Earnings Call Transcript - CAPR Q1 2020

Operator, Operator

Greetings and welcome to the Capricor Therapeutics Inc. First Quarter 2020 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a question-and-answer session. As a reminder, this conference is being recorded on Thursday, May 14, 2020. I'd now like to turn the conference over to AJ Bergmann, Capricor CFO. Please go ahead.

AJ Bergmann, CFO

Thank you. 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 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 in the forward-looking statements. These and other risks are described in our periodic filings made with the SEC. You're 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 Marban, CEO

Good afternoon. And thank you for joining us for our first quarter financial results and corporate update call. The first months of this most unusual and challenging year have been a productive time for Capricor. I am pleased to report that we have made significant progress in the midst of the coronavirus pandemic. And, as many of you know, we are not on the sidelines in the fight against this deadly virus. We are working to develop potential treatments and vaccines against COVID-19. Our lead product candidate CAP-1002 is currently being used to treat patients who have COVID-19, under the US FDA compassionate use pathway. I will discuss our efforts against COVID-19 in a few moments. On the call today, I'm going to spend a few minutes discussing CAP-1002 for the treatment of Duchenne Muscular Dystrophy, which is a major focus, and the main focus of this update will be on CAP-1002 as a potential treatment for COVID-19 patients, the rapid progress of our exosome program, which includes our vaccine initiatives, and finally, our objectives for 2020. So first let me update you on some of the company's recent highlights. Yesterday was a momentous day for Capricor, as we released our 12-month data from the HOPE-2 clinical trial. The data was resoundingly positive with P values below the 0.05 level, and multiple measures of upper limb, cardiac and respiratory function, and we believe it supports accelerated approval. Dr. Craig McDonald hosted a call with me to discuss the data and its importance to the DMD community. We plan on presenting this data to the FDA this summer with the goal of accelerating the pathway to approval of CAP-1002 for DMD. I will present highlights and a bit more color on our HOPE-2 data later in this presentation. Regarding our COVID-19 program, on April 29, we announced positive results in six critically ill patients with COVID-19 who were treated with CAP-1002, all of whom are currently alive, and four of whom have been discharged. In fact, one of the patients was recently interviewed on television, ABC7 in Los Angeles on Tuesday, May 12, and he attributes the cells he received to saving his life. A peer-reviewed publication in the journal Basic Research in Cardiology was published on May 12, which highlights this study. When compared to a natural history group, survival in those patients treated with CAP-1002 was markedly increased. Based on the positive data from the compassionate use series, we filed an expanded access IND with the FDA. We now have approval to treat up to 20 more COVID-19 patients with CAP-1002. However, we also submitted a revised protocol this week to add 20 more patients on placebo, so that we can move quickly into a randomized placebo-controlled trial. I will elaborate a bit more on COVID-19 and CAP-1002 later in this presentation as well. In the second part of our two-pronged approach to COVID-19, we are harnessing our engineered exosome platform to build vaccines for COVID. To that end, on March 26, we conducted a webcast with Dr. Stephen Gould, Professor of Biological Chemistry at Johns Hopkins University. During this time he explained why exosomes are uniquely suited as a platform for vaccine development, whether for infectious disease or oncology. He presented Capricor's strategic plan to expand and capitalize on the vaccine and therapeutic opportunities of our exosome technology platforms as well. Working with Dr. Gould gives us the ability to develop a novel engineered exosome pipeline with access to premier academic data and preclinical studies. Now, as you can see, we have had a busy start to this year, and we’ll continue to build on our various programs throughout 2020. But for now, let me give you some additional color on our programs. Let's turn now to what is on everybody's mind and what is impacting almost everything we do, which is the coronavirus commonly called COVID-19. This virus is causing so much sickness, death and economic and financial destruction to the United States and the world. We have never seen anything that has had such a tremendous impact on our daily lives, and which has so drastically disrupted the way we live and work. We at Capricor have taken this pandemic by the hand. As I mentioned a moment ago, we were taking a two-pronged approach to COVID-19. On the one hand, we are using CAP-1002, our cell therapy product, which as you know, is a late stage clinical development product for Duchenne Muscular Dystrophy, to treat the cytokine storm, which occurs in a later stage of the illness. On the other hand, we are developing our exosomes to be used as a vaccine platform to potentially prevent COVID-19. Using CAP-1002 to treat COVID is a case of serendipity favoring the prepared mind. Over 100 papers have been published on the bioactivity of CDCs, the main components of CAP-1002, and we have shown that CDCs release exosomes as well as anti-inflammatory cytokines that attenuate inflammation in a variety of disease models of profound inflammation, including sepsis, thrombo-related shock, ischemic heart disease and other autoimmune diseases. We decided to use CAP-1002 in COVID because the pathogenesis of the disease has a viral phase in which the virus attacks the body and causes symptoms. In some people, the virus leaves and the person recovers without the severe illness. However, there is a subset of people in which the virus overstimulates the immune system and the person develops a cytokine storm or post-inflammatory responses. Paradoxically, our own immune systems can do more harm than good in these situations and trigger a whole host of inflammatory responses. Based on such strong preclinical and clinical data, we decided to offer CAP-1002 to patients with critical COVID-related ARDS, acute respiratory distress syndrome, under a compassionate use protocol. To remind you, a series of six critically ill patients were treated with 150 million cells, the same dose that we are using in DMD. Two of the