Capstone Holding Corp (CAPS) 2015 Q4 法說會逐字稿

Good day, everyone, and welcome to today's Capstone Therapeutics conference call. As a reminder, today's call is being recorded. (Operator Instructions) At this time for opening remarks, I will turn the call over to Jock Holliman, Executive Chairman of Capstone. Please begin.

Thank you, operator. Hi, everybody. Happy hot summer August day. If you will please go to our website, www.capstonethx.com and on the home page at the upper right, there is an Investors icon, if you'll hit the Investors icon, it will open to our Investors page. Down on the right-hand side, you'll see a Presentation icon. Hit that and then it will allow you to join us with the deck that we have prepared for today's call.

I have to start obviously with Safe Harbor, and there are forward-looking statements being made today that require risks and disclaimers according to those factors discussed in our Form 10-K for the fiscal year ended December 31, 2014.

Turning to slide 3, our corporate facts slide, our market cap is up a little bit. It's about $10 million as of the close of market today. We have $1 [million] in cash as of June 30 (company corrected after the call), no long-term debt, and our primary asset is our investment and stock ownership of 60% of LipimetiX development based in Boston, developing the Apo E mimetic peptides for different lipid indications.

On slide 4, we will talk about the milestones we've achieved over the last 12 months, and they have been considerable. We reported Phase 1a, 1b, and 2a human clinical studies on 51 subjects. We met all study objectives, and we showed a remarkable, rapid reduction in BLDL cholesterol and in triglycerides. These studies were achieved substantially on time and on budget.

Additionally in partnership with the University of Alabama at Birmingham, our development team discovered a new and broad domain of analog molecules to the original AEM-28, the most attractive of which appears to be AEM-28-14, and Doctor Goldberg will talk more about that later. So we do have some fresh IP life that should enable pharma to consider longer chronic and clinical outcome studies.

We settled the Qui Tam lawsuit after six years of challenges on a very favorable basis to our Company effective June 1, and we currently have no litigation. We have also validated multiple cholesterol and hypertriglyceridemic market indications, including acute pancreatitis, homozygous familial hypercholesterolemia, and some other indications of interest. So we are targeting the next stage of our program development.

On page 5, our cash report, as I mentioned, we have slightly over $1 million as of the June 30 quarter.

On slide 6, our capitalization status, which is certainly on our minds, we are undertaking a registered unit offering. We have an S1 file that is a public document. We are awaiting investment banking FINRA clearance. As a result, we are currently in a formal waiting period and are not taking any investor meetings or raising capital at this time. Our fundraising show is potentially targeted for mid-September. Because of the SEC regulations on this call, we are not permitted to specifically discuss any aspects of the financing, but we can give you an operating update on the activities of our Company.

On page 7, Dr. Goldberg will take over and walk you through historical data and some new data that we're excited about.

Thank you, Jock, and good afternoon, everyone. Slide 7 shows you our base peptides in the original molecule that we had began working with AEM-28, and what you see is out of this 299 amino acid structure on the left, we took the 10 amino acid human binding domain to the Apo E receptors on the liver, and we linked it to an 18 amino acid helical peptide that mimicked the major lipid binding domain. And we call that AEM-28.

What this does is targets -- inserts into the surface of lipid proteins and targets them to the Apo E receptors on the liver, and our data in both humans and animals demonstrate that the number of Apo E binding sites on these lipid proteins is a key step in terms of increasing the amount of cholesterol and triglycerides that can be taken up into the liver with these Apo E specific receptors. And I will talk a little bit more about this in terms of the new peptides as we go forward, but keep that base structure in mind.

As Jock mentioned, we completed -- if you go to slide 8, we completed our Phase 1a and 1b clinical trials. We've talked about this a number of times in the past, so I am not going to spend a lot of time on this. There were six cohorts in this with 36 total subjects. The key pieces -- this was a double-blind placebo-controlled study, which, even though you only have four actives per dose and it's not really powered to demonstrate statistical difference, the effects that we've seen were so dramatic that we, as we will talk about in a moment, did see very remarkable decreases in VLDL and triglycerides.

