Capstone Holding Corp (CAPS) 2009 Q3 法說會逐字稿

Good afternoon and welcome to today's Capstone Therapeutics third quarter 2009 conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Dana Shinbaum. Please go ahead, sir.

Thank you. Before we begin, I call your attention to our Safe Harbor statement on slide two, the slides are available today at CapstoneTHX.com in the Investor section. Today's discussion may contain forward-looking statements about the business prospect of Capstone Therapeutics. You may review a list and description of the risks associated with our business and Capstone's 10-K reports filed with the US Securities and Exchange Commission. Please also see our Web site CapstoneTHX.com for additional information. Joining me on the call today are Mr. Jock Holliman, Executive Chairman of Capstone Therapeutics, along with Dr. Randy Steer, MD, PhD, President and Chief Operating Officer. Here now is Mr. Jock Holliman.

Thank you, and good afternoon, everyone. Thanks for your interest and loyalty. Please turn to slide three in our website posting. Capstone is developing two novel peptide compounds for dermal scarring, pulmonary and vascular disease. We have a strong IP portfolio and a skilled staff in all biopharmaceutical disciplines. Slide four, please. AZX,100, our lead platform is a unique peptide. It's novel construction allows it bypasses cell surface receptors, and directly affects the actin cytoskeleton relaxing smooth muscle and reducing or inhibiting fibrosis. Targeted indications include dermal scarring and pulmonary disease. We are encouraged by our preclinical and clinical safety results to date, in both the dermal and pulmonary fibrosis indications.

Slide five, please. The basis upon which we proceeded to Phase II with AZX100 in dermal scarring is presented on this slide. As we've mentioned during past presentations, Capstone's primary market research findings indicate that opinion leaders in dermatology believe the future of invasive surgery will require some form of prophylactic intervention for scar reduction. A drug serving this indication could become standard of care.

Slide six, please. And important slide, why are we excited about AZX 100 in dermal scar reduction. Our most recent epidemiology data confirm that they're nearly 21 million procedures performed annually in the US that can result in some form of scarring. Preclinical and early human clinical safety data suggests AZX100 is safe, and that the product has biologic activity. The dermal scarring market is under-served from a prescription drug standpoint. Current there are no prescription medications specifically indicated for dermal scar prevention or reduction. Further, we believe there is potential for favorable pricing and even reimbursement for a product that performs therapeutically in this area.

Slide seven. The broad care categories of dermal scarring include cosmetic and anesthetic represented by breast augmentation or reduction, and face lifts, postsurgical scars including burns, grafts, donor site surgery, elective surgeries, emergency surgeries and cabbage, and severe scars such as keloids. Our epidemiology work indicates that these markets may well represent aggregate drug revenue potential in excess of $1 billion. Slide eight, please. This slide depicts the range of indications, from atrophic to hypertrophic to keloid scars. Keloids are some of the most difficult to treat. They occur most often in pigmented skin. They can cause loss of range of motion when located near a joint and they're visually prominent. We intend to test whether AZX 100 can effectively treat the full range of scarring indications.

Slide nine. This slide drills a little deeper into the issue of keloid scarring. It is described in the dermatologic literature it has a tough problem, a progressive growth that extends past the original scar, and invades and destroys normal skin and tissue. Cause of keloid formations has not yet been fully elaborated. There's been little innovation in keloid treatment in the past 20 years. Typical therapies may include steroid injections, radiation, pressure treatments, or anti-metabolic agents such as 5-FU. As mentioned previously, there are no approved drugs specifically labeled for keloid treatment or in the broader category of dermal scar reduction. This market is effectively underserved.

Slide ten, please. As mentioned, we are managing two clinical programs in dermal scarring at present, an arthroscopic shoulder surgery scarring trial, targeting reduction of atrophic, and possibly hypertrophic scars. And also, a keloid scarring program targeting prevention of reformation following surgical excision of the original keloid. These programs per FDA-mandated guidelines have lengthy follow up periods. Slide 11. We plan to conduct for internal purposes only, an evaluation of data from these trials, throughout the first half of 2010. The objective is to further refine our measurement techniques in anticipation of future trials, as well as to examine safety and the quality of our data set.

Slide 12, please. We are pleased to announce that two of our AZX100 keloid scarring investigators will present on overview of keloid scarring, and introduce the potential of AZX 100 for this devastating condition to the physician members of the American Academy of Dermatology at their 68th annual meeting in Miami in March of next year. Slide 13. Our pathway to commercialization, the potential market for AZX100 in dermal scarring could be comparable to market for drugs such as Botox for wrinkles, and Restylane as a dermal filler. AZX100 also has the potential to serve unmet medical needs in keloid revision exam and general surgical scarring.

Slide 14. Assuming success, Capstone will seek a collaboration partner to take the dermal scarring programs forward. As indicated in this slide, the mid 2007 transaction involving Shire and Renovo was consummated under different market conditions, and only after a substantial Phase II clinical program. However, the numbers are impressive. We believe there is potential for a significant collaboration with AZX100 and dermal scarring, but of course dependent upon the quality of our results in the existing clinical trials.

