e10vq
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007,
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission file number 0-22025
AASTROM BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
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Michigan
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94-3096597 |
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(State or other jurisdiction of
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(I.R.S. employer |
incorporation or organization)
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identification no.) |
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24 Frank Lloyd Wright Dr. |
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P.O. Box 376 |
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Ann Arbor, Michigan
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48106 |
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(Address of principal executive offices)
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(Zip code) |
(734) 930-5555
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes -
þ No - o |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). |
Large accelerated filer -
o
Accelerated filer - þ Non-accelerated filer - o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuers classes of common stock as
of the latest practicable date.
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COMMON STOCK, NO PAR VALUE
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132,781,785 |
(Class)
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Outstanding at November 1, 2007 |
AASTROM BIOSCIENCES, INC.
Quarterly Report on Form 10-Q
September 30, 2007
TABLE OF CONTENTS
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
AASTROM BIOSCIENCES, INC.
(a development stage company)
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands)
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June 30, |
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September 30, |
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2007 |
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2007 |
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Assets |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
13,439 |
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$ |
24,300 |
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Short-term investments |
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14,886 |
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Receivables, net |
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78 |
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71 |
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Inventories |
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8 |
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8 |
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Other current assets |
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1,766 |
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2,366 |
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Total current assets |
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30,177 |
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26,745 |
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PROPERTY AND EQUIPMENT, NET |
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2,671 |
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2,606 |
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Total assets |
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$ |
32,848 |
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$ |
29,351 |
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Liabilities and Shareholders Equity |
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CURRENT LIABILITIES: |
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Accounts payable and accrued expenses |
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$ |
1,823 |
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$ |
1,823 |
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Accrued employee benefits |
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1,238 |
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1,191 |
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Current portion of long-term debt |
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439 |
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490 |
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Total current liabilities |
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3,500 |
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3,504 |
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LONG-TERM DEBT |
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1,097 |
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989 |
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SHAREHOLDERS EQUITY: |
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Common stock, no par value;
shares authorized 250,000,000;
shares issued and
outstanding 120,012,869 and
120,901,228, respectively |
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187,995 |
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189,652 |
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Deficit accumulated during the development stage |
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(159,744 |
) |
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(164,794 |
) |
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Total shareholders equity |
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28,251 |
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24,858 |
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Total liabilities and shareholders equity |
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$ |
32,848 |
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$ |
29,351 |
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The accompanying notes are an integral part of these financial statements.
3
AASTROM BIOSCIENCES, INC.
(a development stage company)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
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March 24, 1989 |
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Quarter ended |
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(Inception) to |
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September 30, |
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September 30, |
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2006 |
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2007 |
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2007 |
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REVENUES: |
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Product sales and rentals |
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$ |
12 |
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$ |
12 |
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$ |
1,383 |
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Research and development agreements |
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2,105 |
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Grants |
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92 |
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75 |
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9,418 |
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Total revenues |
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104 |
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87 |
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12,906 |
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COSTS AND EXPENSES: |
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Cost of product sales and rentals |
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594 |
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Cost of product sales and
rentals provision for obsolete and excess inventory |
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2,239 |
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Research and development |
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2,304 |
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3,873 |
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125,443 |
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Selling, general and administrative |
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2,384 |
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1,614 |
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58,886 |
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Total costs and expenses |
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4,688 |
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5,487 |
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187,162 |
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LOSS FROM OPERATIONS |
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(4,584 |
) |
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(5,400 |
) |
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(174,256 |
) |
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OTHER INCOME (EXPENSE): |
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Other income |
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1,249 |
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Interest income |
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527 |
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365 |
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9,463 |
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Interest expense |
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(15 |
) |
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(282 |
) |
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Total other income |
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527 |
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350 |
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10,430 |
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NET LOSS |
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$ |
(4,057 |
) |
|
$ |
(5,050 |
) |
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$ |
(163,826 |
) |
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COMPUTATION OF NET LOSS PER SHARE
APPLICABLE TO COMMON SHARES: |
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NET LOSS |
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$ |
(4,057 |
) |
|
$ |
(5,050 |
) |
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NET LOSS PER COMMON SHARE |
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(Basic and Diluted) |
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$ |
(.03 |
) |
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$ |
(.04 |
) |
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Weighted average number
of common shares outstanding
(Basic and Diluted) |
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119,177 |
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120,607 |
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The accompanying notes are an integral part of these financial statements.
4
AASTROM BIOSCIENCES, INC.
(a development stage company)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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March 24, 1989 |
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Quarter ended |
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(Inception) to |
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September 30, |
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September 30, |
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2006 |
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2007 |
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2007 |
|
OPERATING ACTIVITIES: |
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Net loss |
|
$ |
(4,057 |
) |
|
$ |
(5,050 |
) |
|
$ |
(163,826 |
) |
Adjustments to reconcile net
loss to net cash used for operating activities: |
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Depreciation and amortization |
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103 |
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186 |
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4,750 |
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Loss on property held for resale |
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110 |
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Amortization of discounts and
premiums on investments |
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(41 |
) |
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(114 |
) |
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(1,407 |
) |
Stock compensation expense |
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571 |
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550 |
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5,974 |
|
Inventory write downs and reserves |
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2,239 |
|
Stock issued pursuant to license agreement |
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|
3,300 |
|
Provision for losses on accounts receivable |
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204 |
|
Changes in assets and liabilities: |
|
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Receivables |
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35 |
|
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7 |
|
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|
(320 |
) |
Inventories |
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|
1 |
|
|
|
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|
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|
(2,343 |
) |
Other current assets |
|
|
(291 |
) |
|
|
(658 |
) |
|
|
(1,626 |
) |
Accounts payable and accrued expenses |
|
|
(172 |
) |
|
|
|
|
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|
1,717 |
|
Accrued employee benefits |
|
|
(226 |
) |
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(47 |
) |
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1,191 |
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Net cash used for operating activities |
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(4,077 |
) |
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(5,126 |
) |
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(150,037 |
) |
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INVESTING ACTIVITIES: |
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Organizational costs |
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(73 |
) |
Purchase of short-term investments |
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(14,779 |
) |
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(181,338 |
) |
Maturities of short-term investments |
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21,500 |
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15,000 |
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182,745 |
|
Property and equipment purchases |
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(110 |
) |
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(121 |
) |
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(5,632 |
) |
Proceeds from sale of property held for resale |
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|
400 |
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Net cash provided by (used for) investing activities |
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6,611 |
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14,879 |
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(3,898 |
) |
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FINANCING ACTIVITIES: |
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Net proceeds from issuance of preferred stock |
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51,647 |
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Net proceeds from issuance of common stock |
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|
156 |
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1,107 |
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124,305 |
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Repurchase of common stock |
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(49 |
) |
Payments received for stock purchase rights |
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3,500 |
|
Payments received under shareholder notes |
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31 |
|
Restricted cash used as compensating balance |
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58 |
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(719 |
) |
Proceeds from long-term debt |
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|
751 |
|
Principal payments under long-term obligations |
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(57 |
) |
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(1,231 |
) |
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Net cash provided by financing activities |
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156 |
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1,108 |
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178,235 |
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS |
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2,690 |
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|
10,861 |
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|
24,300 |
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CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD |
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|
9,034 |
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|
13,439 |
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|
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD |
|
$ |
11,724 |
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|
$ |
24,300 |
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|
$ |
24,300 |
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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Interest paid |
|
$ |
|
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$ |
15 |
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|
$ |
282 |
|
The accompanying notes are an integral part of these financial statements.
5
AASTROM BIOSCIENCES, INC.
(A development stage company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
Aastrom Biosciences, Inc. was incorporated in March 1989 (Inception), began employee-based
operations in 1991, and is in the development stage. The Company operates its business in one
reportable segment research and product development involving the development of autologous cell
products for use in regenerative medicine.
