosome platform, as I mentioned a few moments ago, we recently presented the data at the American Society of Cell and Gene Therapy held last week in Baltimore, where we were selected for an oral presentation sharing preclinical data of an exosome-based approach to the potential treatment of ARGENACE1 deficiency, otherwise known as ARG1D. a rare genetic metabolic disease characterized by complete or partial lack of the enzyme arginase and the liver and red blood cells. In the study, exosomes were engineered to express human R1 enzyme inside of the exosomes and were evaluated for their in vitro functionality. Results show that the R1 exosomes are enzymatically active and are able to convert arginine into urea in vitro. In addition, the ARG1 exosomes were capable of delivering the ARG1 protein into 293F and HEPG2 cells in a time- and dose-dependent manner, contrary to human recombinant ARG1 protein alone when tested at the same or higher dose. This data strengthens our continued platform development, as we believe there are tremendous opportunities with potentially broad applications, and our data continues to support them. Additionally, we are in development of an exosome-based antisense oligonucleotide or ASO program that could be impactful in the treatment of DMG. And we continue to work in connection with an undisclosed pharma partner on this approach. We look forward to sharing more color on this program as it becomes available. On the corporate side, we continue to engage the buy and sell side in order to continue to bring visibility to our story. which we believe is under-recognized. In terms of capitalization, as we move through 2024 and into 2025, I want to remind you that our U.S. agreement with Nippon Shin'yaku comes with an additional $90 million in potential milestone payments up to the time of approval, which are triggered upon certain regulatory-based achievements. Further, if we receive approval for CAP 1002 for the treatment of DMD, we would be eligible to receive a priority review voucher, otherwise known as a PRV, based on our previous receipt of a rare pediatric disease designation, which we retain full rights to at this time. And finally, we are actively evaluating several non-dilutive capital opportunities to fund aspects of our Exosomes platform outside of the NIAID collaboration. Our main goal is to continue to support our balance sheet, leveraging non-dilutive opportunities in order to fuel CAP 1002 towards potential approval and also to support the Exxon program. In conclusion, I want to thank the patients, their families, our investors for your continued support. We continue to focus our efforts on bringing CAP 1002 towards potential commercialization, and we are investing judiciously across the organization to prepare for that endeavor. Later this quarter, we plan to announce our three-year open label extension data to announce the outcome of our Type B meeting with FDA, as well as to provide further updates on options for cohort B. We will also be presenting at various medical, scientific, and investor-related conferences throughout the next several months. I will now turn the call over to A.J. to run through the financials. A.J.?

Thanks, Linda. This afternoon's press release provided a summary of our first quarter 2024 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. It 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 March 31, 2024, the company's cash, cash equivalents, and marketable securities totaled approximately $39.9 million, compared to approximately $39.5 million on December 31, 2023. In the first quarter, we received a $10 million milestone payment from Nippon Shinnyaku under our exclusive distribution and commercialization agreement with them. Additionally, in the first quarter and through today, we raised approximately $3.5 million in gross proceeds under our at-the-market program at an average price of $5.75 per share. We continue to be disciplined in our ATM use, raising the majority of the funds in the second quarter at over $6.75 per share. Based on our current operating plan and projection, we expect our cash runway to extend to the first quarter of 2025, but this expectation excludes any additional potential milestone payments under our exclusive commercialization and distribution agreements with Nippon Shin'yaku. Turning briefly to the financials for the first quarter of 2024, excluding stock-based compensation, our research and development expense was approximately $10.1 million compared to approximately $7.2 million in Q1 2023. The increase in expenses of $2.9 million was primarily due to an increased clinical and manufacturing costs associated with our Phase III, HOPE III clinical trial. Excluding stock-based compensation, our general and administrative expense was approximately $1.8 million for both the first quarter of 2024 and 2023. Net loss for the first quarter of 2024 was approximately $9.8 million compared to a net loss of approximately $7.8 million for the first quarter of 2023. We will now open the line up for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one should you wish to ask a question. Your first question is from Christian Kluska from Cantor Fitzgerald. Please ask your question.

