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 DECEMBER 31, 2009,
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) |
(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. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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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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226,048,759 |
(Class)
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Outstanding at February 2, 2010 |
Explanatory Note
We are filing this Amended Quarterly Report on Form 10-Q/A (the Amended Filing) to our
Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, which was filed with the
Securities and Exchange Commission (SEC) on February 9, 2010 (the Original Filing), to amend
and restate our unaudited consolidated condensed financial statements and related disclosures for
the six months ended December 31, 2008 and December 31, 2009, and the period from inception to
December 31, 2009, as discussed below and in Note 3 to the accompanying restated consolidated
condensed financial statements, as well as to amend certain other Items within the Original Filing
as listed in Items Amended in this Filing below, as a result of the restatement of our
consolidated condensed financial statements.
Background of Restatement
On February 11, 2011, in connection with responding to certain comments raised by the Staff of
the SEC in its periodic review of our SEC filings, the Company in consultation with its Audit
Committee, concluded that its previously issued consolidated financial statements for all periods
included in our annual report on Form 10-K for the fiscal year ended June 30, 2010 and included in
our quarterly reports on Form 10-Q for the quarters ended September 30, 2009 through September 30,
2010 (collectively, the Affected Periods) should be restated because of a misapplication in the
guidance around accounting for Warrants (as defined below) and should no longer be relied upon.
However, the non-cash adjustments to the consolidated financial statements, in all of the Affected
Periods, do not impact the amounts previously reported for the Companys cash and cash equivalents,
operating expenses or cash flows.
The warrants at issue (collectively, the Warrants) include:
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(i) |
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warrants to purchase an aggregate of 300,000 shares of the Companys common
stock, issued in April 2004 at an exercise price of $13.20 per share; |
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(ii) |
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warrants to purchase an aggregate of 320,248 shares of the Companys common
stock, issued in October 2004 at an exercise price of $13.92 per share; |
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(iii) |
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warrants to purchase an aggregate of 740,131 shares of the Companys common
stock, issued in October 2007 at an exercise price of $12.72 per share; |
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(iv) |
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Class A warrants to purchase an aggregate of 4,882,228 shares of the Companys
common stock, issued in January 2010 at an exercise price of $2.97 per share; and |
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Class B warrants to purchase an aggregate of 3,254,818 shares of common stock,
issued in January 2010 at an exercise price of $2.08 per share. |
Historically, the Warrants were reflected as a component of equity as opposed to liabilities
on the balance sheets and the statements of operations did not include the subsequent non-cash
changes in estimated fair value of the Warrants in accordance with Accounting Standards
Codification 815, Derivatives and Hedging (ASC 815). The Warrants generally provide that, in the
event the related registration statement is not available for the issuance of the Warrant shares,
the holder may exercise the Warrant on a cashless basis (i.e., applying a portion of the Warrant
shares to the payment of the exercise price). In addition, the Class A warrants and Class B
warrants listed above provide the holder with weighted-average anti-dilution price protection in
the event we issue securities at a price per share that is less than the exercise price of the
warrants.
However, under the guidance of ASC 815, warrant instruments that could potentially require net
cash settlement in the absence of express language precluding such settlement, and, additionally,
warrants that provide for anti-dilution price protection, should be initially classified as
derivative liabilities at their estimated fair values, regardless of the likelihood that such
instruments will ever be settled in cash. In periods subsequent to issuance, changes in the
estimated fair value of the derivative instruments should be reported in the statement of
operations. Our Audit Committee, together with management, determined that the financial
statements in the Affected Periods should be restated to reflect the Warrants as liabilities, with
subsequent changes in their estimated fair value recorded as non-cash income or expense in each
Affected Period.
The cumulative effect of these adjustments on our financial statements is a 3.7% decrease in
the deficit accumulated during the development stage in the amount of $7.6 million as of December
31, 2009. These adjustments do not impact the amounts previously reported for the Companys cash
and cash equivalents, operating cash flows or operating expenses in any of the Affected Periods.
An explanation of the impact on our financial statements is contained in Note 3 to the consolidated
condensed financial statements contained in Part I Item 1 of this Amended Filing.
2
Restatement of Other Financial Statements
Along with the filing of this Amended Filing, we are concurrently filing amendments to our
Annual Report on Form 10-K for the fiscal year ended June 30, 2010 and Quarterly Reports on Form
10-Q for the quarters ended September 30, 2009, March 31, 2010 and September 30, 2010. The
amendments to our Quarterly Reports on Form 10-Q are being filed to restate our unaudited
consolidated condensed financial statements and related financial information for the periods
contained in those reports and to amend certain other Items within the previously-issued quarterly
filings, including Item 4 Controls and Procedures to reflect a reassessment of our disclosure
controls and procedures, and internal control over financial reporting. There is no impact on the
amounts previously reported for the Companys cash and cash equivalents, operating cash flows or
operating expenses in any of the Affected Periods as a result of the restatement. The cumulative
adjustment to shareholders equity as of the beginning of the six months ended December 31, 2009
was to reduce previously reported shareholders equity at that time by $0.5 million.
Internal Control Considerations
Our management determined that there was a control deficiency in its internal control that
constitutes a material weakness, as discussed in Part I Item 4 of the Amended Filing. A material
weakness is a deficiency, or combination of control deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of
the annual or interim consolidated financial statements will not be prevented or detected on a
timely basis. For a discussion of managements consideration of the Companys disclosure controls
and procedures and the material weakness identified, see Part I Item 4 included in this Amended
Filing.
Items Amended in This Filing
For the convenience of the reader, this Amended Filing sets forth the Original Filing, as
modified and superseded where necessary to reflect the restatement. The following items have been
amended as a result of, and to reflect, the restatement:
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Part I Item 1. Financial Statements; |
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Part I Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations; and |
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Part I Item 4. Controls and Procedures. |
In accordance with applicable SEC rules, this Amended Filing includes new certifications
required by Rule 13a-14 under the Securities and Exchange Act of 1934 (Exchange Act) from our
Chief Executive Officer and Chief Financial Officer dated as of the date of filing of this Amended
Filing.
Except for the items noted above, no other information included in the Original Filing is
being amended or updated by this Amended Filing. This Amended Filing continues to describe the
conditions as of the date of the Original Filing and, except as contained herein, we have not
updated or modified the disclosures contained in the Original Filing. Accordingly, this Amended
Filing should be read in conjunction with our filings made with the SEC subsequent to the filing of
the Original Filing, including any amendment to those filings.
3
AASTROM BIOSCIENCES, INC.
Quarterly Report on Form 10-Q/A
December 31, 2009
TABLE OF CONTENTS
4
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
AASTROM BIOSCIENCES, INC.