As Jock mentioned, we met all our outcomes. We saw no systemic side effects whatsoever. We saw some infusion site reactions that were mild, and we are primarily at the highest dose in a couple of very big people who got a lot of peptide, and we saw these very nice dose-dependent efficacy response.

As you go on to slide 9, in our 1b, 2a study, we actually, based on the results of 1a, opened up the inclusion criteria to include subjects with high body mass index elevated triglycerides because the triglyceride reduction was so striking. We were trying to get into patients with a little bit higher levels to see just how really -- really how good the higher doses were. We did three doses in the 1b/2a study. Just the three highest doses from the 1a. Again, this was a double-blind placebo-controlled study. We saw the same kind of safety profile. Even after repeated doses, we saw no systemic activity, no systemic side effects, and we saw no indication whatsoever of any antibody neutralizing antibody formation. The effects of the second dose and the third dose were identical to the effects of the first dose. We, again, saw some very nice efficacy signals in this study that we will show you in a moment, and it was, again, a dose-dependent response.

Now if you go to slide 10, this is what we saw in the Phase 1a study that got some people really excited. These were fasted subjects overnight, and as they remain fasted -- so the VLDL, which delivers secretes to send triglycerides to the periphery, continues to go down as metabolized and that you see in the black squares, but the red triangle show you this remarkable effect of our peptide. Within an hour, we had reduced triglycerides by 75%, and they stay there. They stayed there for three hours, and then the patients began to eat after three hours, and you see in both black squares of the triangles, the VLDL cholesterol begins to rise. But you also see that the treated subjects in the red triangles never caught up to the placebo subjects, and even out at 24 hours, when they had been eating ad libitum, they were still -- never got beyond where they were at the baseline.

So this was a very positive effect. We were very excited about this, and you see going out to 48 hours that we still retain that difference between the placebo and the treated subjects.

You go on to slide 11, this is the triglyceride, and you see that this is very similar -- this graph is very similar to the VLDL because in a fasted subject, triglycerides are carried predominantly in VLDL cholesterol. You do see a slightly broader change down at the bottom, but again, the key piece with a single dose -- with one hour, you have dropped triglycerides 75%, and they stay down even though the subjects are eating going out all the way to 48 hours.

If you look now on slide 12, this is our repeat dose study, and we saw the same thing here where we get this very dramatic lipid lowering effect, both VLDL and triglycerides. And what you see if you look at the dose response is that the efficacy has plateaued. And what we saw, for example, was at 2 milligrams per kilogram, reduced triglycerides from 140 to 100 -- 140 to 40, we reduced it by 100 mg/dL. When we went to 3.5 milligrams, we reduced it from 140 to 32 -- 108 milligrams where basically you had taken out all of the VLDL and triglycerides that we could interact with.

So we are still not sure just really how efficacious the 3.54 milligram dose would be if we were in patients with much higher triglyceride levels. But this was an unexpectedly powerful result, and even though you only have four active subjects to group, we see statistically significant changes in both triglycerides and VLDL, and they are dose-dependent.

Now Jock mentioned the new data that we have with our new peptides, and these are our chimeric peptides as we are describing, and they are AEM-28 analogs. And what we have done with these chimeric peptides is we have made some amino acid substitutions in the binding domain that actually enhances affinity to the Apo E receptor, and then we have added -- we have derivatized the binding domain, added some components to the end of the binding domain that help insert the peptide into the lipoprotein surface, and these are remarkably potent. They are four times more efficacious than AEM-28 in our mouse models. With these new peptides in some studies, we have actually brought cholesterol down to zero with a single dose, and the animals stated zero. And then at six hours, when we fed them, they came back up about 60% 24 hours later. And the remarkable piece about that as well is we see absolutely no side effects even though there is a transient period when plasma cholesterol is zero.

