Capricor Therapeutics, Inc. (CAPR) Earnings

Management highlights

- Regulatory and Clinical Update for DERMA-ISL (Darum ISL / daromyosal): • The Biologics License Application (BLA) for daromyosal to treat Duchenne Muscular Dystrophy (DMD)-associated cardiomyopathy is under active FDA review with a PDUFA target action date of August 22, 2026. • Following a July 2025 Complete Response Letter (CRL), the company submitted a response based on positive HOPE III Phase III trial results, which the FDA accepted as complete, resuming full review. All FDA information requests to date have been answered, and labeling discussions are expected to begin shortly. • HOPE III met its primary endpoint (upper limb performance, 54% reduction in disease severity at 12 months, p=0.029) and all type 1 error-controlled secondary endpoints, including a 91% slowing of left ventricular ejection fraction (LVEF) disease progression overall and a 120% slowing in the cardiomyopathy patient subset (p=0.01). Additional positive new data (real-world upper limb function, cardiac fibrosis stabilization) has been presented at major medical conferences, and the full dataset is submitted for peer-reviewed publication. • Over 800 infusions have been completed across trials, with long-term 5-year safety data from open-label extension studies confirming a well-tolerated safety profile. Approval would make the company eligible for a transferable Priority Review Voucher (PRV), which can be monetized for non-dilutive capital. - Legal Action Against Distribution Partner: • In May 2026, Capricorn filed suit against Nippon Shin'yaku and its subsidiary NS Pharma to rescind the U.S. distribution agreement and seek a preliminary injunction to allow Capricorn to commercialize daromyosal independently. • The core issue is a structural pricing flaw in the original agreement that would create large reimbursement shortfalls per dose for providers, making the product inaccessible to patients covered by Medicare, Medicaid, or private insurance. NS Pharma refused to negotiate an acceptable fix and demanded Capricorn cede control of the product, regulatory relationships, and brand identity as a condition of resolution. • NS Pharma also failed to uphold required commercial launch planning investments and status updates after the July 2025 CRL, creating critical delays ahead of the approaching PDUFA date. The FDA review process is not affected by the litigation. - Manufacturing and Commercial Readiness: • The company's in-house GMP manufacturing facility in San Diego passed FDA pre-license inspection, with all observations addressed. It is currently operational and can support 200-250 patients (1,000 doses) per year. • Expansion of the facility is underway, which will increase annual capacity to 2,000-2,500 patients (10,000 doses) per year, with full validation and FDA approval targeted for H1 2027. The company is working with the FDA on a temporary labeling solution to begin stockpiling commercial doses ahead of approval. • Capricorn has accelerated build-out of a full in-house commercial team, including a newly hired Chief Commercial Officer with direct DMD and rare disease experience and a senior vice president of market access. Work is ongoing to build physician education, patient support, and distribution infrastructure focused on seamless patient access across all payer segments. - Pipeline and Life Cycle Management: • The company has pivoted its exosome development program away from COVID-19 vaccine work (after completing key manufacturing and safety milestones) and will now focus on exosome-based therapeutics, with updates expected throughout 2026. • Post-PDUFA, the company plans to pursue label expansion to younger DMD patients, initiate clinical development for Becker muscular dystrophy, and meet with the EMA and PMDA to pursue international approval. The company is also evaluating opportunities in other rare neuromuscular diseases driven by inflammation and fibrosis.

Guidance

- The company's current cash balance of $279 million is sufficient to fund all planned operating expenses and capital expenditures into the fourth quarter of 2027, excluding any potential product revenue or PRV monetization following approval. - Full FDA validation and approval of the expanded manufacturing facility is targeted for the first half of 2027. - The company expects to begin discussions with the FDA regarding clinical development for Becker muscular dystrophy immediately after the August 2026 PDUFA for DMD. - The company expects to meet with the EMA and PMDA later in 2026 to advance international approval plans for daromyosal. - Management did not revise prior PDUFA timing, which remains set for August 22, 2026.