Hi, everyone. Good afternoon. Thanks for taking the questions, and congrats on all the progress that you've had on the trial, as well as your regulatory interaction. So first, thanks for helping us with the Neat Lunch and Yahoo economics. Very helpful to break out, and I think people will appreciate it higher. royalties than what you typically see in a deal. Is it fair to say, you've noted $90 million in regulatory-related milestones for potential approval, is it fair to say that there's a trigger that could occur if you have positive data in the fourth quarter?

Hey, good to hear from you. Thank you for your kind words. We're not at liberty to announce yet sort of the tenor of the milestone payments, but suffice it to say that we plan on them being able to strengthen our balance sheet as we move from approval through BLA.

Okay, fair enough. And then can you remind us of what the latest interaction has been with any regulatory agency ex-US? You've clearly been Aligning very well with them. They're, they're very much sounding committed to working with you, but I'm wondering what the tone has been for any of the other agencies.

Yeah, so we've had some initial reach out mostly through our consultants in terms of strategizing to how to approach both the EMA and then the Japan regulatory authorities, the PMDA. We have a strategy that we've been building as we've been. thinking of the idea of a partnership we're still trying to figure out how to move as rapidly as possible worldwide this opportunity with cohort b has really been wonderful for us and a given opportunity to now take the therapeutic global so we're evaluating those opportunities what we can say is that you know europe has significantly less therapeutics approved in dushan muscular dystrophy than the united states as i believe the difference is number eight I heard at a conference last week. And so they're highly motivated to get something across the line. With our strong efficacy and our strong CMC package, I have good faith that we'll be able to work closely with EMA and get this across the line, as well as with PMDA. And as I mentioned in my prepared remarks, stay tuned as we provide some further color on how we're going to develop this great opportunity to go worldwide.

Okay, thanks. And maybe if I could just ask one more big picture question. When considering the valuation here, cash and a PRV voucher alone could essentially support the current market cap. So what do you think it is that the investment community is missing out considering it's a late stage asset with some data already in place? Thank you so much again.

Thank you so this is the big conundrum that I, as CEO, our management team and our board spend a lot of time thinking about, you know, we have a late days asset. We have really lovely clinical data that's been supported by publication in the highest ranked journals. You know, for instance, the Lancet with our phase two data, we have long-term safety and efficacy with the HOPE II and the HOPE II open label extension data. We have a fully enrolled phase three. We have adoption by the community. We have fleshed out and fairly de-risked CMC. We have a manufacturing plan and a commercial plan for getting this product to market. So it's a little bit elusive why we haven't caught fire. The only thing I can say is that ultimately I believe it will happen, and at Capricor, So heads down, hope three. We're just continuing to do our work, deliver on our milestones, and we're hoping the market will catch up with us.

Thank you. Thank you.

Thank you. Your next question is from Ted Turner from Piper Sandler. Please ask your question.

Hey, thank you very much for taking the question. Really exciting all the progress you guys are making. Question on kind of cost. What... Tell us a sense, give us a sense for what it might cost to make this or what cost of goods sold could ultimately be assuming premium pricing in this orphan disease. Thanks.

Yeah, thanks. I agree to hear from you. So, you know, in terms of COGS, we're still sort of firing away here manufacturing and trying to come up with some final numbers. We've been a little bit quiet on that because building a new manufacturing plant, which is much more efficient, takes advantage of higher scale. manufacturing methods and ways to significantly reduce costs is helping with the COGS. We don't have final numbers yet. We believe that the costs will be relatively minimal compared to what we're going to be able to get in reimbursement for this product. And so, of course, every dollar counts, so we're working to reduce COGS. Stay tuned for more updates on that as they become available. But for right now, we're focusing more on getting across the line and then getting as high of a reimbursement price as as we believe the therapeutic requires.

Great. That makes a lot of sense. Thanks. Thanks, Ted.

Thank you. Your next question is from Joe Penkin. It's from H.C. Wainwright. Please ask your question.

Linda and AJ, good afternoon. Thanks for taking the questions. So, two questions, please. So, first, obviously, you've alluded to your ongoing discussions with regard to the EU for partnering and potentially beyond. Should we be looking for the same type of approximate deal structure as NS, or are you looking at various options?

