Capricor Therapeutics, Inc.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the condensed consolidated notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s most recent annual report on Form 10-K. This discussion includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including, but not limited to, those set forth under Part I, Item 1A, “Risk Factors” in the Company’s most recent annual report on Form 10-K, under Item 1A, “Risk Factors” in this Quarterly Report and under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report, our actual results may differ materially from those anticipated in these forward-looking statements.

As used in this Quarterly Report on Form 10-Q, references to “Capricor Therapeutics,” “Capricor,” the “Company,” “we,” “us,” “our” or similar terms include Capricor Therapeutics, Inc. and its wholly-owned subsidiary.

Company Overview

Capricor Therapeutics, Inc. is a biotechnology company focused on the development and potential commercialization of cell and exosome-based therapeutics for the treatment of Duchenne muscular dystrophy (“DMD”), a rare genetic disorder characterized by progressive muscle degeneration and premature death, as well as other diseases with significant unmet medical need. Since our inception, we have devoted substantial resources to the development of our lead product candidate, Deramiocel, a cell therapy aimed to treat the skeletal and cardiac muscle complications associated with DMD, as well as to advancing our exosome-based platform technologies, developing manufacturing capabilities and supporting our research and development activities. Our Biologics License Application (“BLA”) for Deramiocel for the treatment of DMD is currently under review by the U.S. Food and Drug Administration (“FDA”), with a current Prescription Drug User Fee Act (“PDUFA”) target action date of August 22, 2026, for potential approval in the United States. We currently have no products approved for commercial sale. Our ability to generate product revenue and achieve profitability will depend on the successful development, regulatory approval and commercialization of Deramiocel and any other product candidates we may develop.

Cell Therapy (Deramiocel)

Our core program is focused on the development and commercialization of Deramiocel, a cell therapy product candidate comprised of cardiosphere-derived cells (“CDCs”), a population of cardiac-derived stromal cells isolated from qualified donated human hearts. Deramiocel is designed to slow disease progression in DMD through immunomodulatory, anti-inflammatory, pro-angiogenic and anti-fibrotic activities of CDCs. These effects are mediated in part by exosomes secreted by CDCs that contain bioactive molecules, including microRNAs and other signaling factors, which may influence gene expression and cellular pathways involved in inflammation, fibrosis, and tissue repair.

Our clinical development program for Deramiocel has focused on adolescents and young adults with DMD, including many patients who are non-ambulatory and experiencing progressive skeletal and cardiac muscle decline. Capricor has administered approximately 1,300 intravenous infusions across our clinical program to over 200 patients with DMD in three separate clinical trials. We believe therapies that address inflammatory and fibrotic processes contributing to muscle degeneration may provide potential benefit across a broad population of individuals with DMD.

Exosomes Platform Technology (StealthX^TM)

Extracellular vesicles (“EVs”), including exosomes and microvesicles, are nano-scale membrane-enclosed vesicles secreted by many cell types that contain characteristic lipids, proteins and nucleic acids, including messenger RNA and microRNAs. These vesicles facilitate intercellular communication through the binding and activation of membrane receptors or through the delivery of molecular cargo into target cells. Through these mechanisms, EVs may influence a variety of biological processes, including cell survival, proliferation, inflammation and tissue repair.

Exosomes in particular have attracted increasing interest as potential therapeutic and diagnostic platforms. Their small size, generally low immunogenicity, and ability to deliver biologically active molecules to recipient cells may allow

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

Our exosome platform is supported by internal research and external collaborations. Our collaborations and research around exosomes include the National Institutes of Health, the National Institute of Allergy and Infectious Diseases (“NIAID”), Johns Hopkins University (“JHU”), the Department of Defense, the U.S. Army Institute of Surgical Research, and Cedars-Sinai Medical Center (“CSMC”). Our platform leverages advances in RNA biology, protein engineering and targeted delivery technologies to support the development of exosome-based therapeutics and vaccines. We are currently exploring exosome-based approaches for infectious diseases, monogenic diseases and other potential indications.

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

Our Pipeline – Key Programs

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

Deramiocel’s mechanism of action is distinct from mutation-targeted approaches such as exon-skipping oligonucleotides and gene therapies, which aim to restore dystrophin expression in muscle cells. DMD is caused by mutations in the dystrophin gene that impair production of functional dystrophin, a structural protein important for maintaining muscle integrity. The absence of functional dystrophin leads to progressive skeletal and cardiac muscle damage, muscle cell death and replacement of muscle tissue with fibrosis. Cardiac involvement is a major component of disease progression in DMD. In patients with DMD, heart muscle cells progressively deteriorate and are replaced with scar tissue, leading to cardiomyopathy and ultimately heart failure, which is a leading cause of mortality in individuals with DMD. While several therapies have been developed to address certain genetic mutations associated with DMD, significant unmet medical need remains, particularly in patients with established skeletal and cardiac muscle disease.

