Money-back guarantees are generally the stuff of late night infomercials, not risky biotech ventures. But such a guarantee is essentially what's on the table for shareholders of Capstone Therapeutics, a small company with an interesting history and a mid-stage anti-scarring treatment. If shareholder's approve it at Capstone's upcoming annual meeting, investors will have the right to make the company buy back their shares in mid-2011 at a price to be determined.

 

“Either we have created market cap value by mid-2011, or our stockholders can opt for remaining available cash,” says Jock Holliman, Capstone's executive chair. “We believe this program is novel within the biotech community, and we feel it is the right thing to do for our investors.”

 

The company also sees establishing such a right as a potential kicker for its share value, which has generally hovered around the $1 mark since February.

 

“The availability of the put right as an alternative to selling shares in the open market at any time—and especially following the announcement of our clinical trial results—may also have a positive effect on our share price, if investors place a higher value on our stock due to the existence of the put right,” says the company in its initial proxy filing, made March 23.

 

Capstone is also confident about its opportunity. The company sees a $1 billion market opportunity for its experimental drug, AZX100, which is being tested as a treatment for reducing both common dermal and overgrown (keloid) scarring and has potential for treating muscles spasms as well.

 

Capstone started life as OrthoLogic, a company making orthopedics for fracture healing and spine repair, before buying assets and intellectual property of Chrysalis Biotechnology in 2004 and AzERx in 2006. In 2008, OrthoLogic began doing business as Capstone.

 

The road hasn't been easy. Capstone lost $11.2 million in 2009 and had to shed seven staff positions that year to free up funding for clinical trials. The market hasn't shown particular enthusiasm for its prospects either, giving it a 52-week range of between 49 cents and $1.20.

 

The company will hold its annual meeting May 21, 2010 at its headquarters in Tempe, Arizona.