Slide 15. Our key financial facts slide shows us closing the September 30 quarter with $38.7 million in cash, no long-term debt, and a 52 week trading range between $0.40 and $1.04 a share. Our market cap as of last Friday was $31 million. Our next event day for NASDAQ listing is May 2010. To maintain compliance with the NASDAQ markets continued listing requirement, the closing bid price of the Company's common stock meet or exceed a $1.00 per share for a minimum of ten consecutive business days. We plan to apply to move our listing in the next few weeks to the NASDAQ Capital Market, and affect a seamless transition. The transfer will have no impact on trading.

Slide 16, please. This is a snapshot of our balance sheet, and highlighted in yellow, you will see our cash and short term investments total $38.7 million. And next page, 17 our statement of operations for the quarter shows a net loss of $0.08 per share, consistent with the same period a year ago. Slide 18, our cash slide, Capstone has done a solid job of advancing it's programs while minimizing use of cash. Since this management team took over in mid 2006, we have been favorable to guidance. 2009 guidance estimates cash usage of between $14 million and $16 million. We affirm that guidance at this time.

Slide 19, our summary slide. For the rest of 2009 and 2010, we are executing AZX100 clinical trials in dermal scarring. We will have interim analysis taken in the first half of 2010. Our investment thesis remains unchanged. AZX100 success efficacy and on-going safety will offer significant upside. And our down side event, which would be negative or equivocal data, are protected by our cash asset. We are planning for success, and look forward to the spring of 2010. We welcome your questions at this time.

Yes, thank you. (Operator Instructions)

I'm afraid we have no questions at time.

Yes, since there are no -- Yes, Scott Lewis.

And our first question comes from Scott Lewis with Lewis Capital Management.

Great. Thank you, guys. On the dermal scarring, on the shoulder test, have you completed enrollment there yet?

Good question, Scott. Thank you for asking. We have made excellent progress since a slow start in enrollment in the spring. Randy and the clinical Ops team have expanded to additional clinical site indications, and we have made up a lot of time there. The original study was targeted at 153 but also included a 20% attrition rate. So we were really targeting somewhere around 125 evaluable patients in that study. I am pleased to report as of last Friday, we have enrolled 136 patients in that study.

Now, the time line for evaluation begins at surgery. So we still have a few of those 136 who haven't been operated on yet. But, the good news is that we are closing in on fulfilling our enrollment requirement in that study and hope to do so in the next several weeks. So we are -- we are feeling pretty good about that one. The reason for the slow enrollment was interesting. We designed a conservative and appropriate study that excluded smokers, diabetics and high body mass index people. And when we went to our original set of five clinical investigators, they thought they would enroll 50% of those screened. In practice, these people are in their 50s, 60s, 70s, and aren't as healthy from a vascular standpoint as the surgeons initially thought. So, we actually enrolled only about 20% of those screened. So, we have actually been very, very active in screening, but only hit about a 20% enrollment factor in that study. We would not relax our enrollment criteria at all because we want to maintain the integrity of the study.

Okay. Good. And second question, just, you didn't go over Chrysalin really at all in the slides now. Is that, is anything change there from last quarter?

We are still active in some marketing discussions regarding acute myocardial infarction. It appear that is the pharmaceutical market is more focused on chronic cardiovascular drugs with $600 million and $800 million developmental pathways. The acute market just has not been an exciting one to big Pharma. We st ill have interest, and we still have on going discussion. But we are not emphasizing any kind of definitive deal for Chrysalin at this time.

Okay. And then I guess it ties in a little bit to Slide 19, you talk about the investment thesis down side event, protected by cash asset. It sounds like pretty much right if things don't go well with the AZX, you may do some sort of liquidation event versus trying to pursue developing further?

We don't anticipate spending much money at all, and I mean de minimus money on Chrysalin moving toward. We have proving our thesis with the drug. It is a wonderful compound in vascular. We haven't found the right indication for a variety of reasons. Let's just say that by mid year 2010, roughly speaking, we will have feedback internally on the '03, '04, '05 programs, shoulder and keloid We have been consistent all along. We need to see compelling reasons to move forward and spend shareholder money on development. If we are disappointed in our results internally, we will send a signal to the market, and we will probably enter some sort of strategic process. A liquidation is a possibility within the definition of strategic process. If we see good data, as we certainly hope, and desire to see, we will find ways to communicate that to the market, but recall that these studies have 12 month endpoints, and that we will not have final study results until late Q3 or Q4 of 2010. So, we are very hopeful we will are an understanding of what the molecule is doing by mid year.

Okay. Super. Thanks a lot.

Okay. Thank you.

(Operator Instructions).

We have no more questions at this time. So I would like to turn the call back to Capstone Therapeutics management.

Thank you. We had a Board meeting late last week, and our Board is pleased with the strategy and with our execution. We continue to be in that seemingly interminable period of executing clinical trials, and pursuing follow-up of patient compliance and data. We wish we could speed up the clock, but we are certainly turning down the burn rate. And we, we truly could not be managing this Company in significant clinical trials fashion with any less money. So please know your shareholder money is being spent, we believe very wisely and carefully at this point. And we look forward to being able to share additional data with you on the dermal scarring activities as these data and opportunities present themselves. Thanks so much for tuning in today, and please contact me or data Shinbaum at any time if you have questions. Thank you.

This concludes today's call. We thank you for your participation.