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Aastrom Biosciences, Inc.

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 2003

REGISTRATION NO. 333-_________

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

AASTROM BIOSCIENCES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Michigan (State or Other Jurisdiction of Incorporation or Organization)		94-3096597 (IRS Employer Identification Number)

24 FRANK LLOYD WRIGHT DRIVE
P.O. BOX 376
ANN ARBOR, MICHIGAN 48106
(734) 930-5555
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant’s Principal Executive Offices)

ALAN M. WRIGHT
SENIOR VICE PRESIDENT
ADMINISTRATIVE AND FINANCIAL OPERATIONS, CFO
AASTROM BIOSCIENCES, INC.
24 FRANK LLOYD WRIGHT DRIVE
P.O. BOX 376
ANN ARBOR, MICHIGAN 48106
(734) 930-5555
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)

COPIES TO:

DOUGLAS J. REIN, ESQ.
GRAY CARY WARE & FREIDENRICH LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CALIFORNIA 92121-2133
TELEPHONE: (858) 677-1400
FACSIMILE: (858) 677-1477

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. Π

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]

CALCULATION OF REGISTRATION FEE

PROPOSED

AMOUNT

MAXIMUM

AMOUNT OF

TITLE OF SHARES

TO BE

AGGREGATE

REGISTRATION

TO BE REGISTERED

REGISTERED

PRICE PER UNIT (1)

OFFERING PRICE (1)

FEE

Common Stock

($0 par value)

10,000,000

1.52

15,200,000

1,230

(1) Estimated, pursuant to Rule 457(c), solely for the purpose of calculating the registration fee based on the average of the high and low prices for the common stock, as reported on the Nasdaq SmallCap Market on September 12, 2003.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

SUBJECT TO COMPLETION, DATED SEPTEMBER 19, 2003

The information in this prospectus is not complete and may be changed. We may not sell these securities under this prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any state where the offer and sale would not be permitted.

PROSPECTUS

AASTROM BIOSCIENCES, INC.
10,000,000 SHARES OF COMMON STOCK

We are offering to our registered shareholders up to an aggregate of 10,000,000 shares of our common stock for purchase from time to time under our Shareholder Direct Stock Purchase Plan. The prices at which shareholders may buy the shares will be determined by the prevailing market price for the shares.

Shareholders who enroll may purchase between $250 and $10,000 of stock each month. Purchases will be made on the first Wednesday after the 15th of each month. The purchase price of the shares will be 3% below the average of the closing sale prices for our common stock as reported by Nasdaq for the three trading days ending two days before the purchase date.

Our common stock is quoted on the Nasdaq SmallCap Market under the symbol “ASTM.” On September 18, 2003, the last reported sale price for our common stock was $1.64 per share.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5 OF THIS PROSPECTUS BEFORE MAKING A DECISION TO PURCHASE OUR STOCK.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus is , 2003.

TABLE OF CONTENTS


SUMMARY
RISK FACTORS
WHERE YOU CAN FIND MORE INFORMATION
USE OF PROCEEDS
INFORMATION ABOUT THE PLAN
LEGAL MATTERS
EXPERTS
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 5.1
EXHIBIT 23.1
EXHIBIT 23.2

TABLE OF CONTENTS


	Page

Summary		4
Risk Factors		6
Where You Can Find More Information		13
Use of Proceeds		13
Information About the Plan		14
Legal Matters		20
Experts		20

You should rely only on the information provided or incorporated by reference in this prospectus. We have not authorized anyone to provide you with additional or different information. This document may only be used where it is legal to sell these securities. You should not assume that any information in this prospectus is accurate as of any date other than the date of this prospectus. Information incorporated by reference in this prospectus is accurate only as of the date of the document incorporated by reference. In this prospectus, unless otherwise indicated, the words “we,” “us,” and “our” refer to Aastrom Biosciences, Inc. and its subsidiaries.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding, among other things, (a) our expectations about product development activities, (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for capital. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” in the Form 10-K and other reports that are incorporated by reference into this prospectus, as well as in this prospectus generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this prospectus (including the information incorporated by reference). In light of these risks and uncertainties, the events anticipated in the forward-looking statements may not occur.

SUMMARY

The following summary highlights selected information from this prospectus and in information incorporated by reference. Because this is a summary, it does not contain all the information about us that may be important to you. You should read this entire prospectus and the other documents and the financial statements and related notes which are incorporated by reference in this prospectus.

Our Business

We are a late-stage development company focused on human cell-based therapies. We have identified multiple paths to revenue based on our proprietary ex vivo cell production technology, including the near-term Cell Production Products business, and an active Prescription Cell Product pipeline for stem cell tissue repair and cancer and infectious disease treatments.

Our core technology is based on our proprietary AastromReplicell™ System, an integrated system of instrumentation and single-use consumable kits that implements our patented single-pass perfusion process in a fully automated closed-loop culturing system to optimize cell growth and viability. This system provides nutrients to cells by mimicking the natural cell-growth environment, and enabling cells to grow effectively while retaining high biological function, without various cloning approaches. In addition, this system provides GMP-compliant manufacturing and automated process control for the commercial-scale production of human cells. We do not believe that any other comparable system currently exists.

Our Cell Production Products operation markets the AastromReplicell™ System and cell production kits to researchers and companies for their production of cells for clinical trials. The initial kits are used for the production of dendritic cells used for developing cancer vaccines. We are leveraging our ex vivo cell production technology for a growing Prescription Cell Product pipeline focused on two areas: Tissue Repair Cells (TRCs) for stem cell-derived tissue repair and regeneration, and Therapeutic Cells (TCs) for immune system-directed attacks on certain cancers and other infectious diseases.

Using the AastromReplicell™ System, TRCs are grown from a small sample of a patient’s bone marrow and, once administered back to the patient, are intended to generate normal tissue. The primary TRC product being evaluated is our OCG-I cells for bone grafting (fusions, fractures or dental defects). We are currently preparing for OCG-I clinical trials in both the United States and Europe. We also have in development OC-I cells for osteoporosis, and SC-I cells for autologous bone marrow transplants in lymphoma patients. The SC-I product has been CE marked and is currently being used by a limited number of centers in Europe to evaluate its use In the United States, the SC-I therapy reached Phase III trials, although we halted these trials due to a shift in medical practice that reduced patient need and availability. The OC-I therapy is currently in a Phase I/II clinical trial. We also believe that the stem cell components of our TRCs may be useful for other medical indications, including the regeneration of cardiac and vascular tissues.

We are developing TC products using human cells to cause the patient’s immune system to attack certain cancers and other infectious diseases. Blood-derived dendritic cells, which are the body’s crucial mobilizers of the immune T-Cells response, are cultured in the AastromReplicell™ System to produce our proprietary Dendricell™. After being exposed to a particular biological signal, or antigen, the Dendricell™ may act to trigger a cell-mediated immune response in a patient against the cancer cells or viri. The first Dendricell™ clinical trials are planned at Stanford University for a multiple myeloma cancer vaccine and at Duke University for a colorectal cancer vaccine. In addition, we have been in the pre-clinical stage for a T-cell therapeutic targeting the Epstein-Barr Virus.

