e10vqza
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q/A
Amendment No. 1
(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 MARCH 31, 2010, 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
incorporation or organization)
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(I.R.S. employer
identification no.) |
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24 Frank Lloyd Wright Dr.
P.O. Box 376
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)
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
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
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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28,255,889 |
(Class)
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Outstanding at May 4, 2010 |
AASTROM BIOSCIENCES, INC.
Quarterly Report on Form 10-Q
March 31, 2010
TABLE OF CONTENTS
2
Explanatory Note
This Amendment on Form 10-Q/A is being filed to include a line item that was inadvertently
omitted from the Consolidated Condensed Statements of Cash Flows presented in Part I, Item 1
Financial Statements of Aastrom Biosciences, Inc.s Form 10-Q originally filed on May 10, 2010 (the
Original Filing) and to correct a typographical error contained on page 18 of the Original
Filing. The remainder of the document is unchanged from the Original Filing.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
AASTROM BIOSCIENCES, INC.
(a clinical development stage company)
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands)
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June 30, |
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March 31, |
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2009 |
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2010 |
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Assets |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
17,000 |
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$ |
17,844 |
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Short-term investments |
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5,000 |
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Receivables, net |
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58 |
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Inventory |
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1 |
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Other current assets |
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732 |
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591 |
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Total current assets |
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17,791 |
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23,435 |
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PROPERTY AND EQUIPMENT, NET |
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1,485 |
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1,134 |
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Total assets |
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$ |
19,276 |
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$ |
24,569 |
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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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$ |
853 |
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$ |
1,161 |
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Accrued employee benefits |
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355 |
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358 |
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Current portion of long-term debt |
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479 |
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291 |
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Total current liabilities |
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1,687 |
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1,810 |
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LONG-TERM DEBT |
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305 |
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137 |
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SHAREHOLDERS EQUITY: |
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Common stock, no par value; shares authorized
31,250,000 and 62,500,000, respectively;
shares issued and outstanding 20,027,830 and
28,255,889, respectively |
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213,107 |
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231,059 |
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Deficit accumulated during the development stage |
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(195,823 |
) |
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(208,437 |
) |
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Total shareholders equity |
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17,284 |
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22,622 |
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Total liabilities and shareholders equity |
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$ |
19,276 |
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$ |
24,569 |
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The accompanying notes are an integral part of these financial statements.
3
AASTROM BIOSCIENCES, INC.
(a clinical 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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Nine months ended |
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(Inception) to |
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March 31, |
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March 31, |
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March 31, |
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2009 |
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2010 |
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2009 |
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2010 |
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2010 |
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REVENUES: |
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Product sales and rentals |
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$ |
58 |
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$ |
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$ |
113 |
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$ |
89 |
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$ |
1,850 |
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Research and development agreements |
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2,105 |
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Grants |
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9,657 |
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Total revenues |
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58 |
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113 |
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89 |
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13,612 |
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COSTS AND EXPENSES: |
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Cost of product sales and rentals |
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25 |
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47 |
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34 |
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796 |
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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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2,785 |
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2,845 |
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8,340 |
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9,039 |
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157,147 |
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Selling, general and administrative |
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1,260 |
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1,418 |
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3,909 |
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3,680 |
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72,338 |
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Total costs and expenses |
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4,070 |
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4,263 |
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12,296 |
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12,753 |
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232,520 |
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LOSS FROM OPERATIONS |
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(4,012 |
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(4,263 |
) |
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(12,183 |
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(12,664 |
) |
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(218,908 |
) |
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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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57 |
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34 |
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253 |
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83 |
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10,647 |
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Interest expense |
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(17 |
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(9 |
) |
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(58 |
) |
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(33 |
) |
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(457 |
) |
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Other income |
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40 |
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25 |
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195 |
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50 |
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11,439 |
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NET LOSS |
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$ |
(3,972 |
) |
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$ |
(4,238 |
) |
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$ |
(11,988 |
) |
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$ |
(12,614 |
) |
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$ |
(207,469 |
) |
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COMPUTATION OF NET LOSS PER SHARE
APPLICABLE TO COMMON SHARES: |
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NET LOSS |
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$ |
(3,972 |
) |
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$ |
(4,238 |
) |
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$ |
(11,988 |
) |
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$ |
(12,614 |
) |
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NET LOSS PER SHARE (Basic and Diluted) |
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$ |
(.24 |
) |
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$ |
(.16 |
) |
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$ |
(.72 |
) |
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$ |
(.55 |
) |
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Weighted average number of shares
outstanding (Basic and Diluted) |
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16,821 |
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26,737 |
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16,711 |
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23,016 |
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The accompanying notes are an integral part of these financial statements.
4
AASTROM BIOSCIENCES, INC.
(a clinical development stage company)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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March 24, 1989 |
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Nine months ended |
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(Inception) to |
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March 31, |
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March 31, |
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2009 |
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2010 |
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2010 |
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OPERATING ACTIVITIES: |
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Net loss |
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$ |
(11,988 |
) |
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$ |
(12,614 |
) |
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$ |
(207,469 |
) |
Adjustments to reconcile net loss to net cash used for
operating activities: |
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Depreciation and amortization |
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522 |
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454 |
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6,454 |
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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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(30 |
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(1,704 |
) |
Stock compensation expense |
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1,129 |
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426 |
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8,815 |
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Inventory write downs and reserves |
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2,239 |
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Stock issued pursuant to license agreement |
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3,300 |
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Provision for losses on accounts receivable |
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204 |
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Changes in assets and liabilities: |
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Receivables |
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(236 |
) |
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58 |
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(249 |
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Inventories |
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1 |
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(2,335 |
) |
Other current assets |
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432 |
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(66 |
) |
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(500 |
) |
Accounts payable and accrued expenses |
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(23 |
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|
308 |
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1,104 |
|
Accrued employee benefits |
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(392 |
) |
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3 |
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358 |
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Net cash (used for) operating activities |
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(10,586 |
) |
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(11,430 |
) |
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(189,673 |
) |
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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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(5,000 |
) |
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(217,041 |
) |
Maturities of short-term investments |
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6,000 |
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213,745 |
|
Property and equipment purchases |
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(34 |
) |
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(103 |
) |
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(5,864 |
) |
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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5,966 |
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(5,103 |
) |
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(8,833 |
) |
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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 and warrants |
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7,343 |
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17,526 |
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162,871 |
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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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|
192 |
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|
207 |
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(70 |
) |
Proceeds from long-term debt |
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|
751 |
|
Principal
payments under long-term obligations |
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|
(331 |
) |
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(356 |
) |
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(2,331 |
) |
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Net cash provided by financing activities |
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7,204 |
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17,377 |
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216,350 |
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
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2,584 |
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|
844 |
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17,844 |
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
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16,492 |
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17,000 |
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CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
19,076 |
|
|
$ |
17,844 |
|
|
$ |
17,844 |
|
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|
|
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|
The accompanying notes are an integral part of these financial statements.
