Great. Thanks, and welcome back to another session here at Oppenheimer's 35th Annual Life Sciences and Healthcare Conference. I'm Leland Gershell, one of the Biotech Equity Research analysts here at Oppenheimer. Really my pleasure to have with us as our next company, Capricor. Capricor, as you may know, if you follow our research, is a company that's really come a long way with respect to being able to address Duchenne muscular dystrophy, particularly the cardiomyopathy that those boys and young men face as their disease progresses.
On behalf of Capricor, we have Founder and CEO, Dr. Linda Marbán. We'll be having a fireside chat with Linda, and if you'd like to ask any questions, please submit those, and I'll do the best I can to ask on your behalf. And with that, I'll turn it over to Linda, maybe just for a brief intro on the technology. Those who may be newer to the story may not really know what these CDCs or cardiosphere-derived cells are. So maybe just sort of a quick picture of those, Linda.
Great. So, Leland, thank you so much for having us, having me. This has been an extraordinary time for Capricor. As you correctly stated, I've been working on these cells for nearly two decades. They are an allogeneic, which means off-the-shelf, cell therapy product that is derived from explanted human hearts. These are human hearts that are qualified for transplantation but can't be used for technical reasons. Happens about 40% of the time, so there'll never be a supply chain issue. The cells of interest are what they call a stromal cell population.
It's a cell that naturally exists in the heart, which their job internally is to actually drive repair of small injuries as well as attenuate inflammation. The way the product works is it's infused in. We use 150 million cells that are infused in a simple IV way four times per year. Those cells then trap into the microvasculature of the lungs. Don't worry, it never causes any problems with oxygenation or any of the other aspects of respiratory function because they really are so tiny and so few. They then release these exosomes. Exosomes are the words of cells.
They traverse to sites of injury where they drive cellular repair, primarily in the heart and in skeletal muscle. We've done multiple clinical trials demonstrating the efficacy of these cells, and there have been over 300 papers published from over 55 labs talking about the mechanism of action and bioactivity of the CDCs, which is now deramiocel.
Great. Yeah, now, clearly rigorous science behind this. And you know some may be surprised that one can discover a new cell type in an organ in the modern era. But it seems like the scientific basis for your technology really literally came from that. In terms of isolating the CDCs or developing the cardiospheres, is there any particular know-how or technology, or is it simply a matter of getting explanted hearts that otherwise would go to transplant and putting them through a kind of a couple of more or less basic steps?
So a really great question, Leland. No, it's a relatively developed manufacturing method. The cells have to be isolated out. Then we drive them through synergistic expansion using a spherical suspension culture. And then they're ultimately replated, again, using proprietary methods to drive to the population doublings to get to the relevant dose of 150 million cells per dose. So it's not a minimally manipulated kind of cell. You put it out and put it through a shaker and then infuse it in. It actually becomes a cell therapy product.
You can kind of think about them the way that maybe we would think about an antibody. They have a specific activity that they drive biologically. Our job was to pull them out and to get them up to relevant levels of dosing.
Great. And clearly, based on the multiple benefits, anti-fibrotic, anti-inflammatory, pro-regenerative, so forth, you've taken these into DMD starting some years ago. Maybe if you can kind of describe how you've approached the treatment of the DMD patient with these and your sort of move into the cardiomyopathy, even though that had already sort of been kind of an opportunity, I think, from the beginning, but how that may be changed as data both from your studies and natural history data from outside academics sort of tied together with FDA discussions?
Yeah, again, a really important trajectory to highlight, Leland. So thank you. So Capricor was founded on the theory that we could treat heart disease. We started off treating adult heart disease. And anybody that sort of looks into the history of the company will see that because we were trying to learn along the way, we significantly underdosed. So we always were seeing bioactivity, even adult heart disease patients. But we now know that what we were doing was significantly underdosing them. So you can think about it. If you have a headache, if you take one Motrin, you're not going to obviously feel better.
You need the actual correct dose. We then went back into the lab, worked for a long time on dosing studies, and ultimately decided that we wanted to address the cardiomyopathies associated with rare disease. The one that seemed to be most interesting at the time was Duchenne muscular dystrophy cardiomyopathy.