We've had some additional formulation work. We have a really nice formulation that looks like it's going to work really well. It will be very easy to manufacture, and the beauty of it is that we can get a fivefold increase in the NOAEL dose. That's the no observable adverse event limit in mice without giving up any of the efficacy. And the combination of the enhanced efficacy and safety may yield a 20-fold increase in therapeutic window.

Now what that means, for example, is potentially we go from needing 3.54 milligrams to achieve this kind of lipid reduction to 0.9 milligrams, and further because of what we've seen in the animal models when we got it down to zero, we might have brought these cholesterol levels and triglyceride levels down even further in humans.

Very exciting new data. We're really excited about this molecule. We filed composition of matter patents on the original analogs in 2014. We have converted those patents to full US and TCT, which are international filings in July of 2015, and AEM-28-14 and other analogs similar in that series are covered specifically in those patent filings. And we have a new formulation patent that was filed in October of 2014, and we will be updating that with new data as well in October.

So the bottom line is we now have 21 years of patent life which allows us great latitude in the clinical indications, and it looks like we may have a 20-fold increase in our therapeutic window as well, which means a much easier delivery and much less material, much less expensive to create this technology.

If you go on to slide 14 here, a couple of the -- some of analogs that we have, and you can see different peptides that we list there on the right side. AEM-28-02 was the first of the peptides that we made, the analogs we made, and you see in the black circles, AEM-28-14 within an hour bringing cholesterol down to a mean that is 98% below baseline, and just as a reference, that means we started with animals cholesterol about 450 and we brought them down to a mean of about 10. And that was four animals, two of which had zero.

And then if you look at 24 hours here, you see that there's still only about 60% of baseline. So these are animals that have been fed at six hours, and they still have a remarkable sustained cholesterol reduction.

Slide 15 is some data on AEM-28-14. In April, we knocked down mice, and you see the dose response on the left. This is a beautiful dose response curve. We have really -- even at 6.25 micrograms, which is 0.25 milligrams per kilogram, we have a wonderful result, about a 35% reduction in cholesterol, and you see how nicely dose responsive it is. And on the right, you see that dose response curve -- hyperbolic curve -- and you see how nice and clean the dose response of that peptide.

We are really excited about this peptide. I will say, quite frankly, in my career, I've never seen anything like this.

Slide 16, our development plan. We want to put together a package that pharma wants to see. We want to be able to partner this. So we will be doing a full pre-IND toxin and pharmacokinetic package. We will do all the animal work, safety studies that are needed to get through the regulatory agencies. We will do a full CMC -- that's chemistry, manufacturing, and controls package -- so that we have a appropriately manufactured drug. We're going to do a Phase 1a, 1b, and a -- follow that with a Phase 2 study that will be multicenter, multidose subjects with refractory hypertriglyceridemia. We want to get into subjects that have fasting triglycerides of 500 -- 400 to 500 because we really want to see how well we can bring this -- their cholesterol down, their triglycerides down, and how long it will stay down. And we're going to be kind of open in the population of patients that we treat, whether they are diabetics, metabolic syndrome, whether they have what we call Type IV, Type V refractory triglyceride, which have some genetic basis, and also patients who may have had acute pancreatitis, but remain at high residual triglycerides, putting them at risk for repeated pancreatitis.

End of the goal -- the business goal is to show them a package of safety and unprecedented efficacy in triglyceride reduction and treatment of these patients with both primary hypertriglyceridemia and mixed dyslipidemia, things that have never been seen before.

If we go on to the next slide, slide 17, this is our timeline on here. We anticipate as soon as we raise the funding that Jock talked about that we will initiate our manufacturing process. We already have our manufacturing company, Polypeptide Labs, making a small batch -- 2 grams of materials. So if they get their feet wet and know how to handle this new peptide, we will then put that into preclinical studies to show the safety and tolerability of it. Then we will file a CTA or an IND CTA as a clinical trial authorization that we file if we are doing clinical trials outside the US, and we are likely to do this in Australia again because of the financial incentives provided by the Australian government. And you see based -- historically on what we have already accomplished the timelines for the Phase 1a, 1b studies, and then the Phase 2 study will be a bit longer because we are going to be recruiting patients and doing multiple doses.

