Capricor Therapeutics, Inc. — Form 10-Q Summary
Business context and reporting period
Capricor Therapeutics is a clinical-stage biotechnology company developing regenerative-medicine and related therapies, with six drug candidates in various development stages. Its principal programs include CAP-1002 for cardiovascular disease and Duchenne muscular dystrophy-associated cardiomyopathy, CAP-2003 exosomes, and Cenderitide. The filing covers the unaudited three and nine months ended September 30, 2016, compared with the same periods in 2015.
Financial performance and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Total income | $0.7 million in 2016 vs. $1.3 million in 2015 | $3.1 million vs. $4.4 million |
| Research and development expense | $4.7 million vs. $3.2 million | $13.4 million vs. $10.4 million |
| General and administrative expense | $1.3 million vs. $1.0 million | $3.8 million vs. $3.3 million |
| Loss from operations | $(5.2) million vs. $(2.9) million | $(14.1) million vs. $(9.3) million |
| Net loss | $(5.3) million vs. $(2.9) million | $(14.3) million vs. $(9.5) million |
| Net loss per share | $(0.29) vs. $(0.18) | $(0.81) vs. $(0.60) |
| Cash used in operating activities | Not separately provided | $(11.6) million vs. $(7.2) million |
September 30, 2016 cash and cash equivalents were $18.0 million, marketable securities were $2.5 million, restricted cash was $0.6 million, and working capital was approximately $15.7 million. Total cash, cash equivalents and marketable securities were approximately $20.5 million, compared with $13.6 million at December 31, 2015.
Total liabilities were $24.4 million, including a $13.9 million CIRM loan payable, $0.7 million of accrued interest, and a $3.1 million CIRM award liability. Stockholders’ equity was $49,000 at September 30, 2016, compared with a deficit of $1.0 million at December 31, 2015.
The company has no product sales and remains dependent on equity financings, grants, collaboration payments and CIRM funding. No meaningful operating profitability or positive operating cash flow is reported.
Material changes versus the prior comparable period
- Third-quarter and year-to-date net losses increased to $5.3 million and $14.3 million, respectively, from $2.9 million and $9.5 million.
- R&D expense increased primarily because of higher clinical development, manufacturing and patient-related costs for CAP-1002’s ALLSTAR and HOPE-Duchenne trials, as well as additional exosome research.
- Income declined because collaboration income from Janssen and grant income were lower. Collaboration income is the ratable recognition of the prior Janssen upfront payment, not product revenue.
- Operating cash use increased to $11.6 million from $7.2 million for the nine-month period.
- The company raised approximately $3.9 million net in a March 2016 equity offering and approximately $9.9 million net in September 2016, issuing 5.1 million common shares in aggregate. Shares outstanding increased to 21.4 million from 16.3 million at December 31, 2015.
- CIRM loan proceeds of $4.8 million were received during the first nine months, increasing the loan balance to $13.9 million.
Guidance, outlook, risks and unusual items
- Management expected 2016 CAP-1002 development and manufacturing spending of approximately $10.0 million to $13.0 million, Cenderitide spending of approximately $0.5 million to $1.0 million, and exosome program spending of approximately $2.5 million to $3.5 million.
- ALLSTAR enrollment was completed with 142 subjects randomized and 134 subjects infused. Janssen’s license option decision was expected in mid-2017 after delivery of six-month ALLSTAR results.
- HOPE-Duchenne enrollment was completed with 25 patients; top-line six-month results were expected early in the second quarter of 2017. The trial was supported in part by an approximately $3.4 million CIRM award and required approximately $2.3 million of company co-funding.
- Management expected to submit an IND for CAP-2003 in the first half of 2017 and potentially begin clinical development in 2017, subject to regulatory review.
- The CIRM ALLSTAR loan is repayable with interest, subject to potential forgiveness under specified conditions, and may include a risk premium of up to 500% of the loan amount upon achievement of certain revenue thresholds. Management expected ultimately to draw approximately 70% to 75% of the original loan commitment because of reduced ALLSTAR enrollment.
- The CIRM HOPE award was recorded as a liability because repayment may be required or the award may be converted into a loan. A further $1.1 million was received on November 4, 2016 and was included in awards receivable at September 30.
- Management stated that substantial additional capital will be required. Failure to obtain financing could require expense reductions, delayed or canceled trials, or curtailed operations. Additional equity financing could materially dilute existing holders.
- Clinical, regulatory, manufacturing, intellectual-property, collaboration and reimbursement risks remain significant. The filing reports no material legal proceedings and no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Cash burn, trial spending and the expected duration of available cash and marketable securities.
- Terms, milestones, repayment, forgiveness provisions and potential risk premium associated with the CIRM loan and HOPE award.
- ALLSTAR and HOPE-Duchenne follow-up results, regulatory milestones and the timing and outcome of Janssen’s option decision.
- Potential dilution from the 6.45 million outstanding stock options and 1.08 million outstanding warrants as of September 30, 2016.
- Whether the company can secure additional financing without materially unfavorable terms or loss of significant technology rights.
- Execution of CAP-2003 manufacturing and clinical plans, including the conditional NIH and DoD grant funding.