What changed in this filing

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Item 1A. Risk Factors

2025-03-26 compared with 2024-03-11 · 249 added, 190 removed, 1008 unchanged (30% of the section changed)

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Risks Related to Our Business

● substantial additional funding is needed to complete the development of our product candidates;

● substantial additional funding is needed to complete the development and commercialization of our product candidates within and outside the United States;

● the Company has incurred significant losses and may never be profitable;

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● delays in commencement, enrollment, and completion of clinical testing could result in increased costs to us and delay or limit our ability to obtain regulatory approval for our product candidates;

● our exosome technologies are unproven in their ability to achieve sufficient biological activity or scale in development to date;

● we may not be able to manufacture deramiocel in sufficient quantities to meet market demand;

● product candidates can fail to meet their efficacy endpoints at any time during the clinical development process, which would likely make them ineligible for becoming commercial products;

● we may not be able to use our facilities to manufacture CAP-1002 product for commercial purposes;

● we may be required to obtain consent from CSMC in order to sell commercial product from our Los Angeles facility;

● we may not be able to satisfy clinical and/or regulatory requirements necessary for the approval of our product in the U.S.

● we may not be able to satisfy clinical and/or regulatory requirements necessary for the approval of our product in the U.S., Europe, Japan or other select territories;

● we may not be able to reach the milestones set forth in our distribution agreements therefore preventing us from receiving the financial benefits of those agreements;

● our exosome technologies are unproven in their ability to achieve sufficient biological activity or scale in development to date;

● our partners may not perform as expected and therefore deny us the financial benefits of those agreements.

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● we will depend on the ability of Nippon Shinyaku to perform according to the terms of the U.S.

Distribution and Japan Distribution Agreements and all applicable laws, and to successfully commercialize our lead product CAP-1002 in DMD.

Distribution and Japan Distribution Agreements and all applicable laws, and to successfully commercialize our lead product deramiocel in DMD.

Risks Related to Competitive Factors

● our products will likely face intense competition;

● our products, if approved, will likely face intense competition;

● any of our product candidates for which we receive regulatory approval may not achieve broad market acceptance, which could limit the revenue that we will generate from their sales, if any.

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If we are unable to obtain such additional capital, we will be forced to delay, reduce or eliminate our product development and clinical programs and may not have the capital required to otherwise operate our business.

Developing biopharmaceutical products, including conducting preclinical studies and clinical trials and establishing manufacturing capabilities, is expensive.

Developing biopharmaceutical products, including conducting preclinical studies and clinical trials and establishing manufacturing capabilities and commercialization infrastructure, is expensive.

As of December 31, 2024, we had cash, cash equivalents, and marketable securities totaling approximately $151.5 million.

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From inception, we have financed our operations through private and public sales of our equity securities, government grants and payments from distribution agreements and collaboration partners.

As we have not generated any revenue from the commercial sale of our products to date, and we do not expect to generate revenue for several years, if ever, we will need to raise substantial additional capital in order to fund our general corporate activities and to fund our research and development, including our long-term plans for clinical trials and new product development.

We may seek to raise additional funds through various potential sources, such as equity and debt financings, or through strategic collaborations and license agreements.

We can give no assurances that we will be able to secure such additional sources of funds to support our operations or, if such funds are available to us, that such additional financing will be sufficient to meet our needs.

Moreover, to the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional significant dilution, and debt financing, if available, may involve restrictive covenants.

To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product candidates, or grant licenses on terms that may not be favorable to us.

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Our future funding requirements will depend on many factors, including, but not limited to:

● the scope, rate of progress, cost and results of our research and development activities, especially our CAP-1002 and exosomes programs;

● the next steps in the development of our DMD program, which includes our HOPE-3 clinical trial for our CAP-1002 product candidate for DMD;

● the availability of funding from government programs including the NIH, DoD, and CIRM, if applicable;

● our ability to receive regulatory approval or commercialize our product candidates, within and outside the United States;

● the next steps in the regulatory and commercial development of our DMD program;

● the scope, rate of progress, cost and results of our research and development activities, especially our deramiocel and exosomes programs;

● the costs of developing adequate manufacturing processes and facilities;

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and internationally;

● the availability of funding and clinical trial sponsorship from government programs including NIAID, the NIH, DoD, and CIRM, if applicable;

● the effect of competing technological and market developments;

● the terms and timing of any collaboration, licensing or other arrangements that we may establish;

● our ability to manufacture commercial-scale GMP CAP-1002 product at our San Diego manufacturing facility;

● our ability to manufacture commercial-scale GMP deramiocel product at our San Diego manufacturing facility;

● the cost and timing of technology transfer for, and completion of, clinical and commercial-scale outsourced manufacturing activities;

● the costs of establishing sales, marketing and distribution capabilities, as applicable, for any product candidates for which we may receive regulatory approval;

If our business plans are not successful, we may not be able to continue operations as a going concern and our stockholders may lose their entire investment in us.

Our audited financial statements include a statement that there is substantial doubt about our ability to continue as a going concern.

We have historically incurred substantial losses to fund our business operations including our research and development activities and more recently manufacturing scale-up activities.

We will, in all likelihood, sustain operating expenses without corresponding revenues for the foreseeable future.

This may result in our incurring net operating losses that will increase continuously until we are able to obtain regulatory approval for, and commercialize, our product candidates, the occurrence of which cannot be assured.

While we have historically been able to adjust the timing associated with our R&D efforts, as well as reducing headcount and implementing certain budget restrictions, to alleviate

uncertainties surrounding our ability to continue as a going concern, if ultimately we cannot continue as a going concern, our stockholders may lose their entire investment in us.

● the impact, if any, of any new programs initiated by the Trump administration and the reduction in force of government staffing, as well as proposed reductions in funding for programs in support of research and development of product and vaccine candidates.

We have a history of net losses, and we expect losses to continue for the foreseeable future.

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● delays in the commencement, enrollment, and timing of clinical testing;

● the viability of CAP-1002 as a potential product candidate and its development through all stages of clinical development;

● the viability of deramiocel as a potential product candidate and its development through all stages of clinical development;

● the viability of our exosome technologies as potential product candidates and the advancement of our exosome technologies through all stages of its preclinical and clinical development;

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● our ability to establish an effective sales and marketing infrastructure once our products are commercialized, as necessary or to establish partnerships with other companies who have greater sales and marketing capabilities;

● the ability of our distribution partner, Nippon Shinyaku, to successfully market and sell our CAP-1002 product if and to the extent it is approved;

● our ability to establish or maintain collaborations, licensing or other arrangements, including strategic partnerships for CAP-1002 outside of DMD and our exosomes technologies;

● the ability of our distribution partner, Nippon Shinyaku, to successfully market and sell our deramiocel product if and to the extent it is approved;

● our ability to establish or maintain collaborations, licensing or other arrangements, including strategic partnerships for deramiocel outside of DMD and our exosome technologies;

● our ability and third parties’ abilities to obtain and protect intellectual property rights;

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● the ability of members of our senior management to manage our business and operations.

The Company’s technology is not yet proven and each of our product candidates is still in clinical or preclinical development .

The Company’s product candidates, CAP-1002 and our exosome technologies, are in development and each requires further and, in some cases, extensive clinical testing before it may be approved by the FDA, or another regulatory authority in a jurisdiction outside the United States, which could take several years to complete, if ever.

The Company’s failure to establish the efficacy of its technologies would have a material adverse effect on the Company.

We cannot predict with any certainty the results of such clinical testing, including the results of our ongoing Phase 3 trial of our CAP-1002 product candidate for DMD.

Additionally, we cannot predict with any certainty if, or when, we might commence any additional clinical trials of our product candidates, whether we will be able to secure additional strategic partners, or whether our current trials will yield sufficient data to permit us to proceed with additional clinical development and ultimately submit an application for regulatory approval of our product candidates in the United States or abroad, or whether such applications will be accepted by the appropriate regulatory agencies.

We are also unable to predict whether our preclinical studies of our exosomes products will result in a viable clinical development program.

The Company’s cell therapy technology (deramiocel) is in late-stage development but not yet an approved product, and its exosome technology is still in preclinical development .

The Company’s deramiocel technology is in late-stage development and may require further clinical testing before it may be approved by the FDA, or another regulatory authority in a jurisdiction outside the United States, which could take several years to complete, if ever.

The Company’s failure to establish efficacy of deramiocel would have a material adverse effect on the Company.

We cannot predict with any certainty the results of such clinical testing, including the results of our ongoing Phase 3 trial of our deramiocel product candidate for DMD.

Additionally, we cannot predict with any certainty if, or when, we might commence any clinical trials of our exosome product candidates, whether we will be able to secure additional strategic partners, or whether our current trials will yield sufficient data to permit us to proceed with additional clinical development and ultimately submit an application for regulatory approval of our exosome product candidates in the United States or abroad, or whether such applications will be accepted by the appropriate regulatory agencies.

Our business depends entirely on the successful development and commercialization of our product candidates.

We currently have no products approved for sale and generate no revenues from sales of any products, and we may never be able to develop a marketable product.

Our product candidates will require additional clinical development, evaluation of clinical, preclinical and manufacturing activities, marketing approval in multiple jurisdictions, substantial investment and significant marketing efforts before we generate any revenues from product sales.

