Vericel Corp (VCEL) 2005 Q2 法說會逐字稿

Good day. At this time I would like to turn the program over to your host, Mr. Al Wright. Go ahead, please, sir.

Thank you, Kevin. I want to thank everyone on the call for taking time out of their busy schedule this morning to participate in this program. Before we begin, as always, I will read our Safe Harbor Statement.

This conference call and Web cast will contain forward-looking statements, including, without limitation, statements concerning product development objectives and anticipated timing, clinical trial results and anticipated timing, revenue results, potential market opportunities, market development plans, anticipated key milestones, and potential advantages and applications of the Aastrom Replicell System, which involves certain risks and uncertainties. These and other significant factors are discussed in greater detail in Aastrom's annual report on Form 10-K and other filings with the Securities and Exchange Commission. Actual results may differ significantly from the expectations contained in these forward-looking statements.

Now, it is my pleasure this morning to turn the call over to Dr. Doug Armstrong, our CEO and Chairman. Doug, please?

Thank you, Al. And good morning to our listeners. We appreciate your joining the call today. For those of you who have been on our calls in recent months, I've been telling you this is an exciting time for the Company; and I think as we've seen over the last two months, that excitement has certainly been the key word. So this morning we what we would like to do is to provide you with a review of our progress, along with the financial details from our recently completed second fiscal quarter, remembering our fiscal year begins July 1, and also comment on a few other issues that are relevant to the Company. We will then open the call up to you for any of the questions that you might have.

Now, a lot of the interest in the market of late has come from the interest in using cells as therapeutic tools, which has continued to gain momentum in both the medical and general populations. Along with this interest has been confusion about the different types of cells. This is particularly the case with stem cells, which can have different sources, and, correspondingly, different issues associated with them. Stem cells can come from different donor sources such as embryonic or fetal tissue or they can come from the patients themselves, such as adult bone marrow stem cells. I want to emphasize to our listeners that Aastrom does not use embryonic stem cells, and this is a critical fact that differentiates our bone marrow, adult bow marrow derived tissue repair cells, or as we call them TRCs, from other approaches. Now an excellent example of some of the confusion that I speak to around stem cells, and the sources came from recent news about cultured embryonic stem cells that came from a published report about the use of mouth-derived feeder cells, which were required for the culture process.

Now, this gets pretty technical for many of our listeners to understand, but basically, this report indicated that when embryonic stem cells were grown in association with the mouse feeder cell, the embryonic cells took on some of the biological molecules of the mouse cells, which may impact how they are able to function. Now with this report, the question quickly came up for some people whether the same issue affects Aastrom's tissue repair cells. We utilize our own proprietary technology to produce our TRCs, which are generated from a small amount of the patient's own bone marrow. The patented TRC production process basically continues the natural stem and progenerative growth that begins in the patient's bone marrow. With the Aastrom approach, and with this natural process approach, there is is no requirement to add mouse feeder cells or any other type of feeder cells to the culture. Also, because the TRC stem-cell culture process is short term, it is a 12-day production procedure, the cells are less susceptible to the changes that can occur with the long-term or repeated passage type of cultures that are used for embryonic and other types of stem cells.

Now, with that bit of clarity, I want to now turn the discussion to the Company's operational activity. The first half of our fiscal year has been characterized by a progression of events that have clarified and strengthened Aastrom's strategic position in the tissue regeneration field. These events have increased our operational strength with the appointment of new members to the management team, and as some of you saw this morning, to our board of directors, as well as strength coming from our improved financial position, with the addition of new funding bringing our current cash to over $35 million. And most importantly, our strength coming from the clinical progress that we're making. It is is our clinical progress that I want to focus on during the rest of this call. Let me give you a few more details.

Our strategy has been to initiate different clinical trials that are able to get a good indication of the safety of our TRCs and their ability to generate new tissue in patients. Unlike many types of traditional drug trials, with tissue regeneration utilizing cells, you can very visibly see or not see the effect of cells on tissue generation, so the end points tend to be fairly short. With a new product or treatment, you're often forced to begin with the worst type of patients, one who has a very severe complex type of injury, who has already failed a standard of care treatment. This has been the case for our tissue repair cells in bone grafting.

Bone grafting is used to aid the local generation of bone at the specific site, such as a severe fracture of the leg or arm, or to use -- or to use this bone graft to fuse two or more spine vertebrae together in what is typically called a spine fusion. In Aastrom's case, we began our clinical path using tissue repair cells for the repair of severe long bone, non-union fractures. These are fractures where the bone is broken into two separate pieces, and they are not going to reconnect and grow together without a bone graft. The worst of these situations is when a patient has not healed for eight or more months, even after receiving surgical fixation and often traditional bone graft treatment. These are the types of patients that we began our trials with.