When we started in the space, there was very little known about it from a mechanism of action perspective and disease pathogenesis perspective, but we knew that boys and young men were dying from complications of the heart disease, so we took this new dosing paradigm, which was 150 million cells, new delivery paradigm, IV dosing, and took it into Duchenne muscular dystrophy cardiomyopathy, and we did the HOPE-Duchenne trial, which was published in 2019 in the Journal of Neurology, and it was a very successful trial.
We showed improvement in cardiac function in terms of measures alluding to the functional implications of the cardiomyopathy, as well as skeletal muscle improvement measured in these non-ambulant guys and the performance of the upper limb. Then these are sort of the bad old days with FDA. We went back to FDA, and we were like, we'd like to do a pivotal trial on the cardiac disease. That's where our sweet spot is. And they said, oh, we don't really know anything about the heart disease associated with Duchenne. We don't know how to measure it.
We don't know how to quantify it. We need you to study the skeletal muscle function. So that's why HOPE-2, the primary efficacy endpoint, was the performance of the upper limb. 1.2 is mid-level, which is arm, how you move your arm. We hit the primary efficacy endpoint, published that study in The Lancet. We then continued to study these patients in an open-label extension format. We now have four years of open-label extension data.
When we took the cardiac data from the open-label extension study and showed it to the FDA in comparison to their own funded study to look at predictors of morbidity and mortality and heart disease in Duchenne, they were kind of blown away at the efficacy of what was then CAP-1002, now deramiocel, in treating the cardiomyopathy. Then in nine meetings with FDA last year in 2024, we were able to come to the conclusion that the best application would be on the cardiomyopathy.
We submitted the application at the end of 2024. We're waiting to hear back on our BLA as we speak. All things going well, we expect PDUFA by early fall of 2025.
Great. And to put all this in perspective, so these patients pretty much all go on steroids as they usually not too long after they're diagnosed or at least become symptomatic. And then around the time that you began your development work, we started to see the exon-skipping type therapies and antisense and the like kind of coming in. So do those modalities have any impact on the cardiac disease?
Yeah. So far, nobody has shown any good data in any of the other therapeutics. Some of the bioconjugate antibodies have been alluded to potentially have a cardiac benefit, but nobody's been able to really show. The magnitude of the effect that we have is just extraordinary. We saw, in what we submitted in our BLA, an 8% improvement in ejection fraction over natural history after two years. This would be considered clinically relevant in an adult heart disease, but in these kids, it's extraordinary. All of our treated patients are on steroids.
That was mandated in the clinical trial. I don't know in open-label extension if anybody has gone off steroids. Some of these older guys don't like it anymore, so they go off it. But we haven't seen really any change in the data to suggest that there'd be any difference. In terms of the disease progression, Leland, you know I think it's very important for people to understand that treating the dystrophinopathy, which would be covered by the gene therapies, the exon skippers, the bioconjugate antibodies.
Any of those companies that are trying to develop a therapy to manage or modify the mutation are going to have very different implications in terms of the treatment paradigm than what we're doing, which is to deal with the sequelae of the disease, which is the inflammation and the fibrosis, so we are a partner therapy for a gene therapy for an exon skipper.
In fact, I think even the payers understand that if these guys end up even more active because of getting good treatment for the mutation, they're going to need their hearts stronger even more, so this gives even greater impetus for the approval and utilization of deramiocel.
And so clearly, you've shown improvement on functional endpoints, but you do cardiac MRI also looks at structure and different types of tissue, obviously scar progression. What do you actually see then since you have the benefit of having long-term data from these patients with respect to the scar in the heart?
We haven't looked at scar in the heart directly since the HOPE-Duchenne trial. There had been a little bit of time where people were concerned about the use of gadolinium, which is the dye that allows you to visualize the scar. What we published was that we saw a statistically significant reduction in the amount of scar in the heart, which seemed to correlate very well with function. Since function is easy to measure in the HOPE-2 and the OLE studies, we've measured function and not scar. We will have scar data coming from the HOPE-3 trial, but that won't be till later this year and won't impact our approval.