The recent commercialization of our automated cell production instruments and cell-specific production kits should generate revenues in the near term, although we are not yet able to project the market size and potential growth for those products. While we have initiated marketing activities in Europe for the CE Marked SC-I, DC-I and the DCV-I products, we do not expect to generate positive cash flows from our consolidated operations for at least the next two to three years and then only if more significant product sales commence. Until that time, we expect that our revenue sources will consist of sales from our Cell Production Product operation to academic and commercial research centers, grant revenue and research funding, milestone payments and licensing fees from existing and potential future corporate collaborators. To date, we have financed our operations through public and

private sales of our equity securities. As a development-stage company, we have never been profitable and do not anticipate having net income unless and until significant product sales commence. Through March 31, 2003, we have accumulated losses of approximately $100 million. We cannot provide any assurance that we will be able to achieve profitability on a sustained basis, if at all, obtain the required funding, or complete a corporate partnering or acquisition transaction necessary for us to continue our operations at current levels.

Our principal executive offices are located at 24 Frank Lloyd Wright Drive, P. O. Box 376, Ann Arbor, MI 48106. Our telephone number is (734) 930-5555.

The Offering

This offering relates to the sale of up to 10,000,000 shares of our common stock to our registered shareholders pursuant to our Shareholder Direct Stock Purchase Plan.

Enrollment: This Plan is available only to registered stockholders. If you currently own Aastrom common stock registered in your name, you may participate in the Plan by completing and returning an enrollment form. If you own Aastrom stock, but your shares are currently held by a bank or broker in their name (i.e., “street name”), first you will need to register at least one of the shares in your name and then complete an enrollment form.

Purchases: Once you have enrolled, you may make purchases in any amount from $250 to $10,000 per month by check or through automatic monthly deductions from a qualified bank account. Purchases will be made monthly on the first Wednesday after the 15th of each month. The purchase price will be 3% below the average of the closing sale prices for our common stock as reported by Nasdaq for the three trading days ending two days before the purchase date.

Payment: Payments must be received at least five business days before the purchase date. Payments may be made by wire transfer, check or direct deductions from a bank account.

Safekeeping of Shares: All shares of Aastrom common stock purchased through the Plan will be held by the Plan Administrator in book-entry form in your account. If you hold Aastrom common stock certificates outside of the Plan, you may deposit those certificates for safekeeping with the Plan Administrator and those shares will be reflected in your Plan account.

Sale of Shares: The Plan provides you with the ability to sell all or any portion of Aastrom common stock held in the Plan in book-entry form. You may also request to receive a certificate for these shares and sell the shares outside the Plan.

Fees: There are certain enrollment, investment, brokerage and sales fees associated with the Plan.

More Information: For more information about the Plan, call the Plan’s toll free number, (800) 509-5586 or see our website at www.aastrom.com.

Risk Factors

You should consider carefully all of the information contained in and incorporated by reference in this prospectus, including the information set forth under the caption “Risk Factors,” before making an investment in the shares.

RISK FACTORS

You should carefully consider the following risk factors before purchasing our common stock. The risks and uncertainties described below are not the only ones we face. There may be additional risks and uncertainties that are not known to us or that we do not consider to be material at this time. If the events described in these risks occur, our business, financial condition and results of operations would likely suffer. This prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements. This section discusses the risk factors that might cause those differences. You should also consider the additional information set forth in our SEC reports on Forms 10-K, 10-Q and 8-K and in the other documents considered a part of this prospectus. See “Where You Can Find More Information.”

Our past losses and expected future losses cast doubt on our ability to operate profitably.

We were incorporated in 1989 and have experienced substantial operating losses since inception. As of June 30, 2003, we have incurred cumulative net losses totaling approximately $102.4 million. These losses have resulted principally from costs incurred in the research and development of our cell culture technologies and the AastromReplicell™ System, general and administrative expenses, and the prosecution of patent applications. We expect to incur significant operating losses until product sales increase, primarily owing to our research and development programs, including pre-clinical studies and clinical trials, and the establishment of marketing and distribution capabilities necessary to support commercialization efforts for our products. We cannot predict with any certainty the amount of future losses. Our ability to achieve profitability will depend, among other things, on successfully completing the development of our product candidates, obtaining regulatory approvals, establishing manufacturing, sales and marketing arrangements with third parties, and raising sufficient funds to finance our activities. We may not be able to achieve or sustain profitability.

Our inability to complete our product development activities successfully would severely limit our ability to operate or finance operations.

Commercialization in the United States of our cell product candidates will require substantial clinical trials. While we have commenced initial marketing on a limited basis of the AastromReplicell™ System in Europe, we believe that the United States will be the largest market for our products. We may not be able to successfully complete development of our product candidates, or successfully market our technologies or product candidates. We, and any of our potential collaborators, may encounter problems and delays relating to research and development, regulatory approval and intellectual property rights of our technologies and product candidates. Our research and development programs may not be successful, and our cell culture technologies and product candidates may not facilitate the production of cells outside the human body with the expected result. Our technologies and product candidates may not prove to be safe and efficacious in clinical trials, and we may not obtain the requisite regulatory approvals for our technologies or product candidates and the cells produced in such products. If any of these events occur, we may not have adequate resources to continue operations for the period required to resolve the issue delaying commercialization and we may not be able to raise capital to finance our continued operation during the period required for resolution of that issue.

We may not be able to raise the required capital to conduct our operations and develop our products.

We will require substantial capital resources in order to conduct our operations and develop our products. In October 1999, we were forced to reduce operations based on our declining level of capital resources and our limited financing alternatives available at that time. The previous reduction in our operating activities has delayed our product development programs. We expect that our available cash and financing will be sufficient to fund currently planned activities through our 2004 fiscal year (ending June 30, 2004). However, in order to grow and expand our business, and to introduce our new product candidates into the marketplace, we will need to raise additional funds. We will also need additional funds or a collaborative partner, or both, to finance the research and development activities of our product candidates for the expansion of additional cell types. Accordingly, we are continuing to pursue additional sources of financing.

Our future capital requirements will depend upon many factors, including:

	•		continued scientific progress in our research and development programs;

	•		costs and timing of conducting clinical trials and seeking regulatory approvals;

	•		competing technological and market developments;

	•		our ability to establish additional collaborative relationships; and

	•		the effect of commercialization activities and facility expansions if and as required.

Because of our long-term funding requirements, we are likely to access the public or private equity markets if and whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. Further, we may enter into financing transactions at rates, which are at a substantial discount to market. This additional funding may not be available to us on reasonable terms, or at all. If adequate funds are not available in the future, we may be required to further delay or terminate research and development programs, curtail capital expenditures, and reduce business development and other operating activities.

The issuance of additional common stock for funding has the potential for substantial dilution.

As noted above, we will need additional equity funding to provide us with the capital to reach our objectives. At current market prices, such an equity issuance would cause a substantially larger number of shares to be outstanding and would dilute the ownership interest of existing stockholders. Pursuant to previously approved shareholder resolutions, the Board of Directors has the authority to increase the maximum number of authorized shares from 100 million to 150 million.