We have conducted a comprehensive clinical development program evaluating Deramiocel in patients with DMD, including randomized controlled trials and long-term follow-up studies designed to assess safety and efficacy across multiple measures of disease progression. These studies include the Phase 3 HOPE-3 trial, the Phase 2 HOPE-2 trial and each of their ongoing open-label extension studies, and the earlier Phase I/II HOPE-Duchenne clinical trial.

Biologics License Application: In late 2024, we completed our submission of a BLA to the FDA seeking approval of Deramiocel for the treatment of DMD. The FDA accepted the BLA for review, granted Priority Review, and assigned a PDUFA target action date of August 31, 2025. In July 2025, we received a Complete Response Letter (“CRL”) from the FDA stating that the application did not meet the statutory requirement for substantial evidence of effectiveness and requesting additional clinical data.

Following a Type A meeting with the FDA in August 2025, we aligned with the Agency on a regulatory path forward to address the CRL, including the submission of additional clinical data from the Phase 3 HOPE-3 trial. We subsequently submitted our response to the CRL, which the FDA accepted as a complete response and classified as a Class 2 resubmission, assigning a new PDUFA target action date of August 22, 2026.

HOPE-3 Phase 3 Peer-Review Publication; Update to Statistical Model for LVEF: In July 2026, results from the HOPE-3 trial were published in The Lancet following independent peer review. As part of our dialogue with the FDA regarding the HOPE-3 data, and in connection with the peer review process with The Lancet, the Company identified an update to the statistical model used in its analysis of left ventricular ejection fraction (“LVEF”), the key secondary endpoint of the study. Under the revised model, LVEF yields a p=0.09 (1.8 percentage point treatment difference), compared to p=0.04 previously reported (2.4 percentage point treatment difference). In the pre-specified cardiomyopathy subgroup, the result is nominally significant at p=0.02 (2.8 percentage point treatment difference). Because the LVEF result did not meet the pre-specified significance threshold, endpoints tested subsequently in the pre-specified hierarchical testing sequence

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are no longer considered to be controlled for Type I error, and results for those endpoints are reported as nominal. The primary endpoint of HOPE-3 which addresses the skeletal muscle results was unaffected with Deramiocel demonstrating a statistically significant slowing of upper limb disease progression as measured by the Performance of the Upper Limb 2.0 scale (“PUL 2.0”) compared to placebo, with a least squares mean difference of 4.55 percentage points in favor of Deramiocel p=0.029, corresponding to a difference of approximately 1.2 point absolute change in total PUL 2.0.

Bioresearch Monitoring Inspection: In July 2026, the FDA conducted a Bioresearch Monitoring (“BIMO”) inspection in connection with its review of the BLA. At the conclusion of the inspection, the FDA issued a Form 483, Notice of Inspectional Observations, citing one observation relating primarily to the Company's standard operating procedures, documentation practices, vendor oversight, and audit report timeliness in connection with the conduct of the HOPE-3 clinical trial. The Company does not believe the observation affects the integrity or reliability of the HOPE-3 data, however, we can provide no assurance as to how the FDA will evaluate our response to the 483 or whether the observations will affect the timing or outcome of the FDA’s review of the BLA. At this time, the Company has submitted its response to the FDA and is awaiting further feedback.

Advisory Committee Meeting: On July 29, 2026, the Cellular, Tissue and Gene Therapies Advisory Committee voted 3 in favor and 9 against on whether available evidence provides substantial evidence of effectiveness of Deramiocel for the treatment of cardiomyopathy in patients with DMD. The Committee was not asked to vote on the HOPE-3 primary endpoint or on overall benefit-risk, and in a separate discussion of upper limb function its feedback was directionally supportive of the HOPE-3 clinical evidence. The Advisory Committee’s recommendation is advisory only and is not binding on the FDA.

Next Steps: The current PDUFA target action date of August 22, 2026 remains in effect, and we are continuing to engage with the FDA in connection with its review of the BLA. At this time, we plan to submit an amendment to our BLA that includes the 24-month open-label extension data from our HOPE-3 study, along with additional analyses of the existing data package, in order to support a refined indication focused on the primary endpoint. FDA has indicated it is willing to review this amendment and, upon receipt, to extend the PDUFA action date accordingly. We are finalizing the timing of that submission and will provide further updates when available.

