Capricor Therapeutics, Inc. ($CAPR)

Everyone. Thank you for joining. By way of quick introduction, I'm Will Han, Senior VP of Biotech Investment Banking. I'm thrilled today to welcome Linda Marvin, CEO of Capricor and A.J. Ferggin, CFO of Capricor. As a quick background on Linda and AJ as well as Capricor, Linda is Co-Founder of Capricor has served as CEO since 2010. Linda has been in the biotech field for over 20 years and prior to Capricor held various senior roles at Exagen, a gene therapy biotech company. A.J. has served as Capricor's CFO since 2018 and has been in the biotech industry for 15 years, joined the company in 2011. Capricor is a late-stage biotech company developing dermal cell, allogeneic cardiac-derived cell therapy that has filed for approval for the treatment of Duchenne's muscular dystrophy, PDUFA date of August 22, 2026. Maybe to start, let's start with the regulatory pathway. Can you provide an update on your interactions with FDA, including any feedback of recent meetings, maybe any upcoming labeling discussions?

Yes, yes. So it's been a really tumultuous year for Capricor from a regulatory perspective, but we feel like we are coming out on top. As people may remember, last year, our AdCom was canceled at the last minute. We then got a CRL after filing for approval based on the feedback from the FDA of exactly what they wanted. They upon review, decided they wanted more clinical evidence. We were lucky, but also well prepared in having the HOPE-3 Phase III pivotal trial, which had seen last patient, last visit around the time of the CRL. We were able to meet with the FDA in a Type A meeting, confirm that the HOPE-3 data would suffice for approval. They turned down the opportunity for left ventricular ejection fraction as the primary efficacy endpoint, asked us to keep the performance of the upper limb 2.0 as the primary efficacy endpoint. That trial read out in early December of 2025. As many recall, we hit our primary efficacy endpoint, our key secondary endpoint of ejection fraction and then our 3 type 1 error controlled secondary endpoints to have probably the best clinical data that's ever been presented in the Duchenne muscular dystrophy space in a randomized, double-blind, placebo-controlled trial. We filed the new HOPE-3 data with the FDA. It allowed us to reopen our BLA. Our PDUFA date is August 22, so 10 weeks and 3 days from today. and we're very much in active conversations with the FDA now regarding information requests, regarding clinical opportunities, confirming all of the CMC data, which we had previously presented and all going very smoothly. And then, of course, discussing labeling opportunities, which we anticipate will go into a more serious mode in the next few weeks.

That's very helpful. And maybe kind of the other piece in terms of key recent developments, you recently filed legal action against Ennis Pharma. Can you just talk through that really quick in terms of the dynamics that you're focused on pricing structure, the private label distribute model, any other kind of aspects of that?

Yes. So it's been -- it was very disconcerting to us to find out that the partner that we had worked with so closely was really intractable in coming to terms in a new type of agreement or partnership that would be reflective of what is needed for a contractual situation to work. So basically, what happened is in the original contract that was signed, they built -- we had all built in a concept of a transfer price. This would allow us to have some small stake in the ground financially from them when they went to distribute our product. Upon negotiations or discussions, not negotiations, but discussions with consultants that worked primarily on reimbursement and pricing, it became clear that the structure as stated would not work, that it would then establish the average sale price well below any number that would be reflective of what would be considered appropriate for deramySL. And a Pharma acknowledged that it was the wrong structure. Capricor acknowledged it was the wrong structure. We all agreed that we needed to negotiate a new agreement. And we went into a year of negotiations with them that failed because the only structure that they agreed to would be called a private label distributor, which has never ever been done on a labeled product in the biopharma industry in the U.S. because it really eviscerates the company that gives those rights away and turns them into a contract manufacturer. As of March 27, 2026, so just a few months ago, we tried one last time to get NS to agree to a different type of structure that would work for both companies. They would not agree. So we filed the litigation. And that's going very smoothly. Right now, we have a really strong legal team that are working to defend the rights really to the patients with DMD who deserve deramiocel. Capricor's plan is to launch deramiocel independent of Nppuninaku or NS Pharma at this point so that we provide rapid access to those that needed the most and those are the patients -- the legal stuff kind of goes on in the background, and we look forward to a peaceful resolution, hopefully, rescisision, which allows both parties to kind of go back to ground zero. You keep your drugs, we keep ours.

That makes sense. Do you anticipate any impact to regulatory timing around the legal action?

Around the lawsuit?

Yes.

No. So they kind of operate on separate arms. So the regulatory pathway, in fact, the FDA maintains a very strong dogma that they don't pay attention to anything that happens out in the marketplace. Their job is to decide if something is safe and efficacious for an indication and then help you decide who that should go to. And so they really don't have any interest in what's going on outside in terms of sales marketing...

