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Item 1. Business

2026-03-17 compared with 2025-03-26 · 293 added, 300 removed, 454 unchanged (57% of the section changed)

Capricor Therapeutics, Inc.

is a clinical-stage biotechnology company focused on the development of transformative cell and exosome-based therapeutics for treating Duchenne muscular dystrophy (“DMD”), a rare form of muscular dystrophy which results in muscle degeneration and premature death, and other diseases with high unmet medical needs.

Since our inception, we have devoted substantial resources to developing deramiocel and our other product candidates including our exosomes platform technology, developing our manufacturing processes, staffing our company and providing general and administrative support for these operations.

We do not have any products approved for commercial sale.

Our ability to eventually generate any product revenue sufficient to achieve profitability will depend on the successful development, approval and eventual commercialization of deramiocel for the treatment of DMD and our other product candidates.

If successfully developed and approved, we intend and plan to commercialize deramiocel in the United States and Japan with our partner, Nippon Shinyaku Co., Ltd., a Japanese corporation (“Nippon Shinyaku”).

Capricor may enter into licensing agreements or strategic collaborations in other markets.

is a biotechnology company focused on the development and potential commercialization of cell and exosome-based therapeutics for the treatment of Duchenne muscular dystrophy (“DMD”), a rare genetic disorder characterized by progressive muscle degeneration and premature death, as well as other diseases with significant unmet medical need.

Since our inception, we have devoted substantial resources to the development of our lead product candidate, Deramiocel, a cell therapy designed to address the cardiac and skeletal muscle complications associated with DMD, as well as to advancing our exosome-based platform, developing manufacturing capabilities and supporting our research and development activities.

Our Biologics License Application (“BLA”) for Deramiocel for the treatment of DMD is currently under review by the U.S.

Food and Drug Administration (“FDA”), with a Prescription Drug User Fee Act (“PDUFA”) target action date of August 22, 2026, for potential approval in the United States.

We currently have no products approved for commercial sale.

Our ability to generate product revenue and achieve profitability will depend on the successful development, regulatory approval and commercialization of Deramiocel and any other product candidates we may develop.

If approved, we intend to commercialize Deramiocel in the United States and may seek commercialization through strategic partners in other select international markets.

Our development efforts for Deramiocel for the treatment of DMD have progressed through multiple clinical studies, and we continue activities to support regulatory review and potential approval in the United States, as well as commercialization preparation, if approved.

Technology and Platforms

Cell Therapy Platform (Deramiocel)

Our core program is focused on the development and commercialization of a cell therapy technology (referred to herein as deramiocel) comprised of cardiosphere-derived cells (“CDCs”), which are a rare population of cardiac cells isolated from donated cells of healthy human hearts, for the treatment of DMD.

Deramiocel is designed to slow disease progression in DMD through the immunomodulatory, anti-inflammatory, pro-angiogenic and anti-fibrotic actions of CDCs, which are mediated by secreted exosomes laden with bioactive cargo.

Among the cargo elements known to be bioactive in CDC-exosomes are microRNAs.

Collectively, these non-coding RNA species alter gene expression in macrophages and other target cells, dialing down generalized inflammation and stimulating tissue regeneration in DMD (and in a variety of other inflammatory diseases).

This mechanism of action, consistent with the changes observed in clinical studies to date in circulating inflammatory biomarkers, contrasts with that of exon-skipping oligonucleotides and gene therapy approaches, which aim to restore dystrophin expression.

DMD pathophysiology is driven by the impaired production of functional dystrophin which normally functions as a structural protein in muscle.

The reduction of functional dystrophin in muscle cells leads to significant cell damage and ultimately causes muscle cell death and fibrotic replacement.

In DMD patients, heart muscle cells progressively die and are replaced with scar tissue.

This cardiomyopathy eventually leads to heart failure, which is currently the leading cause of death among those with DMD.

The annual cost of care for patients with DMD is very high and increases with disease progression.

There is no currently approved treatment for DMD-cardiomyopathy, therefore, we believe that DMD represents a significant market opportunity for our product candidate, deramiocel.

Exosomes Platform (StealthX TM )

Extracellular vesicles, including exosomes and microvesicles, are nano-scale, membrane-enclosed vesicles secreted by most cells and contain characteristic lipids, proteins and nucleic acids such as mRNA and microRNAs.

They can signal through the binding and activation of membrane receptors or the delivery of their cargo into the cytosol of target cells.

Exosomes act as messengers to regulate the functions of neighboring or distant cells and have been shown to regulate functions such as cell survival, proliferation, inflammation and tissue regeneration.

Their size, low or null immunogenicity and ability to communicate in native cellular language potentially make them an exciting new class of therapeutic agents with the potential to expand our ability to address complex biological responses.

Because exosomes are cell-free substances, they can be stored, handled, reconstituted and administered in similar fashion to common biopharmaceutical products such as antibodies.

Aspects of our exosome pipeline have been supported through collaborations and alliances.

Our collaborations and research around exosomes include the National Institutes of Health (“NIH”), the National Institute

of Allergy and Infectious Diseases (“NIAID”), Johns Hopkins University (“JHU”), the Department of Defense (“DoD”), the U.S.

Cell Therapy (Deramiocel)

Our core program is focused on the development and commercialization of Deramiocel, a cell therapy product candidate comprised of cardiosphere-derived cells (“CDCs”), a population of cardiac-derived stromal cells isolated from qualified donated human hearts, for the treatment of Duchenne muscular dystrophy.

Deramiocel is designed to slow disease progression through the immunomodulatory, anti-inflammatory, pro-angiogenic and anti-fibrotic activities of CDCs.

These effects are mediated in part by exosomes secreted by CDCs that contain bioactive molecules, including microRNAs and other signaling factors, which may influence gene expression and cellular pathways involved in inflammation, fibrosis, and tissue repair.

This mechanism of action is distinct from mutation-targeted approaches such as exon-skipping oligonucleotides and gene therapies, which aim to restore dystrophin expression in muscle cells.

DMD is caused by mutations in the dystrophin gene that impair production of functional dystrophin, a structural protein important for maintaining muscle integrity.

The absence of functional dystrophin leads to progressive skeletal and cardiac muscle damage, muscle cell death and replacement of muscle tissue with fibrosis.

Cardiac involvement is a major component of disease progression in DMD.

In patients with DMD, heart muscle cells progressively deteriorate and are replaced with scar tissue, leading to cardiomyopathy and ultimately heart failure, which is a leading cause of mortality in individuals with DMD.

While several therapies have been developed to address certain genetic mutations associated with DMD, significant unmet medical need remains, particularly in patients with established skeletal and cardiac muscle disease.

Our clinical development program for Deramiocel has focused primarily on adolescents and young adults with DMD, including many patients who are non-ambulatory and experiencing progressive cardiac and skeletal muscle decline.

We believe therapies that address inflammatory and fibrotic processes contributing to muscle degeneration may provide potential benefit across a broad population of individuals with DMD.

Exosomes Platform Technology (StealthX TM )

Extracellular vesicles (“EVs”), including exosomes and microvesicles, are nano-scale membrane-enclosed vesicles secreted by many cell types that contain characteristic lipids, proteins and nucleic acids, including messenger RNA (“mRNA”) and microRNAs.

These vesicles facilitate intercellular communication through the binding and activation of membrane receptors or through the delivery of molecular cargo into target cells.

Through these mechanisms, EVs may influence a variety of biological processes, including cell survival, proliferation, inflammation and tissue repair.

Exosomes in particular have attracted increasing interest as potential therapeutic and diagnostic platforms.

Their small size, generally low immunogenicity, and ability to deliver biologically active molecules to recipient cells may allow them to modulate complex biological pathways.

Because exosomes are cell-free vesicles, they may be stored, handled, and administered using approaches similar to those used for certain established biologic therapies.

Our exosome platform is supported by internal research and external collaborations.

Our collaborations and research around exosomes include the National Institutes of Health (“NIH”), the National Institute of Allergy and Infectious Diseases (“NIAID”), Johns Hopkins University (“JHU”), the Department of Defense (“DoD”), the U.S.

Army Institute of Surgical Research (“USAISR”), and Cedars-Sinai Medical Center (“CSMC”).

Our platform builds on advances in fundamental RNA and protein science, targeting technology and manufacturing, providing us the opportunity to potentially build a broad pipeline of new therapeutic candidates.

Currently, we are developing exosome-based vaccines and therapeutics for infectious diseases, monogenic diseases and other potential indications.

Our current strategy is focused on securing partners who will provide capital and additional resources to enable us to bring this program into the clinic.

Our platform leverages advances in RNA biology, protein engineering and targeted delivery technologies to support the development of exosome-based therapeutics and vaccines.

We are currently exploring exosome-based approaches for infectious diseases, monogenic diseases and other potential indications.

Our current strategy is focused on advancing these programs through collaborations and partnerships that may provide additional development resources and capital to support potential clinical development.

Objectives and Business Strategy

We believe that our cell therapy and exosome-based platforms can be used to develop novel therapeutics to treat a broad range of diseases.

We intend to leverage our technology, collaborations and resources to develop therapeutics for diseases with high unmet needs.

In pursuit of this objective, we intend to focus on the following activities:

● continuing the development of our deramiocel program for the treatment of DMD in preparation for potential commercialization, which includes streamlining our manufacturing capabilities, furthering our commercial capabilities and securing additional partners in other markets around the world for the potential launch in the U.S., Japan, Europe and in other select territories, subject to rights of Nippon Shinyaku as our exclusive distributor for DMD in the U.S.

● exploring further product expansion opportunities for deramiocel outside of DMD;

● advancing our exosome technology for therapeutic development, focused on internal research, strategic partnerships and collaborations;

● opportunistically evaluating strategic collaborations to accelerate development and commercialization timelines as well as potentially expand our pipeline within our core therapeutic areas.

Capricor, Inc., a wholly-owned subsidiary of Capricor Therapeutics, was founded in 2005 as a Delaware corporation based on the innovative work of its founder, Eduardo Marbán, M.D., Ph.D.

Our core cell therapy technology was first identified in the academic laboratory of Dr.

Eduardo Marbán while he was Chief of Cardiology at JHU.

Since their initial publication in 2007, CDCs have been the subject of over 200 peer-reviewed scientific publications and have been administered to over 250 human subjects across several clinical trials.

We began to explore the therapeutic potential of exosomes as we learned that CDCs mediate most of their therapeutic activities through the secretion of exosomes.