(a clinical development stage company)
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
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June 30, |
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December 31, |
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2009 |
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2009 |
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(Restated) |
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(Restated) |
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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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$ |
14,739 |
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Receivables, net |
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58 |
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23 |
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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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622 |
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Total current assets |
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17,791 |
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15,384 |
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PROPERTY AND EQUIPMENT, NET |
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1,485 |
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1,240 |
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Total assets |
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$ |
19,276 |
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$ |
16,624 |
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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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$ |
1,366 |
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Accrued employee benefits |
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355 |
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352 |
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Current portion of long-term debt |
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479 |
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354 |
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Warrant liabilities |
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532 |
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268 |
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Total current liabilities |
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2,219 |
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2,340 |
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LONG-TERM DEBT |
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305 |
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194 |
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SHAREHOLDERS EQUITY: |
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Common stock, no par value; shares authorized
250,000,000 and 500,000,000, respectively;
shares issued and outstanding 160,222,644 and
173,971,085, respectively |
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205,286 |
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210,736 |
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Deficit accumulated during the development stage |
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(188,534 |
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(196,646 |
) |
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Total shareholders equity |
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16,752 |
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14,090 |
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Total liabilities and shareholders equity |
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$ |
19,276 |
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$ |
16,624 |
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The accompanying notes are an integral part of these financial statements.
5
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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Six months ended |
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(Inception) to |
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December 31, |
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December 31, |
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December 31, |
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2008 |
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2009 |
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2008 |
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2009 |
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2009 |
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(Restated) |
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(Restated) |
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(Restated) |
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(Restated) |
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(Restated) |
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REVENUES: |
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Product sales and rentals |
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$ |
28 |
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$ |
16 |
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$ |
55 |
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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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28 |
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16 |
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55 |
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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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18 |
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2 |
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22 |
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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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2,829 |
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3,283 |
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5,555 |
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6,194 |
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154,302 |
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Selling, general and administrative |
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1,333 |
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1,316 |
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2,649 |
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2,262 |
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70,920 |
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Total costs and expenses |
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4,180 |
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4,601 |
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8,226 |
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8,490 |
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228,257 |
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LOSS FROM OPERATIONS |
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(4,152 |
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(4,585 |
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(8,171 |
) |
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(8,401 |
) |
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(214,645 |
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OTHER INCOME (EXPENSE): |
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(Increase) decrease in fair value of warrants |
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(785 |
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255 |
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(542 |
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264 |
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7,553 |
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Other income |
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1,249 |
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Interest income |
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69 |
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21 |
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196 |
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49 |
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10,613 |
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Interest expense |
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(20 |
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(11 |
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(41 |
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(24 |
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(448 |
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Total other income (expense), net |
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(736 |
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265 |
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(387 |
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289 |
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18,967 |
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NET LOSS |
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$ |
(4,888 |
) |
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$ |
(4,320 |
) |
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$ |
(8,558 |
) |
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$ |
(8,112 |
) |
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$ |
(195,678 |
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COMPUTATION OF NET LOSS PER SHARE APPLICABLE TO
COMMON SHARES: |
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NET LOSS |
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$ |
(4,888 |
) |
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$ |
(4,320 |
) |
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$ |
(8,558 |
) |
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$ |
(8,112 |
) |
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NET LOSS PER SHARE (Basic and Diluted) |
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$ |
(0.04 |
) |
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$ |
(0.02 |
) |
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$ |
(0.06 |
) |
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$ |
(0.05 |
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Weighted average number of shares outstanding
(Basic and Diluted) |
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134,575 |
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173,707 |
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133,686 |
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169,570 |
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The accompanying notes are an integral part of these financial statements.
6
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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Six months ended |
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(Inception) to |
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December 31, |
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December 31, |
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2008 |
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2009 |
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2009 |
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(Restated) |
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(Restated) |
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(Restated) |
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OPERATING ACTIVITIES: |
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Net loss |
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$ |
(8,558 |
) |
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$ |
(8,112 |
) |
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$ |
(195,678 |
) |
Adjustments to reconcile net loss to net cash used for operating activities: |
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Depreciation and amortization |
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350 |
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301 |
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6,301 |
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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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756 |
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350 |
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8,739 |
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Increase (decrease) in fair value of warrants |
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542 |
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(264 |
) |
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(7,553 |
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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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(52 |
) |
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35 |
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(272 |
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Inventories |
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1 |
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(2,335 |
) |
Other current assets |
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84 |
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(27 |
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(461 |
) |
Accounts payable and accrued expenses |
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|
178 |
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|
513 |
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|
1,309 |
|
Accrued employee benefits |
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|
(359 |
) |
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(3 |
) |
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352 |
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Net cash used for operating activities |
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(7,089 |
) |
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(7,206 |
) |
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(185,449 |
) |
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INVESTING ACTIVITIES: |
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Organizational costs |
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(73 |
) |
Purchase of short-term investments |
|
|
|
|
|
|
|
|
|
|
(212,041 |
) |
Maturities of short-term investments |
|
|
6,000 |
|
|
|
|
|
|
|
213,745 |
|
Property and equipment purchases |
|
|
(28 |
) |
|
|
(56 |
) |
|
|
(5,817 |
) |
Proceeds from sale of property held for resale |
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) investing activities |
|
|
5,972 |
|
|
|
(56 |
) |
|
|
(3,786 |
) |
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from issuance of preferred stock |
|
|
|
|
|
|
|
|
|
|
51,647 |
|
Net proceeds from issuance of common stock and warrants |
|
|
1,042 |
|
|
|
5,100 |
|
|
|
150,445 |
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
(49 |
) |
Payments received for stock purchase rights |
|
|
|
|
|
|
|
|
|
|
3,500 |
|
Payments received under shareholder notes |
|
|
|
|
|
|
|
|
|
|
31 |
|
Restricted cash used as compensating balance |
|
|
127 |
|
|
|
137 |
|
|
|
(140 |
) |
Proceeds from long-term debt |
|
|
|
|
|
|
|
|
|
|
751 |
|
Principal payments under long-term obligations |
|
|
(218 |
) |
|
|
(236 |
) |
|
|
(2,211 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
951 |
|
|
|
5,001 |
|
|
|
203,974 |
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
(166 |
) |
|
|
(2,261 |
) |
|
|
14,739 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
16,492 |
|
|
|
17,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
16,326 |
|
|
$ |
14,739 |
|
|
$ |
14,739 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
7
AASTROM BIOSCIENCES, INC.
(a clinical development stage company)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
Aastrom Biosciences, Inc. (the Company) 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
December 31, 2010, 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,
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 six months ended December 31, 2009, 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 restated financial
statements and the notes thereto included in our Amendment No. 1 to Annual Report on Form 10-K/A
for the year ended June 30, 2010, that is being concurrently filed with the SEC.
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.
3. Restatement of Consolidated Financial Statements
Background
On February 11, 2011, in connection with responding to certain comments raised by the Staff of
the SEC in its periodic review of the Companys SEC filings, the Company in consultation with its
Audit Committee, concluded that its previously issued financial statements for all periods included
in the Companys annual report on Form 10-K for the fiscal year ended June 30, 2010 and included in
the Companys quarterly reports on Form 10-Q for the quarters ended September 30, 2009 through
September 30, 2010 (collectively, the Affected Periods) should be restated because of a
misapplication in the guidance around accounting for Warrants (as defined below) and should no
longer be relied upon. However, the non-cash adjustments to the financial statements, in all of
the Affected Periods, do not impact the amounts previously reported for the Companys cash and cash
equivalents, operating expenses or cash flows.
