Capricor Therapeutics(CAPR) - 2021 Q4 - Annual Report

Part I Business Capricor Therapeutics is a clinical-stage biotechnology company focused on developing cell-based (CAP-1002) and exosome-based therapeutics, with its lead program, CAP-1002 for Duchenne Muscular Dystrophy (DMD), advancing to a Phase III pivotal trial (HOPE-3) - Capricor's primary focus is its cell therapy candidate, CAP-1002, for the treatment of Duchenne Muscular Dystrophy (DMD), with the HOPE-2 Phase II trial completed and the HOPE-3 Phase III pivotal study initiating[14] - In January 2022, Capricor entered into an exclusive commercialization and distribution agreement with Nippon Shinyaku for CAP-1002 for DMD in the United States, including a $30.0 million upfront payment and potential future milestone payments up to $705.0 million, plus a share of product revenue[14][98][99] - The company is developing an exosome platform for therapeutics and vaccines, focusing on delivering nucleic acids like mRNA, supported by an exclusive license agreement with Johns Hopkins University (JHU) and collaborations with the Department of Defense (DoD) and National Institutes of Health (NIH)[19][20][24] - Capricor manufactures CAP-1002 for clinical trials at its leased facility at Cedars-Sinai Medical Center (CSMC) and has initiated a technology transfer with Lonza for potential commercial-scale production[101][103] Product Development Pipeline Summary | Product | Indication/Population | Development Stage | | :--- | :--- | :--- | | CAP-1002 | Duchenne Muscular Dystrophy | HOPE-3 Phase III – initiation underway
HOPE-2 Phase II completed | | CAP-1002 | SARS-CoV-2 | INSPIRE Phase II enrollment complete | | CDC-Exosomes (CAP-2003) | Duchenne Muscular Dystrophy | IND submitted | | Engineered Exosomes | Evaluating | Preclinical | HOPE-2 Trial 12-Month Final Efficacy Data (CAP-1002 vs. Placebo) | Endpoint Category | Metric | Difference in Change from Baseline | p-value | | :--- | :--- | :--- | :--- | | Skeletal-Muscle | Mid-level PUL (v1.2) | 2.6 | 0.01 | | Skeletal-Muscle | Shoulder + Mid + Distal PUL (v2.0) | 1.8 | 0.04 | | Cardiac Function | LV Ejection Fraction % | 4.0 | 0.002 | | Cardiac Function | LV End-Systolic Volume, Indexed | -4.2 | 0.01 | | Cardiac Biomarker | Creatine Kinase-MB (% of total CK) | -2.2 | 0.02 | Risk Factors The company faces substantial risks, including the need for significant additional funding, a history of net losses, dependence on clinical-stage candidates, potential trial failures, manufacturing challenges, reliance on third-party collaborators, and intellectual property protection issues - The company requires substantial additional funding to complete the development of its product candidates and has a history of significant net losses, which are expected to continue, with cash and cash equivalents approximately $34.9 million as of December 31, 2021[200][201][207] - The company's success is entirely dependent on the successful development and commercialization of its product candidates, CAP-1002 and its exosome technologies, which are still in clinical or preclinical development and have not yet received regulatory approval[211][213] - Manufacturing is subject to significant risks, including reliance on a supply chain for donor hearts, the need for third-party manufacturers for commercial scale-up, and the ability to comply with cGMP regulations[195][381][387] - The COVID-19 pandemic poses a risk of disrupting business operations, including potential delays in clinical trial enrollment, supply chain issues, and disruptions to the workforce[221][224] - The company depends on its exclusive distributor, Nippon Shinyaku, for the commercial sale of CAP-1002 for DMD in the United States, and its revenue will be largely dependent on this relationship[430][431] - The company's intellectual property is critical to its success, and it faces risks in obtaining, maintaining, and enforcing its patents, also being dependent on intellectual property licensed from third parties such as JHU and CSMC[398][426] Unresolved Staff Comments The company reports that it has no unresolved comments from the staff of the Securities and Exchange Commission - None[518] Properties Capricor Therapeutics does not own any real property and conducts its operations from leased facilities, including its corporate headquarters and laboratory in San Diego, and a key laboratory and manufacturing facility at Cedars-Sinai Medical Center in Los Angeles Leased Facilities | Location | Purpose | Lease Expiration Date | | :--- | :--- | :--- | | San Diego, CA | Laboratory and office space (Corporate headquarters) | October 15, 2026 | | Los Angeles, CA | Laboratory and office space | July 31, 2022 | Legal Proceedings The company is not currently involved in any material pending legal proceedings and is not aware of any material threatened legal actions against it - The company is not involved in any material pending or threatened legal proceedings[522] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[523] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Capricor's common stock is traded on the Nasdaq Capital Market under the symbol "CAPR", with 136 holders of record as of March 9, 2022, and the company has never paid cash dividends nor intends to in the foreseeable future - The company's common stock trades on the Nasdaq Capital Market under the symbol "CAPR"[526] - As of March 9, 2022, there were 136 holders of record of common stock[528] - The company has never declared or paid a dividend and does not anticipate paying cash dividends in the foreseeable future[528] Reserved This item is intentionally left blank - This item is reserved[534] Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2021, Capricor reported a net loss of $20.0 