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

What's making news at Aastrom? Aastrom Biosciences: The Winning Streak Continues Flash Player 9 or higher is required to view the chart Click here to download Flash Player now

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 critical limb ischemia (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 3 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 US, but seem willing to negotiate ex-US 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.

Critical Limb Ischemia or CLI is a severe obstruction of the arteries which seriously decreases blood flow to the extremities (hands, feet and legs) and has progressed to the point of severe pain and even skin ulcers or sores. Critical Limb Ischemia (CLI) is often present in individuals with severe peripheral arterial disease (PAD). CLI is very severe condition that needs comprehensive treatment by a vascular surgeon or vascular specialist as it will not improve on its own. A break-through treatment from ASTM would present the opportunity to serve a multi-billion dollar market.

Disclosure: Long ASTM

Our initial coverage of ASTM: http://biomedreports.com/2010102759024/stem-cell-clinical-data-coming-in-november.html

ASTM VEIGHsymposium webcast : http://bit.ly/afzRZT
ASTM Phase 2b RESTORE-CLI Trial : http://bit.ly/dzq7zA
ASTM $75 million shelf filing : http://bit.ly/95ICi1
National Securities ‘Buy’ with $6 PT(11/8/2010) : http://bit.ly/dcEfTX
National Securities Initial Report(08/16/2010) : http://bit.ly/dcEfTX

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