Brian D. Gibson - Principal Financial Officer, Chief Accounting Officer, Vice President of Finance, Corporate Secretary and Treasurer
Dominick C. Colangelo - Chief Executive Officer, President and Director
Aastrom Biosciences (ASTM) Q2 2013 Earnings Call August 15, 2013 4:30 PM ET
Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Aastrom Biosciences Second Quarter 2013 Conference Call. [Operator Instructions] I would also like to remind you that today's call is being recorded for replay. I would now like to turn the call over to -- the floor over to Brian Gibson, Aastrom's Vice President of Finance. Sir, the floor is yours.
Brian D. Gibson
Great, thank you, Huey, and good afternoon, everyone. Welcome to our Second Quarter 2013 Conference Call to discuss our most recent financial results and the progress of our development programs.
Before we begin, let me remind you that on today’s call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995, and all our projections and forward-looking statements represent our judgment as of today. These statements may involve risks and uncertainties that are described more fully in our filings with the SEC, which are also available on our website. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.
With us on today's call is Aastrom's President and Chief Executive Officer, Nick Colangelo; and because we're in the midst of finalizing our public offering, which closes tomorrow, we will not be holding a question-and-answer session on today's call.
I will now turn the call over to Nick.
Dominick C. Colangelo
Thank you, Brian, and good afternoon, everyone. I'd like to begin today by providing some perspectives on Aastrom's technology platform and the current development strategy for our lead product candidate, ixmyelocel-T, to highlight our progress with some of the important changes that we've instituted in recent months.
At Aastrom, we're working everyday to help people with severe chronic cardiovascular diseases realize the promise of cellular therapy. We've developed an innovative technology platform that generates patient-specific multicellular therapies using a highly automated GMP manufacturing process. This platform is unique in the industry and has demonstrated the capability to expand multiple cell populations for therapeutic use, including bone marrow mononuclear cells, hematopoietic stem cells from cord blood or bone marrow, dendritic cells and T cells, all of which have the potential to play a critical role in the treatment of serious diseases. Our lead product candidate, ixmyelocel-T, is a highly differentiated multicellular therapy. It's the only cell therapy that contains expanded populations in both mesenchymal stromal cells and alternative reactivated M2 like macrophages, 2 cell populations that are known to play a key role, both individually and collectively, in promoting tissue repair and regeneration. In our preclinical and clinical research, we've generated consistent positive data in multiple preclinical models and across a number of clinical indications, demonstrating that ixmyelocel-T is well tolerated and efficacious in treating cardiovascular and other diseases. Aastrom's technology in therapeutic platforms also are covered by a comprehensive patent estate comprised of multiple U.S. and international patents, including a composition of matter patent that protects ixmyelocel-T through 2029.
Our clinical development focus is on the treatment of severe chronic cardiovascular diseases, and we have several clinical development activities under way and expect to have a number of clinical milestones to announce over the next year. Our current clinical development programs fall into 3 areas. The first, is our orphan disease program for the treatment of advanced heart failure due to ischemic dilated cardiomyopathy, or DCM. Earlier this year, we refocused our internal resources on this very important and promising program because it represents an area of significant unmet medical need and a highly compelling commercial opportunity for the company. We also have a potentially streamlined path to regulatory approval and commercialization of ixmyelocel-T for this orphaned indication.
DCM is a leading cause of heart failure and heart transplantation in the world today, with more than 0.25 million advanced heart failure patients in the U.S. refractory to further medical therapy, and with approximately 60% of these cases being of ischemic origin, due to atherosclerotic cardiovascular disease, the refractory ischemic DCM market clearly represents a significant commercial opportunity for ixmyelocel-T. As we've previously stated, with this clinical development program well underway, we have an opportunity to become the first approved product to market for the treatment of ischemic DCM, and we have a strong pharmacoeconomic rationale to support premium pricing based on the limited availability and high treatment cost of -- or high cost of alternative treatments, such as left ventricular assist devices and heart transplantation for these patients.
During the second quarter, we initiated enrollment and treatment of patients in the Phase IIb ixCELL-DCM study. This study is a multicenter randomized double-blind, placebo-controlled Phase IIb study to evaluate the efficacy and safety of ixmyelocel-T in patients with advanced heart failure due to ischemic DCM. The study is designed to enroll 108 patients with advanced heart failure at approximately 30 clinical sites in the U.S. and Canada, with the primary end point being major adverse cardiovascular events, also known as MACE events, which are defined as the number of all caused deaths and hospitalizations and unplanned emergency department visits for treatment of acute worsening heart failure over 12 months. We'll also be evaluating several secondary clinical, functional and symptomatic efficacy measures at 3, 6 and 12 months.
