Capstone Holding Corp (CAPS) 2007 Q2 法說會逐字稿

Good day everyone, and welcome to today's OrthoLogic Conference Call. As a reminder today's call is being recorded. Currently the call is in a listen only mode. (OPERATOR INSTRUCTIONS) At this time for opening remarks I would like to turn the call over to Dana Shinbaum, Vice President Business Development for OrthoLogic. Please go ahead.

Good afternoon and thank you for listening in. Joining me on the call today are Jock Holliman, our Executive Chairman, Dr. Randy Steer President and Les Taeger, Chief Financial Officer of OrthoLogic.

Before we begin, a reminder with respect to any forward-looking statements made during this call. These statements are based on management's current beliefs and expectations of how the future will look given the information available today. There are risks that could cause the company's actual results to differ materially from these statements. You may review a list and description of these risks in our form 10K for the fiscal year ended December 31, 2006 and other documents we file periodically with the Securities and Exchange Commission. Please also see our updated website OrthoLogic.com, for additional information. I will now turn the call over to Mr. Jock Holliman.

I'd like to thank everyone for dialing in today. Good afternoon. We hope you've had a chance to review today's press release in which we announced financial results for the second quarter ended June 30, 2007. We have spent the better part of 2007 advancing the basic science supporting TP508 and preparing for an IND filing for AZX100.

You may have noticed our announcement last week regarding the formation of a new scientific advisory board. The appointments to our SAB of Dr.'s Michael Mendelsohn and Dr. Charles A. Dinarello represent for OrthoLogic the creation of a world-class scientific and technical resource as we continue to make progress towards several important goals for the organization.

Management has growing confidence in the science behind TP508 and its potential value as a common pathway in modulating endothelial dysfunction. We devote energy and resources to TP508 mechanism of action activities because we believe there is promise in the molecule beyond orthopedics and diabetic foot ulcer healing. With a well characterized MOA there is potential for OrthoLogic to move rapidly through Proof of Concept studies and vascular endothelial dysfunction and create value through partnering initiatives with companies interested in this space, and there are many. This is one reason that we've created the SAB and have two independent scientific teams working to define and verify the TP508 mechanism of action at present.

Meanwhile, our parallel efforts continue in partnering TP508 for the fracture and diabetic foot ulcer healing indications. Our internal team is on schedule for an IND filing by year end 2007, in support of AZX100 in a dermal scarring indication. Our preclinical models are also designed to provide evidence of safety and efficacy, and are high priority partnering indications including pulmonary and vascular.

Shifting to the financial side, the company's Q2 2007 results are as follows. For the quarter ending June 30, 2007, net loss was $2.3 million or $0.06 per share versus a net loss of $6.5 million or $0.16 per share for the quarter ended June 30, 2006. For the 6 months ended June 30, 2007, the net loss was $5.3 million or $0.13 per share versus a net loss of $23 million or $0.58 per share for the 6 months ending a year ago. The $17.7 million decrease in net loss in the 6 months ended June 30, 2007 compared to the same period in 2006 resulted primarily from an $8.4 million Purchased and Processed Research and Development costs in 2006, principally tied to the acquisition of the Azerax drug platform.

A decrease of $1.3 million in non-cash stock compensation expense reduced costs in 2007 reflecting management changes and staff reductions, which occurred in the first half of 2007. A decline in clinical costs related to our fracture repair Phase III and Phase IIb clinical trials, which were substantially completed as of December 31, 2006.

And lastly, recognition in 2006 of income tax expense related to the recording of a valuation allowance of $1.1 million for a deferred tax asset associated with an AMP credit carry over.

That's all a mouthful. Lots of detail on the financials it is our disclosure requirement. Thanks for your patience.

We have continued our cost-containment effort with the signing of a new lease commencing January 2008, that reduces our space commitment to 17,000 square feet in our same Tempe, Arizona facility, where we're currently headquartered. Management estimates that obtaining this new lease at the company's present location will result in annual savings approaching $450,000, in addition to avoiding the significant cost and disruption associated with relocation.

The company began the year with $70.2 million in cash and investments and ended this quarter with $64.3 million in cash and investments. As we discussed most recently during the annual stockholders meeting in May, 2007, we are forecasting a cash burn for 2007 of $18 to $19 million on original guidance. We expect to meet or come in below this forecast rate. We continue to rigorously control our costs and manage our cash.

In summary, we are making no significant announcements today. But we are working toward our milestones. Our science team is executing with a keen sense of urgency and we look forward to sharing meaningful developments as they occur. We'll now open the call to questions.

(OPERATOR INSTRUCTIONS) We'll go to Barbara Beckley with Lewis Capital Management.

Hi guys thanks for taking the question.

You bet, hi Barbara.

Hi there. I'm just wondering, can you characterize the nature of the discussions you've had regarding partnering TP508? Are they preliminary? Have they moved beyond preliminary? And can you talk about maybe the number of parties you're talking to?

We love leading questions like that. I wish we could be completely specific. There have been discussions in both bone, from a device and drug standpoint. Some of those are ongoing, diabetic foot ulcer, perhaps more discussions there and ongoing as we speak. It would be inappropriate regrettably for me to tell you that we're close to a deal in either of those indications.

Do you get the sense that the parties need more data or is it just, do they want more data, are they interested in more research, or is it more a matter of them deciding how they would fit it into their program?

Yes, they always want more data. You can never provide enough proof of concept. We actually are, in both TP508 and in AZX100 running some animal studies right now that should answer additional questions regarding partnering. The AZX100 biggest indication we think is in pulmonary refractory asthma. And so we're running a model right there that we think will give us a lot more traction on the partnering front. So yes, we have several Proof of Concept studies moving right now. There are some parties who feel we may have enough historical data in a couple of indications. Most of the time they want more information.

Okay, thank you.

You bet that's a great question we appreciate it.

No problem.

(OPERATOR INSTRUCTIONS) And having no further questions I'd like to turn the conference over to Dana Shinbaum for any additional or closing comments.

This is Jock I will talk for closing comments. We appreciate your loyalty as shareholders. We are working extremely hard to back fill the science in TP508 and move it to partnering level very, very quickly. We're encouraged by some recent developments and as I said earlier we'll share those developments with you as soon as we are able. We think that the best and brightest perhaps indication for TP508 is one of the vascular indications which serve very, very large markets and are of great interest to big pharma in terms of partnering.

We remain very excited about AZX100 and the molecule is showing us everything we expected to see in a rigorous multi-disciplined preclinical regimen that will allow us to deliver the molecule intra-dermally, systemically, we're covering all the bases. So this company is being built on very good science right now. Sometimes you can't rush the science and we're confident we're going to create value for you. Once again, thanks for your patience. Buy some more stock. We'll look forward to talking as developments are disclosable. Thank you very much for joining us today.

This does conclude today's conference. Thank you for your participation. You may now disconnect.