5
AASTROM BIOSCIENCES, INC.
(a clinical development stage company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
Aastrom Biosciences, Inc. (the Company or Aastrom) 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 focused on
innovative therapies to repair or regenerate damaged or diseased tissues or organs. Aastrom is
developing autologous cellular therapies for the treatment of severe, chronic cardiovascular
diseases.
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. While management believes available cash, cash
equivalents and short-term investments are adequate to finance its operations at least through
March 31, 2011, in part due to the fact that many of the Companys expenditures are discretionary
in nature and could, if necessary, be delayed, the Company will need to raise a substantial amount
of 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 of 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., E.U. 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 or enhance products, take
advantage of future opportunities, 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.
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,
6
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 nine months ended March 31, 2010, 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 2009 Annual Report on Form 10-K for the year ended June 30,
2009, as filed with the SEC on September 14, 2009.
The consolidated financial statements include the accounts of the Company 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.
On February 18, 2010, the Companys board of directors by unamious written consent authorized
a one for eight reverse split. Accordingly, all references to numbers of common stock and per
share data in the accompanying financial statements have been adjusted to reflect the reverse stock
split on a retroactive basis.
3. Fair Value Measurements
The Company measures certain assets at fair value on a recurring basis. Fair value represents
the amount that would be received upon the sale of an asset or paid to transfer a liability in an
orderly transaction between market participants. As such, fair value is determined based upon
assumptions that market participants would use in pricing an asset or liability. As a basis for
considering such assumptions, a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value as follows:
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Level 1 inputs: Quoted prices (unadjusted) for identical assets or
liabilities in active markets; |
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Level 2 inputs: Inputs, other than quoted prices included in Level 1
that are observable either directly or indirectly; and |
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Level 3 inputs: Unobservable inputs for which there is little or no
market data, which require the reporting entity to develop its own
assumptions. |
In many cases, a valuation technique used to measure fair value includes inputs from multiple
levels of the fair value hierarchy described above. The lowest level of significant input
determines the placement of the entire fair value measurement in the hierarchy.
At March 31, 2010, the Company had $17.8 million invested in three money market funds and $5.0
million invested in certificates of deposit, that are included within the Cash and cash
equivalents and Short-term investments lines on the balance sheet, respectively. Because there
is an active market for shares of these money market funds and the certificates of deposit, the
7
Company considers its fair value measure of this investment to be based on Level 1 inputs. No other
assets or liabilities on the Balance Sheet as of March 31, 2010 are measured at fair value.
Share-Based Compensation
The Company has various stock incentive plans and agreements (Option Plans) that provide for
the issuance of nonqualified and incentive stock options as well as other equity awards. Such
awards may be granted by the Companys Board of Directors to certain of the Companys employees,
directors and consultants.
Service-Based Options
During the nine months ended March 31, 2010, the Company granted 1,268,525 service-based
options to purchase common stock. These options were granted with exercise prices equal to the
closing price of the Companys stock on the grant date, vest over four years (other than
non-employee director options which vest over one to three years) and expire ten years from the
grant date. The weighted average grant-date fair value of service-based options granted under the
Companys Option Plans during the nine months ended March 31, 2009 and 2010 was $2.08 and $1.54,
respectively.
The net compensation costs recorded for the service-based stock options related to employees
and directors were approximately $75,000 and $415,000 for the quarter and nine months ended March
31, 2010, respectively, compared to $352,000 and $1,060,000 for the corresponding periods in fiscal
year 2009.
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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Nine months ended |
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March 31, |
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2009 |
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2010 |
Stock Option Plans: |
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|
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Expected dividend rate |
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0 |
% |
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0 |
% |
Expected stock price volatility |
|
|
73 |
% |
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70.2% - 72.8 |
% |
Risk free interest rate |
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|
2.1 |
% |
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2.49% - 3.09 |
% |
Estimated forfeiture rate |
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10 |
% |
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10 |
% |
Expected life (years) |
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6.6 |
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5.5 - 6.25 |
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8
The following table summarizes the activity for service-based stock options for the indicated
periods:
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Weighted Average |
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Weighted Average |
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Remaining |
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|
Aggregate Intrinsic |
|
|
|
Options |
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|
Exercise Price |
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Contractual Term |
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Value |
|
Outstanding at June 30, 2009 |
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1,365,353 |
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$ |
7.76 |
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|
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Granted |
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1,268,525 |
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$ |
2.33 |
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Exercised |
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$ |
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|
|
|
|
|
|
|
|
|
|
|
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Forfeited or expired |
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(355,931 |
) |
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$ |
9.58 |
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|
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|
|
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Outstanding at March 31, 2010 |
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2,277,947 |
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$ |
4.45 |
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8.4 |
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$ |
58,000 |
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Exercisable at March 31, 2010 |
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715,046 |
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$ |
7.88 |
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6.5 |
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$ |
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As of March 31, 2010, there was approximately $1,391,000 of total unrecognized
compensation cost related to non-vested service-based stock options granted under the Option Plan.
That cost is expected to be recognized over a weighted-average period of 1.7 years.
Performance-Based Stock Options
There were no grants of performance-based stock options during the nine months ended March 31,
2010. There have been no changes to the terms of the performance-based stock options from those
disclosed in our Annual Report on Form 10-K for the year ended June 30, 2009.
For the nine months ended March 31, 2010, management reviewed the progress toward the
performance conditions necessary for these options to vest and concluded that it was not yet
probable that the performance conditions of any of the tranches of options would be met and,
accordingly, no compensation expense has been recorded.
The following table summarizes the activity for performance-based stock options for the
indicated period:
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Weighted Average |
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Weighted Average |
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Remaining |
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Aggregate Intrinsic |
|
Options |
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Shares |
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Exercise Price |
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Contractual Term |
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Value |
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Outstanding at June 30, 2009 |
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110,162 |
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$ |
11.76 |
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Granted |
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Exercised |
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Forfeited or expired |
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(49,999 |
) |
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$ |
11.24 |
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Outstanding at December 31, 2009 |
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60,163 |
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$ |
12.19 |
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6.6 |
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$ |
0 |
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The aggregate estimated fair value of these awards that are outstanding as of March 31,
2010 is approximately $493,000.
Restricted Stock Awards
9
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 were approximately $1,000 and $11,000 for the quarter and nine months ended March
31, 2010, respectively, compared to $21,000 and $69,000 for the same periods in fiscal year 2009.
A summary of the Companys restricted stock activity for the nine months ended March 31, 2010,
is presented below:
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Weighted Average |
Non-vested Restricted Shares |
|
Shares |
|
Grant Date Fair Value |
Non-vested at June 30, 2009 |
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12,515 |
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$ |
5.92 |
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Granted |
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Vested |
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(12,359 |
) |
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$ |
5.86 |
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Forfeited |
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Non-vested at March 31, 2010 |
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156 |
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$ |
10.53 |
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As of March 31, 2010, there was approximately $800 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 0.4 years.