Successful future operations are subject to several technical hurdles and risk factors,
including satisfactory product development, timely initiation and completion of clinical trials,
regulatory approval and market acceptance of the Companys products and the Companys continued
ability to obtain future funding.
The Company is subject to certain risks related to the operation of its business and
development of its products and product candidates. Management believes with the inclusion of the
cash raised in October 2007, cash, cash equivalents and short-term investments are adequate to
finance its operations. However, the Company will need to raise additional funds in order to
complete its product development programs, complete clinical trials needed to market its products,
and commercialize these products. The Company cannot be certain that such funding will be
available on favorable terms, if at all. Some of the factors that will impact the Companys ability
to raise additional capital and its overall success include: the rate and degree of progress for
its product development, the rate of regulatory approval to proceed with clinical trial programs,
the level of success achieved in clinical trials, the requirements for marketing authorization from
regulatory bodies in the U.S., EU and other countries, the liquidity and market volatility of the
Companys equity securities, regulatory and manufacturing requirements and uncertainties,
technological developments by competitors, and other factors. If the Company cannot raise such
funds, it may not be able to develop, enhance or commercialize products, take advantage of future
opportunities, including possible acquisition or development of complementary business activities,
or respond to competitive pressures or unanticipated requirements, which would likely have a
material adverse impact on the Companys business, financial condition and results of operations.
The Company does not expect to generate positive cash flows from our consolidated operations for at
least the next several years and then only if significant TRC-based cell product sales commence.
2. Basis of Presentation
The consolidated condensed financial statements included herein have been prepared by us
without audit according to the rules and regulations of the Securities and Exchange Commission
(SEC). Certain information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles in the United States of
America have been omitted pursuant to such rules and regulations. The financial statements reflect,
in the opinion of management, all adjustments (consisting only of normal, recurring adjustments)
necessary to state fairly the financial position and results of operations as of and for the
periods indicated. The results of operations for the quarter ended
6
September 30,
2007, are not necessarily indicative of the results to be expected for the full year or for
any other period.
These financial statements should be read in conjunction with the audited financial statements
and the notes thereto included in our 2007 Annual Report on Form 10-K for the year ended June 30,
2007, as filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of Aastrom and its wholly-owned
subsidiaries, Aastrom Biosciences GmbH, located in Berlin, Germany, Aastrom Biosciences, Ltd.,
located in Dublin, Ireland and Aastrom Biosciences, S.L., located in Barcelona, Spain
(collectively, the Company). All significant inter-company transactions and accounts have been
eliminated in consolidation. These subsidiaries have limited operations and are not significant to
the consolidated financial statements.
3. Share-Based Compensation
Service-Based Options
During the quarter ended September 30, 2007, the Company granted 1,631,800 service-based
options to purchase common stock. These were granted with exercise prices equal to the fair value
of the Companys stock at the grant date, vest over four years (other than non-employee director
options which vest over one year) and have lives of ten years. The weighted average grant-date fair
value of service-based options granted under the Companys Option Plans during the quarters ended
September 30, 2006 and 2007 was $1.14 and $0.72, respectively.
The net compensation costs recorded for the service-based stock options related to employees
and directors were approximately $487,000 and $516,000 for the quarters ended September 30, 2006
and 2007, respectively.
The fair value of each service-based stock option grant for the reported periods is estimated
on the date of the grant using the Black-Scholes option-pricing model using the assumptions noted
in the following table.
|
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|
Year ended |
|
|
September 30, |
|
|
2006 |
|
2007 |
Stock Option Plans: |
|
|
|
|
|
|
|
|
Expected dividend rate |
|
|
0 |
% |
|
|
0 |
% |
Expected stock price volatility |
|
|
67 |
% |
|
|
61 |
% |
Risk free interest rate |
|
|
4.9 |
% |
|
|
4.3 |
% |
Estimated forfeiture rate |
|
|
10 |
% |
|
|
10 |
% |
Expected life (years) |
|
|
6.6 |
|
|
|
6.6 |
|
7
The following table summarizes the activity for service-based stock options for the indicated
periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted Average |
|
|
Aggregate |
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Intrinsic |
|
|
|
Options |
|
|
Exercise Price |
|
|
Contractual Term |
|
|
Value |
|
Outstanding at June 30, 2007 |
|
|
8,357,536 |
|
|
$ |
1.46 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,631,800 |
|
|
$ |
1.12 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(290,575 |
) |
|
$ |
1.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2007 |
|
|
9,698,761 |
|
|
$ |
1.41 |
|
|
|
7.8 |
|
|
$ |
501,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2007 |
|
|
4,048,842 |
|
|
$ |
1.59 |
|
|
|
6.0 |
|
|
$ |
380,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2007 there was approximately $2,235,000 of total unrecognized compensation
cost related to non-vested service-based stock options granted under the Option Plan. That cost is
expected to be recognized over a weighted-average period of 3.1 years.
Performance-Based Stock Options
During the quarter ended September 30, 2007, the Board of Directors granted 69,400
performance-based stock options to a key employee in three equal tranches of 23,133 options. The
weighted average grant-date fair value of performance-based options granted under the Companys
Option Plans during the quarter ended September 30, 2007 was $0.67. These performance options have
a 10 year life and an exercise price that exceeded the fair value of the Companys common stock at
the grant date. Vesting of these performance options is dependent on (i) the passage of time
subsequent to the grant date and (ii) meeting certain performance conditions, which relate to our
progress in our clinical trial programs, which were established by the Board of Directors. The
Board of Directors will determine if the performance conditions have been met. Stock-based
compensation expense for these options will be recorded when the Company believes that the vesting
of these options is probable based on the progress of its clinical trial programs and other
relevant factors.
As of September 30, 2007, there are 2,549,800 performance-based options outstanding. There
are three tranches of performance-based options that vest upon the satisfaction of performance
conditions, all of which vest based on progress toward clinical trial or product successes within a
certain timeframe.
For the quarter ended September 30, 2007, management reviewed the progress toward the
performance conditions necessary for these options to vest and concluded that it was not yet
probable that the performance conditions of any of the tranches of options would be met and,
accordingly, no compensation expense has been recorded
8
The following table summarizes the activity for performance-based stock options for the
indicated period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|
Exercise |
|
|
Remaining |
|
|
Aggregate |
|
Options |
|
Shares |
|
|
Price |
|
|
Contractual Term |
|
|
Intrinsic Value |
|
Outstanding at June 30, 2007 |
|
|
2,480,400 |
|
|
$ |
1.50 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
69,400 |
|
|
$ |
1.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2007 |
|
|
2,549,800 |
|
|
$ |
1.50 |
|
|
|
9.1 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate estimated fair value of these awards that are outstanding as of September 30,
2007 is approximately $2,542,000.
Restricted Stock Awards
Restricted stock awards generally vest over a four year period and entitle the recipient to
receive common stock upon vesting. The compensation costs charged as operating expenses for
restricted stock for the quarters ended September 30, 2006 and 2007 were $84,000 and $34,000,
respectively.
A summary of the Companys restricted stock activity for the quarter ended September 30, 2007
is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Grant Date Fair |
|
Non-vested Restricted Shares |
|
Shares |
|
|
Value |
|
Non-vested at July 1, 2007 |
|
|
220,063 |
|
|
$ |
2.19 |
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
(62,755 |
) |
|
$ |
2.19 |
|
Forfeited |
|
|
(14,925 |
) |
|
$ |
2.38 |
|
|
|
|
|
|
|
|
|
Non-vested at September 30, 2007 |
|
|
142,383 |
|
|
$ |
2.16 |
|
|
|
|
|
|
|
|
|
As of September 30, 2007 there was approximately $107,000 of total unrecognized compensation
cost related to non-vested restricted stock awards granted under the Option Plan. That cost is
expected to be recognized over a weighted-average period of 2.2 years.
