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Helix BioMedix: The Wall Street Analyst Forum Presentation Transcript 4 comments

by: The Wall Street Analyst Forum September 20, 2007

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Helix BioMedix, Inc. (HXBM)
The Wall Street Analyst Forum
September 20, 2007 4:00 pm ET

Executives

Steve Beatty - President and CEO

Presentation

Moderator

[Call starts abruptly]

The webcast is live. It's retrievable with audio, with PowerPoint. But in addition to that, we're doing something that the investment banks aren't currently doing at least with their analyst conferences. We've hired, and the investors would know this name better than the public companies probably.

But we've hired seekingalpha.com, which has become an increasingly popular online investment community as they call themselves on the Internet. I think about 2 million unique users a month, about half the size of the users that go to thestreet.com, to put them in perspective. And they do transcription for us; of the presentation and Q&A sessions and including every word spoken, presentation and the Q&A with the analysts in the room is being transcripted out of Israel.

And it's web searchable on Yahoo Finance and Google Finance in the stock box section of Yahoo Finance and Google Finance. If you look up the individual companies dot-doc shows up. Transcript it will be there in six hours. So, it helps us extend the conference way, way beyond those here. They are physically able to attend a particular meeting on a particular hour in New York City at the Princeton Club. I mean, we still do these things but its kind of 1970s format. And so, if you can take a transcript from some of those web search in Shanghai at two in the morning, an hour from now or week from now or months from now, bang, there is a transcript of the presentation and Q&A word-for-word.

And if you are good reader, you can probably go through a transcript in 10 minutes and get everything you need instead of hanging around for a 40-minute webcast. 40 minutes is a long time for webcast or for anybody to focus on any one thing.

In any case, I would like to introduce the next company in this afternoon's program, Helix BioMedix. They're a derm-based biopharmaceutical company. Their objective is to develop and commercialize consumer and pharmaceutical products containing high value peptides and peptide fragments that are proven cosmetic and therapeutic potential carefully selected from their extensive library of patented bioactive peptides.

The company was founded in 1988 and is headquartered in Bothell, Washington. So, without any further introduction, I like to introduce Steve Beatty, President and Chief Executive Officer.

Steve Beatty

Thank you. This presentation will have forward-looking statements in addition to the Safe Harbor printed. I will encourage you to look our website for SEC filings. You can also find them at www.sec.gov.

Helix BioMedix is a derm company that's focused on commercializing of peptides on both the pharmaceutical side and the commercial side. Our ticker symbol is HXBM for a public company. Our recent stock price is $0.80. It trades between about $0.80 and $1. Our market cap runs anywhere from $20 million to $25 million. We have 26 million outstanding shares and as of June 30th, our last filing we had $2.7 million in the bank. We spend about $300,000 a month to give you an idea.

Our peptides are small proteins. The types of peptides that we specialize in are peptides of the innate immune system and nature of these peptides, there are two things. The first, they defend the host against sending pathogen that attempt to get into the host.

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And the second thing they do, if you get a cut or burn or a wound something like this, they actually begin the wound healing process by signaling to the body. Everything we do at Helix BioMedix is actually based on those two fundamental properties of peptides.

In fact at Helix, what we do is we take the naturally occurring peptides and we modify them and subsequently we are able to pattern the modifications and we currently have a vast library of diverse bioactive peptides, in fact we currently have the largest peptide portfolio of its type and existence. Some examples of the properties of the peptides are antimicrobial, anti-inflammatory, migratory and proliferative.

We currently have 19 patents. There are nine US patents and 10 foreign patents in addition to seven additional patents that are also in the process. I might add the 19 patents have already issued.

We have access to outstanding dermatological expertise, our Chief Scientific Officer, Tim Falla and Robert Hancock, are both very well know in scientific community for the discovery and development of peptides. In addition, our Board of Directors, we have Jack Clifford, if you think you've heard that name before, you might have, he was the CEO of Procyte, when Procyte and Johnson & Johnson brought the copper peptide to market. And then finally, we have three very prestigious dermatologists; Zoe Draelos, Barbara Gilchrest and Mark Lebwohl. Additionally, one other person here, we have David Kirske, our Chief Financial Officer, he is sitting over here to my left, if you are interested in talking to him afterwards.

Our commercialization strategy has been a building block strategy. We began the commercialization in the fourth quarter of last year. The first effort was licensing individual peptides where you would literally go to a company and offer out a specific peptide and a specific function.