4. Shareholders Equity
On June 12, 2009, the Company entered into a $30.0 million common stock purchase agreement
with Fusion Capital Fund II, LLC, (Fusion Capital) an Illinois limited liability company. The
terms of the arrangement with Fusion Capital are disclosed in the Companys Annual Report on Form
10-K for the year ended June 30, 2009 and there have been no changes to the terms of this
arrangement during the quarter ended March 31, 2010.
During the nine months ended March 31, 2010, 1,718,538 shares of the Companys common stock
(including 51,432 shares related to its commitment fee) were issued to Fusion Capital for net
proceeds of $5,100,000.
On January 21, 2010, the Company also completed the sale of 6,509,637 units (including 740,387
units sold to the underwriter pursuant to the exercise of its over-allotment option) at a public
offering price of $2.08 per unit. Each unit consisted of (i) one share of common stock, (ii) a
Class A warrant to purchase 0.75 of a share of common stock at an exercise price of $2.97 per share
and (iii) a Class B warrant to purchase 0.50 of a share of common stock at an exercise price of
$2.08 per share. The Company received approximately $12.4 million in net proceeds from the sale of
the units (including the partially exercised option of the over-allotment), after underwriting
discounts and commissions and other offering expenses. The total fair market value of the warrants
at the date of issuance was approximately $4,375,000. This total fair market value was determined
as a proportional amount of the gross proceeds received for the sale of the common stock, class A
and class B warrants. The proportional amount for the warrants was determined through the use of the
10
Black-Scholes option-pricing model and the common stock was determined using the market price of
common stock on the sale date.
The 6,509,637 units consist of an aggregate of 6,509,637 shares of the Companys common stock,
Class A Warrants to purchase an aggregate of 4,882,228 shares of common stock and Class B Warrants
to purchase an aggregate of 3,254,818 shares of common stock. The Class A Warrants are exercisable
for a five year period commencing on July 21, 2010. The Class B Warrants are exercisable at any
time from January 21, 2010 through July 21, 2010.
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 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 March 31, 2009 and 2010 is approximately 2,555,000 and 11,215,000,
respectively.
11
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview of Aastrom
We focus on the development of innovative therapies to repair or regenerate damaged or
diseased tissues or organs. We are developing autologous cellular therapies for the treatment of
severe, chronic cardiovascular diseases. Using our proprietary Tissue Repair Cell (TRC) technology,
we are able to expand the number of stem and early progenitor cells from a small amount
(approximately 50 ml) of bone marrow collected from the patient. Early stage and clinical research
show that these cells may have efficacy in the repair of cardiac and other tissue.
With the use of our proprietary TRC technology, we produce personalized cell products
developed for site-specific delivery to repair or regenerate diseased or damaged tissue in
patients. Nearly 400 patients have been treated in clinical trials based on this therapeutic
approach over the past 10 years with no reported incidence of product safety problems or tissue
rejection.
Cardiac Regeneration
Our lead product is based on the application of autologous stem cells used to repair damaged
cardiac tissue. The U.S. Food and Drug Administration (FDA) has granted Orphan Drug Designation to
our investigational therapy involving the use of TRCs in the treatment of dilated cardiomyopathy
(DCM). DCM is a severe, chronic cardiac disease that leads to enlargement of the heart and is
associated with reduced heart pumping function to the point that blood circulation is impaired. We
have advanced this development program with two U.S. Phase II trials investigating both a surgical
and a catheter-based delivery pathway for the use of CRCs in the treatment of DCM.
The first U.S. patient was treated with TRCs in our Phase II IMPACT-DCM surgical clinical
trial in November 2008. The trial was fully enrolled in January 2010 with 40 patients and the last patient was treated in March 2010. The study is being conducted at five cardiovascular treatment
centers in the U.S., including: Methodist DeBakey Heart & Vascular Center in Houston, TX; Baylor
University Medical Center in Dallas, TX; The University of Utah School of Medicine in Salt Lake
City, UT; Cleveland Clinic Heart & Vascular Institute in Cleveland, OH; and Emory University
Hospital Midtown in Atlanta, GA. We anticipate collecting 6-month interim data from this trial upon
completion of the 6-month follow-up visits for all patients during the third quarter of calendar
year 2010. We are planning to report interim analysis results in the fourth quarter of calendar
year 2010.
Our second cardiac trial, a U.S. Phase II cardiac catheter clinical trial has been designed to
explore a catheter-based delivery of TRCs to treat DCM patients. Clinical site training for this
trial was initiated during the fourth quarter of calendar year 2009, and we enrolled our first patient in April 2010.
Vascular Regeneration
Our TRC technology has also shown promise in the treatment of an advanced stage of peripheral
arterial disease (PAD) called critical limb ischemia (CLI). Patients with CLI generally have
painful wounds on their feet (or hands) that do not heal due to poor blood circulation, often
leading to amputation. More than 160,000 amputations per year are associated with CLI. Our U.S.
Phase IIb RESTORE-CLI clinical trial is investigating the safety and efficacy of TRCs in the
treatment of patients with this severe, chronic disease compared with placebo; neither patients nor
physicians know the treatment received during the study.
12
In February 2010 a planned interim analysis was performed for this study on 46 patients having
completed at least 6 months of the study. According to the interim analysis, the safety profile
was similar between the treatment and placebo patients. Based on a composite efficacy endpoint
assessing time to treatment failure (including major amputations, doubling of wound size and new
gangrene), our autologous TRCs were more effective than placebo (p<0.05). Other clinically
meaningful endpoints (e.g., major amputation rate, complete wound healing) individually showed
encouraging trends, but have not yet reached statistical significance at the interim analysis.
The interim analysis was planned to assess performance of TRCs and to help plan further
studies. Based on the interim findings, we concluded enrollment of new patients in order to
complete the study as soon as possible, and to begin planning and discussions with the FDA for
pivotal clinical trials in CLI. The last patient enrolled in this trial was treated on
March 23, 2010, for a total of 86 patients who will be followed for 12 months per protocol.
The TRC Technology Platform
TRCs are a cellular therapy developed using our proprietary TRC technology, an automated
processing system utilizing single-pass perfusion to manufacture human cell products for clinical
use. The system meets all Good Manufacturing Practices (GMP) guidelines. TRC-based therapies begin
with a small amount of the patients own bone marrow to produce large numbers of stem and early
progenitor cells. This mixture of cell types is capable of developing into cardiac, vascular and
other tissues.
Our cell products have three features that we believe are critical for success in regenerative
medicine. Cellular therapies based on our TRC technology are:
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autologous, which means we start with the patients own
cells, which are accepted by the patients immune system
allowing the cells to differentiate and integrate into
existing functional tissues and organs, and provide
long-term engraftment and repair; |
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expanded, resulting in significantly higher
concentrations of stem and progenitor cells than occur
naturally, especially for older patients; and, |
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a mixed population of cells, which includes all of the
most important cell types required for tissue
regeneration and found in natural bone marrow and are
required for tissue regeneration. |
All TRC-based products are manufactured at centralized facilities. We have our primary cell
processing facility in the U.S. located at our headquarters in Ann Arbor, MI, and two contract
facilities in the E.U. located in Stuttgart, Germany (Fraunhofer Institute for Interfacial
Engineering and Biotechnology) and Bad Oeynhausen, Germany (Institute of Laboratory and Transfusion
Medicine at the Heart Center).