Our stock price has been volatile and future sales of substantial numbers of our shares could have an adverse affect on the market price of our shares.

The market price of shares of our common stock has been volatile, ranging in closing price between $0.23 and $1.45 during the fiscal year ended June 30, 2003. The price of our common stock may continue to fluctuate in response to a number of events and factors, such as:

	•		clinical trial results;

	•		the amount of our cash resources and our ability to obtain additional funding;

	•		announcements of research activities, business developments, technological innovations or new products by us or our competitors;

	•		entering into or terminating strategic relationships;

	•		changes in government regulation;

	•		disputes concerning patents or proprietary rights;

	•		changes in our revenues or expense levels;

	•		public concern regarding the safety, efficacy or other aspects of the products or methodologies we are developing;

	•		reports by securities analysts; and

	•		status of the investment markets.

Any of these events may cause the price of our shares to fall, which may adversely affect our business and financing opportunities. In addition, the stock market in general and the market prices for biotechnology companies in particular have experienced significant volatility that often has been unrelated to the operating performance or financial conditions of such companies. These broad market and industry fluctuations may adversely affect the trading price of our stock, regardless of our operating performance or prospects.

We must successfully complete our clinical trials to be able to market certain of our products.

To be able to market cell products in the United States, we must demonstrate, through extensive preclinical studies and clinical trials, the safety and efficacy of our processes and product candidates, for application in the treatment of humans. If our clinical trials are not successful, our products may not be marketable.

Our ability to complete our clinical trials in a timely manner depends on many factors, including the rate of patient enrollment. Patient enrollment can vary with the size of the patient population, the proximity of suitable patients to clinical sites, perceptions of the utility of cell therapy for the treatment of certain diseases and the eligibility criteria for the study. We have experienced delays in patient accrual in our previous and current clinical trials. If we experience future delays in patient accrual, we could experience increased costs and delays associated with clinical trials, which would impair our product development programs and our ability to market our products. Furthermore, the FDA monitors the progress of clinical trials and it may suspend or terminate clinical trials at any time due to patient safety or other considerations.

Failure to obtain and maintain required regulatory approvals would severely limit our ability to sell our products.

We must obtain the approval of the FDA before commercial sales of our cell product candidates may commence in the United States, which we believe will be the largest market for our products. We may also be required to obtain additional approvals from foreign regulatory authorities to continue or increase our sales activities in those jurisdictions. If we cannot demonstrate the safety, reliability and efficacy of our product candidates, or of the cells produced in such products, we may not be able to obtain required regulatory approvals. Patients receiving cells produced with our technologies and product candidates may not demonstrate long-term engraftment in a manner comparable to cells obtained from current hematopoietic stem cell therapy procedures. If we cannot demonstrate the safety or efficacy of our technologies and product candidates, including long-term sustained engraftment, or if one or more patients die or suffer severe complications, the FDA or other regulatory authorities could delay or withhold regulatory approval of our product candidates.

Finally, even if we obtain regulatory approval of a product, that approval may be subject to limitations on the indicated uses for which it may be marketed. Even after granting regulatory approval, the FDA, other regulatory agencies, and governments in other countries continue to review and inspect marketed products, manufacturers and manufacturing facilities. Later discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions on the product or manufacturer, including a withdrawal of the product from the market. Further, governmental regulatory agencies may establish additional regulations which could prevent or delay regulatory approval of our products.

Even if we obtain regulatory approvals to sell our products, lack of commercial acceptance would impair our business.

We are seeking to obtain regulatory approval to market stem cell tissue repair and regeneration treatments, and cancer and infectious disease treatments. Even if we obtain all required regulatory approvals, we cannot be certain that our products and processes will be adopted at a level that would allow us to operate profitably. Our tissue repair products will face competition from existing, and/or potential other new treatments in the future which could limit revenue potential. It may be necessary to increase the yield and/or cell type purity, for certain of our Aastrom Replicell^TM System cell processes to gain commercial acceptance. Our technologies or product candidates may not be employed in all potential applications being investigated, and any reduction in applications would limit the market acceptance of our technologies and product candidates and our potential revenues.

Failure of third parties to manufacture component parts or provide limited source supplies would impair our new product development and our sales activities.

We rely solely on third parties such as Astro, Moll, Cambrex and Amgen to manufacture our product candidates, component parts and growth factors and other materials used in the cell expansion process. We would not be able to obtain alternate sources of supply for many of these items on a short-term basis. If any of our key manufacturers or suppliers fail to perform their respective obligations or if our supply of growth factors, components or other materials is limited or interrupted, we would not be able to conduct clinical trials or market our product candidates on a timely and cost-competitive basis, if at all.

Furthermore, some of the compounds used by us in our current bone marrow or cord blood cell expansion processes involve the use of animal-derived products. Suppliers or regulatory authorities may limit or restrict the availability of such compounds for clinical and commercial use. Any restrictions on these compounds would impose

a potential competitive disadvantage for our products. Our inability to develop or obtain alternative compounds would harm our product development and commercialization efforts.

Finally, we may not be able to continue our present arrangements with our suppliers, supplement existing relationships, establish new relationships or be able to identify and obtain the ancillary materials that are necessary to develop our product candidates in the future. Our dependence upon third parties for the supply and manufacture of these items could adversely affect our ability to develop and deliver commercially feasible products on a timely and competitive basis.

Our stock may be delisted from Nasdaq, which could affect its market price and liquidity.

We are required to meet certain financial tests (including a minimum bid price for our common stock of $1.00) to maintain the listing of our common stock on the Nasdaq Stock Market. Our common stock may be recommended for delisting (subject to any appeal we would file) if we do not maintain compliance with the Nasdaq requirements within specified periods and subject to permitted extensions. If our common stock were delisted, it could be more difficult to buy or sell our common stock and to obtain accurate quotations, and the price of our stock could suffer a material decline. Delisting would also impair our ability to raise capital.

Given our limited internal sales and marketing capabilities, we need to develop increased internal capability or collaborative relationships to sell, market and distribute our products.

While we have commenced initial marketing on a limited basis of the AastromReplicell™ System and SC-I, DC-I and DCV-I cell production kits in Europe and domestically for research use, we have only limited internal sales, marketing and distribution capabilities. We intend to get assistance to market our products through collaborative relationships with companies with established sales, marketing and distribution capabilities. While we have entered into such arrangements with respect to Switzerland, Turkey and Italy, we will need to establish additional relationships to be able to achieve the market coverage we desire. Our inability to develop and maintain those relationships would limit our ability to market, sell and distribute our products. Our inability to enter into successful, long-term relationships could require us to develop alternate arrangements at a time when we need sales, marketing or distribution capabilities to meet existing demand.

Any changes in the governmental regulatory classifications of our products could prevent, limit or delay our ability to market or develop our products.

The FDA establishes regulatory requirements based on the classification of a product. The AastromReplicell™ System may be regulated as a Class III medical device, or the FDA may ultimately choose to regulate the AastromReplicell™ System under another category. Because our product development programs are designed to satisfy the standards applicable to Class III medical devices and biological licensure for our cellular products, any change in the regulatory classification or designation would affect our ability to obtain FDA approval of our products. The AastromReplicell™ System is used to produce different cell mixtures, and each of these cell mixtures will, under current regulations be regulated as biologic products, which require a BLA. Other countries are adopting new strict policies and requirements for cell products. These new requirements may delay, restrict or prevent the sale or use of our products.