million, an increase from the $13.7 million loss in 2020, primarily driven by increased R&D and G&A expenses, ending 2021 with $34.9 million in cash and cash equivalents - The $5.1 million increase in R&D expenses in 2021 was primarily due to a $2.5 million increase in the exosomes program and a $2.3 million increase in technology transfer and manufacturing for CAP-1002[557] - The company expects to receive a $30.0 million upfront payment from its distribution agreement with Nippon Shinyaku in 2022, which will support the HOPE-3 trial[544][562] - Management believes its cash resources as of December 31, 2021, are sufficient to fund operations for at least the next twelve months[575] - For 2022, the company anticipates spending approximately $10.0 million to $14.0 million on its DMD program and $5.0 million to $7.0 million on its exosomes program[561][564] Financial Results Comparison (Years ended Dec 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenue | $0.2M | $0.3M | | R&D Expenses | $13.6M | $8.5M | | G&A Expenses | $7.6M | $5.5M | | Net Loss | ($20.0M) | ($13.7M) | | Cash & Cash Equivalents (EOY) | $34.9M | $32.7M | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity related to its cash, cash equivalents, and marketable securities, totaling $34.9 million as of December 31, 2021, with an investment policy focused on high-credit-quality, short-term maturity instruments to mitigate risk - The company's main market risk exposure is from interest rate changes affecting its cash and cash equivalents, valued at approximately $34.9 million at year-end 2021[620] - The investment strategy is to use highly rated credit issuers and short-term maturities to limit default and market risk, and the company does not hedge its interest rate exposure[621] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for the fiscal years ended December 31, 2021, and 2020, including key figures such as total assets of $41.3 million and a net loss of $20.0 million for 2021, accompanied by the independent auditor's report and detailed notes Consolidated Balance Sheet Highlights (as of Dec 31, 2021) | Account | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $34.9 | | Total Assets | $41.3 | | Total Liabilities | $10.0 | | Total Stockholders' Equity | $31.4 | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2021) | Account | Amount (in millions) | | :--- | :--- | | Total Revenue | $0.24 | | Research and development | $13.6 | | General and administrative | $7.6 | | Net Loss | ($20.0) | | Net loss per share | ($0.87) | Consolidated Statement of Cash Flows Highlights (Year ended Dec 31, 2021) | Account | Amount (in millions) | | :--- | :--- | | Cash used in operating activities | ($16.8) | | Cash used in investing activities | ($1.2) | | Cash provided by financing activities | $20.2 | | Net increase in cash | $2.2 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting principles, practices, or financial statement disclosure - None[802] Controls and Procedures As of December 31, 2021, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective, and its internal control over financial reporting was also effective, with no material changes identified during the fiscal year - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[804] - Management concluded that internal control over financial reporting was effective as of December 31, 2021[807] - No material changes in internal control over financial reporting occurred during the fiscal year ended December 31, 2021[810] Other Information There is no information to report for this item - None[811] Part III Directors, Executive Officers and Corporate Governance The information required for this item, concerning the company's directors, executive officers, and corporate governance practices, is incorporated by reference from the company's Definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the 2022 Proxy Statement[813] Executive Compensation The information required for this item, detailing executive and director compensation, is incorporated by reference from the company's Definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the 2022 Proxy Statement[814] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this item, regarding security ownership by certain beneficial owners and management, as well as matters related to equity compensation plans, is incorporated by reference from the company's Definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the 2022 Proxy Statement[815] Certain Relationships and Related Transactions, and Director Independence The information required for this item, covering related party transactions and director independence, is incorporated by reference from the company's Definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the 2022 Proxy Statement[816] Principal Accountant Fees and Services The information required for this item, regarding fees paid to and services provided by the principal accountant, is incorporated by reference from the company's Definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information is incorporated by reference from the 2022 Proxy Statement[817] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements included in the report and all exhibits filed as part of the Form 10-K, including material contracts, corporate governance documents, and required certifications from the CEO and CFO - The financial statements required by this item are included in a separate section of this Annual Report on Form 10-K beginning on page 89[819] - A comprehensive list of exhibits filed with the report is provided, including material contracts, corporate governance documents, and officer certifications[822][824][834] Form 10-K Summary This item is not applicable, and no summary is provided - None[838]