Since our inception, we have been a development-stage company engaged in research and product
development conducted principally on our own behalf. We are focused the development of products
based on our TRC technology platform for use in cardiovascular indications. We currently generate
minimal product sales involving cell-therapy based products to physicians in the United States. At
such time as we satisfy applicable regulatory approval requirements, we expect the sales of
therapies based on our TRC technology platform to constitute nearly all of our revenue from product
sales.
13
We do not expect to generate positive cash flows from our consolidated operations for at least
the next several years and then only if we achieve significant TRC-based cell product sales. Until
that time, we expect that revenue sources from our current activities will consist of only minor
sales of our cell products to our academic collaborators, grant revenue, research funding and
potential licensing fees or other financial support from potential future corporate collaborators.
We expect that we will need to raise significant additional funds or pursue strategic
alliances or other operational strategies to advance our product development programs including
completion of our clinical research programs and commercialization of our products. To date, we
have financed our operations primarily through public and private sales of our equity securities,
and we expect to continue to seek to obtain 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 are achieved. With respect to our current activities,
profitability 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 March 31, 2010, we have accumulated a net loss of approximately $207 million. We
cannot provide any assurance that we will achieve profitability or obtain the required funding,
regulatory approvals or complete additional corporate partnering or acquisition transactions to
advance our products to commercial-stage development.
Clinical Development
Our clinical development programs are focused on the utilization of our TRCs for cardiac and
vascular regeneration. Our TRC-based cell therapies have a 72-hour shelf-life which we believe
provides additional flexibility in transport and scheduling treatment for patients.
The mixture of cell types in TRC-based therapies is capable of developing into cardiac,
vascular and other tissues. We have demonstrated in the laboratory that cells in TRC-based
therapies can differentiate into endothelial (blood vessel) lineages. In addition, TRC treatment in
both rat and mouse models of critical limb ischemia have shown evidence of angiogenesis and
increased tissue perfusion, respectively. These preclinical observations support our current
clinical-stage research at treatment centers where we are exploring the use of TRC-based therapies
to regenerate cardiac tissue in patients with dilated cardiomyopathy and vascular tissue in
patients with critical limb ischemia.
Results to date in our current clinical trials may not be indicative of results 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 for our
TRC-based products in a timely fashion, or at all.
14
Clinical Trials Summary
Cardiac Regeneration
Dilated Cardiomyopathy Background
DCM is a severe, chronic cardiac disease that leads to enlargement of the heart and is
associated with reduced heart pumping function to the point that blood circulation is impaired.
Patients with DCM typically present with symptoms of congestive heart failure, including
limitations in physical activity and shortness of breath. DCM generally occurs in patients who have
ischemic heart failure due to multiple heart attacks, though it can also be found in patients with
non-ischemic heart failure caused by hypertension, viral infection, metabolic abnormalities and
other causes. Patient prognosis depends on the stage of the disease but is typically characterized
by a high mortality rate. Other than heart transplantation, there are currently no curative
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
estimate that the patient population with DCM may be as high as 150,000.
Early clinical data in the treatment of DCM with TRCs was obtained from two DCM patients
treated in 2007 at the University Hospital in Düsseldorf, Germany. These two patients showed 15-20%
improvement in their left ventricular ejection fraction approximately 2 months after treatment with
TRCs. One patient maintained this improvement after 7 months of follow-up; however, the other died
due to natural causes after declining further medical treatment. These data provided supportive
information critical to the success of the U.S. Phase II IMPACT-DCM IND application.
Dilated Cardiomyopathy Surgical Trial
In November 2008, the first patient was treated in the 40-patient U.S. IMPACT-DCM surgical
trial to evaluate TRCs in the treatment of DCM. This randomized, controlled, prospective,
open-label, Phase II study was designed using two strata to include 20 patients with ischemic DCM
and 20 patients with non-ischemic DCM. TRCs, manufactured using our TRC technology, received Orphan
Drug Designation from the FDA for the treatment of DCM in February 2007. The FDA activated our
Investigational New Drug (IND) application for this clinical trial in May 2008.
Full
IMPACT-DCM enrollment of 40 patients was completed in January 2010 with the final patient treated in March 2010 and with patients
enrolled at five U.S. clinical sites (Methodist DeBakey Heart & Vascular Center, Houston, TX,
Baylor University Medical Center, Dallas, TX, The University of Utah School of Medicine, Salt Lake
City, UT, Cleveland Clinic Heart & Vascular Institute, Cleveland, OH, and Emory University Hospital
Midtown, Atlanta, GA). We anticipate collecting 6-month interim data from this trial upon
completion of 6-month follow-up visits for all patients during the third quarter of calendar year
2010; the interim analysis results are planned to be reported in the fourth quarter of calendar
year 2010.
Participants in the IMPACT-DCM clinical trial have to be in New York Heart Association (NYHA)
functional class III or IV heart failure, must have an LVEF of less than or equal to 30% (60-75% is
typical for a healthy person), and meet certain other eligibility criteria. The IMPACT-DCM trial is
a controlled trial and patients are randomized in an approximate 3:1 ratio to the treatment versus
the control group within each stratum. All patients receive optimal medical therapy and patients in
the treatment group are treated with CRCs through direct injection into the heart muscle during
minimally invasive open heart surgery (involving an incision of approximately 2 inches).
While the primary objective of this study is to assess the safety of TRCs in patients with DCM
(including the incidence of ectopy and arrhythmia as well as major adverse cardiac events),
15
efficacy measures including cardiac dimensions and tissue mass, cardiac function (e.g. cardiac
output, LVEF, cardiopulmonary exercise testing parameters), cardiac perfusion and viability as well
as other efficacy endpoints will be monitored. NYHA functional class and quality of life are also
assessed. Patients will be followed for 12 months post-treatment.
Dilated Cardiomyopathy Catheter Trial
We have expanded our ongoing clinical program to evaluate TRCs in the treatment of severe
heart failure patients with a second U.S. Phase II cardiac regeneration trial designed to explore a
catheter-based delivery of TRCs to treat DCM patients. The first patient was enrolled into the trial in April 2010.
This randomized, controlled, prospective, open-label, Phase II study seeks to enroll 12
patients with ischemic DCM and 12 patients with non-ischemic DCM at four clinical sites in the U.S.