4. Shareholders Equity
During the quarter ended September 30, 2007, the Company issued 94,460 shares of common stock
as part of the Direct Stock Purchase Plan and 808,824 shares of common stock in connection with the
exercise of certain warrants previously issued to investors, for cash proceeds of $1,107,000.
5. Net Loss Per Common Share
Net loss per common share is computed using the weighted-average number of common shares
outstanding during the period. Common equivalent shares, consisting of
9
options, warrants for the
purchase of common stock and unvested restricted shares of common stock are not included in the per
share calculation where the effect of their inclusion would be anti-dilutive. The aggregate number
of common equivalent shares that have been excluded from the computations of net loss per common
share for the quarters ended September 30, 2006 and 2007 is approximately 13,002,795 and
16,629,787, respectively.
6. Subsequent Events
On October 17, 2007, the Company closed its previously announced registered direct offering of
11,842,105 shares of common stock and warrants to purchase up to 5,921,053 shares of common stock
to certain institutional investors at a price of $1.14 per unit, with each unit consisting of one
share of common stock and one warrant to purchase 0.5 shares of common stock at an exercise price
of $1.5875 per share of common stock. The aggregate gross proceeds from the direct offering were
approximately $13.5 million. The net proceeds, after deducting the placement agents fee and other
estimated offering expenses, were approximately $12.5 million.
10
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview of Aastrom
We are a regenerative medicine company (a medical area that focuses on developing therapies
that regenerate damaged or diseased tissues or organs) focused on the clinical development of
autologous cell products (cells collected from a patient and returned to that same patient) for the
repair or regeneration of multiple human tissues, based on our proprietary Tissue Repair Cell (TRC)
Technology. Our preclinical and clinical product development programs utilize patient-derived bone
marrow stem and early progenitor cell populations, and are being investigated for their ability to
aid in the regeneration of tissues such as bone, vascular, cardiac and neural. TRC-based products
have been used in over 250 patients, and are currently in the following stages of development:
|
|
|
Bone regeneration Bone Repair Cells (BRCs): |
|
o |
|
Osteonecrosis of the femoral head: |
|
§ |
|
U.S.: ON-CORE Phase III clinical trial enrolling patients; Orphan Drug Designation
from the FDA for use in the treatment of osteonecrosis of the femoral head |
|
|
§ |
|
Spain: Pivotal clinical trial enrolling patients |
|
§ |
|
U.S.: Positive final patient results from Phase I/II clinical trial reported in
October 2007 |
|
|
|
Vascular regeneration Vascular Repair Cells (VRCs): |
|
o |
|
Critical limb ischemia: |
|
§ |
|
U.S.: RESTORE-CLI Phase IIb clinical trial enrolling patients |
|
|
§ |
|
Germany: Phase I/II clinical trial enrolling patients; positive interim data
reported in October 2007 |
|
|
|
Cardiac regeneration Cardiac Repair Cells (CRCs): |
|
§ |
|
Preclinical research underway; clinical program under development; Orphan Drug
Designation from the FDA for use in the treatment of dilated cardiomyopathy, a severe
chronic disease of the heart |
|
|
|
Neural regeneration Neural Repair Cells (NRCs): |
|
§ |
|
Preclinical research underway; clinical program under development |
Our platform TRC Technology is based on:
|
|
|
Autologous cell products which are a unique cell mixture containing large numbers of stem
and early progenitor cells produced outside of the body from a small amount of bone marrow
taken from the patient, and |
|
|
|
|
The means to produce these products in an automated process. |
We have developed a patented and proprietary manufacturing system to produce human cells for
clinical use. This automated cell manufacturing system enables the single-pass perfusion cell
culture process. Single-pass perfusion is our patented technology for growing large numbers of
human cells. The cell component of TRC-based products include adult stem
11
and early progenitor cell
populations, which are capable of forming tissues such as bone, vascular, cardiac, neural, and the
hematopoietic and immune system.
Since our inception, we have been in the development stage and engaged in research and product
development, conducted principally on our own behalf. Our initial business plan was to pursue our
targeted markets by commercializing our cell manufacturing system and supplies. Since that time we
have phased out our marketing efforts promoting the cell manufacturing system as a commercial
product in the U.S. Currently, we have product sales consisting of limited sales of manufacturing
supplies to academic collaborators for research and limited revenue related to cell-based products.
Our current focus is on utilizing our TRC Technology to produce autologous cell-based products
for use in regenerative medicine. At such time as we satisfy applicable regulatory approval
requirements, we expect the sales of our TRC-based products to constitute nearly all of our product
sales revenues.
We do not expect to generate positive cash flows from our consolidated operations for at least
the next several years and then only if significant TRC-based cell product sales commence. Until
that time, we expect that our revenue sources from our current activities will consist of only
minor sales of our cell products, and dendritic cell and T-cell manufacturing supplies to our
academic collaborators, grant revenue, research funding and potential licensing fees or other
financial support from potential future corporate collaborators.
We are beginning to explore the possibility of entering into complementary regenerative
medicine business activities, whether through acquisition or otherwise.
To date, we have financed our operations primarily through public and private sales of our
equity securities, and we expect to continue obtaining required capital in a similar manner. As a
development stage company, we have never been profitable and do not anticipate having net income
unless and until significant product sales commence. With respect to our current activities, this
is not likely to occur until we obtain significant additional funding, complete the required
clinical trials for regulatory approvals, and receive the necessary approvals to market our
products. Through September 30, 2007, we have accumulated a net loss of approximately $164
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, obtain the required regulatory approvals,
or complete additional corporate partnering or acquisition transactions.
Clinical Development
Currently, our active clinical development programs are focused on the utilization of our TRC
Technology in the areas of vascular tissue and bone regeneration, and we anticipate beginning
clinical trials in the cardiac and neural regeneration therapeutic areas during fiscal year 2008.
The preclinical data for our TRC-based products have shown that the large numbers of the stem
and early progenitor cells obtained through application of our TRC Technology can develop into a
variety of tissues including blood, bone, vascular and fat, as well as the potential to form
tissues characteristic of certain internal organs. We have demonstrated in the laboratory that
TRC-based products can differentiate into osteoblast (bone cell) and endothelial (blood vessel)
cell lineages. Based on these preclinical observations, clinical trials have been
12
initiated in
the U.S. and European Union (EU) for bone regeneration in patients with severe long bone fractures,
and for vascular tissue regeneration in patients with critical limb ischemia.
It should be noted that the preliminary results of our current clinical trials may not be
indicative of results that will be obtained from subsequent patients in those trials or from future
clinical trials. Further, our future clinical trials may not be successful, and we may not be able
to obtain the required Biologic License Application (BLA) registration in the U.S. or required
foreign regulatory approvals, Marketing Authorization (MA), for our TRC-based products in a timely
fashion, or at all. See Risk Factors.
Clinical Trials Summary
Bone Regeneration
Osteonecrosis of the Femoral Head:
In October 2007, early clinical results from four compassionate use patients were presented by
an investigator from the Orthopaedic Institute, König-Ludwig-Haus, University of Würzburg, Germany,
involving the first use of our BRCs to treat patients suffering from osteonecrosis of the femoral
head. Osteonecrosis of the femoral head involves the death of cells in the bone and marrow within
the femur head and in many cases leads to total hip replacement. All patients tolerated the
procedure well, have reported a reduction in hip pain with no signs of disease progression, as
determined by MRI and X-Ray, and were back to work within 6 months after treatment. In addition,
no cell-related adverse events were reported and none of these patients have required hip
replacement surgery.