Maybe just talking about the data you guys announced. Can you walk through the key efficacy and safety findings from the HOPE-3 trial, how they compare to the prior HOPE-2 results? Maybe start there.

Yes. So we have had 5 clinical trials, all showing approximately the same thing, which is the attenuation of skeletal muscle dysfunction as measured by the performance of the upper limb first in HOPE-Duchenne and then in HOPE-2 with the performance of the upper limb 1.2, primarily the mid-level pull in HOPE-2, which is the use of the arms and would be considered potentially the Goldilocks measure of upper limb function, which I can go through in more detail in a little bit. And then in HOPE-3, we use the performance of the upper limb 2.0 sort of like your smartphone, be the newer better version with less redundancy and less floor and ceiling effect. And so that's the primary efficacy endpoint of the HOPE-3 clinical trial. We hit that with a statistically significant results as well as a clinically significant result. We saw on an absolute value change of 1.2 point change in the performance of the upper limb. And FDA had stated previously and is in writing that a 1-point change would be considered relevant for clinical meaningfulness. So we were really excited not only for ourselves as a company, but also for the patients. This was the first clinical trial in Duchenne muscular dystrophy, where a primary efficacy endpoint was not only hit from a clinical standpoint, but also a statistical standpoint and also has been felt meaningfully by the patients. So we're excited about that. The secondary endpoint of ejection fraction, we also hit. That was a key secondary endpoint. We had asked FDA consistently since 2015 to allow us to use cardiac function ejection fraction as the primary efficacy end point they had denied that because they felt that the pathophysiology of the cardio function or cardiomyopathy of Duchenne had not been well delineated or understood. I think that's changing now. But in regards to that, we have now both the only drug that I'm aware of in the Duchenne space that has demonstrated clinical relevance as well as statistical significant in skeletal as well as cardiac muscle function as defined by the statistical measures that were used and defined in the protocol and the analysis plan presented to FDA. We've had the HOPE-2 open-label extension trial that -- or open trial, the HOPE-2 open-label extension. The 3-year data has been presented publicly and both HOPE-3 and the HOPE-2 open-label extension, 3-year data are under review for publication at this point. We will present the 5-year HOPE-2 open-label extension data at the parent project for muscular dystrophy meeting. This is unprecedented. We can't even find a natural history data set that goes out to 5 years and assessing function and Descend patients because nobody has that data. We will be the first. It's a small study, but what I can say is that the results suggest long-term efficacy of deramycell. But what makes aromyocel even a better option for patients as a safety profile. So it's a quarterly infusion of 150 million cells. They don't need a port. They don't need anything fancy. It's a simple butterfly needle about an hour in infusion. Most patients tolerate it really, really well. There's been no long-term or even short-term safety events that are of any critical significance, early-stage clinical development. We saw some anaphylaxis and sometimes we still see some hypersensitivity that's well managed with simple drugs such as steroids antihistamine, sometimes acetomenophen. So in general, the kids love it. They feel in function better and there's a strong safety profile. We know that all of our long-term OLE patients show up literally the day that they qualify for their infusion because they start to feel the effects of the drug wearing off and they want to get that boost again and they can literally start to feel again. So we're very excited. The other piece of deramyocel that's really powerful is that we're a good player in the sandbox. So Carmelo is designed to address the inflammation and the fibrosis associated with Duchenne muscular dystrophy. So it should provide support to gene therapies, exon skippers, other drugs that might work to mediate the the draconian effects of the genetic disease. So 2 sides of the same coin was work on fixing whatever the mutation that causes the problem, the lack of dystrophin and then the equal of inflammation, fibrosis, which is good.

That's very helpful. Maybe if you could just expand a little bit more on the competitive landscape just again kind of where specifically you see just given the fantastic ethics so far and kind of how you see it playing with other key.

