Good afternoon, ladies and gentlemen, and welcome to the Capricor Therapeutics First Quarter 2024 Earnings Call. [Operator Instructions] I would now like to turn the conference over to A.J. Bergmann. Please go ahead.

Thank you, and good afternoon, everyone. 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 enrollment of patients in our clinical studies, our plans to present or report additional data, our plans regarding regulatory filings, potential regulatory developments involving our product candidates, revenue and reimbursement estimates, manufacturing capabilities, potential milestone payments, our financial position 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 in the forward-looking statements. These and other risks are described in our periodic filings made with the SEC, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements. We disclaim any obligation to update such statements. With that, I'll turn the call over to Linda Marban, CEO. Linda Marbán: Thanks, A.J. Good afternoon, and thank you for joining today's first quarter conference call. 2024 has started off with a tremendous amount of progress for Capricor, and I'm delighted to provide updates on our Duchenne Muscular Dystrophy Program as well as providing update on our exosome platform technology. As I articulated on our last call, we are focused as a company on 4 main areas as we work to bring our lead assets, CAP-1002, a cardiac cell therapy to market for the treatment of DMD as expeditiously as possible. These core areas are clinical, manufacturing, BLA readiness…

Thanks, Linda. This afternoon's press release provided a summary of our first quarter 2024 financials on a GAAP basis, and you may also refer to our quarterly report on Form 10-Q, which we expect to become available shortly and will be accessible on the SEC website as well as the financial section of our website. Let me start with our cash position. As of March 31, 2024, the company's cash, cash equivalents and marketable securities totaled approximately $39.9 million compared to approximately $39.5 million on December 31, 2023. In the first quarter, we received a $10 million milestone payment from Nippon Shinyaku under our exclusive distribution and commercialization agreement with them. Additionally, in the first quarter and through today, we raised approximately $3.5 million in gross proceeds under our at-the-market program at an average price of $5.75 per share. We continue to be disciplined in our ATM use, raising the majority of the funds in the second quarter at over $6.75 per share. Based on our current operating plan and projection, we expect our cash runway to extend into the first quarter of 2025. But this expectation excludes any additional potential milestone payments under our exclusive commercialization and distribution agreements with Nippon Shinyaku. Turning briefly to the financials for the first quarter of 2024, excluding stock-based compensation, our research and development expense was approximately $10.1 million compared to approximately $7.2 million in Q1 2023. The increase in expenses of $2.9 million was primarily due to an increased clinical and manufacturing cost associated with our Phase III HOPE-3 clinical trial. Excluding stock-based compensation, our general and administrative expense was approximately $1.8 million for both the first quarter of '24 and 2023. Net loss for the first quarter of 2024 was approximately $9.8 million compared to a net loss of approximately $7.8 million for the first quarter of 2023. We will now open the line up for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question is from Kristen Kluska from Cantor Fitzgerald.

Congrats on all the progress that you've had on the trial as well as your regulatory interaction. So first, thanks for helping us with the Nippon Shinyaku economics, very helpful to break out, and I think people will appreciate its higher loyalty than what you typically seen in a deal. Is it fair to say -- you've noted $90 million in regulatory-related milestones for potential approval. Is it fair to say that there's a trigger that could occur if you have positive data in the fourth quarter? Linda Marbán: Good to hear from you. Thank you for your kind words. We're not at liberty to announce yet sort of the tenor of the milestone payments, but suffice it to say that we plan on them being able to strengthen our balance sheet as we move from approval through BLA.

Okay. Fair enough. And then can you remind us of what the latest interaction has been with any regulatory agency ex U.S., you've clearly been aligning very well with them, they're very much sounding committed to working with you. But I'm wondering what the tone has been for any of the other agencies? Linda Marbán: Yes. So we've had some initial reach-outs, mostly through our consultants, in terms of strategizing to how to approach both the EMA and then the Japan regulatory authorities, the PMDA. We have a strategy that we've been building as we've been thinking of the idea of a partnership. We're still trying to figure out how to move as rapidly as possible worldwide. This opportunity with Cohort B has really been wonderful for us and given opportunity to now take the therapeutic global. So we're evaluating those opportunities. What we can say is that Europe has significantly less therapeutics approved in Duchenne muscular dystrophy than the United States as I believe the difference is #8, I heard at a conference last week. And so they're highly motivated to get something across the line. With our strong efficacy and our strong CMC package, I have good faith that we'll be able to work closely with EMA and get this across the line as well as with PMDA. And as I mentioned in my prepared remarks, stay tuned as we provide some further color on how we're going to develop this great opportunity to go worldwide.