We are not permitted to market or promote our product candidates before we receive marketing approval from the FDA and comparable foreign regulatory authorities, and we may never receive such marketing approvals.

We are also unable to predict whether our preclinical studies of our exosomes products will result in a viable clinical development program.

Our product candidates may, or in some cases, will require additional clinical development, evaluation of clinical, preclinical and manufacturing activities, marketing approval in multiple jurisdictions, substantial investment and significant marketing efforts before we generate any revenues from product sales.

The success of our product candidates will depend on several factors, including the following:

● our ability to demonstrate our products’ safety, tolerability and efficacy to the FDA or any comparable foreign regulatory authority for marketing approval;

● successful and timely completion of our clinical trials;

● initiation and successful patient enrollment and completion of additional clinical trials on a timely basis;

● the impact of COVID-19 or some other infectious disease outbreak on our operations, ability to conduct clinical trials and on the ability of our regulators to review and approve or authorize our products;

● our ability to demonstrate our products’ safety, tolerability and efficacy to the FDA or any comparable foreign regulatory authority for marketing approval;

● timely receipt of marketing approval for our products;

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● establishment of arrangements with potential manufacturers who are able to develop, validate and maintain a commercially viable manufacturing process that is compliant with cGMP at a scale sufficient to meet anticipated demand and over time enable us to reduce our cost of manufacturing, if necessary;

● establishment of scaled production arrangements with third-party manufacturers to obtain finished products that are compliant with cGMP and appropriately packaged for sale;

● successful launch of commercial sales following marketing approval;

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● the availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and competing treatments;

● the impact of infectious disease outbreaks or pandemics on our operations, ability to conduct clinical trials and on the ability of our regulators to review and approve or authorize our products;

● our ability to compete with other therapies;

● our ability to conduct post-marketing surveillance and comply with requirements of FDA and other comparable regulatory authorities after product approval.

We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing, distribution and sales efforts of any future collaborator.

Accordingly, we cannot assure you that we will ever be able to generate revenue through the sale of our products.

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A significant natural disaster, such as an earthquake, flood or fire, occurring at our headquarters or manufacturing facilities, or at the facilities of any third-party manufacturer or vendor, could have a material adverse effect on our business, financial condition and results of operations.

In addition, outbreaks of viruses, infectious diseases or pandemics (including, for example, the outbreak of the novel coronavirus (COVID-19), terrorist acts or acts of war targeted at the United States, and specifically in the California region, or geopolitical conflicts, such as the Russia-Ukraine conflict and the conflicts in the Middle East, could cause damage or disruption to us, our employees, facilities, contractors and collaborators, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, outbreaks of viruses, infectious diseases or pandemics (including, for example, the outbreak of the novel coronavirus (COVID-19)), terrorist acts or acts of war targeted at the United States, and specifically in the California region, or geopolitical conflicts, such as the Russia-Ukraine conflict and the conflicts in

the Middle East, could cause damage or disruption to us, our employees, facilities, contractors and collaborators, which could have a material adverse effect on our business, financial condition and results of operations.

A breakdown, corruption or breach of our information technology systems or computer systems, or those used or hosted by our CROs, contractors, consultants or third-party vendors could subject us to liability or interrupt the operation of our business.

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While we have not experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations.

For example, the loss of

clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates could be significantly delayed.

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We will need FDA approval to market and sell any of our product candidates in the United States and approvals from FDA-equivalent regulatory authorities in foreign jurisdictions to commercialize our product candidates in those jurisdictions.

In order to obtain FDA approval of any of our product candidates, we must submit to the FDA an NDA or BLA demonstrating that the product candidate is safe for humans and effective for its intended use.

This demonstration requires significant research and animal testing, which are referred to as preclinical studies, as well as human testing, which are referred to as clinical trials.

In order to obtain FDA approval of any of our product candidates, we submitted to the FDA a BLA for potential approval of deramiocel, which BLA has been accepted by the FDA for review.

This application requires significant research and animal testing, which are referred to as preclinical studies, as well as human testing, which are referred to as clinical trials.

Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity, and novelty of the product candidate, and requires substantial resources for research, development, testing and manufacturing.

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The approval process may also be delayed by changes in government regulation, future legislation, administrative action or changes in FDA policy that occur prior to or during our regulatory review.

Even if we comply with all FDA requests, the FDA may ultimately reject one or more of our NDAs or BLAs, as applicable.

Even if we comply with all FDA requests, the FDA may ultimately reject one or more of our BLAs or NDAs, as applicable.

We cannot be sure that we will ever obtain regulatory clearance for our product candidates.

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We have limited experience in conducting late-stage clinical trials, which are complex and subject to strict regulatory oversight.

We have limited late-stage clinical trial experience with respect to its product candidates.

We have limited late-stage clinical trial experience with respect to our product candidates.

The clinical testing process is governed by stringent regulations and is highly complex, costly, time-consuming, and uncertain as to outcome, and pharmaceutical products and products used in the regeneration of tissue may invite particularly close scrutiny and requirements from the FDA and other regulatory bodies.

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● impairment of our business reputation;

● loss of revenues;

● the inability to commercialize our product candidates.

● loss of potential revenues resulting from the inability to commercialize our product candidates.

As the results of earlier preclinical studies or clinical trials are not necessarily predictive of future results, any product candidate we advance into clinical trials may not have favorable results in later clinical trials or receive regulatory approval.

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This failure would cause us to abandon a product candidate and may delay development of other product candidates.

Any delay in, or termination of, our clinical trials will delay or cause us to refrain from the filing of our NDAs and/or BLAs with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues.

Any delay in, or termination of, our clinical trials will delay or cause us to refrain from the filing of our BLAs and/or NDAs with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues.

In addition, our clinical trials to date involve small patient populations.

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Exosome-based therapeutics and vaccines are novel and unproven therapies which may not gain the acceptance of the public, patients or the medical community.

To date, efforts by others to leverage natural exosomes have generally demonstrated an inability to generate exosomes with predictable biologically active properties or to manufacture exosomes at suitable scale to treat more than a small number of patients.

To date, efforts by others to leverage natural exosomes have generally

demonstrated an inability to generate exosomes with predictable biologically active properties or to manufacture exosomes at suitable scale to treat more than a small number of patients.

Our success will depend on our ability to demonstrate that our exosome technologies can overcome these challenges.

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Unfavorable future trial results or other factors, such as insufficient capital to continue development of a product candidate or program, could also cause us to voluntarily withdraw an effective IND.

Delays in the commencement, enrollment, and completion of clinical testing could result in increased costs to us and delay or limit our ability to obtain regulatory approval for our product candidates.

Delays in the commencement, enrollment, and completion of clinical testing, as well as reduced government funding of certain clinical trials, could result in increased costs to us and delay or limit our ability to obtain regulatory approval for our product candidates.

Delays in the commencement, enrollment or completion of clinical testing could significantly affect our product development costs.

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We may be required to withdraw from a clinical trial as a result of changing standards of care, or we may become ineligible to participate in clinical studies.

In addition, clinical trials which were due to receive support from the U.S.

government, such as the NIAID clinical trial using our StealthX TM vaccine candidate, may be impacted by staffing reductions as well as changes in government priorities with a new U.S.

presidential administration.

We do not know whether planned clinical trials will begin on time or be completed on schedule, if at all.

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● recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including the size of the patient population, nature of trial protocol, meeting the enrollment criteria for our studies, screening failures, the inability of the sites to conduct trial procedures properly, the inability of the sites to devote their resources to the trial, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;

● the impact of COVID-19 on site personnel availability, patient screening and patient enrollment;

● the impact of infectious disease outbreaks or pandemics on site personnel availability, patient screening and patient enrollment;

● competition from other companies operating in the same disease setting;

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If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, we or our development partners, if any, may be delayed in obtaining, or may not be able to obtain or maintain, clinical or marketing approval for these product candidates.

We may not be able to obtain approval for

indications that are as broad as intended, or we may be able to obtain approval only for indications that are entirely different from those indications for which we sought approval.

We may not be able to obtain approval for indications that are as broad as intended, or we may be able to obtain approval only for indications that are entirely different from those indications for which we sought approval.

Changes in regulatory requirements and guidance may occur, and we may need to amend clinical trial protocols to reflect these changes with appropriate regulatory authorities.

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Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring drugs to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

The biopharmaceutical industry is subject to extensive regulatory obligations and policies that may be subject to significant and abrupt change, including due to judicial challenges, election cycles, and resulting regulatory updates and changes in policy priorities.

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 U.S.

Department of Health and Human Services, CMS, FDA and other agencies with significant oversight of the biopharmaceutical 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.

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.

Department of Health and Human Services, CMS and FDA.

Efforts by the current administration to limit federal agency budgets or personnel may result in reductions to agency budgets, employees, and operations, which 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.

The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, interim results of a clinical trial do not necessarily predict final results, and the results of our clinical trials may not satisfy the requirements of the FDA or comparable foreign regulatory authorities.

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In addition, the design of a clinical trial can determine whether its results will support approval of a drug and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced.

We have limited experience in designing late-stage clinical trials and may be unable to design and conduct a clinical trial to support marketing approval.