Participants must be in NYHA functional class III or IV heart failure, must have an LVEF of less
than or equal to 30% (60-75% is typical for a healthy person) and meet certain additional
eligibility criteria. All 24 patients will receive optimal medical therapy and 16 of the patients
(8 ischemic and 8 non-ischemic) will also be treated with TRCs via catheter injection. The catheter
trial will randomize patients in an approximate 2:1 ratio to the treatment versus control group within each ischemic/non-ischemic stratum. While the primary objective of this study is to assess the safety of TRCs
delivered by catheter injection in patients with DCM, efficacy measures including heart failure
stage and cardiac function parameters will also be assessed. Patients will be followed for 12
months post-treatment.
Vascular Tissue Regeneration
Critical Limb Ischemia Background
Peripheral Arterial Disease (PAD) is a chronic disease that progressively restricts blood flow
in the limbs and can lead to serious medical complications. This disease is often associated with
other clinical conditions, including hypertension, cardiovascular disease, hyperlipidemia,
diabetes, obesity and stroke. CLI is used to describe patients with the most severe forms of PAD:
those with chronic ischemia-induced pain (even at rest), ulcers, tissue loss or gangrene in the
limbs. CLI is typically the end stage of PAD disease. Patients suffering from this condition are
critically ill, with a high risk of amputation. These patients are extremely limited in their
ambulatory capacity, experience constant and chronic ischemia-induced pain, ulcers, tissue loss or
gangrene to the limbs, which lead to approximately 160,000 amputations per year.
Laboratory observations have shown that TRC-based products have the ability to form small
blood vessel-like structures in vitro. TRC treatment in both rat and mouse models of critical limb
ischemia have shown evidence of angiogenesis and increased tissue perfusion, respectively. These
preclinical observations support our current clinical-stage research where we are exploring the use
of TRC therapies to regenerate vascular tissue in patients with CLI.
16
Initial results from the first clinical trial of TRCs in CLI were reported in October 2007.
The trial examined the safety of TRCs and unexpanded bone marrow cells relative to standard of care
in treatment of chronic diabetic foot wounds. Initial results from 13 patients after 12 month
follow-up indicated similar safety profiles, with no cell-related adverse events reported. No
major amputations were reported in the TRC group (N=4), one in the unexpanded bone marrow cell
group (N=7), and one in the standard of care group (N=2). Patients in the TRC group and in the
unexpanded bone marrow group reported healing of all open wounds; this was not observed in the
standard of care group.
Critical Limb Ischemia Trial
Following the interim clinical results from Germany, we initiated the RESTORE-CLI trial, a
U.S. Phase IIb prospective, controlled, randomized, double-blind, multi-center clinical trial to
treat patients suffering from CLI. This trial is designed to evaluate the
safety and efficacy of TRCs in the treatment of CLI. Patients are being followed for a period of 12
months post-treatment. In addition to assessing the safety of TRCs, secondary endpoints include the
measurement of time to treatment failure, major amputation rates, level of amputation, complete
wound healing, blood flow in affected limbs, patient quality of life, pain scores and analgesic
use.
In February 2010 a planned interim analysis was performed for this study on 46 patients having
completed at least 6 months of the study. We reported the safety profile was similar between the
treatment and control patients. Importantly, we reported that our autologous TRCs were more
effective than placebo (p>.0090), based on a composite efficacy endpoint assessing time to
treatment failure (including major amputations, doubling of wound size or new gangrene). Other
clinically meaningful endpoints (e.g., major amputation rate, complete wound healing) individually
showed encouraging trends, but have not yet reached statistical significance at the interim
analysis.
The interim analysis was planned to assess performance of TRCs in the CLI patient population
and to help plan further studies. Based on the interim findings, we concluded enrollment of new
patients in February 2010 in order to complete the study as rapidly as possible, and to begin
17
planning and discussions with the FDA for pivotal clinical trials in CLI. The last patient
enrolled in this trial was treated on March 23, 2010.
Results of Operations
Total revenues, consisting of product sales, for the quarter and nine months ended March 31,
2010 were $0 and $89,000, respectively, compared to $58,000 and $113,000, respectively, for the
same periods in fiscal year 2009. The fluctuations in product sales is due to the
changes in volume of cell production sales for investigator-sponsored clinical trials in Spain and
limited cell manufacturing supplies to a research institute in the U.S. At such time as we satisfy
applicable regulatory approval requirements, we expect the sales of our TRC cell-based products
will constitute nearly all of our product sales revenues.
Total costs and expenses increased to $4,263,000 for the quarter ended March 31, 2010,
compared to $4,070,000 for the quarter ended March 31, 2009.
Costs and expenses include an increase in research and development expenses to $2,845,000 for
the quarter ended March 31, 2010 from $2,785,000 for the quarter ended March 31, 2009. This
increase reflects continued expansion of our clinical development activities including the costs
associated with recruitment and treatment of patients in our IMPACT-DCM clinical trial. Research
and development expenses also included a non-cash charge relating to share-based compensation
expense of $146,000 for the quarter ended March 31, 2010 compared to $100,000 for the quarter ended
March 31, 2009. A reversal of $171,000 was recorded for the quarter ended March 31, 2010, in
share-based compensation expense for certain stock options no longer expected to vest related to
employee terminations and forfeitures.
Selling, general and administrative expenses increased for the quarter ended March 31, 2010 to
$1,418,000 from $1,260,000 for the quarter ended March 31, 2009. This increase is primarily the
result of increased legal fees and contract services. Selling, general and administrative expenses
for the quarter ended March 31, 2010, included a non-cash charge relating to share-based
compensation expense of $225,000 compared to $273,000 for the quarter ended March 31, 2009. A
reversal of $125,000 was recorded for the quarter ended March 31, 2010, in share-based compensation
expense for certain stock options no longer expected to vest related to employee terminations and
forfeitures.
Total costs and expenses increased to $12,753,000 for the nine months ended March 31, 2010,
compared to $12,296,000 for the nine months ended March 31, 2009.
Research and development expenses increased for the nine months ended March 31, 2010 to
$9,039,000 from $8,340,000 for the nine months ended March 31, 2009. This increase reflects
continued expansion of our clinical development activities including the costs associated with
recruitment and treatment of patients in our IMPACT-DCM clinical trial. Research and development
expenses also included a non-cash charge relating to stock-based compensation expense of $506,000
for the nine months ended March 31, 2010 compared to $435,000 for the nine months ended March 31,
2009. A reversal of $171,000 was recorded for the nine months ended March 31, 2010, in share-based
compensation expense for certain stock options no longer expected to vest related to employee
terminations and forfeitures.
18
Selling, general and administrative expenses decreased for the nine months ended March 31,
2010 to $3,680,000 from $3,909,000 for the nine months ended March 31, 2009. This decrease is
primarily due to an offset of $404,000 in share-based compensation expense recorded for certain
stock options no longer expected to vest related to employee terminations and forfeitures.
Selling, general and administrative expenses for the nine months ended March 31, 2010, included a
non-cash charge relating to share-based compensation expense of $494,000 compared to $694,000 for
the nine months ended March 31, 2009.