In May 2007, the FDA approved our Investigational New Drug (IND) application which allowed us
to proceed with our ON-CORE trial, a U.S. Phase III clinical trial, to use our Bone Repair Cells
(BRCs) based on our TRC Technology in the treatment of osteonecrosis (also known as avascular
necrosis) of the femoral head. Currently, two clinical sites have been initiated for patient
enrollment, and our website will be updated as additional sites are initiated. This trial will
seek to enroll 120 patients, randomized into two patient groups, at up to 20 clinical sites. The
primary efficacy variable of this trial is to delay disease progression to a more severe stage in
patients treated with BRCs by at least 24 months post-treatment. Disease progression will be
measured by a blinded third-party reviewer by x-ray and MRI. We intend this to be a pivotal trial
with the goal of demonstrating clinical safety and efficacy for the submission of a Biologics
License Application (BLA). We may have to provide or generate further patient data, such as data
from the ongoing pivotal trial in Spain, to support a U.S. BLA submission.
In March 2006, we received an Orphan Drug Designation from the FDA to use our BRCs in the
treatment of osteonecrosis of the femoral head.
In January 2007, we initiated patient enrollment and treatment in a pivotal clinical trial in
Spain utilizing BRCs for the treatment of osteonecrosis of the femoral head. The trial protocol
was approved by the Spanish Drug Agency (AEMPS) and Centro Medico Teknons (Teknon) Ethics
Committee for our Investigational Medicinal Product Dossier (IMPD), and is being conducted at
Teknon located in Barcelona, Spain. Patient recruitment is ongoing for up to 10 patients.
13
Fractures, Spine and Jaw:
In October 2007, positive final results from our U.S. Phase I/II clinical trial for the
treatment of severe long bone non-union fractures were reported at the Orthopedic Trauma
Association Annual Meeting in Boston, MA by the lead clinical investigator. In the study, patients
with non-union tibia, humerus or femur fractures that had failed to heal after one or more medical
procedures (average 1.75) showed an overall healing rate of 91% after one year. Overall, 34
patients completed the six-month post-treatment follow-up and 33 completed the 12-month follow-up.
The 33 patients followed for 12 months showed an overall healing rate of 91%, as determined by bone
bridging observed with radiographic imaging or computed tomography. Final results showed healing
success in 91% (21 of 23) of tibia fractures, 100% (3 of 3) of humerus fractures, and 86% (6 of 7)
of femur fractures. In addition to the 91% healing rate observed after 12 months, results at six
months showed that bone bridging successfully occurred in 85% (29 of 34) of patients and that signs
of early healing (callus formation) were present in 97% (33 of 34) of patients. Three patients
failed to complete the required follow-up visits. Though final data could not be collected from
these three patients, two showed healing by 18 weeks. No cell-related adverse events were reported.
The following centers participated in the multi-center, prospective, open-label clinical trial:
Lutheran General Hospital, Park Ridge, IL; the University of Michigan Health System, Ann Arbor, MI;
William Beaumont Hospital, Royal Oak, MI; and Lutheran Medical Center, Brooklyn, NY.
An initial bone regeneration study was conducted at three centers in Spain under Ethical
Committee approvals. Results from this feasibility study conducted at Hospital General de
lHospitalet, Teknon and Hospital de Barcelona-SCIAS in Spain were disclosed in May 2005. All five
patients, with a total of 6 treated fractures, have been reported as healed by a third party
independent reviewer using radiographic images, or by clinical observation. No cell-related adverse
events were observed to date. Following the feasibility trial, an IMPD was approved by the AEMPS to
commence a 10-patient Phase II non-union fracture trial. The Phase II study has completed
enrollment and BRC treatment of all 10 patients, and we are continuing the specified 24-months
follow-up of these patients.
A Phase I/II spine fusion clinical trial is currently open at William Beaumont Hospital, Royal
Oak, MI that may enroll up to 25 patients. No cell-related adverse events have been reported to
date. With the FDA approval of the Phase III ON-CORE Trial we believe this trial is no longer
necessary to demonstate the feasibility of using BRCs for bone regeneration. We are continuing
regular patient follow-up for treated patients, however, further patient enrollment has been
discontinued.
We have completed a jaw bone (maxilla) regeneration clinical feasibility trial in Barcelona,
Spain, for edentulous patients with severe bone loss who needed a sinus lift procedure so that
dental implants could be placed. This feasibility trial has enrolled the targeted 5 patients. No
cell-related adverse events have been reported.
14
Vascular Tissue Regeneration
Critical Limb Ischemia:
Based on our laboratory observations that TRC-based products have the ability to form small
blood vessels, and third party trials involving the use of bone marrow cells for peripheral
vascular disease, we are conducting trials to evaluate the safety and efficacy of Vascular Repair
Cells (VRCs) based on TRC Technology in the treatment of diabetics with open foot wounds and
critical limb ischemia (CLI).
In April 2007, we initiated patient enrollment in our RESTORE-CLI trial, a U.S. Phase IIb
prospective, controlled, randomized, double-blind, multi-center clinical trial to treat patients
suffering from critical limb ischemia, the end stage of peripheral arterial disease. This study is
expected to enroll 120 patients at up to 20 sites, randomized into two patient groups, to evaluate
the safety and efficacy of VRCs in the treatment of critical limb ischemia. Currently, nine
clinical sites have been initiated for patient enrollment, and our website will be updated as
additional sites are initiated. Patients will be followed for a period of twelve months
post-treatment. In addition to assessing the safety of the VRCs, secondary objectives include
assessing the number of patients requiring major amputation, wound closure and blood flow in the
affected limbs, patient quality of life, pain scores and analgesic use. Patient enrollment began
in June 2007, when the first patient was accrued and treated.
In October 2007, positive interim results from the first 13 patients treated in a multi-arm
Phase I/II single-center clinical trial to evaluate the safety of VRCs and normal bone marrow cells
in the treatment of chronic diabetic foot wounds associated with CLI were reported by an
investigator from the Heart & Diabetes Center located in Bad Oeynhausen, Germany at the 2nd
Congress of the German Society for Stem Cell Research in Würzburg, Germany. Results reflect
treatment experience from: four diabetic patients with ischemia-related chronic tissue ulcers who
were treated with our VRCs; seven patients who were treated with normal bone marrow cells; and two
standard of care patients who received no cells. All patients received standard wound care as
described by the American Diabetes Association. Twelve months post-treatment, all patients in the
interim analysis who were treated with VRCs reported no major amputations, no cell-related adverse
events, and healing of all open wounds. Of the seven patients treated with normal bone marrow
cells, five reported results similar to the VRC-treated patients 12 months post-treatment, one
reported similar results to the VRC-treated patients 18 months post-treatment, and one patient
received a major amputation. For the two standard of care patients who only received wound care (no
cells), one patient received a major amputation and one patient experienced no improvement in wound
healing after 12 months. Patient accrual is ongoing.
Cardiac Regeneration
In February 2007, our proprietary Cardiac Repair Cells (CRCs) based on our TRC Technology
received an Orphan Drug Designation from the FDA for use in the treatment of dilated cardiomyopathy
(DCM). DCM is a chronic cardiac disease that leads to enlargement of the heart and is associated
with the reduced pump function to a point that blood circulation is impaired. Typically patients
with DCM present with symptoms of congestive heart failure, including limitations in their physical
activity and shortness of breath. DCM often represents the end stage of chronic ischemic heart
disease in patients who have experienced multiple heart
15
attacks. Patient prognosis depends on the stage of the disease but is characterized by a high
mortality rate. Other than heart transplant, there are no effective long-term treatment options
for end stage patients with this disease. The New England Journal of Medicine estimates that in
the U.S. alone 120,000 people currently suffer from this disease; other sources report estimates of
up to 150,000.
We are in the process of preparing clinical activities in the EU that will include treating
patients suffering from DCM. We expect that these patient treatments will provide early clinical
experience that will assist us in the development of the clinical protocols we are preparing for a
U.S. IND submission targeting this indication.