We have limited

experience in designing late-stage clinical trials and may be unable to design and conduct a clinical trial to support marketing approval.

Further, if our product candidates are found to be unsafe or lack efficacy, we will not be able to obtain marketing approval for them and our business would be harmed.

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We do not know whether any clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain marketing approval to market our product candidates.

In the event that an adverse safety issue, clinical hold or other adverse finding occurs in one or more of our clinical trials, once initiated, such event could adversely affect our other clinical trials using the same product candidate.

In the event that an adverse safety issue, clinical hold or other adverse finding occurs in one or more of our clinical trials, once initiated, or in a clinical trial conducted by a third party sponsor or investigator using the same product candidate, such event could adversely affect our other clinical trials and ability to obtain marketing approval.

Moreover, there is a relatively limited safety data set for product candidates using an exosome platform.

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The speed at which select parties have acted to create and test many therapeutics and vaccines for COVID-19 or other infection diseases is atypical.

Further, changing plans or priorities within the FDA or the regulatory authorities in other jurisdictions, including changes based on new knowledge of COVID-19 or other infectious diseases, and new variants of the virus, may significantly affect the regulatory timeline for further authorizations or approvals.

Further, changing plans or priorities within the FDA, other government departments, or the regulatory authorities in other jurisdictions, including changes based on new knowledge of COVID-19 or other infectious diseases, and new variants of the virus, may significantly affect the regulatory timeline for further authorizations or approvals.

We cannot anticipate or predict with certainty the timelines or regulatory processes that may be required for the development of our potential COVID-19 vaccine that may be developed to fight against variants of the SARS-CoV-2 virus.

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● the strength of sales, marketing and distribution support;

● the performance of third-party distributors, such as our exclusive distributor for our lead product candidate, CAP-1002;

● the performance of third-party distributors, such as our exclusive distributor for our lead product candidate, deramiocel;

● changes in the standard of care for the targeted indications for the product;

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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.

We have competitors both in the United States and internationally.

With CAP-1002, 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 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 (U.S.

NS Pharma, Inc.).

In June 2023, the FDA approved Sarepta’s BLA application seeking accelerated approval of Elevidys (delandistrogene moxeparvovec), its microdystrophin gene therapy, for the treatment of ambulant individuals with Duchenne.

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

At this time, there are four FDA conditionally approved exon skipping drugs:

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.

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The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics in guiding the use of related therapeutics, the level of generic competition and the availability of reimbursement from government and other third-party payors.

The FDA has granted orphan drug status and an RMAT designation to CAP-1002 for the treatment of DMD, but we may be unable to maintain or receive the benefits associated with orphan drug status , including market exclusivity, or an RMAT designation.

The FDA has granted orphan drug status and an RMAT designation to deramiocel for the treatment of DMD, but we may be unable to maintain or receive the benefits associated with orphan drug status , including market exclusivity, or an RMAT designation.

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition or for which there is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic for a disease or condition will be recovered from sales in the United States for that drug or biologic.

If a biological product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity.

We have received orphan drug status for CAP-1002 for the treatment of DMD.

We have received orphan drug status for deramiocel for the treatment of DMD.

Even though we have received orphan drug designation (“ODD”) as described above, we may not be the first to obtain marketing approval for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products.

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In addition, our exclusive marketing rights in the United States, if obtained, may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure the availability of sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Even though we have obtained orphan drug designation for CAP-1002 for a select indication, we may be unable to seek or obtain orphan drug designation for our future product candidates and we may not be the first to obtain marketing approval for any particular orphan indication.

Even though we have obtained ODD for deramiocel for a select indication, we may be unable to seek or obtain ODD for our future product candidates and we may not be the first to obtain marketing approval for any particular orphan indication.

In addition, Congress is considering updates to the orphan drug provisions of the FDCA in response to a recent 11 th Circuit decision.

Any changes to the orphan drug provisions could change our opportunities for, or likelihood of success in obtaining, orphan drug exclusivity and would materially adversely affect our business, financial condition, results of operations, cash flows and prospects.

We have also obtained an RMAT designation for CAP-1002 for the treatment of DMD.

We have also obtained an RMAT designation for deramiocel for the treatment of DMD.

The RMAT designation program is intended to fulfill the Cures Act requirement that the FDA facilitate an efficient development program for, and expedite review of, any drug that meets the following criteria:

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Additionally, RMAT designation can be revoked if the criteria for eligibility cease to be met as clinical data emerges.

Even if we were to obtain approval for CAP-1002 for the treatment of DMD with the rare pediatric disease designation, the Rare Pediatric Disease Priority Review Voucher Program may no longer be in effect at the time of such approval.

CAP-1002 has received rare pediatric disease designation from the FDA for the treatment of DMD.

Even if we were to obtain approval for deramiocel for the treatment of DMD with the rare pediatric disease designation, the Rare Pediatric Disease Priority Review Voucher Program may no longer be in effect at the time of such approval.

Deramiocel has received rare pediatric disease designation from the FDA for the treatment of DMD.

The FDA generally define a "rare pediatric disease" as a serious or life-threatening disease that affects fewer than 200,000 individuals in the U.S.

primarily under the age of 18 years old.

Under the FDA's Rare Pediatric Disease Priority Review Voucher program, upon the approval of a 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.

Under the FDA's Rare Pediatric Disease Priority Review Voucher program, upon the approval of a BLA or NDA 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 BLA or NDA.

The Priority Review Voucher may be sold or transferred an unlimited number of times, as long as the sponsor making the transfer has not yet submitted the application.

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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.

This program has been subject to criticism, including by the FDA, and it is possible that even if we obtain approval for CAP-1002 and qualify for such a Priority Review Voucher, the program may no longer be in effect at the time of approval.

This program has been subject to criticism, including by the FDA, and it is possible that even if we obtain approval for deramiocel and qualify for such a Priority Review Voucher, the program may no longer be in effect at the time of approval.

Providing product for use in third-party trials or for compassionate use poses risks to our product candidates.

In addition to manufacturing CAP-1002 for its own clinical trials, Capricor provided CAP-1002 for investigational purposes in two clinical trials sponsored by CSMC.

In addition to manufacturing deramiocel for its own clinical trials, Capricor provided deramiocel for investigational purposes in two clinical trials sponsored by CSMC.

Additionally, we recently were selected to be part of Project NextGen, an initiative by the U.S.

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There is no assurance that if research injuries are sustained, any insurance carrier will compensate Capricor for any liabilities or other losses sustained by Capricor arising out of these injuries.

We have been informed by CSMC that both of the CAP-1002 (REGRESS and ALPHA) trials have ceased enrollment and that the trials have been concluded.

We have been informed by CSMC that both of the deramiocel (REGRESS and ALPHA) trials have ceased enrollment and that the trials have been concluded.

Notwithstanding their cessation, there is a risk that injuries could result from the use of the product or other claims may arise.

Our products face a risk of failure due to adverse immunological reactions.

A potential risk of an allogeneic therapy such as that being tested by the Company with CAP-1002 is that patients might develop an immune response to the cells being infused.

A potential risk of an allogeneic therapy such as that being tested by the Company with deramiocel is that patients might develop an immune response to the cells being infused.

Such an immune response may induce adverse clinical effects which would impact the safety and efficacy of the Company’s products and the success of our trials.

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To reduce the risk of future events, we initiated a pre-medication strategy commonly used by physicians to prevent and treat allergic reactions.

We cannot provide any assurances that this will not happen again in our current trials or in any future studies.

We cannot provide any assurances that similar events will not happen again in our current trials or in any future studies.

If these or other reactions continue to occur, it could have a material adverse impact on the effectiveness of the product, our ability to receive approval of our product candidates, and could result in substantial delays, increased costs and potentially termination of the trial.

Our business faces significant government regulation, and there is no guarantee that our product candidates will receive regulatory approval.

Our research and development activities, preclinical studies, clinical trials, and manufacturing and marketing of our potential products are subject to extensive regulation by the FDA and other regulatory authorities in the United States, as well as by regulatory authorities in other countries.

as well as by regulatory authorities in other countries.

In the United States, our product candidates are subject to regulation as biological products or as combination biological products/medical devices under the Federal Food, Drug and Cosmetic Act, the Public Health Service Act and other statutes, and as further provided in the Code of Federal Regulations.

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The same possibilities exist for trials to be conducted outside of the United States that are subject to regulations established by local authorities and local law.

Any such determinations

would delay or deny the introduction of our product candidates to the market and have a material adverse effect on our business, financial condition, and results of operations.

Any such determinations would delay or deny the introduction of our product candidates to the market and have a material adverse effect on our business, financial condition, and results of operations.

Drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Agency, other federal agencies and corresponding state agencies to ensure strict compliance with good manufacturing practices, and other government regulations and corresponding foreign standards.

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Any of those options would involve a significant monetary investment, time delays, and increased risk and may impact the progress of our clinical trials and regulatory approvals.

Further, we have entered into the Japanese Distribution Agreement with Nippon Shinyaku for the distribution of CAP-1002 in Japan.

In order for us to be able to sell CAP-1002 in Japan, we will be required to satisfy the requirements of and get approval from the PMDA.