patients received two doses one week after the first dose. As of today, we currently have a 100% survival rate and four patients have been discharged from the hospital. Two of them remain in the ICU, but are clinically stable. Earlier this week, along with our colleagues at Cedars-Sinai Medical Center, we published a peer-reviewed paper in the journal Basic Research in Cardiology detailing the patients' trajectories following the cell treatments. To evaluate whether those treated with CAP-1002 had different outcomes than those that were untreated, the data from the six were compared to a group of 34 patients from the same hospital, who did not receive CAP-1002. The treated patients did much better; the untreated patients had a mortality rate of 18% versus our 100% survival to date. Additionally, laboratory biomarkers correlated with poor outcomes were measured in all patients prior to cell delivery. Following infusion, several patients showed improvements in these biomarkers such as ferritin, absolute lymphocyte counts, and C-reactive protein, which may be important in recovery from the cytokine storm. No adverse first-release events related to the administration of CAP-1002 were observed. We were so encouraged by this preliminary clinical data that we submitted an IND with the FDA for expanded access to treat up to 20 additional COVID-19 patients, which has been approved. We expect to begin enrolling patients into this program soon. We also submitted a revised protocol this week to add 20 placebo patients and move immediately into the randomized placebo-controlled portion of the trial to treat patients with severe to critical disease. This is of course subject to approval by the FDA. Based on the global concerns surrounding COVID-19, we hope to find at least part of this program non-dilutive funding for which we are now applying. Now please stay tuned for updates on this very important program. As we all know, if the cells continue to look promising, they could offer hope for hundreds of thousands if not millions of people. Now let me turn your attention to Duchenne Muscular Dystrophy. As I mentioned, yesterday was a momentous day for Capricor. Based on the strength and value of the data from our HOPE-2 trial, we are getting calls from around the world from parents anxious to get CAP-1002 for their children with DMD. The data was perhaps the best ever seen in some DMD studies with multiple areas of functional improvement in treated versus placebo patients. To our knowledge, improvements in multiple areas of muscle function, including cardiac muscle, such as seen in HOPE-2, have never been reported before. The only other positive data which has shown such profound effects are steroids, and remember, steroids may negatively impact cardiac function, not improve it. We are energized by the data and are laser focused on our goal to bring CAP-1002 to patients with Duchenne Muscular Dystrophy. Let me also remind you that all of our patients were steroid treated. So the effect of cells was on top of all standard of care medicines, including any of the exon-skipping drugs for which they qualified. We already know DMD is the genetic disorder that causes muscle degeneration due to the lack of dystrophin, which is a protein in the muscle fiber membrane. The lack of dystrophin causes muscle damage, makes them unable to function properly and also produces inflammation, which is responsible for the muscle deterioration of skeletal and cardiac muscle. But DMD ultimately leads to an untimely demise, unfortunately at an average age of 27 with up to 40% of them related to heart failure. The HOPE-2 trial treated DMD participants who were mainly non-ambulant; these are boys and young men older than 10 years of age. Boys with DMD lose their ability to walk between the ages of 12 and 15. Patients are living longer with DMD due to steroid therapy, and by the age of 18, 70% of patients with DMD have depressed heart function. We presented the topline data from the 12-month final data set from HOPE-2 yesterday. We were very pleased with the data which we believe may offer real hope to patients with advanced stages of DMD. The data is the first of its kind, as I said, because it is the first opportunity to treat skeletal and cardiac muscle dysfunction that comes from DMD, and it's targeted to those later-stage patients for which no current therapies exist. The data was very strong with multiple measures of cardiac and upper limb function achieving P values that suggest very little of the data could be due to chance. Furthermore, these patients are not typically eligible for the current gene therapy trials and there are a lot of misgivings that gene therapy may not work well in the highly fibrotic tissue that occurs in the older boys. Now there are a few things that I would like to put into context. Originally HOPE-2 was powered to detect a one-point difference in the performance of the upper limb commonly called the PUL 1.2 mid-level, which is essentially the use of the arm. But in discussions with the FDA, they have now recommended that we use the full PUL and the newer, better calibrated version of the test, the PUL 2.0, as a primary efficacy endpoint to support registration. So although we performed the analysis using the PUL 1.2 version, we also performed the analysis using the PUL 2.0 and consider this the most important finding of this study. And to that end, you can see we have a P value of 0.05 in the full PUL. In the full PUL, which is what most clinical trials monitor, we achieved statistical significance. Now we also came very close to significance in the PUL 1.2 mid-levels with all of the data included. We also showed very strong P values in measures of global cardiac function, never before seen in DMD, with ejection fraction and volumes improving over the one-year trial period. Taken together this data set is very strong and suggests treatment with CAP-1002 improves clinical outcomes in DMD. Now, I gave you a preview of the data that I was planning to present now, which I find very compelling. You see we noticed that in every parameter there was one treated patient who was an outlier, commonly a non-responder. He is included in every analysis that we have presented, but I wanted to understand more about him and why he might not have responded to the treatment. What we found was that he did not respond to steroids either. He was non-ambulant before the age of 10, which is extremely uncommon in the era of steroids, and he had several other health issues that might have prevented him from responding. Dr. McDonald told us yesterday that it is not uncommon that there is a 60% non-responder