Although obviously a challenge, we frankly didn't mind starting in this position, as we felt that if our tissue repair cells would regenerate bone in these types of patients, this would really distinguish our technology and generate value. We set up long-bone fracture trials with three types. We began a multicenter trial in the United States, under an approved IND from the FDA. We also began a single-center trial in Bochum, Germany and a separate single- center trial in Barcelona, Spain. The Barcelona trial has made the most progress to date.

[inaudible] all five of its patients and completing six different treatments. One patient had a nonunion fracture in both of his legs. The investigators have provided an important progress-to-date report to Aastrom that stated that Aastrom's TRCs were safe, there were no adverse events reported, and that the patients are exhibiting various stages of healing at their nonunion fracture sites. Now, some of the ways we and our investigators measure this is based on x-ray visualization of the treated fracture sites that tells us how bone is forming.

Now, based on the overall healing results to date among these patient, the investigators in Aastrom determined to expand this and other fracture studies and to begin our formal plans for obtaining the clinical data that will be needed for registration of our tissue-repair product for use in bone graft surgery in both the EU, the European Union, as well as the United States. We are all now anxious to have more complete data to present on these first patients.

Because of the severe and quite variable nature of these fractures, as well as the previous failure for these fractures to repair following a standard-of-care treatment, the response to TRCs was expected to be variable, with respect to successor time to bone regeneration. Although local bone formation progress can be measurable during the recovery process, full fusion of the bones is a longer-term process. Our intention has been to allow enough time so that we can can measure effectively fusion success for these patients, and then prepare a disclosure to describe the results of the study in greater detail to our shareholders and interested parties. The preparation of the data is currently in process, and we should announce these more complete results at some point in the coming months.

Based in part on the success of the first fracture treatments, last October we initiated patient enrollment in a clinical trial at the Maxilofacial Surgical and Implantology Center at the Technon Hospital in Barcelona; and this trial was designed to determine the safety and effects - - effect of our tissue-repair cells in what is called the maxillary sinus lip bone graft procedures, which for awful you who have trouble knowing what that means, is you can hear me have trouble saying the word, it is basically thickening the bone in the upper-jaw area, which is the needed procedure for a dental implant host to be inserted. In the initial phase of this trial, five patients will be approved to compare the outcome of the Aastrom tissue repair cell treatment procedure with that of a standard treatment approach to build new bone tissue. An interesting feature of this study is that each patient actually will receive two different treatment approaches. They will receive tissue repair cells for implants on one side of the jaw, and they will receive a standard bone graft treatment on the other side of the jaw. This allows for comparison of procedures within each patient.

Now, as you might have already surmised, these are also patients with very severe conditions, as suggested by the large number of dental implants that they will be receiving, implants on both sides of the jaw. However, we expect to be able to report preliminary results from this study by the end of the summer. And those results are expected to include safety, adverse events, and the level and degree and quality of bone formation with our cells compared to standard bone grafting. We think this will be a very, very interesting study.

We have also made some key progress in the United States trial for nonunion fractures. The IND, which is the approval from the FDA for this trial, had two initial restrictions. Only three patients could be initially treated, and these patients had to have an established nonhealing type of nonunion fracture for at least eight months. If certain safety markers were established in these patients, with the treatment with our TRCs, the trial could then be expanded to include more patients and could also, and this is a very important aspect of the study, could include nonunion type of fractures of any period. In other words fresh fractures. There was no requirement to wait for the eight months. We just announced that we were able to meet this clinical trial milestone with the accrual of our first patients, and we can now move forward with the expanded accrual criteria.

I will also note that our trial in Bochun, Germany is continuing to accrue patients, following some small changes that we made in the study protocol to align that protocol better with our other sites. I mentioned earlier that we had some site differences between the different sites.

Now, one of the strategic strengths of the Company is the ability to pursue multiple market indications with a single technology and operational infrastructure, based around our tissue repair cells. This important business model allows a desired level of diversity for multiple market opportunities, but with a cost savings development approach of only a single technology. I think this is just one of the most important aspects of Aastrom in this field of regenerative medicine. The value of this position continues to emerge with the progress from the nonunion fracture trials, to more recently the sinus lift trial in Barcelona and now our announced plan for trial with the Heart and Diabetes Center located in Bad Oeynhausen, Germany. This progression is expected to continue.

With the data now coming in from the current bone graft trials, Aastrom is actively moving forward with the protocol for using TRCs in spine fusion indications. These plans should be more formally described for our shareholders in the coming months.