8
The warrants at issue (collectively, the Warrants) include:
|
(i) |
|
warrants to purchase an aggregate of 300,000 shares of the Companys common
stock, issued in April 2004 at an exercise price of $13.20 per share; |
|
|
(ii) |
|
warrants to purchase an aggregate of 320,248 shares of the Companys common
stock, issued in October 2004 at an exercise price of $13.92 per share; |
|
|
(iii) |
|
warrants to purchase an aggregate of 740,131 shares of the Companys common
stock, issued in October 2007 at an exercise price of $12.72 per share; |
|
|
(iv) |
|
Class A warrants to purchase an aggregate of 4,882,228 shares of the Companys
common stock, issued in January 2010 at an exercise price of $2.97 per share; and |
|
|
(v) |
|
Class B warrants to purchase an aggregate of 3,254,818 shares of common stock,
issued in January 2010 at an exercise price of $2.08 per share. |
Historically, the Warrants were reflected as a component of equity as opposed to liabilities
on the balance sheets and the statements of operations did not include the subsequent non-cash
changes in estimated fair value of the Warrants in accordance with Accounting Standards
Codification 815, Derivatives and Hedging (ASC 815). The Warrants generally provide that, in the
event the related registration statement is not available for the issuance of the Warrant shares,
the holder may exercise the Warrant on a cashless basis (i.e., applying a portion of the Warrant
shares to the payment of the exercise price). In addition, the Class A warrants and Class B
warrants listed above provide the holder with weighted-average anti-dilution price protection in
the event we issue securities at a price per share that is less than the exercise price of the
warrants.
However, under the guidance of ASC 815, warrant instruments that could potentially require net
cash settlement in the absence of express language precluding such settlement, and, additionally,
warrants that provide for anti-dilution price protection, should be initially classified as
derivative liabilities at their estimated fair values, regardless of the likelihood that such
instruments will ever be settled in cash. In periods subsequent to issuance, changes in the
estimated fair value of the derivative instruments should be reported in the statement of
operations. The Audit Committee, together with management, determined that the financial
statements in the Affected Periods should be restated to reflect the Warrants as liabilities, with
subsequent changes in their estimated fair value recorded as non-cash income or expense in each
Affected Period.
Impact of the Restatement
The cumulative effect of these adjustments on the Companys previously-reported deficit
accumulated during the development stage and total shareholders equity was a decrease of $7.4
million and $0.4 million, respectively, as of the beginning of the six month period ended December
31, 2008. These adjustments do not impact the amounts previously reported for the Companys cash
and cash equivalents, net cash used for operating activities or operating expenses in any of the
Affected Periods.
The effects of the restatement on the following financial statement line items as of and for
the periods indicated are summarized in the following tables (in thousands except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Condensed Balance Sheets |
|
|
|
As Previously |
|
|
|
|
|
|
|
|
|
|
|
|
Reported |
|
|
Adjustments |
|
|
As Restated |
|
As of June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities |
|
$ |
|
|
|
$ |
532 |
|
|
$ |
532 |
|
Total current liabilities |
|
$ |
1,687 |
|
|
$ |
532 |
|
|
$ |
2,219 |
|
Common stock |
|
$ |
213,107 |
|
|
$ |
(7,821 |
) |
|
$ |
205,286 |
|
Deficit accumulated during the
development stage |
|
$ |
(195,823 |
) |
|
$ |
7,289 |
|
|
$ |
(188,534 |
) |
Total shareholders equity |
|
$ |
17,284 |
|
|
$ |
(532 |
) |
|
$ |
16,752 |
|
As of December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities |
|
$ |
|
|
|
$ |
268 |
|
|
$ |
268 |
|
Total current liabilities |
|
$ |
2,072 |
|
|
$ |
268 |
|
|
$ |
2,340 |
|
Common stock |
|
$ |
218,557 |
|
|
$ |
(7,821 |
) |
|
$ |
210,736 |
|
Deficit accumulated during the
development stage |
|
$ |
(204,199 |
) |
|
$ |
7,553 |
|
|
$ |
(196,646 |
) |
Total shareholders equity |
|
$ |
14,358 |
|
|
$ |
(268 |
) |
|
$ |
14,090 |
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Condensed Statements of Operations |
|
|
|
As Previously Reported |
|
|
Adjustments |
|
|
As Restated |
|
For the quarter ended December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in fair value
of warrants |
|
$ |
|
|
|
$ |
(785 |
) |
|
$ |
(785 |
) |
Total other income |
|
$ |
49 |
|
|
$ |
(785 |
) |
|
$ |
(736 |
) |
Net loss |
|
$ |
(4,103 |
) |
|
$ |
(785 |
) |
|
$ |
(4,888 |
) |
Net loss per share (basic and diluted) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.04 |
) |
For the six months ended December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in fair value
of warrants |
|
$ |
|
|
|
$ |
(542 |
) |
|
$ |
(542 |
) |
Total other income |
|
$ |
155 |
|
|
$ |
(542 |
) |
|
$ |
(387 |
) |
Net loss |
|
$ |
(8,016 |
) |
|
$ |
(542 |
) |
|
$ |
(8,558 |
) |
Net loss per share (basic and diluted) |
|
$ |
(0.06 |
) |
|
$ |
|
|
|
$ |
(0.06 |
) |
For the quarter ended December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in fair value
of warrants |
|
$ |
|
|
|
$ |
255 |
|
|
$ |
255 |
|
Total other income |
|
$ |
10 |
|
|
$ |
255 |
|
|
$ |
265 |
|
Net loss |
|
$ |
(4,575 |
) |
|
$ |
255 |
|
|
$ |
(4,320 |
) |
Net loss per share (basic and diluted) |
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
|
$ |
(0.02 |
) |
For the six months ended December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in fair value
of warrants |
|
$ |
|
|
|
$ |
264 |
|
|
$ |
264 |
|
Total other income |
|
$ |
25 |
|
|
$ |
264 |
|
|
$ |
289 |
|
Net loss |
|
$ |
(8,376 |
) |
|
$ |
264 |
|
|
$ |
(8,112 |
) |
Net loss per share (basic and diluted) |
|
$ |
(0.05 |
) |
|
$ |
|
|
|
$ |
(0.05 |
) |
March 24, 1989 (Inception) to December 31,
2009: |
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in fair value
of warrants |
|
$ |
|
|
|
$ |
7,553 |
|
|
$ |
7,553 |
|
Total other income |
|
$ |
11,414 |
|
|
$ |
7,553 |
|
|
$ |
18,967 |
|
Net loss |
|
$ |
(203,231 |
) |
|
$ |
7,553 |
|
|
$ |
(195,678 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Condensed Statements of Cash Flows |
|
|
|
As Previously Reported |
|
|
Adjustments |
|
|
As Restated |
|
For the six months ended December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,016 |
) |
|
$ |
(542 |
) |
|
$ |
(8,558 |
) |
Increase (decrease) in fair value
of warrants |
|
$ |
|
|
|
$ |
542 |
|
|
$ |
542 |
|
For the six months ended December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( 8,376 |
) |
|
$ |
264 |
|
|
$ |
(8,112 |
) |
Increase (decrease) in fair value
of warrants |
|
$ |
|
|
|
$ |
(264 |
) |
|
$ |
(264 |
) |
March 24, 1989 (Inception) to December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(203,231 |
) |
|
$ |
7,553 |
|
|
$ |
(195,678 |
) |
Increase (decrease) in fair value
of warrants |
|
$ |
|
|
|
$ |
(7,553 |
) |
|
$ |
(7,553 |
) |
10
4. Fair Value Measurements
Effective July 1, 2008, the Company began measuring assets and liabilities at fair value on a
recurring basis. In addition to expanding the disclosures surrounding fair value measurements, U.S.
