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I Believe in Aastrom Biosciences

Aastrom (NASDAQ: ASTM) is focused on the treatment of cardiac and vascular diseases, such as dilated cardiomyopathy (NYSE:DCM) and critical limb ischemia (NYSE:CLI). Aastrom is developing Cardiac Repair Cells (CRCs), based on TRC technology, and with the goal of repairing and regenerating damaged heart tissue in patients with dilated cardiomyopathy (DCM) and Vascular Repair Cells (VRCs) with the goal of repairing and regenerating the ischemic tissues of these patients by improving the blood flow in the affected areas. It’s proprietary Tissue Repair Cell (NYSE:TRC) technology expands the numbers of stem and early progenitor cells from a small amount of bone marrow collected from the patient.

Market Opportunity: Many of the 5.5 M people in the U.S. suffering from severe heart failure have DCM, a condition where expansion of the patient’s heart reduces pump function, making it impossible to maintain normal blood circulation. Patients with DCM typically have symptoms of congestive heart failure, including severe limitations in physical activity and shortness of breath.

  • DCM generally occurs in patients who have ischemic heart failure due to multiple heart attacks, though it can also be found in patients with non-ischemic heart failure caused by hypertension, viral infection or alcoholism. Patient prognosis depends upon the stage of the disease but is typically characterized by numerous health problems and a very high mortality rate,
  • Heart disease remains the number one killer in the United States and millions of patients continue to suffer from chronic heart disease. These patients face limited therapeutic options and little chance for meaningful clinical improvement. Critical limb ischemia, the most severe form of peripheral vascular disease, leads to over 160,000 major limb amputations per year. Therapeutic options are limited and largely ineffective for the most severe patients.

NASDAQ Listing: Received a Staff Determination letter from the NASDAQ Stock Market (NASDAQ) on 10/2/09 indicating they has not regained compliance with the $1.00 minimum closing bid price requirement for continued listing. As a result, the stock would be subject to delisting from the NASDAQ Capital Market on 10/13/09. Aastrom intends to request an oral hearing before the Panel within the time-frame provided by NASDAQ, which will stay the delisting of the Company’s securities. In our blog dated, 10/6/09, 50 “other” biotech/lifescience companies are afflicted with this issue and many are good companies weathering these market conditions!

Financing: ASTM executed a $30 M of future funding with Fusion Capital which will be based on the prevailing market prices of the shares at the time of sales. There are no negative covenants, restrictions on future fundings, penalties or liquidated damages in the agreement. The proceeds received are expected to be used to conduct 12-month patient follow-up for patients enrolled and to be enrolled in the U.S. Phase II IMPACT-DCM cardiac regeneration clinical trial; to expand cardiovascular clinical development programs beyond the IMPACT-DCM trial and to initiate plans for design, development, and scale-out of new GMP cell manufacturing systems in preparation of commercial-scale production as needed. There is always a cost to new money; but, it is a draw-down and beats constantly going back to the market!

Corporate Governance: ASTM’s as of 1-Oct-09 is better than 84.9% of CGQ Universe companies and 67.9% of Pharmaceuticals, Biotechnology & Life Sciences companies. Not bad!

Management Changes: On 9/3/09, Aastrom announced a change to executive management:

  • George W. Dunbar, currently Chief Executive Officer, President, Chief Financial Officer and a Director will transition out of day-to-day management and is expected to assume the role of Chairman of the Board after annual meeting, currently planned for 12/14/09,
  • Timothy M. Mayleben, a member of the Board of Directors, will remain a Director and become the new CEO, President and CFO at the time Mr. Dunbar steps down from those positions in 12/09.  New management always initiates new focus and direction! Prior to this he served as the President and COO and a Director of NightHawk Radiology Holdings; Mr. Mayleben was formerly the COO of Esperion Therapeutics, which later became a division of Pfizer Global Research & Development. He joined Esperion in late 1998 as CFO. Important history: while at Esperion, Mr. Mayleben led the raising of more than $200 M in venture capital and institutional equity funding and later negotiated the acquisition of Esperion by Pfizer in 12/03. Prior to joining Esperion, Mr. Mayleben held various senior and executive management positions at Transom Technologies, Inc., now part of Electronic Data Systems, Inc., and Applied Intelligent Systems, Inc., which was acquired by Electro-Scientific Industries, Inc. in 1997. Anyone see a pattern!
  • Nelson M. Sims, who has served as Chairman of the Board of Directors since 10/08, is expected to assume the role of Lead Director with Harold C. Urschel, Jr., M.D., being elected to the  Board (10/20/09).

