Capricor Therapeutics, Inc. — Fiscal 2021 Form 10-K Summary
Business context and reporting period
Capricor is a clinical-stage biotechnology company developing cell- and exosome-based therapeutics. The audited period covers the year ended December 31, 2021; the Form 10-K was filed March 11, 2022. The company has no products approved for commercial sale and remains dependent on external financing, grants, collaborations and potential licensing or distribution revenue.
- Lead program: CAP-1002 for Duchenne muscular dystrophy (DMD), with the Phase III HOPE-3 trial in start-up.
- Other clinical program: INSPIRE, a Phase II COVID-19 study, completed enrollment of 63 patients in the fourth quarter of 2021.
- Pipeline: engineered exosomes and CDC-derived exosomes (CAP-2003) remain in preclinical or regulatory-development stages.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $244,898 | $310,250 | Down $65,352 |
| Research and development expense | $13.6 million | $8.5 million | Up $5.1 million |
| General and administrative expense | $7.6 million | $5.5 million | Up $2.1 million |
| Loss from operations | $(20.9) million | $(13.7) million | Loss increased |
| Net loss | $(20.0) million | $(13.7) million | Loss increased $6.4 million |
| Net loss per share | $(0.87) | $(0.88) | Improved slightly |
| Cash and cash equivalents | $34.9 million | $32.7 million | Up $2.2 million |
| Cash used in operating activities | $(16.8) million | $(10.1) million | Higher cash burn |
| Stockholders’ equity | $31.4 million | $28.2 million | Up $3.2 million |
Revenue consisted primarily of miscellaneous income from supplying CAP-1002 for related-party investigational trials and no commercial product sales. Grant income was zero in 2021 versus approximately $0.2 million in 2020. Other income included approximately $0.5 million from the CARES Act Employee Retention Credit and $0.3 million from forgiveness of the Paycheck Protection Program loan. No meaningful commercial margin is reported because the company has no approved products and revenue is immaterial relative to operating expenses.
Financing activities provided approximately $20.2 million in 2021, principally from the sale of 3.6 million shares under equity programs. Total liabilities were approximately $10.0 million, including $2.9 million of operating lease liabilities and a $3.4 million CIRM liability. The company stated that existing cash resources were sufficient to fund operations for at least the next twelve months, but also expects substantial additional capital will be required.
Material changes versus the prior comparable period
- R&D expense increased approximately 60%, driven principally by exosome development, CAP-1002 technology-transfer and manufacturing activities, and related stock-based compensation.
- G&A expense increased approximately 37%, reflecting higher stock-based compensation, salaries and recruiting, corporate expenses and insurance costs.
- Operating cash burn increased from $10.1 million to $16.8 million.
- Cash increased modestly despite the higher burn because of approximately $20.2 million of equity financing.
- CAP-1002 HOPE-2 final data reported statistically significant improvements in multiple upper-limb and cardiac measures; the company advanced HOPE-3 toward Phase III initiation.
- The company entered into an exclusive exosome license agreement with Johns Hopkins University in April 2021.
- The COVID-19 exosome-mRNA vaccine program was placed on hold for further development and IND filing pending a determination that advancement would be advantageous.
- The company completed close-out documentation for its Department of Defense grant and recognized no related grant income in 2021.
Guidance, outlook, commentary and risks
- Management expected 2022 DMD program spending of approximately $10 million to $14 million, including clinical, regulatory and manufacturing costs.
- Management expected 2022 exosome-program spending of approximately $5 million to $7 million.
- In January 2022, after year-end, Capricor entered into an exclusive U.S. commercialization and distribution agreement with Nippon Shinyaku for CAP-1002 in DMD. The company expects a $30.0 million upfront payment and potential additional development and sales milestones of up to $705.0 million. These amounts are contingent and were not recognized as 2021 revenue.
- Capricor plans to conduct and manufacture for HOPE-3, while Nippon Shinyaku will distribute CAP-1002 in the United States if approved. The company expects to begin treating HOPE-3 patients in the second quarter of 2022.
- INSPIRE top-line data were expected by the end of the first quarter of 2022; the filing does not provide the subsequent results.
- The CSMC manufacturing and laboratory lease expires July 31, 2022. Failure to extend or replace the facility could delay clinical development and regulatory activities.
- Key risks include clinical-trial failure or delay, FDA rejection or additional requirements, limited late-stage trial experience, manufacturing scale-up and cGMP compliance, donor-heart supply, dependence on third parties and licensors, COVID-19 disruption, intellectual-property challenges, competition, product liability and the need for additional financing.
- CAP-1002 previously experienced a serious hypersensitivity event in HOPE-2; the company uses a premedication strategy but cannot assure that similar reactions will not recur.
- As of December 31, 2021, approximately $34.4 million of cash deposits were uninsured. The filing reports no material pending legal proceedings, and management assessed disclosure controls and internal control over financial reporting as effective.
Most important facts for investors to verify
- Whether the $30.0 million Nippon Shinyaku upfront payment was received and how the distribution agreement’s accounting and conditions affect liquidity.
- HOPE-3 initiation, enrollment, manufacturing readiness, FDA interactions and the actual 2022 cash requirements.
- INSPIRE top-line results and whether Capricor and the FDA identified a viable development path for COVID-19.
- Whether the CSMC manufacturing lease was extended or replaced before its July 31, 2022 expiration.
- Actual cash runway after accounting for operating burn, clinical spending, equity issuance and contingent milestone receipts.
- The terms and potential repayment or revenue-sharing implications of the approximately $3.4 million CIRM liability.
- Future dilution from the remaining ATM capacity, outstanding options and warrants; the filing reports approximately 3.8 million options outstanding and 105,782 warrants at December 31, 2021.