Capricor Therapeutics, Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
Capricor Therapeutics is a clinical-stage biotechnology company developing cell- and exosome-based therapeutics, primarily CAP-1002 for Duchenne muscular dystrophy (DMD) and a preclinical exosome platform. The filing covers the unaudited three months ended March 31, 2024, compared with the three months ended March 31, 2023.
- CAP-1002 is in the Phase 3 HOPE-3 trial. Cohort A enrollment was completed with 61 subjects, and top-line data are expected in the fourth quarter of 2024.
- The company has no approved products and has generated no commercial product sales.
- Nippon Shinyaku is the exclusive distributor for CAP-1002 in the United States and Japan, subject to regulatory approval.
Financial performance and key metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $4.9 million | $3.0 million | +$1.9 million, approximately 64% |
| Research and development expense | $11.1 million | $7.7 million | +$3.4 million, 45% |
| General and administrative expense | $4.1 million | $3.5 million | +$0.6 million, 16% |
| Loss from operations | $(10.3) million | $(8.2) million | Greater operating loss |
| Net loss | $(9.8) million | $(7.8) million | Greater net loss |
| Net loss per share | $(0.31) | $(0.31) | Unchanged |
| Operating cash flow | $(1.3) million | $4.2 million | Decrease of $5.5 million |
Revenue consisted of clinical development income recognized from the Nippon Shinyaku U.S. distribution agreement as Capricor performs the HOPE-3 Cohort A obligation. Revenue does not represent commercial product sales.
- Q1 2024 revenue included proportional recognition of the $30.0 million upfront payment and the $10.0 million milestone payment under the U.S. agreement.
- Investment income was $471,829, compared with $416,442 in Q1 2023.
- Stock-based compensation expense was $3.3 million, compared with $2.2 million in Q1 2023.
Balance sheet, liquidity, debt and cash flow
- Cash and cash equivalents were $6.2 million at March 31, 2024, compared with $14.7 million at December 31, 2023.
- Marketable securities were $33.7 million, up from $24.8 million. Cash, cash equivalents and marketable securities totaled approximately $39.9 million, compared with approximately $39.5 million at year-end 2023.
- Working capital was approximately $15.0 million, compared with $19.6 million at December 31, 2023.
- Total liabilities were $31.0 million, including $19.4 million of current deferred revenue.
- The company reported no traditional debt balance; liabilities included a $3.4 million CIRM liability and $2.0 million of operating lease liabilities.
- Investing cash outflow was $9.5 million, primarily reflecting purchases of marketable securities and property and equipment.
- Financing cash inflow was $2.3 million from the sale of 447,221 shares under the ATM program.
- Cash and cash equivalents declined by $8.5 million during the quarter.
Material changes versus the prior comparable period
- Revenue increased approximately 64%, primarily because of progress-based recognition of the additional $10.0 million Nippon Shinyaku milestone.
- R&D expense increased 45%, driven by HOPE-3 enrollment and development, the HOPE-2 extension study, expanded CAP-1002 manufacturing, higher personnel costs, facility expansion and stock-based compensation.
- G&A expense increased 16%, principally due to higher stock-based compensation and depreciation.
- Operating cash flow changed from $4.2 million provided in Q1 2023 to $1.3 million used in Q1 2024, reflecting the timing of milestone-related deferred revenue and working-capital changes.
- Shares outstanding increased to 31.6 million at March 31, 2024 from 31.1 million at December 31, 2023. The company also had 5.0 million warrants and 10.6 million stock options outstanding at quarter-end.
Guidance, outlook, commentary and risks
- Management estimated that the current cash balance would fund operating expenses and capital expenditures into the first quarter of 2025, excluding additional potential Nippon Shinyaku milestone payments.
- The company disclosed substantial doubt about its ability to continue as a going concern because available cash is not sufficient to fund current operations for at least the next twelve months from the filing date.
- Management expects 2024 CAP-1002 DMD program spending of approximately $25 million to $35 million and exosome program spending of approximately $3 million to $5 million.
- Management expects a Type-B FDA meeting in the second quarter of 2024 to discuss a potential pre-BLA meeting and rolling BLA schedule. The company stated that FDA discussions supported comparability of CAP-1002 manufactured at its Los Angeles and San Diego facilities, subject to facility approval.
- The StealthX exosome vaccine IND was under FDA review; NIAID was expected to initiate a Phase 1 trial in late 2024 if the IND is cleared.
- Capricor is relying on additional equity or debt financing, licensing, collaborations, grants and distribution-related payments. Failure to obtain funding could delay, reduce or terminate clinical and research programs and could cause substantial shareholder dilution.
- CSMC alleged that Capricor owes $1.0 million, representing 10% of the $10.0 million Nippon Shinyaku milestone, under the CSMC license agreement. Capricor disputes the allegation and stated that CSMC reserved purported termination rights if the matter is not cured.
- The company had no material pending legal proceedings and reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether HOPE-3 Cohort A produces positive top-line data in the expected fourth quarter of 2024 and supports a BLA submission.
- The timing, amount and conditions of any additional Nippon Shinyaku milestones, including the potential $90.0 million in U.S. development and regulatory milestones.
- Whether Capricor obtains sufficient financing before its projected funding runway ends and the resulting dilution or financing terms.
- The resolution of CSMC’s $1.0 million payment claim and whether it affects the company’s license rights.
- FDA approval of the San Diego manufacturing facility and the regulatory status of CAP-1002 and the StealthX vaccine.
- The company’s ability to convert deferred revenue into future operating cash flow, given that current revenue is development-related rather than commercial product revenue.