Okay. And maybe if I could just ask one more big picture question. I think when considering the valuation here, cash and the PRV voucher loan could essentially support the current market cap. So what do you think it is that the investment community is missing out, considering it's a late-stage asset with some data already in place? Linda Marbán: Thank you. So this is the big conundrum that I as CEO, our management team and our Board, spent a lot of time thinking about. We have a late-stage asset. We have really lovely clinical data that's been supported by publication in the highest-ranked journals. For instance, the Lancet with our Phase II data. We have long-term safety and efficacy with the HOPE-2 and the HOPE-2 open-label extension data. We have a fully enrolled Phase III. We have adoption by the community. We have flushed out and fairly derisked CMC. We have a manufacturing plan and a commercial plan for getting this product to market. So it's a little bit elusive why we haven't caught fire. The only thing I can say is that, ultimately, I believe it will happen and at Capricor, heads down HOPE-3, we're just continuing to do our work, deliver on our milestones, and we're hoping the market will catch up with us.

Your next question is from Ed Tenthoff from Piper Sandler.

Really exciting all the progress you guys are making. A question on kind of cost. What -- tell us a sense, give us a sense for what are my costs to make this or what cost of goods sold could ultimately be assuming premium pricing in this orphan disease? Linda Marbán: Yes. Thanks, Ed, great to hear from you. So in terms of COGS, we're still sort of firing away here manufacturing and trying to come up with some final numbers. We've been a little bit quiet on that because building a new manufacturing plant, which is much more efficient, takes advantage of higher scale manufacturing methods and ways to significantly reduce cost is helping with the COGS. We don't have final numbers yet. We believe that the costs will be relatively minimal compared to what we're going to be able to get in reimbursement for this product. And so -- of course, every dollar counts, so we're working to reduce COGS, stay tuned for more updates on that as they become available. But for right now, we're focusing more on getting across the line and then getting as high of a reimbursement price as we believe the therapeutic requires.

Your next question is from Joe Pantginis from H.C. Wainwright.

Linda and A.J., so two questions, please. So first, obviously, you've alluded to your ongoing discussions with regard to the EU for partnering and potentially beyond. Should we be looking for the same type of approximate deal structure as NS? Or are you looking at various options? Linda Marbán: So NS -- thanks, Joe. Great to hear from you, always. Really excited. We've been building this therapy along side you for a long time. So we appreciate your continued support. NS took a risk with us with an asset that was not nearly as derisked as it is today. They came in post Phase II, prior to Phase III. Data looked good, but certainly nothing like the advancements that we've made to this point with the long-term open-label extension data, the derisked CMC and a fully enrolled Phase III that's reading out by the end of the year, plus the wonderful opportunity that we have had to work closely with FDA to get this across the line. So I can't reveal the types of deals that we are pursuing right now nor the analysis that we're doing internally as to whether we would take this forward independently. What I can say is that we have great confidence in CAP-1002 and its ability to be a worldwide asset for the treatment of DMD. We're going to take the strongest deal possible on a highly derisked asset.

No, that's helpful. And then off of your recent FDA update call, we started the discussions about the potential of cardiovascular, and I wanted to dive into that just a little bit more about its potential role, not necessarily in the label, but potentially in the label, but also for patient benefit. So with that said, can you at least take some high-level shots at the metrics and the benchmarking that the FDA will really be looking at and potentially get excited about with regard to label inclusions? Linda Marbán: Yes. So you hit my sweet spot. I just am back late last week, the PPMD, Parent Project for Muscular Dystrophy, posted a meeting that's become annual on the topic of the cardiomyopathy associated with Duchenne muscular dystrophy. And to kind of give you a flavor of the room, there's about 60 to 80 people in there, the world leaders in terms of the physicians treating the cardiomyopathy, and it's really a strategy session. And I walked out of that meeting with a great sense of hope and enthusiasm for CAP-1002, treating the cardiomyopathy associated with DMD across the age cohorts. We know this, and the KOL say it is the #1 reason for death in these boys and young men. It is a unique and highly intractable cardiomyopathy, starting with the beginning of the disease. Many of these boys and young men develop very severe cardiac disease early on in life, and it's anachronistic in the sense that, that does not seem to match the skeletal muscle myopathy, so that leaves the door open for treating earlier. And most importantly and what has become very relevant as we know that the earlier we treat these guys, the better off they are. So all of the KOLs say, we've actually…

No, I really appreciate that. And just to dive in slightly further and thanks for your patience, just to say what would be then -- if mortality is not the answer for an endpoint, what would be the endpoint and its sort of underlying benchmark that we in the investment community should look for? Linda Marbán: Joe, it's really an interesting question. I'm going to go out on a limb here and say looking like some of the traditional secondary cardiac endpoints that adult heart disease has been looking at for a long time, ejection fraction and volumes. Jon Soslow published a beautiful paper in [indiscernible] heart failure last year 2023, I just recently read it myself, that talks about the DMD cardiomyopathy and guides the regulators towards these very important end points. I think it's going to be a dialogue with FDA, but I think it's going to be a winner, and we're hoping to be at the front of that line.