Interest income was $34,000 and $83,000, respectively, for the quarter and nine months ended
March 31, 2010 compared to $57,000 and $253,000, respectively, for the same periods in fiscal 2009.
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 lower interest rates.
Interest expense was $9,000 and $33,000, respectively, for the quarter and nine months ended
March 31, 2010 compared to $17,000 and $58,000, respectively, for the same periods in fiscal 2009.
Interest expense is related to the secured loan with Key Equipment Finance Inc.
Our net loss was $4,238,000, or $.16 per common share for the quarter ended March 31, 2010
compared to $3,972,000, or $.24 per common share for the quarter ended March 31, 2009. For the
nine months ended March 31, 2010, our net loss increased to $12,614,000, or $.55 per common share
compared to a net loss of $11,988,000, or $.72 per common share for the nine months ended March 31,
2009.
On April 27, 2010, Moll Industries, a supplier of the
cell culture cassettes used in the
production of TRC-based products, filed for bankruptcy protection in a Delaware court.
Although we believe we have adequate supplies of these materials for our anticipated
uses, there can be no assurance that we will be able to continue our present arrangements
with Moll or, if necessary, establish new relationships on the same or similar terms as
we have with Moll. Although we anticipate that the cell culture cassettes will be able to be
manufactured for us on the same or similar terms as Moll is currently providing, any
increase in the cost of these cassettes could increase our research and development
expense which may have a material adverse affect on our business, financial condition
and results of operations. See Part I, Item 1A, Risk Factors in our Annual Report on
Form 10-K for the year ended June 30, 2009.
Our major ongoing research and development programs are focused on the clinical development of
TRC-based products, bone marrow-derived adult stem and early progenitor cells, for use in cardiac
regeneration, as well as vascular regeneration. We have reprioritized our clinical development
programs to focus on cardiovascular applications including our Phase II IMPACT-DCM (dilated
cardiomyopathy) trial and our Phase IIb RESTORE-CLI (critical limb ischemia) trial. 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 and to
decrease the cost of manufacturing our TRC-based products.
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 in Part I, Item 1A, Risk Factors in our Annual Report on Form
10-K for the year ended June 30, 2009. The potentially lengthy process of seeking regulatory
approvals for our
19
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 March 31, 2010, have totaled approximately
$231 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. These financing sources have generally
allowed us to maintain adequate levels of cash and other liquid investments.
Our combined cash and cash equivalents and short-term investments totaled $22,844,000 at March
31, 2010, an increase of $5,844,000 from June 30, 2009. During the nine months ended March 31,
2010, the primary source of cash and cash equivalents was from equity transactions, of which net
proceeds of $17,500,000 were raised through sales of our equity securities pursuant to the June
2009 agreement with Fusion Capital and an underwritten public offering of public offering of our
common stock and warrants. The primary uses of cash and cash equivalents during the nine months
ended March 31, 2010 included $11,430,000 to finance our operations and working capital
requirements, and $103,000 in capital equipment additions. Our combined cash and cash equivalents
at April 30, 2010 was approximately $21,556,000.
In our underwriting agreement with Oppenheimer & Co. Inc., we have agreed not to issue or sell
any securities under our existing financing agreement with Fusion Capital or otherwise enter into
any similar equity financing program with any third party for a period of 180 days from the date of
the prospectus supplement (January 15, 2010) without the prior written consent of Oppenheimer & Co.
Inc. Pursuant to our financing agreement with Fusion Capital we are not able to put shares to
Fusion Capital for purchase so long as our stock price is below $2.88.
Our monthly cash utilization has average approximately $1.3 million for the nine months ended
March 31, 2010. We expect our monthly cash utilization for the remainder of fiscal year 2010 to
average approximately $1.4 million per month due to increased expenses to conduct our IMPACT-DCM
clinical trial.
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 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
research and development
20
agreements or grants, distribution and marketing agreements and through public or private debt
or equity financing transactions. 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. We expect that
our available cash and expected interest income will be sufficient to finance current planned
activities at least through March 31, 2011, in part due to the fact that many of our expenditures
are discretionary in nature and could, if necessary, be delayed. These estimates are based on
certain assumptions. See Results of Operations above. 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.
On January 21, 2010, we completed the sale of 6,509,637 units (including 740,387 units sold to
the underwriter pursuant to the exercise of its over-allotment option) at a public offering price
of $2.08 per unit. Each unit consisted of (i) one share of common stock, (ii) a Class A warrant to
purchase 0.75 of a share of common stock at an exercise price of $2.9744 per share and (iii) a
Class B warrant to purchase 0.50 of a share of common stock at an exercise price of $2.08 per
share. We received approximately $12.4 million in net proceeds from the sale of the units
(including the partially exercised option of the over-allotment), after underwriting discounts and
commissions and other offering expenses.
The 6,509,637 units consist of an aggregate of 6,509,637 shares of our common stock, Class A
Warrants to purchase an aggregate of 4,882,228 shares of common stock and Class B Warrants to
purchase an aggregate of 3,254,818 shares of common stock. The Class A Warrants are exercisable
for a five year period commencing on July 21, 2010. The Class B Warrants are exercisable at any
time from January 21, 2010 through July 21, 2010.
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 Part I, Item 1. Financial Statements Notes to Consolidated
Financial Statements in this Quarterly Report on Form 10-Q and Notes to Consolidated Financial
Statements in our Annual Report on Form 10-K for the year ended June 30, 2009.
Off-Balance Sheet Arrangements
At March 31, 2010, we were not party to any off-balance sheet arrangements.
21
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 of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. 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. The factors described in Part I,
Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year-ended June 30, 2009 Such
factors, among others, could have a material adverse effect upon our business, results of
operations and financial conditions.
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, unless required by law, 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.
Among the factors about which we have made assumptions are:
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potential strategic collaborations with others; |
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future capital needs and expected cash flows; |
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adequacy of existing capital to support operations for a specified time; |
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the rate and degree of progress on our product development and marketing plans; |
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the rate of regulatory approval to proceed with clinical trial programs and the
success achieved in clinical trials; |
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enrollment in and results of our clinical trials; |
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the requirements for marketing authorization from regulatory bodies in the U.S.,
E.U.and other countries; |
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the liquidity and market volatility of our equity securities; |
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the continued listing of our securities on the NASDAQ Capital Market; |
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regulatory and manufacturing requirements and uncertainties; |
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technological developments by competitors; |
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anticipation of future losses; |
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replacement of manufacturing sources; |
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our products and commercialization plans; and |
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revenue expectations and operating results. |
For further information on factors which could impact us and the statements contained herein,
see Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2009.