So, NS, thanks, Joe. Great to hear from you. Always really excited. We've been building this therapy alongside you for a long time, so we appreciate your continued support. You know, NS took a risk with us with an asset that was not nearly as de-risked as it is today. They came in post Phase 2 prior to Phase 3. Data looked good, but certainly nothing like the advancements that was made to this point with the long-term open-label extension data, the de-risk CMC, and a fully enrolled Phase 3 that's reading out by the end of the year plus. you know, the wonderful opportunity that we have had to work closely with FDA to get this across the line. So, I can't reveal the types of deals that we are pursuing right now, nor the analyses that we're doing internally as to whether we would take this forward independently. What I can say is that we have great confidence in CAP-10 or 2 and its ability to be a worldwide asset for the treatment of DMD, and we're going to take the strongest deal possible on a highly de-risked asset.

No, that's helpful. Thank you. And then off of your recent FDA update call, we started the discussions about the potential of cardiovascular, and I wanted to dive into that just a little bit more about its potential role, not necessarily in the label, but potentially in the label, but also for patient benefit. So with that said, Can you at least take some high level shots at the metrics and the benchmarking that the FDA will really be looking at and potentially get excited about with regard to label inclusions?

Yeah, so you hit my sweet spot. I'm back late last week, the PPMD Parent Project for Muscular Dystrophy hosted a meeting that's become annual on the topic of the cardiomyopathy associated with Duchenne muscular dystrophy. And to kind of give you a flavor of the room, there's about 60 to 80 people in there, the world leaders in terms of the physicians treating the cardiomyopathy. And it's really a strategy session. And I walked out of that meeting with a great sense of hope and enthusiasm for CAP-1002, treating the cardiomyopathy associated with DMD across the age course. We know, and the KOL say, it is the number one reason for death in these boys and young men. It is a unique and highly intractable cardiomyopathy, starting with the beginning of the disease, Many of these boys and young men develop very severe cardiac disease early on in life, and it's anachronistic in the sense that does not seem to match the skeletal muscle myopathy. So that leaves the door open for treating earlier. And most importantly, and what has become very relevant is we know that the earlier we treat these guys, the better off they are. So all of the KOLs say, and we've actually seen this with our clinical data, that the greater percentage of preserved cardiac muscle, so with ejection fractions, let's call it greater than 45%, you have a much higher chance of preserving and saving their hearts rather than trying to get these guys in late-stage heart failure. There's no Lazarus effect. You're not bringing back a heart that is really permeated with fibrofatty accumulation. And so we can tell you that the KOLs are really anxious to work with us. They're anxious to work with the FDA. There's a lot of communication going on as the FDA becomes aware of the fact that a MACE, major adverse cardiac event, or mortality endpoint may not be the answer. In fact, is not, not may not, is not the answer in treating the cardiomyopathy associated with Duchenne. And then finally, to complete the point, as we know, with the gene therapies are not having great benefit in terms of cardiac function. And so if any of those get approved, and these kids are on their feet longer, they're going to need to be able to recruit more heart muscle to support that healthier skeletal muscle. So we are really in a wonderful position. We are going to take advantage of that by working closely with the FDA and all of the thought leaders as we begin to envision the label for CAPTENDR2 and DMD.

No, I really appreciate that. And just to dive in slightly further, and thanks for your patience, just to say what would be then, if mortality is not the answer for an endpoint, what would be the endpoint and its sort of underlying benchmark that we in the investment community should look for?

You know, Joe, it's really an interesting question. I'm going to go out on a limb here and say, you know, looking like some of the traditional secondary cardiac endpoints that adult heart disease has been looking at for a long time, ejection, fraction, and volume. John Soslow published a beautiful paper in Cirque Research Heart Failure last year, 2023. I just recently read it myself. The talks about the DMD cardiomyopathy and guides the regulators towards these very important endpoints. I think it's going to be a dialogue with FDA, but I think it's going to be a winner, and we're hoping to be at the front of that line.

Linda, thank you very much.

Thank you, Jill. Great talking to you.

Thank you. Once again, ladies and gentlemen, please press star 1 should you wish to ask a question. Your next question is from Aiden Hussainov from Leidenberg, Coleman & Co. Please ask your question.

Good afternoon, Linda, AJ. Congratulations with the progress this quarter. A couple of questions for me. So first I want to ask you about the cohort B enrollment. So it seems to be pretty fast. I think it mentioned you're going to wrap it up by next month, 44 patients. So could you share with us any feedback related to this apparent enthusiasm of physicians and patients? And also clarify how many if any of those patients had prior therapies such as exon skivers.