We have assembled a scientific advisory board with cardiology and neurology experts, including DMD specialists.

Our advisors include clinicians and researchers who are experts on DMD’s cardiac and skeletal aspects.

Moreover, some of our advisors lead clinical units at some of the leading DMD centers in the United States and are actively involved in our drug development process and programs.

Capricor became public after the completion of a merger between Capricor and a subsidiary of Nile Therapeutics, Inc., a Delaware corporation (“Nile”), in 2013, where Capricor became a wholly-owned subsidiary of Nile and Nile formally changed its name to Capricor Therapeutics, Inc.

Capricor Therapeutics was listed on the Nasdaq Capital Market shortly thereafter and currently trades under the symbol “CAPR”.

Capricor Therapeutics and Capricor have together raised approximately $300 million in equity capital (both privately and publicly) as well as approximately $100 million in non-dilutive funding from our collaboration partners including Nippon Shinyaku Co.

Ltd., a Japanese corporation (“Nippon Shinyaku”), as well as government sources such as the NIH and the California Institute for Regenerative Medicine (“CIRM”).

We believe that our cell therapy and exosome-based platforms have the potential to enable the development of novel therapeutics for a broad range of diseases.

We intend to leverage our technology platforms, collaborations and internal capabilities to develop therapeutics for diseases with significant unmet medical need.

Our current strategic priorities include the following:

● advancing Deramiocel through the regulatory process and preparing for potential commercialization in the United States and other key markets;

● continuing the development of our Deramiocel program for the treatment of DMD and preparing for potential commercialization, including expanding manufacturing capabilities to support commercial supply, further developing our commercial infrastructure, and securing additional partners in select international markets, subject to the rights of Nippon Shinyaku as our exclusive distributor for DMD in the United States and Japan;

● evaluating potential additional therapeutic indications for Deramiocel beyond DMD;

● advancing our exosome platform for therapeutic development through internal research, strategic collaborations and partnerships;

● selectively pursuing strategic collaborations and partnerships to accelerate development and commercialization timelines and potentially expand our pipeline within our core areas of focus.

Capricor, Inc., a wholly-owned subsidiary of Capricor Therapeutics, Inc., was founded in 2005 as a Delaware corporation to develop therapeutic applications based on the discovery of cardiosphere-derived cells by its founder, Eduardo Marbán, M.D., Ph.D.

The CDC technology was first identified in the academic laboratory of Dr.

Marbán while he served as Chief of Cardiology at Johns Hopkins University.

Since the initial scientific publication describing CDCs in 2007, research related to CDCs has been reported in more than 250 scientific publications, and CDC-based therapies have been administered to more than 250 subjects across multiple clinical studies.

Subsequent research suggested that many of the therapeutic effects of CDCs are mediated through the secretion of extracellular vesicles, including exosomes, which led us to begin exploring the potential therapeutic applications of exosome-based technologies.

To support our research and clinical development activities, we have assembled a scientific advisory board consisting of experts in cardiology, neurology and Duchenne muscular dystrophy.

Members of our advisory board include clinicians and researchers with expertise in both the cardiac and skeletal muscle manifestations of DMD, including physicians affiliated with leading DMD clinical centers in the United States.

Capricor became a public company following the completion of a merger between Capricor and a subsidiary of Nile Therapeutics, Inc., a Delaware corporation (“Nile”), in 2013.

Upon completion of the merger, Capricor became a wholly-owned subsidiary of Nile and Nile changed its name to Capricor Therapeutics, Inc.

Capricor Therapeutics was

subsequently listed on the Nasdaq Capital Market and currently trades under the symbol “CAPR” on the Nasdaq Global Select Market.

Since our inception, we have received approximately $600 million in funding through a combination of equity financings, strategic collaborations, grants and government-supported programs.

These sources include our collaboration with Nippon Shinyaku Co., Ltd.

(“Nippon Shinyaku”), as well as funding from organizations such as the National Institutes of Health and the California Institute for Regenerative Medicine (“CIRM”).

Core Therapeutic Areas

Duchenne muscular dystrophy (DMD):

DMD is a rare, monogenic, X-linked muscle disease with mortality at a median age of approximately 30 years.

There is no cure for DMD, and for the vast majority of patients, there are no satisfactory symptomatic or disease-modifying treatments.

It is estimated that DMD occurs in approximately one in every 3,500 to 5,000 live male births and that the patient population is estimated to be approximately 15,000 to 20,000 in the United States.

DMD pathophysiology is driven by the impaired production of functional dystrophin, which normally functions as a structural protein in muscle.

The reduction of functional dystrophin in muscle cells leads to significant cell

damage and ultimately causes muscle cell death and fibrotic replacement.

Due to reduced functional dystrophin protein, affected individuals generally experience the following symptoms, although disease severity and life expectancy vary:

● muscle damage characterized by inflammation and fibrosis beginning at an early age;

● muscle weakness and progressive loss of muscle function beginning in the first few years of life;

● decline of ambulation and respiratory function after the age of seven;

● total loss of ambulation in the pre-teenage or early teenage years;

● progressive loss of upper extremity function during mid- to late-teens;

● respiratory and/or cardiac failure, resulting in death before the age of 30 with cardiomyopathy leading to heart failure, which is currently the leading cause of death among those with DMD.

Glucocorticoid treatment, the current standard of care, has been shown to improve muscle strength temporarily, prolong the period of ambulation and slow the progression of DMD.

However, glucocorticoid use is associated with well-known adverse side effects, including:

severe weight gain, stunted growth, weakening of bone structure (osteoporosis) and metabolic dysfunctions, among others.

Despite recent therapeutic advances, DMD represents a significant societal and economic burden.

The annual cost of care for patients with DMD is very high and increases with disease progression.

The economic burden includes costs associated with hospital admissions, medications, frequent doctor visits, assistive devices, as well as indirect costs related to productivity losses for caregivers and costs due to pain, anxiety, social handicap as well as end-of-life care expenses.

While there are many clinical initiatives in DMD, Capricor’s program is one of the very few to focus on predominantly older patients.

These boys and young men are looking to slow the progression of cardiac and skeletal muscle function.

We therefore believe that DMD represents a significant market opportunity for our product candidate, deramiocel.

Coronaviruses are a large family of viruses that can cause illness in animals or humans.

In humans, several known coronaviruses cause respiratory infections.

These coronaviruses range from the common cold to more severe diseases such as severe acute respiratory syndrome (“SARS”), Middle East respiratory syndrome (“MERS”) and COVID-19.

SARS-CoV-2 is the novel coronavirus first identified in humans in 2019 and is the cause of COVID-19.

The risk of mortality increases with age and the risk of severe disease and mortality increases for persons with certain pre-existing diseases or comorbid conditions (e.g.

cardiovascular disease, diabetes, chronic lung disease, obesity).

Since late 2021, infections have been dominated by subvariants of the Omicron strain especially the XEC variant, which continue to displace previous circulating strains by evading immunity and spreading more efficiently resulting in an increased risk of breakthrough infection among the vaccinated.

As the world pivots from the kinds of responses needed during the COVID-19 pandemic, vulnerable populations need a vaccine strategy to provide protective durable immunity against current and emerging variants of SARS-CoV-2 to reduce the infection and disease burden for both the public and health care systems globally.

We therefore believe that SARS-CoV-2 represents a potential market opportunity for our exosome-based vaccine program.

Our strategy is focused on securing partnerships to provide the necessary resources and capital to bring our exosome-based vaccine into clinical development.

Duchenne muscular dystrophy :

DMD is a rare, monogenic, X-linked muscle disease characterized by progressive degeneration of skeletal and cardiac muscle, with mortality typically occurring in the third decade of life.

There is currently no cure for DMD, and available therapies remain limited in their ability to slow overall disease progression.

It is estimated that DMD occurs in approximately one in every 3,500 to 5,000 live male births and that the patient population is approximately 15,000 individuals in the United States and approximately 200,000 worldwide.

DMD is caused by mutations in the dystrophin gene that impair the production of functional dystrophin, a structural protein that helps maintain muscle cell integrity.

The absence or reduction of dystrophin leads to repeated cycles of muscle damage, inflammation and fibrosis, ultimately resulting in progressive muscle degeneration and replacement of muscle tissue with fibrotic and fatty tissue.

Disease severity and progression may vary among patients, but the condition typically follows a predictable clinical course that includes:

● early muscle damage and inflammation beginning in early childhood;

● progressive muscle weakness and loss of muscle function during childhood;

● decline in ambulation and respiratory function typically beginning around school age;

● loss of independent ambulation during the pre-teen or early teenage years;

● progressive loss of upper extremity function during adolescence;

● progressive respiratory and cardiac complications, including cardiomyopathy that may lead to heart failure.

Glucocorticoids remain a commonly used component of the standard of care and have been shown to temporarily improve muscle strength and prolong the period of ambulation.

However, long-term glucocorticoid therapy is associated with well-recognized adverse effects, including weight gain, growth suppression, reduced bone density (osteoporosis) and metabolic complications.

DMD is associated with substantial medical and economic burden.

The cost of care typically increases as the disease progresses and may include hospitalizations, medications, frequent physician visits, assistive devices and supportive respiratory or cardiac care.

Additional indirect costs may arise from caregiver burden, reduced productivity and other quality-of-life impacts associated with progressive neuromuscular disease.

Cardiac disease, particularly cardiomyopathy associated with Duchenne muscular dystrophy, has emerged as a leading cause of mortality in individuals with DMD, highlighting the need for therapeutic approaches that address both skeletal muscle degeneration and cardiac dysfunction associated with the disease.

Becker Muscular Dystrophy :

Becker muscular dystrophy (“BMD”) is a related dystrophinopathy caused by mutations in the dystrophin gene, the same gene implicated in Duchenne muscular dystrophy.

BMD typically presents later in life and generally follows a slower disease progression than DMD.

It is estimated to affect approximately 5,000 individuals in the United States.

Despite its comparatively milder course, many individuals with BMD develop progressive cardiac complications, including cardiomyopathy, which can significantly impact morbidity and mortality.

Given the role of cardiac dysfunction in BMD, we are exploring the potential use of Deramiocel in this indication.

SARS-CoV-2 is the novel coronavirus responsible for coronavirus disease 2019 (“COVID-19”).