Now, before leaving this section, I want to comment further on the planned clinical trial in Bad Oeynhausen that will evaluate the safety and effect of our tissue-repair cells in the regeneration of peripheral vascular tissue to treat severe ischemia in the legs of diabetic patients. As most of you know, we have signed our clinical trial agreement but cannot yet start treating patients. As previously disclosed, the reason for this period of delay is the new requirement in Germany to obtain a cell manufacturing license. We are working with our collaborators at Bad Oeynhausen now to complete the work to secure this license. I want to emphasize this is not a delay in our plans. We had put that anticipation of that license into our plans, but we do get questions as to since we signed the agreement, have we began accruals yet. I can tell you it is difficult to project with much accuracy exactly when the license will be obtained, but we still anticipate this trial will begin accruing patients in mid-calendar year 2005.

The new regulations introduced this year in Europe for manufacturing, cell manufacturing, as well as the regulations for using cells as therapeutic tools, have definitely brought new issues to the planning and for the initiation of new clinical activities for anybody using cells in medicine. However, we believe that the requirements for quality assurance and evidence-based medicine, in other words good trial, which is what the new EU directives address, will ultimately work in our favor. Regulated clinical trials that show the true effectiveness and quality of our tissue repair cells, and then those cells receiving licensure, just like a drug, should create a stronger and more competitive market entry for our products. So you combine that particular point, along with the level of clinical activity and where we are in the clinic, you can begin to see the basis for the excitement that I have in Aastrom's strategic position.

Clinical progress is what our shareholders should continue to look for in the coming months. Specifically, should look for the continuation of the accrual of patients to our current FDA multi-center bone graft trial here in the United States, with the addition of at least one to two more clinical sites added to this trial. You should look for the announcement of more detailed long-term -- excuse me, long-term bone fracture repair results from the recently completed first phase of the Barcelona trial. You should also look for the announcement of results from the Barcelona jawbone sinus lift trial in patients needing dental implants. You should look for an announcement of the initiation of patient treatments in the clinical trial utilizing tissue repair cells to regenerate vascular tissue in patients with diabetic limb ischemia; and finally, solidificationof our clinical trial plans in the spine fusion indication from both the United States and in Europe.

Now, that's a lot of clinical activity, lots of opportunity for excitement over the coming months, and our ability to again to move to these types of trials is based around the fact that we can do this out of the same tissue repair cell product, and our internal operational structure to support that product.

Now, before I turn the call over to our President and Chief Operating Officer, Jim Coor, I want to comment on this morning's announcement regarding our newest member of the Board of Directors. Dr. Warren Chaunce Bogard, Jr, has joined our board and brings over 20 years of management, strategic planning, business development and particularly important for us, new product marketing experience. With this experience coming from such companies as Merck and Senta Core[ph]. We think those experiences should contribute greatly to Aastrom. Both the board and the management team, as we progress in our transformation from a development company to a company actively engaged in the commercialization of our product.

Now, this is a topic that Jim Coor is going to talk to you a little bit more about, so I would like to now turn the call over to Jim who will provide you with an update on a few related operational matters. Jim?

Thank you, Doug. As we move forward into calendar year 2005, folks at Aastrom will continue to shift from that of a company principally engaged in research and development, to one that is more balanced between achieving near-term commercial sales and continuing to invest in research projects for our future. We continue to make progress in the clinic and the financial markets have recognized our efforts by increasing our stock valuation. At this time, it is critical that we continue to meet our commitments by expanding our clinical trial program and getting ready to go to market. The task ahead of us will require a slightly different focus and realignment of our resources. To support the successful execution for the remaining go-to-market tasks, we will be creating a new department, staffing them with individuals who bring expertise in the commercialization of medical products to the Company.

My joining Aastrom last summer was one of the Company's first steps to change the operational focus. However, other examples of our leadership progress has been more recently - - has been more recently announced. Dr. Janet Hock joined Aastrom as Vice President, Global Research a few months ago. Dr. Hock brings Aastrom a fairly unique blend of biological research, medicine and drug development skills, highlighted by her successful leadership in the clinical and regulatory approval of two important tissue regeneration drugs for Eli Lilly. She has the proven business and academic leadership capabilities, along with the highly respected scientific credentials to support and complement the Company's needs in moving our own tissue regeneration products through the clinical development stage.

A major part of our development strategy is our activity in commercialization targets in Europe. Given this focus, leadership in Europe is paramount to our success. We've been fortunate to attract Dr. Gunter Rosskamp to join our team. Doctor Rosskamp is the new managing director of our European subsidiary located in Germany. He is now leading our effort to target opportunities for research and development, collaboration in the U, and the identification of commercial markets for our products and business. Dr. Rosskamp has worked almost 30 years in the pharmaceutical, bio technology, venture capital and life sciences industries, after receiving his academic training, in toxicology, in the life sciences.

