Seeking Alpha
Profile| Send Message|
( followers)  

By Patrick Crutcher

Given the proximity to their key data presentation, we wanted to take a moment to focus on Aastrom Biosciences (NASDAQ:ASTM) once again.

With results on their pipeline set to be delivered on Thursday, we want to cover some important points and provide our readers with a more in-depth look at Aastrom.

We continue to believe the results will be significant for the future of their critical limb ischemia (CLI) program and potentially indicative of success in dilated cardiomyopathy (DCM). Aastrom will present data from an interim analysis of its Phase 2b RESTORE-CLI clinical trial at the VEITHsymposium™ on November 18, 2010 at 1:00 pm ET.

First, we want to review the Phase 2b RESTORE-CLI trial, including the initial interim data. The data set will be comprised of 86 patients, with 46 patients at 6 months and 40 patients at 12 months. National Securities biotechnology analyst, Jason Kolbert, “expects the 12 month data to continue to show a strong separation between the active and control arms, and that the 6 months data set will confirm the earlier data sets reported.” The interim study results in CLI showed a statistically significant improvement of the composite endpoint assessing time to treatment failure (including major amputations, doubling wound size and new gangrene)(p-value=0.005). Most importantly, results showed a statistically significant improvement in amputation free survival, the FDA’s gold-standard endpoint for Phase 3 CLI studies (p-value=0.038). We also saw beneficial improvements in wound healing and fewer amputations.

4.25 +0.15 (+3.63%)
Intraday | 3 Month | 6 Month | 1 Year
Quotes delayed at least 20 mins.

Investors should not forget that this “data set was so compelling that ASTM chose to end the trial, analyze the data, and move to a pivotal program, seeking an SPA” (Kolbert). We should stress that this was a well-designed trial (randomized / double-blinded / multi-center). ASTM is keen to show that their TRC technology works and by using a robust trial design, they can have more confidence in the data. We believe their results on Friday will continue to show highly significant benefits supporting the ASTM’s approach. We are expecting that amputation-free survival and the composite endpoint for all 86 patients (covering 6 months) to be similar if not better than the interim data. (Click chart to enlarge.)

ASTM has made great strides in their pipeline, and over the next six months they will be showing their cards. As you can see below, ASTM has a lot in store for investors. Specifically, there are 5 catalysts that investors should be watching closely for:

1. Phase 2b CLI 6-month results on November 18th
2. Phase 2 Surgical-DCM 6-month results in January
3. SPA negotiations for Phase 3 in CLI with FDA between now and early 2011
4. Phase 2b CLI 12-month results in Q2
5. Phase 2 Surgical-DCM 12 month results in Q2/Q3

The value of Aastrom’s pipeline will be more clear going forward, as results start to trickle in. Success in CLI or DCM would set them apart from other stem cell companies.

After a recent meeting with Aastrom’s management, Zack’s Managing Director & Sr. Biotechnology Analyst, Jason Napodano, had this to say about Aastrom Biosciences:

"ASTM is the premier stem cell play for CV(cardiovascular) disease, and may be the premier stem cell play period. My meeting with ASTM today really did a lot to convince me that they are a solid team with a real shot at big things one day."

As we all know, in after-hours on Friday ASTM filed a mixed shelf registration statement for $75 million. Aastrom is currently a developmental stage company and capital raises will be necessary. They stated they have enough cash until June 2011. This offering opens the opportunity for ASTM to raise capital as they need it to further their programs on their own terms. While most expect them to raise capital sometime within the next 3-5 months; the shelf is there for future use, it may not necessarily be used right away. Aastrom wants to develop their treatments alone, hence the need to raise capital to push these programs forward.

Aastrom is on the verge of demonstrating their technology in CLI, which is a significant market (>$1B in US) and has little to no competition. Note, the last time ASTM had a shelf, they didn't use it for three months. (ASTM filed an S-3 registration in Nov. 2008 and priced it in Feb. 2009.) With so many upcoming catalysts ASTM would be smart to allow the stock to appreciate. Based on presumably significant results in CLI and SPA news, a capital raise could come at higher levels, limiting shareholder dilution. (Note: this is assuming that ASTM demonstrates that their TRC’s are effective in treating CLI).

An important point that investors might have missed in the shelf registration statement was the cancellation of the financing deal with Fusion Capital. We see this as a net positive since the deal would hurt their share structure and give Fusion to much control of Aastrom. It’s clear insiders expect positive results in the coming quarters and would prefer not to dilute their own holdings. They have “adequate liquidity to finance our operations, including development of our products and product candidates, with our existing cash and cash equivalents as of September 30, 2010 through June 30, 2011.” By funding their pipeline themselves, it ensures that Aastrom retains 100% ownership of their treatments for DCM and CLI. They don’t want to partner in the U.S., but seem willing to negotiate ex-U.S. licensing rights.

We feel that the data on Thursday will be highly supportive of a large Phase 3 trial in CLI and that ASTM will eventually receive an SPA for this trial. Positive results in CLI will lay the foundation for the next-stage in Aastrom’s development. By moving their autologous stem-cell treatment into Phase 3, they can definitively set themselves apart from competitors.

Disclosure: Long ASTM



Source: New Data Poised to Boost Aastrom Biosciences