Coronaviruses are a family of viruses that can cause respiratory illness in humans, ranging from mild infections such as the common cold to more severe diseases including severe acute respiratory syndrome (“SARS”) and Middle East respiratory syndrome (“MERS”).

Although the acute phase of the COVID-19 pandemic has subsided in many regions, SARS-CoV-2 continues to circulate globally and remains a public health concern, particularly for vulnerable populations.

We are developing an exosome-based vaccine candidate targeting SARS-CoV-2 using our exosome platform technology.

This program is currently being evaluated in a Phase 1 clinical study conducted in collaboration with the National Institutes of Health.

Our strategy for this program is to pursue strategic partnerships that may provide additional resources and capital to support further clinical development.

Our Pipeline – Key Programs

Duchenne Muscular Dystrophy Program :

Deramiocel is designed to slow disease progression in DMD through the immunomodulatory, anti-inflammatory, pro-angiogenic and anti-fibrotic actions of CDCs, with the goal of improving cardiac and skeletal muscle function in patients with DMD.

Biologics License Application (“BLA”):

In the third quarter of 2024, we held a pre-BLA meeting with FDA where we discussed our rolling BLA submission schedule, potential label expansion, plans for commercial manufacturing as well as other topics.

Subsequent to this meeting, we held several additional meetings with FDA and announced our intent to file a BLA based on existing cardiac data from our Phase 2 HOPE-2 and HOPE-2 OLE trials compared to patient-level natural history data.

We completed the full submission of the BLA in December 2024 and in the first quarter of 2025, we were informed by the FDA, they have accepted for review our BLA seeking full approval for deramiocel as a treatment for patients diagnosed with DMD cardiomyopathy.

Additionally, the FDA granted the BLA Priority Review with a Prescription Drug User Fee Act (“PDUFA”) target action date of August 31, 2025.

The FDA also informed us that they have not yet decided whether an Advisory Committee meeting is needed in relation to our application.

Deramiocel is Capricor’s lead product candidate and is being developed for the treatment of DMD, a rare, progressive genetic disease characterized by degeneration of skeletal and cardiac muscle.

Deramiocel is designed to slow disease progression in DMD through the immunomodulatory, anti-inflammatory, pro-angiogenic and anti-fibrotic actions of CDCs.

Through these mechanisms, Deramiocel is designed to slow disease progression and preserve both skeletal and cardiac muscle function in patients with DMD.

We have conducted a comprehensive clinical development program evaluating Deramiocel in patients with DMD, including randomized controlled trials and long-term follow-up studies designed to assess safety and efficacy across multiple measures of disease progression.

These studies include the Phase 3 HOPE-3 trial, the Phase 2 HOPE-2 trial and its ongoing open-label extension, and the earlier Phase I/II HOPE-Duchenne clinical trial.

Biologics License Application :

In late 2024, we completed our submission of a BLA to the FDA seeking approval of Deramiocel for the treatment of Duchenne muscular dystrophy.

The FDA accepted the BLA for review, granted Priority Review, and assigned a PDUFA target action date of August 31, 2025.

In July 2025, we received a Complete Response Letter (“CRL”) from the FDA stating that the application did not meet the statutory requirement for substantial evidence of effectiveness and requesting additional clinical data.

Following a Type A meeting with the FDA in August 2025, we aligned with the Agency on a regulatory path forward to address the CRL, including the submission of additional clinical data from the Phase 3 HOPE-3 trial.

We subsequently submitted our response to the CRL, which the FDA accepted as a complete response and classified as a Class 2 resubmission, assigning a new Prescription Drug User Fee Act target action date of August 22, 2026.

If approved, Deramiocel has the potential to become the first therapy designed to address both skeletal and cardiac muscle manifestations of Duchenne muscular dystrophy.

In parallel with our U.S.

regulatory activities, we have initiated regulatory engagement in Europe and Japan and are working with the relevant health authorities to determine the most appropriate regulatory pathway for Deramiocel in those regions.

The clinical trials supporting the development of Deramiocel are summarized below.

Phase 3 (HOPE-3) Clinical Trial :

HOPE-3 is a Phase 3, multi-center, randomized, double-blind, placebo-controlled clinical trial comprised of two cohorts evaluating the safety and efficacy of deramiocel in participants with DMD and impaired skeletal muscle function who are on a stable regimen of systemic glucocorticoids.

Non-ambulatory

and ambulatory boys who meet eligibility criteria are randomly assigned to receive either deramiocel or placebo every 3 months for a total of 4 doses during the first 12-months of the study.

Approximately 105 eligible study subjects are currently enrolled in the dual-cohort study (comprised of Cohorts A and B).

Cohort A uses product manufactured at our Los Angeles facility and Cohort B uses product manufactured at our San Diego facility.

Subjects are randomized to either deramiocel or placebo in a 1:1 ratio.

In the fourth quarter of 2023, we announced a positive outcome of the futility analysis for Cohort A of HOPE-3, which was reviewed by the Data Safety Monitoring Board (“DSMB”).

This resulted in a favorable recommendation to continue the HOPE-3 trial as planned.

The primary outcome measure of the HOPE-3 study will be the Performance of the Upper Limb (“PUL”) v2.0, a validated tool specifically designed for assessing high (shoulder), mid (elbow) and distal (wrist and hand) functions, with a conceptual framework reflecting weakness progression in upper limb function.

HOPE-3 will also measure various secondary endpoints including cardiac function assessments.

To support potential label expansion to treat DMD, we plan to provide clinical data on skeletal muscle myopathy by combining Cohorts A and B of the HOPE-3 clinical trial to serve as a post-approval study.

Furthermore, if necessary, the HOPE-3 study will also be supporting ex-U.S.

marketing authorizations.

Currently, we have initiated regulatory activities in Europe and Japan and will be working with the various health authorities to develop the most efficient path for regulatory approval of deramiocel in these regions.

HOPE-3 is a Phase 3, multi-center, randomized, double-blind, placebo-controlled clinical trial consisting of two cohorts evaluating the safety and efficacy of Deramiocel in participants with DMD and impaired skeletal muscle function who are on a stable regimen of systemic glucocorticoids.

Non-ambulatory and ambulatory boys and young men who meet eligibility criteria were randomly assigned to receive either intravenous Deramiocel at 150 million cells per infusion or placebo every three months for a 12-month period.

The study randomized 106 participants across 20 U.S.

clinical sites and the average age of participants was approximately 15 years.

Baseline demographics were well balanced between treatment arms, approximately 90 percent were receiving cardiac medications at baseline, and approximately 75% had a clinical diagnosis of cardiomyopathy.

The primary outcome measure of the HOPE-3 study was the Performance of the Upper Limb (“PUL”) v2.0, a validated tool specifically designed for assessing high (shoulder), mid (elbow) and distal (wrist and hand) functions, with a conceptual framework reflecting weakness progression in upper limb function.

In HOPE-3 we also measured various secondary endpoints including cardiac function assessments.

In December, 2025, we announced positive topline results from this study showing that the primary endpoint of PUL v2.0 and the key secondary cardiac endpoint of left ventricular ejection fraction (“LVEF”) achieved statistical significance (p=0.03 and p=0.04, respectively).

Additionally, the study showed statistical significance in all type 1 error controlled secondary endpoints.

Furthermore, Deramiocel maintained a safety and tolerability profile consistent with prior clinical experience.

Topline Efficacy Results

% Slowing of Progression 3

(Deramiocel vs.

Performance of Upper Limb (PUL v2.0) Total Score¹

(Primary endpoint, n=106)

Left Ventricular Ejection Fraction (LVEF %)²

(Key secondary endpoint, n=83)

¹n reflects the number of patients in the ITT population with evaluable PUL v2.0 assessments.

²n reflects the number of patients in the ITT population with centrally reviewed and evaluable cardiac MRI LVEF assessments at baseline and at 12 months.

3 Percent slowing is calculated as the treatment difference divided by the placebo change from baseline.

In March 2026, additional analyses and new functional outcomes data from the HOPE-3 trial were presented in a late-breaking oral presentation at the 2026 Muscular Dystrophy Association Clinical & Scientific Conference.

Cardiac MRI analyses demonstrated a statistically significant reduction in myocardial fibrosis as measured by late gadolinium enhancement (“LGE”), corresponding to a three-segment treatment difference compared to placebo at 12 months (p=0.022).

In patients with baseline cardiomyopathy, treatment resulted in a 3.3 percentage-point improvement in left ventricular ejection fraction compared to placebo (p=0.017).

A Global Statistical Test (“GST”), a composite including

PUL v2.0, LVEF and Patient Global Impression of Severity (“PGI-S”), demonstrated a statistically significant overall treatment effect favoring Deramiocel (p=0.017).

Additional functional outcomes were also reported including data from the Duchenne Video Assessment (“DVA”) showed the “eat 10 bites” task demonstrated approximately 83% slowing of disease progression compared to placebo (p=0.018).

Phase 2 (HOPE-2) Clinical Trial :

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The final one-year results from HOPE-2 were published in The Lancet in March 2022, showing that the trial met its primary efficacy endpoint of the mid-level dimension of the PUL v1.2 (p=0.01) and additional positive endpoints of full PUL v2.0 (p=0.04).

Left ventricular ejection fraction (LVEF), a global measure of cardiac pump function, decreased in the placebo group over time, but improved in the deramiocel group, showing a 107% slowing of the progression of cardiac disease (p=0.002).

Additionally, the data suggested global improvements in cardiac function as measured by indexed volumes (LVESV, LVEDV).

Left ventricular ejection fraction, a global measure of cardiac pump function, decreased in the placebo group over time, but stabilized in the Deramiocel group, showing a 107% slowing of the progression of cardiac disease (p=0.002).

Additionally, the data suggested statistically significant benefits in cardiac function as measured by indexed volumes (LVESV i , LVEDV i ).

These are surrogate measures of cardiac function and are considered significant in relevance to long-term outcomes.

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Deramiocel was generally safe and well tolerated throughout the study.

With the exception of hypersensitivity reactions early in the clinical trial, which were mitigated with a common pre-medication regimen, there were no serious safety signals identified by the HOPE-2 DSMB.

HOPE-2 Study Results - 12-Month Efficacy Data

12-Month Difference in Change from Baseline†

Δ, deramiocel vs.

