Capstone Holding Corp (CAPS) 2008 Q3 法說會逐字稿

Good day, everyone, and welcome to today's Capstone Therapeutics conference call. (Operator Instructions). At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Dana Shinbaum, Vice President Business Development for Capstone Therapeutics. Please go ahead, sir.

Good afternoon. Thank you. Joining me on the call today are Jock Holliman, our Executive Chairman and Dr. Randy Steer, President of Capstone Therapeutics. Today's slides are available at our website under the investors section at www.capstonethx.com.

Before we begin, a reminder that today's discussion may contain forward-looking statements about the business prospects of Capstone Therapeutics. We're on slide two. You may review a list and description of the risks associated with our business in Capstone's 10K reports filed with the US Securities and Exchange Commission. Please also see our website, capstonethx.com for additional information.

If you would please turn to slide three. Capstone therapeutics, as you know, is a development stage biopharmaceutical company with two novel therapeutic peptide products in various stages of development. We have a strong patent portfolio and a small but experienced team that is skilled in all facets of product development and commercialization. The Company's new identity, Capstone Therapeutics, was introduced on October 1st of 2008. We are focused on a future that includes therapies for dermal scar reduction, heart disease and other vascular and pulmonary disorders. The new name, Capstone Therapeutics, embraces and reflects this new direction for the Company.

I will now turn the call over to Mr. Jock Holliman, Executive Chairman.

Thanks, Dana, and thanks everybody for tuning in today. We'll start on page 4, and review the financials. I want to call your attention to the balance sheet categories of cash and cash equivalents, short-term investments and long-term investments, which totaled $51 million as of September 30th, 2008, compared to $60.6 million at December 31st, 2007. The change in these balances includes the effect of our stock purchase plan, which through September 30th, 2008, totaled 1,082,796 shares at a cost of $1,017,000. Currently, we do not plan to purchase additional shares in the fourth quarter of 2008.

Slide five, please. Total operating expenses were comparable between 2008 and 2007. The increase in net loss for 2008 was driven by lower investment income due to declining interest rates between periods and reduction in investment balances due to use of cash in operations and the share repurchase program. While the operating numbers are comparable between periods, we will highlight today how our efforts have accelerated.

We marked the completion in 2007 of an IND, or AZX100 in dermal scarring, and the initiation of our landmark pre-clinical study of Chrysalin, and acute myocardial infarction at Harvard Beth Israel hospital. In 2008, we advanced AZX100 into human clinical safety trials, completed the Chrysalin pre-clinical study and commenced partnering efforts for Chrysalin and vascular indications.

Slide six, please. On October 14, 2008, we announced revised guidance of $13 million to $15 million in cash burn for 2008. Prior guidance was $16 million to $18 million for the year. We continue to be relentlessly focused on preserving our cash position while pursuing clinical and partnering opportunities for our two peptide programs.

Slide seven. We'll first speak about our progress with AZX100. Slide eight is a summary of the status of the AZX100 Phase IB human clinical trial in dermal scarring. This is a safety study. We have seen no serious adverse events thus far, and the side effects observed and reported today appear to be mild, local site reactions. We look forward to reporting final results of this study in December 2008.

Slide nine. This slide reflects the current outline for the first AZX100 Phase II human clinical efficacy trial in dermal scarring. We anticipate enrollment starting first quarter 2009, assuming an acceptable safety profile from our current Phase IB study. This Phase II trial will enroll approximately 150 subjects undergoing arthroscopic shoulder surgery. The procedure will produce a type of scar we are interested in testing with AZX100. This study will be powered to accommodate an interim analysis from a statistical standpoint late in 2009.

Slide ten, please. This slide shows our current status with respect to the entire suite of AZX100 projects. I'll call your attention to the bottom two. We anticipate having data for internal analysis from the pulmonary fibrosis and intimal hyperplasia pre-clinical studies within the next two months.

Slide 11. This is our Chrysalin molecule, and turning your attention to Chrysalin on slide 12, this slide shows the updated status of Chrysalin in cardiovascular disease. As we have announced, we have generated pre-clinical proof of concept data in both chronic and acute ischemic heart disease, and on the acute side of the equation, Chrysalin is effective in both normal and hypercholesterolemic models. This is a first-ever discovery, and we are currently in the market seeking a partner to move this program to IND and into human clinical trials.

Slide 13. This is where we reiterate our strategy, which is consistent with previously announced programs and milestones. Slide 14 shows our progress against those stated milestones. It should be clear from this that we have continued in 2008 to generate results on schedule while performing favorably to budget. Our strategy has been clearly articulated and we are delivering according to plan.

Slide 15 reflects some key financial facts regarding our cash position, our balance sheet and our market cap. Slide 16, in summary, we have two priorities for value creation in 2009. Number one is the AZX100 Phase II program in dermal scarring, statistically-powered to give us a chance to show efficacy results. Secondly, the Chrysalin corporate partnering program in acute myocardial infarction is in full swing at this point. Thank you for your attention and we'll certainly open the phone to questions at the present time.

