Business Context and Reporting Period
Capricor Therapeutics, Inc. is a clinical-stage biotechnology company developing cell- and exosome-based therapeutics and vaccines. Its principal programs include CAP-1002 for Duchenne muscular dystrophy and severe COVID-19, and exosome-based vaccines and therapeutics. This unaudited Form 10-Q covers the quarter ended March 31, 2021, with comparisons to the quarter ended March 31, 2020.
Financial Highlights
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $40,816 | $185,693 | Down approximately 78% |
| Research and development expense | $3.30 million | $1.16 million | Up approximately $2.14 million |
| General and administrative expense | $1.91 million | $1.14 million | Up approximately $0.77 million |
| Operating loss | $5.16 million | $2.11 million | Loss increased approximately $3.05 million |
| Net loss | $5.15 million | $2.08 million | Loss increased approximately $3.07 million |
| Basic and diluted loss per share | $0.23 | $0.30 | Improved due primarily to higher share count |
| Net cash used in operating activities | $3.33 million | $1.22 million | Use increased approximately $2.11 million |
| Cash and cash equivalents at period-end | $41.88 million | $13.22 million | Up approximately $28.66 million year over year |
Revenue consisted primarily of miscellaneous income from providing CAP-1002 doses for investigator-sponsored clinical trials. The company has no commercial product sales and stated that commercial revenue is not expected for several years, if ever. Operating and net margins were deeply negative because revenue was immaterial relative to development and administrative costs.
Financing activities generated $12.58 million in Q1 2021, primarily from common-stock sales under the May 2020 at-the-market program. Total assets were $43.54 million, total liabilities were $7.16 million, and stockholders’ equity was $36.38 million at March 31, 2021. Working capital was approximately $38.86 million.
Material Changes Versus the Prior Comparable Period
- R&D expense increased 185% to $3.30 million, driven by CAP-1002 clinical development, exosome-program activities, technology transfer and manufacturing activities.
- G&A expense increased approximately 68%, including higher stock-based compensation, salaries, insurance, investor-relations, legal and other corporate expenses.
- Cash used in operations increased to $3.33 million from $1.22 million, reflecting the higher net loss, partially offset by increased accrued liabilities and non-cash stock compensation.
- Cash increased substantially because of $12.58 million of equity financing proceeds; the company issued 2.22 million common shares during the quarter.
- Grant income fell to approximately zero from approximately $0.1 million because the Department of Defense grant expired in September 2020.
- Miscellaneous income declined to approximately $41,000 from approximately $67,000 because COVID-19 delayed the REGRESS and ALPHA investigator-sponsored trials.
- Stock-based compensation increased to $753,000 from $288,000 and represented a significant non-cash component of operating expenses.
Guidance, Outlook, Risks and Unusual Items
- Management expects to spend approximately $4 million to $6 million during 2021 on CAP-1002 development and approximately $10 million to $12 million on the exosome program. Actual spending depends on regulatory outcomes, clinical progress, manufacturing requirements, financing and potential partnerships.
- The company expects top-line data from the INSPIRE Phase II COVID-19 trial in the third quarter of 2021. The trial is designed to enroll up to 60 patients.
- Management planned to submit an IND for its exosome-mRNA COVID-19 vaccine by the third quarter of 2021, subject to regulatory approval.
- The FDA has encouraged a Phase III study of CAP-1002 for DMD, but the company had not initiated the study as of the filing date and continued discussions regarding the registration pathway. The company is seeking partners and funding for the program.
- The FDA requested additional manufacturing information for the CAP-2003 DMD IND; further information must be submitted before potential acceptance.
- Management stated that cash resources were sufficient to fund operations for at least the next twelve months, but also stated that substantial additional capital will be required. Additional equity financing could dilute shareholders, while debt or collaboration financing could impose restrictions or require surrendering rights.
- COVID-19 may affect clinical-trial enrollment, trial timelines, supply chains, contract performance, sponsor payments, grant disbursements, workforce stability and access to financing.
- The $318,160 Paycheck Protection Program loan was forgiven by the SBA in April 2021, after the quarter end; the company recognized a gain on forgiveness in April.
- The company carried a CIRM liability of approximately $3.4 million. It has not decided whether to convert the award into a loan, which could require repayment and interest.
- As of March 31, 2021, approximately $0.6 million remained receivable under the CSMC-sponsored trials, subject to enrollment and other conditions.
- Subsequent to quarter end through May 13, 2021, the company sold 80,000 additional ATM shares for gross proceeds of approximately $409,000. Approximately $2.9 million remained available under the ATM program at that date.
- No material legal proceedings, material changes to previously disclosed risk factors, or off-balance-sheet arrangements were reported.
Most Important Facts for Investors to Verify
- Whether the INSPIRE trial produces clinically meaningful and statistically reliable results and whether the company delivers the expected third-quarter 2021 data.
- FDA feedback and the timing, funding and design of any Phase III CAP-1002 DMD trial or BLA pathway.
- Regulatory resolution of the CAP-2003 manufacturing questions and the planned exosome-mRNA vaccine IND.
- Actual cash burn relative to management’s 2021 spending estimates and the stated minimum twelve-month cash runway.
- Future reliance on ATM equity sales, potential dilution and the terms of any additional financing or strategic partnership.
- The timing and collectability of the remaining CSMC trial compensation and the impact of COVID-19-related delays.
- The company’s decision regarding conversion of the approximately $3.4 million CIRM liability into a loan and any resulting repayment obligation.
- Share-count changes: 22,797,930 shares were outstanding at March 31, 2021, while 22,877,930 were reported outstanding as of May 13, 2021.