We continue to make progress in the ixCELL-DCM study, a majority of the clinical sites have now been activated and we expect the remaining sites will be activated within the next couple of months. As we previously communicated, we expect to complete enrollment in this study by the end of Q1 2014 and to have top line efficacy results from the study in Q2 2015.
We also have recently completed several important initiatives designed to support rapid execution of this study. In July, we held a successful meeting with regulatory authorities at Health Canada regarding our submission of a clinical trial application to initiate the ixCELL-DCM study in Canada. As in the United States, congestive heart failure represents a significant and growing public health problem in Canada. The opportunity to initiate this study at leading Canadian cardiovascular centers represents an important opportunity for Aastrom to expand this study into centers outside the United States. This will support our patient recruitment efforts and position us to target the treatment of patients in an underserved and potentially lucrative market. I'm very pleased to report that we submitted the clinical trial application to Canada earlier today.
We also recently established a steering committee of internationally-renowned cardiovascular and cell therapy clinical investigators to support and help guide the ixCELL-DCM study. In addition to Dr. David Recker, our Chief Medical Officer, the committee is comprised of Dr. Amit Patel, Director of Clinical Regenerative Medicine and Tissue Engineering at the University of Utah; Dr. Timothy Henry, Director of Research at the Minneapolis Heart Institute Foundation; Dr. Anthony DeMaria, Chair in Cardiology and Founding Director of the Sulpizio Cardiovascular Center at UC San Diego; and Dr. Gary Schaer, Director of Cardiology Research at Russ Medical Center in Chicago. These leaders in interventional cardiology have already provided significant support and insight for the ixCELL-DCM study and the overall ixmyelocel-T development program, and we're very pleased to have the opportunity to continue to work closely with them moving forward.
Our second area of ongoing clinical investigation of ixmyelocel-T is in the treatment of critical limb ischemia, or CLI, the most severe form of peripheral artery disease. Our Phase IIb RESTORE clinical study results demonstrated that ixmyelocel-T was well tolerated and efficacious in CLI patients. During the second quarter, we amended the REVIVE-CLI study protocol to evaluate the approximately 40 patients at 15 sites who were enrolled in the REVIVE the study for safety and certain efficacy end points, including mortality, amputations and wound closure at 12 months. We expect to have the results from the REVIVE study in the second quarter of 2014.
We're also evaluating the potential initiation of an investigator sponsored study evaluating ixmyelocel-T as adjunct therapy to an endovascular procedure in CLI patients. This is another exciting potential application for this therapy, and we look forward to sharing more information about this potential clinical research with investors in the coming months.
Our third area of ongoing clinical activity is in craniofacial reconstruction, where we have ongoing studies and partnership with the University of Michigan that are funded by the NIH, the Burroughs Welcome Fund and the Oral and Maxillofacial Surgery Foundation. These studies are evaluating ixmyelocel-T treatment for patients with craniofacial defects undergoing reconstructive surgery. Results from the first of these studies, which were recently published in the Journal of Cell Transplantation, demonstrated that ixmyelocel-T accelerated bone regeneration in craniofacial bone defects. These findings further highlight the potential utility of ixmyelocel-T to repair damaged tissue. Enrollment in the third of these studies is expected to be completed by the end of this year.
So, in summary, we will continue to focus our internal resources on our promising DCM heart failure program and aggressively pursue additional high-value clinical research through alternative funding mechanisms and sponsored research.
Turning to our preclinical research program. Ongoing research by Aastrom scientists and our collaborators continues to bring us new insights into the highly differentiated mechanism of action of ixmyelocel-T, and the broad therapeutic potential for our technology platform and products. Results of some of this research were presented at important international scientific meetings during the second quarter, and we expect much of this data to be published over the coming months.
Finally, we continue to build upon the comprehensive patent estate that covers Aastrom's technology and therapeutic platform. We reported last week, that we received a Notice of Acceptance in Australia, for the patent application covering the composition of the methods of use for ixmyelocel-T. Issuance of this patent will expand and strengthen our international patent estate and provide significant protection for the commercial value and market opportunities that we're creating with ixmyelocel-T.
This concludes my update on recent activities. I'll now turn the call over to Brian Gibson for his financial report.
