Capricor Therapeutics, Inc. 2022 Form 10-K Summary
Business context and reporting period
Capricor Therapeutics is a clinical-stage biotechnology company developing cell and exosome-based therapeutics. Its lead program, CAP-1002, is an allogeneic cardiosphere-derived cell therapy for Duchenne muscular dystrophy (DMD). The company also has preclinical engineered-exosome and CDC-derived exosome programs, including CAP-2003. The filing covers the fiscal year ended December 31, 2022, and was filed March 17, 2023.
- CAP-1002: Phase III HOPE-3 trial enrolling DMD patients; HOPE-2 Phase II completed; HOPE-2 open-label extension ongoing.
- HOPE-3 was designed for up to 68 subjects at approximately 15–20 U.S. sites; more than 30% of patients had been treated and 11 sites were active at year-end disclosure.
- CAP-1002 has FDA orphan drug, RMAT and Rare Pediatric Disease designations.
- Nippon Shinyaku holds exclusive U.S. and Japan distribution rights, subject to regulatory approval.
Financial performance and key metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $2.6 million | $0.2 million | Increase of approximately $2.3 million |
| Research and development expense | $21.8 million | $13.6 million | Increase of 61% |
| General and administrative expense | $10.4 million | $7.6 million | Increase of 37% |
| Operating loss | $29.7 million | $20.9 million | Loss increased by $8.8 million |
| Net loss | $29.0 million | $20.0 million | Loss increased by $9.0 million |
| Net loss per share | $1.18 | $0.87 | Worsened |
| Cash flow from operating activities | $4.9 million provided | $16.8 million used | Improvement driven primarily by deferred revenue |
Revenue consisted primarily of recognition of the $30.0 million U.S. distribution agreement upfront payment over the HOPE-3 performance period. The company has not generated commercial product sales. Approximate operating and net profit margins were negative 1,164% and negative 1,137%, respectively, reflecting the company’s pre-commercial development stage.
- Cash and cash equivalents: $9.6 million at December 31, 2022, versus $34.9 million at December 31, 2021.
- Marketable securities: $31.8 million at December 31, 2022; primarily short-term U.S. Treasuries.
- Total cash, cash equivalents and marketable securities: approximately $41.4 million, versus $34.9 million at prior year-end.
- Working capital: $19.3 million; stockholders’ equity: $11.8 million.
- Total liabilities: $38.3 million, including $27.4 million of deferred revenue, $3.4 million of CIRM liability and $2.6 million of operating lease liabilities.
- Investing cash outflow was $35.1 million, primarily reflecting purchases and maturities of marketable securities, property and equipment purchases and San Diego facility improvements.
- Financing cash inflow was $4.9 million, including $4.8 million of net proceeds from common-stock sales.
- Stock-based compensation expense was $4.5 million, up from $3.0 million in 2021.
Material changes versus the prior comparable period
- The company entered into the U.S. Nippon Shinyaku agreement in January 2022 and received a $30.0 million upfront payment. It recognized $2.6 million as revenue in 2022 and recorded approximately $27.4 million as deferred revenue at year-end.
- R&D spending increased primarily because of HOPE-3 commencement, continuation of the HOPE-2 extension, expanded CAP-1002 manufacturing efforts, higher personnel costs and San Diego facility expansion.
- G&A expense increased due mainly to higher personnel, stock-based compensation, professional services and facility costs.
- Cash was shifted substantially into marketable securities, resulting in lower cash and higher investment balances compared with 2021.
- The company issued 830,858 common shares under its ATM program for net proceeds of approximately $4.8 million.
- The new San Diego GMP pilot manufacturing facility was completed or substantially completed for potential clinical and commercial-scale CAP-1002 production.
- The company reported positive final one-year HOPE-2 results, including statistically significant improvements in upper-limb and cardiac measures. Hypersensitivity reactions observed early in the trial were mitigated with premedication; no serious safety signal was identified by the HOPE-2 DSMB.
Guidance, outlook, commentary and risks
- Management estimated that year-end cash, cash equivalents and marketable securities, together with the expected $12.0 million Japan upfront payment, would fund operations and capital expenditures into the fourth quarter of 2024. This estimate excludes potential milestone payments.
- Expected 2023 spending was approximately $12.5 million–$17.5 million for CAP-1002 and $4.0 million–$6.0 million for the exosome program.
- Management expected the HOPE-3 interim analysis for sample-size re-estimation and conditional power to be available in the fourth quarter of 2023 and expected 24-month HOPE-2 extension data in the second quarter of 2023.
- The company expected the San Diego facility to be able to manufacture CAP-1002 doses by the third quarter of 2023, subject to manufacturing and regulatory requirements.
- On February 10, 2023, the company entered into the Japan distribution agreement, providing for an expected $12.0 million upfront payment and potential additional milestones of approximately $89 million, subject to foreign exchange rates and achievement of conditions.
- Management stated that substantial additional capital will eventually be required. Additional equity financing could dilute existing stockholders, while debt or licensing transactions could impose restrictive terms or require relinquishing rights.
- Key execution risks include successful completion and interpretation of HOPE-3, patient enrollment, FDA agreement on manufacturing comparability and BLA requirements, scale-up of GMP manufacturing, donor-heart supply, third-party manufacturing, regulatory approval and reimbursement.
- The company has no approved products and may never generate commercial product revenue or achieve profitability.
- The CIRM liability was approximately $3.4 million. The company had not decided whether to convert the award into a loan, which could require repayment of some or all awarded amounts.
- The company reported no material pending legal proceedings and no off-balance-sheet arrangements.
Most important facts for investors to verify
- HOPE-3 enrollment, interim analysis results, final efficacy and safety outcomes, and whether the trial supports a BLA.
- FDA feedback on use of San Diego-manufactured product, comparability requirements and any need to add patients or conduct additional studies.
- Actual receipt and accounting treatment of the $12.0 million Japan upfront payment and progress toward Nippon Shinyaku milestones.
- Cash burn, deferred-revenue recognition and whether the stated funding runway remains achievable as clinical and manufacturing costs evolve.
- San Diego facility readiness, GMP validation, manufacturing yields, donor-heart availability and any need for Lonza or other third-party manufacturing.
- Regulatory and commercial prospects for CAP-1002, including reimbursement, market adoption and the potential Rare Pediatric Disease Priority Review Voucher.
- Potential dilution from the remaining $62.6 million capacity under the June 2021 ATM program, outstanding options and warrants, and future financing needs.
- Terms and potential repayment or revenue-sharing obligations associated with the CIRM award and licensed intellectual property.