GAAP (Generally Accepted Accounting Principles) clarifies that 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:
|
|
|
Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active
markets |
|
|
|
|
Level 2 inputs: Inputs, other than quoted prices included in Level 1 that are observable
either directly or indirectly; and |
|
|
|
|
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 December 31, 2009, the Company had $14.7 million invested in one money market fund, which
is included within the Cash and cash equivalents line on the consolidated condensed balance
sheet. Because there is an active market for shares of this money market fund, the Company
considers its fair value measure of this investment to be based on Level 1 inputs.
See Note 7 for disclosures related to the fair value of the Companys warrants. The Company
does not have any other assets or liabilities on the balance sheet as of December 31, 2009 that are
measured at fair value.
5. 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 six months ended December 31, 2009, the Company granted 6,542,200 service-based
options to purchase common stock. These options were granted with exercise prices equal to the fair
value of the Companys stock at the grant date, vest over four years (other than non-employee
director options which vest over one year) and 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 six months ended December 31, 2008 and 2009 was $0.39 and $0.23 respectively.
The net compensation costs recorded for the service-based stock options related to employees
and directors were approximately $301,000 and $340,000 for the quarter and six months ended
December 31, 2009, respectively, compared to $365,000 and $708,000 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.
|
|
|
|
|
|
|
|
|
|
|
Six months ended December 31, |
|
|
|
2008 |
|
|
2009 |
|
Stock Option Plans: |
|
|
|
|
|
|
|
|
Expected dividend rate |
|
|
0 |
% |
|
|
0 |
% |
Expected stock price volatility |
|
|
70 |
% |
|
|
70.2% 72.8 |
% |
Risk free interest rate |
|
|
3.3 |
% |
|
|
2.49% 2.98 |
% |
Estimated forfeiture rate |
|
|
10 |
% |
|
|
10 |
% |
Expected life (years) |
|
|
6.6 |
|
|
|
5.5 6.25 |
|
11
The following table summarizes the activity for service-based stock options for the indicated
periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
Aggregate |
|
|
|
|
|
|
|
Weighted Average |
|
|
Remaining |
|
|
Intrinsic |
|
|
|
Options |
|
|
Exercise Price |
|
|
Contractual Term |
|
|
Value |
|
Outstanding at June 30, 2009 |
|
|
10,923,059 |
|
|
$ |
0.97 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
6,542,200 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(2,480,300 |
) |
|
$ |
1.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
14,984,959 |
|
|
$ |
0.64 |
|
|
|
8.4 |
|
|
$ |
41,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009 |
|
|
4,906,411 |
|
|
$ |
1.06 |
|
|
|
6.5 |
|
|
$ |
6,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there was approximately $1,393,000 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 1.6 years.
Performance-Based Stock Options
There were no grants of performance-based stock options during the six months ended December
31, 2009. 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 six months ended December 31, 2009, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
Aggregate |
|
|
|
|
|
|
|
Weighted Average |
|
|
Remaining |
|
|
Intrinsic |
|
Options |
|
Shares |
|
|
Exercise Price |
|
|
Contractual Term |
|
|
Value |
|
Outstanding at June 30, 2009 |
|
|
881,334 |
|
|
$ |
1.47 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(333,333 |
) |
|
$ |
1.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
548,001 |
|
|
$ |
1.52 |
|
|
|
6.8 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate estimated fair value of these awards that are outstanding as of December 31,
2009 is approximately $561,000.
Restricted Stock Awards
Restricted stock awards generally vest over a four year period and entitle the recipient to
receive common stock upon vesting. The compensation costs charged as operating expenses for
restricted stock were approximately $1,000 and $10,000 for the quarter and six months ended
December 31, 2009, respectively, compared to $28,000 and $48,000 for the same periods in fiscal
year 2009.
A summary of the Companys restricted stock activity for the six months ended December 31,
2009 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Grant Date |
|
Non-vested Restricted Shares |
|
Shares |
|
|
Fair Value |
|
Non-vested at June 30, 2009 |
|
|
100,150 |
|
|
$ |
0.74 |
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
(98,725 |
) |
|
$ |
0.73 |
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at December 31, 2009 |
|
|
1,425 |
|
|
$ |
1.38 |
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there was approximately $1,300 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 0.7 years.
12
6. 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 December 31, 2009.
During the six months ended December 31, 2009, 13,748,439 shares of the Companys common stock
(including 411,467 shares related to its commitment fee) were issued to Fusion Capital for net
proceeds of $5,100,000.
7. Stock Purchase Warrants
The Company had the following warrants to purchase shares of common stock of the Company
outstanding during the quarters ended December 31, 2008, and December 31, 2009:
|
(i) |
|
warrants to purchase an aggregate of 300,000 shares of the Companys common stock,
issued on April 5, 2004 in connection with the Companys registered direct offering,
exercisable for a five year period commencing on April 5, 2004 at an exercise price of
$13.20 per share, all of which expired unexercised; |
|
|
(ii) |
|
warrants to purchase an aggregate of 320,248 shares of the Companys common stock,
issued on October 27, 2004 in connection with the Companys registered direct offering,
exercisable from April 28, 2005 through October 27, 2008 at an exercise price of $13.92
per share, 229,855 of which expired unexercised; and |
|
|
(iii) |
|
warrants to purchase an aggregate of 740,131 shares of the Companys common stock,
issued on October 17, 2007 in connection with the Companys registered direct offering,
exercisable from April 18, 2008 through April 17, 2013 at an exercise price of $12.72 per
share. |
The foregoing warrants are recorded as liabilities at their estimated fair value at the date
of issuance, with subsequent changes in estimated fair value recorded in other income (expense) in
the Companys statement of operations in each subsequent period. The estimated fair value of the
warrants is determined using Level 3 inputs. The liability is measured using the Black Scholes
valuation model, which is based, in part, upon unobservable inputs for which there is little or no
market data, requiring the Company to develop its own assumptions. The assumptions used by the
Company are summarized in the following tables:
|
|
|
|
|
|
|
|
|
October 2007 Warrants |
|
June 30, 2009 |
|
|
December 30, 2009 |
|
Closing stock price |
|
$ |
3.36 |
|
|
$ |
2.48 |
|
Expected dividend rate |
|
|
0 |
% |
|
|
0 |
% |
Expected stock price volatility |
|
|
70.8 |
% |
|
|
73.9 |
% |
Risk free interest rate |
|
|
1.6 |
% |
|
|
1.7 |
% |
Expected life (years) |
|
|
3.75 |
|
|
|
3.25 |
|
The following table summarizes the changes in the estimated fair value of our warrant
liabilities (in thousands):
|
|
|
|
|
Warrant Liabilities |
|
|
|
|
Balance at June 30, 2009 |
|
$ |
532 |
|
Decrease in fair value |
|
|
(264 |
) |
|
|
|
|
Balance at December 31, 2009 |
|
$ |
268 |
|
|
|
|
|
8. 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 December 31, 2008 and 2009 is approximately 21,013,000 and 21,455,000,
respectively.