If we do not keep pace with our competitors and with technological and market changes, our products may become obsolete and our business may suffer.

The market for our products is very competitive, is subject to rapid technological changes and varies for different individual products. For each of our potential products, we believe that there are potentially many competitive approaches being pursued, including some by private companies for which information is difficult to obtain.

Many of our competitors have significantly greater resources, more product candidates and have developed product candidates and processes that directly compete with our products. Our competitors may have developed, or could in the future develop, new technologies that compete with our products or even render our products obsolete. As an example, in the past, published studies have suggested that hematopoietic stem cell therapy may have limited

clinical benefit in the treatment of breast cancer, which was a significant portion of the overall hematopoietic stem cell transplant market. This resulted in a substantial decline in the market for the AastromReplicell™ System with our SC-I kit.

Our products are designed to improve and automate the processes for producing cells used in therapeutic procedures. Even if we are able to demonstrate improved or equivalent results, researchers and practitioners may not use our products and we will suffer a competitive disadvantage. As a result, we may be unable to recover the net book value of our inventory. Finally, to the extent that others develop new technologies that address the targeted application for our products, our business will suffer.

If we cannot attract and retain key personnel, then our business will suffer.

Our success depends in large part upon our ability to attract and retain highly qualified scientific and management personnel. We face competition for such personnel from other companies, research and academic institutions and other entities. Further, in an effort to conserve financial resources, we have implemented reductions in our work force on two separate occasions. As a result of these and other factors, we may not be successful in hiring or retaining key personnel. The Company has a key man life insurance policy for R. Douglas Armstrong, the Chairman, Chief Executive Officer and President of Aastrom. Our inability to replace any other lost key employee could harm our operations.

If our patents and proprietary rights do not provide substantial protection, then our business and competitive position will suffer.

Our success depends in large part on our ability to develop or license and protect proprietary products and technologies. However, patents may not be granted on any of our pending or future patent applications. Also, the scope of any of our issued patents may not be sufficiently broad to offer meaningful protection. In addition, our issued patents or patents licensed to us could be successfully challenged, invalidated or circumvented so that our patent rights would not create an effective competitive barrier. Furthermore, we rely on three exclusive, world-wide licenses relating to the production of human cells granted to us by the University of Michigan for certain of our patent rights. If we materially breach such agreements or otherwise fail to materially comply with such agreements, or if such agreements expire or are otherwise terminated by us, we may lose our rights under the patents held by the University of Michigan. At the latest, these licenses will terminate when the patent underlying the license expires. The first of these underlying patents will expire on March 21, 2012. We also rely on trade secrets and unpatentable know-how that we seek to protect, in part, by confidentiality agreements with our employees, consultants, suppliers and licensees. These agreements may be breached, and we might not have adequate remedies for any breach. If this were to occur, our business and competitive position would suffer.

Intellectual property litigation could harm our business.

Our success will also depend in part on our ability to develop commercially viable products without infringing the proprietary rights of others. Although we have not been subject to any filed infringement claims, other patents could exist or could be filed which would prohibit or limit our ability to market our products or maintain our competitive position. In the event of an intellectual property dispute, we may be forced to litigate. Intellectual property litigation would divert management’s attention from developing our products and would force us to incur substantial costs regardless of whether we are successful. An adverse outcome could subject us to significant liabilities to third parties, and force us to curtail or cease the development and sale of our products and processes.

The government maintains certain rights in technology that we develop using government grant money and we may lose the revenues from such technology if we do not commercialize and utilize the technology pursuant to established government guidelines.

Certain of our and our licensors’ research have been or are being funded in part by government grants. As a result of such funding, the U.S. Government has certain rights in the technology developed with the grant. These rights include a non-exclusive, paid-up, world-wide license to use the technology for any governmental purpose. In addition, the government has the right to require us to grant an exclusive license to use the developed technology to a third party if the government determines that:

	•		we have not taken adequate steps to commercialize such technology;

	•		such action is necessary to meet public health or safety needs; or

	•		such action is necessary to meet requirements for public use under federal regulations.

In these instances, we would not receive revenues on the products we developed. Additionally, technology that was partially funded by a federal research grant is subject to the following government rights:

	•		products using the technology which are sold in the United States are to be manufactured substantially in the United States, unless a waiver is obtained;

	•		the government may force the granting of a license to a third party who will make and sell the needed product if we do not pursue reasonable commercialization of a needed product using the technology; and

	•		the U.S. Government may use the technology for its own needs.

If we fail to meet these guidelines, we would lose our exclusive rights to these products and we would lose potential revenue derived from the sale of these products.

The market for our products will be heavily dependent on third party reimbursement policies.

Our ability to successfully commercialize our product candidates will depend on the extent to which government healthcare programs, such as Medicare and Medicaid, as well as private health insurers, health maintenance organizations and other third party payors will pay for our products and related treatments. Reimbursement by third party payors depends on a number of factors, including the payor’s determination that use of the product is safe and effective, not experimental or investigational, medically necessary, appropriate for the specific patient and cost-effective. Reimbursement in the United States or foreign countries may not be available or maintained for any of our product candidates. If we do not obtain approvals for adequate third party reimbursements, we may not be able to establish or maintain price levels sufficient to realize an appropriate return on our investment in product development. Any limits on reimbursement available from third party payors may reduce the demand for, or negatively affect the price of, our products. For example, in the past, published studies have suggested that stem cell transplantation for breast cancer, that constituted a significant portion of the overall stem cell therapy market, at the time, may have limited clinical benefit. The lack of reimbursement for these procedures by insurance payors would negatively affect the marketability of our products.

Potential product liability claims could affect our earnings and financial condition.

We face an inherent business risk of exposure to product liability claims in the event that the use of the AastromReplicell™ System during research and development efforts, including clinical trials, or after commercialization results in adverse affects. As a result, we may incur significant product liability exposure, which could exceed existing insurance coverage. We may not be able to maintain adequate levels of insurance at reasonable cost and/or reasonable terms. Excessive insurance costs or uninsured claims would increase our operating loss and affect our financial condition.

Our corporate documents and Michigan law contain provisions that may make it more difficult for us to be acquired.

Our Board of Directors has the authority, without shareholder approval, to issue additional shares of preferred stock and to fix the rights, preferences, privileges and restrictions of these shares without any further vote or action by our shareholders. This authority, together with certain provisions of our charter documents, may have the affect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire control of our company. This affect could occur even if our shareholders consider the change in control to be in their best interest.

Forward-looking statements

This prospectus and the information incorporated by reference in it contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These forward-looking statements include statements regarding:

	•		potential strategic collaborations with others;

	•		future capital needs;

	•		product development and marketing plan;

	•		clinical trial plans and anticipated results;

	•		anticipation of future losses;

	•		replacement of manufacturing sources;

	•		commercialization plans; and

	•		revenue expectations and operating results.