Neural Regeneration
We have begun the process of developing a proprietary Neural Repair Cell (NRC) product for the
treatment of spinal cord injuries. Preclinical work has been initiated and we are in the process
of preparing clinical activities in the EU. We expect that these patient treatments will provide
early clinical experience that will assist us in the development of future clinical protocols.
Additional Activity
In certain non-U.S. regions, autologous cells, such as our TRC-based products, do not require
a marketing authorization for commercial distribution. This enables us to gain product-use
experience and refine our clinical development strategies through compassionate use and standard of
care patient treatment in countries where it is allowed and where both patient and physician see
some potential benefit from using TRC-based products. We do not anticipate generating significant
sales outside of the U.S. until we have sufficient evidence of clinical efficacy to ensure
physician acceptance and product reimbursement, and to justify the investment in manufacturing,
sales and marketing infrastructure. However, we are currently generating limited, nominal sales of
TRC-based products and expect to continue this level of activity. As a result of these
compassionate use and other patient treatment activities, it is possible that we, or third parties,
may make case studies and other data generated outside of a clinical trial program available on
websites, in publications or in presentations. Such data should be considered anecdotal; it is not
intended to represent evidence of clinical efficacy or suggest that any future clinical trials will
demonstrate that TRC-based products are effective in any specific medical application.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in accordance with U.S. generally
accepted accounting principles (GAAP) requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, net revenues and expenses, and related
disclosures. We believe our estimates and assumptions are reasonable; however, actual results and
the timing of the recognition of such amounts could differ from these estimates.
There are several accounting policies that we believe are significant to the presentation of
our consolidated financial statements. The most signicant accounting policy relates to stock-based
compensation expense.
16
Performance-Based Stock Options See the footnotes in our financial statement as well
as our Critical Accounting Policies discussion in our Annual Report on Form 10-K for information
with respect to key terms and provisions of our performance-stock options.
During the quarter ended September 30, 2007, management reviewed the progress toward the
performance conditions necessary for these options to vest and concluded that it was not yet
probable that the performance conditions of any of the tranches of options would be met and,
accordingly, no compensation has been recorded. However, it is possible for the first tranche of
options; progress toward the necessary performance conditions in the next three to six months may
cause management to determine that this tranche of options is probable of vesting. If management
had determined that, as of September 30, 2007, the first tranche of 849,933 options was probable of
vesting, compensation expense of approximately $759,000 would have been recorded in the quarter
(which would represent the accumulated compensation expense from the grant dates of these options
through September 30, 2007).
Results of Operations
Total revenues for the quarter ended September 30, 2007 were $87,000, which consisted of grant
revenues and product sales, compared to total revenues of $104,000 for the same period in fiscal
year 2007. Product sales for the quarter ended September 30, 2007 were $12,000, which was the
same for the quarter ended September 30, 2006. Grant revenues decreased to $75,000 for the quarter
ended September 30, 2007 compared to $92,000 for the quarter ended September 30, 2006. The decrease
in grant revenues is the result of decreased activities on grants from the National Institutes of
Health. Grant revenues are recorded on a cost-reimbursement basis and accounted for 86% of total
revenues for the quarter ended September 30, 2007 and 88% of total revenues for the quarter ended
September 30, 2006. Grant revenues may vary in any period based on timing of grant awards,
grant-funded activities, level of grant funding and number of grant awards received.
Total costs and expenses increased to $5,487,000 for the quarter ended September 30, 2007,
compared to $4,688,000 for the quarter ended September 30, 2006.
Costs and expenses include an increase in research and development expenses to $3,873,000 for
the quarter ended September 30, 2007 from $2,304,000 for the quarter ended September 30, 2006.
This increase reflects continued expansion of our research and development and manufacturing
activities to support future regulatory submissions and on-going and planned tissue regeneration
clinical trials and activities in the U.S. and EU that include: additional headcount and
increases in contract services from fees associated with Clinical Research Organizations. Research
and development expenses also included a non-cash charge relating to share-based compensation
expense of $224,000 for the quarter ended September 30, 2007 compared to $108,000 for the quarter
ended September 30, 2006.
Selling, general and administrative expenses decreased for the quarter ended September 30,
2007 to $1,614,000 from $2,384,000 for the quarter ended September 30, 2006. This decrease is
primarily due to the additional employee costs for the quarter ended September 30, 2006, that
included: an accrual relating to the former Chief Executive Officers revised employment agreement,
and an accrual and severance payments relating to the former President and Chief Operating
Officers employment agreement. The quarter ended
17
September 30, 2007
did not include any such charges. In addition, selling, general and administrative expenses
for the quarter ended September 30, 2007, included a decrease in the non-cash charge relating to
share-based compensation expense of $326,000 compared to $463,000 for the quarter ended September
30, 2006.
During
the quarter ended September 30, 2007, we decreased our estimate
of the fiscal year 2007 management performance bonuses by
approximately $238,000 that is included in the financial results for
the current quarter. At September 30, 2007, we have accrued $537,000 for management performance bonuses relating to
fiscal year 2007. Payment of these bonuses is subject to the approval of the Compensation
Committee. We believe that it is probable that these performance bonuses will paid, however, it is
possible the amount may differ from our current accrual.
Interest income was $365,000 for the quarter ended September 30, 2007 compared to $527,000 for
the quarter ended September 30, 2006. The fluctuations in interest income are due primarily to
corresponding changes in the level of cash, cash equivalents and short-term investments during the
periods and improved yields from our investments.
Interest expense was $15,000 for the quarter ended September 30, 2007 related to the secured
loan with Key Equipment Finance Inc.
Our net loss was $5,050,000, or $.04 per common share for the quarter ended September 30, 2007
compared to $4,057,000, or $.03 per common share for the quarter ended September 30, 2006. The
increase in net loss is primarily the result of increased costs and expenses offset on a per share
basis by an increase in the weighted average number of common shares outstanding.
Our major ongoing research and development programs are focused on the development of
TRC-based products, bone marrow-derived adult stem and early progenitor cells, for use in bone
regeneration and vascular regeneration, as well as cardiac and neural regeneration. Clinical
trials using TRC-based products have been initiated to evaluate: (i) the treatment of osteonecrosis
of the femoral head (in the U.S. and EU) (ii) bone formation in patients with long bone fractures
(in the U.S. and EU); and (iii) bone formation in spine fusion (in the U.S.). Clinical trials are
open for patient enrollment in the U.S. and EU for the treatment of limb ischemia resulting from
peripheral vascular disease. All of these potential product applications use TRC Technology, our
proprietary cells and platform manufacturing technologies. We are also completing other research
and development activities using our TRC-based products that are intended to improve the
functionality for certain clinical indications, to improve shelf life, and to decrease the cost of
manufacturing our TRC-based products. Research and development expenses outside of the TRC-based
product development consist primarily of immunotherapy programs, engineering and cell
manufacturing.
The following table summarizes our research and development expenses for the first fiscal
quarters ended September 30, 2006 and September 30, 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
R&D Project |
|
2006 |
|
|
2007 |
|
TRC-based products |
|
$ |
2,027 |
|
|
$ |
3,612 |
|
Other |
|
|
277 |
|
|
|
261 |
|
|
|
|
|
|
|
|
Total |
|
$ |
2,304 |
|
|
$ |
3,873 |
|
|
|
|
|
|
|
|
18
Because of the uncertainties of clinical trials and the evolving regulatory requirements
applicable to TRC-based products, estimating the completion dates or cost to complete our major
research and development program would be highly speculative and subjective. The risks and
uncertainties associated with developing our products, including significant and changing
governmental regulation and the uncertainty of future clinical study results, are discussed in
greater detail in the Any changes in the governmental regulatory classifications of our products
could prevent, limit or delay our ability to market or develop our products, Our inability to
complete our product development activities successfully would severely limit our ability to
operate or finance operations, and We must successfully complete our clinical trials to be able
to market certain of our products, sections under the heading Risk Factors of this report. The
potentially lengthy process of seeking regulatory approvals for our product candidates, and the
subsequent compliance with applicable regulations, will require the expenditure of substantial
resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could
cause our research and development expenditures to increase and, in turn, have a material adverse
effect on our results of operations. We cannot be certain when any net cash inflow from products
validated under our major research and development project, if any, will commence.
