Capricor Therapeutics, Inc. 2020 Form 10-K Summary
Business context and reporting period
Capricor Therapeutics is a development-stage biotechnology company focused on cell- and exosome-based therapeutics. The filing covers the fiscal year ended December 31, 2020, with comparative results for 2019. The company has no approved commercial products and generates no commercial product sales.
- Lead program: CAP-1002 for Duchenne muscular dystrophy (DMD); HOPE-2 Phase II was completed, while a potential Phase III study remained in planning and had not begun.
- COVID-19 program: INSPIRE Phase II trial of CAP-1002 was enrolling up to 60 patients with severe or critical COVID-19.
- Exosome programs: Included an exosome-mRNA vaccine, an exosomal antigen vaccine, engineered exosomes and CDC-derived exosomes (CAP-2003).
Financial performance and key metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $0.3 million | $1.0 million |
| Research and development expense | $8.5 million | $5.1 million |
| General and administrative expense | $5.5 million | $3.6 million |
| Total operating expenses | $14.0 million | $8.7 million |
| Loss from operations | $(13.7) million | $(7.7) million |
| Net loss | $(13.7) million | $(7.6) million |
| Basic and diluted loss per share | $(0.88) | $(2.06) |
| Cash used in operating activities | $(10.1) million | $(6.8) million |
Revenue consisted primarily of grant income and miscellaneous income from providing CAP-1002 for investigator-sponsored trials. Grant income declined to approximately $0.2 million from $0.5 million, and miscellaneous income declined to approximately $0.1 million from $0.5 million.
- Liquidity: Cash, cash equivalents and marketable securities were $32.7 million at December 31, 2020, compared with $9.9 million at year-end 2019. Working capital was $30.7 million, compared with $9.6 million.
- Cash flow: Investing activities provided $5.4 million, primarily reflecting marketable securities activity, while financing activities provided $33.4 million.
- Financing: The company received approximately $33.0 million from equity sales in 2020 and $0.3 million from the SBA Paycheck Protection Program.
- Debt and obligations: Total liabilities were $6.4 million, including a $3.4 million CIRM liability and a $0.3 million PPP note payable. The PPP note bears interest at 1% and matures April 29, 2022, subject to potential forgiveness.
- Margins: Gross margin is not meaningful because the company has no commercial product sales. Operating margin was approximately negative 4,414% based on reported revenue and operating loss.
Material changes versus 2019
- Revenue decreased by approximately $0.7 million, or 69%, primarily because of lower grant activity and COVID-19-related delays in investigator-sponsored CSMC trials.
- R&D expense increased by approximately $3.4 million, driven by CAP-1002 clinical development, exosome research, and technology-transfer and manufacturing activities.
- G&A expense increased by approximately $1.9 million, primarily from higher stock-based compensation, salaries and recruiting, investor relations and insurance costs.
- Net loss increased by approximately $6.0 million, reflecting higher operating expenses and lower revenue.
- Cash and marketable securities increased by approximately $22.8 million, primarily due to equity financing proceeds.
- Shares outstanding increased from approximately 5.2 million at December 31, 2019 to 20.6 million at December 31, 2020, creating substantial dilution for existing holders.
- Outstanding warrants declined from approximately 7.5 million to 0.1 million, largely due to warrant exercises.
- Stock-based compensation increased to approximately $2.0 million from $0.7 million.
Guidance, outlook, commentary and risks
- Management expected to spend approximately $4.0 million to $6.0 million in 2021 on CAP-1002 development for DMD and COVID-19.
- Management expected to spend approximately $10.0 million to $12.0 million in 2021 on exosome development, including the exosome-mRNA vaccine and engineered exosome platform.
- Top-line data from the INSPIRE Phase II COVID-19 trial was expected in the third quarter of 2021.
- Management planned to file an IND for the exosome-mRNA vaccine by the third quarter of 2021, subject to regulatory approval.
- The FDA continued to encourage a Phase III DMD study for CAP-1002, but the company had not initiated the study and was seeking partners and additional funding.
- Management stated that available cash was expected to fund operations for at least the next twelve months, but the company will require substantial additional capital to continue development and may raise equity or debt, pursue grants, or enter licensing and collaboration arrangements.
- The current manufacturing facility is not approved as a commercial cGMP facility. The company initiated a technology transfer with Lonza Houston for potential late-stage clinical or commercial manufacturing of CAP-1002.
- COVID-19 caused delays in clinical trials, investigator-sponsored work, supply chains and other operations; the duration and financial impact remained uncertain.
- Key risks include clinical-trial failure or delay, regulatory non-approval, limited manufacturing capacity, dependence on third parties and licensors, intellectual-property challenges, intense competition, reimbursement uncertainty, product liability, cybersecurity, continued losses and future equity dilution.
- The seven-patient compassionate-use experience with CAP-1002 in severe COVID-19 did not establish efficacy because of the small sample size, concurrent experimental treatments and lack of a control group.
- HOPE-2 reported encouraging 12-month results in several upper-limb and cardiac measures, but the p-values were nominal and unadjusted for multiple testing, and the FDA still indicated that a Phase III study was needed.
Most important facts for investors to verify
- Whether the company can secure funding or partners to support a potential CAP-1002 Phase III DMD study and continued exosome development.
- Cash burn, updated liquidity and the timing and terms of future equity or debt financings.
- Progress, enrollment and top-line results of the INSPIRE Phase II trial and any subsequent FDA discussions.
- Whether the exosome-mRNA vaccine IND was filed and whether FDA permitted clinical testing.
- Manufacturing readiness, the Lonza technology transfer, cGMP requirements and facility lease extensions beyond July 2021 or July 2022.
- Status and potential forgiveness of the $318,160 PPP loan and the company’s $3.4 million CIRM liability.
- Potential dilution from the May 2020 ATM program, stock options and remaining warrants; through March 12, 2021, the company reported additional ATM sales of approximately $13.0 million.
- Whether the company achieves any commercial approval or product revenue, since the filing reports no approved products and continued substantial operating losses.