Capricor Therapeutics, Inc. — Q1 2022 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), along with preclinical exosome therapeutics and vaccines. The filing covers the three months ended March 31, 2022; financial statements are unaudited. The company has no approved products or commercial product sales.
Financial highlights
| Metric | Q1 2022 | Q1 2021 / Prior period |
|---|---|---|
| Revenue | $0 | $40,816 |
| Research and development expense | $5.1 million | $3.3 million |
| General and administrative expense | $2.7 million | $1.9 million |
| Total operating expenses | $7.8 million | $5.2 million |
| Net loss | $7.8 million | $5.2 million |
| Basic and diluted loss per share | $0.32 loss | $0.23 loss |
| Cash and cash equivalents | $58.3 million at March 31, 2022 | $34.9 million at December 31, 2021 |
| Working capital | $46.4 million | $32.3 million at December 31, 2021 |
Operating margin and net margin are not meaningful because revenue was zero. The accumulated deficit was approximately $115.9 million at March 31, 2022. Net cash provided by operating activities was $24.0 million, primarily reflecting the $30.0 million upfront payment from Nippon Shinyaku recorded as deferred revenue. Investing cash outflow was $0.6 million, and financing cash inflow was $27,465, primarily from stock-option exercises.
Total liabilities were $40.3 million, including $30.0 million of deferred revenue, $3.4 million of CIRM liability, and $2.8 million of operating lease liabilities. The prior PPP loan was forgiven in 2021. Approximately $57.9 million of cash deposits were uninsured at March 31, 2022.
Material changes versus the prior comparable period
- Revenue declined to zero from $40,816 because the related-party clinical trials generating prior-period miscellaneous income had completed or ceased enrollment.
- R&D expense increased approximately $1.8 million, driven primarily by the exosome program, CAP-1002 clinical development, and technology-transfer and manufacturing activities.
- G&A expense increased approximately $0.8 million, reflecting higher headcount, salaries, recruiting, stock-based compensation, investor-relations costs, and other general expenses.
- Net loss increased approximately $2.7 million year over year, and loss per share increased to $0.32 from $0.23.
- Cash increased approximately $23.4 million from year-end 2021, principally due to the $30.0 million Nippon Shinyaku upfront payment.
- Stock-based compensation expense increased to $1.1 million from $0.8 million. The company had 5.6 million options outstanding and 105,782 warrants at March 31, 2022.
Guidance, outlook, commentary, risks, and unusual items
- Under the January 2022 Nippon Shinyaku agreement, Nippon Shinyaku is the exclusive U.S. distributor for CAP-1002 for DMD. Capricor remains responsible for the HOPE-3 Phase 3 trial and manufacturing. The agreement provides potential additional development and sales milestones of up to $705.0 million, but their achievement is uncertain.
- The $30.0 million upfront payment is being recognized as revenue over the HOPE-3 performance period. No revenue had been recognized through March 31, 2022; the company expected to begin recognition in the second quarter as patient visits occurred.
- HOPE-3 is expected to enroll approximately 70 patients at approximately 20–30 U.S. sites. The company expected first-patient enrollment in the second quarter of 2022.
- Management estimated that cash and cash equivalents would fund planned operating expenses and capital expenditures into at least the second quarter of 2024, although future expenditures and capital needs remain uncertain.
- For 2022, management expected CAP-1002 DMD development expenses of approximately $8 million to $12 million and exosome-program expenses of approximately $5 million to $7 million.
- The company reported positive topline safety results for the INSPIRE Phase 2 COVID-19 study but did not expect further material expenses and decided not to pursue further clinical development for that indication.
- The company expects substantial continuing losses and will likely require additional capital. Potential sources include equity or debt financing, grants, licensing transactions, and strategic collaborations. Additional equity could dilute existing stockholders.
- COVID-19 may affect clinical-trial enrollment, vendor performance, workforce stability, supply chains, grant disbursements, financing access, and development timelines.
- The CIRM award remains recorded as a liability of approximately $3.4 million because Capricor may elect to convert it into a loan, potentially requiring repayment. The company had not made that election as of March 31, 2022.
- Capricor paid Johns Hopkins University a $250,000 Phase 2 development milestone in March 2022. No material legal proceedings were reported, and management stated that there were no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Progress, enrollment, costs, and regulatory status of the HOPE-3 Phase 3 DMD study.
- Timing and amount of deferred-revenue recognition under the Nippon Shinyaku agreement and the conditions for the potential $705.0 million milestone payments.
- Whether the company’s projected cash runway remains adequate as clinical, manufacturing, and exosome-program expenses increase.
- Future financing requirements, availability of the remaining approximately $67.5 million under the June 2021 ATM program, and potential dilution.
- Whether the CIRM liability will be converted into a loan and the resulting repayment obligations or revenue-sharing requirements.
- Manufacturing scale-up, supply-chain conditions, regulatory milestones, and the impact of COVID-19 on clinical execution.
- The company’s ability to advance CAP-1002 and the exosome platform despite recurring losses, no commercial product revenue, and reliance on external financing.