Liquidity and Capital Resources
We have financed our operations since inception primarily through public and private sales of
our equity securities, which, from inception through September 30, 2007, have totaled approximately
$190 million and, to a lesser degree, through grant funding, payments received under research
agreements and collaborations, interest earned on cash, cash equivalents, and short-term
investments, and funding under equipment leasing agreements. In addition, on October 17, 2007, we
raised net cash proceeds of an additional $12.5 million through a registered direct offering of
shares of our common stock. These financing sources have generally allowed us to maintain adequate
levels of cash and other liquid investments.
Our combined cash, cash equivalents and short-term investments totaled $24,300,000 at
September 30, 2007, a decrease of $4,025,000 from June 30, 2007. During the quarter ended
September 30, 2007, the primary source of cash, cash equivalents and short-term investments was
from equity transactions from the Direct Stock Purchase Plan and the exercise of certain warrants
previously issued to investors, with net proceeds of $1,107,000. The primary uses of cash, cash
equivalents and short-term investments during the quarter ended September 30, 2007 included
$5,068,000 to finance our operations and working capital requirements, and $121,000 in capital
equipment additions.
We expect that our total capital expenditures, other than possible business acquisitions, for
the fiscal year ending June 30, 2008 to be approximately $436,000. We expect our monthly cash
utilization to average approximately $1.7 million per month during fiscal year 2008.
Our future cash requirements will depend on many factors, including continued scientific
progress in our research and development programs, the scope and results of clinical trials, the
time and costs involved in obtaining regulatory approvals, the costs involved in filing,
prosecuting and enforcing patents, competing technological and market developments, costs of
possible acquisition or development of complementary business activities and the cost of product
commercialization. We do not expect to generate a positive cash flow from
19
operations
for at least the next several years due to the expected spending for research and development
programs and the cost of commercializing our product candidates. We intend to seek additional
funding through public or private debt or equity financing transactions, research and development
agreements or grants and distribution and marketing agreements. Successful future operations are
subject to several technical and risk factors, including our continued ability to obtain future
funding, satisfactory product development, obtaining regulatory approval and market acceptance for
our products. Management believes with the inclusion of the cash raised in October 2007, cash,
cash equivalents and short-term investments are adequate to finance our operations. These
estimates are based on certain assumptions which could be negatively impacted by the matters
discussed under this heading and under the caption Risk Factors, below. In order to grow and
expand our business, to introduce our product candidates into the marketplace and to possibly
acquire or develop complementary business activities, 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. We
expect that our primary sources of capital for the foreseeable future will be through collaborative
arrangements and through the public or private sale of our equity or debt securities. There can be
no assurance that such collaborative arrangements, or any public or private financing, will be
available on acceptable terms, if at all, or can be sustained. Several factors will affect our
ability to raise additional funding, including, but not limited to, market volatility of our common
stock, continued stock market listing and economic conditions affecting the public markets
generally or some portion or the entire technology sector. If our common stock is delisted from
the Nasdaq Stock Market, the liquidity of our common stock could be impaired, and prices paid by
investors to purchase our shares of our common stock could be lower than might otherwise prevail.
If adequate funds are not available, we may be required to delay, reduce the scope of, or
eliminate one or more of our research and development programs, which may have a material adverse
affect on our business. See Risk Factors and Notes to Consolidated Financial Statements in our
2007 Annual Report on Form 10-K and Notes to Consolidated Financial Statements and Risk Factors
included herein.
Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including
those described below, that could adversely affect our business, financial condition, results of
operations, cash flows, and trading price of 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.
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 September 30, 2007, we have incurred a cumulative net loss totaling approximately
$164 million and we have continued to incur losses since that date. These losses have resulted
principally from costs incurred in the research and development of our cell culture technologies
and our cell manufacturing system, general and administrative expenses,
20
and the prosecution of
patent applications. We expect to continue to incur significant operating losses
over the next several years and at least until, and probably after, product sales increase,
primarily owing to our research and development programs, including preclinical 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, timely initiation and completion
of clinical trials, obtaining regulatory approvals, establishing manufacturing, sales and marketing
arrangements with third parties, maintaining supplies of key manufacturing components, acquisition
and development of complementary activities and raising sufficient cash to fund our operating
activities. In addition, we may not ever be able to achieve or sustain profitability.
We may not be able to raise the required capital to conduct our operations and develop and
commercialize our products.
We will require substantial capital resources in order to conduct our operations and develop
and commercialize our products and cell manufacturing facilities. However, in order to grow and
expand our business, to introduce our new product candidates into the marketplace and to acquire or
develop complementary business activities, 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 cell product candidates for additional indications. 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, clinical 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 |
|
|
|
|
the effect of commercialization activities and facility expansions, if and as required |
|
|
|
|
complementary business acquisition or development opportunities |
Because of our long-term funding requirements, we intend to access the public or private
equity markets if conditions are favorable to complete a financing, even if we do not have an
immediate need for additional capital at that time, or whenever we require additional operating
capital. 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.
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 U.S., which we believe will ultimately be the largest market for our products.
We will also be required to obtain additional approvals from various foreign regulatory authorities
to initiate sales activities of cell products in those jurisdictions, including certain countries
in the EU. If we cannot demonstrate the safety and efficacy of our cell
21
product candidates, or of
the cells produced in our manufacturing system, we may not be able
to obtain required regulatory approvals. If we cannot demonstrate the safety and efficacy of
our technologies and product candidates, 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 and regulatory agencies in other countries continue to review and inspect
marketed products, manufacturers and manufacturing facilities, which may create additional
regulatory burdens. 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, regulatory agencies may establish additional regulations that
could prevent or delay regulatory approval of our products.
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. Because
our product development programs are designed to satisfy the standards applicable to 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. Each of these cell mixtures (such
as our TRC-based products) is, under current regulations, regulated as a biologic product, which
requires a Biological License Application (BLA).
EU Directives and regulations (laws) have become effective, and have influenced the
requirements for manufacturing cell products and the conduct of clinical trials. Recent changes to
the EU Medicinal Products Prime Directive (including added annexes and new regulations) shifted
patient-derived cells to the medicinal products category, which will require Marketing
Authorizations in order to market and sell these products. These new requirements have delayed
some of our current planned clinical trials with TRC-based products in the EU, and will require
clinical trials with data submission and review by one or more European regulatory bodies. There
is uncertainty about which clinical trial activities and data are required, and because of the
recent nature of these new directives, laws and regulations, there is no established precedent to
understand the timeline or other requirements for Marketing Authorization.
Our inability to complete our product development activities successfully would severely limit our
ability to operate or finance operations.
Commercialization in the U.S. and the EU of our cell product candidates will require
completion of substantial clinical trials, and obtaining sufficient safety and efficacy results to
support required registration approval and market acceptance of our cell product candidates. We
may not be able to successfully complete the 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
22
human body with the expected
result. Our technologies and cell 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 must successfully complete our clinical trials to be able to market certain of our products.
To be able to market therapeutic cell products in the U.S. and across the EU, we must
demonstrate, through extensive preclinical studies and clinical trials, the safety and efficacy of
our processes and product candidates. 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.
Our research programs are currently directed at improving TRC-based product functionality for
certain clinical indications, improving product shelf life, and decreasing the cost of
manufacturing our TRC-based products. These production process changes may alter the functionality
of our cells, and require various additional levels of experimental and clinical testing and
evaluation. Any such testing could lengthen the time before these products would be commercially
available.