rate. So the fact that we had one is not surprising, and in fact, suggests that the data has a very, very strong balance and a strong treatment effect. So let's see what happens when we remove him from the data analysis. Shown here, the mid PUL 1.2, the originally stated primary efficacy endpoint for the fully enrolled study, the P value is 0.08, which is very good for an orphan disease and can stand on its own merits. But look what happens when our non-responder is removed from the analysis: we have a highly significant P value, which suggests a strong treatment effect and hence efficacy. We consider this to be very important data to present to the FDA. Similarly, look at the full PUL 2.0, the endpoint suggested by the FDA to support approval. Even with a non-responder included we achieved what wouldn't traditionally be considered statistical significance at P equals 0.05. But look again at what happens when we pull him out of the analysis: an unequivocal sign of efficacy with a P value of 0.004. Again, we will seek the guidance of the FDA in support of our requests for approval. Now, our goal is to convince the FDA that this therapeutic needs to be approved with a confirmatory study to follow and we plan on starting that discussion this summer. We respect the FDA process and welcome the opportunity to share our exciting data on the PUL 2.0 and other data with the FDA. Now last but not least, let's turn our attention to an update on our exosome technology. Our first mission is to develop vaccines using the exosome as the platform. Obviously, we chose COVID-19 as our first target, based on its current place in global health risk and the need for medication. As we announced earlier this year, we have retained Dr. Stephen Gould of Johns Hopkins University and his laboratory to assist us in developing our engineered exosome platform. We did not have internal capabilities to conduct the primary research necessary for determining a viable vaccine product candidate, but we have a lot of expertise in terms of product development and early stage manufacturing of cell-based biologics. Bringing Dr. Gould in as an executive consultant and collaborating with his labs to develop exosomes was the best way to move this program forward quickly. Briefly on Dr. Gould's background, in case you missed it: he is a professor of biological chemistry at Johns Hopkins University, where he directs the research laboratory dedicated to understanding the biology of exosomes, especially in the context of human disease, while also serving as the Director of Johns Hopkins University's graduate program in biological chemistry. Dr. Gould is co-founder and acting President of the American Society for Exosomes and Microvesicles. On March 26, we held a webcast hosted by Dr. Gould that was informative, interesting and educational for all who were on the webcast. The replay is still available on our corporate website. I hope you can find time to listen to Dr. Gould's presentation. I believe you will find it worthwhile. I will provide you with some of the key points that Dr. Gould made on the webcast that clearly showed the advantages of our exosome technology and why we believe that it is uniquely suited for the development of vaccines and treatments. First, as we've been talking about for a while, exosomes are small secreted single-membrane particles. They're approximately 30 to 150 nanometers in size, and highly enriched in selected proteins, lipids, nucleic acids and glycoconjugates released by all cells and are abundant in biofluids. Exosomes have the potential to be excellent delivery vehicles. Normally, concentration falls dramatically over distance. However, concentrations within exosomes remain concentrated, allowing enhanced signaling from a single molecule, multi-dimensional signaling and engagement of biochemical pathways. Exosomes accumulate at sites of vascular leakiness, which of course includes sites of inflammation, tumors and infections. This is an advantage for exosomes since vascular permeability is limited in most tissues, but is very high in infection, wounds and decisive inflammation. Now, most vaccines are comprised of purified recombinant proteins, live attenuated agents, killed pathogens or antigens and coding DNA. While these other approaches are effective against many viruses, immunization with recombinant proteins and DNA often yield relatively weak protection against infection, while immunization with killed virus or live attenuated strains poses health risks for both vaccinated individuals and those who produce the vaccine. Utilizing our exosome technology provides the opportunity to develop vaccines against newly emerging infectious diseases such as COVID-19 without risk of infection. We are developing two vaccine platforms in our collaboration with Dr. Gould. One is a tripartite exosome and mRNA vaccine formulation designed to elicit a protective, long-lasting immune response to SARS-CoV-2 by targeting all four structural proteins of this virus. This vaccine includes portions of the spike, the S protein, but also the N protein which is the primary target of protective immune responses in COVID-19 patients, along with the M or membrane protein and the E or envelope protein. Furthermore, Capricor mRNA expresses these antigens in forms that are designed to induce a balanced humoral and cellular response that has the potential for long-lasting protection against SARS-CoV-2. The other is called an exosomal antigen vaccine, which are vesicle-based, nucleic-acid-free formulations targeting all structural proteins of SARS-CoV-2. These are often referred to as VLPs, virus-like particles. These extracellular vesicles have the size range of exosomes and are produced by the same process pioneered by Capricor in this study of cardiosphere-derived cells currently used to treat COVID-19 patients, and they mimic the native composition of SARS-CoV-2 virus particles in a non-infectious and virus-free form and can be produced at scale by industry-standard techniques. We already have exciting cell-based data on these two candidates and expect to be in animal studies very soon. While there are many vaccines in development, we believe that the combination of exosomes, the four proteins, and Dr. Gould's 20 years in the field could offer a unique opportunity for a potential novel vaccine. I tell my team regularly, David slew Goliath. For this reason, we are exceedingly bullish about our vaccine program. In addition, everything we are doing in developing vaccines may be potentially applied as a platform technology for other indications. I will now turn our call over to AJ Bergmann, our CFO.