But bottom line is we think we will have a really attractive package of safety and efficacy in an appropriate patient population. Patients that would be treated by this when we get it on the market in about 25 months.

If you look at slide 18, our plan then ultimately is to partner. We will hand this off to a large partner to do the later pivotal studies, and there will be multiple indications for them to choose from. As you see, they can go into cardiovascular disease based on our data in reducing atherosclerosis. We can -- think one of the most attractive short-term studies would be in acute pancreatitis with hypertriglyceridemia. We can go into the severe refractory hypertriglyceridemia, which will require an outcome study, but we can do that now because we have 21 years of patent life.

We definitely will go back into the homozygous familial hypercholesterolemia. That market remains underserved. Patients with diabetes have a number of vascular complications, and they have a very triglyceride-rich lipid protein profile, and our peptides are perfect for that population. Metabolic syndrome includes Type 2 diabetics. And in acute coronary syndrome, treating patients who have had a primary coronary event and preventing them from having a second one. These are large, valuable target markets. Broad indications that will appeal to potential partners.

Slide 19 -- just talk a bit about acute pancreatitis. Patients come into the emergency room with severe abdominal pain. This is, as we described, is one of the most painful things that someone can have. They have nausea, loss of appetite, fever, respiratory distress. It's just a terrible indication.

When they get into the emergency room, they are put on IV liquids, they are given morphine for pain, and they do a lipid profile immediately because a lot of these patients will have severely elevated triglycerides. And if your triglycerides are up, you need to get them down within 24 hours or the outcome is going to be worse. The date is very clear that hypertriglyceridemia simply exacerbates the acute pancreatitis regardless of the actual ideology.

What is currently done, as I mentioned, they put opiates to pain. They give them fibrates and fish oils, but that takes weeks to show an effect. They give them a no fat parenteral diet. That means that they are getting nothing by mouth, and has been described by a pancreatologist, we then pray. And the key, as you see on the bottom, get those triglycerides down within 24 hours. You will improve the outcome, get these patients out of the hospital sooner, and decrease the likelihood of a recurrence.

Slide 20, homozygous FH. We've talked about that for a number of years. We have orphan drug status for AEM-28. We will get orphan drug status for the new peptides as well. Patients who are homozygous have no LDL receptors on the liver, and even the new PCSK9 inhibitors do not work in those patients. They provide them with very minimal decreases in cholesterol because they work by enhancing the expression of the LDL receptor.

Their blood is just really difficult. When you have cholesterol levels of 800 or 1000, you wind up with blood that looks like what you see on the right.

Historically, plasmapheresis has been used where they put a large bore needle in each arm and they draw the entire blood volume out, run it over a column to filter out the cholesterol containing lipids. They try to do this every week. Those are very expensive, very difficult, and in the United States, there are really only about 50 centers or 45 centers around the entire country that do this. So some places it is a two- or three-day event to be able to get to the apheresis center and get treated.

You may know that there were two drugs that were recently approved, Aegerion/Juxtapid. That prevents the liver from secreting VLDL. The result is that the liver builds up triglycerides and fat. The other issue with Juxtapid is you have to be on a no fat diet -- and I mean a no fat diet -- and they still have significant GI side effects. And the result is that even in these patients who have a high morbidity life-threatening indication, they are getting a 36% dropout rate. The patients who get the drug, just 36% of them will not continue because it's too hard to take.

Kynamro, which was developed by Sanofi Genzyme, that's a antisense. You inject it. They get very variable response. The patients who respond best to Kynamro have the worst liver issues. They have very severe injection site reactions, and we can't even find out how many subjects -- patients who are on this -- the estimates are something about 25 worldwide because people just don't want to take it.