The next block which gives you a greater economic opportunity was licensing platforms of peptides and the second quarter of this year we began that process.

Well, third block in the process is finished products and we have two finished products scheduled, one is for the fourth quarter of this year and the second one is for the middle of next year.

And then finally, of course, the greatest [Biodenic] the biotech companies are pharmaceutical program where we have the topical anti-infective that we're just beginning to move to the IND phase.

So stepping back and going through the execution, our in-licensing individual peptides, the fourth quarter of last year at that point we had licensed our first peptide to a company called Levlad. Levlad is a manufacturer for several companies a lot of those companies is Nature's Gate and we have a peptide in a product base that are called Natural Results.

During that timeframe we licensed, a broader-based license to our marketing partner Grant Industries. Grant Industries is a supplier to cosmetic companies, of multiple products including now our peptide-based products.

What you'll see is that with this strategy you can very quickly get into a market and since last December, we are now into Walgreens, Rite Aid, CVS, Nordstrom, Home Shopping Network and Whole Foods. We’ve gotten into Wild Oats a little bit earlier through Levlad and we are about to announce another large chain later this year.

To give you an idea of the types of products that you are looking at, you can see that the top three here, acne products, these are OTC using usually sulfuric acid as the active ingredient, the bottom five are anti-aging and anti-wrinkle types of products, but the real focus here, the real story take on here is in nine months we are able to get eight products into the market and begin while we will hopefully be a nice revenue stream.

Moving on to the second part of the structure is platform licensing. Our platform licensing gives you a greater opportunity. It takes a little bit longer. You may have seen one of two announcements we had in the second and third quarter this year that we licensed an entire class of our peptides to Degussa. Well, might have changed their name one day later to Evonik. Under this license they have access to an entire class of peptides, there will be several thousand of them, and during the announcement they also point out they will have their first product in the market in 2008.

I might add for those of you who don't know the company, they do about $15 billion a year. This is a pretty big company.

Moderator

Well, what did they change the name to?

Steve Beatty

EVONIK. Yeah, hopefully I had nothing to do with that. Okay. The third building block of our structure is actually putting finished products in the market ourselves. We have two finished products, we are moving to the market, one is an acne product and the second is a anti-aging product. The anti-acne product is being taken to market with another joint venture we have with the company called DermaVentures. It will be focused on the Hispanic market. This is a large segment, its growing and perhaps more important is on the per capital basis they spend about twice as much as the other segments on personal care. This will be a three part kit that goes to the market and we are seeing this in the market the fourth quarter this year, so it will be in the market in next couple of months.

This is just a example of the product, you can see after eight weeks that the subject has, of course, less information, certainly the acne is significantly improved.

The second finished product is scheduled to go in market in middle of 2008; this will be an anti-aging product using multiple peptides. The type of attributes you get from these peptides will be sulfur, proliferation, anti-inflammatory activity and extracellular matrix cell stimulation.

We'll be focused on an older age group, they will be the 50 years and older. We have already identified the channel that will be a QVC type of marketing effort. And we also have already identified our partner. This is a company that's got a good track record with actually being able to focus on the mature audience. Then we'll be announcing that later.

We've already finished the formulation and complete the design for the package. The package will have five parts in the product line when it rolls out and again that launch is for the middle of 2008.

Just a little bit of science, shows some of our excitement on the peptides. What you're looking at is a cell migration. This is simply, on a slide you take a healthy tissue and you just draw a discolored line down to the cell, so what you have is a two sets of cells. The dark line down the middle is where you're just looking straight down to the bottom of the slide or the plate itself. And columns to the left, where you just have Saline control, you can see that over a 10 hour period on the bottom the cells have migrated about 25% of the way to completion.

In the second column down, you're looking at one of the better selling peptides in the market today. And you can see after six hours they are pretty far ahead of mother nature, but by 10 hours mother nature is pretty much caught up.

The third column is, one of the peptides that we've marked by way of license to one of our marketing partners. As you can see by the tenth hour the migration is 75% complete, which is a significant advantage over either the current peptide or to that Mother Nature.

And then the fourth column again is the second peptide that we've licensed to another of our marketing partners, and you can see effectively the same result. Very exciting for us. Migration of cells is, of course, very important for wound healing, in our case also important for anti-wrinkle and anti-aging.

The fourth block is our Rx program. This, of course, is the best opportunity financially for the company. We've got a broad-spectrum, cidal topical anti-infective. It's a new class of lipopeptide with a novel mechanism of action and it's got a very good resistance profile.