These statements are subject to risks and uncertainties, including those set forth in this Risk Factors section, and actual results could differ materially from those expressed or implied in these statements. In some cases, you can identify these statements by our use of forward-looking words such as “may,” “will,” “should,” “anticipate,” “expect,” “estimate,” “plan,” “believe,” “potential,” or “intend.” All forward-looking statements included in this registration statement are made as of the date hereof. We assume no obligation to update any such forward-looking statement or reason why actual results might differ.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC’s public reference rooms located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our filings with the SEC are also available to the public on the SEC’s Internet web site at http://www.sec.gov. We also provide information on our website: http//www.aastrom.com/.

The SEC allows us to “incorporate by reference” the information we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file with the SEC later will automatically update and supersede the information in this prospectus or incorporated by reference. The following documents filed by us (and any future filings made by us with the SEC under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we sell all of the common stock offered hereby) are incorporated by reference in this prospectus:

1.		Our Annual Report on Form 10-K for the year ended June 30, 2003;

2.		Our Current Reports on Form 8-K filed with SEC on July 10, 2003 and September 2, 2003; and

3.		The description of our common stock set forth in our Registration Statement on Form 8-A filed with the SEC on April 11, 1997, as amended (Commission File No.: 000-22025).

In addition, we will deliver without charge a copy of any of the information incorporated by reference into this prospectus to each person (including a beneficial owner) receiving a copy of this prospectus. If you need a copy of these documents, you may request copies, at no cost, by writing or telephoning us at the following address:

Aastrom Biosciences, Inc,.
Attention: Chief Financial Officer
24 Frank Lloyd Wright Drive
Ann Arbor, MI 48105

Telephone Number: (734) 930-5555

USE OF PROCEEDS

We cannot guarantee that we will receive any proceeds in connection with this offering, as the amount of shares sold will depend on the interest our shareholders have in purchasing shares under this Plan. Any proceeds we receive will be used for operating costs, capital expenditures, working capital and other general corporate purposes.

We have not specifically identified the precise amounts we will spend on each of these areas or the timing of these expenditures. The amounts actually expended for each purpose may vary significantly depending upon numerous factors, including the amount and timing of the proceeds from this offering, progress with clinical product development and other cell therapy application programs. In addition, expenditures may also depend on the establishment of new collaborative arrangements with other companies, the availability of other financing, and other factors.

We anticipate that we will be required to raise substantial additional capital to continue to fund the clinical development of our cell therapy applications. We may raise additional capital through additional public or private financing, as well as collaborative relationships, incurring debt and other available sources.

INFORMATION ABOUT THE PLAN

Purpose

Why did Aastrom establish the Shareholder Direct Stock Purchase Plan?

We established the Plan to promote long term ownership in our stock and to give our shareholders a simple, convenient and economical way to purchase additional shares. This Plan is also designed to enable us to raise additional capital through the direct sale of newly issued shares.

Benefits and Risks

What are the benefits of participation in the Plan?

By participating in the Plan, you may purchase shares in relatively small amounts, which would allow you to conveniently add to your investment over time without incurring brokerage costs and to buy shares at a slight discount to a recent average market price. The Plan permits you to monitor your investment and make new purchases efficiently by using the forms included with your Plan Statement. Additionally, by having the Plan Administrator hold your shares in book-entry form, you eliminate concerns over lost and stolen stock certificates.

Are there potential disadvantages or risks to participating the Plan?

There are potential disadvantages to participating in the Plan compared to purchases of Common Stock through brokers or otherwise. For example, neither Aastrom nor the Plan Administrator will pay interest on any cash held pending the next purchase date. Additionally, since the purchase price under the Plan is an average of recent closing prices for a few days prior to the purchase date, your purchase price may be higher than that which you could have obtained by directing a purchase through a broker or in an negotiated transaction. Shareholders will be required to deposit funds in advance of knowing the purchase price. Finally, any discount from the market prices at the time of the investment in common shares purchased under the Plan may create additional taxable income to the participant. Purchase of shares is subject to all of the customary risks of stock ownership, including those discussed in the Risk Factors section of this Prospectus.

Eligibility and Enrollment

How does an Aastrom shareholder enroll in the Plan?

If you are already an Aastrom registered shareholder (i.e., if you own shares that are registered in your name, not your broker’s), you may enroll in the Plan simply by completing and returning an Enrollment Form. You may obtain an Enrollment Form from the Plan Administrator or directly from our website: http://www.aastrom.com/.

I already own shares, but they are held by my bank or broker and registered in “street name.” How can I participate?

If you currently own shares of Aastrom stock that are held on your behalf by a bank or broker (i.e., “street name”), you will need to arrange with your bank or broker to have at least one share registered directly in your name in order to be eligible to participate. Once the shares are registered in your name, you can complete an Enrollment Form, which is available from the Plan Administrator or directly from our website: http://www.aastrom.com/.

I’m not currently a shareholder. May I participate in the Plan?

If you currently do not hold shares of Aastrom Common Stock, you must first purchase Aastrom stock and have it registered in your name.

Are there fees associated with enrollment?

Participation in the Plan is subject to the following fees. These fees may change at any time and you will be notified of any changes.

Fee Schedule:


One-time enrollment fee in direct purchase plan			$10.00
Fee for insufficient funds for check or automatic deductions			$50.00

Who may participate in the Plan?

All U.S. citizens who are registered shareholders are eligible to participate. Foreign citizens are eligible to participate as long as their participation would not violate any laws in their home countries. We may limit the participation of any shareholder if compliance with any applicable regulatory requirements of the shareholder’s state or country of residence would be unduly burdensome in our determination.

Purchases and Sales

What are the minimum and maximum amounts for purchases?

The minimum amount for purchases is $250 and the maximum amount is $10,000 during any month.

10.

How do I make a purchase?

You may send a check payable in U.S. dollars to Aastrom Biosciences Direct Stock Purchase Plan. Checks must be drawn against a U.S. bank or U.S. bank affiliate. We will accept wire transfers or debits from an account with a U.S. bank or U.S. bank affiliate. Cash, money orders and third-party checks are not allowed. For initial purchases, you must send an Enrollment Form with or before sending checks or wire transfers. Checks and forms should be mailed to Aastrom Biosciences Shareholder Direct Stock Purchase Plan, c/o Continental Stock Transfer and Trust Company (Attn: DRP), 17 Battery Place, New York, NY 10004-1125.

11.

May I have funds for purchases automatically deducted from my bank account?

Yes. You may authorize monthly automatic deductions from an account at a financial institution that is a member of the National Automated Clearing House Association.

	•		To initiate this service, you must send an Authorization Form, with the “Automatic Deduction Service” section completed, to the Plan Administrator.

	•		To change any aspect of the instruction, you must send a revised Authorization Form, with the “Automatic Deduction Service” section completed, to the Plan Administrator.

	•		To terminate the deductions, you must notify the Plan Administrator in writing.

Initial set-up, changes and terminations to the automatic deduction instructions will be made as soon as practicable. Once effective, funds will be deducted from your designated account at least 2 days before each purchase date. You should contact the financial institution where you maintain your account to determine if they will impose any fees on automatic monthly deductions.

12.