Brian D. Gibson
Thanks, Nick. I'll begin with the review our quarterly financial results. For the second quarter ended June 30, 2013, Aastrom had an net loss attributable to common shareholders of $4.9 million or $0.11 per share versus $11.7 million or $0.26 per share for the same period in 2012. The substantial decrease in net loss is due to reductions in all areas, with research and development costs decreasing by 48%, general and administrative expenses decreasing by 30%, as well as noncash changes in the fair value our warrants and accretion of our preferred stock.
Our loss from operations for the quarter, which excludes the impact of the warrants and preferred stock, was $5.2 million or $0.11 per share compared to $9.3 million or $0.24 per share a year ago. R&D expenses for the quarter ended June 30, 2013, were $3.7 million versus $7.1 million for the same period a year ago. The decrease in R&D expense is primarily attributable to the reduction of clinical trial expenses, due to stopping enrollment in the REVIVE-CLI clinical trial and the execution of a corporate restructuring that substantially reduced headcount and operating expenses.
General and administrative expenses for the second quarter were $1.6 million versus $2.2 million for the same period in 2012. This decrease is primarily attributable to the corporate restructuring.
At the end of the quarter, Aastrom had $4.5 million in cash and cash equivalents compared to $9.2 million at the end of the first quarter. Our cash use for operations of $4.7 million during the quarter was in line with our previous forecast of $4.5 million to $5 million. We expect our cash spend to continue to decline in the third quarter, decreasing to $4 million to $4.5 million.
Moving to the public offering that we priced on Tuesday morning. We are pleased that we raised $9 million in this offering to support our ongoing development programs. The closing of this financing also positions us to successfully address our NASDAQ listing requirements and limitations in our authorized and unreserved shares. It's important to note that the proceeds from this week's offering were limited by our remaining authorized unreserved shares. There was additional demand for the offering, but we reached the maximum number of shares reserved in outstanding. Therefore, we have decided to seek shareholder approval to increase our authorized shares to ensure that we have flexibility to continue to fund our research and development programs over the long term. More details will be included in a special proxy that we expect to file next week.
Regarding our NASDAQ listing requirements, we previously announced that we are not in compliance with NASDAQ's minimum listing requirement of $35 million in market value or shareholders' equity of $2.5 million. Meeting only one of these 2 measures is required to regain compliance.
Last week, we announced an amendment to our preferred stock agreement with Eastern Capital. This amendment removes certain redemption rights of the Series B to preferred stock, which will allow us to reclassify nearly $38 million of value currently accounted for as mezzanine equity into shareholders' equity. This amendment, along with the proceeds of the recent offering, should allow us to meet the minimum equity requirement of $2.5 million.
We also plan to address NASDAQ's minimum bid price rule, which requires the company to maintain a minimum share price of $1. In order to address this quickly and decisively, we will include a proposal and a special proxy seeking shareholder approval to effect a reverse stock split. We expect to hold this special shareholder meeting in mid to late October to finalize this process.
That completes my financial review and I'll now turn the call back over to Nick.
Dominick C. Colangelo
Thanks, Brian. As you can see, we're continuing to make good progress with the clinical development of ixmyelocel-T for the treatment of advanced heart failure due to ischemic DCM. We're also making important progress in research, targeting additional potential indications where ixmyelocel-T may have meaningful therapeutic benefits. The Phase IIb ixCELL-DCM study is proceeding well with the support of our DCM Steering Committee, several new clinical sites now preparing to begin enrollment and our planned expansion into Canada. Positive results from this study will enable us to prepare for Phase III studies in the treatment of advanced heart failure due to ischemic DCM, and we'll also be well positioned to continue to pursue other potential indications for ixmyelocel-T moving forward. With a number of upcoming clinical milestones, promising preclinical programs underway and continued enhancement of our IP estate, we believe that we're well positioned to drive significant value for the company over the coming year. As Brian described, we've completed an essential step to address our current capital requirements and now are in a stronger financial position to continue to advance our ongoing clinical and preclinical programs, and address our capital structure and NASDAQ listing requirements. We appreciate the continued support of our investors as we work to complete these initiatives and advance our company, and I thank you for joining us today. We remain excited about the opportunities ahead for Aastrom and look forward to updating you on our next call. That concludes our call for this afternoon.
Thank you, gentlemen and thank you, participants. This does conclude today's call. Thank you for your participation and have a wonderful day. Attendees, you may now all disconnect at this time.