Skeletal-Muscle (Upper Limb Function)

Mid-level PUL (v1.2)*

Shoulder + Mid + Distal PUL (v1.2)

Shoulder + Mid + Distal PUL (v2.0)

Cardiac Function

LV Ejection Fraction %*

LV End-Diastolic Volume, Indexed mL/m 2

LV End-Systolic Volume, Indexed mL/m 2

Creatine Kinase-MB (% of total CK)

ITT (intent to treat) population shown

†Non-parametric mixed model repeated measures analysis with percentile ranked baseline, treatment, visit, visit-by-treatment interaction, PUL entry-item score at stratification, and site as model effects.

Percentile ranked change from baseline converted back to original scale

‡Negative value favors deramiocel

*Graphed figures below

PUL v1.2 mid-level dimension (1)

Left ventricular ejection fraction % (LVEF) (1)

(1) Images from HOPE-2 Lancet Publication (March 2022)

Phase 2 (HOPE-2-Open Label Extension) (“OLE”) Clinical Trial :

We are currently conducting an OLE clinical trial available to all patients who participated in the HOPE-2 study which includes those patients who received placebo.

12 patients elected to continue treatment.

Initially, 13 patients elected to continue treatment.

Data from the study suggests disease modification with statistically significant differences in the PUL v2.0 scale in the Deramiocel original treatment group when compared to the original placebo group from HOPE-2.

The HOPE-2-OLE study previously met its primary endpoint at the one-year timepoint on the PUL v2.0 scale.

The study remains ongoing and the three-year data demonstrated improvements in multiple measures of cardiac function, including left ventricular ejection fraction (LVEF), as well as indexed volumes, which are considered highly relevant in terms of predicting long-term cardiac outcomes.

In order to evaluate the relevance of the data to disease progression as well as the chronic and progressive nature of DMD where cardiac function can decline year over year, a natural history data set was used to compare the trajectory of those treated with deramiocel to standard of care.

In addition to the cardiac data, patients demonstrated a statistically and clinically relevant benefit in the PUL v2.0 total score when

compared to an external comparator dataset of similar DMD patients.

The HOPE-2-OLE study previously met its primary efficacy endpoint at the one-year timepoint on the PUL v2.0 scale.

The study remains ongoing and the four-year data continue to show sustained functional improvements in multiple measures of skeletal and cardiac function.

Deramiocel treatment during the OLE portion of the study continues to yield a consistent safety profile and has been well-tolerated throughout the study.

Left ventricular ejection fraction % (LVEF) compared to external comparator (2)

End-Systolic Volumes, indexed compared to external comparator (2)

PUL v2.0 Total Score compared to external comparator (2)

(2) Images from HOPE-2 OLE

Phase I/II (HOPE-Duchenne) Clinical Trial :

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The StealthX™ vaccine is a proprietary vaccine developed internally by Capricor utilizing exosomes that were engineered to express either spike or nucleocapsid proteins on the surface.

Preclinical results from murine and rabbit models published in the peer-reviewed journal, Microbiology Spectrum , showed the StealthX™ vaccine resulted in robust antibody production, potent neutralizing antibodies, a strong T-cell response and a favorable safety profile.

Preclinical results from murine and rabbit models published in the peer-reviewed journal, Microbiology

Spectrum , showed the StealthX™ vaccine resulted in robust antibody production, potent neutralizing antibodies, a strong T-cell response and a favorable safety profile.

These effects were obtained with administration of only nanogram amounts of protein and without adjuvant or synthetic lipid nanoparticles.

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Department of Health and Human Services to advance a pipeline of new, innovative vaccines providing broader and more durable protection for COVID-19.

As part of Project NextGen, the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, will conduct a Phase 1 clinical study with our StealthX™ vaccine, subject to regulatory approval.

At this time, manufacturing is underway for our StealthX™ vaccine and we have submitted an Investigational New Drug Application (“IND”) to the FDA, which is currently under review.

At this time, NIAID is planning for regulatory approval in the second quarter of 2025 with the clinical study initiated soon thereafter.

NIAID's Division of Microbiology and Infectious Diseases (“DMID”) would oversee the study.

If NIAID finds that our StealthX™ vaccine meets its criteria for safety and efficacy, they may consider our program for a funded Phase 2.

As part of Project NextGen, the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, is conducting a Phase 1 clinical study with our StealthX™ vaccine which is currently ongoing.

Preliminary data indicate the StealthX™ vaccine has been generally well tolerated and demonstrated a favorable safety profile across all dose levels tested.

Early analyses showed limited neutralizing antibody responses at the evaluated dose levels, which may reflect prior vaccination or infection among trial participants.

Final results from the trial, including cellular immune response data, are expected in the second quarter of 2026, subject to completion of the study by NIAID.

If NIAID finds that our StealthX™ vaccine meets its criteria for safety and efficacy, they may consider our program for a funded Phase 2 study, for which we are actively preparing should that trial be initiated.

Exosome Platform:

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Development Stage

Distributor/Partner/Collaborator

Distributor/Collaborator

(allogeneic CDCs)

Duchenne muscular dystrophy – Cardiomyopathy*

BLA accepted for priority review;

August 31, 2025

Duchenne muscular dystrophy*

BLA under U.S.

(PDUFA target action date August 22, 2026)

Nippon Shinyaku Co., Ltd.

and Japan rights)

Exosome protein-based vaccine (multivalent design)

IND submitted

Collaboration with National Institute of Allergy and Infectious Diseases

Becker muscular dystrophy**

Exosome-based vaccine

National Institute of Allergy and Infectious Diseases

Engineered exosomes (RNA, protein and small molecule delivery)

* The FDA has granted orphan drug, Regenerative Medicine Advanced Therapy, and Rare Pediatric Disease designations to deramiocel for the treatment of DMD.

* Deramiocel has received FDA Orphan Drug, Rare Pediatric Disease, and RMAT designations for DMD, and Orphan Drug and ATMP designations in Europe for DMD.

** Deramiocel has received FDA Orphan Drug designation for BMD.

Manufacturing, Supply and Distribution

We have developed proprietary Chemistry, Manufacturing and Controls (“CMC”) and manufacturing capabilities that allow manufacturing and testing of our product candidates to support both clinical development as well as potential commercialization.

Manufacturing of biological products is subject to extensive regulations that impose procedural and documentation requirements.

These regulations govern record keeping, manufacturing processes and controls, personnel, quality control and quality assurance.

We continue to enhance, refine and optimize our manufacturing processes.

We are required to obtain and maintain certain other licenses in connection with our manufacturing facilities and activities.

At this time, we have Drug Manufacturing and Tissue Bank Licenses issued from the State of California for both our San Diego and CSMC facilities.

We have developed proprietary Chemistry, Manufacturing and Controls (“CMC”) and manufacturing capabilities that support the production, testing and release of our product candidates for use in both clinical development and potential commercialization.

Our CMC platform includes proprietary manufacturing processes, quality systems and analytical methods designed to ensure the identity, purity, potency and consistency of our cell-based therapeutic product candidates.

These activities include process development, analytical method development, product characterization and stability testing, as well as implementation of quality control and quality assurance procedures.

Manufacturing of biological products is subject to extensive regulation by governmental authorities, including the FDA and comparable foreign regulatory agencies, which impose procedural, documentation and reporting requirements.

These regulations govern record keeping, manufacturing processes and controls, personnel qualifications, facility standards, quality control and quality assurance systems, and product testing.

Compliance with these regulations requires ongoing monitoring, documentation and inspection of our manufacturing operations.

We continue to enhance, refine and optimize our manufacturing processes and quality systems to support the advancement of our clinical programs

and potential future commercial supply.

We are required to obtain and maintain certain licenses and permits in connection with our manufacturing facilities and activities.

At this time, we maintain Drug Manufacturing and Tissue Bank Licenses issued by the State of California for both our San Diego manufacturing facility and our Cedars-Sinai Medical Center (“CSMC”) facility in Los Angeles, California.

We currently maintain two manufacturing facilities for the production of Deramiocel.

Our primary manufacturing facility is located in San Diego, California within our corporate headquarters.

This facility was designed to be compliant with U.S.

and European Medicines Agency (“EMA”) as well as Good Manufacturing Practice (“GMP”) standards.

We are preparing for potential commercial launch, subject to FDA approval, from this facility.

It is to be determined whether the FDA will ultimately approve commercial manufacturing at this facility.

We recently entered into an amendment to our lease adding an additional approximate 22,000 square feet of space for continued manufacturing expansion.

We plan to build additional cleanrooms in this expanded space suitable for commercial manufacturing, subject to FDA approval.

Our second manufacturing facility is located within our laboratory, research and manufacturing facilities at CSMC in Los Angeles, California pursuant to a Facilities Lease.

In that portion of the leased premises where we manufacture deramiocel, we believe that we follow current good manufacturing practices to the extent that they are applicable to the stage of our clinical programs, although our facility at CSMC is not current Good Manufacturing Practices (“cGMP”) qualified for commercial manufacturing.

We currently manufacture our exosome-based vaccine to support our collaboration with NIAID in a short-term leased facility located in Vista, California.

This facility supports clinical and potential commercial manufacturing activities for Deramiocel and was designed and constructed to comply with U.S.

Food and Drug Administration and European Medicines Agency (“EMA”) requirements, as well as current Good Manufacturing Practice (“cGMP”) standards.

The facility contains controlled cleanroom suites, quality control laboratories, and supporting infrastructure necessary for cell therapy manufacturing, testing, and release.

We believe this facility is capable of supporting initial commercial supply of Deramiocel, subject to regulatory approval.

In mid-2025, the FDA completed its Pre-License Inspection (“PLI”) of this facility in connection with our Biologics License Application for Deramiocel.

Following the inspection, the FDA issued Form 483 observations, to which we provided responses.

At this time, the FDA has accepted all of our responses to the observations noted during the PLI.

As part of our preparation for potential commercialization, in 2025 we entered into an amendment to our lease for our San Diego headquarters, adding approximately 22,000 square feet of additional space.

This expansion is intended to support future manufacturing scale-up, additional production suites, and expanded quality control and operational capabilities to accommodate enhanced capacity and anticipated commercial demand, subject to regulatory approval.

Our second manufacturing facility is located within our leased facilities at Cedars-Sinai Medical Center in Los Angeles, California.

In the portion of the leased premises where we manufacture Deramiocel, we believe that we follow current good manufacturing practices to the extent applicable to the stage of our clinical programs, although this facility is not cGMP-qualified for commercial manufacturing.

At this time, we do not plan to extend our lease at CSMC beyond mid-2026.