Further, we have entered into the Japanese Distribution Agreement with Nippon Shinyaku for the distribution of deramiocel in Japan.

In order for us to be able to sell deramiocel in Japan, we will be required to satisfy the requirements of and get approval from the Pharmaceuticals and Medical Devices Agency (“PMDA”).

At this time, we are uncertain as to the type or types of trials that may be required, whether the PMDA in Japan will accept product manufactured at our facilities, if approved, the price at which our product may be sold and market acceptance.

To the extent we conduct business in the European Union (“EU”), or receive information about EU residents, we will also have to comply with the EU General Data Protection Regulation (the “GDPR”), which was officially adopted in April 2016 and went into effect in May 2018.

The GDPR introduces new data protection requirements in the EU, as well as substantial fines for breaches of data protections rules.

Failure to comply with the requirements of the GDPR can result in (among other things) substantial fines for breaches of data protections rules.

The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers.

Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide revenue, whichever is higher.

Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide

revenue, whichever is higher.

The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of personal data, such as healthcare data or other sensitive information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions in which we operate.

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If any of our products were granted accelerated approval, the FDA could require post-marketing confirmatory trials to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit.

FDA may withdraw approval of a drug or indication approved under the accelerated approval pathway if any of the following were to occur:

Additional delays may result if an FDA Advisory Committee, EMA’s Committee for Medicinal Products for Human Use, or CHMP, or other regulatory authority recommends non-approval or restrictions on approval.

In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of product development, clinical trials, and the review process.

The FDA may withdraw approval of a drug or indication approved under the accelerated approval pathway if any of the following were to occur:

a trial required to verify the predicted clinical benefit of the product fails to verify such benefit;

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Failure to obtain regulatory approval in other countries, or any delay or setback in obtaining such approval, could have the same adverse effects detailed above regarding FDA approval in the United States.

and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing follow-up studies.

Such effects include the risks that our product candidates may not be approved for all indications requested, which could limit the uses of our product candidates and have an adverse effect on product sales and potential royalties, and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing follow-up studies.

If we or current or future collaborators, manufacturers, or service providers fail to comply with healthcare laws and regulations, we or they could be subject to enforcement actions and substantial penalties, which could affect our ability to develop , market and sell our products and may harm our reputation.

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Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations.

However, there may be significant delays in obtaining coverage

for newly-approved drugs.

However, there may be significant delays in obtaining coverage for newly-approved drugs.

Moreover, eligibility for coverage does not necessarily signify that a drug will be reimbursed in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution costs.

Also, interim payments for new drugs, if applicable, may be insufficient to cover our costs and may not be made permanent.

Thus, even if we succeed in bringing one or more products to the market, these products may not be considered medically necessary or cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis.

Because our programs are in early stages of development, we are unable at this time to determine their cost effectiveness or the likely level or method of reimbursement.

Because our programs are in early stages of development or have otherwise not been approved for commercial sale, we are unable at this time to determine their cost effectiveness or the likely level or method of reimbursement.

In addition, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our product on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained.

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Self-administered outpatient drugs are typically reimbursed under Medicare Part D, and drugs that are administered in an inpatient hospital setting are typically reimbursed under Medicare Part A under a bundled payment.

It is difficult for us to predict how Medicare coverage and reimbursement policies will be applied to our products in the future and coverage and reimbursement under different federal healthcare programs are not always consistent.

It is difficult for us to predict how Medicare coverage and reimbursement policies will be applied to our products in the future and coverage and reimbursement under different

federal healthcare programs are not always consistent.

Medicare reimbursement rates may also reflect budgetary constraints placed on the Medicare program.

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There have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

Among policy makers and payors in the United States there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality of care and/or expanding access to care and the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product.

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federal government agencies currently face potentially significant spending reductions.

For example, as a result of the Budge Control Act of 2011, the Bipartisan Budget Act (“BBA”), and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an annual 2% reduction to Medicare payments took effect on April 1, 2013, and has been extended into through the first six months of the fiscal year 2032 sequestration order (with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 and a subsequent reduction to 1% from April 1, 2022 until June 30, 2022).

For example, as a result of the Budget Control Act of 2011, the Bipartisan Budget Act (“BBA”), and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an annual 2% reduction to Medicare payments took effect on April 1, 2013, and has been extended into through the first eight months of the fiscal year 2032 sequestration order.

federal budget remains in flux, which could, among other things, result in additional cuts to Medicare payments to providers and otherwise affect federal spending on clinical and preclinical research and development.

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The full impact on our business of any future cuts in Medicare or other programs is uncertain.

In addition, we cannot predict any impact which the actions of President Biden’s administration and the U.S.

In addition, we cannot predict any impact which the actions of the current Trump administration and the U.S.

Congress may have on the federal budget.

If federal spending is reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or the National Institutes of Health, to continue to function at current levels.

Amounts allocated to federal grants and contracts may be reduced or

If federal spending is reduced, and staffing reductions are put into effect, these actions will also impact the ability of relevant agencies, such as the FDA, CMS, HHS, or the National Institutes of Health, to continue to function at current levels.

Amounts allocated to federal grants and contracts may be reduced or eliminated.

These reductions may also impact the ability of relevant agencies to timely review and approve drug research and development, manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may develop.

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In particular, keeping up with the demand for vaccines may be difficult due to the complexity of producing vaccines.

● Changes in leadership, especially within the U.S.

Department of Health and Human Services, have the potential to significantly impact vaccine-related policies and public health initiatives.

Changes, including those resulting from the 2024 U.S.

election and resulting changes in the Department of Health and Human Services may impact funding for vaccine research and development, reimbursement for vaccines and their administration, vaccine mandates and recommendations and public perception of vaccine importance.

Risks Related to the Manufacturing of our Product Candidates

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In 2022, we completed construction of our new primary manufacturing facility located within our Research and Development Facility in San Diego, California as we prepare for potential commercial launch.

This facility is designed to produce commercial-scale GMP CAP-1002 product for clinical and potential commercial use, subject to FDA approval.

Additionally, we also maintain a portion of our laboratories, research and manufacturing facilities in leased premises at CSMC in Los Angeles, California.

Currently, in the area of our leased premises at CSMC where we manufacture CAP-1002 and may potentially manufacture our exosome technologies, we believe that we follow good manufacturing practices sufficient for an investigational stage product.

Capricor has been manufacturing CAP-1002 in this facility for our current and previous studies including Cohort A of the HOPE-3 trial.

This facility is designed to produce GMP deramiocel product for clinical and potential commercial use, subject to FDA approval.

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

We are using product manufactured from our San Diego facility to support Cohort B of the ongoing HOPE-3 trial and supporting our OLE trials.

Furthermore, 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.

Additionally, we also maintain a portion of our laboratories, research and manufacturing facilities in leased premises at CSMC in Los Angeles, California.

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.

Capricor has been manufacturing deramiocel in this facility for our current and previous studies including Cohort A of the HOPE-3 trial.

Our plans to use the CSMC facility for future trials could change if we fail to meet the specifications necessary to produce our product in a qualified manner.

Currently, our CSMC Facilities Lease is scheduled to expire on July 31, 2026.

There can be no assurance that the Facilities Lease for the manufacturing space will be continued beyond July 31, 2026 or whether the facility will be approved by the FDA for commercial manufacturing following approval of the BLA.

In the third quarter of 2023, we met with the FDA, where we affirmed alignment with respect to our Phase 3, HOPE-3 program where the FDA agreed to allow us to submit a BLA supported by results using product manufactured at our Los Angeles manufacturing site.

At this time, we can provide no assurance that the FDA will ultimately approve this facility for commercial use, or that CMSC will allow us to market commercial product from this facility.

Should this facility ultimately not be approved to manufacture commercial product, this may result in delays and significant expenses which would materially impact our business and product development.

In addition, FDA may consider the data we provide are insufficient to prove that the drug used in Cohort B of our HOPE-3 study is comparable to the drug produced in our Los Angeles facility and used in our prior clinical studies.

This could result in us being required to conduct further comparability testing and may result in us being required to conduct

additional clinical and/or nonclinical studies before we are able to submit a BLA for approval.

Additional testing or clinical trial requirements could lead us not to pursue an application for approval.

Conducting a clinical trial may prove too difficult or too expensive, and the process of designing a clinical trial, enrolling enough patients, and completing treatment and data collection under the protocol could take a significant amount of time, effort, and resources.

Even if we do complete the clinical trial, the study may not meet its prespecified endpoints, and even if it does, the FDA may still disagree with our determination that the trial is sufficient to support the submission and approval of a BLA application.

We have been given no assurances that the CSMC Facilities Lease for the manufacturing space will be continued beyond July 31, 2026.

In addition, the FDA may consider the data we provide as part of our BLA is insufficient to prove that the drug used in our San Diego facility is comparable to the drug produced in our Los Angeles facility and used in our prior clinical studies.

This could result in us being required to conduct further testing and may result in us being required to conduct additional clinical and/or nonclinical studies prior to BLA approval.

We obtain the donor hearts from which our CDCs are manufactured from organ procurement organizations (“OPOs”).

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There is no guarantee that laws and regulations pursuant to which our OPOs provide donor hearts will not change, making it more difficult or even impossible for the OPOs to continue to supply us with the hearts we need to produce our product candidates.