How are payments with “insufficient funds” handled?

If the Plan Administrator does not receive a payment because of insufficient funds or incorrect draft information, the requested purchase will be deemed void, and the Plan Administrator will immediately remove from your account

any shares purchased in anticipation of receiving such funds. If the net proceeds from the sale of such shares are insufficient to satisfy the balance of the uncollected amounts, the Plan Administrator may sell additional shares from your account as necessary to satisfy the uncollected balance.

In addition, an “insufficient funds” fee of $50.00 will be charged. The Plan Administrator may place a hold on the Plan account until the “insufficient funds” fee is received from you, or may sell shares from your account to satisfy any uncollected amounts.

13.

When will shares be purchased?

The Plan Administrator will buy shares on the first Wednesday after the 15th of each month if your funds and/or instructions are received no later than five business days before that day.

14.

When must funds for purchases and instructions be received by the Plan Administrator?

For all purchases, your funds must be received by the Plan Administrator no later than five business days before the purchase date. For initial purchases, your Enrollment From must also be received by the Plan Administrator no later than five business days before the purchase date.

15.

What is the price of shares purchased under the Plan?

The purchase price for shares is a 3% discount from the average of the closing sale prices for our common stock as reported by Nasdaq for three trading days ending two days before the purchase date. You will not earn any interest on funds held in your account and you bear the risk of any price changes in Aastrom stock during the pricing period and until the purchase date, as well as from the purchase date through the time you sell your shares.

The Plan Administrator will use your funds to purchase as many full shares as possible and will use any amount remaining to purchase a fraction of a share.

16.

What happens if I deposit less than $250 or more than $10,000 by two business days before the monthly purchase date?

If your account has less than the $250 minimum purchase amount (or if your account has more than $10,000 maximum purchase amount) as of two business days before the purchase date, the Plan Administrator will promptly return those funds to you, without interest.

17.

How do I sell my shares?

You can sell some or all of the Plan shares you hold in book-entry form by providing written instructions to the Plan Administrator through the mail or by facsimile. Sample forms that could be used for sales of shares are contained on our website: http://www.aastrom.com. If you prefer, you can withdraw shares from the Plan, at no cost to you, and sell them through a broker of your own choosing. Shares will normally be mailed to you or transferred to your broker (as you specify) within five business days of receipt of your instructions.

18.

When will shares be sold under the Plan? What is the price of shares sold under the Plan?

The Plan Administrator will sell shares on each Friday. No sales will be made that week if the markets are closed on a particular Friday. The sale price for your shares will be the average weighted price per share received by the Plan Administrator for all sales made that day for Plan participants.

19.

When must sales instructions be received?

To sell your shares under the Plan, the Plan Administrator must receive your signed sales instructions by the close of business at least two days before the sales date. Thus, if you want to sell your shares on a particular Friday, the Plan Administrator must receive your sales instructions by the close of business on the preceding Wednesday.

20.

Will I be charged brokerage fees for sales of shares under the Plan?

No. Aastrom will pay brokerage fees for shares sold under the Plan.

21.

Are there restrictions on how quickly shares that are purchased under the Plan can be sold?

Shares that are purchased under the Plan or deposited into the Plan may not be sold under the Plan for at least 9 days after they are purchased or deposited into the Plan. Thus, someone purchasing shares under the Plan could not submit sale instructions the same day as the purchase to sell those shares under the Plan on the Friday that would be two days away. The first sale of those shares under the Plan could take place on the following Friday (nine days after the purchase). This restriction does not apply to other shares that have been held under the Plan for at least 9 days. As a result, a participant could purchase shares under the Plan on Wednesday and sell different shares on the next Friday. This restriction does not apply to shares that are withdrawn from the Plan; those shares could be sold at any time.

Source of Stock

22.

What is the source of Aastrom stock purchased through the Plan?

Share purchases will be made directly from Aastrom. At Aastrom’s option, we may elect to have share purchases made in the market, although we do not expect to use this option in the near future.

How Shares Are Held

23.

How does the safekeeping service (book-entry shares) work?

All shares of Aastrom stock that are purchased through the Plan will be held by the Plan Administrator and registered in book-entry form in your Plan account on the records of the Plan Administrator. If you hold Aastrom Common Stock certificates outside the Plan, you may also, at any time, deposit those certificates for safekeeping with the Plan Administrator, and the shares represented by the deposited certificates will be included in book-entry form in your Plan account.

24.

How do I deposit my Aastrom stock certificates with the Plan Administrator?

To deposit certificates into the Plan, you should send your certificates, by registered and insured mail, to the Plan Administrator at Continental Stock Transfer and Trust Company (Attn: DRP) , 17 Battery Place, New York, NY 10004-1125, with written instructions to deposit those shares in your Plan account. The certificates should not be endorsed and the assignment section should not be completed.

25.

Are there any direct charges to shareholders associated with this custodial service?

No. There is no cost to you either for having the Plan Administrator hold the shares purchased for you through the Plan or for having the Plan Administrator hold additional shares you deposit into your account. We may pay some minor fees to the Plan Administrator.

26.

How can I receive a stock certificate?

Normally, stock certificates for shares purchased under the Plan will not be issued; rather shares will be registered in the name of the Plan Administrator or its nominee and credited to your Plan account. However, you may request a stock certificate by indicating your preference on the stub attached to your account statement and forwarding it to the Plan Administrator. There is no charge for this service. Stock certificates for fractional shares will not be issued under any circumstances.

Transfers of Shares

27.

Can I transfer shares that I hold in the Plan to someone else?

Yes. You may transfer ownership of some or all of your Plan shares by sending the Plan Administrator written transfer instructions. Your signature must be “Medallion Guaranteed” by a financial institution. Most banks and brokers participate in the Medallion Guarantee program. The Medallion Guarantee program ensures that the individual signing is in fact the owner of the participant’s account.

You may transfer shares to new or existing Aastrom shareholders. However, a new Plan account will not be opened for a transferee as a result of a transfer of less than one full share. If you are opening a new Plan account for a transferee, you must include an Authorization Form with the transfer instructions, and the transferee must complete an Enrollment Form.

Withdrawal from the Plan

28.

How do I close my Plan account?

You may terminate your participation in the Plan either by giving written notice to the Plan Administrator or by completing the appropriate section of your account statement and returning it to the Plan Administrator. Upon termination, you must elect either to receive a certificate for the number of whole shares held in your Plan account and a check for the value of any fractional shares, or to have all of the shares in your Plan account sold for you as described above. The Plan Administrator will send you your proceeds, without interest, or your certificates as soon as is practicable.

Administration

29.

Who administers the Plan?

The Plan is administered by Continental Stock Transfer and Trust Company, Aastrom’s stock transfer agent. As Plan Administrator, Continental Stock Transfer and Trust Company acts as agent for Plan participants and keeps records, sends statements and performs other duties relating to the Plan.

30. What are some of the other duties of the Plan Administrator?

The Plan Administrator will do the following:

	•		receive and hold funds pending the purchase of shares

	•		issue shares to the account of participants shortly after each purchase date

	•		hold shares in the Plan through book-entries

	•		receive any deposits of additional shares in the Plan

	•		following receipt of instructions, sell shares on the applicable sales date and remit payment to the participant

	•		distribute shares to the participant or upon withdrawals of shares from the Plan

31.

