Capricor Therapeutics, Inc. — Q1 2023 Form 10-Q Summary
Business context and reporting period
Capricor is a clinical-stage biotechnology company developing cell- and exosome-based therapeutics, principally CAP-1002 for Duchenne muscular dystrophy (DMD), and an early-stage exosome platform. The company has no approved products or commercial product sales. This unaudited report covers the three months ended March 31, 2023, compared with the three months ended March 31, 2022.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $3.0 million | $0 | New revenue |
| Research and development | $7.7 million | $5.1 million | +50% |
| General and administrative | $3.5 million | $2.7 million | +29% |
| Operating loss | $8.2 million | $7.8 million | +4.5% |
| Investment income | $0.4 million | $13,440 | Higher interest income |
| Net loss | $7.8 million | $7.8 million | Essentially unchanged |
| Loss per share | $0.31 | $0.32 | Improved |
| Operating cash flow | $4.2 million | $24.0 million | Down $19.8 million |
Revenue consisted of approximately $3.0 million of clinical development income recognized from the U.S. Nippon Shinyaku distribution agreement. This is not commercial product revenue. Approximate operating and net loss margins were negative 274% and negative 260%, respectively, based on reported revenue.
At March 31, 2023, cash and cash equivalents were $10.6 million and marketable securities were $34.6 million, for total cash, cash equivalents and marketable securities of approximately $45.2 million, compared with approximately $41.4 million at December 31, 2022. Working capital was $9.5 million, versus $19.3 million at year-end.
Total liabilities were $47.7 million, including $36.5 million of deferred revenue, a $3.4 million CIRM liability and $2.4 million of operating lease liabilities. The filing does not report conventional interest-bearing debt. Stockholders’ equity declined to $6.2 million from $11.8 million, principally because of the quarterly net loss.
Material changes versus the prior comparable period
- Revenue increased from zero to $3.0 million as the company began recognizing the U.S. distribution agreement upfront payment over the HOPE-3 clinical study period.
- The company received a $12.0 million upfront payment under a new Japan commercialization and distribution agreement with Nippon Shinyaku. The payment was recorded as deferred revenue because no distinct performance obligation had yet been identified.
- R&D expense increased $2.5 million, primarily due to HOPE-3, the HOPE-2 open-label extension, CAP-1002 manufacturing scale-up, higher personnel costs and facility expansion.
- G&A expense increased $0.8 million, largely because stock-based compensation increased by $0.9 million.
- Cash from operations fell substantially because the prior-year period included the $30.0 million U.S. distribution agreement upfront payment, compared with the $12.0 million Japan payment in the current period.
- Capital activity was limited to approximately $3,895 from stock award exercises. No ATM shares were sold during Q1 or through May 11, 2023; approximately $62.6 million remained available under the ATM program.
Guidance, outlook, risks and unusual items
- HOPE-3 Phase III was enrolling up to 68 patients at approximately 15–20 U.S. sites. Management reported 13 active sites and expected full enrollment by the second half of 2023, with an interim analysis for sample-size re-estimation and conditional power expected in Q4 2023.
- Management expected the new San Diego GMP pilot manufacturing facility to be available to manufacture CAP-1002 doses by Q3 2023 and continued discussions with the FDA regarding manufacturing requirements and a potential BLA.
- Management expected 2023 CAP-1002 DMD program spending of approximately $15 million to $20 million and exosome program spending of approximately $4 million to $6 million.
- Management estimated that available cash, cash equivalents and marketable securities would fund operating expenses and capital expenditures into Q4 2024, excluding potential additional Nippon Shinyaku milestones. The filing also states that additional capital will be required and that financing may be unavailable or unfavorable.
- The U.S. agreement provides for potential additional development and sales milestones of up to $705 million; the Japan agreement provides for potential milestones of approximately $89 million, subject to foreign exchange rates. These amounts remain contingent and are not included in the current transaction price.
- The company recognized $2.2 million of stock-based compensation, substantially increasing from $1.1 million in the prior-year quarter. Approximately $15.2 million of unrecognized compensation cost remained at March 31, 2023.
- The CIRM award is recorded as a liability because Capricor may elect to convert it into a loan and could be required to repay some or all of the award. The outstanding liability was approximately $3.4 million.
- COVID-19-related risks remain, including potential effects on clinical enrollment, supply chains, vendor performance and workforce stability. No material legal proceedings or material changes to previously disclosed risk factors were reported.
Key facts investors should verify
- Progress, enrollment, interim analysis results and regulatory implications of the HOPE-3 Phase III trial.
- FDA feedback on commercial-scale manufacturing, the requested Type-B clinical meeting and the timing and requirements of any potential BLA.
- The company’s ability to manufacture CAP-1002 at the San Diego facility and the related capital and operating costs.
- The timing and conditions for recognizing the remaining approximately $24.5 million of U.S. agreement deferred revenue and the $12.0 million Japan upfront payment.
- Cash burn, runway and the timing or terms of any additional equity, debt, licensing or partnering financing.
- The probability and timing of the contingent Nippon Shinyaku milestones and future product-revenue sharing.
- Potential repayment or revenue-sharing obligations associated with the $3.4 million CIRM liability.
- Clinical, manufacturing, regulatory, intellectual-property, reimbursement and commercialization risks associated with CAP-1002 and the preclinical exosome platform.