Capricor Therapeutics, Inc. — Form 10-Q Summary
Business context and reporting period
Capricor Therapeutics is a clinical-stage biotechnology company focused primarily on cardiovascular therapies. The company reported unaudited consolidated results for the three months ended March 31, 2015, compared with the three months ended March 31, 2014. Its six drug candidates include CAP-1002, Cenderitide, exosomes, CAP-1001, CU-NP and cardiospheres. The company has no product sales and does not expect product revenue until regulatory approval, if ever.
Key financial metrics
| Metric | Q1 2015 | Q1 2014 or prior period |
|---|---|---|
| Total income | $1.8 million | $1.0 million |
| Collaboration income | $1.0 million | $1.0 million |
| Grant income | $0.7 million | None |
| Operating expenses | $5.2 million | $2.2 million |
| Research and development expense | $3.8 million | $1.4 million |
| General and administrative expense | $1.4 million | $0.9 million |
| Operating loss | $3.4 million | $1.2 million |
| Net loss | $3.5 million | $1.2 million |
| Basic and diluted loss per share | $0.23 | $0.10 |
| Net cash used in operating activities | $2.1 million | Cash provided of $11.3 million |
Approximate operating and net loss margins were negative 191% and negative 194%, respectively, based on total reported income. Cash and cash equivalents were $6.9 million at March 31, 2015, and marketable securities were $15.5 million, primarily short-term U.S. Treasuries. Including restricted cash of $2.0 million, total cash, cash equivalents, restricted cash and marketable securities were approximately $24.5 million.
Working capital was approximately $17.9 million, compared with $5.3 million at December 31, 2014. Total liabilities were $20.1 million, including a $9.2 million CIRM loan payable, $0.3 million of accrued interest and $7.3 million of deferred revenue under the Janssen agreement. Stockholders’ equity improved to $7.3 million from a deficit of $6.2 million at year-end 2014.
Material changes versus the prior comparable period
- Total income increased $0.7 million, driven by $0.7 million of NIH grant income; Janssen collaboration income was unchanged at approximately $1.0 million.
- R&D expense increased approximately $2.4 million, primarily because CAP-1002 and Cenderitide clinical trials were active, increasing clinical, manufacturing, patient and contract research organization costs.
- G&A expense increased approximately $0.5 million, primarily from higher headcount-related costs and approximately $0.4 million of additional stock-based compensation.
- Net loss increased approximately $2.3 million, and interest expense increased to $61,681 from $25,327 as the CIRM loan balance increased.
- The company completed two private placements: approximately $10.0 million in January and $7.05 million in February. Net proceeds from common-stock sales were $16.4 million after fees, increasing shares outstanding to 16.2 million at March 31, 2015.
- Cash declined by approximately $1.1 million during the quarter because operating cash use and purchases of $15.5 million of marketable securities offset the equity financing proceeds.
Guidance, outlook, commentary and risks
- Management expected 2015 CAP-1002 development spending of approximately $10 million to $14 million, primarily for the Phase II ALLSTAR and DYNAMIC trials, and Cenderitide development spending of approximately $1 million to $2 million.
- ALLSTAR Phase II enrollment was slower than expected. Management was evaluating additional U.S. and Canadian sites and an interim analysis, subject to concurrence from interested parties including the FDA.
- DYNAMIC enrollment was completed in April 2015, with initial top-line results expected in late 2015. Cenderitide Phase II enrollment was completed in March 2015, with initial top-line results expected in mid-to-late 2015.
- Management stated that substantial additional financing will be required to continue operations and clinical development. Potential sources include equity or debt financing, strategic collaborations and licensing transactions; additional equity could dilute existing stockholders.
- The CIRM loan is subject to clinical, financial and other milestones, availability of state funding and possible suspension of disbursements. It carries interest and may include a risk premium of up to 500% of the loan amount upon specified revenue thresholds.
- Janssen holds an exclusive option related to CAP-1002 that may be exercised after specified ALLSTAR follow-up results. If exercised, potential upfront and milestone payments could total up to $325 million, plus royalties; exercise is not assured.
- The company faces the usual biotechnology risks, including clinical-trial delays or failures, regulatory uncertainty, manufacturing challenges, dependence on third parties, intellectual-property risks and continuing operating losses. No material legal proceedings or material changes to previously reported risk factors were disclosed.
- In April 2015, after the reporting period, CAP-1002 received FDA orphan drug designation for DMD-associated cardiomyopathy. The filing also disclosed the April 2015 expiration of warrants covering 52,650 shares.
Most important facts for investors to verify
- Actual enrollment, interim-analysis plans and clinical results for ALLSTAR, DYNAMIC and Cenderitide.
- Whether Janssen exercises its CAP-1002 option and the resulting economics, obligations and development funding.
- The company’s cash runway after planned 2015 clinical spending and the timing and terms of future financing.
- CIRM loan disbursement status, milestone compliance, repayment or forgiveness conditions and potential risk-premium exposure.
- Potential dilution from outstanding options and warrants; 6.1 million potentially dilutive securities were excluded from Q1 2015 loss-per-share calculations.
- Material related-party obligations, including amounts payable to Cedars-Sinai Medical Center and related-party lease and consulting arrangements.