Manufacturing Process for Deramiocel

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We have also made significant progress planning the next steps for the manufacturing process for our exosome product candidates.

We believe these developments will enable us to scale up our manufacturing capabilities and allow us to manufacture enough material for early-stage clinical development, subject to FDA approval.

These developments have enabled us to scale up our manufacturing capabilities and allowed us to manufacture enough material for early-stage clinical development.

We have explored the use of various cell sources to generate our exosomes for preclinical and potential clinical use.

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We have forged productive collaborations with pharmaceutical and biotechnology companies, government agencies, academic laboratories, and research institutes with diverse area expertise and resources in as effort to advance our programs.

Commercialization and Distribution Agreement with Nippon Shinyaku (Territory:

United States)

Commercialization and Distribution Agreement (Nippon Shinyaku - United States)

On January 24, 2022, Capricor entered into a Commercialization and Distribution Agreement (the “U.S.

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Pursuant to the U.S.

Distribution Agreement, Capricor received an upfront payment of $30.0 million in 2022.

Distribution Agreement, Capricor received an upfront payment of $30.0 million.

The first milestone payment of $10.0 million was paid upon completion of the futility analysis of the HOPE-3 trial whereby the outcome was determined to be not futile.

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Subject to regulatory approval, Capricor will have the right to receive a share of product revenue which falls between 30 and 50 percent.

Commercialization and Distribution Agreement with Nippon Shinyaku (Territory:

Commercialization and Distribution Agreement (Nippon Shinyaku - Japan)

On February 10, 2023, Capricor entered into a Commercialization and Distribution Agreement (the “Japan Distribution Agreement”) with Nippon Shinyaku.

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In addition, Capricor or its designee will hold the Marketing Authorization in Japan if the product is approved in that territory.

Binding Term Sheet with Nippon Shinyaku (Territory:

European Region)

European Region Binding Term Sheet

On September 16, 2024, Capricor entered into a Binding Term Sheet (the “Term Sheet”) with Nippon Shinyaku for the commercialization and distribution of Deramiocel for the treatment of DMD in the European region, as defined in the Term Sheet.

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Subject to regulatory approval, Capricor would receive a double-digit share of product revenue and additional development and sales-based milestone payments.

If the definitive agreement is entered into on the same economic terms as the term sheet, Capricor will receive an upfront payment of $20.0 million upon execution of the definitive agreement, with potential additional development and sales-based milestone payments of up to $715.0 million.

If the definitive agreement is entered into, Capricor will receive an upfront payment of $20.0 million upon execution of the definitive agreement, with potential additional development and sales-based milestone payments of up to $715.0 million.

At this time, Capricor and Nippon Shinyaku have entered into various amendments to the Term Sheet, pursuant to which the parties agreed to extend the date during which the parties shall negotiate the definitive agreement to April 1, 2026.

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Department of Health and Human Services to advance a pipeline of new, innovative vaccines providing broader and more durable protection for COVID-19.

NIAID's DMID will oversee the study.

Under the terms of the collaboration, Capricor will be responsible for supplying investigational product for the trial.

As part of Project NextGen, the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, is conducting a Phase 1 clinical study with our StealthX™ vaccine.

NIAID's DMID is overseeing the study.

Under the terms of the collaboration, Capricor is responsible for supplying investigational product for the trial.

Intellectual Property Rights for Capricor’s Technology - Deramiocel and Exosomes

Capricor has entered into exclusive license agreements for intellectual property rights related to certain cardiac-derived cells with Università Degli Studi Di Roma La Sapienza (the “University of Rome”), JHU and CSMC.

Capricor has also entered into an exclusive license agreement for intellectual property rights related to exosomes with CSMC and JHU.

In addition, Capricor has filed patent applications related to the technology developed by its own scientists.

University of Rome License Agreement

Capricor and the University of Rome entered into a License Agreement, dated June 21, 2006 (the “Rome License Agreement”), which provides for the grant of an exclusive, world-wide, royalty-bearing license by the University of Rome to Capricor (with the right to sublicense) to develop and commercialize licensed products under the licensed patent rights in all fields.

Pursuant to the Rome License Agreement, Capricor paid the University of Rome a license issue fee, is currently paying minimum annual royalties in the amount of 20,000 Euros per year, and is obligated to pay a lower-end of a mid-range double-digit percentage on all royalties received as a result of sublicenses granted, which are net of any royalties paid to third parties under a license agreement from such third-party to Capricor.

The minimum annual royalties are creditable against future royalty payments.

The Rome License Agreement will, unless extended or sooner terminated, remain in effect until the later of the last claim of any patent or until any patent application comprising licensed patent rights has expired or been abandoned.

Under the terms of the Rome License Agreement, either party may terminate the agreement should the other party become insolvent or file a petition in bankruptcy.

Either party may terminate the agreement upon the other party’s material breach, provided that the breaching party will have up to 90 days to cure its material breach.

Capricor may also terminate the Rome License Agreement for any reason upon 90 days’ written notice to the University of Rome.

The Johns Hopkins University License Agreements

License Agreement for CDCs

Capricor is also a party to an exclusive license agreement for intellectual property rights related to exosomes with CSMC.

In addition, Capricor has filed solely-owned patent applications related to the CDC and exosomes technology developed by its own scientists.

The Johns Hopkins University License Agreement for CDCs

Capricor and JHU entered into an Exclusive License Agreement, effective June 22, 2006 (the “JHU License Agreement”), which provides for the grant of an exclusive, world-wide, royalty-bearing license by JHU to Capricor (with the right to sublicense) to develop and commercialize licensed products and licensed services under the licensed patent rights in all fields and a nonexclusive right to the know-how.

Various amendments were entered into to revise certain provisions of the JHU License Agreement.

Under the JHU License Agreement, Capricor is required to exercise commercially reasonable and diligent efforts to develop and commercialize licensed products covered by the licenses from JHU.

Under the JHU License Agreement, Capricor is required to exercise commercially reasonable and diligent efforts to develop and commercialize licensed products covered by the license from JHU.

Pursuant to the JHU License Agreement, JHU was paid an initial license fee and, thereafter, Capricor is required to pay minimum annual royalties on the anniversary dates of the JHU License Agreement.

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The maximum aggregate amount of milestone payments payable under the JHU License Agreement, as amended, is $1,850,000.

In March 2022, Capricor paid the $250,000 development milestone related to the Phase 2 study pursuant to the terms of the JHU License Agreement.

Capricor’s next milestone payments will be triggered, if at all, upon a successful completion of a full Phase 3 study, for which a payment of $500,000 will be due, and upon receipt of a full FDA market approval for which a payment of $1,000,000 will be due.

In December 2025, Capricor accrued the $500,000 development milestone related to the Phase 3 study pursuant to the terms of the JHU License Agreement.

Capricor’s next milestone payments will be triggered, if at all, upon receipt of a full FDA market approval for which a payment of $1,000,000 will be due.

The JHU License Agreement will, unless sooner terminated, continue in effect in each applicable country until the date of expiration of the last to expire patent within the patent rights, or, if no patents are issued, then for twenty years from the effective date.

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On March 7, 2022, Capricor entered into a non-exclusive cell line license agreement with Life Technologies Corporation, a subsidiary of Thermo Fisher Scientific, Inc., for the supply of certain cells which we are utilizing in connection with the development of our exosomes platform.

An initial license fee payment was made in 2022 and additional milestone fees may become due based on the progress of our development program.

An initial license fee payment was made and additional milestone fees may become due based on the progress of our development program.

University of Rome License Agreement

The minimum annual royalties are creditable against future royalty payments.

The Rome License Agreement remained in effect until the later of the last claim of any patent or until any patent application comprising licensed patent rights has expired or been abandoned.

The last-to-expire patent licensed under the Rome License Agreement expired on January 4, 2026.

Patents and Proprietary Rights

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As a result, biotechnology products are often protected by several families of patent filings that are made at different times in the development cycle and cover different aspects of the product.

Earlier filed broad patent applications directed to the discovery of the platform technology thus usually expire ahead of patents covering later developments such as

manufacturing processes, specific formulations, additional indications and dosing regimens.

Earlier filed broad patent applications directed to the discovery of the platform technology thus usually expire ahead of patents covering later developments such as manufacturing processes, specific formulations, additional indications and dosing regimens.

Patent expirations on products may therefore span several years and vary from country to country based on the scope of available coverage.

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Our product candidates and our technologies are primarily protected by composition of matter and process (methods of use and methods of making) patents and patent applications as well as trade secrets.

As of the date of this filing, we have 149 granted patents and pending patent applications covering processes and compositions of matter related to the CDC (deramiocel) technology as well as processes and compositions of matter related to exosome technologies.

As of the date of this filing, we have over 150 granted patents and pending patent applications covering processes and compositions of matter related to the CDC (Deramiocel) technology as well as processes and compositions of matter related to exosome technologies.

Regulatory Designations

Regulatory Designations for deramiocel for the treatment of DMD

Regulatory Designations for Deramiocel for the treatment of DMD and BMD

In 2015, the FDA granted Orphan Drug Designation to Deramiocel for the treatment of DMD.

Orphan drug designation is granted by the FDA’s Office of Orphan Drug Products to drugs intended to treat a rare disease or condition affecting fewer than 200,000 people in the United States or a disease or condition that affects more than 200,000 people in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug.

This designation confers special incentives to the drug developer, including tax credits on the clinical development costs and prescription drug user fee waivers and may allow for a seven-year period of market exclusivity in the United States upon FDA approval.

Orphan drug designation is granted by the FDA’s Office of Orphan Drug Products to drugs intended to treat a rare disease or condition affecting fewer than 200,000 people in the United States or a disease or condition that affects more than 200,000 people in the United States for which there is no reasonable expectation that the cost of developing and making the drug available in the United States will be recovered from sales in the United States.

This designation confers certain incentives to the drug developer, including potential tax credits for qualified clinical testing expenses, waiver of certain prescription drug user fees, and the potential for seven years of market exclusivity in the United States following FDA approval.

In Europe, Deramiocel has received Orphan Drug Designation as well as Advanced Therapy Medicinal Product (“ATMP”) designation.

In 2017, the FDA granted Rare Pediatric Disease Designation to Deramiocel for the treatment of DMD.

The FDA defines a “rare pediatric disease” as a serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years and that affects fewer than 200,000 individuals in the United States, or a disease or condition that affects more than 200,000 people in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug.