So we don't feel that we really have any competitors. There's an antifibrotic drug that's been approved evinostat that's being used. That does not seem to have the cardiac benefit and also does not seem to have the long-term antifibrotic effects that we see with deramifel, although anything that can be done for these boys and young men should be tried. We're focusing hard on the fact that we attenuate the inflammation and the fibrosis and the skeletal muscle realm, especially in the patients that we've studied most effectively, which are the later-stage nonambulant guys. And let's remember, those guys really have no options left, right? So -- even the gene therapies, I think they're going to start trying them again. exon skippers, those guys, some of them have been on them for a very long time. So whatever disease attenuation they've gotten from those modifying types of therapeutics is already in place, and this is an added benefit with neromyocel. So we feel like rather than being competitive, as I mentioned a moment ago, we go well with nearly the any other therapy. And I think it's also worth mentioning that diseases -- genetic diseases seem so simple, right? Oh, you have just a mutation, tiny well mutation, tiny little exon that's just not working quite right in this genetic disease. We should be able to fix that, right? Take our toolbox of biology and let's fix it. And it's so tantalizing even diseases like cystic fibrosis. You should be able to fix this, right? It's so simple. It's 1 amino acid on the chlorate. But in general, these diseases are vertical. So it's going to be a polypharmacy approach with and all these other diseases. And we're excited not only for Duchenne, but in the expansion of our pipeline, we expect to be able to make impacts in muscular dystrophy. We're looking at FSHD. We're looking at limb-girdle other types of pathologies that are similar to Duchenne that have cardiac complications that we'll be addressing as well.

Yes. And that makes sense. And I know, obviously, you're still discussing with the FDA, so maybe limited in terms of can say. But as you think about the label going forward, just given obviously what we just talked about around competitive landscape or rather synergistic landscape. Just kind of curious how you look at the potential label and then also potential is.

So the label that we're asking for is for attenuation of -- or improvement in upper limb dysfunction as demonstrated in hope 3. So anybody that has sort of loss of upper limb function early-stage, late-stage ambulance patients that have an attenuated 10-meter walk time. Those will be our sweet spot patients. The youngest point we've treated thus far with Dermacell, 10 years old. So we're not anticipating going much younger than that, but we'll see how far the FDA will let us push that envelope towards the younger guide. And we think that the earlier that they get on to deramiocel, the best impact you will have. And I know our opinion leaders, a lot of the physicians would love to see those young boys on deramiocel. So we'll work hard on that. And then we're also going to ask for a cardiomyopathy label. What we see, and it's absolutely phenomenal is that -- and you'll see this actually, I'll give you kind of a hint that we're going to be presenting this data at parent project muscular dystrophy. But there really is a line in preservation of cardiac function of ejection fraction above 45% versus those below 45%. It literally is a dividing line that is unequivocal. And so it's going to be critical to give daramyacel while they still have preservation of cardiac function. Because remember, unlike skeletal muscle where you can drive skeletal muscle back into the cell cycle, made new muscle with the heart cardiac muscle cells lost that sells loss. And the replacement of cardiac muscle cells and is most liberal understanding is about 1% per year. So we don't get a lot of chances the cardiac muscle. So we have to get in there and preserve it. And that's where we're going to be focusing hard in our labeling discussions with the agency is that we've got to get early with these guys. And so the way that you would do that is attenuation of left ventricular ejection fraction, even on some basic level, but then also measurement of scar. So a lot of these guys now are getting MRIs as part of standard especially as certified Duchenne care centers, starting pretty early on 6, 7 years of age. And as soon as the clinicians start to see scar, they'd like to see them on daromyocel because we want to slow that process down because remember, the more scar tissue you have in your heart the more burden put on your heart, the more risk you are for cardiac dysfunction. And ultimately, that's what happens to these kids. They end up getting so much scar that their hearts can't function normally, and that's when the ejection fractions start to drop. And unlike an adult part disease where you can sort of have a slow steady decline of cardiac function. What we've seen in these Duchenne kids as sort of a paradoxic aggregation of scar, and they're almost asymptomatic, nobody really knows what's going on. And a lot of that is because they're not ambulant, so there's not a lot of burden on their heart. And so their hearts really kind of fail almost in a falling off the cliff way, which is different than an adult. So if you see an adult that's had a heart attack and cardiac dysfunction and then end up with an ejection fraction of 25%, they probably got a lot of life left in them. With the Duchenne kid, when they start to drop below 30%, they really go very quickly. So we have to get into early.

So I'd imagine some of the feedback you've heard from KOLs or your muskies list has been kind of the same in terms of areas that they would want to see therapy being used.

Yes, yes. So the KOLs love deramiocel because it's safe. It works. It is easy to administer and benefits are clear to see. So the other thing that's really nice and the benefit of deromyecel is the mechanism of action, which we've talked about and has been the subject of really several hundred academic personnel, both by our labs of our collaborators and others. So that deramiocel works primarily by anti-inflammatory, antifibrotic mechanism or potency assay, which has been accepted by the FDA as an antifibrotic potent assay as well as an identity criteria, which identifies deramiocel as very unique from any other cell type. So the KOLs really like the story is clean. We know what it's supposed to do. It measures that. It works like a drug, it's easy to deliver. It's safe and it works. So yes, they're very supportive, and we look for to rapid adoption on the commercial lines.

