Capstone Therapeutics Provides Operating Update And Announces 2011 Financial Results

On October 13, 2011, the Company’s Board of Directors adopted a plan to preserve cash during our ongoing partnering efforts and effected a reduction from 18 employees to four employees.

On January 20, 2012, we took additional actions to preserve cash and move towards winding down operations while we continue efforts to create shareholder value through a development partnership (of clinical or pre-clinical stage assets) or other strategic transactions.  These additional actions included the following:

We have completed wrap-up of our AZX100 Phase 2a dermal scarring clinical trials and have returned intellectual property related to TP508 to UTMB. Certain pre-clinical, manufacturing and regulatory projects related to AZX100 that are either required from a statutory perspective or are under contract will continue. We presently have four employees and a few part-time consultants.  Most of our part-time consultants have already terminated due to completion of their wind-down projects.  As of July 2012, we anticipate having only two fulltime employees.  We remain a publicly-traded company, subject to the regulations and reporting requirements of the Securities and Exchange Commission and will continue to bear certain administrative and reporting expenses.

Until resolution of the ongoing qui tam litigation, Capstone is limited in its ability to execute a strategic corporate transaction and is restricted under Delaware Law in its ability to return remaining cash to stockholders.

The Company incurred a net loss in 2011 of $9.7 million compared to a net loss of $10.9 million in 2010.  The decrease in the net loss for 2011 compared to 2010 resulted primarily from reduced clinical costs in 2011 compared to 2010 related to our AZX100 Phase 2 clinical trials, the elimination of our performance- based incentive bonus plan and decreased operating costs after October 31, 2011. Our Phase 2 clinical trials for keloid scar revision were completed in 2010 and our Phase 2 clinical trial in dermal scarring following shoulder surgery was substantially completed in 2010.  These cost decreases were partially offset by severance costs of approximately $1.7 million in 2011.

The Company ended 2011 with approximately $13.8 million in cash and investments.