23
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Company conducted an evaluation, under the supervision and with the participation of
management, including the Chief Executive Officer/Chief Financial Officer (CEO)/(CFO), who
currently is the same individual, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
and Exchange Act of 1934, as amended (the Exchange Act). Based on that evaluation, the CEO/CFO
has concluded that the Companys disclosure controls and procedures were effective as of March 31,
2010 to ensure that information related to the Company required to be disclosed in reports the
Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms, and (ii) accumulated and
communicated to the Companys management, including the CEO/CFO, to allow timely decisions
regarding required disclosure. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that the Companys disclosure controls and
procedures will detect or uncover every situation involving the failure of persons within the
Company to disclose material information otherwise required to be set forth in the Companys
periodic reports; however, the Companys disclosure controls are designed to provide reasonable
assurance that they will achieve their objective of timely alerting the CEO/CFO to the information
relating to the Company required to be disclosed in the Companys periodic reports required to be
filed with the SEC.
24
Changes in Internal Control over Financial Reporting
During our third quarter of fiscal 2010, there were no changes made in our internal control
over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
Act) that have materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.
25
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 2. Unregistered Sales of Equity Securities and Use of Proceeds
On June 12, 2009, the Company entered into a $30.0 million common stock purchase agreement
with Fusion Capital, an Illinois limited liability company. The terms of the arrangement with
Fusion Capital are disclosed in the Companys Annual Report on Form 10-K for the year ended June
30, 2009 and there have been no changes to the terms of this arrangement during the quarter ended
March 31, 2010.
The Company did not issue any unregistered securities during the three months ended March 31,
2010. During the nine months ended March 31, 2010, 1,769,970 shares of the Companys common stock,
including 51,432 shares issued as payment of the Companys commitment fee were issued to Fusion
Capital for net proceeds of $5,100,000. The Company has an effective registration statement
covering the resale by Fusion Capital of all of these shares under the Securities Act of 1933, as
amended.
Item 6. Exhibits
The Exhibits listed in the Exhibit Index immediately following the Signatures, are filed as a
part of this Quarterly Report on Form 10-Q.
26
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: May 13, 2010 |
/s/ Timothy M. Mayleben
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Timothy M. Mayleben |
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President and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer) |
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EXHIBIT INDEX
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Exhibit Number |
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Description |
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4.1
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Class A Warrant Agreement, dated as of January 21, 2010, by and between the Registrant and
Continental Stock Transfer & Trust Company (incorporated herein by reference to Exhibit 4.1 to
the Companys Current Report on Form 8-K filed with the SEC on January 27, 2010) |
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4.2
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Class B Warrant Agreement dated as of January 21, 2010, by and between the Registrant and
Continental Stock Transfer & Trust Company (incorporated herein by reference to Exhibit 4.2 to
the Companys Current Report on Form 8-K filed with the SEC on January 27, 2010) |
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10.1
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Underwriting Agreement, dated as of January 15, 2010, and between the Registrant and
Oppenheimer & Co. Inc. (incorporated herein by reference to Exhibit 1.1 to the Companys
Current Report on Form 8-K filed with the SEC on January 15, 2010) |
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31.1
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Rule 13a-14(a)/15d-14(a) Certification (furnished herewith) |
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32.1
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (furnished herewith) |
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GLOSSARY
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TERM |
|
DEFINITION |
Adult Stem Cell
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A cell present in adults
that can generate a limited
range of cell types as well
as renew itself. |
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Adverse Event
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Any adverse change in health
or side-effect that occurs
in a person participating in
a clinical trial, from the
time they consent to joining
the trial until a
pre-specified period of time
after their treatment has
been completed. |
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AEMPS Agencia Española de Medicamentos y
Productos Sanitarios
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Spanish Drug Agency |
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Allogeneic
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Originating from a human
donor other than the patient
receiving treatment
(Aastrom does NOT use
allogeneic cells). |
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ATMP Advanced Therapy Medicinal Product
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New medicinal products in
the European Union based on
genes (gene therapy), cells
(cell therapy) and tissues
(tissue engineering). |
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Autologous
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Originating from the patient
receiving treatment.
(Aastrom uses only
autologous cells) |
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BLA Biologics License Application
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An application containing
product safety, efficacy and
manufacturing information
required by the FDA to
market biologics products in
the U.S (equivalent to NDA) |
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CBER Center for Biologics Evaluation and
Research
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Branch of the FDA that
regulates biological
products for disease
prevention and treatment
that are inherently more
complex than chemically
synthesized pharmaceuticals. |
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CLI Critical Limb Ischemia
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A vascular disease
characterized by
insufficient blood flow in
the extremities that causes
severe pain, tissue loss or
both. |
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Controlled Clinical Trial
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A clinical study that
compares patients receiving
a specific treatment to
patients receiving an
alternate treatment for the
condition of interest. The
alternate treatment may be
another active treatment,
standard of care for the
condition and/or a placebo
(inactive) treatment. |
29
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TERM |
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DEFINITION |
CRC Cardiac Repair Cell
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Aastroms proprietary Tissue Repair
Cells for cardiac indications. (Also
see TRC Tissue Repair Cell) |
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DCM Dilated Cardiomyopathy
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A chronic cardiac disease where
dilation of the patients heart
reduces its function to a point that
the normal circulation of blood cannot
be maintained. |
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Double-Blind Clinical Trial
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Clinical trials in which neither the
patient nor the physician know if the
patient received the experimental
treatment or a control/placebo. |
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EMEA European Medicines Agency
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European Union body responsible for
coordinating the existing scientific
resources put at its disposal by
Member States for the evaluation,
supervision and pharmacovigilance of
medicinal products. The Agency
provides the Member States and the
institutions of the E.U. scientific
advice on any question relating to the
evaluation of the quality, safety and
efficacy of medicinal products for
human or veterinary use referred to it
in accordance with the provisions of
E.U.legislation relating to medicinal
products. EMEA is similar in function
to the US FDA (see FDA below). |
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E.U. European Union
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The economic and political union of 27
member states, located primarily in
Europe, for which the EMEA holds the
medical regulatory power. |
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Ex vivo
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Outside the body |
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FDA Food and Drug Administration
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The U.S. FDA ensures that medicines,
medical devices, and
radiation-emitting consumer products
are safe and effective. Authorized by
Congress to enforce the Federal Food,
Drug, and Cosmetic Act and several
other public health laws, the agency
monitors the manufacture, import,
transport, storage, and sale of $1
trillion worth of goods annually. |
30
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TERM |
|
DEFINITION |
GCP Good Clinical Practice
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GCP is an international
ethical and scientific
quality standard for
designing, conducting,
recording and reporting
trials that involve the
participation of human
subjects. Compliance with
this standard provides public
assurance that the rights,
safety and well-being of
trial subjects are protected,
consistent with the
principles that have their
origin in the Declaration of
Helsinki, and that the
clinical trial data are
credible. |
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GMP Good Manufacturing Practice
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GMP regulations require that
manufacturers, processors,
and packagers of drugs,
medical devices, some food,
and blood take proactive
steps to ensure that their
products are safe, pure, and
effective. GMP regulations
require a quality approach to
manufacturing, enabling
companies to minimize or
eliminate instances of
contamination, mix-ups, and
errors. |
|
|
|
GTP Good Tissue Practice
|
|
GTP regulations help ensure
that donors of human cellular
and tissue-based products are
free of communicable diseases
and that the cells and
tissues are not contaminated
during manufacturing and
maintain their integrity and
function. Key elements of the
proposed rule are: Establishment of a quality
program, which would evaluate
all aspects of the firms
operations, to ensure
compliance with GTP;
Maintenance of an adequate
organizational structure and
sufficient personnel;
Establishment of standard
operating procedures for all
significant steps in
manufacturing; Maintenance of
facilities, equipment and the
environment; Control and
validation of manufacturing
processes; Provisions for
adequate and appropriate
storage; Record keeping and
management; Maintenance of a
complaint file; Procedures
for tracking the product from
donor to recipient, and from
recipient to donor. |
31
|
|
|
TERM |
|
DEFINITION |
Hematopoietic Stem Cells
|
|
Stem cells that give rise to
all blood cell types
including myeloid (monocytes
and macrophages, neutrophils,
basophils, eosinophils,
erythrocytes,
megakaryocytes/platelets,
dendritic cells), and
lymphoid lineages (T-cells,
B-cells, NK-cells). |
|
|
|
IMPACT-DCM
|
|
Aastroms U.S. Phase II
surgical clinical trial
evaluating the use of CRCs in
the treatment of dilated
cardiomyopathy. |
|
|
|
IMPD Investigational Medicinal Product
Dossier
|
|
An IMPD is now required to
accompany an application to
perform clinical trials in
any European Member State.