9. Recent Accounting Pronouncements
In July 2009, the Financial Accounting Standards Board (FASB) issued the FASB Accounting
Standards Codification (ASC) as the only authoritative source of generally accepted accounting
principles. The ASC is effective for interim and annual reporting periods ending after September
15, 2009. The Company implemented use of the ASC without a significant impact on its consolidated
financial statements.
13
In September 2006, the FASB issued ASC 820 (formerly SFAS No. 157, Fair Value Measurements.
SFAS No. 157). This standard defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles, and expands disclosures about fair value measurements.
It emphasizes that fair value is a market-based measurement, not an entity-specific measurement.
Fair value measurements should be determined based on the assumptions that market participants
would use in pricing an asset or liability. The Company adopted the disclosure and recognition
provisions for non-financial assets and liabilities, for interim and annual periods effective July
1, 2009 and it had no effect on the consolidated financial statements.
10. Subsequent Events
On January 21, 2010, the Company completed the sale of 52,077,100 units (including 5,923,100
units sold to the underwriter pursuant to the exercise of its over-allotment option) at a public
offering price of $0.26 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 $0.3718 per
share and (iii) a Class B warrant to purchase 0.50 of a share of common stock at an exercise price
of $0.26 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 estimated fair market value was a
proportional amount of the total proceeds received allocable to the warrants at the date of
issuance that was approximately $4,375,000. The value was based on the Black-Scholes option-pricing
model.
The 52,077,100 units consist of an aggregate of 52,077,100 shares of the Companys common
stock, Class A Warrants to purchase an aggregate of 39,057,825 shares of common stock and Class B
Warrants to purchase an aggregate of 26,038,550 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.
On January 29, 2010, the Companys Board of Directors approved a one-for-eight reverse stock
split of the Companys common stock and for the Company to pursue an effective date of such reverse
stock split during February 2010. As of February 9, 2010 (the date of this Form 10-Q), this reverse
stock split is not yet effective. Unaudited pro forma information, as if the reverse stock split
was effective, is presented below for each of the interim periods ended December 31, 2008 and 2009
(in thousands, except per share amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended December 31, |
|
|
Six Months Ended December 31, |
|
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
|
(Restated) |
|
|
(Restated) |
|
|
(Restated) |
|
|
(Restated) |
|
Net loss |
|
$ |
(4,888 |
) |
|
$ |
(4,320 |
) |
|
$ |
(8,558 |
) |
|
$ |
(8,112 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma net loss per share (Basic and Diluted) |
|
$ |
(0.29 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proforma weighted average number of shares
outstanding (Basic and Diluted) |
|
|
16,821 |
|
|
|
21,713 |
|
|
|
16,710 |
|
|
|
21,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Restatement
As discussed in the Explanatory Note and Note 3 to this Amended Filing, we are amending
and restating our unaudited consolidated condensed financial statements and related disclosures for
all periods presented in this Amended Filing.
The following discussion and analysis of our financial condition and results of operations
incorporates the restated amounts. For this reason, the data set forth in this section may not be
comparable to discussion and data in our previously filed Quarterly Report on Form 10-Q for the
quarter ended December 31, 2009.
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 numbers 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. More than 375 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 and Cardiac Repair Cells (CRCs) |
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 CRCs (TRC-based cell therapy for cardiac
indications) 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. patients were treated with CRCs in our Phase II IMPACT-DCM surgical clinical
trial in November 2008. As of January 31, 2010, the trial was fully enrolled with 40 patients who
will be followed for one year. 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 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.
Our second cardiac trial, a U.S. Phase II cardiac catheter clinical trial has been designed to
explore a catheter-based delivery of CRCs to treat DCM patients. Clinical site training for this
trial was initiated during the fourth quarter of calendar year 2009, and we expect to begin
enrolling patients in the first quarter of calendar year 2010.
|
|
Vascular Regeneration and Vascular Repair Cells (VRCs) |
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 use of VRCs in the treatment of patients
with this severe, chronic disease. To date, 82 patients have been enrolled in this trial. Analysis
of interim data began during the fourth quarter of calendar year 2009, and we expect to report
conclusions from the interim analysis in the first quarter of calendar year 2010.
|
|
The TRC Technology Platform |
CRCs and VRCs are cellular therapies 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 and can potentially reconstitute the
hematopoietic and immune systems.
15
Our cell products have three features that we believe are critical for success in regenerative
medicine. Cellular therapies based on our TRC technology are:
|
|
autologous, which helps to ensure the cells are not rejected by patients immune system
allowing the cells to engraft, differentiate and integrate into functional tissues and organs
to produce a long-term repair; |
|
|
expanded, resulting in significantly higher concentrations of stem and progenitor cells
than occur naturally; and, |
|
|
a mixed population of cells, which includes most of the cell types found in natural bone
marrow and are required for tissue regeneration. |
All TRC-based products are manufactured at centralized facilities. We have one 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. With an initial focus on broader development
and commercialization of cell therapy processing systems and supplies, we are now focused on 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.
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 December 31, 2009, we have accumulated a net loss of approximately $203 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 TRC technology for
cardiac and vascular regeneration. We have also extended the shelf-life of our TRC-based cell
therapies which provides additional flexibility in transport and scheduling treatment for patients.
The extended shelf-life product has been qualified and implemented at our centralized facilities in
the U.S. and E.U. It is used for all cardiac and vascular regeneration clinical trials in the U.S.
and is available for E.U. treatment sites.
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, VRC 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 in the U.S. and E.U. 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.
16
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. See Risk Factors.
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.
The earliest clinical data from DCM patients treated with CRCs was obtained from two
compassionate-use patients treated during 2007 at the University Hospital in Düsseldorf, Germany. A
cardiothoracic surgeon with previous cell therapy experience performed the first human application
of our CRC product through direct injection into the heart muscle during open heart surgery.