Under the FDA's Rare Pediatric Disease Priority Review Voucher program, upon the approval of a qualifying New Drug Application (“NDA”) or BLA for the treatment of a rare pediatric disease, the sponsor of such application would be eligible for a Rare Pediatric Disease Priority Review Voucher that can be used to obtain priority review for a subsequent NDA or BLA.

The Priority Review Voucher may be sold or transferred an unlimited number of times.

If Capricor were to receive market approval for deramiocel by the FDA, Capricor would be eligible to receive a Priority Review Voucher based on its designation as a rare pediatric disease.

In 2018, we were granted the Regenerative Medicine Advanced Therapy (“RMAT”) designation for deramiocel for the treatment of DMD.

The FDA grants the RMAT designation to regenerative medicine therapies intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition and for which preliminary clinical evidence indicates a potential to address unmet medical needs for that condition.

The RMAT designation makes therapies eligible for the same actions to expedite the development and review of a marketing application that are available to drugs that receive fast track or breakthrough therapy designation – including increased meeting opportunities, early interactions to discuss any potential surrogate or intermediate endpoints and the potential to support accelerated approval.

Deramiocel is one of the few therapies currently in development to help late-stage patients with DMD.

To receive the RMAT designation, we submitted data from the HOPE-Duchenne clinical trial.

The FDA defines a “rare pediatric disease” as a serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years and that affects fewer than 200,000 individuals in the United States, or a disease or condition that affects more than 200,000 individuals in the United States for which there is no reasonable expectation that development costs will be recovered from sales.

Under the FDA’s Rare Pediatric Disease Priority Review Voucher program, upon approval of a qualifying New Drug Application (“NDA”) or Biologics License Application for the treatment of a rare pediatric disease, the sponsor may be eligible to receive a Rare Pediatric Disease Priority Review Voucher.

Such a voucher may be used to obtain priority review for a subsequent NDA or BLA and may be transferred or sold.

If Capricor were to receive FDA approval for Deramiocel, we may become eligible to receive a Priority Review Voucher based on this designation.

In 2018, we were granted Regenerative Medicine Advanced Therapy (“RMAT”) designation for Deramiocel for the treatment of DMD.

The FDA grants RMAT designation to regenerative medicine therapies intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition and for which preliminary clinical evidence indicates the potential to address unmet medical needs.

RMAT designation provides opportunities for increased interaction with the FDA to facilitate development and review of the product candidate, including frequent meetings with the FDA, early discussions of potential surrogate or intermediate endpoints, and the potential eligibility for accelerated approval and priority review.

We received RMAT designation based on clinical data from the HOPE-Duchenne clinical trial.

Deramiocel has received Orphan Drug Designation from the FDA for the treatment of Becker muscular dystrophy.

Our trademarks are generally filed to protect our corporate brand, our products and our platform technologies.

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We are the owner of several common law, and federal trademark registrations or applications in the U.S.

including, but not limited to, Capricor®, Capricor Therapeutics, StealthX™, and the Capricor

including, but not limited to, Capricor®, Capricor Therapeutics, StealthX™, and the Capricor logo.

Trademark protection varies in accordance with local law, and continues in some countries as long as the trademark is used and in other countries as long as the trademark is registered.

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Our ongoing research and development activities primarily concern Deramiocel and exosomes and are focused on the characterization of their composition and actions, the evaluation of their therapeutic potential in selected disease settings, the development of next generation product candidates, and the identification of new technologies and indications.

We are engaged in fields that are characterized by extensive worldwide research and competition by pharmaceutical companies, medical device companies, specialized biotechnology companies, hospitals, physicians, academic institutions, government agencies and research organizations both in the United States and abroad.

There are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations that compete with us in developing various approaches to the treatment of DMD, which includes competitors both in the United States and internationally.

With deramiocel, we expect to face competition from existing products and products in development.

In addition, at this time, there are four FDA conditionally approved exon skipping drugs:

EXONDYS 51 (eteplirsen), AMONDYS 45 (casimersen) and VYONDYS 53 (golodirsen), which are phosphorodiamidate Morpholino oligomers (PMOs) approved for the treatment of DMD patients amenable to Exon 51, Exon 45 and Exon 53 skipping, respectively, and are marketed by Sarepta Therapeutics, Inc., and VILTEPSO (vitolarsen), a PMO approved for the treatment of DMD patients amenable to Exon 53 skipping, which is marketed by Nippon Shinyaku through its U.S.

subsidiary, NS Pharma, Inc.

Currently, Sarepta’s microdystrophin gene therapy, Elevidys (delandistrogene moxeparvovec) is approved for the treatment of ambulant individuals with Duchenne who are at least 4 years of age and conditionally approved for non-ambulant individuals with Duchenne.

There are multiple other companies focused on developing genetic based therapies that target dystrophin mechanisms and non-dystrophin mechanisms for the treatment of DMD.

Additionally, competition is particularly intense for products involving the treatment or prevention of diseases associated with COVID-19.

The pharmaceutical industry is highly competitive, with a number of established, large pharmaceutical companies, as well as many smaller companies being involved.

Many of the organizations competing with us have substantially greater financial resources, larger research and development staffs and facilities, longer drug development history in obtaining regulatory approvals, and greater manufacturing and marketing capabilities than we do.

We expect any future products and product candidates we develop to compete on the basis of, among other things, product efficacy and safety, time to market, price, extent of adverse side effects, and convenience of treatment procedures.

The biotechnology and pharmaceutical industries are subject to rapid and significant technological change.

The drugs that we are attempting to develop will have to compete with existing and future therapies.

Our future success will depend in part on our ability to maintain a competitive position with respect to evolving cell therapy and exosome technologies.

There can be no assurance that existing or future therapies developed by others will not render our potential products obsolete or noncompetitive.

In addition, companies pursuing different but related fields represent substantial competition.

These organizations also compete with us to attract patients for clinical trials, qualified personnel and parties for acquisitions, joint ventures, or other collaborations.

We are engaged in fields that are characterized by extensive worldwide research and competition.

We operate in highly competitive areas of biotechnology and pharmaceutical development characterized by extensive worldwide research conducted by pharmaceutical companies, biotechnology companies, academic institutions, government agencies and research organizations.

Many of these organizations have substantially greater financial resources, larger research and development staffs and facilities, longer histories of obtaining regulatory approvals and greater manufacturing and commercialization capabilities than we do.

Duchenne Muscular Dystrophy

There are numerous companies and research groups developing therapies for the treatment of DMD, including approaches that target the underlying genetic cause of the disease as well as therapies designed to address downstream muscle degeneration and associated complications.

Similar competitive dynamics exist for Becker muscular dystrophy, a related dystrophinopathy caused by mutations in the dystrophin gene that generally follows a slower disease progression but is also associated with progressive muscle degeneration and cardiomyopathy.

Several exon-skipping therapies have been approved by the FDA for the treatment of certain subsets of patients with DMD who have specific genetic mutations, including EXONDYS 51® (eteplirsen), AMONDYS 45® (casimersen), and VYONDYS 53® (golodirsen), which are phosphorodiamidate morpholino oligomers (“PMOs”) developed by Sarepta Therapeutics, Inc., and VILTEPSO® (viltolarsen), developed by Nippon Shinyaku Co., Ltd.

and marketed in the United States through its subsidiary NS Pharma, Inc.

These therapies are designed to restore partial dystrophin expression but are applicable only to certain genetically defined subsets of the DMD population.

Gene therapy approaches have also been developed with the goal of delivering functional microdystrophin genes to muscle cells.

ELEVIDYS® (delandistrogene moxeparvovec-rokl), developed by Sarepta Therapeutics, Inc., has been approved in the United States for certain individuals with DMD aged four years and older.

Despite recent therapeutic advances, DMD remains a progressive disease with significant unmet medical need, particularly with respect to preserving both skeletal muscle and cardiac function.

Deramiocel is designed to target inflammatory and fibrotic pathways that contribute to disease progression and may be complementary to mutation-targeted approaches.

Other Areas of Development

Competition also exists in other areas in which we are developing technologies, including exosome-based vaccines and therapeutics targeting infectious diseases such as SARS-CoV-2.

These programs compete with established pharmaceutical companies and biotechnology firms developing vaccines and biologics targeting similar pathogens.

More broadly, the biotechnology and pharmaceutical industries are subject to rapid technological change.

Our product candidates will compete with existing and future therapies based on factors including efficacy, safety, time to market, price, side-effect profile and convenience of administration.

Companies developing alternative technologies may also compete with us for clinical trial participants, qualified personnel and potential collaborators or strategic partners.

Government Regulation

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Failure to comply with the applicable U.S.

requirements may subject us to administrative or judicial sanctions, such as the FDA’s refusal to approve a pending NDA or a pending BLA, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.

requirements may subject us to administrative or judicial sanctions, such as the FDA’s refusal to approve

a pending NDA or a pending BLA, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.

We would also be facing additional regulations and requirements from regulatory authorities in other countries outside the U.S.

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If the FDA imposes a clinical hold, clinical trials can only proceed under terms authorized by the FDA.

If applicable, our preclinical and clinical studies must conform to the FDA’s Good Laboratory Practice (“GLP”), and Good Clinical Practice (“GCP”) requirements, respectively, which are designed to ensure the quality and integrity of submitted data and protect the rights and well-being of study patients.

and integrity of submitted data and protect the rights and well-being of study patients.

Information for certain clinical trials also must be publicly disclosed within certain time limits on the clinical trial registry and results databank maintained by the NIH.

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Under the Orphan Drug Act, the FDA may grant orphan drug designation to therapeutic candidates intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the U.S.

more than 200,000 individuals in the U.S.

or more than 200,000 individuals in the U.S.

and for which there is no reasonable expectation that the cost of developing and making available in the U.S.

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Currently, the Priority Review Voucher can be used to obtain priority review for any subsequent application and may be sold or transferred an unlimited number of times.

Congress has only authorized the rare pediatric disease priority review voucher program until September 30, 2024.

However, if a drug candidate receives Rare Pediatric Disease designation before September 30, 2024, it is eligible to receive a voucher if it is approved before September 30, 2026.

Congress has currently authorized the rare pediatric disease priority review voucher program until September 30, 2029.

Post-Approval Requirements

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Oftentimes, even after a drug has been approved by the FDA for sale, the FDA may require that certain post-approval requirements be satisfied, including the conduct of additional clinical studies.