AJ Bergmann, CFO

Thanks, Linda. This afternoon's press release provided a summary of our first quarter 2020 financials on a GAAP basis. You may also refer to our quarterly report on Form 10-Q, which we expect to become available very soon and will be available on the SEC website, as well as the financial section of our website. As of March 31, 2020, the company's cash, cash equivalents and marketable securities totaled approximately $13.2 million, compared to approximately $9.9 million at December 31, 2019. In the first quarter, we completed a warrant inducement generating net proceeds of approximately $4.5 million. In addition, from January 1, 2020 through May 13, 2020, we raised approximately $12.8 million in net proceeds under our aftermarket offering program. Turning quickly to the financials. In the first quarter of 2020, our net cash used in operating activities was approximately $1.2 million. For the first quarter of 2020, excluding stock-based compensation, our research and development expense was approximately $1.1 million, compared to approximately $1.8 million in Q1 2019. Again, excluding stock-based compensation, our general and administrative expenses were approximately $900,000 in Q1 2020, compared to approximately $800,000 in Q1 2019. Net loss for the first quarter 2020 was approximately $2.1 million, compared to a net loss of approximately $2.5 million for the first quarter of 2019. In summary, as we move forward, we continue to manage our expenses diligently, but we continue to focus on the advancement of our core pipeline programs as Linda articulated. We will now open the line-up for questions.

Operator, Operator

Our first question comes from Jason McCarthy with Maxim Group. Please proceed with your question.

Analyst (Maxim Group, on behalf of Jason McCarthy), Analyst

Michael on the line for Jason. Thanks for taking the question. So first off, I'd like to get your take on the data from earlier this week. Specifically some of the stuff with the PUL 2.0 versus the PUL 1.2. You missed on the 1.2, but it is a very small margin, but I'd like to see what are some of the differences between the endpoints that led to the slight variation in the results? Is there a specific measure in the 2.0 that drove that more significant result?