There are also no guarantees that the OPOs which supply hearts have followed federal or state regulations addressing the donation of human organs and other regulatory matters.

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

For example, we have recently entered into Azzur License Agreement with Azzur Cleanrooms-on-Demand – San Diego, LLC pursuant to which we have been granted an exclusive license to use certain space and the non-exclusive right to use certain equipment and property for our early phase clinical and/or pre-clinical manufacturing purposes.

We are planning to use this facility to manufacture our exosome-based vaccine for potential clinical use.

There is no guarantee that any licenses issued to us will not expire, be revoked, forfeited by operation of law or otherwise.

There is no guarantee that any licenses issued to us will not expire, be revoked, or forfeited by operation of law or otherwise.

If we were denied any required license or if any of our licenses were to be revoked or forfeited, we would suffer significant harm.

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The process of manufacturing our products is complex and we may encounter difficulties in production, particularly with respect to process development or scaling-up of our manufacturing capabilities.

We are currently producing doses of CAP-1002 in order to conduct our ongoing clinical trials at both of our facilities.

We are currently producing doses of deramiocel in order to conduct our ongoing clinical trials as well as prepare for potential commercial launch.

The process of manufacturing our products is complex, highly regulated and subject to multiple risks.

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For instance, changes in our process during the course of clinical development may require us to show the comparability of the product used in earlier clinical trials or at earlier portions of a trial to the product used in later clinical trials or later portions of the trial.

We may also make further changes to our manufacturing process before or after commercialization, and such changes may require us to show the comparability of the resulting product to the product used in the clinical trials using earlier processes.

We may also make further changes to our manufacturing process before or after commercialization, and such changes may require us to show the comparability of the resulting product to the product

used in the clinical trials using earlier processes.

We may be required to collect additional clinical data from any modified process prior to obtaining marketing approval for the product candidate produced with such modified process.

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We may never be successful in manufacturing product candidates in sufficient quantities or with sufficient quality for commercial use.

Our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, operator error,

natural disasters, unavailability of qualified personnel, difficulties with logistics and shipping, problems regarding yields or stability of product, contamination or other quality control issues, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

Our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, operator error, natural disasters, unavailability of qualified personnel, difficulties with logistics and shipping, problems regarding yields or stability of product, contamination or other quality control issues, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

Furthermore, compliance with cGMP requirements and other quality issues may arise during our internal efforts to scale-up manufacturing, and with our current suppliers, or any future CMOs.

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If we were to encounter any of these difficulties, our ability to provide our product candidate to patients in clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.

We will need to increase our manufacturing capacity in the future and we may encounter problems at our current manufacturing facilities.

In order to manufacture deramiocel in quantities sufficient to meet our anticipated commercial opportunity in the U.S.

and other global markets, we will need to continue to increase our manufacturing capabilities.

We may encounter technical challenges to increasing the scale at which we manufacture deramiocel, including with respect to material procurement and quality control and assurance.

An increase in production could make it more difficult for us to comply with quality system regulations or other applicable requirements that are currently enforced by the FDA and other regulatory authorities, or that may be introduced in the future, in both the United States and in other countries.

Commercial scale production of deramiocel on a continuing basis also will require us to continue to hire and retain additional management and technical personnel who have the necessary manufacturing experience and skills.

We might not successfully identify, hire or retain qualified personnel on a timely basis or at all.

Our inability to increase the scale of our manufacturing of deramiocel could impair our ability to generate revenue and adversely affect market acceptance of our product.

In addition, we are planning to conduct our commercial manufacturing operations at our facility in San Diego, California.

Any interruption in operations at this location could result in our inability to satisfy product demand.

Despite our efforts to safeguard this facility, including acquiring insurance on commercially reasonable terms, adopting environmental health and safety protocols, a number of factors could damage or destroy our manufacturing equipment or our inventory of component supplies or finished goods, cause substantial delays in our operations, result in the loss of key information, and cause us to incur additional expenses, including:

● operating restrictions, partial suspension or total shutdown of production imposed by regulatory authorities;

● equipment malfunctions or failures;

● technology malfunctions;

● work stoppages;

● damage to or destruction of the facility due to natural disasters or other events;

● regional or local power shortages.

Our insurance may not cover our losses in any particular case, or insurance may not be available on commercially reasonable terms to cover certain of these catastrophic events.

In addition, regardless of the level of insurance coverage, damage to our facilities or any disruption that impedes our ability to manufacture deramiocel in a timely manner could materially and adversely affect our business, financial condition, operating results, cash flows and prospects.

Additionally, we rely on third-party vendors for certain tests (sterility, etc.) required for product release.

If these vendors are unable to perform the services, whether due to capacity, availability of materials, regulatory or other constraints, including federal and state regulations, we will not be able to sell deramiocel until we can retain an alternative vendors to supply these services.

We may be unable to transition to alternative methods in a timely or cost-effective manner or at all, which could harm our business and results of operations.

We are subject to a number of manufacturing risks, any of which could substantially increase our costs and limit supply of our product candidates.

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In addition, the manufacturing facilities in which our product candidates are made could be adversely affected by supply chain issues, equipment failures, labor shortages, natural disasters, power failures and numerous other factors.

Cell therapy medicines are novel and any product candidates we develop may be complex and difficult to manufacture.

We could experience delays in satisfying regulatory authorities or production problems that result in delays in our development or commercialization programs, limit the supply of our product candidates we may develop, or otherwise harm our business.

Our product candidates being developed will likely require processing steps that are more complex than those required for most chemical pharmaceuticals.

Moreover, unlike chemical pharmaceuticals, the physical and chemical properties of a biologic such as the product candidates we intend to develop generally cannot be fully characterized.

As a result, assays of the finished product candidate may not be sufficient to ensure that the product candidate will perform in the intended manner.

Problems with the manufacturing process, including even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims, insufficient inventory, or potentially delay progression of our potential regulatory filings.

If we successfully develop product candidates, we may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA, EMA or other comparable applicable foreign standards or specifications with consistent and acceptable production yields and costs.

In addition, the FDA, the EMA, and other regulatory authorities may require us to submit samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time.

Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls.

Lot failures or product recalls could cause us to delay clinical trials or product launches, which could be costly to us and otherwise harm our business, financial condition, results of operations, and prospects.

Given the nature of biologics manufacturing, there is a risk of contamination during manufacturing.

Any contamination could materially harm our ability to produce product candidates on schedule and could harm our results of operations and cause reputational damage.

Some of the raw materials that we anticipate will be required in our manufacturing process are derived from biologic sources.

Such raw materials are difficult to procure and may be subject to contamination or recall.

A material shortage, contamination, recall, or restriction on the use of biologically derived substances in the manufacture of any product candidates we may develop could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could materially harm our development timelines and our business, financial condition, results of operations, and prospects.

Any problems in our manufacturing process or the facilities with which we contract could make us a less attractive collaborator for potential partners, including larger pharmaceutical companies and academic research institutions, which could limit our access to additional attractive development programs.

We may need to rely exclusively on third parties to formulate and manufacture our product candidates and provide us with the devices and other products necessary to administer such a product.

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If we need to secure an additional manufacturer of our product candidates, demand for third-party manufacturing or testing facilities may grow at a faster rate than their existing capacity, which could disrupt our ability to find and retain third-party manufacturers capable of producing sufficient quantities of such raw materials, components, parts, and consumables required to manufacture our products.

If CAP-1002 or any of our exosome technologies receives FDA approval, we may need to ultimately rely on one or more third-party contractors to manufacture supplies of these products which may cause delays in our ability to sell commercially.

If deramiocel or any of our exosome technologies receives FDA approval, we may need to ultimately rely on one or more third-party contractors to manufacture supplies of these products which may cause delays in our ability to sell commercially.

Our current and anticipated future reliance on a limited number of third-party manufacturers exposes us to the following risks:

● We may be unable to identify manufacturers needed to manufacture our product candidates on acceptable terms or at all because the number of potential manufacturers is limited, and subsequent to approval of an NDA or BLA, the FDA must approve any replacement contractor.

● We may be unable to identify manufacturers needed to manufacture our product candidates on acceptable terms or at all because the number of potential manufacturers is limited, and subsequent to approval of an BLA or NDA, the FDA must approve any replacement contractor.

This approval would require new testing and compliance inspections.

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Each of these risks could delay our clinical trials, the approval, if any, of our product candidates by the FDA, or the commercialization of our product candidates, or result in higher costs or deprive us of potential product revenues.

Disruptions in our supply chain or failure to adequately forecast product demand could result in significant delays or lost sales.

The loss of a material supplier could significantly disrupt our business.

In some cases, we obtain components used in certain of our products from single sources.

If we experience difficulties acquiring sufficient quantities of required materials or products from our existing suppliers, or if our suppliers are found to be non-compliant with the FDA, EMA or other comparable applicable foreign bodies, then qualifying and obtaining the required regulatory approvals to use alternative suppliers may be a lengthy and uncertain process during which production could be delayed and we could lose sales.

Our sources of supply for raw materials may be threatened by shortages and other market forces, tariffs and other trade barriers, by natural disasters, climate impacts, public health crises or other disruptive events, by the supplier’s failure to maintain adequate quality, or a recall initiated by the supplier.

