Business Context and Reporting Period
Capricor Therapeutics, Inc. is a clinical-stage biotechnology company developing cell-based and exosome-based therapeutics and vaccines. Its lead programs include CAP-1002 for Duchenne muscular dystrophy (DMD) and severe COVID-19, and exosome-based vaccine and therapeutic platforms. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2021, filed November 10, 2021.
Key Financial Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | $0.0 million vs. $0.02 million | $0.24 million vs. $0.25 million |
| Research and development expense | $2.51 million vs. $2.63 million | $9.31 million vs. $5.71 million |
| General and administrative expense | $1.80 million vs. $1.30 million | $5.50 million vs. $4.05 million |
| Net loss | $3.93 million vs. $3.91 million | $13.83 million vs. $9.48 million |
| Net loss per share | $0.17 vs. $0.20 | $0.61 vs. $0.68 |
| Net cash used in operating activities | Not separately provided | $11.18 million vs. $6.21 million |
Operating margins are not meaningful because revenue was negligible and the Company remains pre-commercial. Other income included approximately $0.37 million from the Employee Retention Credit and $0.32 million of debt forgiveness during the first nine months.
Balance Sheet, Debt and Liquidity
- Cash and cash equivalents were $40.84 million at September 30, 2021, compared with $32.67 million at December 31, 2020.
- Working capital was approximately $38.31 million, compared with $30.71 million at year-end 2020.
- Total liabilities were $6.36 million, including a $3.38 million CIRM liability and $2.99 million of accounts payable and accrued expenses.
- The $318,160 Paycheck Protection Program loan was forgiven in April 2021; no note payable remained at September 30, 2021.
- Financing activities provided $20.18 million during the first nine months, primarily from equity sales. Cash increased by $8.17 million after operating and investing uses.
- Approximately $40.6 million of cash deposits were uninsured at September 30, 2021.
Material Changes Versus the Prior Comparable Period
- Nine-month net loss increased by $4.35 million, or approximately 46%, primarily reflecting higher R&D and G&A spending.
- Nine-month R&D expense increased $3.60 million, driven mainly by exosome development and technology-transfer and manufacturing activities for CAP-1002.
- Nine-month G&A expense increased $1.45 million, primarily due to higher salaries, recruiting, stock-based compensation, insurance and other general expenses.
- Operating cash use increased by approximately $4.97 million year over year.
- Shares outstanding increased from 20.58 million at December 31, 2020 to 24.15 million at September 30, 2021, principally through ATM equity sales and other stock issuances.
- The June 2021 ATM program generated approximately $7.5 million of gross proceeds through September 30, 2021, with approximately $67.5 million remaining available under the program.
- Stock-based compensation increased to $2.19 million for the first nine months, compared with $1.48 million in the prior-year period; approximately $8.5 million of additional unrecognized expense remained at September 30, 2021.
Guidance, Outlook, Risks and Unusual Items
- Management stated that existing cash resources were expected to fund operations for at least the next twelve months, but the Company expects to require substantial additional capital to support expanded clinical and research programs.
- For 2021, management expected to spend approximately $6 million to $8 million on CAP-1002 development and approximately $6 million to $8 million on the exosome program. Actual spending depends on regulatory developments, clinical progress, financing and partnering.
- Following positive final HOPE-2 data in DMD, the Company submitted a proposed Phase III protocol to the FDA and initiated study start-up activities. It did not intend to begin patient enrollment until securing a partner or additional capital.
- The INSPIRE Phase II COVID-19 study subsequently completed enrollment at 63 patients; top-line data were expected in the first quarter of 2022. The filing states that efficacy of CAP-1002 in the earlier compassionate-use experience was not demonstrated because of the small, uncontrolled sample and concomitant treatments.
- The FDA requested additional manufacturing information for the CAP-2003 IND, and the Company was evaluating next steps.
- COVID-19 may continue to affect clinical enrollment, trial execution, supply chains, workforce stability, vendor performance, financing and grant timing.
- Revenue is not expected from commercial product sales for several years, if ever. Revenue from the CSMC-sponsored REGRESS and ALPHA trials was not expected to be material going forward because enrollment was complete.
- The $3.38 million CIRM award remains recorded as a liability because the Company may elect to convert the award into a loan and could be required to repay some or all of the amount. The award may also entail future revenue-sharing obligations.
- A new San Diego office and laboratory lease commenced October 1, 2021, with estimated right-of-use asset and liability of approximately $2.7 million. In November 2021, the Beverly Hills office lease was reduced to $5,548 per month.
- No material legal proceedings or material changes to previously disclosed risk factors were reported. Management concluded disclosure controls were effective.
Most Important Facts for Investors to Verify
- Whether $40.8 million of cash and the remaining ATM capacity are sufficient for the planned clinical, manufacturing and exosome activities, given the $11.2 million nine-month operating cash burn.
- The FDA’s response to the proposed CAP-1002 DMD Phase III program and the Company’s ability to secure a partner or additional financing before enrollment.
- Top-line and full results from the INSPIRE COVID-19 trial and the resulting regulatory strategy.
- The manufacturing information required for the CAP-2003 IND and the timing of any resubmission or FDA acceptance.
- The potential dilution from the June 2021 ATM program, outstanding options and warrants, and future equity financings.
- The ultimate treatment of the CIRM liability, including any repayment, interest or revenue-sharing exposure.
- Whether increasing R&D and G&A spending, lease commitments and stock-based compensation materially accelerate cash depletion.