Yeah. Yeah, I think the rapid enrollment speaks for itself. Let me just remind you that our patients that we're treating in cohort A and cohort B are late-stage ambulance and non-ambulant patients with attenuated upper limb function, as I've mentioned many times. There's nothing for these guys, literally nothing. There's not clinical trials, and there's no approved therapeutics beyond Steroids and potentially the X on skippers. So they are very anxious for something to preserve upper limb function. And what I can tell you and look for me to be talking more and more about this is that the physician leaders know that what is most important to these boys and young men is the preservation of upper limb function as I've stated in other scenarios. you know once they go off their feet they're pretty tired they've fallen they've broken bones their legs are tired but they do not want to lose the independence of being able to use their smartphones or remote move their wheelchairs transfer themselves to perform bathroom activities and those kinds of things so Really important, and I think that drives the energy in addition to the strong safety profile. So once a quarter infusion, so it's not disruptive to life and the safety profile is great in terms of side effects or implications. So, there is a lot of energy and we believe that there will be rapid adoption of cap center to by the community once it's approved. The other part of your question was whether we have patients and other therapies in our clinical trials. And the answer to that is absolutely anything that is approved. They are allowed to be on. We look for them to be stably on their medications so that we don't have any opportunity for big swings. And that can be anything from. growth hormones to you know massive changes in their steroid dose that may not be weight-based as well as exon skipping and we even have some in our programs that are post gene therapy where um despite, you know, the fact that they got the gene therapy, they still meet our inclusion criteria multiple years later. So, you know, I continue to say and I continue to believe, and the payers have supported in some of the initial documents that I've seen, the concept that CAP-1002 will go along well with any of these other therapeutics with a combined mechanism of action of reduction in inflammation and reduction in fibrosis.

Understood. This is helpful. So, in other words, FDA would not require additional combination studies if you move sort of further to the front lines or early ages, the FDA, you think would not require specifically like a combination studies with gene therapies or exon skippers with CAP-10-OTO?

No, we're positioning it as an independent or adjunctive therapy, and we've gotten really good feedback on that. I don't think anybody's thinking about it sort of as a, you know, do we need to test them both at the same time? It can only help.

Understood. Thank you. All right. Another question I want to have is that could you give us any updates on possible preclinical or preparational work you do as it relates to Baker musculoskeletal dystrophy? And also, if you happen to develop CAP-1002 in Baker dystrophy, how does it affect your financial relationships with Nikon-Shinyaku? I just want to hear your general thoughts on this.

Yeah, so we're looking at Becker dystrophy as well as other types of neurodegenerative diseases that are characterized by inflammation and fibrosis. As I mentioned in my prepared remarks, we are in a very sweet spot because we have strong efficacy, we have potency assays that reflect our mechanism of action, and we have a manufacturing paradigm that is plug and play and can be expanded to suit. So we are ripe and ready to take this therapeutic to other people that could need or benefit from it. about Becker dystrophy being one of them. Obviously, the advantage of Becker muscular dystrophy is it's very similar disease progression to Duchenne, just significantly slowed. And once we get across the line and potential indication expansion for CAP Center 2 and Duchenne muscular dystrophy, that becomes a very tangible opportunity as well. In addition, you know, has rights to shed muscular dystrophy marketing distribution. No other indications have been presumptive or mentioned in that deal. So we have freedom to operate and plan to do so as we expand cap 10 or 2 just to highlight. I've spent 19 years developing this therapeutic and so we know it and we know it very well and we want to see it in as many people that can benefit from it as possible.

Thank you. Thank you. I appreciate the updates and congratulations for the quarter.

Thanks. Thank you. There are no further questions at this time. I will now hand the call back to the Capricors management team for the closing remarks.

I just want to thank everyone who joined us this afternoon. We appreciate your continued support. I also want to congratulate Pat furlong of the parent project of muscular dystrophy, who last week was awarded the Sonia award for the American by the American society of cell gene therapy for public service. It goes without saying that without these advocates that bring rare disease to our attention. there is very little that is done to move them forward. So congrats to Pat, and we look forward to seeing you out and about at the meetings. Have a wonderful day.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.