Even when substitute suppliers are available, the need to verify the substitute supplier’s regulatory compliance and the quality standards of the replacement material could significantly delay production and materially reduce our sales.

Any failure by us to forecast demand for, or to maintain an adequate supply of, raw material and finished product could result in an interruption in the supply of certain products, which could impact potential sales of that product.

If we or our suppliers are unable or our suppliers are unwilling to meet our increased manufacturing requirements, we may not be able to produce enough materials or products in a timely manner, which could impact our sales.

Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties.

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Furthermore, there can be no assurance that others will not independently develop substantially equivalent technologies not covered by patents to which we have rights or obtain access to our know-how.

In addition, the laws of certain countries

may not adequately protect our intellectual property.

In addition, the laws of certain countries may not adequately protect our intellectual property.

Our competitors may possess or obtain patents on products or processes that are necessary or useful to the development, use, or manufacture of our product candidates.

There can also be no assurance that our proposed technology will not infringe upon valid and enforceable patents or proprietary rights owned by others, with the result that others may bring infringement claims against us and require us to license such proprietary rights, which may not be available on commercially reasonable terms, if at all.

Any such litigation, if instituted, could have a material adverse effect, potentially including monetary penalties, diversion of management resources, and injunction against continued manufacture, use, or sale of certain products or processes.

litigation, if instituted, could have a material adverse effect, potentially including monetary penalties, diversion of management resources, and injunction against continued manufacture, use, or sale of certain products or processes.

Some of our technology has resulted and/or will result from research funded by agencies of the U.S.

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These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation.

In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent.

In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first inventor to file” system in which the first inventor to file a patent application will be entitled to the patent.

Third parties are allowed to submit prior art before the issuance of a patent by the U.S.

Patent and Trademark Office (“USPTO”), and may become involved in derivation, post-grant review, or inter partes review, proceedings challenging our patent rights or the patent rights of our licensors.

An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our or our licensors’ patent rights, which could adversely affect our competitive position.

An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or render unpatentable, our or our licensors’ patent rights, which could adversely affect our competitive position.

It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.

If we fail to protect or enforce our intellectual property rights adequately or secure rights to patents of others, the value of our intellectual property rights and product candidates would diminish.

Our commercial viability will depend, in part, on obtaining and maintaining patent protection and trade secret protection of our product candidates, and the methods used to manufacture them, as well as successfully defending these patents against third-party challenges.

Our ability to stop third parties from making, using, selling, offering to sell, or importing our products is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

We have licensed certain patent and other intellectual property rights that cover cardiospheres (CSps), and cardiosphere-derived cells (CDCs), (including our CAP-1002 product candidate) from the University of Rome, JHU, and CSMC.

Our commercial viability will depend, in part, on obtaining and maintaining patent protection and trade secret protection of our product candidates, and the methods used to manufacture and utilize them, as well as successfully defending these patents against third-party challenges.

We have licensed certain patent and other intellectual property rights that cover cardiospheres, and cardiosphere-derived cells, (including our deramiocel product candidate) from the University of Rome, JHU, and CSMC.

We have also licensed certain patent and other intellectual property rights from CSMC that cover extracellular vesicles, such as exosomes and microvesicles.

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We cannot be certain that such activities by these institutions have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights.

Under our Amended and Restated Exclusive License Agreement with CSMC and our Exclusive License Agreement with CSMC, as the same have been amended, we have assumed, in coordination with CSMC, financial responsibility for the prosecution and maintenance of certain patents and patent applications

Our enforcement of certain of these licensed patents or defense of any claims asserting the invalidity and/or unenforceability of these patents would also be subject to the cooperation of the University of Rome, JHU, and/or CSMC.

The patent positions of pharmaceutical and biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved.

No consistent laws regarding the breadth of claims allowed in biopharmaceutical patents has emerged to date in the United States.

The biopharmaceutical patent situation outside the United States is even more uncertain.

The patent positions of pharmaceutical and biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain uncertain and unclear.

No clear statutes or common law regarding the breadth of claims allowed in biopharmaceutical patents has clearly emerged to date in the

United States.

The biopharmaceutical patent situation outside the United States may be more uncertain.

Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property.

Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in the patents we own or that are in-licensed.

Accordingly, we cannot predict the breadth of claims that may be allowed, or remain valid or enforceable in the patents we own or that are in-licensed.

Further, if any of our owned or in-licensed patents are determined by legal authority to be invalid or unenforceable, it could impact our ability to commercialize or license our technology.

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However, trade secrets are difficult to protect.

Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators, and other advisors may unintentionally or willfully disclose our information to competitors.

Although we use reasonable efforts as proscribed in state and federal statutes to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators, and other advisors may unintentionally or willfully disclose our information to competitors.

In addition, courts outside the United States are sometimes less willing to protect trade secrets.

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If we choose to go to court to stop a third-party from using the inventions covered by our patents, that individual or company has the right to ask the court to rule that such patents are invalid and/or should not be enforced against that third-party.

These lawsuits are expensive and would consume time and other resources, even if we were successful in

discontinuing the infringement of our patents.

These lawsuits are expensive and would consume time and other resources, even if we were successful in discontinuing the infringement of our patents.

In addition, there is a risk that the court will determine that these patents are not valid and that we do not have the right to stop the other party from using the inventions.

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Supreme Court has modified certain legal tests so as to make it harder to obtain patents from the USPTO, and to defend issued patents against invalidity challenges.

As a consequence, issued patents may be found to contain invalid claims according to the revised legal standards.

Some of our own or in-licensed patents may be subject to challenge and subsequent invalidation in a variety of post-grant proceedings, before the Patent Trial and Appeal Board (the PTAB) of the USPTO or in litigation under the revised legal standards, which make it more difficult to defend the validity of claims in already issued patents.

As a consequence, issued patents may be found by federal courts to contain invalid claims according to the revised legal

Some of our own or in-licensed patents may be subject to challenge and subsequent invalidation in a variety of post-grant proceedings, before the Patent Trial and Appeal Board of the USPTO or in litigation under the revised legal standards, which make it more difficult to defend the patentability or validity of claims in already issued patents.

Furthermore, a third-party may claim that we or our manufacturing or commercialization partners are using inventions covered by the third-party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates.

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The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products, manufacturing processes or methods of use.

The coverage of patents is subject to claim construction by the courts, which is not always predictable or reasonable.

The coverage of patents is subject to claim construction by the courts, which is not always predictable or favorable.

If we are sued for patent infringement, we would need to demonstrate that our products, manufacturing processes or methods of use either do not infringe the patent claims of the relevant patent and/or that the patent claims are invalid, and we may not be able to do this.

Proving invalidity, in particular, is difficult since it requires a proof by clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

Proving invalidity, in particular, is difficult since it requires proof by clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

As some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing, and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications, or that we were the first to invent the technology.

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We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise improperly used, misappropriated or disclosed confidential information of these third parties or our employees’ former employers.

may be necessary to defend against these claims.

Litigation may be necessary to defend against these claims.

Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.

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We have several license agreements, including with the University of Rome, JHU and CSMC.

These licenses may be terminated upon certain conditions, including in some cases, if we fail to meet certain minimum funding or spending requirements, fail to take certain developmental actions, fail to pay certain minimum royalties, or fail to maintain the licensed intellectual property.

These licenses may be terminated upon certain conditions, including in some cases, if we fail to meet certain minimum funding or spending requirements, fail to take certain developmental actions, fail to attain certain developmental milestones, fail to pay certain minimum royalties, or fail to maintain the licensed intellectual property.

Any termination of these licenses could result in the loss of significant rights and could harm our ability to commercialize our product candidates.

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Risks Related to Our Relationships with Third Parties

We will depend on our exclusive distributor, Nippon Shinyaku, for the commercial sale of our lead product CAP-1002 in DMD in the United States and Japan, if we receive regulatory approval in those territories.

We will depend on our exclusive distributor, Nippon Shinyaku, for the commercial sale of our lead product deramiocel in DMD in the United States and Japan, if we receive regulatory approval in those territories.

We believe that a substantial portion of our revenue for the foreseeable future will depend on milestones and other payments received from our distributor, Nippon Shinyaku.

Nippon Shinyaku has exclusive distribution rights for CAP-1002 in the United States and Japan for a significant period of time, with only limited rights of either party to terminate these agreements.

Nippon Shinyaku has exclusive distribution rights for deramiocel in the United States and Japan for a significant period of time, with only limited rights of either party to terminate these agreements.

In the event that Nippon Shinyaku fails to adequately commercialize deramiocel in the United States or Japan because it lacks financial or other resources, decides to focus on other initiatives or otherwise, our ability to successfully commercialize deramiocel in the United States and Japan would be limited, which would adversely affect our business, financial condition and results of operations.

Our results of operations could be materially harmed if we or our distributor are unable to accurately forecast customer demand for our products and manage our inventory.

We seek to maintain sufficient levels of inventory in order to protect ourselves from supply interruptions and to support the projected demand for our product candidates, but keep limited materials on hand.

