Greetings, and welcome to Capricor Therapeutics Fourth Quarter Full Year 2020 Earnings and Corporate Update Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, AJ Bergmann, Chief Financial Officer. Mr. Bergmann, are you muted?

Yes. Thank you very much. Before we start, I would like to state that we will be making certain forward-looking statements during today's presentation. These statements may include statements regarding, among other things, the efficacy, safety and intended utilization of our product candidates, our future research and development plans, including our anticipated conduct and timing of preclinical and clinical studies, our plans to present or report additional data, our plans regarding regulatory filings, potential regulatory developments involving our product candidates and our possible uses of existing cash and investment resources. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained. These and other risks are described in our periodic filings as made with the SEC, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, and we disclaim any obligation to update such statements. With that, I'll turn the call over to Linda Marbán, CEO. Linda Marbán: Good afternoon and thank you for joining us for our fourth quarter and full year 2020 financial results and corporate update call. We will begin today with an update on our Exosomes Platform Technology, which was highlighted in a paper published earlier this week on bioRxiv. I will then provide a brief overview of our other programs. We are extremely excited about the progress that we made in 2020. And looking ahead, we are very enthusiastic about 2021. Joining me today is Dr. Stephen Gould, Professor of Biological Chemistry at Johns Hopkins University. Dr. Gould has worked in the exosome field for nearly two decades and works at Capricor both as an Executive Consultant and Scientific Collaborator. Dr. Gould has…

Thank you, Dr. Marbán. Yes, it has been a very clear presentation of the general approach that we've been pursuing here at Hopkins and that we started a very deep, broad collaboration with Capricor over the past year. We are very excited to be working with Capricor and it allows us to expand our horizons both in terms of basic research, but also in applying the rules of exosome biogenesis and production and targeting to actual real world clinical problems. Our approach is essentially outlined in this slide here, there's a great need to make sure that we develop the exosome platform in an efficient high-throughput way so that we can optimize the production of exosomes, the loading of them, the formulation, the manufacturing, and the targeting. And so what I'm going to start with is talking a little bit about a small piece of the data that we've been collecting about the general utility of exosome platforms for RNA delivery. So one of the questions that you might be thinking of right away is how the exosomes compare to other RNA delivery platforms specifically lipid nanoparticles or LNPs. And so we've undertaken a wide variety of experiments that I'm going to show you a very small piece of our data on that issue. The first thing I'd like to show is a figure here that reflects weight change data in response to the injection of equal numbers of exosomes or equal numbers of lipid nanoparticles and black dots are the weight of animals on day zero. The red squares are the weight of animals three days after the injection. And what we have seen is that exosome injections, they're not engender any gross adverse effects that can be detected upon visual examination of the animals, weighing the animals. And…

Thank you, Linda. This afternoon's press release provided a summary of our fourth quarter and full year 2020 financials on a GAAP basis. You may also refer to our annual report on Form 10-K, which we expect to become available in the next few days, it will be accessible on the SEC website, as well as the financial section of the company website. As of December 31, 2020, the company's cash, cash equivalents and marketable securities totaled approximately $32.7 million compared to approximately $9.9 million on December 31, 2019. Based on our current plans and projections Capricor expects that its cash and cash equivalents will fund our research and development programs and other operations through at least the second quarter of 2023. Turning quickly to the financials. In the fourth quarter of 2020, our net cash used in operating activities was approximately $3.8 million for the fourth quarter of 2020. Excluding stock-based compensation, our research and development expense was approximately $2.7 million compared to approximately $800,000 in Q4 2019. Again, excluding stock-based comp our general and administrative expense was approximately $1.1 million in Q4 2020, and approximately $800,000 in Q4 2019. Net loss for the fourth quarter 2020 was approximately $4.2 million compared to a net loss of approximately $1.5 million for the fourth quarter of 2019. And net loss for the full year of 2020 was approximately $13.7 million compared to a net loss of approximately $7.6 million for the full year 2019. We continue to remain financially focused on the development of ourselves in exosome programs. We will now open the line up for questions. Linda Marbán: Thank you, AJ.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Jason McCarthy of Maxim Group. Please proceed with your question.