Segment performance

Capricorn Therapeutics is a clinical-stage biotech company with one lead product candidate in regulatory review and an early-stage exosome pipeline. No revenue was recognized in Q1 2026 or Q1 2025. Total operating expenses for Q1 2026 were $36.8 million (100% of total operating costs), compared to $25 million in Q1 2025. The increase in operating expenses was driven by investments in clinical, regulatory, manufacturing, and commercial infrastructure for the lead DERMA-ISL program, which represents the vast majority of the company's current activity. The exosome pipeline and pipeline expansion efforts make up a small minority of current operating expenses. Net loss for Q1 2026 was $33.9 million, or $0.59 per share, compared to a net loss of $24.4 million, or $0.53 per share, in Q1 2025. As of March 31, 2026, the company held $279 million in cash, cash equivalents, and marketable securities.

Risks & headwinds

- The ongoing litigation with Nippon Shin'yaku and NS Pharma creates uncertainty around commercialization rights, and the court's timeline for a decision on the preliminary injunction and rescission request is outside of management's control. There is a risk that a negative court ruling could delay or disrupt commercial launch even if the BLA is approved. - The FDA could still issue a negative decision on the BLA at the PDUFA date, or require additional clinical data before approving, which would delay commercialization and require additional capital. - The compressed timeline for building an in-house commercial team and launch infrastructure (following the decision to pursue independent commercialization) could create gaps in launch preparedness if execution is delayed. - Pricing and reimbursement uncertainty remains for an ultra-orphan drug like daromyosal, which could impact patient access and commercial revenue even after approval. - Forward-looking statements regarding clinical success, regulatory approval, launch, and litigation outcomes are inherently uncertain, and actual results may differ materially from expectations. Additional risks are detailed in the company's periodic SEC filings.

Analyst Q&A

• Q: Why was NS Pharma so unwilling to negotiate a fix to the pricing flaw, given their position as a focused rare disease company that would gain from a successful launch? /

  A: Capricorn had been negotiating with NS Pharma since March 2025, proposing multiple reasonable solutions that preserved the original economic split outlined in the agreement. NS Pharma refused all compromises, and just one week before the suit was filed confirmed that their proposed structure (which would eliminate Capricorn's control of the brand and future indications) was the only one they would accept, leaving no room for resolution. Management notes that Capricorn is now positioned to launch the product itself, leveraging its 20+ years of deep experience with the drug and the DMD community.

• Q: What is the plan for commercial launch if the litigation has not been resolved before the August PDUFA date? /

  A: Capricorn's current plan is to launch daromyosal on the timeline consistent with FDA approval regardless of litigation status. The company already owns manufacturing rights and has already built the groundwork for launch, so it is prepared to move forward. The company filed for a preliminary injunction to secure the right to launch during litigation, and the legal team expects expedited review of this motion. Management also notes that given daromyosal is life-modifying for DMD patients, courts are unlikely to block distribution while the dispute proceeds.

• Q: What is the commercial launch readiness timeline? Will you be ready to launch shortly after approval if approved in August? /

  A: NS Pharma had paused most launch planning after the 2025 CRL and was severely behind on required preparation work. However, Capricorn had been quietly preparing behind the scenes for many months, anticipating potential issues, and already has key commercial leadership in place, a third-party logistics provider identified, and most launch preparation work already underway. Management expects to be ready for a timely launch, and will prioritize uninterrupted access for the ~100 patients already on daromyosal in open-label extension trials.

• Q: What is the expected repayment to NS Pharma if the distribution agreement is rescinded? What is the market opportunity for daromyosal in Becker muscular dystrophy? /

  A: Management expects that if rescission occurs, the company would repay the $50 million in upfront and milestone payments NS Pharma has made to date, though the final amount will depend on the court's ruling or any negotiated settlement. For Becker muscular dystrophy, the U.S. market size is approximately 5,000 patients, with pathophysiology identical to DMD and cardiomyopathy as the leading cause of death, making daromyosal an ideal treatment candidate. Development will not start until after the PDUFA for DMD to preserve eligibility for the pediatric Priority Review Voucher.