That's fantastic. And maybe Tina talking about the commercial side, you recently hired a new Commercial Officer. Just kind of curious what steps you're planning to take as you gear up for commercial.

So this is really an exciting time. I'm a scientist, and I decided to go into biotech now as you mentioned several decades ago because I wanted to bring the idea of what we can make improvements in human health and therapies to people, medicines to people. I'm actually going to be able to do this. So I'm really excited, both on a personal and professional level. And so building a commercial team at Capricor is a dream come true. We have hired Mike Moore as our Chief Commercial Officer. He comes to us from the rare disease space. Specifically, he has experience in Duchenne muscular dystrophy. He was at Sarepta was participating in launching Levetis. So he knows our patients, he knows our community. He knows how the world of Duchenne muscular dystrophy commercialization works. And then we're building the team with him. And so I think most people know that in a rare disease, especially one like Duchenne, where patients are well informed tied to each other face good proof advocacy groups. The whole key is market access, market access, patient services and reimbursement strategies. And so those are our 3 pillars that we're putting in place right now. and building actively for launch. We expect our PDUFA to be coming very soon. The #1 focus of Capricor's commercial preparation and launch and we intend to do it team. The good news is we have over 100 patients that are on open-label extension at this point that will likely roll over into commercial products. we'll be able to help them get there again by sort of making sure that we get reimbursement strategies in place and here. Their engagement, payers are excited about deramiocel. Te cardiac benefits are the only that been administrated in Duchenne muscular dystrophy. So we expect to have a good road with our payers. And as a result of that, things are looking up in terms of getting ready for launch and getting this product to the people that really need it the most.

Yes. That's great. And then kind of on that payer point, maybe not. I guess how are you thinking about pricing? I don't know if you're giving that guidance now, but just relative to some of the other therapies out there given obviously the potential synergistic use with some of the others.

Yes. So since I'm joined by my CFO, A.J. Bergmann, I'll let you take that pricing question.

Yes. Thanks. Well, obviously, we're thinking and engaging really hard on the payer front right now, speaking with multiple payers, developing our decks needed to get out there. But what we've guided to is that to be at or of the approved exon skipping therapies. I think those are slightly different that they're weight-based, but that's our aim in terms of the current price. This is a chronic therapy, so it will be administered over many years, 4 doses a year. And we feel fairly confident with the data that we presented and the data that we're going to continue to generate should be able to target.

Helpful. In terms of MFN, obviously, I would assume just given it's a rare disease, maybe it's a little bit lower impact, but just kind of curious if you have thought about that so far. .

Yes. So obviously, we've thought about that a lot. We have focus on U.S. approval, primarily for multiple reasons. One, we've done our clinical trials in the U.S. Two, we're a U.S.-based company. And so we have almost employees, which obviously, we feel a tremendous responsibility to them. But also because getting into Europe, independent often is complicated. And so we want to make sure that we have the right partner, and the right partner will likely be one that understands not only that we got approval in the United States, but that what the EMA is going to ask of us. And so we're actively engaging with EMA now. That's always a part of our goal. Once we have clarity, which I think we'll know what they want. We've had some preliminary discussions with them. And we think that the HOPE-3 clinical trial mice for EMA approval will then actively a partner in Europe. MFN has been a headache for all of us because everybody has been trying to figure out how we fit, right? And rare disease, orphan designation technically can get around ATM or get around the MFN. We have ATMP, which is orphan designation in Europe. But because of the focus on the U.S., we realize that we need to get across line there and then find a European partner that knows how to negotiate MFN as well as all the other regulatory opportunities and commercialization opportunities in Europe.

Yes. sense. And I guess the other kind of part of just I think for commercial launch is really around manufacturing, given it's a cell-based product. Can you just speak to kind of some of the work you are doing to make sure you're ready to hit the ground.

Yes. So Capricor made a commitment to ourselves a long time ago that we were going to maintain manufacturing as part of our core capabilities and ability to drive deramiocel through commercialization. It is a cellular therapy. The good news is we really have fine-tuned the manufacturing into a very strategically driven, very efficient process. It's led by my Chief Operating Officer, Dr. Kristi Elliot, background in biology and long term and manufacturing it absolutely a star. So he was able to design and build a small commercial manufacturing lot in our core Pines location that will meet the needs of a initial launch about 250 patients annually. And then we're in late-stage construction in our exact same building of more plug-and-play clean rooms that will come on sequentially in 2027, ultimately, by the end of the year, able to meet of about 2,000 or 2,500 patients, which should be more than adequate for the first year or 2 post launch. And then we have a new facility that we've identified in close in and Laya close to our current facilities in Torrey Pines that is ready to be built out. Should we decide that that's an opportunity that we take, which we're actively designing and planning right now.