Regulatory Status: ASTM has treated more than 350 patients in various clinical trials over 10 years without any product safety issues and is currently conducting a Phase II cardiac regeneration clinical trial (the IMPACT-DCM trial) in patients with dilated cardiomyopathy (DCM – severe chronic heart failure) and a Phase IIb vascular regeneration clinical trial (the RESTORE-CLI trial) in patients with critical limb ischemia (CLI – the most severe form of peripheral arterial disease).

  • U.S. Phase II cardiac regeneration clinical trial:  On 5/5/09 ASTM reported that preliminary findings from a U.S. Phase II IMPACT-DCM clinical trial to treat dilated cardiomyopathy (DCM) with Cardiac Repair Cells (CRCs) which was  presented at the International Society for Cellular Therapy annual meeting .  IMPACT-DCM is the first clinical trial in the U.S. to evaluate the surgical delivery of autologous cells directly into the human heart muscle for the treatment of congestive heart failure associated with DCM in both ischemic and non-ischemic patients,
  • 3 treatment group patients have completed the 3-month follow-up visit; all of these patients improved from New York Heart Association (OTC:NYHA) class III to class II.  This represents clinically meaningful improvement in these patients. In contrast, the NYHA class did not improve in 2 of 3 control group patients,
  • Overall quality of life scores improved in all treatment group patients based on the Minnesota Living with Heart Failure Questionnaire.  Physical and emotional well-being of all treatment patients also improved based on patient responses to this questionnaire.  There were no consistent trends in the control group patients,
  • No CRC-related serious adverse events were reported in any of  the 4 treatment group patients who have completed at least their 1-month follow-up visit.  To date, the trial has enrolled 21 patients at the following sites: Methodist DeBakey Heart & Vascular Center in Houston, TX Baylor University Medical Center in Dallas, TXUniversity of Utah School of Medicine in Salt Lake City, UT Cleveland Clinic Heart and Vascular Institute in Cleveland, OH,and Emory University Hospital Midtown in Atlanta, GA,
  • The 40-patient, randomized, controlled, prospective, open-label, multi-center clinical trial seeks to enroll 20 patients with ischemic DCM and 20 patients with non-ischemic DCM.

U.S. Phase IIb vascular regeneration clinical trial:

  • To date, the U.S. Phase IIb RESTORE-CLI clinical trial has enrolled 73 patients (treatment and placebo control).  This clinical trial is evaluating Vascular Repair Cells (VRCs) in the treatment of patients suffering from the most severe form of peripheral arterial disease (PAD), a condition known as critical limb ischemia (CLI).  The 150-patient, prospective, controlled, randomized, double-blind, multi-center clinical trial seeks to enroll patients suffering from CLI, the end stage of peripheral arterial disease.

Compassionate-Use Bone Repair Cell (NYSE:BRC) treatments in Spain: In an oral presentation in Dalian, China on August 10, 2009, Dr. Jose Mendonca of Hospital POLUSA in Lugo, Spain  reviewed the results of treatment with BRCs  in three compassionate-use patients with craniofacial defects:

  • These patients each presented with different craniofacial defects; all of the patients demonstrated formation of new bone 12 months post-BRC treatment,
  • All patients underwent a minor surgery to insert a dental  implant into the newly regenerated jaw bone.  Eight weeks and later, the dental prosthesis (teeth) was attached to the implant completing the treatment objectives with the restoration of oral function.



Bottom Line: Projecting the future valuation of Aastrom Biosciences and its innovative technology should  be understood in terms of vulnerabilities over the next few months: 

  • ASTM trades at $0.34 (range -$0.296-0.78) with a market cap of $57.23 M and enterprise value of $41.02 M but has suffered a -15% depreciation in the past month.  ASTM had $17 M in cash.  ASTM has reduced operating expenses by a combination of clinical program prioritization and fiscal discipline. Shares outstanding shares are 168.33 M but a healthy reverse followed by a major announcement might drive the valuation to where it should be,
  • ASTM is in a mid-stage phase of a clinical trial that tests the ability of autologous stem cells, or stem cells from the patient’s own body to treat dilated cardiomyopathy; a severe form of chronic heart failure that causes the heart to swell and impairs circulation,
  • Institutional Investors (4.5%) are low but include: Vanguard Group, Barclays Global Investors UK Holdings Ltd, Renaissance Tecknologies, Commerzbank Aktiengesellschaft,  CALPERS,  Deutsche Bank , Northern Trust Corp, Geode Capital Management, Bank of New York Mellon Corporation, State  Street Corp and now Fusion Capital. Management only holds: 0.28% which is very low, 
  • For additional disclosure purposes, this blog is posted – without  any – contact with ASTM and is my – own – view  with – NO – personal holdings (see disclosure section in Scimitar Equity site), 
  • We believe ASTM’s valuation will be enhanced when they can emerge from its “at risk” status with results from clinical initiatives and settling  the delisting process,
  • My vote, the only wrong thing to do … is nothing!