Capstone Therapeutics Corp. (NASDAQ:CAPS)
Q2 2014 Earnings Conference Call
August 14, 2014, 4:30 PM ET
Jock Holliman - Executive Chairman
Good day, everyone, and welcome to today's Capstone Therapeutics Conference Call. As a reminder today's call is being recorded. Currently, the call is in listen-only mode. There will be a Q&A session to follow.
At this time for opening remarks, I would like to turn the call over to Jock Holliman, Executive Chairman of Capstone.
Thank you very much. Good afternoon, everyone, and we hope that everyone is having a pleasant summer and getting some vacation break.
We have a short update today. I would encourage you to go to the Capstone website, www.capstonethx.com, and on the homepage in the left column, you will see an icon for investors, it will take you to a second page, and on the right-hand side of the second page, you’ll see our Web filing for today’s call. The PowerPoint should be easy to pull up.
And while you are doing that, I’ll go through the necessary Safe Harbor statement. There is inherent risk in our business and we will be making forward-looking statements today. So, we would encourage you to further evaluate these risks by looking at our Form 10-K for the fiscal year ended 12/31/13 and other filings with the SEC, which you can find on EDGAR and most of which you can find also on our website.
So I’ll start with page 3, corporate facts, and I believe most of you on the call today understand the nature of our business model and of our joint venture with LipimetiX, based in Boston, to develop an Apo E mimetic peptide family for cardiovascular disease. Our mission statement has not changed and we are moving forward with our clinical trials.
On page 4, this is our cash report. You’ll note that during the quarter, on a consolidated basis, we used approximately $1.3 million in cash, leaving a cash balance of approximately $4.2 million, of which $800,000 is held-in in reserve for use by LipimetiX.
On page 5, I’ll update the Qui Tam lawsuit. We do believe we’re making some progress on this front. A Qui Tam lawsuit is a whistleblower lawsuit and this lawsuit was filed against the entire medical device bone stim industry, so we are one of many co-defendants in the case, and the basic legal complaint is rent versus buy, meaning that was the device rented or purchased and was there proper notification for the rent option primarily.
This was a business that our legal predecessor, OrthoLogic, was in for approximately 10 years, and the period in question is 1998 through 2003. OrthoLogic/Capstone sold the bone stim business in 2003. We didn’t learn of the lawsuit until April of 2009, almost six years after we sold the business, so it was a bit of a surprise.
Of note, the Department of Justice/U.S. Government has not joined the complaint against OrthoLogic and Capstone, so this is very positive and most of the Qui Tam cases where the government has not joined, the complaints are settled or dismissed. There was a status conference with the new judge held in July of this year to check the progress in discovery, which is moving forward, and we plan to vigorously defend ourselves against these legal claims.
If you’ll turn to page 6, this is the operating update showing major milestones, and I’ll take you down the page to April 2014, mid page. We received our Clinical Trial Notification to begin human clinical trials in Australia with AEM-28, and in that same month, initiated the Phase 1a safety study in Australia.
In June, based upon the safety profile we were observing in the Phase 1a, the Medical Safety Committee allowed us to initiate the Phase 1b/2a study, which is a Multiple Ascending Dose study.
In July of 2014, we completed treatment of the Phase 1a Single Ascending Dose study, and a new and very good event for our joint venture is that we filed a new composition of matter patent on an AEM-28 analog, we’re calling it AEM-28-02, and this molecule was developed jointly by Dennis Goldberg, the LipimetiX team and the University of Alabama Birmingham, and in early preclinical tests, it appears to have greater tolerability and perhaps greater efficacy than our original primary molecule. So we’re excited about that.
If the patent is granted, that will provide 21 years of protection for anyone developing the drug and will actually allow this drug to become a candidate for some of the larger indications where clinical outcomes, longitudinal trials are required. So this is a very significant development for us.
On page 7, target schedule. September 2014, report topline safety data and any pharmacodynamic biomarker signals for our Phase 1a study. In November, we anticipate completing treatment of the Phase 1b/2a study, but that is gated by enrollment and I’ll discuss that momentarily.
We should be reporting topline safety data and any biomarker signals for that Phase 1b/2a in December. That is still our plan. If we get too far into the holidays, it’s possible, for visibility reasons, that we may simply choose to announce the data after the first of the year.
In January 2015, it is our plan to initiate strategic licensing/partnering discussions.
On slide 8, the Phase 1a. Footnotes/observations, we have treated 36 subjects. The Medical Safety Committee has advised an acceptable safety profile, and that has allowed us sequentially to go up the dose ladder in the Phase 1a and to begin the Phase 1b/2a. This is a double-blinded study. The biomarker laboratory work is underway in Australia, and we should have that work presented to us around the end of the month, and we do anticipate making our trial results, topline results, available right after Labor Day.
To remind you, a Phase 1a study is focused on safety. Any early biomarker signal would be a bonus, and these early studies are not statistically powered, so we would not be seeking any kind of statistical outcome.
On the Phase 1b/2a, we have completed the first of three multiple dose cohorts. There has been a slowdown in enrollment in our original target of statin refractory patients. So, to enhance enrollment and maintain the focus on safety, our enrollment criteria are being expanded. The inclusion criteria will now allow normal healthy volunteers with elevated cholesterol and with higher body mass index. These patients should be more readily available and we anticipate picking up our recruitment fairly quickly.
On slide 9, the only thing to note is the underlined portion under format of the Phase 1b/2a where this is the change to include normal healthy volunteers with elevated cholesterol and high body mass index.
On slide 10, funding. The original program cost was budgeted at $6 million over 27 months. We’re now estimating $6.5 million. That is an acceptable overrun for the drug development business. I’m actually very pleased that we are managing our cash so efficiently. It is helped by the Australia program that the government of Australia offers a possible 43.5% R&D cash rebate.
We have established an Australian subsidiary as an agent in Australia and an accounting firm that is guiding us through this regulatory reimbursement process. So it is not a sure bet, but we certainly are anticipating a positive response. So, available joint venture funds are anticipated to be adequate to complete the development plan and to report data. We will be exploring joint development partnering licensing with Pharma in 2015.
Happy to open the floor to any questions at this point in time, and Randy Steer, Dr. Steer, our Chief Medical Officer is on the phone, as well as Dr. Dennis Goldberg with LipimetiX in Boston, if you have any specific questions.
(Operator Instructions) We’ll give it a moment to see if we have any questions.
Thank you, operator. I’ll make some closing remarks. Again, thank you all for tuning in, in the middle of August. Our next big event will be the press release for topline results right after Labor Day, and we look forward to your continuing interest in our story and our fingers are crossed for good results. Thank you very much. That concludes the call today.
Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you may all disconnect. Everyone have a great day.
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