Maybe kind of switching gears a little bit. You had mentioned a little bit earlier dermal and kind of ability to go into potential other muscular dystrophies, other diseases. Maybe just expanding a little bit more on that kind of the scientific rationale for that, kind of where you might be focused.

Yes. So a perfect jump off from our last question, which is we have fine-tuned manufacturing. We have a potency assay identity criteria like we have a cell therapy that is a drug product. And -- it's very exciting to me, just sort of as a side bar I've been in science for a long time and I remember the advent of the antibody world where nobody thought antibodies could be commercialized, nobody thought they could be made, manufactured cost could be controlled, whatever. And now we know where antibody therapies are, they're as common as breathing. We're going to see cell therapies do the same thing in the next 10 years, and we're at the forefront of that. So I'm very excited about that opportunity. DMD is our first path in terms of approval and commercialization in a base deramiocel, but then we look at other diseases of inflammation and fibrosis with both skeletal as well as cardiac implications. Becker is obviously 1 of our first targets. We'll be going after Becker very shortly after we achieve PDUFA for Duchenne. And then after that, there will be other ones that are on the similar dystrophic renopathy, paradigm, so limb-girdle, FSHD. We're looking at other types of rare cardiomyopathies, that would be beneficial to preservation of cardiac muscle structure.

Maybe just kind of talk a bit more broad about the platform, the StealthX platform, some of the key advantage you might have, how you might think about utilizing that.

Yes. So our exosome technologies have been coming behind for the last multiple years, 6, 7 years. We discovered the exosomes mediate the benefit of deramiocel that's actually been part of our potency assay profile. The exosomes that are released by the cells are what drives the mechanism of action. So we became interested and exosomes as therapeutic mediators themselves quite a while ago. We decided not to pursue that in lieu of the cells because the cells are great for releasing exosomes, why mess with what works. But now that we have identified that as sort of the API. We've now taken exosomes both from ourselves of CDC-based exosomes as well as Stealthx, which is a generic exosome made by a standard cell line. And we're doing 2 different things with them. We're looking at biodistribution. We're looking at targeting and we're looking at sort of the indications that would be appropriate for utilization of an exosome-based therapeutic. Following sort of behind and a lot of the footsteps of those that have pioneered bringing new therapies forward. our first indication that we used our exosome serine vaccine. And that program has been funded and actually operated by the National Institutes of Allergy and Infectious Disease. It's an exosome-based vaccine that has the spike protein of COVID inside the follow-on product will be the NSS the nucleocapsid as well as spike protein. It's safe. We'd like to sort of go up and dosing and sort of continue our work with NIAD, continue to build this vaccine platform forward. I think as everybody knows, there has been a lot of negative implications of vaccine development and even vaccine utilization in the United States in the past few years. We think those times will pass soon. And so we'll continue to keep our vaccine program alive with under a low similar so that we can ultimately take it forward. and then also build therapeutics for the exosome-based technologies, which, again, will be an exciting opportunity in '27 and '28.

Got it. Very exciting. Maybe 1 final question just to close it out. Obviously, a lot to do ahead of you. platform, pipeline, commercial launch. Can you just speak to maybe your cash balance now and kind of how you're thinking about funding all of this going forward? .

Yes, sure. So Capricor has obviously built deramiocel program and pipeline of exosomes very strategically over this last 15 years as we've continued to mature. We have $278 million in the bank at the end of the first quarter, a super strong balance sheet. We're growing, but we're investing very judiciously as Linda pretty articulated in the CMC expansion as well as the commercial development and then very judiciously in our pipeline, but we have strong conviction that building pipeline behind the scenes is a huge value driver as bring deramiocel to the market. Secondarily to that, at approval, we're eligible for a priority review voucher. I think everybody knows those sell for quite significant sums of money. I think the last 1 million. We would look to sell that and monetize that in short order, which would give us an even stronger balance sheet as we move into the commercial launch. So we feel very, very good about the cash position we're in and, the hiring we're doing right to the right areas. And then, of course, you add in the revenue element, hopefully, post launch, of course. And that presents a whole new range of opportunity pipeline. So we feel good about it.

Great. Listen, it sounds like you obviously guys have a very, very exciting next 12, 24 months ahead of you, very much look forward to watching your progress.

Well, thank you so much for having us. Thank you for the insightful questions. And we look forward to getting to know you better as well.

Absolutely.

All right. Thank you.

Thanks.