Patient #1 had a left ventricular ejection fraction (LVEF) of approximately 10% prior to the CRC
treatment in November 2007. Over the course of two months, this patients LVEF increased to 25-30%
with improvement of heart failure stage also noted. As reported by the treating surgeon, during
in-hospital rehabilitation the patient declined further medical treatment and chose to leave the
hospital against medical advice. This patients subsequent death due to natural causes was found to
be unrelated to the cell therapy treatment. Patient #2 had an LVEF of 25-30% prior to being treated
with CRCs in December 2007. Upon discharge from the surgical center in February 2008, her LVEF had
improved to 45%. In September 2008, at a 7-month follow-up visit with the treating surgeon, this
patients LVEF was again measured at 45% and the patient reported further improvement in heart
failure symptoms. These E.U. compassionate-use treatments provided supporting information
considered 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 CRCs 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. CRCs, manufactured using our TRC technology, received Orphan
Drug Designation from the U.S. Food and Drug Administration (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.
To date, 40 patients have enrolled in our IMPACT-DCM clinical trial at the 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 vs. 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 CRCs in patients with DCM (including the
incidence of ectopies and arrhythmia as well as major adverse cardiac events), 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.
17
Dilated Cardiomyopathy Catheter Trial
We have expanded our ongoing clinical program to evaluate CRCs 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 CRCs to treat DCM patients. The FDA activated our IND application for
this clinical trial in November 2009. The first clinical site was trained in December 2009 and
patient enrollment is expected to begin during the first quarter of calendar year 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 CRCs via catheter injection. The catheter
trial will randomize patients in an approximate 2:1 ratio to the treatment vs. control group within
each stratum. While the primary objective of this study is to assess the safety of CRCs 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
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. The
term CLI is used to describe patients with chronic ischemia-induced pain (even at rest), ulcers,
tissue loss or gangrene in the limbs. CLI is the most severe form of PAD, and is typically the end
stage of the 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. VRC 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 in the
U.S. and E.U. where we are exploring the use of VRC therapies to regenerate vascular tissue in
patients with CLI.
The first evaluation of VRCs was conducted in a small clinical trial in Germany. Initial
results from this study were reported in October 2007 at the 2nd Congress of the German Society for
Stem Cell Research in Würzburg, Germany, by the studys Principal Investigator from the Heart &
Diabetes Center in Bad Oeynhausen, Germany. This interim report provided results from the first 13
patients treated in a 30-patient, multi-arm Phase I/II single-center clinical trial to evaluate the
safety of VRCs and unexpanded bone marrow cells in the treatment of chronic diabetic foot wounds
associated with CLI. As presented, results reflect treatment experience from 4 diabetic patients
with ischemia-related chronic tissue ulcers who were treated with VRCs, 7 patients who were treated
with normal unexpanded marrow cells, and two standard-of-care patients who did not receive cells.
All patients received wound care according to treatment standards outlined by the American Diabetes
Association. Twelve months post-treatment, all patients in the interim analysis who were treated
with VRCs reported no major amputations, no cell-related adverse events, and healing of all open
wounds. Of the 7 patients treated with unexpanded bone marrow cells, 5 reported results similar to
the VRC-treated patients 12 months post-treatment, 1 reported similar results to the VRC-treated
patients 18 months post-treatment, and 1 patient underwent a major amputation. For the 2
standard-of-care patients who only received wound care (no cells), 1 patient received a major
amputation and 1 patient experienced no improvement in wound healing after 12 months. Patient
follow-up has been completed and final data are expected to be reported by the investigator.
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 enroll up to 150 patients at up to 30
sites. Patients are randomized into two groups (treatment or placebo control) to evaluate the
safety and efficacy of VRCs in the treatment of CLI. To date, 82 patients have been enrolled in the
RESTORE-CLI trial and 18 clinical sites are open for patient enrollment. Patients will be followed
for a period of 12 months post-treatment. In addition to assessing the safety of
VRCs, secondary objectives include the measurement of major amputation rates, the level of
amputation, wound healing and blood flow in affected limbs, patient quality of life, pain scores
and analgesic use.
18
In the fourth calendar quarter of 2009, data were unblinded for the subset of patients
enrolled in the RESTORE-CLI trial (treatment and placebo control) who had completed at least 6
months of follow-up, including the first 30 patients who had completed the entire 12-month
follow-up period. The analysis of these interim data is ongoing and conclusions from the interim
results will be reported during the first quarter of calendar year 2010.
Additional Activity
In certain non-U.S. regions, autologous cells, such as our TRC-based products, do not require
a marketing authorization for commercial distribution. This enables us to gain product use
experience and refine our clinical development strategies through compassionate use and standard
patient treatment in countries where it is allowed and where both the patient and the physician see
a potential benefit from using TRC-based products.
We are not currently treating patients in the E.U.; however, through limited commercial use of
TRC-based products, we are able to obtain a privileged regulatory position in some regions. In the
E.U., the Advanced Therapies and Medicinal Products (ATMP) regulation went into effect January 1,
2009 requiring cell products such as ours to obtain a marketing authorization from the European
Medicines Agency (EMEA) before they can be marketed in E.U. member states. However, the ATMP
includes a grandfathering provision that allows products on the market in one or more E.U. member
states on December 31, 2008 to remain on the market in those E.U. member states for a period of
four years before EMEA market authorization must be obtained. With the activities completed to date
in Germany, we believe TRC-based products meet the requirements for the ATMP transition period in
this member state.
In any event, we do not anticipate generating significant sales in any geographic region until
we have sufficient evidence of clinical safety and efficacy to ensure marketplace acceptance and
product reimbursement and to justify the investment in manufacturing, sales and marketing
infrastructure. However, we are currently generating limited, nominal sales of TRC-based products.
As a result of these limited, commercial treatment activities, it is possible that we, or third
parties, may make case studies and other data generated outside of a clinical trial program
available on websites, in publications or in presentations. Such data should be considered
anecdotal; it is not intended to represent evidence of clinical efficacy or to suggest that any
future clinical trials will demonstrate that TRC-based products are effective in any specific
medical application.
Results of Operations
Total revenues, consisting of product sales, for the quarter and six months ended December 31,
2009 were $16,000 and $89,000, respectively, compared to $28,000 and $55,000, 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 $4,601,000 for the quarter ended December 31, 2009,
compared to $4,180,000 for the quarter ended December 31, 2008.
Costs and expenses include an increase in research and development expenses to $3,283,000 for
the quarter ended December 31, 2009 from $2,829,000 for the quarter ended December 31, 2008. 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 $175,000 for the quarter ended December 31, 2009 compared to $174,000 for the quarter
ended December 31, 2008.
Selling, general and administrative expenses decreased for the quarter ended December 31, 2009
to $1,316,000 from $1,333,000 for the quarter ended December 31, 2008. Selling, general and
administrative expenses for the quarter ended December 31, 2009, included a non-cash charge
relating to share-based compensation expense of $127,000 compared to $219,000 for the quarter ended
December 31, 2008.