Hi, this is Michael Okunewitch on the line for Jason. Thanks for taking the question. So for the first question, I kind of want to look at how we should look at Capricor going forward. It seems like much of your future development is focused on the engineered exosomes. So would it makes sense to view Capricor more in the same space as companies like Codiak or Evox than the more traditional signaling based cell therapy companies going forward? Linda Marbán: Thank you, Michael, and send my regards to Jason. Yes, you have pegged it exactly as we see it. So we see ourselves as actually sitting somewhat between what I would call a Madrona and a Codiak or an Evox. We are taking RNA medicines, we're putting them in exosomes as delivery vehicles, and we are planning on deploying them for everything from the vaccine work you saw today, all the way through therapeutics for monogenic diseases, other types of vaccines and other types of diseases as well. So we are definitely moving away from cell therapy, where we remain bullish about CAP-1002 at works, we believe very strongly in it. We plan on taking it all the way through commercialization one way or another. But right now we are focusing most of our development efforts on the exosome platform.

Thank you. Actually regarding the mRNA strategy, is that going to be focused more so on developing your own internal mRNA pipeline, or are you going to position Capricor as a potential delivery partner or external collaborative programs? Linda Marbán: Yes. So our plan is similar to what you'll see sort of enrolling with Codiak and Evox, and some of those others is to have some programs that we maintain internally. We certainly have a good focus and have been building in monogenic diseases over the past few years, as well as obviously some of this vaccine technology that we're working on right now. But we also plan on making this so translatable, so plug and play that will attract a large number of partners and also be able to develop this in conjunction with them.

Awesome. And then one more, if you don't mind on the actual mRNA vaccine candidate. I'd just like to ask if an exosome based mRNA vaccine, you would expect it to have the same ultra-low temp cold chain requirements as the current mRNA vaccines? And then also given the improved delivery of the genes, is there a possibility for having it as a single dose vaccine? Linda Marbán: Yes. So at this point we're still working on storage, but we're anticipating the cold chain type of storage that's necessary for the current mRNA vaccines. And in terms of single dose, we remain open to that possibility. The current design that we have is two doses as is again with the current mRNA vaccines, but it's certainly possible that we could ultimately move towards a single dose.

All right, again, thank you very much for taking my questions and congrats on the progress. Linda Marbán: Thanks, thanks a lot.

The next question is from Joseph Pantginis of H.C. Wainwright. Please proceed with your question.

Good afternoon, guys. This is Emanuela on for Joe. Thank you for taking my questions. So my first two questions are related to the development of the exosome based vaccine. The first one is I guess more short-term. You obviously have done a lot of work already and you're waiting for FDA feedback. But can you give us a sense of the work that may still be required for entering the clinic with the vaccine? Linda Marbán: Yes. We remain poised and ready to go into the clinic based on the feedback from the FDA. We can't anticipate what they're going to ask for, but one of the advantages that Capricor has in the development of this new platform pipeline is that we've been in the clinic before, we've been working with FDA for a lot of years. We know what it takes to get something through the regulatory process. And so, I will tell you that we are ready to go as soon as we complete the requirements that FDA asks for.

Got it. Thank you for that. And like more on the long-term I guess, what do you think the regulatory pathway could look like, given that there is no precedent yet for toolbar of an exosome based therapeutic? I guess, like, what is your impression of the general sentiment of the regulator and what do you think is the aspect that would require more work? If any. Linda Marbán: So we have an IND – an active IND with an exosome product that we have not completed, but we got a lot of feedback and working with FDA on that program, it gave us a lot of clarity on what they would look for. Of course, things can change and the field is moving forward rapidly. But I really do think that the regulatory process will be easier than with self, certainly, and probably similar to something that would be like an antibiotic, you have to go through all of the biologic hoops, but I don't think there'll be anything very specific. The exosome is one of the great values of working with the engineered exosomes and why we switched basically from using primarily a CDC based exosome to an engineered exosome, as it functions like a drug. So you can load it with whatever you want to put inside there, we're using RNA now, but it could be approaching, it could be another nucleic acid, and then you can develop potency assays as well as other types of metrics of mechanism of action and a very clear and concise way. So it should be a relatively straightforward regulatory pathway.

Got it. Thank you for that. And switching to CAP-1002, you mentioned, you may pursue a partnership before the program. Can you give us an idea of what would be the ideal partner for CAP-1002 development? Linda Marbán: The ideal partner for Capricor for CAP-1002 development obviously would be a corporate partner that has activity and\or commercial product in the Duchenne muscular dystrophy space, it's definitely the type of program and exposure that we would like. However, we’re in conversations with multiple partners at this time, and I think the intriguing clinical data, the strong implications of the mechanism of action and the unmet medical need of the non-ambulant boys and young men make this a really desirable target. So we're very excited about the pathway for CAP-1002 right now.

Thank you very much.

