Capstone Holding Corp (CAPS) 2008 Q1 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. They will be a question-and-answer session to follow.

At this time, I would like to turn the call over to Mr. Jock Holliman, Executive Chairman, and Mr. Dana Shinbaum, Vice President, Business Development for OrthoLogic. Please go ahead.

Thank you. This is Dana Shinbaum speaking.

Before we begin, a reminder that today's discussion may contain forward-looking statements about the business prospects of OrthoLogic Corp. These statements are based on management's current beliefs and expectations of how the future will look given the information presently available. And they include expectations regarding OrthoLogic's financial performance and potential future products in several areas of therapeutic research and development.

There are risks that could cause the Company's actual results to differ materially from these statements, including but not limited to progress of OrthoLogic's product programs, actions of regulatory authorities, availability of capital, future actions in the biotechnology and pharmaceutical markets and development by competitors. You may review a list and description of these and other risks, which are detailed in OrthoLogic's 10-K reports filed with the U.S. Securities and Exchange Commission.

Please also see our Web site, www.OrthoLogic.com for additional information, and also to view today's presentation under the "Investors" section of the Web site, and also under "Calendar of Events" section of the Web site.

I would like to turn the call over now to Mr. Jock Holliman, Executive Chairman of OrthoLogic.

Thanks, Dana, and thanks to everybody for listening in today. We appreciate this very good group of loyal shareholders that we have.

If you will turn to slide 3, and we will move fairly rapidly, this is the OrthoLogic profile outlining AZX100 and TP508, our two principal product platforms. We possess a strong IP portfolio, 26 full-time employees, eight of whom are PhD or MD, and we have a fully disciplined, multi-disciplined capability for pharmaceutical development within the Company.

Turn to Slide 4, please. You know of our NASDAQ listing. We closed the 3/31/08 quarter with $57.3 million in cash, which equates to $1.37 per share. No long-term debt. Our trading range is $0.79 to $1.64 in the last 12 months. Our market cap is up a bit today, over $40 million.

Slide 5, please. This is our March 31, 2008 balance sheet, released last week, showing a very strong cash position.

Slide 6. This slide shows our income statement for the quarter ended March 31, 2008, also released last week.

Slide 7. You will remember from our last conference call the discussion of the OrthoLogic report card. As you can see from this slide, for year-to-date 2008, we continue to make progress on both platforms. The most recent example is the completion of our initial Phase I human clinical trial of AZX100 and dermal scarring. Last Thursday, we announced positive safety results from that trial, and we are preparing to initiate the next AZX100 Phase I trial early in the third quarter of this year.

We are advancing the mechanism of action; we're supporting the repurposing of TP508 and vascular applications. And we believe we have gained a much more complete understanding of the MOA, which will help significantly in our future partnering efforts.

Slide 8, please. This slide is the May 8, 2008 announcement of positive safety data in the AZX100 Phase Ia trial. Our team executed the trial with precision, and we are quite pleased with the results.

Slide 9. Cash burn in 2008 is estimated to be $16 million to $18 million. Since we have stated previously the full-year budgeted spend is predicated upon success in our preclinical and clinical programs being performed during the first half of the year. With the $3.3 million cash burn in the first quarter of 2008, we are running favorable to plan on a year-to-date basis.

Slide 10. This slide offers a more detailed look at our two peptide platforms, AZX100 and TP508; are both potent, smooth muscle relaxing agents that work via unique and different mechanisms of action.

Slide 11. This is a molecular rendering of AZX100.

Slide 12, please. This slide depicts the delivery mechanism of AZX100, and we are learning a lot more about it. Other agents in this category, such as pletal, Viagra, MetaCore, requires cell surface mediation and multiple pathways in order to exert smooth muscle relaxing activity. AZX100 is different, in that its unique cargo plus carrier structure allows it to cross the cell membrane and act directly on actin cytoskeleton, therefore relaxing smooth muscle and inhibiting fibrosis. This elegant delivery mechanism means that AZX100 may offer more specific and targeted therapy with the potential for fewer side effects.

Slide 13. You've seen this slide before. It shows our two principal mechanisms in smooth muscle relaxation and anti-fibrosis and the clinical targets that we're pursuing.

Slide 14. We include this slide as a reminder of the high value target indications we're pursuing, all of which are in the multiple billions of dollars range.

Slide 15. This is a progress slide on our multiple development pathways, updated to reflect recent progress specifically in the Phase Ia. All of our other programs remain substantially on track.

Slide 16. OrthoLogic plans to continue internal development of the AZX100 dermal scarring indication and to seek partners at the appropriate juncture for the pulmonary and vascular indications.

Slide 17. This is a molecular image of our good friend, TP508.

Slide 18. Management has stated previously our belief that the future clinical benefit of TP508 may be in one or more vascular applications. The foundation for this mechanism is the work we have completed today, which is focused on three fundamental characteristics of the molecule. We have demonstrated that TP508 modulates nitric oxide enzyme, contributing to the smooth muscle relaxing effects of the molecule. This means TP508 may have potential to increase blood flow to an ischemic heart.

Secondly, we have gained a better understanding of the protective effect of TP508 at the cellular level, and these data were recently published. TP508 has been shown to prevent apoptosis or programmed cell death, meaning it may help limit myocardial tissue damage resulting from a heart attack.

Thirdly, we have demonstrated that TP508 restores or up-regulates vascular endothelial growth factor in human endothelial cells, which helps to explain its angiogenic and revascularization effects. This may translate into a potentially beneficial effect in damaged myocardial tissue.