If such post-approval requirements are not satisfied, the FDA may withdraw its approval of the drug.

In addition, holders of an approved NDA or BLA are required to report certain adverse reactions to the FDA, comply with certain requirements concerning advertising and promotional labeling for their products, and continue to have quality control and manufacturing procedures conform to

cGMP after approval.

If such post-approval requirements

are not satisfied, the FDA may withdraw its approval of the drug.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements.

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Third-party payors may limit coverage to specific products on an approved list or formulary, which might not include all of the FDA-approved products for a particular indication.

Also, third-party payors may refuse to include a particular branded drug on their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or another alternative is available.

Also, third-party

payors may refuse to include a particular branded drug on their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or another alternative is available.

Third-party payors are increasingly challenging the prices charged for medical products and services.

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After the NHI drug price is listed, the NHI price, which is the official price of drugs, will be reviewed and updated on a regular basis.

In principle, NHI price revisions are conducted once every two years in conjunction with the

April revision of medical fees.

In principle, NHI price revisions are conducted once every two years in conjunction with the April revision of medical fees.

When NHI drug prices are revised, most drugs will be priced lower than before the revision.

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Accordingly, the NHI drug price revisions every two years may lead to the cut of the drug price in Japan.

Other Healthcare Fraud and Abuse Laws

Healthcare Laws and Compliance Requirements

Although we currently do not have any products on the market and do not make patient referrals or bill Medicare, Medicaid, or other government or commercial third-party payors, our activities, including current and future arrangements with investigators, healthcare professionals, consultants, third-party payors and customers, may be subject to additional healthcare laws, regulations and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business.

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In addition, certain of our future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information, and other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law.

Penalties for federal civil False Claims Act violations may include up to three times the actual damages sustained by the government, plus mandatory civil penalties of between $14,308 and $28,619 per false claim or statement for penalties assessed after January 15, 2025 with respect to violations occurring after November 2, 2015.

Penalties for federal civil False Claims Act violations may include up to three times the actual damages sustained by the government, plus mandatory civil penalties of between $14,308 and $28,619 per false claim or statement for penalties assessed after July 3, 2025 with respect to violations occurring after November 2, 2015.

Other penalties include the potential for exclusion from participation in federal healthcare programs.

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federal criminal False Claims Act, which is similar to the federal civil False Claims Act and imposes criminal liability on those that make or present a false, fictitious or fraudulent claim to the federal government.

representations, or make or use any materially false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items, or services.

The Federal Criminal Statute on False Statements Relating to Health Care Matters makes it a crime to knowingly and willfully falsify, conceal, or cover up a material fact, make any materially false, fictitious, or fraudulent statements or representations, or make or use any materially false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items, or services.

Federal Civil Monetary Penalties Law (the “CMPL") authorizes the imposition of substantial monetary penalties against an entity, such as a pharmaceutical manufacturer, that engaged in activities including, among others (1) knowingly presenting, or causing to be presented, a claim for services not provided as claimed or that is otherwise false or fraudulent in any way;

(2) arranging for or contracting with an individual or entity that is excluded from participation in federal health care programs to provide items or services reimbursable by a federal health care program;

(2) arranging for or contracting with an individual or entity that is excluded from participation in federal healthcare programs to provide items or services reimbursable by a federal healthcare program;

(3) violations of the federal Anti-Kickback Statute;

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In addition, many state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways, are often not pre-empted by HIPAA, and may have a more prohibitive effect than HIPAA, thus complicating compliance efforts.

For instance, the California Consumer Privacy Act (“CCPA”) became effective on January 1, 2020, giving California residents expanded privacy rights, and requiring

businesses to provide detailed information about their data practices.

For instance, the California Consumer Privacy Act (“CCPA”) became effective on January 1, 2020, giving California residents expanded privacy rights, and requiring businesses to provide detailed information about their data practices.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

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Additionally, the U.S.

federal Physician Payments Sunshine Act (the “Sunshine Act”), created under the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report annually to Centers for Medicare and Medicaid Services (“CMS”) information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists, and licensed chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified nurse anesthetists, certified nurse-midwives and U.S.

teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.

federal Physician Payments Sunshine Act (the “Sunshine Act”) and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, among others, track and report annually to the Centers for Medicare and Medicaid Services (“CMS”) information related to all payments or other transfers of value made to U.S.-licensed physicians (defined to include doctors, dentists, optometrists, podiatrists, and licensed chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified nurse anesthetists, certified nurse-midwives and U.S.

teaching hospitals, as well as track and report annually certain ownership and investment interests held by U.S.-licensed physicians and their immediate family members, unless an exception applies.

Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties of up to an aggregate of $150,000 (adjusted annually for inflation) per year and up to an aggregate of $1,000,000 (adjusted annually for inflation) per year for “knowing failures.” Covered manufacturers are required to submit reports on aggregate payment data to the Secretary of the U.S.

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Additionally, to the extent that we have business operations in foreign countries or sell any of our products in foreign countries and jurisdictions, including Japan or the European Union, we may be subject to additional regulations.

Although we do not currently have any products on the market, once our product candidates or clinical trials are covered by federal health care programs, we will be subject to additional healthcare statutory and regulatory requirements and enforcement by the federal and state governments of the jurisdictions in which we conduct our business.

Although we do not currently have any products on the market, once our product candidates or clinical trials are covered by federal healthcare programs, we will be subject to additional healthcare statutory and regulatory requirements and enforcement by the federal and state governments of the jurisdictions in which we conduct our business.

Because we intend to commercialize products that could be reimbursed under a federal healthcare program and other governmental healthcare programs, we intend to develop a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program requirements to which we will or may become subject.

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If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject, without limitation, to significant civil, criminal and administrative penalties, damages, fines, individual imprisonment, disgorgement, exclusion from participation in federal and state healthcare programs, reputational harm, diminished profits and future earnings, additional oversight and reporting obligations pursuant to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with applicable laws and regulations, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

Additionally, we expect our products, if and when approved, may be eligible for coverage under Medicare, the federal health care program that provides health care benefits to the aged and disabled, and covers outpatient services and supplies, including certain pharmaceutical products, that are medically necessary to treat a beneficiary’s health condition.

Additionally, we expect our products, if and when approved, may be eligible for coverage under Medicare, the federal healthcare program that provides health care benefits to the aged and disabled, and covers outpatient services and supplies, including certain pharmaceutical products, that are medically necessary to treat a beneficiary’s health condition.

In addition, our products may be covered and reimbursed under other government programs, such as Medicaid and the 340B Drug Pricing Program.

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In the United States and foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to healthcare systems that could affect our future results of operations.

In the United States, the pharmaceutical industry has been a particular focus of healthcare reform efforts and has been significantly affected by major legislative and regulatory initiatives, including the ACA, which has had, and is expected to continue to have, a significant impact on the healthcare industry.

In the United States, the pharmaceutical industry has been a particular focus of healthcare reform efforts and has been significantly affected by major legislative and regulatory initiatives.

For example, the ACA included significant changes to the coverage and payment for pharmaceutical products under government healthcare programs.

This law was designed to expand access to health insurance coverage for uninsured and underinsured individuals while at the same time containing overall healthcare costs.

With regard to pharmaceutical products, among other things, the ACA contains provisions that may potentially affect the profitability of our products, including, for example, subjecting biologics potential competition by lower-cost biosimilars, increased rebates for products sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, expansion of entities eligible for discounts under the Public Health Service’s pharmaceutical pricing program, and a significant annual fee on companies that manufacture or import certain branded prescription drug products.

Additionally, there have been executive, judicial, and legislative challenges to certain aspects of the ACA.

For example, while Congress has not passed legislation to comprehensively repeal the ACA, the Tax Cuts and Jobs Act included a provision that, effective January 1, 2019, changed to $0 the tax-based shared responsibility payment imposed by ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year, which is commonly referred to as the “individual mandate.” Additionally, in March 2021, Congress enacted the American Rescue Plan Act of 2021, which included among its provisions a temporary increase in premium tax credit assistance for individuals eligible to receive qualified health plan premium subsidies for 2021 and 2022 and temporarily removed the 400% federal poverty level limit that otherwise applies for purposes of eligibility to receive premium such tax credits.

The Inflation Reduction Act of 2022 (“IRA”) extended this increased tax credit assistance and removal of the 400% federal poverty limit through 2025.

Moreover, on June 17, 2021, the U.S.

Supreme Court dismissed a judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted.

For example, the Budget Control Act of 2011 included reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislation, will stay in effect into through the first eight months of the fiscal year 2032 sequestration order (with the exception of a temporary suspension, and subsequent reduction, due to the COVID-19 pandemic).

The ACA and certain of its provisions have been subject to judicial challenges as well as legislative and regulatory efforts to repeal or replace them or to alter their interpretation or implementation.

For example, on June 17, 2021, the U.S.

Supreme Court dismissed a judicial challenge to the ACA brought by several states who argued that without the individual mandate, the entire ACA was unconstitutional.

The Supreme Court’s dismissal of the lawsuit did not specifically rule on the constitutionality of the ACA.

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted.

For example, through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislation, will stay in effect through the first eleven months of fiscal year 2032, unless additional Congressional action is taken (with the exception of a temporary suspension, and subsequent reduction, due to the COVID-19 pandemic).

Additionally, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

In the future, there may be additional challenges and/or amendments to the ACA.

It remains to be seen precisely what any new legislation will provide, when or if it will be enacted, and what impact it may have on the availability and cost of healthcare items and services, including drug products.

In addition, in recent years the pricing and costs of prescription pharmaceuticals has been the subject of considerable discussion in the United States.

A number of federal reports and inquiries have focused on these issues, and various legislative and regulatory provisions have been proposed and enacted at the federal and state level that seek to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the out-of-pocket cost of prescription drugs, and reform government program reimbursement methodologies for drugs.

For example, on December 21, 2020, Congress passed a $900 billion U.S.

coronavirus relief and

government appropriations legislation, the Consolidated Appropriations Act of 2021, which contains several important new drug price reporting and transparency measures that could result in additional transparency with respect to manufacturers’ prescription drug prices.

Among other things, the Act includes provisions requiring Medicare Part D prescription drug plan (the “PDP”) sponsors and Medicare Advantage organizations (“MAOs”) to implement tools to display Medicare Part D prescription drug benefit information in real time and provisions requiring group and health insurance issuers offering health insurance coverage to report information on certain pharmacy benefit and drug costs to the Secretaries of HHS, Labor, and the Treasury.

