Aastrom Biosciences Gaining Momentum on Outlook for Positive CLI Trial Results

| About: Vericel Corporation (VCEL)
Aastrom Biosciences Inc.(NASDAQ: ASTM) has started to gain some momentum as news of their November presentation on clinical data has spread. They will be giving an update on their Phase 2b trial in critical limb ischemia (CLI).

Shares of the company rose to 1.78+0.17 (10.56%) during the regular session and again after hours to $1.83 +0.05 (2.81%) after we told subscribers yesterday that we believe they are considerably undervalued given the potential for results and the large market this treatment will be addressing.

ASTM will be hosting a satellite session at the VEITHsymposium on November 18, 2010 at 1:00 pm (EDT). The event will feature a presentation by Richard Powell, MD, Principal Investigator in the RESTORE-CLI clinical trial, as well as a Q&A session.

Aastrom’s Tissue Repair Cell (TRC) technology is an autologous based platform, meaning they use a small sample of a patients bone-marrow. Their TRC platform then expands the number of stem and progenitor cells many times (49 times) what would otherwise be obtained from patient’s, and these cells are then delivered directly to the damaged tissue. ASTM has demonstrated very compelling efficacy in their Phase 2b RESTORE-CLI trial. Originally, this study had anticipated enrolling close to 150 patients, but due to the exceedingly positive interim results in 86 patients, the drug safety monitoring board advised discontinuing enrollment and moving forward to Phase 3. It would appear this news hasn’t quite dawned on the broader market.

In February 2010, they reported top-line results from the planned interim analysis of the RESTORE-CLI trial. Based on a composite efficacy endpoint assessing time to first occurrence of treatment failure (such as major amputation, all-cause mortality, doubling in wound size and de novo gangrene), treatment with autologous tissue repair cells (TRCs) prepared by ASTM were shown to be more effective than placebo (P=0.005). They later reported amputation-free survival (time to major amputation or death) was statistically significant in favor of TRC treatment (P=0.038).

In the past few weeks, ASTM has made several important news announcements regarding this trial. Most recently, they announced that they had submitted an SPA to the FDA for their Phase 3 protocol. Several days earlier, they announced their Phase 3 trial was given Fast Track designation. ASTM expects to initiate the Phase 3 program in early 2011. Both of these important announcements strengthen our outlook for very positive Phase 2b results.

Critical limb ischemia is a severe obstruction of the arteries that seriously decreases blood flow to the extremities and is manifested by pain at rest, non-healing wounds, and tissue necrosis. People with CLI face a high risk of amputation and in some cases death. Approximately 1 million patients in the U.S. suffer from CLI and results in more than 160,000 amputations each year. Nearly 20% of patients will die within the first 6-12 months of CLI onset.

ASTM’s valuation relative to other stem cell companies seems drastically out of line, especially considering Phase 2 results are close and the markets they are going after. Roth Capital has a $3.50 price target with a “Buy” rating. Zack’s made it very clear, ”no other firm has such an advanced program for peripheral arterial disease or heart failure." The recent failure of SNY's trial aimed at CLI gives ASTM less competition. Aastrom has also a clinical trials in progress for dilated cardiomyopathy (DCM). If their technology is proven successful, Aastrom would possess multi-billion dollar treatments for CLI and DCM. We will continue to keep you updated.

Disclosure: Long ASTM.