We're going for, I should mention this, full approval of deramiocel, not accelerated, full approval. If we get it, any cardiac data that we get in addition will be superfluous. What we'll be using HOPE-3 for then will be for label expansion into the skeletal muscle myopathy aspect of the disease.
Great. And that phase III is still running. Is there a plan at which time point you expect to unblind that? Would it be kind of toward the end of the year after the priority review? I'm not sure we think about that.
Yeah. So that would be the general thinking would be that that study will be unblinded post-PDUFA. It just happens to be that we have to collect all the data, analyze all the data. There's a lot of cardiac data. We also are exploring the opportunity to use the HOPE-3 trial to expand our global impact by going to Japan and adding patients from Japan. We've had word from PMDA where we also would like to get approval that we need to add Japanese patients. We can do it in an open-label extension format. And so that's something that we're keeping in the back pocket as of right now.
Yeah. So you're partnered with Nippon Shinyaku, which I think that began with the Japan partnership and then expanded to the U.S. Now you're contemplating sort of a European part of that as well. Tell us how they became interested and where they are with respect to DMD.
Yeah. So Nippon Shinyaku approached us now multiple years ago. They had a product which is still on the market called Viltepso. It's an exon skipper. They are a spinoff of a Japanese company called Nippon Shinyaku. The one in the U.S. is called NS Pharma. And they were looking for an asset, exactly which is what we are in the Duchenne muscular dystrophy space that would ultimately be able to use the sales and marketing structures that they already have in place. That is the exact type of partner that we were looking for at the time.
We wanted to be sort of the golden child, so to speak, and that was possible with NS. They are laser-focusing on bringing deramiocel to market. They feel like it is going to be their flagship product. And so we are delighted to have them as our partner. Things are moving forward very well in terms of launch planning, which we anticipate this year.
And you've given us some guidance with respect to the economics that you'll get the U.S. It sounds like a very healthy royalty rate. And obviously, you'll get milestones. If you could remind us the milestones from now until approval, I know it had been $90 million, but I think you got maybe $10 million for the BLA and so.
Yeah. So the next relevant milestone from NS would be $80 million at drug approval. We also qualify for a PRV, have been awarded a PRV should we get approval. Since that program is going away, we believe the value of those will be even more. I think the most recent ones have been selling for around $150 million. And then, of course, there's sales milestones and royalties that come on top of that. So we are well capitalized.
We are very lucky to have done a good fundraise later in 2024 and therefore have enough operating capital until 2027 based on our milestones, deliverables. And that doesn't include any extra monies from Nippon Shinyaku, which, of course, we expect.
The royalty from NS in the U.S., I think it starts at 30. Is that correct?
It doesn't start. They have never allowed us for their own reasons to completely disclose the royalty rate. What they did allow us to say is that it's between 30 and 50%.
Got it. Okay. And that's helpful. And this is an allogeneic cell, right? So in terms of safety, what have you seen with regard to patients' tolerability of the infusions and redosing and all that?
Yeah. You know, it's really interesting to see. And probably one of the greatest strengths in our application is the safety that goes along with the efficacy of this infused cell. So what we see typically is that they'll get a little headachy, a little nauseous, sometimes a little bit febrile post-infusion. Very typical. Can be easily managed with standard meds like Tylenol. And pre-infusion, they take an oral dose of steroids. They do a bolus dose as well as antihistamines just to attenuate sort of any opportunity for an allergic reaction. They really tolerate it well. The guys like it.
They don't feel their heart changing function and improving function, but they do feel their skeletal muscle changing function. So they'll know when they're getting to the end and need another infusion, and they'll start calling their physician or sometimes even us asking to come back in because they're ready for their next infusion. They feel it.
Great. So you'd submit the BLA kind of at year-end. So that would put sort of the acceptance of the filing in the early kind of mid-March time frame. So that's kind of the catalyst coming up that we're looking out for. And then in terms of AdCom, it's always a big question among investors. Would we expect to hear on definition of an AdCom at the time of the acceptance or just fill us in on what that may look like?
That's my hunch. I mean, they don't really give you a roadmap. They have alluded to the fact that if they want an AdCom, they'll typically tell you at BLA acceptance. An AdCom in this kind of a disease process is so easy that we are sort of agnostic as to whether we need one. We're almost positive that if we have an AdCom, it will go very smoothly.