The result is that we think this market is still significantly underserved and that our peptide will provide an alternative pathway with a mechanism that is distinct from either of those and from the PCSK9 inhibitors and anything else on the market to really treat patients who need multiple treatment modalities to get them down to goal.

Slide 21, you see a new list of orphan indications that we are going to be pursuing. The HoFH is Type 2, so you don't see type 2 on this list. But you have patients with severe -- 1 and 2 have severe triglyceride elevations. They are rare, rare genetic defects. Type 3 and 4 are much more common, and again, you have defects. One of them specifically a defect in the Apo E binding domain. These are much more common, and these are patients that can vary readily wind up with cholesterols of -- triglycerides of 500 or 1000, and then the bottom is acute pancreatitis. We see about 45,000 hospitalizations a year in the US with severe elevated triglycerides, and that also will be an orphan indication.

Slide 22, you see the long-term non-orphan opportunities, acute coronary syndrome. Data on reduction of atherosclerosis in multiple animal models is really quite unique, and there are still 1.3 million hospitalizations each year in the United States for acute coronary syndrome.

Peripheral artery disease is considered a pandemic by the World Health Organization, particularly due to the expansion of Type 2 diabetes worldwide. There are about 600,000 people worldwide who have peripheral artery disease, which can result in loss of limbs. And then high risk metabolic syndrome, this is the public health crisis in the United States of this century with a combination of obesity, Type 2 diabetes, and it is epidemic proportions. And along with the metabolic syndrome, the obesity and diabetes, you would see this huge increase in VLDL in triglycerides, and those are not things that are well treated by anything else on the map.

So we have some very attractive orphan indications which will give us rapid access to the markets, and then we have some very large future indications, which will enable us to expand the markets once we get a product on the market.

Gee, Jock, I think I stepped on your slides here.

You're doing great, Dennis.

I'm on a roll.

Slide 23, we just wanted to share the resumes of the clinical management team, and they are very experienced. And Dennis and Randy collaborated on RenaGel and WelChol, which is still doing over $1 billion in sales worldwide.

On the summary slide, page 24, and thank you all for your attention and patience today. We are obviously very close to the story and embrace the story fully.

Looking at the big picture, we've shown human proof of concept with AEM-28. We met the study objectives. We had a little bit of toxicity at the highest dose level, and AEM-28 had a short patent life. We went back to work to discover some analogues, and AEM-28-14 has turned out to be more tolerable, significantly more efficacious in preclinical models, and it's blessed with potentially an additional 20 years of patent life. So it has obviously become our lead candidate for development.

When we position the story for pharma, there is a slight deduction for the IV delivery because you have to be in an acute setting or an infusion clinic, and that limits the size of the market. However, there are a number of large indications that, once we establish the drug and its potential -- its efficacy, its safety, we expect that even in an IV format, it will be taken into clinical outcome studies.

We operate on a capital-efficient virtual model. We will continue to do so. We've shown that we can deliver on time and on budget, and trials like we run are usually significantly more expensive, but Dennis and his team do a wonderful job. So in conclusion, we have a new lead candidate.

We are going back into development of AEM-28-14 from a preclinical and into human clinical format. AEM-28-14 -- we say this in bold, and this is not -- this is what we believe right now. That AEM-28-14 may be the most powerful cholesterol triglyceride reduction drug yet discovered. Time will tell. We have a lot of work to do. We have to prove it. But pre-clinically, it is certainly looking good.

So overall, we have a risk mitigated program targeting valuable pharma markets, and we are delighted that you are shareholders. I will be pleased to open for questions now.

(Operator Instructions)

Okay, operator. Fine.

There are no questions at this time, sir.

Very good. I will make a few concluding comments. Thank you for understanding that we are not able to discuss financing matters at this time. We will be able to be much more disclosive when we start our roadshow, which we certainly expect to be the middle of September. And once again, we thank you for your time today, and the call is concluded.

Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.