Prior to adding Aastrom, he held management and executive positions with Schering AG, and the industrial investment council in Berlin, served as CEO of Robitar[ph] Biopharmaceuticals AG in Berlin. His capabilities and experience, combined with his enthusiasm, with the Aastrom TRC capabilities, enhance our team in an important and complimentary way. Our shareholders should look for continued product focus, evolution, and the operations of Aastrom, built around our progressive clinical programs.

Now I will ask Al Wright, our CFO, to provide you with a review of the Company's second quarter, six months' financial results. Al?

Thanks, Jim. As reported, we ended the second quarter on December 31, 2004, with approximately 23 million in cash. In addition, we were recently successful in raising additional capital to further strengthen our cash position, which is expected to support our planned clinical and operational goals and objectives. Currently, our cash position is approximately 35 million with no debt outstanding. Our current monthly cash utilization stands at approximately $1 million. Total revenues for the quarter, ended December 31, were approximately equal to the same period last fiscal year, at 300,000. While total costs and expenses increased slightly to 2.9 million, for the quarter ended December 31, 2004, compared to 2.8 million from the same period in the last fiscal year. In an important shift in our stockholder position, as of December 31, our institutional holdings stood at approximately 19 percent, a large increase from where we began the year.

We would now like to open the call to questions. Kevin? Would you call the registration procedure for our listeners to pose questions?

Very well, sir. (Operator Instructions). And we move first to the site of Steven Dunn from Dawson James. Go ahead, please.

Good morning, Doug. And congratulations on hitting your first safety end point there.

Thank you.

A couple of questions here. A little clarification. You're now moving in the U.S., you're moving from the long-term eight-month-old non-union fractures, now expanding into the fresh non-union fractures. If I recall, Barcelona and Germany are still under the long-term non-union fractures. Is that going to stay that way, or is that going to move to fresh or - -

Well, first of all, the first phase of the trial in Barcelona is completed, and the patients who entered that trial did not have the requirement for eight months. They did have a requirement for having either not -- not progressed or have failed other standard of treatments, but there wasn't a strict eight-month criteria in that study. So some of those details, both from prior treatments, time of nonprogression, and so on, should be a part of the disclosure that we will be having when we present the complete details. So it didn't have that requirement. In Bochum it is a requirement, and at the moment, it will continue.

Okay. On the sinus list, in Barcelona, that trial, I wasn't clear. Have you initiated that trial? And if so -- and when are you planning on initiating if you haven't already? And how long before you get results on those five patients?

Okay. The trial was announced that it initiated accrual, and at the end of October. So, yes, that trial is active in accruing patients. What we can tell you, and we can't go into too much detail here on the call, but we are comfortable stating that we should have all patients treated, end points evaluated and measured, data collected and reportable by midsummer.

Okay.

So that should tell that you things are moving in a very positive direction.

So is it fully enrolled now?

I can't comment on that - - Okay.

- - on the phone. Two more questions. Your burn rate now, can you can give us any guidance into the final two quarters of calendar '05? Or your first two quarters of your fiscal '06?

Again, our -- just was making sure I have the quarters straight. For [inaudible]

In other words - - in other words the July through December of this year.

Yes. Our burn rate for the next two quarters should continue similar to what - - where we've been, with some slight modifications. We're in the process of now of preparing our budget and plan for the new fiscal year. Obviously, that begins in July, so we're in that planning process now. We will have final numbers and better indications at that point. But we're certainly very comfortable that the cash we have on hand will carry us through the next fiscal year and beyond. How much beyond is difficult to say at the moment.

Okay. Final question. I don't know if you can comment on it, but if you can, I would love to hear it. Are you currently in any discussions or feeling around for what the synthetic bone matrix manufacturers?

Good question. And just to provide a little clarity, in the bone-graft indication, our cells are provided to the clinician in the operating room; and then in the current protocol, those cells are mixed with a commercial standard matrix that they use in orthopedic surgery. Matrix being some granules that the cells go into and help place the cells into the surgical site.

We formed a strategic partnership a little over a year ago with MTF to utilize their matrix which is an allograph matrix primarily here in the United States. In Europe, we are not using allograph matrix; we are using and evaluating different synthetic matrixes. Determining which ones might be best, if any, because it may not matter which matrix we use, the cells will produce the effect, and then that is some of the differences between the trials.

We are having certainly discussions with the companies we think that have good matrixes. We do expect, as part of our strategic partnering, to form more formalized relationships with at least one, if not a couple companies who have these matrix products. So on our corporate partnering, strategic partnering side, partnerships with strategic -- with synthetic matrix companies is definitely part of our objective, part of our ongoing activity. As is starting to have discussions for marketing relationships within our different indications.

Okay. Well, I look forward to your data in the next couple of - - next quarters. Thanks.

Again, clinical trial progress and announcements is -- over the coming months is what our shareholders should be looking for.