We know a lot of the opinion leaders in the space, the data is unequivocally positive, and the patients love it. If we have an AdCom, the company that we've hired to help us prep for that, which we're already underway doing, obviously, thinks it would happen sometime in the early second quarter.
Got it. Okay, great. So you'll have obviously incoming revenues from deramiocel, of course, presuming approval. You have a lot of interesting science in the background, exosomes. That could really be kind of a long-term return for Capricor. Before we switch into that, though, just wanted to ask, given that the cells could have other opportunities in whether it's Becker, I know you've mentioned plans there, even outside of that, maybe limb-girdle. Maybe just give us a broad brushstroke on what your thoughts are with respect to those other development campaigns.
Yeah, so we've worked a long time to build out not only the cell as a potential therapy for Duchenne, but sort of as an overall product to treat cardiomyopathy, so we are actively pursuing the opportunities to expand the indications. The first one that we anticipate going into would be Becker cardiomyopathy. The manifestation physiologically is identical to Duchenne. It's just a little bit slower of a disease process, so we expect that that regulatory pathway will be relatively straightforward. We do have plans to, as soon as we get through PDUFA, we don't want anything to get in the way of our PRV.
The Becker patients are, as you know, an adult patient population, but we anticipate entering into the Becker space probably in 2026, and then there's other orphan cardiomyopathies that we're actually looking at for the cells. We have expanded our manufacturing capabilities. By mid-2026, we should have a new facility online to meet the needs of thousands of patients, which is what we would predict would be necessary based on market uptake of deramiocel.
Any comment on the pre-approval inspection process?
Yeah. So we've gone through mock audits. We're actively prepping for that. We believe that that's going to be a very positive outcome for us. And of course, FDA will come and hopefully find it to be acceptable. We're planning for that.
Great, and so exosomes, let's touch on that a bit. I know you've done some validation work there. It's been kind of a long time in the background with respect to moving those into the clinic. Where are we now? And share with us what could be, I guess, the start of a, is it a government-funded study that anyways, please go ahead.
Yeah. Thank you so much. So my goal is to build a really well-expanded biotechnology company. And so we've been working on these exosomes, which are in the pipeline for the last several years. And the way that we approach the exosome technology is different than how others have. Our technology, we call it StealthX. It's basically a standard exosome made from a standard cell line.
You can think of it as a blank envelope in which you can customize contents that can be safely delivered across the cell membrane and drive post-transcriptional, primarily translational or post-translational modifications of cellular behaviors. You can put a tracking moiety on the surface of these StealthX exosomes. Right now, we're working with TfR, transferrin receptor. We've presented at a lot of scientific meetings and we'll continue to do that, sort of outlining our plan.
But I can tell you, sort of to give you a sense, is we're planning on being a vertically integrated muscular dystrophy company. And so our exosome targets for therapeutic use will be along that same venue. And we really believe that this will be a great opportunity for expansion into a unique, but very useful pipeline. In terms of the proof of concept of that product, what we decided very early on is that we wanted to see if you could drive any biology. We wanted to make sure we could get it in front of FDA.
We wanted to make sure we had a Chemistry, Manufacturing, and Controls process that would be appropriate with FDA, appropriate for FDA approval. And so what we did is we developed a COVID vaccine during those dark, dark days. And this one is very unique. It both has the nucleocapsid as well as the spike protein on it. These are native protein vaccines, not recombinant, so they're very quick to make. So they're potentially as easy, or almost as easy to make as an mRNA vaccine, but far more potentially effective. The National Institute of Allergy and Infectious Diseases saw that.
They decided to bring our vaccine in for Project NextGen, and assuming that vaccine programs aren't shut down, this clinical program is slated to begin very soon, very shortly, Q2 of 2025. However, because of all that's going on in the government, vaccine programs are not moving as quickly as they were before. We were never planning on becoming a vaccine company. I want to be clear. This was to show that an exosome could drive biology, faithful translation of the protein, and drive an immune response. We expect that there would be a good partner out there to take in the vaccine because you can use it for COVID.