Lastly and recently, we have generated new data, albeit on a preliminary basis, that suggests that TP508 may play a significant role in inflammatory cytokine modulation, a potentially important mechanism in addressing acute cardiac therapy.

Slide 19. Vascular applications for TP508 may potentially include underserved critical care conditions such as myocardial infarction, ischemia and peripheral vascular disease. This slide underscores the fact that these markets represent multi billions of dollars in terms of drug revenue.

Slide 20. This is our pipeline slide on TP508. Our next step is to complete the preclinical proof of concepts studies in acute myocardial ischemia at Harvard's Beth Israel Deaconess Medical Center and further demonstrate the beneficial effects of TP508 and vascular disease models.

If successful, these studies will provide additional support for partnering TP508 with companies vitally interested in this space. We expect to have results in-house for internal decision-making beginning in the third quarter of 2008.

We continue our active partnering dialogue for TP508 in diabetic foot ulcer, and we have an orthopedic evaluation of TP508 underway with a large, highly skilled company in this space.

Slide 21. It is our current plan to partner all TP508 indications that show a basis for commercialization. The myocardial infarction indication represents the greatest potential value. If our Harvard study is successful, we will move aggressively to find a development partner. Data should be available for initial review at the end of the third quarter 2008.

Slide 22. Our milestone chart, showing a few more checks. In summary, our initial AZX100 Phase Ia human clinical trial program is now successfully completed, and we expect to be initiating the second Phase I human trial early in the third quarter.

Five proof-of-concepts studies are underway for AZX100 and TP508. Data from these programs will become available internally to OrthoLogic in the second and third quarters of this year.

We believe that if these initiatives are successful, we can become a highly valued company. We look forward to sharing significant developments just as soon as we can release them, and we hope to add many positive development checkmarks to this milestone slide in the months ahead.

With the completion of the AZX100 phase Ia program in dermal scarring, and the preliminary but possibly significant data on TP508 and cytokine modulation, we continue the transformation of OrthoLogic from a preclinical and basic science company into a genuine clinical stage development organization with multiple potential value-creating opportunities in the portfolio. We'll now open the floor to questions.

(OPERATOR INSTRUCTIONS). Mike Dwyer, Robert W. Baird.

Can you give us some color as to the proof of concept for some of your other programs?

Thanks, Mike. Yes, indeed. Our programs are beginning to develop some information for our internal evaluation, and they are all substantially on track. We should have data within the next one to four months that will help us drive some go, no-go decisions. And there will likely be some follow-on studies possible as we learn about the way that our two molecules work in these different indications. But we should be at some preliminary decision points in the fourth quarter of this year.

Thanks.

(OPERATOR INSTRUCTIONS). Scott Lewis, Lewis Capital Management.

On the AZX100 dermal scarring, could you talk a little bit about the parameters for the Ib tests? And also, was the Ia test -- was there any -- were those in patients with the scarring, or was it just pure safety tests?

Randy Steer, our President and Chief Medical Officer is on the phone as well. Randy, would you be so kind as to give a little more color there?

I'm delighted. Can you hear me clearly?

Yes.

In the Phase Ia study, we used normal subjects, and what we did was a intradermal injection of AZX100 at increasing doses. And we really looked to determine its safety tolerability.

The results were really very gratifying. There was just one minor side effect, which was a little bit of stinging at the highest dose.

With respect to the Phase Ib study, we're going to use healthy, normal subjects again, but in the Ib study, we're going to create a wound with a small punch biopsy, a standard biopsy using standard approaches, and we will do that at a single site center. And what we're going to do, again, is to recapitulate the design of the first study to some degree by doing an increasing dose range. We are also going to look for preliminary pharmacokinetics and tolerability in that study. But these, again, will be normal subjects.

Great. Thank you.

Michael Heaberg, Axiom Asset Management.

Just wondering if you had any update, and I might have missed it, to any progress on the share repurchase program.

Thank you. Yes, I didn't address that. I'm looking at our CFO. How many shares did we repurchase?

Well, we purchased 190,000 as of March 31.

That's right. In the month of March, we initiated a program after the March 5 call, and 190,000 shares were purchased by the Company during the month of March at an average price of about $0.95 per share, I believe. That's what I recall.

Our program continues, Mike, and I believe I can make this statement in correctness. Either an employee or director, or the Company has been in the market purchasing shares every day since we initiated the program.

Now you know that we are, as a Company, we are limited by 10b-18 Safe Harbor in terms of how many shares we can purchase on a daily basis, 30-day moving average percentage. So we haven't been able to purchase that many shares, but every share that we purchase is accretive on a cash value per share to all the remaining shareholders. So we are continuing that program. We closed at $1 today. We are pleased by the little bit of momentum and our news last week. And hopefully this call will continue to help people get interested in the stock.

Thank you.

(OPERATOR INSTRUCTIONS). There appear to be no further questions at this time. I will turn the conference back over to our speakers for any additional or closing comments.

Thank you once again for the support of OrthoLogic. The biotech market continues to be challenged from a market capitalization standpoint. We really believe we're making progress. We are doing what we said we would do in 2008. We are working on some very urgent timeliness, and I couldn't be more pleased with our clinical development and preclinical team. They are working the hours, the long weekends, to deliver on time, on schedule.

So our shareholder value creation motive is number one in our minds, and we really appreciate your support, and we hope that we'll have good news to share with you in the next few months. That's all from Tempe. Thank you very much.

That does conclude today's conference call. We thank you all for participation, and you may now disconnect.