Great. Thanks.

Thank you, Steven.

We move next to the site of Alan Zahan from Greenwood Partners.

Doug --

Yes, sir.

I hope you're feeling better. It sounds like you've got really a rough cold there.

I woke up a little nasally today, sorry.

Okay. Listen, you covered this a little bit on your opening remarks but because of the embryonic stem-cell line in contamination in the U.S., what is the potential for Aastrom that this situation presents, if you could elaborate on that, I would appreciate it. Thank you.

I'm sorry, so you're asking on the -- with the mouse feeder cell issue?

Well, basically, you covered part of that in your opening remarks, but my personal feeling on this is that this presents awesome potential for Aastrom, and I would like to you elaborate on that, if you could.

Okay. Well the fundamental thing, and the point to look at, and I think this is really important, is whatever we're using as a treatment, the question comes down, does it work? Does it produce the effect you want, and does it produce that without an adverse event? And this is the really critical position of Aastrom, in that we have a lot of clinical experience with our tissue repair cells.

We utilize these cells in over 170 cancer patients for bone marrow transplantation. Patients who -- with something yet to be seen, you would expect to see it. These are patients who had multiple medical problems. They were immuno-suppressed from their treatments. And we had no adverse event, no problems with the cells, and the cells were effective at being able to regenerate healthy normal tissue. So we know that. That's behind us. We don't have to guess at that. And that's the real issue with these types of studies with embryonic cells and other cells, is nobody knows what these events or what these changes in cells might cause with their -- with respect to their effectiveness. For us, that's behind us. We know that the cells are safe. We know that they can generate in healthy normal tissue.

I think that as our clinical trial results now begin to come out in these bigger market areas, bone grafting, treatment of ischemic disease in diabetic patients, all of this is what is coming out for the Company this year. These issues of -- does any of the manipulations eliminate the activity of the cells, for our tissue repair cell, should be behind us. So I think it is a great opportunity, and Aastrom should be able to show itself in a different category than the other cell companies.

Well, that's great to hear. And that answers my question. Thank you.

Thank you, Alan.

We move next to the site of Sherry Grisewald -- or Grisewood, from Jessup Lamont. Go ahead, please.

Hi, good morning, Doug and Al. How are you you?

Hi, Sherry.

I actually will have three questions. The first, I guess, Al, is in your camp, Al. Could you give us a little color on the composition of the revenues, and whether the trend in revenues at about that level is likely to continue?

The trend in revenues is, as you know in total, about [flat] fourth quarter, but was more from the sale of product than from grants.

Device products.

Yeah, well, and grant revenues. So I don't think I can predict with much accuracy the mix going forward, but there is that trend in the last quarter.

Will you sort of continue to expect to have some device sales, or does this happen to be kind of a one-off situation in this quarter?

Sherry, let me give a little more insight into that. Again, the AastromReplicell System that we developed as our manufacturing platform for the tissue repair cells is such a novel device that we -- we have been exploring putting that manufacturing capability in the hands of people who are developing other types of cell therapies, particularly dendritic cell vaccines and some of the immuno-therapy types of applications. We are interested to stay involved in that field, but only as a provider of the platform to those groups, and companies, who might be pursuing it. So, and these relationships often do derive revenue for us.

But it is -- first of all, I think that we should look at it -- whatever revenue is going to be coming in, is probably immaterial to the real business plan of the company. The key thing is that we can, without cost and sometimes with some profit, are able to get our technology involved in other new developmental programs, such that if those therapeutic approaches work, that they will be based on our technology. So we have that activity going,. There will be the occasional revenue, but the real importance of that, is that it is an indication that the Company has this technology in the hands of other collaborators that may begin to identify new therapeutic directions.

Thank you. I understand that, and I appreciate that additional description. Doug, I was wondering also if you can give us a little -- some of the details of what you anticipate to be the protocol for the diabetes ischemia trial and whether you can discuss any of the indications that you might be specifically considering for your initial spine application.

Let me answer the spine first, because it is a shorter answer. We're exploring two different approaches in spine. We haven't finalized on either one. We may actually pick one for Europe and the other for the United States. Those final protocols are being developed. We will have an announcement on -- that will detail the plan and the protocol in the coming months.

Okay.

Now, on the limb ischemia trial in Bad Oeynhausen, we have very carefully designed this protocol. We think this is such an important area and direction for our tissue repair cells that rather than running the typical proof of concept trial, where our cells are used by themselves, evaluated and then that data is used for more formalized clinical direction, we're actually starting this trial out in a very formal way, where the patients will be randomized into different groups, where our tissue repair cells will be compared against bone marrow by itself, to help delineate the additional advantage of the TRCs versus native bone marrow, and we will be randomized against standard of care treatment. Now, what we will be looking at in this trial is the ability of the treatment to remedy some of the problems that these patients have; and these problems typically are severe ulcers in the feet and ankle area, immobility problems and even limb salvage, in other words these patients typically progress to amputation. So we will be evaluating those effects in a randomized -- small randomized trial where we will run an initial cohort of 25 patients, evaluate data, and then look to determine how it will be expanded.