Linda Marban, CEO

So, actually, we didn’t miss at all on the 1.2. Let me remind you that the study was originally powered to be a 76-patient study in order to detect a one-point difference in the PUL. We ended up capping it at 20 patients primarily due to business reasons. And so we've considered these results utterly astounding. Our P value of 0.08 and a difference of more than two points in the mid-level is really clinically very meaningful. The statistical significance, as I just showed on the call when you remove the one outlier patient who scored double zero and a four for the mid-level, becomes even stronger. So we consider this very clinically significant and we don't feel like we missed at all; it's like a big success. Having said that, the second part of your question is very relevant and important. PUL 1.2 is the first version of the metric and then PUL 2.0 is a newer version. So it's like your smartphone, it gets better every time. What they were able to do in the 2.0 is they removed some redundant tasks, changed the scoring system so it became more quantifiable, and then removed floor and ceiling effects. So the actual numbers are different, and the way that it's scored is different. That's why you see a slight difference in how it is measured. From 1.2 to 2.0, they moved some of the tasks that were in the mid-level to the distal level, which is the hand, and so they reordered some of the shoulder tasks and the scoring can look a little bit different. Success or failure on a given task might lead to a difference in the total score, which then would ultimately impact the mean values and calculation of the statistical relevance.

Analyst (Maxim Group, on behalf of Jason McCarthy), Analyst

Thank you very much. In that you actually answered my second question, but I actually want to have some clarification. When you said that your goal is to go to the FDA and seek approval with a confirmatory study, I just wanted to see if you were saying that you would be seeking accelerated approval and then running a confirmatory study? Or if you're seeking a confirmatory study prior to approval?

Linda Marban, CEO

Yes, we're looking for accelerated approval with a confirmatory study on the back side. We believe the best thing that we can do for the patients is broad access and availability of the therapeutic; they could get it in an infusion center five minutes from their houses rather than putting boys and young men in a wheelchair to get another clinical trial. The treatment effect appears to be so obvious and we hope that FDA sees that and recognizes that, especially now, in this environment of COVID-19 when traveling for clinical trials is virtually impossible. The best thing to do would be to approve it, and we can do a confirmatory study afterward. We're willing to take it off the market if it doesn't meet the requirements of an efficacious therapeutic, which we think is not likely. But we absolutely have to see this through to approval.

Analyst (Maxim Group, on behalf of Jason McCarthy), Analyst

Thank you. And then, I'd like to switch gears over to the COVID-19, because you saw some really encouraging data in the ARDS patients. It seems like it's tracking generally with what we've seen from some other cell therapy companies in the space. Cell therapy really seems to be working in this highly inflammatory condition. So what I'd like to ask then for CAP-1002, are there any specific features that could make it particularly effective in this setting? Recall that the cells tend to localize to the lung; could that make them a bit more ideal for treating ARDS versus other types of cell therapy?

Linda Marban, CEO

Yes, it's a very important question. And yes, I think this is finally the coming of age of cell therapy in general. However, what I can tell you is, for many years, we have been working to understand the mechanism of action of CDCs. When we deliver the cells intravenously, they do travel for the long haul and generally lodge in the microvasculature of the lungs. We know they're very safe because not only do we use them in a lot of patients with diseases like Duchenne, but now we've used them in COVID-19, and there were no infusion difficulties at all. We know that they then release the exosomes that contain microRNAs that are profoundly immunomodulatory. We have never stopped trying to dig into the secret sauce of what makes CDCs effective. What we found is that in our exosomes there are a large proportion of non-coding RNAs called microRNAs and Y RNAs that actually contribute to control of inflammation, triggering release of IL-10, which is a calming cytokine, as well as some of the other types of responses that one would assume would happen with repair rather than attack. Now, when we did a direct comparison, and we just published this paper also last week, we show that exosomes from mesenchymal stem cell sources, which are some of the other cells that are out there being tried, do not have this type of microRNA profile; they have more transfer RNA fragments. So they may not have the same type of bioactivity. So we are incredibly bullish on CAP-1002 as a treatment for COVID-19 hyperinflammatory states, both for ARDS and for the potential myocarditis that's occurring. We also have very interesting preclinical data in multisystem inflammatory syndrome in children (MIS-C), which has become a topic of concern, as many young children now seem to be afflicted by a post-COVID inflammatory syndrome.