Total costs and expenses increased to $8,490,000 for the six months ended December 31, 2009,
compared to $8,226,000 for the six months ended December 31, 2008.
19
Research and development expenses increased for the six months ended December 31, 2009 to
$6,194,000 from $5,555,000 for the six months ended December 31, 2008. 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 $361,000
for the six months ended December 31, 2009 compared to $335,000 for the six months ended December
31, 2008.
Selling, general and administrative expenses decreased for the six months ended December 31,
2009 to $2,262,000 from $2,649,000 for the six months ended December 31, 2008. This decrease is
primarily due to an offset of $279,000 to the stock compensation expense that was recorded in the
first quarter of fiscal year 2010. This offset reversed previously recognized stock compensation
expense for certain options held by George W. Dunbar that were forfeited when he stepped down as
Chief Executive Officer, President and Chief Financial Officer on December 14, 2009, as these
options were no longer expected to vest. Selling, general and administrative expenses for the six
months ended December 31, 2009, included a non-cash charge relating to share-based compensation
expense of $268,000 compared to $421,000 for the six months ended December 31, 2008.
Income (expense) from the change in fair value of warrants was $255,000 and $264,000 for the
quarter and six months ended December 31, 2009, respectively, compared to $(785,000) and $(542,000)
for the quarter and six months ended December 31, 2008, respectively. The fluctuations are due
primarily to changes in the fair value of our common stock and the related impact on our warrant
liabilities.
Interest income was $21,000 and $49,000, respectively, for the quarter and six months ended
December 31, 2009 compared to $69,000 and $196,000, 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 $11,000 and $24,000, respectively, for the quarter and six months ended
December 31, 2009 compared to $20,000 and $41,000, respectively, for the same periods in fiscal
2008. Interest expense is related to the secured loan with Key Equipment Finance Inc.
Our net loss was $4,320,000, or $0.02 per common share for the quarter ended December 31, 2009
compared to $4,888,000, or $0.04 per common share for the quarter ended December 31, 2008. For the
six months ended December 31, 2009, our net loss decreased to $8,112,000, or $0.05 per common share
compared to a net loss of $8,558,000, or $0.06 per common share for the six months ended December
31, 2008.
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 sections under the heading Risk Factors of this report. The
potentially lengthy process of seeking regulatory approvals for our product candidates, and the
subsequent compliance with applicable regulations, will require the expenditure of substantial
resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could cause
our research and development expenditures to increase and, in turn, have a material adverse effect
on our results of operations. We cannot be certain when any net cash inflow from products validated
under our major research and development project, if any, will commence.
20
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 December 31, 2009, have totaled approximately
$211 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 totaled $14,739,000 at December 31, 2009, a decrease of
$2,261,000 from June 30, 2009. During the six months ended December 31, 2009, the primary source of
cash and cash equivalents was from equity transactions, of which net proceeds of $5,100,000 were
raised principally through sales of our equity securities pursuant to the June 2009 agreement with
Fusion Capital. The primary uses of cash and cash equivalents during the six months ended December
31, 2009 included $7,206,000 to finance our operations and working capital requirements, and
$56,000 in capital equipment additions. After the completion of our underwritten public offering of
common stock and warrants in January 2010, our combined cash and cash equivalents at January 31,
2010 was approximately $25,500,000.
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. However, 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 $0.36.
Our monthly cash utilization has average approximately $1.2 million for the six months ended
December 31, 2009. 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 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 December 31, 2010, 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 Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations Forward Looking Statements and Item 1A. Risk
Factors. 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 52,077,100 units (including 5,923,100 units sold
to the underwriter pursuant to the exercise of its over-allotment option) at a public offering
price of $0.26 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 $0.3718 per share and
(iii) a Class B warrant to purchase 0.50 of a share of common stock at an exercise price of $0.26
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.
21
The 52,077,100 units consist of an aggregate of 52,077,100 shares of our common stock, Class A
Warrants to purchase an aggregate of 39,057,825 shares of common stock and Class B Warrants to
purchase an aggregate of 26,038,550 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 Item 1. Financial Statements Notes to Consolidated Financial
Statements and Item 1A. Risk Factors 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.
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. Any forward-looking statements
are qualified in their entirety by reference to the factors discussed throughout this report, and
in particular those factors listed under Item 1A. Risk Factors.
Because the factors referred to in the preceding paragraph could cause actual results or
outcomes to differ materially from those expressed in any forward-looking statements we make, you
should not place undue reliance on any such forward-looking statements. Further, any
forward-looking statement speaks only as of the date on which it is made, and we undertake no
obligation to update any forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us to predict which
factors will arise. In addition, we cannot assess the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
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; |
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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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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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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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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 Item 1A: Risk Factors.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of December 31, 2009, our cash and cash equivalents included money market securities,
therefore, we would not expect our operating results or cash flows to be affected to any
significant degree by the effect of a sudden change in market interest rates or credit conditions
on our securities portfolio.
Our sales to customers in foreign countries are denominated in U.S. dollars or Euros. Our
vendors, employees and clinical sites in countries outside the U.S. are typically paid in Euros.
However, such expenditures have not been significant to date. Accordingly, we are not directly
exposed to significant market risks from currency exchange rate fluctuations. We believe that the
interest rate risk related to our accounts receivable is not significant. We manage the risk
associated with these accounts through periodic reviews of the carrying value for
non-collectibility and establishment of appropriate allowances. We do not enter into hedging
transactions and do not purchase derivative instruments.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31,
2009. The term disclosure controls and procedures is defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934 (the Exchange Act). Management recognizes that any
disclosure controls and procedures no matter how well designed and operated, can only provide
reasonable assurance of achieving their objectives and management necessarily applies its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
At the time that our Quarterly Report on Form 10-Q for the quarter ended December 31, 2009 was
filed on February 9, 2010, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures were effective as of December 31, 2009. Subsequent to that
evaluation, our management, including our Chief Executive Officer and Chief Financial Officer,
concluded that our disclosure controls and procedures were not effective to provide reasonable
assurance as of December 31, 2009 because of a material weakness in our internal control over
financial reporting described below.
Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable possibility that a material misstatement
of the companys annual or interim financial statements will not be prevented or detected on a
timely basis. We did not maintain effective controls relating to accounting for warrants.
Specifically, we did not maintain effective controls over the identification and proper accounting
treatment of certain terms and conditions in our warrant agreements. This material weakness
resulted in a material misstatement of our liabilities, non-cash expense relating to the changes in
fair value of common stock warrants and accumulated deficit accounts and related financial
disclosures and the restatement of our consolidated financial statements for the years ended June
30, 2008, 2009 and 2010, the period from Inception to June 30,
2010, and each of the quarterly periods
(including the period from Inception) from September 30, 2008 through September 30, 2010 (the
Affected Periods) as discussed below and in Note 3 to the consolidated financial statements
included in this Quarterly Report on Form 10-Q/A. Additionally, this deficiency could result in
misstatements of the aforementioned accounts and disclosures that would result in a material
misstatement of the consolidated financial statements that would not be prevented or detected.