Thank you.

And we will take our next question from Ian Melon from Nesbitt Burns. Go ahead, please.

Good morning, Dr. Armstrong.

Good morning.

Bear with me -- Hi, how are you? Congratulations on your success to you and your team.

Thank you.

Bear with me I have got a bit of a cough, and I had a problem with my line. I think this may have been covered, so bear with me, and I apologize if it has been. Could you just briefly touch on where are you are in dendritic cell vaccines and how - - what the plans are over the foreseeable future for that platform.

Okay. About two years ago, we elected not pursue our own dendritic cell vaccines, because we felt it was just too of an early stage area. There was a lot that still needed to be learned. So instead, we took a tact to use the [inaudible] system as a manufacturing platform to make those vaccines, and then to collaborate with groups who were undertaking the developmental direction to make the vaccines themselves and to test them clinically. So with that direction, we have formed some academic collaborations. We have announced and discussed our collaborations at Stanford University, as well as one at Duke University, where the AastromReplicell System is used as the manufacturing platform for vaccines that are now moving into clinical trial. These trials are directed, controlled, by the collaborators, so we are not involved in an up-to-date fashion as we are in our own trials, but we will expect some announcements as those trials move to completion.

Do you anticipate that over the next -- is it -- do you have any idea about time frames, Doctor?

We don't other than we can tell you the studies are active and starting to accrue patients.

Okay.

But these are investigator IND-led trials, so they have a little bit different level of rigger and time line attendant to them.

I understand. And thank you.

We move next to the site of Jeffrey Robbins, Philadelphia United Go ahead, please.

Yes, I just one question for you. Has there been any talk about associating yourself with a major company, for example like a Merck or something to promote your products down the line?

The cells as products is not something that pharmaceutical companies have really been active in, so this is a new area. And what's going to cause the companies like Mercks and the other larger pharmaceuticals, as well as bio-medical device companies, to take interest is some clinical results. So what we have laid out is a strategy to take our proof of concept trials, get them completed, show that tissue repair cells can generate tissue effectively and safely; and then concurrently begin to have introductory meetings with companies that we feel have sales and marketing capabilities in the indications that we want to go in. And what we are seeing, as you might expect, as clinical data begins to come in, their interest begins to grow.

So we don't believe that we will be able to effect a material partnership until we have each one of these proof-of-concept trials individually completed, where it is clear what the benefit and use of the cells is going to be; but I can definitely tell you the interest on the parts of people who previously haven't been too interested is definitely growing.

Thank you.

Strategic partnering is one of our objectives, in addition to clinical milestones in the coming 6 to 24 months. We would expect value growth from our third-party relationships.

One other question. Where do you stand in terms of state funding? Has there been any talk of state funding coming to the Company?

We're located in Michigan, and there is no stem-cell funding type of proposal that has been brought forth like there is in California and a few other states. We have -- we've been tracking this and are interested in it, but we think our real value for our shareholders is going to come from our demonstrating clinical utilities of cells and getting partnerships, as opposed to some new stem cell types of grants. I can tell that you we have been very successful, and we continue to be very focused on the grants that we can obtain from the government, and the National Institutes of Health. Remembering that our cells are not embryonic stem cells so the government has no problem supporting our tissue-repair cell, bone-marrow stem cell direction of research. So we can continue to access those funds when the other groups cannot.

Thank you.

And we move next to the site of Jim Irwin from Wingreen Capital. Go ahead, please.

Thanks very much. Sorry. Congratulations, Doug and Al, on this safety milestone. I guess we all have a frog in our throat today. I wanted to just get maybe a few examples, Doug, of numbers, perhaps current numbers, or projected numbers, and perhaps the jurisdiction of the United States, in terms of sufferers of some of the maladies, some of the indications that you're working on, in terms of getting a feel for the market that is really out there.

Okay. Good question, Jim. First of all, I direct you and others listening to the Aastrom Web site, aastrom.com, where there is a fairly updated slide presentation that presents some of the -- some of these numbers and indications.

But let me review it a little bit for you. Bone grafting, which is a market typically divided into three segments, one is trauma, or fracture types of indications, the second is spine fusions types of indications, and the third are the dental or maxillofacial types of indications. The data that has been published recently from the marketing group called Data Monitor, places the market size for bone graft applications in spine fusion and in trauma or fractures in the United States and Europe at about 1.5 million procedures and growing.

Per year.