How do I contact the Plan Administrator?

To request enrollment packages or for other questions, please call (800) 509-5586


or write to:		Aastrom Biosciences Shareholder Direct Stock Purchase Plan c/o Continental Stock Transfer and Trust Company 17 Battery Place New York, NY 10004-1125

When communicating with the Plan Administrator, you should have available your account number and taxpayer identification number.

32.

What kind of reports will be sent to participants in the Plan?

You will receive a quarterly statement of account activity. Supplemental account statements will be provided for any month in which you make a cash investment, withdraw or sell shares. You should retain these statements in order to establish the cost basis of shares purchased under the Plan for income tax and other purposes.

Additional Information

33.

How would a stock split or stock dividend affect my account?

Any shares resulting from a stock split or stock dividend paid on shares held in custody for you by the Plan Administrator will be credited to your book-entry position. Of course, you may request a certificate at any time for any or all of your shares.

34.

Can I vote my Plan shares?

You will be sent a proxy statement, together with a proxy card. This proxy card, when duly signed and returned, will be voted as you indicate. Fractional shares will be aggregated and voted in accordance with the participant’s directions. If the proxy card is not returned or if it is returned unsigned, the shares will not be voted.

35.

Can the Plan be changed?

We may add to, modify or discontinue the Plan at any time. We will send you written notice of any significant changes.

Upon discontinuance of the Plan, we will return to you any uninvested automatic deductions from your bank account, and any uninvested cash investments. We will also issue you free of charge a certificate for full shares credited to your account and pay you in cash for any fractional shares credited to your account.

36.

What are the responsibilities of Aastrom and the Plan Administrator?

Neither Aastrom Biosciences nor the Plan Administrator, will be liable for any act, or for any failure to act as long as they have made good faith efforts to carry out the terms of the Plan, as described in this Prospectus and on the forms that accompany each investment or activity.

Participants should recognize that neither Aastrom Biosciences nor the Plan Administrator can promise a profit or protect against a loss on the Common Stock purchased under the Plan.

Federal Income Tax Consequences

You should consult with your tax advisor for a complete analysis of the tax consequences of participating in the Plan.

The Internal Revenue Service has indicated in somewhat similar situations that a participant who purchases shares under the Plan will be treated as having received a distribution equal to the excess, if any, of the fair market value of the common shares on the purchase date over the amount of the cash payment made by the participant. Such a distribution would be taxable as ordinary dividend income to the extent that we have current or accumulated “earnings and profits” as of the end of the taxable year in which the distribution occurs. If the distribution exceeds the holder’s allocable share of those earnings and profits, then the excess will generally be treated first as a tax-free return of basis, and thereafter as capital gain.

You will not realize a gain or loss for U.S. Federal income tax purposes upon a transfer of shares to the Plan or the withdrawal of whole shares from the Plan. You will, however, generally realize a gain or loss when shares are sold. The amount of gain or loss will be the difference between the amount that you receive for the shares sold and your tax basis in these shares. In order to determine the tax basis for shares in your account, you should retain all account and transaction statements.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for Aastrom by Pepper Hamilton LLP, Detroit, Michigan acting as special counsel to Aastrom. Gray Cary Ware & Freidenrich LLP, San Diego, California, has acted as counsel to Aastrom in connection with this offering.

EXPERTS

The financial statements incorporated in this Prospectus by reference to the Annual Report on Form 10-K for the year ended June 30, 2003, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Other expenses in connection with the registration of the common stock hereunder will be substantially as follows (all expenses other than the SEC Registration Fee are estimates):


		Company
Item		Expense

SEC Registration Fee		$	1,230
Blue Sky fees and expenses		$	5,000
Printing and engraving expenses		$	20,000
Legal fees and expenses		$	25,000
Accounting fees and expenses		$	15,000
Nasdaq Filing Fees		$	22,500
Miscellaneous		$	11,270
	Total	$	100,000

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Sections 1561 through 1571 of the Michigan Business Corporation Act (the “MBCA”) authorize a corporation to grant or a court to award indemnity to directors, officers, employees and agents in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933.

The Bylaws of the Registrant, provide that the Registrant shall, to the fullest extent authorized or permitted by the MBCA, or other applicable law, indemnify a director or officer who was or is a party or is threatened to be made a party to any proceeding by or in the right of the Registrant to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Registrant, against expenses, including actual and reasonable attorneys’ fees, and amounts paid in settlement incurred in connection with the action or suit, if the indemnitee acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the Registrant or its shareholders. This section also authorizes the Registrant to advance expenses incurred by any agent of the Registrant in defending any proceeding prior to the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the agent to repay such amount unless it shall be determined ultimately that the agent is entitled to be indemnified.

The Bylaws also authorize the Registrant to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Registrant against any liability asserted against or incurred by such person in such capacity or arising out of such person’s status as such, regardless of whether the Registrant would have the power to indemnify such person against such liability under the provisions of the MBCA.

The Registrant has entered into an indemnification agreement with certain of its directors, officers and other key personnel, which contains provisions that may in some respects be broader than the specific indemnification provisions contained under applicable law. The indemnification agreement may require the Registrant, among other things, to indemnify such directors, officers and key personnel against certain liabilities that may arise by reason of their status or service as directors, officers or employees of the Registrant, to advance the expenses incurred by such parties as a result of any threatened claims or proceedings brought against them as to which they could be indemnified and, to the maximum extent that insurance coverage of such directors, officers and key employees under the Registrant’s directors’ and officers’ liability insurance policies is maintained.

Section 1209 of the MBCA permits a Michigan corporation to include in its Articles of Incorporation a provision eliminating or limiting a director’s liability to a corporation or its shareholders for monetary damages for

breaches of fiduciary duty. The enabling statute provides, however, that liability for breaches of the duty of loyalty, acts or omissions not in good faith or involving intentional misconduct or knowing violation of the law, or the receipt of improper personal benefits cannot be eliminated or limited in this manner. The Registrant’s Restated Articles of Incorporation include a provision which eliminates, to the fullest extent permitted by the MBCA, director liability for monetary damages for breaches of fiduciary duty.

ITEM 16. EXHIBITS.


EXHIBIT
NUMBER		DESCRIPTION OF DOCUMENT

5.1		Consent and Opinion of Pepper Hamilton LLP
23.1		Consent of PricewaterhouseCoopers LLP, independent accountants
23.2		Consent of Gray Cary Ware & Freidenrich LLP
23.3		Consent of Pepper Hamilton LLP (included in Exhibit 5.1)
24.1		Power of Attorney (see Signature page)

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

(1)

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(a)

To include any prospectus required by section 10(a)(3) of the Securities Act of 1933 (the “Securities Act”);

(b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(c)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(2)		That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)		To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

The undersigned Registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1)		For the purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective.

(2)		For the purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Ann Arbor, State of Michigan, on September 19, 2003.

AASTROM BIOSCIENCES, INC.