[Operator Instructions] Your next question is from Aydin Huseynov from Ladenburg Thalmann & Co.

Linda, A.J., congratulations with the progress this quarter. A couple of questions for me. So first, I want to ask you about the Cohort B enrollment. So it seems to be pretty fast. I think it mentioned you're going to wrap it up by next month, 44 patients. So could you share with us any feedback related to this apparent enthusiasm of physicians and patients? And also clarify how many, if any of those patients, had prior therapies such as exon-skippers? Linda Marbán: Yes. So I think the rapid enrollment speaks for itself. Let me just remind you that our patients that we're treating in Cohort A and Cohort B are late-stage ambulant and nonambulant patients with attenuated upper limb function, as I've mentioned many times. There's nothing for these guys, literally nothing. There's not clinical trials, and there's no approved therapeutics beyond steroids and potentially the exon-skippers. So they are very anxious for something to preserve upper limb function. And what I can tell you and look for me to be talking more and more about this, is that the physician leaders know that what is most important to these boys and young men is the preservation of upper limb function. As I've stated in other scenarios, once they go off their feet, they're pretty tired. They've fallen, they've broken bones, they're legs are tired, but they do not want to lose the independence of being able to use their smartphones or remote, moving their wheelchairs, transfer themselves to perform bathroom activities and those kinds of things. So really important, and I think that drives the energy. In addition to the strong safety profile is a once-a-quarter infusion. So it's not disruptive to life and the safety profile is great in terms of side effects or implications. So there is a lot of energy, and we believe that there will be rapid adoption of CAP-1002 by the community once it's approved. The other part of your question was whether we have patients on other therapies in our clinical trials. And the answer to that is absolutely, anything that is approved, they are allowed to be on, we look for them to be stably on their medications so that we don't have any opportunity for big swings, and that can be anything from growth hormones to massive changes in their steroid dose that may not be weight-based as well as exon skipping. And we even have some in our programs that are post gene therapy, where despite the fact that they got the gene therapy, they still meet our inclusion criteria multiple years later. So I continue to say and I continue to believe and the payers have supported in some of the initial documents that I've seen the concept that CAP-1002 will go along well with any of these other therapeutics with a combined mechanism of action of reduction in inflammation and reduction in fibrosis.

Understood. This is helpful. So in other words, FDA would not require additional combination status, if you move it sort of further to the front lines or early ages of the FDA, you think would not require specifically like a combination status with gene therapy or exon-skippers, with CAP-1002? Linda Marbán: No, we're positioning it as an independent or adjunctive therapy. And we've gotten really good feedback on that. I don't think anybody is thinking about it sort of as a -- do we need to test them both at the same time, it can only help.

Understood. All right. Another question I want to have is that, could you give us any updates on possible preclinical or preparation work you do as it relates to Becker muscle dystrophy? And also, if you happen to develop CAP-1002 in Becker dystrophy, how does it affect your financial relationships with Nippon Shinyaku? Just want to hear your general thoughts on this. Linda Marbán: Yes. So we're looking at Becker dystrophy as well as other types of neurodegenerative diseases that are characterized by inflammation and fibrosis. As I mentioned in my prepared remarks, we are in a very sweet spot because we have strong efficacy, we have potency assays that reflect our mechanism of action, and we have a manufacturing paradigm that is plug-and-play and can be expanded to suit. So we are ripe and ready to take this therapeutic to other people that could either benefit from it. Becker dystrophy being one of them. Obviously, the advantage of Becker muscular dystrophy is it has very similar disease progression to Duchenne, just significantly slowed. And once we get across the line and potential indication expansion for CAP-1002 and Duchenne muscular dystrophy, that becomes a very tangible opportunity as well. In addition, Nippon Shinyaku, NS, has rights to Duchenne muscular dystrophy, marketing and distribution. No other indications have been presumptive or mentioned in that deal. So we have freedom to operate and plan to do so as we expand CAP-1002. Just to highlight, I've spent 19 years developing this therapeutic. And so we know it, and we know it very well, and we want to see it in as many people that can benefit from it as possible.

There are no further questions at this time. I will now hand the call back to the Capricor's management team for the closing remarks. Linda Marbán: I just want to thank everyone who joined us this afternoon. We appreciate your continued support. I also want to congratulate Pat Furlong of the Parent Project of Muscular Dystrophy who last week was awarded the Sonia Skarlatos award by the American Society of Cell and Gene Therapy for public service. It goes without saying that without these advocates that bring rare disease to our attention, there is very little that is done to move them forward. So congrats to Pat, and we look forward to seeing you out and about at the meeting. Have a wonderful day.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.