A Position In Capricor Therapeutics Inc (NASDAQ:CAPR) Is Already Paying Off

Back on July 19, we highlighted Capricor Therapeutics Inc (NASDAQ:CAPR) as being a stock to keep an eye on in the biotechnology space. The company had a rough start to 2017 and was trading below one dollar a share (off highs of close to $3.40 apiece) at the time of our coverage. The misfortune came on the back of the company failing to demonstrate as part of a phase 3 trial that it lead development asset, a drug called CAP-1002, could be effective in the treatment of patients who have experienced a large heart attack with residual cardiac dysfunction.We noted that this was now in the rearview mirror and that the company had a potentially rewarding path forward rooted in an alternative indication (but one based on the same drug, CAP-1002) of Duchenne muscular dystrophy (DMD). CAP-1002 had demonstrated some degree clinical benefit signals as part of preclinical and early-stage trials and – at the start of July – Capricor announced that it had picked up Orphan Drug Designation from the US Food and Drug Administration (FDA) in the DMD indication in question.Our thesis was relatively simple – the orphan designation brought with it the potential for a Priority Review Voucher in the event of successful clinical completion and, we argued (and give some examples to support this argument) that this voucher was worth many multiples of the company's then-current market capitalization if management chooses to sell it.Toward the end of this week, Capricor has picked up another piece of good news and the company is running to the upside on the back of its release. At market close on Thursday, Capricor traded for $1.30 a share, up 30% on its preannouncement market capitalization.So, what is our take on the news in question and what does it mean for our thesis going forward?The release details the minutes of a meeting with the FDA that focused on a pathway for the above-discussed asset (CAP-1002) in the DMD indication. For those unfamiliar with this process, Capricor has to submit what's called an IND to the agency that outlines the protocol and study design it intends to use in the program. The FDA either accepts or declines this IND. If accepted, the company can carry out­ the clinical trial that the application outlines under the approved protocol.Sometimes, a company will meet with the FDA (as was the case here) to discuss its plans ahead of IND submission. This allows said company to get an idea of what the FDA wants to see from the trial and improves the chances are an IND green light first time around.So why was this meeting so beneficial for Capricor outside of it serving as clarification for the upcoming trial?Well, as management announced in the latest update, the meeting minutes detailed the willingness of the FDA to accept what's called the Performance of the Upper Limb (PUL) as a primary efficacy endpoint for the study. This is an instrument that was specifically designed to assess upper limb function in ambulant and non-ambulant patients with DMD and it is a scale against which the drug under investigation has already demonstrated a strong performance in previous trials.With this now being the primary efficacy endpoint for the study, all that Capricor has to do is replicate previous study results in a slightly larger population group (as a side note, said population group is probably still going to be relatively small, with this indication being a rare disease) and it will be able to complete the study successfully.From a timeframe perspective, management expects to kick off the study (which will be a phase 2 study) at some point during the second half of this year. We expect markets to load up on Capricor stock ahead of this initiation and – by proxy – we expect the company to appreciate into the close of 2017 and beyond.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on CAPR, sign up below!Image courtesy of NIAID via FlickrDisclosure: We have no position in CAPR and have not been compensated for this article.