Capricor Therapeutics(CAPR) - 2023 Q4 - Annual Report

Clinical Development - CAP-1002 is in Phase 3 clinical development for the treatment of Duchenne muscular dystrophy (DMD), with top-line data expected in Q4 2024[658] - The ongoing HOPE-2 open label extension study has shown statistically significant improvements in the Performance of the Upper Limb (PUL) scale at one year (p=0.02) and two years (p=0.021)[660] - Enrollment for Cohort B of the Phase 3 trial is underway, targeting approximately 44 participants randomized in a 1:1 ratio to receive either CAP-1002 or placebo, with completion expected in Q2 2024[661] - Cohort A of the Phase 3 trial has completed enrollment with 61 subjects, and an interim futility analysis resulted in a favorable recommendation to continue the trial[686] - The FDA Type-B meeting in Q3 2023 confirmed alignment on the Phase 3 HOPE-3 program and discussed plans for a Biologics License Application (BLA) submission[662] - The company plans to readout top-line data for Cohort A in the fourth quarter of 2024 and expects to complete enrollment for Cohort B in the second quarter of 2024[723] - The company plans to meet with the FDA in the first quarter of 2024 to discuss the pathway to BLA submission and further CMC plans for commercial launch[723] Financial Performance - Net losses for the year ended December 31, 2023, were $22.3 million, compared to$29.0 million for 2022, with an accumulated deficit of $159.4 million as of December 31, 2023[691] - Cash used in operating activities was approximately$25.6 million for the year ended December 31, 2023, compared to cash provided by operating activities of approximately $4.9 million for the year ended December 31, 2022, resulting in a net change of approximately$30.5 million[769] - The net loss for the year ended December 31, 2023, was $22.29 million, compared to a net loss of$29.02 million in 2022, indicating an improvement of 23.1%[817] - The company expects to continue incurring substantial losses, which will generate negative net cash flows from operating activities, as it develops product candidates and engages in further research and development activities[769] Funding and Capital - The company completed a registered direct offering in October 2023, raising gross proceeds of approximately $23.0 million[666] - The company anticipates needing substantial additional capital to fund operations and clinical trials, with potential dilution for existing shareholders if additional equity securities are issued[672] - The company expects to incur expenses of approximately$25.0 million to $35.0 million in 2024 for the ongoing HOPE-3 Phase 3 study and related activities for CAP-1002[707] - The company anticipates needing substantial additional funding to support ongoing operations and development of CAP-1002 and other product candidates[696] Research and Development - Research and development expenses increased by approximately$14.6 million, or 67%, in 2023, totaling $36.4 million, primarily driven by costs associated with the DMD program[701] - Research and development expenses increased by$11.2 million primarily due to the enrollment of the HOPE-3 clinical program and expanded manufacturing efforts for CAP-1002[729] - R&D expenses consist primarily of salaries, clinical trial costs, and other related expenses, with costs expensed as incurred except for certain capitalized intangible assets[761] Agreements and Partnerships - The company is developing exosome-based vaccines and therapeutics for various diseases, with a focus on securing partnerships for clinical development[665] - The company entered into a Commercialization and Distribution Agreement with Nippon Shinyaku, receiving an upfront payment of $12.0 million and potential milestone payments of up to approximately$89.0 million[744] - The U.S. Distribution Agreement includes potential milestones totaling up to $90.0 million leading to BLA approval and sales-based milestones tied to annual net sales of CAP-1002 of up to$605.0 million[715] - Capricor entered into a Commercialization and Distribution Agreement with Nippon Shinyaku on February 10, 2023, appointing Nippon Shinyaku as its exclusive distributor in Japan for CAP-1002[773] Cash and Assets - Cash and cash equivalents as of December 31, 2023, were $14.7 million, with total cash, cash equivalents, and marketable securities at approximately$39.5 million, down from $41.4 million in 2022[712] - As of December 31, 2023, the company had cash, cash equivalents, and marketable securities totaling approximately$39.5 million[720] - Total current assets increased to $50.86 million as of December 31, 2023, compared to$42.89 million in the previous year, representing a growth of 18.5%[814] - Cash and cash equivalents rose to $14.69 million from$9.60 million, marking an increase of 53.5% year-over-year[814] - Marketable securities decreased to $24.79 million from$31.82 million, a decline of 22.1%[814] - Total liabilities decreased to $36.13 million from$38.31 million, a reduction of 5.7%[814] - Stockholders' equity increased significantly to $22.60 million from$11.79 million, reflecting an increase of 92.5%[814] Income and Revenue - The company reported clinical development income of approximately $25.2 million for the year ended December 31, 2023, compared to$2.6 million in 2022[727] - Investment income for 2023 was approximately $1.7 million, up from$0.5 million in 2022, attributed to increased interest rates and higher principal balances[706] - Deferred revenue increased to $24.27 million from$17.98 million, a rise of 35.0% year-over-year[814] - The company has not generated any revenues from the commercial sale of products and will not be able to do so until receiving FDA approval for its drug candidates[720] - The company has not yet achieved commercial sales of its drug candidates, but the new revenue recognition standard is applicable to its distribution agreements[786] Regulatory and Compliance - The proprietary StealthX™ exosome-based vaccine for SARS-CoV-2 is part of Project NextGen, with a Phase 1 clinical trial planned for late 2024, pending regulatory approval[669] - The company is expanding the manufacturing capacity of CAP-1002 at its new San Diego facility, which is intended for commercial use, subject to regulatory approval[723] - The company accounts for the CIRM grant disbursements as long-term liabilities, recognizing them as a liability rather than income until certain conditions are met[760] - The Financial Accounting Standards Board issued ASU 2023-06, which affects various topics within the Accounting Standards Codification, with the company currently evaluating its impact on financial statement disclosures[827] Investment and Risk Management - The company’s investment portfolio primarily consists of money market funds and short-term U.S. treasuries[799] - The investment policy aims to limit credit exposure by investing in highly rated credit issuers, focusing on preserving invested funds and mitigating default risk[829] - The company does not hedge interest rate exposure and believes that a hypothetical 100 basis point change in interest rates would not materially impact the fair value of its investment portfolio[829] - The company has been actively monitoring clinical trial costs through detailed invoice reviews and budget analyses[821] - The company is required to estimate accrued expenses related to clinical trials, reflecting appropriate expenses based on patient progression and trial completion[825]