Per year. Thank you, Al. And out of those procedure, about half are done just with auto graft, which is the surgical procedure of chiseling away bone and marrow and using that as an auto graft which is what we are targeting to replace. So if you take those numbers just as stated, 50 percent of 1.5 million is about 700-and-some thousand that are the patients that we would target for Aastrom. Now we have even segmented that down a little bit further and think that the market in the United States and Europe for fractures and spine is somewhere between 400 to 600,000. I don't have the numbers right in front of me, but that's approximately the range. So a nice-sized market. That by itself is a 2 to $3 billion market opportunity for us. So if we can get to that market in a -- even in a small way, a very important revenue stream should result.

The dental applications, is probably one of the biggest growing markets, with dental implants and implantology coming on to the scene. We are trying to get more and better numbers in that area. But we're projecting now the types of patients who would get multiple implant, in other words four or more implants, which is not everybody, is a pretty good-sized market. It should be over -- or I don't even want to give a number on the -- here, because I don't want to -- in case it isn't exactly right, but it is a major market.

Diabetic limb ischemia is -- wow, what a market here. There is no effective therapeutic treatment for diabetic limb ischemia. The only treatments are interventional surgical procedure, going in with surgery, putting in a stent, doing a bypass, and these things tend to address only the major circulation pathways, not the microvascular areas. The data for just the United States for the patients who are getting interventional procedures that are reimbursed up to 20, $24,000, is over 400,000. You probably double that easily in Europe, and then obviously the rest of the world will add to that. So these are big markets.

The difference here with leg ischemias is there is no effective treatment out there, which is why we're in that trial at Bad Oeynhausen. We're actually randomizing right out of the block, because if we see an effect, we want to begin to have the data collected right away, that allows us to get to early registration.

Did that answer your question, Jim?

That's very, very, very good summary there, Doug, and I really appreciate the work you guys are doing. You're really gathering some steam up here in Canada in terms of following. Thank you very much.

Thank you, Jim. Next question?

and we will take our next question from Sarah Siso. She is a private investor. Go ahead, please.

Yes, hi. I wanted to ask regarding the FDA, if do you feel that they are going to approve it?

I mean first of all, let me emphasize that the FDA will regulate our cells, presumably as a biologic, which will require randomized trials, and then submission review, panel review, and so on, just like a pharmaceutical. So whether they approve it or not is going to come from the data that we that we will be providing. Data drives approvals.

And so it is difficult to say what that timeline pathway is going to be until we get into that study. I think what -- what I would encourage you to track is the progress we make with the FDA in the current trials. So for example, we recently cleared the first safety milestone in our fracture protocol. We've been able to expand the trial into multiple centers. All of those things are signs that you can look for that the FDA is agreeing or supporting what we are -- what is happening clinically and, you know, you begin to keep that going, and pretty soon, you end up with an approved product.

Now, we will be looking in Europe, as well, to take through registration, we still believe that our first revenues from approved products should come from the European Union, and we're active with that registration plan, as well.

Okay. I have one more question. Regarding your income, the fourth quarter, it shows that you lost some of your income. Would that affect the stock price right now?

As we talked a little bit about, our stock is not driven by income and revenue. It is always good to have right now, and we welcome having it, but the value in our stock needs to come from our clinical studies with our tissue repair cells, and progress that we're seeing clinically. That's what we would encourage people to look at. Now, again, when you see revenue, it should tell you that we are active looking to try to build value wherever we can. But in the near term, the level of revenue should not be viewed as material to what the company is actively pursuing.

Okay. That's fair enough. Thank you.

Thank you.

And we move next to the site of Paul Lee, private investor. Go ahead, please.

The number of shares outstanding and authorized?

The number of - - excuse - - the number of shares authorized by shareholders is 250 million shares. The number of shares authorized by the Board of Directors within that is 150 million shares. And there are approximately 100 million shares outstanding.

You do not see any need, any time soon, with 35 million bucks in the bank, for -- to do a secondary right now, do you?

Well, we have money in the bank to cover what we're doing. We're always exploring the best and appropriate way to raise capital. So as part of that, we have traditionally always tried to keep, as all companies like ours do, to keep active registration statements alive for if there is an opportunity that we feel is correct, and appropriate, with good terms, to raise money, we will. So we will continue to keep that philosophy, that if we think that we can do something that will enhance the position of the Company to be successful, we will do that.

Now, we are looking, as one of our objectives in the investor side, that if we look to -- and we're doing this in general, which is to basically try to bring more funds into the stock and get more of an institutional ownership position. We have been proactive in that side over the last year, and that's starting to show up as Al Wright mentioned with an increased institutional ownership in the Company. If we think we can combine that objective with strengthening our fiscal position, we would do that.