Even if successful clinical results are reported for a product from a completed clinical
trial, this does not mean that the results will be sustained over time, or are sufficient for a
marketable or regulatory approvable product.
Failure of third parties to manufacture component parts or provide limited source supplies, or
imposition of additional regulation, would impair our new product development and our sales
activities.
We rely solely on third parties such as Astro, Ethox, Moll and Lonza to manufacture or supply
certain of our devices/manufacturing equipment, as well as component parts and other materials used
in the cell product manufacturing 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
fails to perform its respective obligations or if our supply of 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.
23
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.
Manufacturing our cell products in centralized facilities may increase the risk that we will not
have adequate quantities of our cell products for clinical programs.
We rely on a third party manufacturer, Fraunhofer Institute for Interfacial Engineering and
Biotechnology in Stuttgart, Germany, to supply our TRC-based cell products for certain EU clinical
trials. Reliance on third party manufacturers entails risks including regulatory compliance and
quality assurance and the possible breach of the manufacturing agreement by the third party. We
are subject to similar regulatory and compliance risks at our site in Ann Arbor, Michigan. Both
sites could be subject to ongoing, periodic, unannounced inspection by regulatory agencies to
ensure strict compliance with GMP regulations and other governmental regulations and corresponding
foreign standards. Our present and future manufacturers might not be able to comply with these
regulatory requirements. We do not have redundant cell manufacturing sites. In the event our cell
manufacturing facilities are damaged or destroyed or are subject to regulatory restrictions, our
clinical trial programs and other business prospects would be adversely affected.
Even if we obtain regulatory approvals to sell our products, lack of commercial acceptance could
impair our business.
We will be seeking to obtain regulatory approvals to market our TRC-based cell products for
tissue repair and regeneration treatments. Even if we obtain all required regulatory approvals, we
cannot be certain that our products and processes will be accepted in the market place at a level
that would allow us to operate profitably. Our products may be unable to achieve commercial
acceptance for a number of reasons such as the availability of alternatives that are less
expensive, more effective, or easier to use, the perception of a low cost-benefit ratio for the
product amongst physicians and hospitals, or an inadequate level of product support from ourselves
or a commercial partner. 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.
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 payors 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 U.S. 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
24
sufficient to realize an appropriate return on
our investment in product development. Any limits on reimbursement from third party payors may
reduce the demand for, or negatively affect the price of, our products. For example, in the past,
published studies suggested that stem cell
transplantation for breast cancer, which 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 has negatively affected the marketability of our products in
this indication in the past.
Use of animal-derived materials could harm our product development and commercialization efforts.
Some of the manufacturing materials and/or components we use in, and are critical to,
implementation of our TRC Technology involve the use of animal-derived products, including fetal
bovine serum. Suppliers or regulatory changes may limit or restrict the availability of such
materials for clinical and commercial use. We currently purchase all of our fetal bovine sera from
protected herds in Australia and New Zealand. These sources are considered to be the safest and
raise the least amount of concern from the global regulatory agencies. If, for example, the
so-called mad cow disease occurs in New Zealand or in Australia, it may lead to a restricted
supply of the serum currently required for the TRC-based product manufacturing processes. Any
restrictions on these materials would impose a potential competitive disadvantage for our products
or prevent our ability to manufacture TRC-based cell products. Regulatory authorities in the EU
are reviewing the safety issues related to the use of animal-derived materials, which we currently
use in our production process. The FDA has issued draft regulations for controls over bovine
materials. These proposed regulations do not appear to affect our ability to purchase the
manufacturing materials we currently use. However, the FDA may issue final regulations that could
affect our operations. We do not know what actions, if any, the authorities may take as to animal
derived materials specific to medicinal products distributed in the EU. Our inability to develop
or obtain alternative compounds would harm our product development and commercialization efforts.
There are certain limitations in the supply of certain animal-derived materials, which may lead to
delays in our ability to complete clinical trials or eventually to meet the anticipated market
demand for our cell products.
Given our limited internal manufacturing, sales, marketing and distribution capabilities, we need
to develop increased internal capability or collaborative relationships to manufacture, sell,
market and distribute our products.
We have only limited internal manufacturing, sales, marketing and distribution capabilities.
As market needs develop, we intend to establish and operate commercial-scale manufacturing
facilities, which will need to comply with all applicable regulatory requirements. We will also
need to develop new configurations of our cell manufacturing system for these facilities to enable
processes and cost efficiencies associated with large-scale manufacturing. Establishing these
facilities will require significant capital and expertise. Any delay in establishing, or
difficulties in operating, these facilities will limit our ability to meet the anticipated market
demand for our cell products. We intend to get assistance to market some of our future cell
products through collaborative relationships with companies with established sales, marketing and
distribution capabilities. 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
25
alternate arrangements at a time when we need
sales, marketing or distribution capabilities to meet existing demand. We may market one or more
of our TRC-based products through our own sales force. Our inability to develop and retain a
qualified sales force could limit our ability to market, sell and distribute our cell products.
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. We may enter into financing transactions at prices which are at a substantial
discount to market. Such an equity issuance would cause a substantially larger number of shares to
be outstanding and would dilute the ownership interest of existing stockholders.
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 $1.10 and $1.60 during the twelve month period ended September 30, 2007. 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 |
|
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|
|
announcements of research activities, business developments, technological
innovations or new products by us or our competitors |
|
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|
|
entering into or terminating strategic relationships |
|
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|
changes in government regulation |
|
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|
disputes concerning patents or proprietary rights |
|
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|
|
changes in our revenues or expense levels |
|
|
|
|
public concern regarding the safety, efficacy or other aspects of the products or
methodologies we are developing |
|
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|
news or reports from other stem cell, cell therapy or regenerative medicine
companies |
|
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|
|
reports by securities analysts |
|
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|
|
status of the investment markets |
|
|
|
|
concerns related to management transitions |
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.
Our stock may be delisted from Nasdaq, which could affect its market price and liquidity.
We are required to meet certain qualitative and 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 Capital
Market. In May 2003 and in July 2004, we received notification from Nasdaq
26
of potential delisting
as a result of our stock trading below $1.00 for more than thirty consecutive business days. While
in each case our stock price recovered within the permitted grace periods and Nasdaq notified us
that we were again in full compliance, we cannot provide any assurance that our stock price would
again recover within the specified times if future
closing bid prices below $1.00 triggered another potential delisting. The qualitative tests
we must meet address various corporate governance matters, including Audit Committee and Board
composition. If we do not maintain compliance with the Nasdaq requirements within specified
periods and subject to permitted extensions, our common stock may be recommended for delisting
(subject to any appeal we would file). 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.
If we do not keep pace with our competitors and with technological and market changes, our products
will become obsolete and our business may suffer.
The markets for our products are very competitive, subject to rapid technological changes, and
vary for different 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 use for bone marrow transplantation, following
marrow ablation due to chemotherapy, 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 the practical elimination of this market for our cell-based product for this
application.
Our cell manufacturing system is 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, the cost or process of treatment and other factors may cause researchers and practitioners
to not use our products and we could suffer a competitive disadvantage. Finally, to the extent
that others develop new technologies that address the targeted application for our products, our
business will suffer.
We have experienced significant management turnover, and 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 previous occasions.
As a result of these and other factors, we may not be successful in hiring or retaining key
personnel. Our inability to replace any 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
27
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. Certain patent equivalents to the U.S. patents have also been
issued in other jurisdictions including Australia, Japan, the Republic of
Korea, Canada and under the European Convention. Certain of these foreign patents are due
expire beginning in 2008. Furthermore, we rely on 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, each of 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 managements 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 established guidelines and have
certain rights in the technology developed with the grant. 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.
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 manufacture and/or use of TRC-based products during clinical trials, or after
commercialization, results in adverse events. 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.