To ensure adequate inventory supply and manage our operations with our suppliers, we forecast anticipated materials requirements and demand for our products (if commercialized) in order to predict inventory needs and then place orders with our suppliers based on these predictions.

Our ability to accurately forecast demand for deramiocel could be negatively affected by many factors, including, product recalls, labor shortages, the failure to accurately manage our commercial strategy, product introductions by competitors, an increase or decrease in demand for our products, our failure or the failure of our distributor to accurately forecast demand, unanticipated changes in general market conditions or regulatory matters, insurance reimbursement levels, and weakening of economic conditions or consumer confidence in future economic conditions.

Inventory levels in excess of product demand may result in a portion of our inventory becoming obsolete or expiring, as well as inventory write-downs or write-offs.

Conversely, if we underestimate patient demand for deramiocel or our own requirements for materials, our manufacturing partners and suppliers may not be able to deliver components or other materials to meet our requirements and our manufacturing may be affected by the impact of inflation and labor shortages on our suppliers, which could result in inadequate inventory levels or interruptions, delays or cancellations of deliveries, any of which would damage our reputation and business.

In addition, several materials incorporated into our products require lengthy order lead times and additional supplies or materials may not be available when required on terms that are acceptable to us or our manufacturing partners, or at all, and our manufacturing partners and suppliers may not be

able to allocate sufficient capacity in order to meet our increased requirements, any of which could have an adverse effect on our ability to meet demand for our products and our results of operations.

We are dependent on our relationships with our licensors and collaborators and there is no guarantee that such relationships will be maintained or continued.

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There is no guarantee that we will be able to satisfy all of our obligations under our license agreements to each of the institutions and that such license agreements will not be terminated.

By way of example, we recently received a letter from CSMC alleging that pursuant to the Amended CSMC License Agreement between CSMC and Capricor, Capricor has certain overdue payment obligations to CSMC arising out of a milestone payment received by Capricor pursuant to the U.S.

Distribution Agreement entered into between Capricor and Nippon Shinyaku.

The notice letter requests that Capricor cure the alleged breaches of the Amended CSMC License Agreement, and reserves CMSC’s purported right to terminate the Amended CSMC License Agreement if such alleged breaches are not cured.

We dispute the allegations in the letter from CSMC and intend to vigorously defend our position and pursue all available remedies, but there is no guarantee that any disputes that we have with CSMC will be resolved or if resolved, will not result in our incurring certain payment and other obligations.

Each of the institutions receives funding from independent sources such as the NIH and other private or not-for-profit sources and are investigating scientific and clinical questions of interest to their own principal investigators as well as the scientific and clinical communities at large.

These investigators (including Capricor, Inc.’s founder, Dr.

Marbán, who is the Director of the Smidt Heart Institute at CSMC) are under no obligation to conduct, continue, or conclude either current or future studies utilizing our cell therapy or exosomes technology, and they are not compelled to license any further technologies or intellectual property rights to us except as may be stated in the applicable licensing agreements or research agreements between those institutions and us.

Eduardo Marbán, who is the Director of the Smidt Heart Institute at CSMC) are under no obligation to conduct, continue, or conclude either current or future studies utilizing our cell therapy or exosomes technology, and they are not compelled to license any further technologies or intellectual property rights to us except as may be stated in the applicable licensing agreements or research agreements between those institutions and us.

Further, the failure of any third-party licensor to comply with its licensing obligations under its respective agreement with us would have a material adverse effect on us.

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Some of these awards remain subject to annual and quarterly reporting requirements and require us to allocate expenses to the applicable project.

On June 16, 2016, Capricor entered into the CIRM Award with CIRM in the amount of approximately $3.4 million to fund, in part, the HOPE-Duchenne trial.

Pursuant to terms of the CIRM Award, disbursements were tied to the achievement of specified operational milestones.

The CIRM Award is further subject to the conditions and requirements set forth in the CIRM Grants Administration Policy for Clinical Stage Projects.

Such requirements include, without limitation, the filing of quarterly and annual reports with CIRM, the sharing of intellectual property pursuant to Title 17, California Code of Regulations (CCR) Sections 100600-100612, and the sharing with the State of California of a fraction of licensing revenue received from a CIRM funded research project and net commercial revenue from a commercialized product which resulted from the CIRM funded research as set forth in Title 17, CCR Section 100608.

The maximum royalty on net commercial revenue that Capricor may be required to pay to CIRM is equal to nine times the total amount awarded and paid to Capricor.

On June 16, 2016, Capricor was granted a CIRM Award in the amount of approximately $3.4 million to fund, in part, the HOPE-Duchenne trial.

Pursuant to the terms of the CIRM Award, disbursements were tied to the achievement of specified operational milestones.

The CIRM Award was further subject to the conditions and requirements set forth in the CIRM Grants Administration Policy for Clinical Stage Projects.

Such requirements include, without limitation, the filing of quarterly and annual reports with CIRM, the sharing of intellectual property pursuant to Title 17, California Code of Regulations (“CCR”) Sections 100600-100612, and potentially sharing with the State of California of a fraction of licensing revenue received from a CIRM funded research project and net commercial revenue from a commercialized product which resulted from the CIRM funded research as set forth in Title 17, CCR Section 100608.

In the first quarter of 2025, Capricor notified CIRM that it was electing to convert the CIRM Award into a loan.

As a result, certain requirements of the CIRM Award will no longer be applicable, including the revenue sharing requirements.

The terms of the loan agreement are currently under discussion with CIRM.

The Company accounts for this award as a liability rather than income.

If we enter into strategic partnerships, we may be required to relinquish important rights to and control over the development of our product candidates or otherwise be subject to terms unfavorable to us.

We are actively looking into potential additional strategic partnerships for our product candidates, particularly for CAP-1002 in additional territories outside the United States and Japan and our exosomes product candidates.

We are actively looking into potential additional strategic partnerships for our product candidates, particularly for deramiocel in additional territories outside the United States and Japan, and for our exosomes product candidates.

For example, we are in advanced negotiations pursuant to a binding term sheet with Nippon Shinyaku for the distribution of deramiocel in the European region.

If we do not establish strategic partnerships, we potentially will have to undertake development and commercialization efforts with respect to our product candidates on our own, which would be costly and adversely impact our ability to commercialize any future products or product candidates.

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Biologic products for commercial purposes must also be produced under cGMP.

Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the regulatory approval process.

Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients may require us to repeat

clinical trials, which would delay the regulatory approval process.

Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws and regulations.

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As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.

As we advance our programs through potential commercial launch, we have substantial fixed costs associated with third party contracts that will increase and will not be able to be terminated, even if our product candidates are not ultimately approved.

As we advance our programs, in particular our lead product candidate deramiocel, we have incurred and will continue to incur substantial costs associated with those programs.

For example, we are increasing our spending on manufacturing-related costs as we prepare to be able to manufacture deramiocel for a potential commercial launch following potential regulatory approval.

We have continued to expand our use of real estate as we expand our capacity to manufacture and otherwise support deramiocel.

While we seek to be prudent with our spending programs, many of our agreements are for agreed upon amounts with our counterparties and are not able to be terminated by us, even if we ultimately are unable to commercially launch deramiocel due to failure to receive regulatory approvals.

Risks Related to Competitive Factors

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Our future success will depend in part on our ability to maintain a competitive position with respect to evolving therapies as well as other novel technologies.

Existing or future therapies developed by others may render our potential products obsolete or noncompetitive.

Existing or future therapies developed by others may render our potential

products obsolete or noncompetitive.

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

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Because of the specialized nature of our technology, we are dependent upon existing key personnel and on our ability to attract and retain qualified executive officers and scientific personnel for research, clinical studies, and development activities conducted or sponsored by us.

There is intense competition for qualified personnel in our fields of research and development, and there can be no assurance that we will be able to continue to attract additional qualified personnel necessary for the development and commercialization of our product candidates or retain our current personnel.

There is intense competition for qualified personnel in our fields of research and development, as well as manufacturing and quality assurance, and there can be no assurance that we will be able to continue to attract additional qualified personnel necessary for the development and commercialization of our product candidates or retain our current personnel.

We have experienced employee turnover from time to time, including involving some of our key employees.

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The Company currently does not maintain “key man” insurance policies on any of its officers or employees.

All of the Company’s employees will be employed “at will” and, therefore, each employee may leave the employment of the Company at any time.

All of the Company’s employees are and will be employed “at will” and, therefore, each employee may leave the employment of the Company at any time.

If we are unable to retain our existing employees, including qualified scientific and manufacturing personnel, and attract additional qualified candidates, the Company’s business and results of operations could be adversely affected.

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We have entered into the U.S.

Distribution Agreement and the Japan Distribution Agreement with Nippon Shinyaku for the exclusive commercialization and distribution rights in the United States and Japan of CAP-1002 for DMD.

Distribution Agreement and the Japan Distribution Agreement with Nippon Shinyaku for the exclusive commercialization and distribution rights

in the United States and Japan, respectively, of deramiocel for DMD.

We continue to evaluate additional potential partners for this program in other territories outside of these territories, subject to any rights of Nippon Shinyaku.

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As we entered into the U.S.

Distribution Agreement and the Japan Distribution Agreement with Nippon Shinyaku, we will depend upon Nippon Shinyaku’s strategic interest in our CAP-1002 product candidate and Nippon Shinyaku’s ability to successfully market and sell any such products, if and when approved.