Additionally, the American Rescue Plan Act of 2021 included among its provisions a sunset of the ACA’s cap on pharmaceutical manufacturers’ rebate liability under the Medicaid Drug Rebate Program.

Under the ACA, manufacturers’ rebate liability was previously capped at 100% of the average manufacturer price for a covered outpatient drug.

However, effective January 1, 2024, manufacturers’ Medicaid Drug Rebate Program rebate liability is no longer be capped, potentially resulting in a manufacturer paying more in Medicaid Drug Rebate Program rebates than it receives on the sale of certain covered outpatient drugs.

Further, in August 2022, former President Biden signed into law IRA, which implements substantial changes to the Medicare program, including drug pricing reforms and the creation of new Medicare inflation rebates.

Namely, the IRA imposes inflation rebates on drug manufacturers for products reimbursed under Medicare Parts B and D if the prices of those products increase faster than inflation;

implements changes to the Medicare Part D benefit that, beginning in 2025, cap beneficiary annual out-of-pocket spending at $2,000, while imposing new discount obligations for pharmaceutical manufacturers;

and, beginning in 2026, establishes a “maximum fair price” for a fixed number of high expenditure pharmaceutical and biological products covered under Medicare Parts B and D following a price negotiation process with the CMS.

Since its enactment, CMS has taken steps to implement various drug pricing provisions of the IRA.

This includes, without limitation, releasing the negotiated maximum prices, which will be effective in 2026, for the first ten drugs that were subject to the IRA’s negotiation process, releasing quarterly lists of Medicare Part B products that are subject to adjusted coinsurance rates based on the inflationary rebate provisions of the IRA, and announcing a list of fifteen additional drugs that will be subject to price negotiations during 2025.

Several pharmaceutical manufacturers and other industry stakeholders have challenged the law, including through lawsuits brought against the Department of Health and Human Services, the Secretary of the Department of Health and Human Services, CMS, and the CMS Administrator challenging the constitutionality and administrative implementation of the IRA’s drug price negotiation provisions.

We cannot predict whether the IRA, or any of its component parts, will be overturned, repealed, replaced, or amended nor can we predict the likelihood, nature, or extent of other health reform initiatives that may arise from future legislation, administrative, or other action.

However, we expect these initiatives to increase pressure on drug pricing.

There have also been administrative developments in the U.S.

related to drug pricing.

For example, on February 14, 2023, the Department of Health and Human Services issued a report which, among other things, selects three potential drug affordability and accessibility models to be tested by the CMS Innovation Center.

Specifically, the report addresses:

(1) a model that would allow Part D Sponsors to establish a “high-value drug list” setting the maximum co-payment amount for certain common generic drugs at $2;

(2) a Medicaid-focused model that would establish a partnership between CMS, manufacturers, and state Medicaid agencies that would result in multi-state outcomes-based agreements for certain cell and gene therapy drugs;

and (3) a model that would adjust Medicare Part B payment amounts for Accelerated Approval Program drugs to advance the developments of novel treatments.

We cannot predict what other healthcare reforms will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation.

Accordingly, we face uncertainties that might result from additional reforms.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control biopharmaceutical and biologic product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize any product that is ultimately approved, if approved.

In addition, several recently passed state laws require disclosures related to state agencies and/or commercial purchasers with respect to certain price increases that exceed a certain level as identified in the relevant statutes.

Another emerging trend at the state level is the establishment of prescription drug affordability boards, some of which will prospectively permit certain states to establish upper payment limits for drugs that the state has determined to be “high-cost.” Some of these laws and regulations contain ambiguous requirements that government officials have not yet clarified.

Moreover, there have been several recent U.S.

Congressional inquiries and proposed federal legislation designed to, among other things, bring more transparency to pharmaceutical and biological product pricing, reduce the cost of prescription drugs and biological products under Medicare, and reform government program reimbursement methodologies for drug and biological products.

For example, in August 2022, former President Biden signed into law the IRA, which implements substantial changes to the Medicare program, including drug pricing reforms and changes to the Medicare Part D benefit design.

Among other reforms, the IRA imposes inflation rebates on drug and biological product manufacturers for products reimbursed under Medicare Parts B and D if the prices of those products increase faster than inflation;

implements changes to the Medicare Part D benefit that cap beneficiary annual out-of-pocket spending at $2,000 (adjusted annually for inflation), with new discount obligations for pharmaceutical manufacturers;

and establishes a “maximum fair price” for a fixed number of high expenditure pharmaceutical and biological products covered under Medicare Parts B and D following a price negotiation process with the CMS.

CMS continues to take steps to implement the IRA.

This includes, without limitation, negotiating and publishing “maximum fair prices” for drugs selected under the IRA’s price negotiation framework and releasing quarterly lists of Medicare Part B products and annual lists of Medicare Part D products that are subject to adjusted coinsurance rates based on the inflationary rebate provisions of the IRA.

it remains to be seen how the drug pricing provisions imposed by the IRA will affect the broader pharmaceutical industry, several pharmaceutical manufacturers and other industry stakeholders have challenged the law, including through lawsuits brought against the U.S.

Department of Health and Human Services, the Secretary of the Department of Health and Human Services, CMS, and the CMS Administrator challenging the constitutionality and administrative implementation of the IRA’s drug price negotiation provisions.

Additionally, when originally enacted, the IRA explicitly excluded from price negotiation orphan drugs designated for only one rare disease or condition and for which the only active approved indication is for such disease or condition.

However, the One Big Beautiful Bill Act (“OBBBA”) signed into law on July 4, 2025, amended the applicable statute to broaden the orphan drug exclusion such that products with more than one orphan designation and more than one approved indication will remain exempt from price negotiation, so long as each approved indication is for a rare disease or condition.

The OBBBA also postpones the start of price negotiation requirements for drugs and biologics with orphan designations until the product receives approval for a non-orphan indication.

The current presidential administration has also signaled its intent to pursue additional healthcare reform measures, including those aimed at reducing prescription drug prices, through various means, including presidential executive orders and agency action.

These efforts include, among other things, proposals to establish a “most favored nation” drug pricing policy that would tie U.S.

drug prices to the prices paid for drugs in other countries.

It remains to be seen how these drug pricing initiatives will affect the broader pharmaceutical industry.

At the state level, individual states in the U.S.

have increasingly passed legislation and implemented regulations designed to control biopharmaceutical and biologic product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

In addition, several state laws require disclosures related to state agencies and/or commercial purchasers with respect to certain price increases and new product launches that exceed certain pricing thresholds as identified in the relevant statutes.

Some states have also established prescription drug affordability boards that are tasked with identifying certain high-cost prescription products that may pose affordability challenges for consumers and payers, conducting cost reviews on such products, and, in some circumstances, imposing upper payment limits on such products.

Some of these laws and regulations contain ambiguous requirements that government officials have not yet clarified.

Given the lack of clarity in the laws and their implementation, our future reporting actions could be subject to the penalty provisions of the pertinent federal and state laws and regulations.

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For example, on June 28, 2024, the U.S.

Supreme Court issued an opinion holding that courts reviewing agency action pursuant to the Administrative Procedure Act (“APA”) “must exercise their independent judgment” and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” The decision will have a significant impact on how lower courts evaluate challenges to agency interpretations of law, including those by CMS and other agencies with significant oversight of the healthcare industry.

Supreme Court issued an opinion holding that courts reviewing agency action pursuant to the Administrative Procedure Act (“APA”) “must exercise their independent judgment” and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” The decision may have a significant impact on how lower courts evaluate challenges to agency interpretations of law, including those by CMS and other agencies with significant oversight of the healthcare industry.

The new framework is likely to increase both the frequency of such challenges and their odds of success by eliminating one way in which the government previously prevailed in such cases.

As a result, significant regulatory policies may be subject to increased litigation and judicial scrutiny.

In addition, federal agency priorities, leadership, policies, rulemaking, communications, spending, and staffing may be significantly impacted by election cycles, including, for example, the current presidential administration’s commitment to significantly reduce government spending through cuts to federal healthcare programs and reductions in the workforces of key government agencies, such as the U.S.

In addition, federal agency priorities, leadership, policies, rulemaking, communications, spending, and staffing may be significantly impacted by election cycles.

For example, the current presidential administration has signaled its continued commitment to significantly reduce government spending through cuts to federal healthcare programs and reductions in the workforces of key government agencies, such as the U.S.

Department of Health and Human Services, FDA, and CMS.

Efforts by the current administration to limit federal agency budgets or personnel may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates.

Efforts by the current administration to further limit federal agency budgets or personnel may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates.

Any resulting changes in regulation may result in unexpected delays, increased costs, or other negative impacts on our business that are difficult to predict.

Human Capital Resources

As of December 31, 2025, we had 231 employees, all of whom were full-time employees, and 59 of whom held advanced degrees.

Our employees support research and development, technical operations and manufacturing, quality, regulatory, clinical, commercial readiness, and general and administrative activities.

Our business and future growth depend on our ability to attract, develop and retain highly qualified personnel in a competitive market for scientific, technical, manufacturing, quality, regulatory, and commercial talent.

Consistent with this objective, we seek to provide competitive compensation and benefits, performance-based incentives, equity, and professional development opportunities intended to support employee engagement and retention.

We also utilize third-party consultants and service providers in selected areas to supplement internal capabilities and provide specialized expertise, while continuing to evaluate the appropriate balance between internal resources and outsourced support based on business needs.

None of our employees are represented by a labor union or covered by a collective bargaining agreement.

We have not experienced any material work stoppages and believe our relations with our employees are satisfactory.

Corporate Information

Our corporate and research headquarters are located at 10865 Road to the Cure, Suite 150, San Diego, California 92121.

Our corporate and research headquarters are located at 10865 Road to the Cure, San Diego, California 92121.

Our telephone number is (858) 727-1755 and our internet address is www.capricor.com .

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We have included our website address in this Annual Report on Form 10-K solely as an inactive textual reference.

As of December 31, 2024, we had 160 employees, all of whom are full-time employees with 44 holding advanced degrees.

None of our employees are covered by a collective bargaining agreement.

We believe that our relations with our employees are satisfactory.

We have also retained several consultants to perform various operational and administrative functions.

Certain officers of Capricor are also serving as officers of the Company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business