Capricor Therapeutics, Inc. — Q3 2022 Form 10-Q Summary
Business context and reporting period
Capricor is a clinical-stage biotechnology company developing cell- and exosome-based therapeutics, led by CAP-1002 for Duchenne muscular dystrophy (DMD) and an early-stage exosome platform. The filing covers the three and nine months ended September 30, 2022; financial statements are unaudited.
- CAP-1002 was in the Phase 3 HOPE-3 DMD study, which targeted approximately 70 patients at 15–20 U.S. sites.
- The company had no approved products and no commercial product sales as of the filing date.
- As of November 9, 2022, 25,241,402 common shares were outstanding.
Financial performance and position
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $1.6 million in 2022; none in 2021 | $1.6 million in 2022 versus $0.2 million in 2021 |
| Research and development expense | $5.5 million versus $2.5 million | $15.6 million versus $9.3 million |
| General and administrative expense | $2.6 million versus $1.8 million | $7.6 million versus $5.5 million |
| Operating loss | $6.5 million versus $4.3 million | $21.6 million versus $14.6 million |
| Net loss | $6.4 million, or $0.26 per share, versus $3.9 million, or $0.17 per share | $21.3 million, or $0.87 per share, versus $13.8 million, or $0.61 per share |
| Operating cash flow | Not separately provided for the quarter | $11.8 million provided versus $11.2 million used |
Revenue primarily reflects recognition of a portion of the $30.0 million upfront payment from Nippon Shinyaku under the CAP-1002 commercialization and distribution agreement. The company recognized approximately $1.6 million during the nine months and recorded $28.4 million of deferred revenue at September 30, 2022.
- Cash and cash equivalents were $8.4 million, compared with $34.9 million at December 31, 2021.
- Marketable securities were $38.2 million, bringing cash, cash equivalents and marketable securities to approximately $46.6 million versus $34.9 million at year-end 2021.
- Working capital was approximately $24.3 million versus $32.3 million at year-end.
- Total liabilities were $38.5 million, including $28.4 million of deferred revenue, a $3.4 million CIRM liability and $2.8 million of operating lease liabilities.
- Stockholders’ equity declined to $15.4 million from $31.4 million, while accumulated deficit increased to $129.4 million.
- Net cash used in investing activities was $40.2 million, primarily reflecting purchases of marketable securities and capital expenditures for the San Diego laboratory build-out.
- Net proceeds from common-stock sales and stock-award exercises were $1.9 million, compared with $20.2 million in the prior-year period.
Material changes versus the prior comparable period
- Revenue increased because the company began recognizing the Nippon Shinyaku upfront payment; prior-year revenue mainly reflected approximately $0.2 million from investigational doses supplied to Cedars-Sinai-sponsored trials.
- Research and development expense increased $3.0 million in the quarter and $6.3 million year to date, driven by CAP-1002 clinical development, manufacturing and technology-transfer activities, and exosome preclinical work.
- General and administrative expense increased $0.8 million in the quarter and $2.1 million year to date, primarily due to increased headcount, salaries, recruiting, business development, rent and stock-based compensation.
- Year-to-date operating cash flow turned positive because of the $30.0 million upfront payment, despite higher net losses.
- The company invested substantially in marketable securities and laboratory infrastructure, resulting in a $26.5 million decrease in cash and cash equivalents during the nine months.
- Common shares outstanding increased to 24.7 million at September 30, 2022 from 24.2 million at December 31, 2021.
Guidance, outlook, risks and unusual items
- Management estimated that approximately $46.6 million of cash, cash equivalents and marketable securities would fund operating expenses and capital expenditures into the second quarter of 2024, excluding potential Nippon Shinyaku milestone payments.
- Management expected HOPE-3 enrollment to be completed by the third quarter of 2023, with topline data available in the second half of 2024.
- Expected 2022 spending was approximately $9.0–$11.0 million for the CAP-1002 DMD program and $5.0–$6.0 million for the exosome program.
- The Nippon Shinyaku agreement provides for potential additional development and sales milestones of up to $705.0 million, but none were included in the recognized transaction price because achievement remained uncertain.
- The company expects continued substantial losses and states that it will require additional capital. Potential sources include equity or debt financing, grants, licensing transactions and strategic collaborations; additional equity could dilute existing stockholders.
- COVID-19-related risks include clinical-trial enrollment delays, supply-chain constraints, contract-performance disruptions, workforce impacts, grant-payment uncertainty and financing risks.
- 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 liability was approximately $3.4 million.
- No material legal proceedings or material changes to previously disclosed risk factors were reported.
- After quarter-end through November 9, 2022, the company sold 490,594 shares under its ATM program for gross proceeds of approximately $3.0 million.
Most important facts for investors to verify
- Progress, enrollment and timing of topline results for the HOPE-3 Phase 3 trial.
- Whether available liquidity remains sufficient through the projected second quarter of 2024 as clinical, manufacturing and laboratory costs evolve.
- The pace of recognition of the $28.4 million deferred revenue balance and the conditions for any Nippon Shinyaku milestone payments.
- Future financing requirements, ATM activity and potential shareholder dilution.
- Manufacturing scale-up, regulatory interactions and the pathway toward potential CAP-1002 approval.
- COVID-19, supply-chain and trial-enrollment effects on development timelines and costs.
- Potential repayment or revenue-sharing obligations associated with the CIRM award and licensing agreements.