Operator, Operator

Our next question comes from the line of Emanuela Branchetti with H.C. Wainwright. Please proceed with your question.

Emanuela Branchetti, Analyst (H.C. Wainwright)

My first question is related to the activities you are doing in preparation for the meeting with the FDA. I was actually wondering about any additional data or analyses that you are thinking about bringing into the meeting with the FDA, the order and activities in general as you're doing in preparation for this meeting?

Linda Marban, CEO

Well, yes, of course. I mean, what we released yesterday was topline data. We're continuing to do a deep analysis into the data to understand it. One of the late discoveries was understanding more about our non-responder patient, which we'll bring to the attention of the FDA, and how that impacts the data. There's a lot of other data that we have not presented yet that we're still digging through that have a lot of positive signals; for instance, there's some promise in the respiratory function data—very real trends and improvements in those patients that were treated versus placebo. So we'll put together a very strong data package and present that to the FDA and hope that they see the same potential in the therapeutic as we do.

Emanuela Branchetti, Analyst (H.C. Wainwright)

Related to this question, I actually have curiosity regarding the CK-MB and the marker review presented yesterday. I found that very interesting. And I was wondering, why did you choose specifically that marker? And why might that marker be particularly significant for patients with Duchenne Muscular Dystrophy?

Linda Marban, CEO

So CK-MB is a specific enzyme that's released by cardiac cells when they've been damaged. Up until pretty recently it was actually used in hospitals to diagnose patients who have come in with suspicion of a heart attack. You don't typically see it in a patient's blood unless they have some type of damage to their heart. We know that Duchenne patients' hearts are under constant attack just like their skeletal muscle. But this is the very first time that we've been able to track a biomarker of injury and show that it is different in the blood of patients with Duchenne when they've been treated with a therapeutic, and that it correlates with some type of metric of global performance, such as ejection fraction and volume. So this is an important story, and it's one of my favorite pieces of data, because it really is very objective proof that something different is happening in the bodies of the treated patients versus placebo patients, and the amount of damage to their heart is going down. That's just so exciting for these families.

Emanuela Branchetti, Analyst (H.C. Wainwright)

Thank you. And then switching over to the COVID-19 program, I was wondering if you can give us a little bit more detail on the target population of the next study. You mentioned severely ill patients. Can you give us a little more color on that?

Linda Marban, CEO

Yes. So in the compassionate use program, of course, you only really provide the opportunity to those that are at high risk of losing their life. Those were the very critical patients. What we'd like to do now is step back a bit: can we keep people from being intubated? So in the study that we are going to be starting under the expanded access program, we'll be treating patients that are either already intubated—those very critical ones—or those that are at risk of being intubated. So they're sick, they're getting oxygen, they're not doing well, but they're not yet on ventilator support at that moment.

Emanuela Branchetti, Analyst (H.C. Wainwright)

So, patients possibly already in the ICU, maybe not yet on the ventilator or something like that?

Linda Marban, CEO

Exactly.

Emanuela Branchetti, Analyst (H.C. Wainwright)

Got it. And lastly, just a final question about the timeline for the vaccines, which is of course very exciting. I believe you mentioned in the past 3Q and 4Q as a potential projected timeline for filing an IND. Given the progress you have made, do you think those are feasible timelines or do you anticipate any changes?

Linda Marban, CEO

We haven't provided detailed guidance yet on the vaccine program specifically, except that we're moving very quickly. Obviously, we're as anxious as the entire world to get a vaccine candidate moving forward, especially when the work will be in animal studies soon and will provide clarity and updates as the data moves forward. In addition, I just wanted to add that with the COVID-19 treatment under our expanded access program, we also are laser-focused on those patients with cardiac dysfunction or myocarditis as an implication of COVID, which obviously none of the other cell therapies directly target to the same extent. So our patients include those with ARDS, but also those who potentially have myocarditis which can itself be fatal.

Operator, Operator

Our next question comes from the line of Alan Leong with BioWatch News. Please proceed with your question.

Alan Leong, Analyst / Reporter (BioWatch News)

Linda, I have to commend you; you're pulling rather a compelling Capricor story. You have to abbreviate the trial. I was actually in a bit of despair, I never thought you said any statistical significance. This is a wonderful surprise overall. I want to frame the non-responder, but really give us as market. So as I remember, there's a need for going younger with treatments that have a better side effect profile, and the need to prevent cardiac deterioration early. Although you target CAP-1002 for non-ambulatory patients, there's a potential need at the other end—especially thinking about the non-responder, I wonder about the potential for much earlier intervention with CAP-1002 and where you might go after you enter the non-ambulatory market?