By:		/s/ R. Douglas Armstrong, Ph.D. R. Douglas Armstrong, Ph.D. President and Chief Executive Officer (Principal Executive Officer)

KNOW ALL MEN BY THESE PRESENCE, that each person whose signature appears below hereby constitutes and appoints R. Douglas Armstrong and Alan M. Wright, or either of them, as his or her attorney-in-fact, each with full power of substitution for him or her in any and all capacities, to sign any and all amendments to this Registration Statement, including, but not limited to post-effective amendments and any all new registration statements filed pursuant to Rule 462 under the Securities Act of 1933 in connection with or related to the offer contemplated by this Registration Statement, as amended, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney to said Registration Statement and any and all amendments thereto.

Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.


Signature	Title	Date

/s/ R. Douglas Armstrong, Ph.D. R. Douglas Armstrong, Ph.D.	President, Chief Executive Officer, and Chairman of the Board of Directors (Principal Executive Officer)	September 19, 2003

/s/ Alan M. Wright Alan M. Wright	Senior Vice President, Administrative and Financial Operations, Chief Financial Officer (Principal Financial and Accounting Officer)	September 19, 2003

/s/ Mary L. Campbell Mary L. Campbell	Director	September 19, 2003

/s/ Arthur F. Staubitz Arthur F. Staubitz	Director	September 19, 2003

/s/ Joseph A. Taylor Joseph A. Taylor	Director	September 19, 2003

/s/ Susan L. Wyant Susan L. Wyant	Director	September 19, 2003

INDEX TO EXHIBITS


EXHIBIT
NUMBER	NOTES	DESCRIPTION OF DOCUMENT

5.1		Consent and Opinion of Pepper Hamilton LLP
23.1		Consent of PricewaterhouseCoopers LLP, independent accountants
23.2		Consent of Gray Cary Ware & Freidenrich LLP
23.3		Consent of Pepper Hamilton LLP (included in Exhibit 5.1)
24.1		Power of Attorney (see signature page)
99.1		Direct Stock Purchase Plan Offering Materials*

To be filed by amendment.

Exhibit 5.1 PEPPER HAMILTON OPINION September 19, 2003 Aastrom Biosciences, Inc. Lobby L 24 Frank Lloyd Wright Dr. Ann Arbor, Michigan 48105 Re: Aastrom Biosciences, Inc. Registration Statement on Form S-3 Gentlemen: We have acted as special counsel to Aastrom Biosciences, Inc., a Michigan corporation (the "Company"), in connection with the filing with the Securities and Exchange Commission (the "Commission") of a registration statement on September 19, 2003 (the "Registration Statement") of the Company on Form S-3 under the Securities Act of 1933, as amended (the "Act"). The Registration Statement relates to the issuance by the Company of up to 10,000,000 shares of the Company's Common Stock (the "Shares"), covered by the Registration Statement which may be issued from time to time on a delayed or continuous basis pursuant to Rule 415 under the Act. The Shares will be issued pursuant to the Company's Shareholder Direct Stock Purchase Plan (the "Plan"). In this connection, we have examined the Registration Statement, including the exhibits thereto, the originals or copies, certified or otherwise identified to our satisfaction, of the Restated Articles of Incorporation and the By-Laws of the Company amended to date, resolutions of the Company's Board of Directors and such other documents and corporate records relating to the Company and the issuance and sale of the Shares as we have deemed appropriate. The opinion expressed herein is based exclusively on the applicable provisions of the Michigan Business Corporation Act as in effect on the date hereof. In rendering the opinion set forth below, we have assumed that (i) all information contained in all documents reviewed by us is true and correct; (ii) all signatures on all documents examined by us are genuine; (iii) all documents submitted to us as originals are authentic and all documents submitted to us as copies conform to the originals of those documents; (iv) each natural person signing any document reviewed by us had the legal capacity to do so; (v) each person signing in a representative capacity (other than on behalf of the Company) any document reviewed by us had authority to sign in such capacity; (vi) the Registration Statement, and any amendments thereto (including post-effective amendments) will have become effective and comply with all applicable laws; (vii) the Shares will be issued and sold in compliance with applicable federal and state securities laws and in the manner stated in the Registration Statement and in accordance with the Plan; (viii) the Plan will be administered in accordance with its terms and is enforceable against the Company; (ix) the certificates representing the Shares, will be duly executed and delivered; and (x) the Restated Articles of Incorporation and the By-Laws of the Company amended to date and resolutions of the Company's Board of Directors specifically authorizing the issuance and sale of the Shares remain in effect and unmodified, except as may be required as set forth in this opinion. On the basis of the foregoing, we are of the opinion that the Shares, when (i) the terms of the offer, issue and sale have been duly established in conformity with the Plan and do not violate any applicable law or result in a default under or breach of any agreement or instrument binding upon the Company and comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company, (ii) the Shares have been duly executed and authenticated in accordance with the Plan and offered, issued and sold as contemplated in 26

the Registration Statement and the Plan, and (iii) the Company has received the consideration determined to be adequate in the resolutions of the Company's Board of Directors authorizing the issuance and sale of the Shares and in the Plan, will be duly authorized, validly issued, fully paid, and non-assessable. The foregoing opinion is qualified to the extent that the enforceability of any document, instrument or the Shares may be limited by or subject to bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally, and general equitable or public policy principles. It is understood that this opinion is to be used only in connection with the offer and sale of the Shares while the Registration Statement is in effect. Please note that we are opining only as to the matters expressly set forth herein, and no opinion should be inferred as to any other matters. This opinion is based upon currently existing statutes, rules, regulations and judicial decisions, and we disclaim any obligation to update this opinion or otherwise advise you of any change in any of these sources of law or subsequent legal or factual developments which might affect any matters or opinions set forth herein. We hereby consent to the reference to our firm under the caption "Legal Matters" in the Registration Statement and to the filing of this opinion as an exhibit to the Registration Statement. Such consent does not constitute a consent under Section 7 of the Act, because we have not certified any part of such Registration Statement and do not otherwise come within the categories of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder. Very truly yours, PEPPER HAMILTON LLP 27

Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated August 8, 2003, relating to the financial statements and financial statement schedule, which appears in Aastrom Biosciences, Inc.'s Annual Report on Form 10-K for the year ended June 30, 2003. We also consent to the reference to us under the heading "Experts" in such Registration Statement. PRICEWATERHOUSECOOPERS LLP Minneapolis, Minnesota September 17, 2003 28

Exhibit 23.2 [GRAY CARY WARE & FREIDENRICH LETTERHEAD] September 18, 2003 Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Aastrom Biosciences, Inc. Registration Statement on Form S-3 Ladies and Gentlemen: As counsel to Aastrom Biosciences, Inc., a Michigan corporation (the "Company"), in connection with the proposed offer and sale of those certain shares of the Company's Common Stock, $0 par value, as set forth in the Registration Statement on Form S-3 (the "Registration Statement") for the Company's Shareholder Direct Stock Purchase Plan, we hereby consent to the use of our name under the caption "Legal Matters" in the Registration Statement, including the Prospectus constituting a part thereof, as originally filed or as subsequently amended. Very truly yours, /s/ GRAY CARY WARE & FREIDENRICH LLP 29

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