It provides a summary of
information on the quality of
the product being evaluated
in a clinical trial planned
to occur in a European Member
State, including reference
products and placebos. It
also provides data from
non-clinical studies and
available previous clinical
experience with the use of
the investigational medicinal
product. |
|
|
|
In vitro
|
|
In a laboratory dish or test
tube; in an artificial
environment |
|
|
|
IND Investigational New Drug
|
|
An application submitted to
the FDA for a new drug or
biologic that, if allowed,
will be used in a clinical
trial. |
|
|
|
IRB Institutional Review Board
|
|
A committee designated to
formally approve, monitor,
and review biomedical
research at an institution
involving humans.
Institutional Review Boards
aim to protect the rights and
welfare of the research
subjects. For
Aastrom-sponsored clinical
trials, IRB approval must be
obtained at each individual
clinical site in order for
patient recruitment and
treatment to commence at that
site. |
|
|
|
LVEF Left Ventricular Ejection Fraction
|
|
The fraction of blood pumped
out of the left ventricle
with each heart beat. |
|
|
|
Open-label Clinical Trial
|
|
A trial in which both the
treating physician and the
patient know whether they are
receiving the experimental
treatment or control
treatment. |
32
|
|
|
TERM |
|
DEFINITION |
Orphan Drug Designation
|
|
Orphan drug refers to a drug or biologic that
is intended for use in the treatment of a rare
disease or condition. Orphan drug designation
from the U.S. Food and Drug Association (FDA)
qualifies the sponsor to receive certain
benefits from the Government in exchange for
developing the drug for a rare disease or
condition. The drug must then go through the
FDA marketing approval process like any other
drug or biologic which evaluates for safety and
efficacy. Usually a sponsor receives a quicker
review time and lower application fees for an
orphan product. |
|
|
|
Phase I Clinical Trial
|
|
A Phase I trial represents an initial study in
a small group of patients to test for safety
and other relevant factors |
|
|
|
Phase II Clinical Trial
|
|
A Phase II trial represents a study in a small
number of patients to assess the safety and
efficacy of a product |
|
|
|
Phase IIb Clinical Trial
|
|
A Phase IIb trial is a moderately-sized Phase
II study that is more specifically designed
assess the efficacy of a product than a Phase
IIa trial |
|
|
|
Phase III Clinical Trial
|
|
Phase III studies are initiated to establish
safety and efficacy in an expanded patient
population at multiple clinical study sites and
are generally larger than trials in earlier
phases of development. |
|
|
|
Progenitor Cells
|
|
A parent cell that gives rise to a distinct
cell lineage by a series of cell divisions. |
|
|
|
Prospective Clinical Trial
|
|
A clinical trial in which participants are
identified and then followed for the duration
of the clinical trial. |
|
|
|
Randomized Clinical Trial
|
|
A clinical trial in which the participants are
assigned randomly to treatment and control
groups. |
|
|
|
Somatic Cell
|
|
Any of the cells responsible for forming the
body of an organism such as internal organs,
bones, skin, connective tissues and blood. |
33
|
|
|
TERM |
|
DEFINITION |
SPP Single-Pass Perfusion
|
|
SPP is Aastroms proprietary technology that
controls gas and cell culture media exchange
to enable the replication of early-stage stem
and progenitor cells while preventing their
differentiation into mature cells. |
|
|
|
Standard of care treatment
|
|
The treatment normally prescribed in medical
practice for a particular illness, injury or
procedure. |
|
|
|
Stem Cell
|
|
Unspecialized (undifferentiated) cells that
retain the ability to divide throughout a
lifetime and give rise to more specialized
(differentiated) cells which take the place
of cells that die or are lost.
In culture, these undifferentiated cells
possess the ability to divide for indefinite
periods in culture and may give rise to
highly specialized cells. |
|
|
|
TRC Tissue Repair Cell
|
|
Aastroms cell manufacturing process begins
with the collection of a small aspirate
(approximately 50 ml) of bone marrow from the
patients hip in an outpatient procedure. The
sample of bone marrow is shipped to a
manufacturing facility, and transferred into
Aastroms cell manufacturing system. In this
fully automated, sterile process, the stem
and progenitor cell populations present in
the bone marrow are greatly expanded to yield
cellular products based on Aastroms Tissue
Repair Cell (TRC) technology. The finished
TRC-based product is shipped back to the
physician who administers it to the original
patient as an autologous cell therapy. |
|
|
|
VRC Vascular Repair Cell
|
|
Aastroms proprietary Tissue Repair Cells for
Vascular indications. (Also see TRC
Tissue Repair Cell) |
34
exv31w1
Exhibit 31.1
CERTIFICATION
I, Timothy M. Mayleben, certify that:
|
1. |
|
I have reviewed this Quarterly Report on Form 10-Q/A 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. |
|
I am 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 my 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;
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under my 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;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report my 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; and
|
5. |
|
I have disclosed, based on my 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.
Date:
May 13, 2010
|
|
|
|
|
/s/ Timothy M. Mayleben
|
|
|
Timothy M. Mayleben |
|
|
President and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(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/A for the quarter ended March 31, 2010, as filed with the Securities and Exchange Commission on
the date hereof (the Report), I, Timothy M. Mayleben, President, Chief Executive Officer 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) 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.
May 13, 2010
|
|
|
|
|
/s/ Timothy M. Mayleben
|
|
|
Timothy M. Mayleben |
|
|
President and Chief Executive Officer
(Principal Executive Officer)
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.