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

StealthX™ Exosome Platform: Our StealthX™ exosome platform program consists of engineered exosomes for vaccine and therapeutic development.

Exosome Platform: Engineered Exosome-Based Vaccines: The StealthX™ vaccine is a proprietary vaccine developed internally by Capricor utilizing exosomes that were engineered to express either spike or nucleocapsid proteins on the surface. Preclinical results from murine and rabbit models published in the peer-reviewed journal, Microbiology Spectrum, showed the StealthX™ vaccine resulted in robust antibody production, potent neutralizing antibodies, a strong T-cell response and a favorable safety profile. We were selected to be part of Project NextGen, an initiative by the U.S. Department of Health and Human Services to advance a pipeline of new, innovative vaccines providing broader and more durable protection for COVID-19. As part of Project NextGen, the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, is conducting a Phase 1 clinical study with our StealthX™ vaccine. Preliminary data indicated the StealthX™ vaccine has been generally well tolerated and demonstrated a favorable safety profile across all dose levels tested. Early analyses showed limited neutralizing antibody responses at the evaluated dose levels, which may reflect prior vaccination or infection among trial participants. Final results from the trial, including cellular immune response data, are expected later in 2026, subject to completion of the study by NIAID. If NIAID finds that our StealthX™ vaccine meets its criteria for safety and efficacy, they may consider our program for a funded Phase 2 study.

Exosome Platform: Engineered Exosome-Based Therapeutics: We are focused on developing a precision-engineered exosome platform technology that has the potential to deliver defined sets of effector molecules that exert their effects through defined mechanisms of action. Pending further regulatory clarity for our DMD program, we plan to

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continue to explore the use of our proprietary StealthX™ exosome platform for a broad range of therapeutic applications including targeted RNA, protein and small molecule therapeutics to treat or prevent a variety of diseases.

These programs represent our core technology and products.

Financial Operations Overview

As of June 30, 2026, we had cash, cash equivalents, and marketable securities totaling approximately $237.9 million. Since our inception, we have received approximately $600 million through a combination of equity financings, strategic collaborations, grants and other non-dilutive funding sources.

Due to our significant research and development expenditures, and general administrative costs associated with our operations, we have generated substantial operating losses in each period since our inception. Our net losses were approximately $40.7 million and approximately $25.9 million, for the three months ended June 30, 2026 and 2025, respectively. Our net losses were approximately $74.7 million and approximately $50.3 million, for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, we had an accumulated deficit of approximately $379.6 million. We expect to incur significant expenses and operating losses for the foreseeable future.

As we seek to develop and commercialize Deramiocel or any other product candidates including those related to our exosomes program, we anticipate that our expenses will increase significantly and that we will need additional funding to support our continuing operations. Until such time when we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity financings, debt financings or other sources, which may include licensing agreements or strategic collaborations or other distribution agreements. We may be unable to raise additional funds or enter into such agreements or arrangements when needed on favorable terms, if at all. If we fail to raise capital or other potential funding or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of Deramiocel or our other product candidates. The timing and scale of any commercial launch expenditures, and our ability to access capital on favorable terms, may be affected by the outcome of the FDA’s review of the BLA.

We have no commercial product sales to date and will not have the ability to generate any commercial product revenue until after we have received approval from the FDA or equivalent foreign regulatory bodies to begin selling our product candidates. Developing biological products is a lengthy and very expensive process. To date, most of our development expenses have related to our product candidates, consisting of Deramiocel and our exosome technologies. As we proceed with the clinical development and potential commercialization of Deramiocel, and as we further develop our exosome technologies, our expenses will further increase. Accordingly, our success depends not only on the safety and efficacy of our product candidates, but also on our ability to finance the development of our products and our clinical programs. Our recent major sources of working capital have been primarily proceeds from public equity sales of securities and upfront payments pursuant to our U.S. and Japan Distribution Agreements with Nippon Shinyaku. While we pursue our preclinical and clinical programs, we continue to explore potential partnerships for the development of one or more of our product candidates in the U.S. and in other territories across the world, subject to the rights of Nippon Shinyaku and the outcome of our dispute against NS.