If any of our other product candidates are cleared for commercialization, we intend to pursue collaborative arrangements regarding the sales and marketing of such products, however, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if able to do so, that such collaborators will have effective sales forces.

Distribution Agreement and the Japan Distribution Agreement with Nippon Shinyaku, we will depend upon Nippon Shinyaku’s strategic interest in our deramiocel product candidate and Nippon Shinyaku’s ability to successfully market and sell any such products, if and when approved.

If any of our other product candidates are cleared for commercialization, we intend to pursue collaborative arrangements regarding the sales and marketing of such products, however, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that such collaborators will have effective sales forces.

To the extent that we decide not to, or are unable to, enter into collaborative arrangements with respect to the sales and marketing of our proposed products, significant capital expenditures, management resources, and time will be required to establish and develop an in-house marketing and sales force with sufficient technical expertise.

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If any of our product candidates for which we receive regulatory approval do not achieve broad market acceptance, the revenues that we generate from their sales, if any, will be limited.

The commercial viability of our product candidates for which we may obtain marketing approval from the FDA or other regulatory authorities will depend upon their acceptance among physicians, the medical community, patients, and coverage and reimbursement of them by third-party payors, including government payors.

The commercial viability of our product candidates for which we may obtain marketing approval from the FDA or other regulatory authorities will depend upon their acceptance among physicians, the medical community, patients, and the availability of coverage and reimbursement by third-party payors, including government payors.

The degree of market acceptance of any of our approved products will depend on a number of factors, including:

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● limitations inherent in the approved indication for any of our product candidates compared to more commonly understood or addressed conditions;

● lower demonstrated clinical safety and efficacy compared to other products;

● demonstrated clinical safety and efficacy compared to other products;

● prevalence and severity of adverse effects;

● ineffective marketing and distribution efforts;

● lack of availability of reimbursement from managed care plans and other third-party payors;

● lack of cost-effectiveness;

● the effectiveness of marketing and distribution efforts;

● availability of reimbursement from managed care plans and other third-party payors;

● cost-effectiveness;

● timing of market introduction and perceived effectiveness of competitive products;

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Our development of a potential vaccine for COVID-19 or other indications is at an early stage and is subject to significant risks.

Our development of a vaccine is in early stages and we may be unable to produce a vaccine that successfully treats a particular virus in a timely manner, if at all.

Even if we were able to successfully develop and obtain regulatory approval for a vaccine, if the outbreak is effectively contained or the risk of coronavirus infection is diminished or eliminated before we can successfully develop and manufacture our vaccine, we may not be able to generate product revenues from the vaccine.

Our development of a vaccine of COVID-19 is in early stages and we may be unable to produce a vaccine that successfully treats a particular virus in a timely manner, if at all.

Additionally, a number of pharmaceutical companies have already obtained regulatory approval for COVID-19 vaccines, and other companies with significantly more resources and visibility than us are developing COVID-19 vaccines.

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In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors.

Many third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies, but also have their own methods and approval processes to decide which drugs they

will pay for and establish reimbursement levels.

Many third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies but also have their own methods and approval processes to decide which drugs they will pay for and establish reimbursement levels.

Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available.

If any of our product candidates fail to demonstrate attractive efficacy profiles, they may not qualify for coverage and reimbursement.

If any of our product candidates fail to demonstrate sufficient efficacy profiles, they may not qualify for coverage and reimbursement.

However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates that we develop through approval will be made on a plan-by-plan basis.

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Such decisions can strongly influence the adoption of a drug by patients and physicians.

Patients who are prescribed treatments for their conditions and treating healthcare providers generally rely on third-party payors to reimburse all or part of the associated healthcare costs.

Patients may be unlikely to use and prescribers unlikely to prescribe our products unless adequate coverage is provided and reimbursement is available.

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Further, there have been a number of legislative and regulatory proposals to change the healthcare system that could affect our ability to sell any future drugs profitably.

government, state legislatures, and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement, and requirements for substitution by generic products.

government, state legislatures, and foreign governments

have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement, and requirements for substitution by generic products.

We anticipate additional state and federal healthcare reform measures will be adopted in the future.

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The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval, if at all, expose the Company to the risk of product liability claims.

Product liability claims might be brought against the Company by consumers, health care providers or others using,

administering or selling our products.

Product liability claims might be brought against the Company by consumers, health care providers or others using, administering or selling our products.

If we cannot successfully defend ourselves against these claims, we will incur substantial liabilities.

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In addition, our clinical trial agreements and most agreements with third-party vendors contain provisions requiring us to maintain certain levels of insurance extending for multiple years beyond the termination or expiration of the agreement as well as indemnification obligations requiring us to indemnify them from any losses and claims that may be brought in connection with their provision of services, testing, manufacture or other activities in connection with the use of our products.

If we are unable to procure policies in the amounts, with suitable coverage and for the duration required, we could be in breach of our agreements with such third parties.

Our business involves risk associated with handling hazardous and other dangerous materials.

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Distribution Agreement and Japan Distribution Agreement with Nippon Shinyaku;

● failure to satisfy licensing obligations, including our ability to meet milestone requirements under our license agreements;

● failure to satisfy contractual obligations, including our ability to meet milestone requirements under our license agreements;

● market conditions in the pharmaceutical, biotechnology and other healthcare related sectors;

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Investors seeking cash dividends should not invest in the Company’s common stock for that purpose.

Accordingly, you will have to rely on capital appreciation, if any, to earn a return on your investment in our common stock.

We may issue shares of blank check preferred stock without stockholder approval in the future.

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As of December 31, 2024, there were approximately 45.6 million shares of common stock outstanding and approximately 4.9 million common warrants outstanding, as well as outstanding awards to purchase approximately 10.7 million shares of common stock under various incentive stock plans of the Company.

Additionally, as of December 31, 2023, there were approximately 1.2 million shares of common stock available for future issuance under our incentive plans.

This number of shares available for future issuance under those plans was subsequently increased by 1,557,416 shares in accordance with the terms of our 2021 equity incentive plan which include an automatic increase previously approved by our Board and stockholders.

Additionally, as of December 31, 2024, there were 59,850 shares of common stock available for future issuance under our incentive plans.

This number of shares available for future issuance under those plans was subsequently increased by 2,279,114 shares on January 1, 2025 in accordance with the terms of our 2021 Equity Incentive Plan which include an automatic increase previously approved by our Board and stockholders.

We may issue additional common stock, warrants and other convertible securities from time to time to finance our operations.

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The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other applicable securities rules and regulations, and are subject to the listing requirements of The Nasdaq Stock Market LLC (“Nasdaq”).

requirements of The Nasdaq Stock Market LLC (“Nasdaq”).

Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources.

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Therefore, we cannot be certain that in the future material weaknesses or significant deficiencies will not exist or otherwise be discovered.

If material weaknesses or other

significant deficiencies occur, these weaknesses or deficiencies could result in misstatements of our results of operations, restatements of our consolidated financial statements, a decline in our stock price, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.

If material weaknesses or other significant deficiencies occur, these weaknesses or deficiencies could result in misstatements of our results of operations, restatements of our consolidated financial statements, a decline in our stock price, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.

You may experience future dilution as a result of future equity offerings.

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Additionally, we may be subject to litigation and business challenges in the operation of our company due to actions instituted by activist stockholders.

Perceived uncertainties as to our future direction as a result of stockholder activism may lead to the perception of a change in the direction of the business or other instability and may affect our relationships with vendors, distributors, collaborators, prospective and current employees and others.

uncertainties as to our future direction as a result of stockholder activism may lead to the perception of a change in the direction of the business or other instability and may affect our relationships with vendors, distributors, collaborators, prospective and current employees and others.

Responding to legal and/or business challenges related to securities class action litigation, or litigation initiated by individual stockholders, including activist stockholders, could be costly and time-consuming, may not align with our business strategies, and could divert management’s attention and resources from the pursuit of our business strategies, any of which could harm our business and result in a decline in the market price of our common stock.

In the event we fail to satisfy any of the listing requirements of The Nasdaq Capital Market, our common stock may be delisted, which could affect our market price and liquidity.

Our common stock is listed on The Nasdaq Capital Market.

For continued listing on The Nasdaq Capital Market, we will be required to comply with the continued listing requirements, including the minimum market capitalization standard, the minimum stockholders’ equity requirement, the corporate governance requirements and the minimum closing bid price requirement, maintaining board diversity among other requirements.

In the event that we fail to satisfy any of the listing requirements of The Nasdaq Capital Market, our common stock may be delisted.

If our securities are delisted from trading on The Nasdaq Stock Market, however, and we are not able to list our securities on another exchange or to have them quoted on The Nasdaq Stock Market, our securities could be quoted on the OTC Markets or on the “pink sheets.” As a result, we could face significant adverse consequences including:

● a limited availability of market quotations for our securities;

● a determination that our common stock is a “penny stock,” which would require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

● a limited amount of news and analyst coverage;

● a decreased ability to issue additional securities (including pursuant to short-form registration statements on Form S-3) or obtain additional financing in the future.

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 1A. Risk Factors