Capricor Therapeutics, Inc. — Q1 2018 Form 10-Q Summary
Business Context and Reporting Period
Capricor is a clinical-stage biotechnology company developing cell- and exosome-based therapies, primarily for Duchenne muscular dystrophy. The company’s active programs are CAP-1002, including the HOPE-2 trial, and CAP-2003, which remains in preclinical development. The filing covers the three months ended March 31, 2018; financial statements are unaudited and prepared under U.S. GAAP.
Financial Highlights
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Total income | $0.4 million | $0.9 million |
| Research and development expense | $2.7 million | $3.3 million |
| General and administrative expense | $1.4 million | $1.2 million |
| Operating loss | $3.7 million | $3.6 million |
| Net loss | $3.7 million | $3.7 million |
| Basic and diluted loss per share | $0.14 | $0.17 |
| Cash used in operating activities | $3.4 million | $4.7 million |
- Income consisted of $306,750 of grant income and $93,316 of other income from supplying CAP-1002 doses for investigator-sponsored trials; no collaboration income was recorded.
- Cash and cash equivalents were $7.2 million at March 31, 2018, compared with $6.1 million at December 31, 2017. Marketable securities were $6.0 million, and restricted cash was $0.6 million.
- Working capital was approximately $13.1 million, compared with $14.0 million at December 31, 2017. Total liabilities were $4.9 million, including a $3.4 million CIRM award liability.
- Cash, cash equivalents and restricted cash increased by $0.9 million during the quarter, supported by $2.4 million of net ATM offering proceeds and $139,140 from stock-option exercises.
- The company had no commercial product sales. Profit margins are not meaningful because revenue is limited to grants and other development-related income.
Material Changes Versus the Prior Comparable Period
- Collaboration income declined to zero from $683,594 because the Janssen agreement had terminated and all related revenue had been recognized by June 30, 2017.
- Grant income increased by approximately $0.1 million to $306,750, primarily due to the timing of NIH and Department of Defense grant activities.
- Other income increased to $93,316 from zero due to CAP-1002 doses supplied to CSMC-sponsored clinical trials.
- R&D expense decreased approximately $0.6 million, mainly because of reduced activity in the ALLSTAR, HOPE-Duchenne, DYNAMIC and Cenderitide programs.
- G&A expense increased approximately $0.2 million, reflecting higher compensation and recruiting, investor-relations and general operating costs.
- Interest expense declined to zero from $105,320 following forgiveness of the CIRM loan in December 2017.
- Weighted-average shares increased to 26.9 million from 21.4 million, while reported loss per share improved to $0.14 from $0.17.
Guidance, Outlook, Risks and Unusual Items
- Management expected 2018 CAP-1002 clinical development and manufacturing spending of approximately $8.0 million to $12.0 million, primarily for HOPE-2 and manufacturing activities.
- Management expected 2018 CAP-2003 preclinical and research spending of approximately $2.0 million to $4.0 million, partially offset by NIH and Department of Defense grants.
- HOPE-2 enrollment began in April 2018. The randomized, double-blind trial is expected to enroll approximately 84 patients at 10–15 U.S. sites; 12-month results were anticipated in the first half of 2020, subject to enrollment and other factors.
- CAP-1002 received FDA Regenerative Medicine Advanced Therapy designation in February 2018, in addition to prior orphan drug and rare pediatric disease designations. These designations do not assure regulatory approval.
- The company had no commercial revenue and expected continuing operating losses and negative operating cash flows. Management stated that additional financing would be required and could be pursued through equity, debt, grants, licensing or collaborations.
- Management stated that expense reductions, including slowing R&D, reducing headcount and imposing budget restrictions, could extend available cash and investments into the second quarter of 2019. Additional equity financing could materially dilute existing shareholders.
- The October 2017 ATM program allowed up to $14.0 million of aggregate sales. By May 10, 2018, the company had sold 3.5 million shares for gross proceeds of approximately $6.8 million, with approximately $7.2 million remaining available.
- The CIRM loan balance of approximately $15.7 million, including accrued interest, was forgiven in December 2017 after abandonment of the ALLSTAR-funded project. The separate CIRM HOPE award remained recorded as a liability and could be converted into a loan or require repayment depending on future circumstances.
- Key risks include clinical-trial execution and results, manufacturing scale-up, regulatory approval, intellectual-property protection, dependence on external financing and grants, potential dilution, reliance on third-party vendors, and uncertain commercial acceptance and reimbursement.
- No material legal proceedings or material changes to previously disclosed risk factors were reported. The company stated that disclosure controls were effective.
Most Important Facts for Investors to Verify
- HOPE-2 enrollment progress, interim-futility analysis timing and clinical results.
- Cash burn, remaining cash and marketable securities, and whether financing is obtained before available resources are exhausted.
- Actual 2018 CAP-1002 and CAP-2003 spending compared with management’s stated ranges.
- Terms and remaining availability of the ATM program, including dilution from shares issued after March 31, 2018.
- Status and repayment or conversion terms of the $3.4 million CIRM award liability.
- Manufacturing readiness, regulatory interactions and the evidentiary requirements associated with CAP-1002’s RMAT designation.
- Whether preliminary HOPE-Duchenne findings are confirmed in larger or later-stage studies; the filing cautions that final clinical data may differ materially from preliminary results.