We have proofs of concepts in two different animal models. I'll show you a couple of slides for those in just a moment. The applications include acne, atopic dermatitis, rosacea, wound infection and cutaneous mycoses. We intend to address the acne market first.

I am sure this is a little hard to see from back there, but this is a list of about 50 pathogens. These are pretty massive pathogens. A lot of them MSR, MRSA and VRSA, and within each case what you can see on the far right P1345 is basically we’ve got low single-digit dilutions as it's killing all of the different pathogens.

This is the first animal model. This is the antibacterial. This is the abraded skin infection model by George Rodeheaver in the University of Virginia. Under this model you take tens of the fifth units of bacteria. This is MRSA again. In fact, the host, you wait three days for the infection at the same time to take hold and then you treat. We treat it in three groups. The numbers are small. But yellow indicates that the treatment was completely successful, if it's in white that means the treatment was unsuccessful.

On the far right you have control group C. You can see that within the treatment period untreated the bacteria has grown about two magnitudes, so it's 500 times or more about in weight and in size. And the middle column, that's Omiganan, which is one of our competitors. And there you can see half of the animals were successfully treated, and the other half were not. What's interesting is the ones that were not successfully treated. In each case the bacteria was again two LOG’s higher. And then on slide eight, one to the far left you can see that all the animals were successfully treated.

Moving on to our antifungal test with animals again, the protocol for this test, again, is to infect the animal, wait three days and then you treat for seven days. At the end of that you have to wait for an additional three days. This is to allow if there is any down in the host, it will grow up so can you find it otherwise you have a hard time detecting it. And again, we were successful in treating all of the animals, a very solid result for us.

Looking at the size of the market, the derma market is about $16 billion annually depending on what you include in the market. The indications for the technology, again, are acne, wounds, cutaneous fungal and atopic dermatitis with us planning to move forward first in acne.

The acne market is the largest of the dermatology markets. In 2005, the pharmaceuticals [throughout] the acne market was about $1.3 billion in the United States, with Clindamycin being the leader at about $500 million. The projections we have for 2006 globally are about $3 billion.

Moving to the antifungal market, it's a significantly larger than I had anticipated when we started. The estimated market for 2007 is about $1.2 billion for the prescriptive and it's also about $1.2 billion for the OTC. Types of indications you are talking about here are Athlete's foot, ringworm, nail fungus and thrush.

Looking at clinical development, we are looking at pre-IND work that will take one year and cost about $2 million. Our Phase I will take one year and cost about $4 million or $5 million. The phase IIa would take one year and cost about $5 million and then phase IIb would be two years and about $15 million to $20 million.

One thing which we are planning out it is our Phase I actually includes three arms after which we believe we'll have a very good idea of not only dosing, but also of whether or not it's just the efficacy itself. So, it's a pretty solid test and that's why the numbers in that might go a little bit higher than you would anticipate.

We had four milestones for 2007. I went through them under the building block discussion. But quickly, our first milestone was to deliver our first finished product to the market. We will be delivering that to the market in the fourth quarter of this year. Our second milestone was to do the development work for the second product, and that's our anti-aging product to be delivered to the market in 2008. The third milestone is to enter into negotiations for out-licensing rights for the pharmaceutical program.

Well, our strategy here has been a two-pronged approach. Our product development and science teams are working together to talk to some of the larger pharmaceutical companies that specialize in our area to look for interest in either taking another part other than acne forward or have somebody at least prepared which is to hand acne off, for example, at Phase II. The second pronged approach, of course, is the financial size of the companies we're seeking, finding as we speak to begin moving these programs into the planning.

The fourth milestone for 2007 was to begin generating revenue from the early licensing we've done. And if you had looked at our financials, I would call it a trace of revenue probably it's the best way to describe it. The first quarter we had our first ever revenue and the second quarter of this year the revenue was up over 100%, so it appears we are getting there.

So, quick summary. At the end, we are a derma company. We specialize in peptides. We commercialize in both the pharmaceutical market and the cosmetic market. We have a multiple strategy with a dermatology focus, and the three takeaways are that we initially had single peptides that we are licensing out. We've completed that and we are beginning to see revenues from that.

The second is to put our own products into the market. Our first product will be in the market in the fourth quarter of this year with the second one being in the market in the middle of 2008. And then the third area is we are beginning to move our pharmaceutical program forward.

So, with that if there's any questions I'll open it up.

Question-and-Answer Session