(Operator Instructions). We will take our first question from Mike Dwyer with Robert W. Baird. Please go ahead.

Hi, this is actually [Tom Anslow] on behalf of Mike Dwyer.

Hi, Tom. Thanks for calling in.

No problem. On the Phase IB trial, we understand that it's primarily designed as a safety study, but is there any chance you will get any hint of efficacy from the study?

Good, fair question. I would like to defer that to the designer of the trial, Randy Steer. Randy? Would you answer that, please?

Sure, can you hear me clearly?

I can, yes.

Good. Well, you're absolutely correct, it is a safety study, and-- but it's a good question, and it is possible to get a hint of efficacy, we believe, because we designed the study in a manner that we're doing a punch biopsy at the indicated time, and we'll have an opportunity to look at histology as well as digital photography. That will be evaluated by a blinded, independent group. So, again, the focus is on safety. The data are blinded to us now, but we are-- I think there is a significant chance of getting a hint of efficacy. And by that hint, I mean a trend of efficacy.

We didn't power the study in a manner that would be consistent with efficacy study, so the end number is not real large, but when the data come out this winter, we'll have a chance to see if there is some trend line in preliminary efficacy.

Thank you.

Thanks, Randy.

(Operator Instructions). We will go next to [William Jones] with Smith Barney. Please go ahead.

Hi, guys. So, on the dermal scarring, are we in a position where we're not going to try to get a partner until we get the results from the Phase II program?

It is a subject of ongoing discussion, and I would say that we are tactically getting ourselves on the radar screen of some potential partners so that they can follow the program, but to partner at this early stage, before we have proof of efficacy would be throwing the baby out with the bathwater. If we see some hint of efficacy from the Phase IB study, that will obviously be very encouraging, and as soon as you enter human clinical trials, you do occasionally get a phone call expressing interest in learning about and following the program by a corporate strategic, and we certainly have had those phone calls to this point in time.

But we are not, from a strategic standpoint, actively trying to partner dermal scarring yet. It's just a little bit too early. There was a significant deal done between Renovo and Shire in 2007, and I'll try to get the numbers right, but just to kind of set the magnitude of the opportunity, even though we do live in a different world today, Shire partnered from Renovo, a UK-based company, their dermal scarring drug Juvista for North America, and my recollection is that it was $125 million in combined direct up-front licensing and equity purchases and an additional $700 million in clinical milestones for a total of $825 million, and that's based upon market research that we have seen from Renovo that suggests the entire surgical dermal scarring market is approximately $4 billion.

So, it's a sizable market. It's largely-- there is no drug really serving this market at this point in time. So, if we can continue to show safety and efficacy in a Phase II and have statistically-driven results in late 2009, we've got a heck of an asset on our hands. Bill, thanks for tuning in today. We appreciate it.

Well, one other question. On the Chrysalin corporate partnering, how has the interest been since you've come out with the discovery or the updates?

We are active in contacting a very specific list of targets. We are coming in on an introduced basis, and I would say that we are getting a very solid reception at this point. It is very, very early in the game, and big Pharma has been quite preoccupied lately with a changing landscape. Merck has laid off 7400 people, Wyatt has downsized their list of platforms and indications, Pfizer has exited the cardiovascular business, in an announcement about a month ago. So there is a lot of turmoil right now regarding particularly high-dollar partnering initiatives.

So, I would say we're getting a very fair reception. I don't want to paint it as we're progressing to a deal by any scratch. We're early in the game, and I think we'll have a pretty good read of whether we're getting uptake in the market by the next conference call, which is in early February.

Well good luck. Thank you.

Well, thank you. I will tell you, we have a knock-dead presentation. Dana Shinbaum is working like an animal, and-- with support from Randy, our scientific advisory board and we've got the doors open, but these things just don't happen overnight, particularly in the current environment.

Thank you.

There are currently no participants in the question queue. (Operator Instructions). Gentlemen, it appears we have no further questions. Mr. Holliman, I will turn the call back over to you for closing comments.

Thank you very much. It's nice to see existing shareholders and a few new names on the call list today. We really appreciate your attention. Being on the radar screen is important. Dana is going up to speak at the Rodman & Renshaw conference next week. Our industry is obviously under a lot of pressure with the capital markets particularly coming down hard on small-cap biotechs. All we can do is to block and tackle in our programs and create value, and we're doing that on very limited cash and we're doing it on schedule.

So, stay tuned. We will continue to be very direct with you in terms of our accomplishments and our disappointments, and we are looking forward to some good news in the future at Capstone Therapeutics. Thank you. That concludes the call for today.

Ladies and gentlemen, this will conclude today's teleconferencing. We thank you for your participation, and you may disconnect at this time.