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Conventional wisdom says that once the heart is scarred from a heart attack, the damage is permanent and healthy heart muscle, once lost, cannot ever be restored.

A tiny California start-up, Capricor Therapeutics Inc. (OTCQB:CAPR) is trying to disprove that notion.

Capricor is using stem cells from a donor's cardiac tissue to heal the damage caused by the heart attack, and the company's trials, so far, successfully proved that this is possible.

Capricor received clearance from the National Heart Lung and Blood Institute's Gene and Cell Therapy Data Safety Monitoring Board to begin the Phase 2 portion of its Phase 1 & 2 clinical trial testing its compound CAP-1002. The trial, dubbed Allstar, will investigate CAP-1002 if it can reduce the size of the scar caused by a heart attack in patients.

The trial is supported by $20 million from CIRM (California Institute for Regenerative Medicine) and receiving another $12.5 million from Johnson & Johnson (NYSE:JNJ) as an upfront fee for an option to buy into the program.

The Caduceus trial

Initially Capricor's work centered on using the patient's own cells.

But at some point the company switched to using off-the-shelf allogeneic stem cells from donors which makes the commercialization and treatment process much simpler.

The Phase 1 Caduceus trial studied 25 patients, with an average age of 53, who had suffered a heart attack in the previous month. The stem cells were implanted within five weeks following the heart attacks.

Doctors removed heart tissue from the patients, about the size of half a raisin, using a minimally invasive procedure that involved a thin needle threaded through the veins. After separating the stem cells from the tissue, they were reinserted using a second minimally invasive procedure.

17 patients received coronary artery infusions of 12 to 25 million stem cells taken from healthy tissue in their own hearts. The remaining eight underwent standard care.

A year later, the proportion of the heart scarred in patients who had the stem cell treatment had been reduced from 24 per cent to 12 per cent. This is a 50 percent reduction in cardiac scar tissue compared with no improvement for the eight who received standard care. This moved the treated patients from a high risk to a low risk group.

The procedure however produced no significant change in the ejection fraction which is a measure of the heart's pumping capacity.

Yet the regeneration of heart tissue marked a significant progress in the field. The small trial showed that stem cells could repair damaged heart tissue after they suffered a heart attack, giving Capricor the confidence to continue on with a larger study.

During the year following the procedure, six patients in the stem cell group had serious adverse events, including a heart attack, chest pain, a coronary bypass, implantation of a defibrillator, and two other events unrelated to the heart. Only one of these events were linked to the treatment.

Dr Eduardo Marbán, director of the Cedars-Sinai Heart Institute in Los Angeles who led the investigation, remarked:

"This discovery challenges the conventional wisdom that, once established, scar is permanent and that, once lost, healthy heart muscle cannot be restored."

Phase 2 trial

Using donor hearts has several advantages: it provides a sustainable source of tissue from which stem cells can be derived, the manufacturing is scalable and one heart can provide thousands of doses.

There is also a financial advantage: the gross margin in the procedure can be as high as 90 percent.

A CDC (cardiosphere-derived cell) is a cell derived from a donor heart when a heart cannot be used for transplantation. The heart is taken back to the lab, sectioned and cultured. During the procedure, the heart is melted like a snowball.

Without melting, says CEO Linda Marban, injecting the cells through a cardiac catheter would be like

"flushing a bowling ball down the toilet. Our cells work by going in and acting as a drug. In effect, they tell the local environments to get in and fix the problem. Within a month, they're gone from the recipient's system."

In the Phase 2 study investigators will test this approach in two patient groups. One group will be tested in 30 to 90 days after the heart attack and the other, a sicker group, in 30 days to a year after a heart attack. Capricor is hoping to see the kind of reduction in scar tissue that excited researchers in the Phase 1 trial.

Patients in the experimental arm of the trial will be infused with a single dose of 25 million cardiosphere-derived cells.

274 patients will be enrolled and the trial is planning for a 2016 completion.

The primary outcome measure is the percentage reduction in the size of the scar as measured by an MRI scan in the experimental group compared to the placebo group at 6 and 12 months after the infusion.

Safety endpoint is the proportion of patients experiencing cardiac events attributable to the circulating antibodies in their bodies from CAP-1002.

Cells derived from donor heart tissue are called allogeneic adult stem. Allogeneic stem cells are blood-forming stem cells (cells from which all blood cells develop) from a genetically similar, but not identical, donor. This could be a sister or brother, but also could be an unrelated donor.

The number of cells is expanded in the laboratory using a specialized process before infused directly into a patient's heart via the coronary artery through a catheter.

The Johnson & Johnson deal

According to the J&J contract, Janssen Biotech, a subsidiary of J&J, will have 60 days following delivery of the 6-month follow-up to Phase 2 to decide whether it wants to take control of the program and carry on with the late-stage studies. If J&J exercises the option, Capricor will be eligible to receive up to $325 million in milestone payments and also receive royalties on sales, if any, of CAP-1002.

Phase 2 should be completed in the middle of 2016, says Capricor CEO Linda Marbán, and J&J will decide then or before that if it wants to take the gamble on a Phase 3 trial.

Eduardo Marban

Capricor initially raised $4 million from angel investors back in 2006 to start exploring the commercial potential of heart stem cells. Dr Eduardo Marbán did the initial lab work at Johns Hopkins, investigating how stem cells could repair damaged heart tissue, with his wife Linda Marbán heading up the company.

Marbán was then named director of the Cedars-Sinai Heart Institute in 2007. The move to the West Coast made Capricor a rare biotech that is based in Beverly Hills.

Late last year, the company went public. In November 2013 the company reverse merged with San Mateo, CA-based Nile Therapeutics, another clinical-stage company developing innovative products for cardiovascular diseases. Capricor Therapeutics' stock began trading under the symbol "CAPR" in December, 2013 on the OTCMKTS.

Investors' summary

J&J: This isn't the first deal J&J has made in the stem cell arena. The company signed one with Germany's Evotec AG and the Harvard Stem Cell Institute earlier in 2013. Johnson & Johnson's other stem cell programs are BetaLogics and a program in AMD (advanced macular degeneration).

Capricor has about 870, 000 shares outstanding, the market cap is only about $5 million and has a 6 percent institutional ownership. Its share price ranged from $1.40 to $10.00 in the short period it publicly traded. The announcement of the J&J contract boosted the share price.

In intellectual properties, Capricor has exclusive licenses from the University of Rome, Johns Hopkins University, Cedars-Sinai Medical Center and the Mayo Foundation for Medical Education and Research.

Capricor's lead compund, CAP-1002 is complemented by Cenderitide, a dual receptor agonist natriuretic peptide intended to treat patients with advanced heart failure. Natriuretic peptides are important regulators of cardiac growth, blood volume, and arterial pressure.

Using it via a continuous infusion, Cenderitide is being tested to stabilize the patient's heart and kidney functions, preventing the worsening of heart failure symptoms and re-admissions to the hospital during the post-acute heart failure period.

That period is the 90-days immediately after discharge from the hospital for acute decompensated heart failure and it is often associated with a worsening of heart failure symptoms or renal function. Rates of re-admission and mortality can be as high as 40 percent during that period.

Capricor is a small company and its efforts may not lead anywhere or may take a long time to achieve any results.

But make no mistake: this pioneering work is of major significance for patients, investors and the heart treatment field in general. If the theory is validated, even partially, it means a revolution in medicine, with corresponding financial rewards for all the people involved, including early investors.

Source: Capricor: Can A Scarred Heart Be Repaired?