Morgan Stanley asked us to present in June. I suppose that that would be a big plus that could be seen as a plus for the Company.

Yes, we're expecting to present at both the Robin and Renshaw health care conference in May, and then the Morgan Stanley small cap conference. And I can't recall if this is May or June.

June, yes. One last question. In terms of the IND for the spinal fusion, can you give us a timeline?

No, other than we expect to have some announcement of what the -- what the first steps are going to be for the clinical trials by midsummer.

By midsummer?

But we have said that -- we have targeted it as a third quarter, one, two, three, third-quarter fiscal year milestone for the Company, so sometime in the spring, summer, that should be clarified.

Thank you very much.

And we will take our next question from Mike Vaneerden. He is a private investor. Your line is open, sir.

Thank you. Hello, gentlemen. And congratulations. You are doing a great job so far and I love your technology.

Thanks, Mike. Thanks for participating.

Yeah, I have a question, following up on one of Jim's earlier questions on where the revenues are coming from in the potential size of the market. You did not mention what the potential size of the market would be for licensing the AastromReplicell manufacturing process. Do you have any feel for how large that might be?

Well, all of that is tied to somebody else having a successful cell therapy and then what the size of the market is for that cell therapy. But most of the activity right now is targeted at the immunotherapy of cancer, so that is a pretty sizable market. So if any of these vaccine approaches were to work, that would be a very important market direction.

I assume we're talking a multi-billion dollar market for the licensing?

Well, we probably wouldn't license, because what we would probably do is become a supplier.

Okay.

Or some other relationship where we would continue to be the manufacturer and the controller of our technology for the Replicell System but would derive revenue from every vaccine made.

Excellent. You know, following up on a comment you made earlier, Doug, about one of the great things here is the platform that will allow you to go into multiple directions very quickly, recently, I believe it was earlier this week,Tufts University came out with a commentary that they think they've identified the ability of adult stem cells in bone marrow to regenerate into all tissue types. Now I don't know if you guys have had any kind of a similar experiences there, but I assume this could lead for, you know, a killer application in terms of commercialization of, for example, hair follicles, bald guys, you could regrow hair. Is that a potential market?

Well, there are -- you have to begin first with understanding the biology of the cells, and that's what the group at Tufts and others, including Aastrom, have done. We have demonstrated already that our tissue repair cells can develop into bone, into all of the blood cells, all of the immune system cells, they can develop into cartilage, they can develop into vascular tissue, and they can develop into adipose tissue. So they're [multi-lineage]. So the question becomes, how do you then utilize those in a therapeutic sense? And that's always the tricky bridge to cross. Just because a cell can do something, doesn't mean that have you have the therapy.

And the productization of the cells, and then combining with how to use those for the specific medical indications, again is a little bit of the tricky part. And there, again, is why our trials for bone grafting, our trials for vascular disease, we've overcome those issues, so we know that we can go in those direction, at least from a trial standpoint. Now, if you begin to think about other things, like can cells be used to generate or heal damaged pancreases in diabetes, or can they be used to heal and repair damaged kidneys or livers or even some of the things such as hair growth or rebuild fat tissue for cosmetic surgery, those are all potential indications, you have to figure out how to use the cells in the right way to get that type of an effect.

So we can't do all of those ourselves. So what we're practicing is a plan to select the markets that where we know cells can work in a therapeutic setting. Focus on that. But then begin to collaborate and make ourselves available to some other people to do some exploratory investigation.

That's great. I mean, you know, this cosmetic application obviously isn't as noble and lofty as some of the other applications, but I think there is huge market potential there as well.

Yes..

Thank you for your time.

You also asked about cartilage as an example. [inaudible]

Yes, for knee, absolutely. Yes, that is huge.

We know that our cells can develop into the cartilage lineage, but again how much we can take on is a different issue. So we collaborate. So we have collaborations where our cells are being explored and looked at by investigators to begin to get the data that we feel suffices to go to the clinic.

Absolutely. And, hence, the partnerships you spoke of earlier. I mean I think it is wonderful. Great job. I'm really big on you guys.

Thanks, Mike.

Thank you.

And due to the time, we will -- and due to the time, if your question was not answered today, please direct those questions to email at Aastrom.com, and our Investor Relations department will answer that promptly. At this time, though, I would like to turn the program back over to Mr. Alan Wright for any closing comments.

Thank you. Thank you for everyone participating. This is our largest audience to date, which we're very thrilled. And I would like to remind those on the call, and those to whom you speak, that the replay of this conference call will be available in a few hours after now for those that didn't hear all of, or want to replay it for themselves.

Thank you very much. And have a great day and a great weekend. Thank you. Bye.

And once again, this does conclude today's teleconference. You may disconnect your lines at this time. We thank you for participating. And everyone, have a great day.