You can use it for flu. The amount of protein that we use on the surface, because it's so effective, is in the nanogram range. And if you remember, the mRNA vaccines are in the microgram range, so significantly less protein. You can load a lot of protein on the surface of these exosomes. So there's lots of combinatorial possibilities. But we're going to focus at Capricor on the therapeutic opportunity. We're going to take this CMC, this manufacturing paradigm, and build therapeutics using the exosomes. And we expect that to be a goal in 2026.
Great. And yes. And so, back to the CDCs, those really are the exosomes, are really the arbiter of the way they do their job in your current program. I guess for those who are trying to get kind of a handle on the mechanism, obviously, the exosomes are packed with all kinds of microRNAs. We've seen that from RNA-seq, other analyses you've done. Can you share with us kind of what you know about the various different types of activities that the exosomes from the CDCs are able to perform and what they may be hitting in their target cells?
Yeah. So one of the aspects of our mechanism of action development that I'm most proud of was the determination of how the exosomes were driving the biology. So we knew that a long time ago from a published mouse study. We won't go through a lot of details. We're short on time, but it is published that the exosomes drive the mechanism of action. What's inside are microRNAs primarily and some other nucleic acids that drive several processes. The one that we laser focus on is their antifibrotic and anti-inflammatory microRNAs.
Those are part of the cocktail that we measure for our potency assay, which has been approved by FDA. And the cells, by their released exosomes, have to drive a certain amount of antifibrotic activity in order to be considered potent. So those are the primary actions of the exosomes, are to carry these nucleic acids that slow down inflammation and then also drive repair. And we've published on all of this, by the way.
Yeah. No, and things like the potency assay, which are extremely important, but sometimes kind of don't get really recognized, kind of like CMC, how it doesn't get really recognized unless there's an issue. But it sounds like you were able to work that out very well with some of your key scientists who you brought on in recent years.
Yeah, so we were really careful to try and build a potency profile that would be more like a drug and less like a hand-waving cell therapy, well, the cell works, and we don't really know what it's doing, so we actually really drove in. We looked at 166 different genes and different cell types and then compared them to ours, the CDCs, and the potency assay profile using mRNA-seq.
We now have culled it down to 37 genes that have to have greater than 97% differential expression from any other cell types, so differentiating out our cells, and we know that these are the genes of interest because we used as our test case the cell banks that we used in the HOPE-2 trial that was published in The Lancet, which showed significant efficacy.
Terrific. Maybe just in the last minute or two, just kind of devil's advocate type of question. You have the phase III that's still blinded. You have a BLA. Some people speculate like, "Oh, the FDA could ask you to unblind the phase III, and that could be introduced as a data component." What's your outlook there?
I actually know now that that's not going to be an issue. I can't disclose exactly the communication that we've had from the agency, but I can tell you that they are focusing on the application based on the data that we have presented. HOPE-3 will be a TBD later.
Great. Just a few questions from the audience here. Let's see. Oh, the EU application, I guess just any update on timelines there?
Yeah. We're going to get this U.S. opportunity across the line. We've had good news from EMA that we don't need to do another clinical trial. So the clinical trials work is done. We haven't unblinded it yet. So we'll continue to work with EMA. I think we're planning on submitting more documentation to them in the early part of this year. We hope to meet with them in 2025 and be actively involved in our Europe activities also in 2026.
Great. And then finally, just kind of a housekeeping question. So obviously, there's some academic royalties, Johns Hopkins and Rome and so forth. Can you give us a sense of what those kind of come to? And do you effectively have to pay those out from what you get from NS? Right?
Yeah. So obviously, the money that we get from NS, then we'll go to address our licensors' requirements. They're relatively negligible in the low single-digit % range, and some of them will be not effective as patent opportunities have changed, so we've obviously built a big patent portfolio of some of these earlier stage patents that will ultimately time out, and so really, the opportunity for capital to be dispensed to licensors is very negligible.
Excellent. Great. Okay. I think we're at our time here, so we'll conclude there. Thank you very much, Linda. Thanks to all of you who zoomed in for this very informative discussion with Capricor. Have a great rest of your day.
Thank you so much, Leland. I always enjoy talking to you. And I hope everybody has a good day and stays warm.
Yes, thank you.
Bye-bye.