Our results have included non-cash compensation expense due to the issuance of stock awards and warrants, as applicable. We expense the fair value of stock awards and warrants over their vesting period as applicable. When more precise pricing data is unavailable, we determine the fair value of stock options using the Black-Scholes option-pricing model. The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. Generally, the stock awards vest based upon time-based conditions. Stock-based compensation expense is included in the condensed consolidated statements of operations under general and administrative (“G&A”) or research and development (“R&D”) expenses, as applicable. We expect to record additional non-cash compensation expense in the future, which may be significant.

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Results of Operations

Revenue

Clinical Development Income. Clinical development income for the three and six months ended June 30, 2026 and 2025 was zero.

Operating Expenses

Research and Development Expenses. R&D expenses consist primarily of compensation and other related personnel costs, supplies, clinical trial costs, patient treatment costs, rent for laboratories and manufacturing facilities, consulting fees, costs of personnel and supplies for manufacturing, costs of service providers for preclinical, clinical and manufacturing, certain legal expenses resulting from intellectual property prosecution, stock-based compensation expense and other expenses relating to the design, development, testing and enhancement of our product candidates.

The following table summarizes our R&D expenses by category for each of the periods indicated:

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R&D expenses for the three months ended June 30, 2026 increased by approximately $6.8 million, or 31%, compared to the three months ended June 30, 2025. The increase was primarily driven by the following:

The increase was partially offset by a $0.6 million decrease in research expenses related to our exosomes platform, primarily related to timing of research activities for exosomes.

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R&D expenses for the six months ended June 30, 2026 increased by approximately $15.3 million, or 37%, compared to the six months ended June 30, 2025. The increase was primarily driven by the following:

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The increase was partially offset by a $1.4 million decrease in research expenses related to our exosomes platform, primarily related to timing of research activities for exosomes.

General and Administrative Expenses. G&A expenses consist primarily of compensation and other related personnel expenses for executive, finance and other administrative personnel, stock-based compensation expense, accounting, legal and other professional fees, consulting expenses, rent for corporate offices, business insurance and other corporate expenses.

The following table summarizes our G&A expenses by category for each of the periods indicated:

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G&A expenses for the three months ended June 30, 2026 increased by approximately $8.4 million, or 148%, compared to the three months ended June 30, 2025. The increase was primarily driven by the following:

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G&A expenses for the six months ended June 30, 2026 increased by approximately $11.7 million, or 100%, compared to the six months ended June 30, 2025. The increase was primarily driven by the following:

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Other Income (Expense)

Investment Income. Investment income for the three months ended June 30, 2026 and 2025 was approximately $2.2 million and $1.8 million, respectively. Investment income for the six months ended June 30, 2026 and 2025 was approximately $5.1 million and $2.5 million, respectively. The increase in investment income for three and six months ended June 30, 2026 as compared to three and six months ended June 30, 2025 is due to a higher principal balance in our marketable securities, savings and money market fund accounts.

Products Under Active Development

Deramiocel for the treatment of DMD – The expenses for our DMD program include costs for personnel, clinical, regulatory, commercial, and research activities, including expenses related to scale-up for potential commercial scale manufacturing if our Deramiocel product is approved. For the first six months of 2026, we spent approximately $28.2 million on our Deramiocel program. This amount excludes personnel costs. The Company expects to provide additional guidance on its longer-term financial outlook for this program following greater regulatory clarity, which will inform future strategic and capital allocation decisions.

Exosome Platform – Our exosome platform is in early-stage development. For the first six months of 2026, we spent approximately $1.3 million on our exosome program, primarily related to research, preclinical studies and manufacturing costs associated with our NIAID program. This amount excludes personnel costs. We are prioritizing capital toward Deramiocel and are minimizing expenses related to the exosome platform until further regulatory clarity is obtained with respect to our DMD program.

Our expenditures on current and future clinical development programs, particularly our Deramiocel and exosomes programs, cannot be predicted with any significant degree of certainty as they are dependent on the results of our current trials and our ability to secure additional funding and/or strategic partners. In particular, our expenditures on the commercialization of Deramiocel, if approved, will depend on the outcome of our litigation with NS and, if we are successful in such litigation, whether we commercialize Deramiocel in the United States directly or through one or more distributors. Further, we cannot predict with any significant degree of certainty the amount of time which will be required to complete our clinical trials, the costs of completing research and development projects or whether, when and to what extent we will generate revenues from the commercialization and sale of any of our product candidates. The duration and cost of clinical trials may vary significantly over the life of a project as a result of unanticipated events arising during manufacturing and clinical development and as a result of a variety of other factors, including: