Vericel Corp (VCEL) 2008 Q2 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Aastrom Biosciences second-quarter fiscal year 2008 investor conference call. At this time all participants are in a listen-only mode, a brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded. It is now my pleasure to introduce your moderator, Ms. Kris Maly, Director of Investor Relations that Aastrom. Thank you, Ms. Maly, you may begin.

Thank you, Everett. Good morning and welcome to our conference call. Before we continue it's important that we review our Safe Harbor statement. This conference call and webcast contain forward-looking statements including, without limitation -- statements concerning clinical trial plans and expectations; clinical activity; timing; intended product development and commercialization objectives; adequacy of existing capital to support operations for a specified time; future capital needs and potential advantages and applications of tissue repair cell technology, all of which involve certain risk 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 SEC. Actual results may differ significantly from the expectations contained in these forward-looking statements. Now it's my pleasure to turn our call over to our CEO, George Dunbar.

Good morning, everyone, and Thanks, Kris. Thank you very much for participating on our call today. This morning we will briefly highlight Aastrom's clinical progress since our last quarterly call and we will review our second-quarter financial highlights, then we'll open up to questions from the audience.

First, let me make a comment about the fact that Aastrom's stock has been trading below $1 a share for the last several months. I am personally frustrated, and I'm sure some of you are as well, and feel strongly that our stock price does not reflect our achievements during the last year and a half. We have successfully met all of our clinical milestones in a timely fashion, demonstrated safety and shown promising signs of efficacy in our vascular and bone indications and we intend to continue meeting our milestones during 2008.

With regard to our clinical milestones for cardiac regeneration, we recently reported the first patient treatment using cardiac repair cells, what we call CRCs, manufactured using our TRC technology. The patient who was treated under compassionate use in Europe suffered from dilated cardiomyopathy, a severe chronic heart disease. This represents a significant clinical milestone for Aastrom. The compassionate use of CRCs is ongoing and we expect to report clinical data from these cases during 2008. Dr. Burchardt will provide more information on the cardiac regeneration program and the rest of our programs during the clinical update section of the call.

In addition to beginning our cardiac regeneration program, we also continue to recruit patients in our U.S. RESTORE-CLI Phase IIb clinical trial to treat critical limb ischemia or CLI. We currently have 15 clinical sites initiated and we will update our website as sites open up for patient enrollment. If you are interested in learning more we invite you to visit the clinical trials website at www.restoreCLI.com. This website has been developed to provide more information on CLI, the most severe form of peripheral vascular disease, and how Aastrom's Vascular Repair Cells are being clinically evaluated in the treatment of these patients.

Likewise our U.S. ON-CORE Phase III clinical trial to treat osteonecrosis of the femoral head is actively recruiting patients. Currently five clinical sites have been initiated and we will update our website as sites open for patient enrollment. If you would like more information on osteonecrosis and Aastrom's clinical evaluation of Bone Repair Cells in the treatment of osteonecrosis, please visit the clinical trial site at www.ONCORE-study.com. I'll now turn the call over to Jerry Brennan, our CFO, for a review of the second-quarter financial highlights.

Thank you, George. We ended our second quarter on December 31, 2007 with approximately $31.2 million in cash, cash equivalents and short-term investments compared to $28.3 million at June 30, 2007. This increase is due in part to a registered direct offering of our common shares for net cash proceeds of $12.5 million which was completed in October of 2007. Our projected average cash utilization is $1.8 million per month for fiscal year 2008. These projections are consistent with our current clinical plans and the announced clinical milestones.

Total revenues for the quarter ended December 31, 2007 consisting of grant funding and limited product sales were $84,000 compared to $158,000 for the same period in 2007. As a result of the continued expansion of research and development activities to support regulatory submissions and ongoing and planned tissue regeneration clinical trials and activities in the U.S. and EU, research and development expenses for the quarter ended December 31, 2007 increased to $3.9 million from $2.6 million for the same period in fiscal year 2007.

We also reported that this increase was in part offset by a decrease in our selling, general and administrative expenses for the quarter ended December 31, 2007 to $1.7 million from $2.3 million for the same period in fiscal year 2007. The research and development expenses and selling, general and administrative expenses include non-cash charges related to an accounting standard which requires us to measure the fair value of all employee share-based payments and recognize that value as an operating expense.

Let me take a moment to review our NASDAQ listing. In December we received a deficiency letter from NASDAQ indicating that we were not in compliance with the $1 closing minimum bid price requirement. At that time, and per NASDAQ rules, we were provided a 180-day compliance period, or until June 17th, to regain compliance with this requirement. To regain compliance we must maintain a closing bid price of $1 or more for at least 10 consecutive business days between now and then.

In the event we do not regain compliance before June 17th, we should be eligible or an additional 180-day compliance period or until December 14, 2008 as long as we meet the rest of NASDAQ's initial listing criteria which we currently meet.

The capital markets are in very difficult shape and may take some time to recover. We are monitoring the situation and managing the Company appropriately to maximize shareholder value in these uncertain times. We have exciting clinical activities to look forward to in the cardiac and neural areas and we are maximizing our resources in these programs to achieve our stated milestones. Now Dr. Burchardt will provide you with a clinical programs update. Elmar?

Thank you, Jerry. This morning I would like to review the clinical program accomplishments which we have achieved over the last several months. Let me start with cardiac. George mentioned earlier Aastrom achieved its first significant clinical milestone in the cardiac regeneration arena. In January we reported our first patient treatment using our CRCs in a European compassionate use case to treat dilated cardiomyopathy or DCM. Our CRCs were administered to the patient via direct injection into the heart muscle.

This patient population is typical of the patient population -- this patient is typical of the patient population. He is a 76-year-old male diagnosed with severe DCM who has suffered numerous previous heart attacks. He had a cardiac ejection fraction of 12% compared to a normal ejection fraction of 60% to 70%. He also met the clinical criteria for Class 4 heart failure according to the New York Heart Association classification guidelines.

Furthermore, this patient experienced shortness of breath, even at rest; coughing, due to fluid retention in his lungs; chronic fatigue and poor memory because his brain had also been affected by the lack of blood circulation. The patient was not eligible for a heart transplant because of his age. He had a very negative prognosis with only a slight chance of surviving for more than a year and a severely impaired quality of life due to advanced heart failure.

This prompted this patient's decision to undergo compassionate use CRC treatment which entails the injection of extremely high doses of stem and progenitor cells into his heart. This first patient has in the meantime left the hospital and lives with his family.

Currently heart transplantation is the only curative option for some fortunate endstage DCM patients. However, its availability is limited by the number of donors. It typically is only offered to younger patients and requires lifelong medications with severe adverse side effects. The hope for these DCM patients is to halt or to reverse the cardiac disease progression with our CRCs to increase life expectancy and to improve their quality of life.

Clinical data is being collected from the first patients treated for dilated cardiomyopathy and the use of CRCs in compassionate use patients is ongoing in the European Union. It is anticipated that more comprehensive clinical follow-up data from the compassionate use cases will be available during 2008.

In addition, we expect that the compassionate use cases of CRCs will provide useful experience for the development of clinical protocols in future regulatory submissions targeting DCM. We are preparing a U.S. IND and EU IMPD submission to evaluate our CRCs in dilated cardiomyopathy for which we have received an orphan drug designation from the FDA. In preparation of this call, George has made me aware that these are an awful lot of abbreviations. It just basically means that we're preparing the paperwork to go into clinical trials.

In October we also reported encouraging interim results from two German research groups utilizing Aastrom's proprietary tissue repair cell, TRC technology platform to manufacture autologous stem cell products. These results were presented at the second congress of the German Society for Stemcell Research in Wurzburg, Germany.

Let me now talk a little bit about diabetic patients with CLI. Interim results from the first 13 patients treated in a multi-arm Phase I/II single center clinical trial to evaluate the safety of Vascular Repair Cells, or VRCs, normal bone marrow cells and the standard of care in the treatment of chronic diabetic foot wounds associated with critical limb ischemia, CLI, were presented by Dr. Bernd Stratmann of the diabetes center at the Heart and Diabetes Center in North Rhine-Westphalia located in Bad Oeynhausen, Germany. 12 months post treatment all four patients in the interim analysis who were treated with our VRCs have reported no major amputations, no cell-related adverse events and healing of all open wounds.

Now changing to osteonecrosis -- early clinical data involving the first use of Aastrom Bone Repair Cells, BRCs, in the treatment of patients suffering from osteonecrosis of femoral head were presented by Dr. Ulrich Noth of the Orthopedic Institute Konig-Ludwig-Haus, University of Wurzburg, Germany. All four patients have tolerated the procedure well, have reported a reduction in hip pain with no signs of disease progression determined by MRI and x-ray and for all back to work within six months after treatment. In addition, no cell-related adverse events were reported and none of these patients have required hip replacement surgery.

Fracture. In October we reported promising final results from a U.S. Phase I/II clinical trial designed to collect safety and efficacy data using our VRCs in the treatment of severe non-union fractures. These results presented by Dr. Matt Jimenez of the Illinois Bone and Joint Institute during a podium presentation at the Orthopedic Trauma Association annual meeting in Boston included the following.

There was an overall 91% healing rate in 30 of 33 patients who had completed follow-up with non-union tibia, humorous or femur fractures who had failed to heal after one or more prior medical procedures; mean of 1.75 one year post BRC treatment. 100% of the patients who healed are fully weight bearing, have regained range of motion and are no longer impaired by their injuries. These positive results from the severe bone fracture clinical trial supported our bone regeneration proof of principal and the initiation of our U.S. Phase III osteonecrosis of the femoral head clinical trial.

Now I would like to take a moment to remind listeners about our two ongoing late stage U.S. clinical trials. RESTORE-CLI trial -- our RESTORE-CLI trial is a 120 patient U.S. Phase IIb clinical trial enrolling patients suffering from critical limb ischemia, or CLI, the most severe form of PAD. This is a chronic disease that progressively restricts blood flow in the limbs and can lead to serious medical complications. It is often associated with other clinical conditions such as hypertension, cardiovascular diseases, hyperlipidemia, diabetes, obesity and stroke.

All patients in this trial are critically ill with a higher risk of amputation. These patients are extremely limited in their ambulatory capacity, experience constant and chronic ischemia induced pain, ulcers, tissue loss or gangrene to the limbs which lead to approximately 160,000 amputations per year in the U.S. alone. We will only be treating these endstage patients who have no other therapeutic options to address their CLI.

The ON-CORE trial -- our ON-CORE trial is a 120 patient U.S. Phase III clinical trial enrolling patients suffering from osteonecrosis of the femoral head. Osteonecrosis is a progressive heart disease that currently has no established effective treatment. There are up to 20,000 patients per year diagnosed with osteonecrosis and, due to lack of treatment options, many of these cases eventually require total hip replacement. If healthy bone is successfully regenerated in the femoral head it is our expectation that the need or a hip replacement could be delayed or eliminated in these patients.

Neuro -- the latest therapeutic area we intend to explore is spinal cord injury. The typical spinal cord injury patient is a male in his mid 30s with an active lifestyle. He has suffered a traumatic injury, is wheelchair-bound with limited motor function and sensation. He has limited control over bladder, bowel movement and sexual function.

The lifetime costs for care of these patients are expected to run over $1 million. The hope of these patients is to increase their quality of life, improvement of sensation, bladder, bowel and sexual function and to reduce pain and muscle specificity. We anticipate initiating clinical activity in the EU for the treatment of clinical -- of spinal or injury during 2008.

This is a very exciting time for Aastrom as we continue to move forward with our trials and into our new clinical trial programs. I look forward for the next opportunity I have to provide you with an update on our clinical progress. I will now turn the call back to George.

Thanks, Elmar. We're very pleased with the progress we've made in the clinic during fiscal year 2008. The Aastrom team is working very hard every day to ensure that we are implementing and meeting our clinical and operational milestones. Our goal is to move our TRC-based cell products through the clinical trial and regulatory processes and into the market as quickly as possible while continuing to maintain our strong safety record.

We hope that you will continue to follow and support Aastrom's progress as we move through fiscal 2008. Those are the prepared remarks we have. Everett, I'd like to open it up to any questions from our listeners, please.

(OPERATOR INSTRUCTIONS). Ren Benjamin, Rodman & Renshaw.

Good morning, guys. Thanks for taking the question. I guess I have just one main one and that is what are the milestones for 2008 that we can expect from Aastrom? It seems like all the Phase III trials are ongoing, we probably won't see anything from those trials, unless there are interim analyses planned, until 2009 or so. So can you tell us what sort of drivers are in place for 2008, what conferences we may see some data at and what additional trials will be initiated during 2008? Thank you.

This is George. I think if you look at our website and the public presentations that we're giving on milestones, what we started doing last year was to lay out what we saw as the significant milestones over the next 12 to 24 months. And then each time we report, either at a meeting, at a conference or on calls like this, disclose and tell you where we are.

I think the current update is that we've achieved six or seven milestones during the '07 period. We have a similar number going forward for the 2008 time period. For example, in the bone regeneration area, one of the milestones we have for '08 is to complete the 10 patient enrollment for the osteonecrosis clinical trials in Spain. We're going to review the interim osteonecrosis patient data in the U.S. in 2008 or when we get the critical mass of patients we're trying to identify to be able to do that.

The RESTORE-CLI trial, the interim data 12 months after the 30th patient treatment. We're not giving guidance on exactly when that will be, but you'll hear more as we get closer to the time. In cardiac we announced, as you know, the treatment of the first patient because that was a milestone that we had indicated that we were going to achieve. And then we will continue to report the interim data six months or so after a number of patients have been treated.

And then there's going to be the submission of the U.S. IND and the submission, as Elmar had indicated, of the INPD in Europe for Phase I/II clinical trials in '08. And last but not least, similarly in the spinal cord area where we intend to initiate European clinical trial activity. So I think there are a lot of activities that we look forward to presenting and we'll be giving you guidance on the conferences where we think that this data can be talked about.

Then I guess another question is at one point you guys were debating (technical difficulty) stock split. Can you give us an update as to what your thoughts are now on fixing the corporate structure?

Sure. Jerry?

Ran, we are looking at a number of alternatives to fix the corporate structure, one of them is a reverse stock split, but we don't want to do that unless we're sure that we have additional data that will support the stock price. So we're continuing to look at that. We do not plan on being delisted by NASDAQ, but we're going to do everything we can to keep the stock price up.

And you mentioned that you were looking at other options. Can you (technical difficulty) any other options?

I think other options would be additional ways to increase the price of the stock by helping to unlock the value of the Company. We've mentioned in some other press releases that we're looking at partnering opportunities as well as licensing opportunities and we think that there may be ways to demonstrate the value of the Company and increase the stock price by doing that as well, for instance.

Can you characterize for us how the conversations have been going with (technical difficulty)? Is it early stage or have there been meaningful discussions such that now multiple rounds have already occurred and you've had some serious (technical difficulty).

Sure, this is George. That's a difficult question to answer without setting off expectations one way or another; so let me just try to give you some guidance on that. Recognizing that this is a new field; recognizing that the adoption process and the commercialization process is going to require the help of partners, we began a focused effort over a year ago to begin an outreach program at scientific meetings, at partnering meetings, to not only tell the Aastrom story for the first time in the way that it's being presented now, but to begin to have exchanges in dialogues with a number of companies, some who are already in regenerative medicine, others who are trying to educate and understand more about it. This process takes a very, very long time.

So that process continues. I think to reflect on what Jerry Brennan said a few minutes ago, we believe that not only are partnerships integral to the strategy, but also would be viewed by people like yourselves as a significant external event, not unlike some of the clinical news that we generate. So we are continuing to work on this, but I'm not prepared to provide any guidance on exactly who we're talking to or where we are.

Terrific. Thanks, guys, and good luck in 2008.

Thank you.

Jose Haresco, Merriman.

Good morning, guys. Elmar, this is a question for you. On the European front, could you give us a little bit more -- or actually just on the cardiac side -- could you just give a little bit more insight on the kind of patients you are treating? Specifically you gave us some insight into the kind of other drugs or technologies that they -- or treatments that they're having in conjunction with yours; for example, are they on amiodarone, or they have ICDs implanted? Could you give us a little bit of a profile of those patients?

I think these are really endstage DCM patients, that's the general description and you are asking the right questions. Most of these patients will have an ICD implanted because the heart triggers a disease called arrhythmia so the heart doesn't beat regularly, but they're at great risk actually of going into ventricular arrhythmias, which you know then can end up as a disaster. So many of these patients prophylactically have an ICD implanted. But even with the (multiple speakers)

Was it before or after?

Before. We're really going after the very endstage patients here. So typically we give this example of the first patient we've treated with an ejection fraction of 12%. These patients are very much circulatory wise impaired, as you can imagine. They just have a heart function that is barely minimal. If you look at this patient, the heart was extremely enlarged. Normal volume was 300 milliliters, we were at 650 milliliters, that's a reflection that just couldn't cope with the amount of blood that rests in the heart and couldn't pump it away.

So these patience have all kinds of problems. I would say the first patient was a typical example of a patient who didn't even make it to the transplant test was because he was beyond this. And this is the kind of patient population we're looking at. It's basically [transcendance] patients and beyond.

Jose, your question might be implicit because some other people doing stem cell work have to do work with -- to deal with arrhythmias with their patients. We don't believe that's an issue for our patients. And in fact, the patients don't necessarily need any other direct intervention -- right, Elmar -- when they get other than the injection of the cells in their arm?

Jose, if you basically allude to the fact that with competing technologies, like with the injection of skeletal myoblast into the heart, a very frequent observation has been that these patients develop arrhythmias. For bone marrow derived stem cells there are no reports in the literature that would suggest anything of this kind.

I was actually coming at it from the other angle just from the sense that we've seen so many problems in the ICD space that the presence of ICDs is more controversial than not. So it was actually not about the arrhythmia as much as about the ICD question. Do you expect to -- also on the European front, there's so much -- the content seems to be much more advanced in terms of how they looked at -- we've talked about this before -- about cell therapy. What's the likelihood of getting some sort of commercialization there within the next 12, 24 months? Even single countries where you already are quite advanced in getting patients treated there for any of these indications?

Let me try that. I'll give you some guidance on that. I think what you said is accurate. In many cases with autologous cells that are deemed to be safe by all concerned it's actually easier to treat patients than it is to go through the approval process in terms of timing. And that's the fundamental basis behind why we are treating patients there first, to help give us early guidance on the likelihood and the probability of procedural and trial applications here in the U.S. and also should we go forward in the EU.

At the end of the day having the approval is one thing, having the clinical data and the standard of care worked out for treatment and reimbursement is quite another. And so I think that we'd be getting the cart before the horse to try to go into commercialization before the other pieces of the infrastructure were put in place for example. But clearly it's something that is an opportunity that can be taken advantage of.

Great, thank you very much.

Amy Stevens, Susquehanna Financial Advisors.

Good morning, thanks for taking the question. Just quickly, in terms of the Phase III trial, the 120 patients, the enrollment of those patients. Can you just let me know, is there a control arm in terms of this study, how is it structured? And then just a little more detail in terms of how quickly you think it will enroll from a quarter-to-quarter perspective?

Yes, I think you're asking two questions. Number one is with regard to the control arm. Basically what it is is a standard procedure, it's called a core track that is drilled into the patient; it's basically a pressure release surgery that helps to relieve some of the pain that is due to the pressure buildup in the femur head. So that's done both in the treatment and the control arm.

The difference between the two treatments is that we are in the control arm putting a matrix material into the core track while we're placing a cell matrix mixture into the treatment arm. So the difference between the two treatments is essentially that the hole so to speak is filled just with a matrix in the control arm while the treatment arm is filled with a matrix mixture that contains cells.

So the matrix that's being put in the control arm has no additional agents, no BMPs, nothing like that, it's just nothing? Except the matrix?

Exactly, that's the nature that was, in my opinion, a very clean trial, because the same matrix material is used for both the control group as well as for the treatment group. The add-on is just the cells that are contained in the cell matrix mixture in the treatment group.

Okay. And time for enrollment, how are you thinking about that?

We can say that we are enrolling 120 patients in total. There are five spots open at this point and there will be a 24-month follow-up for these patients. After we have enrolled the last patient there will still be at least a 24-month follow-up period where we have to follow the patient and see if the patient progresses a fracture or not.

And that is based on your conversations with FDA in terms of what you think you need to have?

Absolutely. There was an end-point discussion with the FDA about the nature of the endpoint. And it's a hard endpoint; it's progression to fracture. So it's basically the question whether the femur head collapses or not that is being answered here.

Let me also tell you a little bit -- one additional piece of information that may be important in terms of news flow. This is an open label trial so we will be able to, from time to time when it makes sense and when the body of evidence suggests that it's meaningful to report data, we will do so and we will report on the progress with the clinical trial and on the interim results.

Okay. And in terms of the incidence of fracture that you would expect to see in the patient population you're looking at, around what is that?

It's anywhere between 60% and 80% in the kind of patient population we're looking for over a one to two year period. So after two years it's expected to be around 80% (multiple speakers).

Okay. Thank you. And how would you expect that the to compare to what's out there right now? I mean, BMPs or other agents attempt similar attempts to kind of get to the same point? Is there any data that you've seen at conferences that sets a bar for you at all?

It's a conference and it's also literature. This disease has been tackled unsuccessfully with BMPs and with all kinds of matrix materials for a number of years. So there is really -- the progress in this disease has been from the decompression surgery itself which basically has the effect to take away some of the pain that these patients suffer.

But in terms to actual progression into fracture and in terms to changing the course of the disease and restoring the actual bone structure, there is nothing on the market that suggests that there is a substantial effect to improve the course of the disease and to really regenerate the original bone structure so that this process stops.

And are there any important exclusion criteria that we should be aware of?

There is of course a list of exclusion criteria and I'll just give you a couple. Of course these patients should not be on anti-angiogenic drugs because we believe a large portion of the effect of the cells comes from the ability to improve and restore blood flow in femur head, so we don't want (multiple speakers) for example that interfere in there. For example anti-VGF agents, that's an important (multiple speakers) exclusion criteria.

Okay. And the average age of the patient population that you're looking at?

That's a very important point there. The average age is between 30 and 40 years in this patient population. It's a young patient population and that's why it's so important to interfere with the course of the disease because these patients are expected to require -- the majority of them are expected to require a total hip replacement at some point. It's really something that's almost inevitable.

So it's diagnosed at some point and these patients will progress into fracture at some point with over 80% certainty. So it's very important to help them early on to prevent them to go into a total hip replacement. And as you know, every subsequent procedure to replace the total hip replacement after it typically lasts for about 10 years will take away some more bone substance and in the end when these patients are in their 60s there is very little to attach an artificial hip bone to.

Okay. And in terms of the dilated cardiomyopathy studies, should unfortunately any of the patients pass on, do you have the ability to look at the tissue postmortem? Is that part of the structure of what they might sign?

We hope not that's the answer. The idea is to halt or reverse disease progression. And we're very early, as you know, in the process and it's a decision of the family and of the patient of course, if something should happen be it related to the natural course of the disease or --

So that is dealt with at that time?

Yes, that's (multiple speakers). But we don't have any provisions in there that they would have to donate the organ or something. That's not what is intended here. It's a true compassionate use case and we're trying to save these patients.

Okay. All right, thank you very much.

Aaron Lindberg, William Smith & Co.

Have you evaluated other delivery methods or is it always injection? Are there opportunities for like a sustained [dilution] profile if you were to build the cells into a matrix or a polymer?

That's a very good question and of course we're looking into these kinds of things. But really at this point there are pure advantages going the direct route. It's a far easier regulatory process; we're not in the combination product category. There are no other confounding variables associated with the procedure. It's really a very simple, simple kind of question we're asking and that is so these cells when we're injecting them into patients have a positive effect on the patient's outcome.

So there are no confounding variables and there are a number of -- there's a very high number of patients actually waiting for a solution in this indication. There is really, as I've stated before, nothing out there with the exception of heart transplantation.

So it's a topic for a future time after that's already been established?

Absolutely. I think there is. Once we have established that the cells are biologically active and help these patients I think there is ample opportunity for extending the technology platform and for other delivery methods as well.

That's a good question. I think the practical aspect is in these patients that we're trying to decide whether they benefit from our cells and therefore do we take them further in the clinical trial process is do the cells work clinically. And the purest way to do that is to put these cells directly into the repair site in the case of the heart by direct injection. I think the next step of ease-of-use and the regulatory implications of devices and catheters for example is another matter, but first we have to establish whether there's efficacy with the cells directly or not.

Got it. Thanks.

[Scott Smith].

Hello, gentlemen. I've got a number of questions for you. The first question I'd like to ask is can you give us an update on your [dendritic] cell platform? What is occurring at Stanford and Duke with respect to the DCV-I and the DCV-II trials? Are there any updates? What phase of clinical trials are those in? When do you expect to hear results out of those trials? I realize that Aastrom is not directing those.

This is a program, Scott, that I inherited prior to joining the Company and the focus of the Company since I've been here has been to really focus single mindedly on what we can take into the clinic and into clinical trials where there's tremendous commercial opportunity ahead of us. We will continue to work with groups, like you mentioned, on an individual case-by-case basis to explore other applications of our core platform and then evaluate whether there's a commercial opportunity or clinical opportunity or not for us. So that work will continue and you may see more of this in the future, but not to be confused with that we're taking this to market in the way that your question might have suggested.

(multiple speakers) In the sales number that I mentioned earlier, it is made up of sales both of products to collaborators that are working in these general areas as well as some small sales of cell-based products of our own. So that's one way to sort of track the activity level in this area by looking at the amount of sales in the sales line.

Okay, but can you tell me what phase of trials those are in for the DCVI-I and DCVI-II (sic)? Or are these just research efforts going on right now where they're just using the Replicell as a tool basically right now?

I would look at it as just -- as a research use application of our cells. And again, as I said, we will do more of this in the future. Elmar, do you want to make a comment.

Yes, it's basically Phase I/II trials that are very early trials.

Okay, they are Phase I and Phase II, okay. The next question I have is regards to your patent portfolio. There has been a -- on the U.S. government patent site a note regarding Aastrom's -- some 3-D system. Can you give us an update on what the 3-D system might entail regarding the patents and where are you at with the general U.S. and EU patent submissions and where the FDA and European Commission might be at?

So there are a lot of questions involved in what you just asked, Scott, so I'll try to take them in pieces. With the 3-D system it is basically a research level application of a bioreactor and we think it's an interesting research tool. It may have some potential as a research tool and we've received a patent, I believe it's been issued. That's technology we would look at licensing to somebody that would have more of a research focus rather than try to develop ourselves.

In our overall patent portfolio in the last year and a half we've done extensive work to update our patents and have filed a number of applications to extend the patent life and the scope of the patents that cover our products. We don't know whether those patents will be granted or not, but it's an area we're actively pursuing.

My next question I have for you is with regards to you bone technology. You have right now the osteonecrosis trial in Phase III, can you tell me will you be -- assuming that the osteonecrosis trial does prove successful and gets through the FDA, will you also be pursuing the non-union bone market and the -- specifically the jaw bone reconstruction market? Is there enough demand for that particular kit to go after that particular market?

This is George; let me give you some insight there. Again, going back to the focus of the programs that we have today we felt that the osteonecrosis trial in the U.S. was where we could have a clear, hard endpoint unambiguous with the FDA on whether these products work or not in this condition of osteonecrosis of the femoral head.

As you know from those long bone fracture trials and other trials, bone does heal. The cases that we have identified and been extremely successful with and are very proud of are those nonunions that have not healed. So we have the opportunity to really improve the quality of life in these patients. Bit if you then look at the -- if you look at where we place our clinical trial efforts and activities, it's going to be in those that we think can give us the near-term advantage to get us on the market.

As you know, we do not have any products yet approved in the U.S. and our goal is to get through -- to and through the FDA in the most expeditious way possible. You've heard me say in the past that the fracture data from that trial that you refer to and other bone work that has taken place really is the base body of safety evidence and data that is supportive of other trials that we're doing outside of the bone area also to really demonstrate the huge safety advantages that our cells do have.

So is has served a very useful purpose to date. And we will evaluate where we are clinically and economically as the osteonecrosis trial matures and make the decision about these other trials at that time.

And can you also tell me if the [Replicell] is approved for let's say the osteonecrosis in Phase III, will it be approved for the other kits to go to the market with or will each indication need to be approved separately by the FDA?

Let me answer it this way -- the manufacturing process, which you're referring to, I mean the ARS was originally intended I think historically to be a stand-alone medical device that in and of itself would have to have an FDA approval. With the regulations as they are and the cells are regulated or drug like as a biologic, the facility, the GMP environment in which the cells are produced and indeed however those cells are made using the ARS system or other ancillary technology is all part of the submission process that we make to the FDA. So it's not ARS specific in the way your question may have implied.

Okay. And you pulled in those units -- originally those units were set up at like Hackensack and a number of facilities. And then at some point in time -- I believe it's under Dr. Armstrong's reign, you pulled in the Replicels in-house and decided to go with a prescription-based approach towards the manufacturing of these cells.

Have you looked into any -- I know you're setting up a number of centers in the United States and overseas, have you looked at any type of way of getting those prescriptions with a faster turnaround or even having local sites set up at medical centers? Because there are some other competing technologies out there that they've been talking about 15 minutes or half an hour sort of set up and they have their cells in place?

Well, there's multiple parts to your question. I will admit that the things that you're talking about really predate me. I can only really talk about the program that we have in place today, the logic behind it and the path that we're taking. I think the shift in emphasis that you are seeing Aastrom today is we're not any device company, I mean full stop. Rightly or wrongly the FDA made changes in the law that requires us to be regulated as a biologic and actually we welcome that and we welcome it for a reason that another questioner asked earlier about commercializing in Europe or elsewhere.

This process not only requires us, and we welcomed that, to generate very, very detailed statistically significant and relevant clinical data throughout the process of the multiple trials that we undertake. That data not only will help us achieve the regulatory approval, but would also begin to build the body of evidence that will be clinically significant and statistically significant as part of a commercial and educational campaign to convince doctors and payers and providers to begin to adopt our approach as their standard of care. I'm not certain how you would do it any other way.

Can I address one other part of your question, too? Because you referred to people that have 15 minute turnarounds. Our process takes approximately 12 days, so putting the system at the site to get a faster turnaround is not significant. But we deliver a very high dose of cells and we're focusing on severe unmet medical needs, typically chronic conditions where a really fast processing time is not really a significant factor. The quality of the cells that are delivered is the most significant factor and that's why we're focusing on the product --.

Okay. And then the last question I have is can you tell me in terms of insider ownership and institutional ownership what are the figures right now? And are Aastrom management and your Board of Directors planning on increasing the ownership percentage that you have of Aastrom to maybe offset some of the price decline that has been occurring, maybe stabilize share price with having more shares in the hands of insiders and institutions?

That question is similar to a question that we get asked a lot on the message board and this gives me a good opportunity to address one of the factors that needs to be taken into account. That is that there's typically a blackout period with regard to the time that insiders can purchase our shares, it's an SEC rule. For instance, we could not by any shares between approximately the middle of December and essentially next Monday.

But a number of us purchased shares in early December; George and I both purchased 20,000 shares at that point in time. We think the stock is a very good value and we'll continue to purchase shares when we're allowed to in the open market. We've encouraged other management and Board members, our Chairman, Nelson Sims, has also purchased shares as well as Stephen Sudovar, our former Chairman. And we spend a lot of time with institutions to encourage them to buy shares as well.

Excellent. Okay, I appreciate your help. I wish you continuing success. Thank you for answering all my questions.

(OPERATOR INSTRUCTIONS). Thank you, ladies and gentlemen, but there appear to be no further audio questions at this time. I'd like to turn the call back to Mr. George Dunbar for closing comments.

First off, we appreciate the number and quality of the questions that have been asked. We stand ready to address anything and everything that we can about what we're doing. We welcome all comers to ask and try to better understand the programs that we have. We're not going to talk about what we think our competitors are doing and speculate. We can only tell you what we're doing and encourage you to support the Company, as I know many of you are. And we look forward to providing you with updates as we go forward and talking to you either at conferences or at our next scheduled quarterly call. Thanks very much.

Thank you, ladies and gentlemen. This concludes today's teleconference and you may disconnect your lines at this time. Thank you for your participation.