The next question comes from Alan Leong of BioWatch News. Please proceed with your question.

Hi. Yes, thank you for taking the time to answer my questions and congratulations on the positive preclinical data. I was noticing that there's a quite amount of the additional data points that you guys are doing with the INSPIRE trial. And I was wondering if you plan to go for a label expansion on post-COVID patients? Linda Marbán: Yes. So we're looking at a lot of things in the INSPIRE trial. As you can imagine, the story of COVID has unfolded, it's very difficult to see exactly how the disease progresses and then also what improvement looks like. So we built a trial with endpoints so that we can best plan the path forward. And we're not ruling out label expansion. We're not ruling out if the data were good enough, we wouldn't try and take it to FDA and see, for some type of accelerator program, we're also not ruling out that it might need further clinical development, which we would evaluate doing at the time based on the pandemic itself, the vaccine applicability in terms of the general population and that kind of thing. So to sort of summarize, we are really excited about INSPIRE because it hits really closely to what we've demonstrated as the immunomodulatory impact of the cells over many years, including in DMD. But we remain curious and open to the impact of CAP-1002 in COVID-19.

Wonderful, yes. Regarding 1002 for DMD, you mentioned that you are working on to additional studies with outside collaborators. Is there any color that you can provide on that, on what you might be looking for? Linda Marbán: Yes. So these are not clinical studies. What we are doing is we're working with consultants, advocates as well as statisticians to fully understand the impact of a CAP-1002 in DMD. We feel that it's very important because this is, even though it's a monogenic disease, it's obviously very heterogeneous in its presentation. And so what we're doing is we are doing analysis to best figure out how the patients are impacted. I can tell you that we are extremely excited, but what we are finding and we're talking to the FDA about it currently. And so stay tuned for more information there.

Wonderful, yes, I really look forward to it. It needs to be realized. The last question I have for you is really just regarding delivery system of the exosome platform in comparison to lipid nanoparticles, if there was anything that you'd like to expand on that, I view it as a big problem in this space. So what do you see in terms of market potential or how much interest has really been brought to your attention regarding that platform? Linda Marbán: Yes. So I'm going to actually ask Steve to elaborate a little bit on that one. Steve, if you're still on the line, would you be willing to answer that question for Alan?

Sure. Yes. I mean, in the general area of RNA delivery, challenge for therapeutics whether you're delivering mRNAs to treat a monogenic disease or small interfering RNAs or microRNAs to fight cancers, you have to have a platform that is safe, that is reproducibly – repeatedly dosable. And I think this is an area where exosomes really shine through in terms of potential. We've done many, many animals now. We never see adverse effects of exosomes injections, even when they're loaded with RNA, even when they're dosed at very high levels, even when we dose very frequently over and over and over again. And we have some, a lot of really interesting data that we'll be presenting in the not too distant future, I hope, on repeat dosing efficacy as well as tolerability. So those areas are clear cut opportunities for exosome-based therapeutics and vaccines. Another issue that – where exosomes have a lot of potential is in the area of targeting to specific tissues based on molecular tropism that you engineer into the exosomes. So the exosomes are delivery vehicle, but they're not completely inert. And while we do harvest them from cell cultures, we have numerous avenues open to us for engineering in molecular targeting modalities, small molecules, biologics, what have you by various different techniques. And so we're very excited by our ongoing efforts in this area. And I just want to point your attention back to those mice we showed, because we can so easily monitor in real-time gene expression from our platform. We can very quickly run through many, many variables in our design and our manufacturing that affect targeting efficiencies. I mean, this is an extremely important thing to be able to do. We know this from the extensive industry expertise and biologics, where it's not just having the right antibody, but knowing how to optimize it for proper stability in the bloodstream, et cetera. And so we're very interested both in exploring the safety profile differences and in exploring the tropism differences and the repeat dosing differences. Those are kind of the three areas where I see exosomes is having really high ceilings.

Awesome. Thank you. I'm excited for the future. Linda Marbán: Thank you very much. Thank you both. Are there any more questions?

[Operator Instructions] There are no additional questions at this time. I would like to turn the call back to company management for closing remarks. Linda Marbán: Thank you. And thank you for joining us today. As you can see, in 2020, we wonder when a complete pivot away from cell and gene therapy and towards this new exosome platform, which we think will bring great opportunities, both in terms of the vaccine, but also in terms of therapeutic development. We look forward to providing you with updates on all of the programs that we have, and please stay well during these very difficult times. Good bye.

This concludes today's conference. You may disconnect your lines. Thank you for your participation.