Linda Marban, CEO

So the issue you raised is obviously in our mind and has been in my thinking. I actually had planned to go after later-stage, non-ambulant patients in our first label. We always would like to go younger. Here's the thing that makes us very fortunate: the later-stage patients—the ones we are treating—are on a steep slope of decline, and you are able to pick up changes much more easily and much more rapidly than in the younger children who decline more slowly. So once we get approval in the later-stage patients, and remember we've seen profound treatment effects, we have a realistic understanding that something is happening in the treated patients versus placebo that is inarguable. Once we get approved for the non-ambulant, later-stage patients, our goal will be to step back into the younger cohorts and then do the appropriate studies, which are usually longer, perhaps a couple of years, to see if we can attenuate their decline, because of course our goal will be to keep them ambulatory.

Alan Leong, Analyst / Reporter (BioWatch News)

Switching gears on the vaccine approach: one of the things I was impressed with Dr. Gould in his presentation is that he advocated the need to have sterilizing neutralization levels and attention to T-cell responses. I wonder if you could provide some color on what's been seen in his lab with animal models for exosome vaccines. I know you probably won't be able to get into strong detail about ongoing work, but I assume from your statements that Dr. Gould isn't seeing any major roadblocks. Could you provide some general color?

Linda Marban, CEO

As I think most of you know, I'm a scientist and I love the merging of science and medicine. I can truly say that I have never seen a program transition from academia into potential product development as smoothly as this one. Steve is going full speed ahead. He himself is spending long hours in the lab. So far—knock on wood—we have seen absolutely nothing that gives us a hint that we're going to slow down. We are moving fast and furious into animals, hopefully into nonhuman primates very soon and then directly into human beings. I will be watching the progress closely.

Alan Leong, Analyst / Reporter (BioWatch News)

This is really good news. I've been watching a few of the other programs and they're not looking at targeting such high levels of immune responses. Good work, and I'm really excited—thank you.

Operator, Operator

Our next question comes from the line of Kim Chang with Northland Securities. Please proceed with your question.

Analyst (Northland Securities), Analyst

I remember from the recent data set that you guys announced. My question really is, as you approach the FDA meeting, how important do you think it will be to have some of the patient advocacy groups also there at the meeting, for instance PPMD? It seems like from the presentation that Dr. McDonald gave, the study had a lot of support from PPMD. Could you comment on that?

Linda Marban, CEO

Yes. The advocacy groups are obviously incredibly important. Families are speaking loudly for their children and for their rights to have every possible therapeutic that could potentially augment their lives. One of the mothers said to me a few weeks ago, the real world is now dealing with what we deal with every day, which is life-and-death levels every day as we talk about COVID. To answer your question, yes, we had PPMD and Pat Furlong with us at our meeting with the FDA in October. We plan on bringing her with us again when we go back this summer. We have other advocates that we are working closely with; we have a variety of regulatory counsel that we are working with as well as lobbyists, and we are going to rally the troops and make sure the FDA hears clearly that this data cannot be turned away.

Analyst (Northland Securities), Analyst

I guess just one follow-up, Linda. How long would it take to scale up commercially CAP-1002? I know that you guys have hired a CMO to help you with that. But is that a lengthy process? Or are we talking six months or are we talking a year to scale up?

Linda Marban, CEO

So we're already in the process of scaling up, but we've planned it because we knew way back on the interim data that as the natural history of the patients continued to decline, which it is, we had good hope that the therapy would work. We had anticipated needing commercial manufacturing. So we are working with a global CMO. We haven't announced who they are yet, but they are very credible and we're hoping that it goes smoothly. My goal was to have commercial manufacturing ready at the same time we have the BLA ready so that there's no hedging when moving forward.

Operator, Operator

Ms. Marban, there are no further phone questions at this time. I’ll now turn the call back to you. Please continue with your presentation or closing remarks.

Linda Marban, CEO

In closing, we are excited about the continued progress that we expect to receive in 2020. We look forward to updating you on our progress as we move forward in our program for COVID-19, as well as in our Duchenne Muscular Dystrophy program. Thank you and please stay safe and stay well.

Operator, Operator

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.