28
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 effect 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 effect could occur even if our shareholders consider the change in control to be in
their best interest.
We are required to evaluate our internal control over financial reporting under Section 404 of the
Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could have a negative
market reaction.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), we are required to
furnish a report by our management on our internal control over financial reporting. That report
must contain, among other matters, an assessment of the design and operating effectiveness of our
internal controls over financial reporting as of the end of the fiscal year. This assessment must
include disclosure of any material weaknesses in our internal control over financial reporting
identified by management. That report must also contain a statement that our independent
registered public accounting firm has issued an attestation report on the design and operating
effectiveness of our system of internal accounting controls over financial reporting. If in the
future we are unable to assert that our internal control over financial reporting is effective as
of the end of the then current fiscal year (or, if our independent registered public accounting
firm is unable to express an unqualified opinion on the design and operating effectiveness of our
internal controls), we could lose investor confidence in the accuracy and completeness of our
financial reports, which would have a negative effect on our stock price and our ability to raise
capital.
Forward-looking statements
This report, including the documents that we incorporate by reference, contain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. Any statements about our expectations, beliefs, plans, objectives,
assumptions or future events or performance are not historical facts and may be forward-looking.
These statements are often, but are not always, made through the use of words or phrases such as
anticipates, estimates, plans, projects, trends, opportunity, comfortable, current,
intention, position, assume, potential, outlook, remain, continue, maintain,
sustain, seek, achieve, continuing, ongoing, expects, management believes, we
believe, we intend and similar words or phrases, or future or conditional verbs such as will,
would, should, could, may, or similar expressions. Accordingly, these statements involve
estimates, assumptions and uncertainties which could cause actual results to differ materially from
those expressed in them. Any forward-looking statements are qualified in their entirety by
reference to the factors discussed throughout this report, and in particular those factors listed
under the section Risk Factors.
29
Because the factors referred to in the preceding paragraph could cause actual results or
outcomes to differ materially from those expressed in any forward-looking statements we make,
you should not place undue reliance on any such forward-looking statements. Further, any
forward-looking statement speaks only as of the date on which it is made, and we undertake no
obligation to update any forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us to predict which
factors will arise. In addition, we cannot assess the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. These forward-looking
statements include statements regarding:
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potential strategic collaborations with others |
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future capital needs |
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adequacy of existing capital to support operations for a specified time |
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product development and marketing plan |
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clinical trial plans and anticipated results |
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anticipation of future losses |
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replacement of manufacturing sources |
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commercialization plans |
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revenue expectations and operating results |
30
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2007, our cash and cash equivalents included money market securities and
short-term investments included short-term corporate debt securities with original maturities of
less than twelve months. Due to the short duration of our investment portfolio, an immediate 10%
change in interest rates would not have a material effect on the fair market value of our
portfolio, therefore, we would not expect our operating results or cash flows to be affected to any
significant degree by the effect of a sudden change in market interest rates on our securities
portfolio.
Our sales to customers in foreign countries are denominated in Euros. Our vendors, employees
and clinical sites in countries outside the U.S. are typically paid in Euros. However, such
expenditures have not been significant to date. Accordingly, we are not directly exposed to
significant market risks from currency exchange rate fluctuations. We believe that the interest
rate risk related to our accounts receivable is not significant. We manage the risk associated
with these accounts through periodic reviews of the carrying value for non-collectibility and
establishment of appropriate allowances in connection with our internal controls and policies. We
do not enter into hedging transactions and do not purchase derivative instruments.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, we
conducted an evaluation, under the supervision and with the participation of our management,
including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures as of the end of the period
covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our current disclosure controls and procedures were effective in ensuring
that all information required to be disclosed in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms.
Changes in Internal Control over Financial Reporting
During our first quarter of fiscal 2008, there were no changes made in our internal control
over financial reporting that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
31
PART II OTHER INFORMATION
Item 1. Legal Proceedings
From time to time we receive threats or may be subject to litigation matters incidental to our
business. However, we are not currently a party to any material pending legal proceedings.
Item 1A. Risk Factors
We have provided updated risk factors in the section labeled Risk Factors in Part I, Item 2
to allow readers to understand the material risks and uncertainties affecting our businesses and to
qualify forward-looking statements we make.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
See Exhibit Index.
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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AASTROM BIOSCIENCES, INC.
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Date: November 9, 2007 |
/s/ George W. Dunbar
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George W. Dunbar |
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President and Chief Executive
Officer
(Principal Executive Officer) |
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Date: November 9, 2007 |
/s/ Gerald D. Brennan, Jr.
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Gerald D. Brennan, Jr. |
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Vice President, Administrative & Financial
Operations and Chief Financial Officer
(Principal Financial and Accounting Officer) |
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33
EXHIBIT INDEX
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Exhibit Number |
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Description |
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3.2 *
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Amended and Restated Bylaws |
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10.96**
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Placement Agency Agreement, dated October 15, 2007, by and between Aastrom and BMO Capital
Markets Corp. |
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10.97**
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Escrow Agreement, dated as of October 15, 2007, among Aastrom, BMO Capital Markets Corp.
and The Bank of New York |
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10.98**
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Form of Purchase Agreement |
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10.99**
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Form of Warrant |
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
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31.2
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
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32.1
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 |
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32.2
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Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 |
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* |
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Incorporated by reference to the Companys Current Report on Form 8-K filed on
September 12, 2007. |
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** |
|
Incorporated by reference to the Companys Current Report on Form 8-K filed on October
16, 2007. |
34
exv31w1
Exhibit 31.1
CERTIFICATION
I, George W. Dunbar, certify that:
|
1. |
|
I have reviewed this Quarterly Report on Form 10-Q of Aastrom Biosciences, Inc.; |
|
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
|
|
3. |
|
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
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|
4. |
|
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared; and
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; and
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting.
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5. |
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The registrants other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
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Date: November 9, 2007 |
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George W. Dunbar |
|
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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|
exv31w2
Exhibit 31.2
CERTIFICATION
I, Gerald D. Brennan, Jr., certify that:
|
1. |
|
I have reviewed this Quarterly Report on Form 10-Q of Aastrom Biosciences, Inc.; |
|
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
|
|
3. |
|
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
|
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared; and
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; and
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting.
|
5. |
|
The registrants other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
|
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Date: November 9, 2007 |
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/s/ Gerald D. Brennan, Jr.
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|
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Gerald D. Brennan, Jr. |
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Vice President, Administrative & Financial |
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Operations and Chief Financial Officer |
|
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(Principal Financial and Accounting Officer) |
|
|
exv32w1
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Aastrom Biosciences, Inc. (the Company) on Form
10-Q for the quarter ended September 30, 2007, as filed with the Securities and Exchange Commission
on the date hereof (the Report), I, George W. Dunbar, President and Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Section 906), that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
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November 9, 2007 |
|
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|
|
|
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George W. Dunbar |
|
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President and Chief Executive Officer |
|
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(Principal Executive Officer) |
|
|
A signed original of this written statement required by Section 906 has been provided to Aastrom
Biosciences, Inc. and will be retained by Aastrom Biosciences, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.
exv32w2
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Aastrom Biosciences, Inc. (the Company) on Form
10-Q for the quarter ended September 30, 2007, as filed with the Securities and Exchange Commission
on the date hereof (the Report), I, Gerald D. Brennan, Jr., Vice President, Administrative and
Financial Operations and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 906),
that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) and 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
November 9, 2007
|
|
|
/s/ Gerald D. Brennan, Jr.
|
|
|
Gerald D. Brennan, Jr. |
|
|
Vice President, Administrative & Financial |
|
|
Operations and Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
|
|
A signed original of this written statement required by Section 906 has been provided to Aastrom
Biosciences, Inc. and will be retained by Aastrom Biosciences, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.