Restatement of Consolidated Financial Statements
On February 11, 2011, in connection with responding to certain comments raised by the Staff of
the SEC in its periodic review of the Companys SEC filings, the Company in consultation with its
Audit Committee, concluded that its previously issued
consolidated financial statements for the Affected Periods should be restated because of a
misapplication in the guidance around accounting for warrants and should no longer be relied upon.
However, the non-cash adjustments to the financial statements, in all of the Affected Periods, do
not impact the amounts previously reported for the Companys cash and cash equivalents, operating
expenses or cash flows.
23
Remediation Plan
Management has been actively engaged in developing a remediation plan to address the material
weakness. Implementation of the remediation plan is in process and consists of the hiring of new
accounting/finance personnel and their revisiting the original accounting assessment for each of
their historical warrants and assessing the original accounting and the on-going accounting impact.
Management has completed this assessment during February 2011 and the results of this analysis
have been used to adjust the Affected Periods in the restated documents.
Management believes the foregoing efforts will effectively remediate the material weakness. As
the Company continues to evaluate and work to improve its internal control over financial
reporting, management may execute additional measures to address potential control deficiencies or
modify the remediation plan described above. Management will continue to review and make necessary
changes to the overall design of the Companys internal control.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Companys internal control over financial reporting during
the quarter ended December 31, 2009 that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
From time to time we receive threats or may be subject to litigation matters incidental to our
business. However, we are not currently a party to any material pending legal proceedings.
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including
those described below, that could adversely affect our business, financial condition, results of
operations, cash flows, and trading price of our common stock. The risks and uncertainties
described below are not the only ones we face. There may be additional risks and uncertainties that
are not known to us or that we do not consider to be material at this time. If the events described
in these risks occur, our business, financial condition, and results of operations would likely
suffer.
Our past losses and expected future losses cast doubt on our ability to operate profitably.
We were incorporated in 1989 and have experienced substantial operating losses since
inception. As of December 31, 2009, we have incurred a cumulative net loss totaling approximately
$196 million, and we have continued to incur losses since that date. These losses have resulted
principally from costs incurred in the research and development (including clinical trials) of our
cell culture technologies and our cell manufacturing system, general and administrative expenses,
and the prosecution of patent applications. We expect to continue to incur significant operating
losses over the next several years and at least until, and probably after, product sales increase,
primarily owing to our research and development programs, including preclinical studies and
clinical trials, and the establishment of marketing and distribution capabilities necessary to
support commercialization efforts for our products. We cannot predict with any certainty the amount
of future losses. Our ability to achieve profitability will depend, among other things, on
successfully completing the development of our product candidates, timely initiation and completion
of clinical trials, obtaining regulatory approvals, establishing manufacturing, sales and marketing
arrangements with third parties, maintaining supplies of key manufacturing components, acquisition
and development of complementary activities and raising sufficient cash to fund our operating
activities. Therefore, we may not be able to achieve or sustain profitability.
The global economy and capital markets are challenging for the small cap biotech sector. This
situation makes the timing and potential for future equity financings uncertain.
Our stock may be delisted from NASDAQ, which could affect its market price and liquidity.
As a result of the hearing that we had with the NASDAQ Hearing panel (the Panel) on November
12, 2009, we have until March 31, 2010 to regain compliance with the minimum bid price requirement
of NASDAQ. If we are unable to gain compliance, our common stock will be delisted from NASDAQ.
We can regain compliance with the minimum closing bid price rule if the bid price of our
common stock closes at $1.00 per share or higher for a minimum of ten consecutive business days
before March 31, 2010, although NASDAQ may, in its discretion, require us to maintain a minimum
closing bid price of at least $1.00 per share for a period in excess of ten consecutive business
days (but generally no more than 20 consecutive business days) before determining that we have
demonstrated the ability to maintain long-term compliance.
On December 14, 2009, we received approval from our shareholders to conduct a reverse stock
split at any time within four months at the Boards discretion at a ratio between one for five and
one for eight. On January 29, 2010, the our Board of Directors approved a one-for-eight reverse
stock split of our common stock and for us to pursue an effective date of such reverse stock split
during February 2010. As of February 9, 2010 (the date of this Form 10-Q), this reverse stock split
is not yet effective. We intend to attempt to regain compliance with the NASDAQ bid price
requirement by effecting this reverse stock split as soon as possible, however there can be no
assurance that the reverse stock split will be successful in achieving sustained compliance with
the minimum bid price requirement of NASDAQ.
25
In the event that our common stock is delisted from the NASDAQ Capital Market there are
alternative listing options, as follows:
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We may be eligible for quotation on FINRAs Over-the-Counter Bulletin Board (OTCBB) if a
market maker makes an application to register and quote our common stock in accordance with
SEC Rule 15c2-11, and such application, Form 211, is cleared. Only a market maker is able to
file Form 211. |
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If we do not qualify for quotation on the OTCBB, we could apply to other unregulated
markets. |
We cannot provide any assurance that our stock price will recover within the permitted grace
period. If our common stock were delisted, it could be more difficult to buy or sell our common
stock and to obtain accurate quotations, and the price of our stock could suffer a material
decline. Delisting may also impair our ability to raise capital.
We may not be able to raise the required capital to conduct our operations and develop and
commercialize our products.
In addition to our recent public offering underwritten by Oppenheimer & Co. Inc. and our
existing financing program with Fusion Capital, under which we may put shares to Fusion Capital for
purchase so long as our stock price is not less than $0.36 (subject to any adjustment in such stock
price that may be required by the NASDAQ Capital Market or our other principal market at such time
on account of any reverse stock split or otherwise), we will require substantial additional capital
resources in order to conduct our operations and develop and commercialize our products and cell
manufacturing facilities. 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.
In order to grow and expand our business, to introduce our new product candidates into the
marketplace and to acquire or develop complementary business activities, we will need to raise a
significant amount of additional funds. We will also need significant additional funds or a
collaborative partner, or both, to finance the research and development activities of our cell
product candidates for additional indications. Accordingly, we are continuing to pursue additional
sources of financing.
Our future capital requirements will depend upon many factors, including:
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continued scientific progress in our research, clinical and development programs; |
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costs and timing of conducting clinical trials and seeking regulatory approvals; |
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competing technological and market developments; |
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our ability to establish additional collaborative relationships; |
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the effect of commercialization activities and facility expansions, if and as required;
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complementary business acquisition or development opportunities. |
Because of our long-term funding requirements, we intend to try to access the public or
private equity markets if conditions are favorable to complete a financing, even if we do not have
an immediate need for additional capital at that time, or whenever we require additional operating
capital. This additional funding may not be available to us on reasonable terms, or at all. If
adequate funds are not available in the future, we may be required to further delay or terminate
research and development programs, curtail capital expenditures, and reduce business development
and other operating activities.
On January 21, 2010, we completed the sale of 52,077,100 units (including 5,923,100 units sold
to the underwriter pursuant to the exercise of its over-allotment option) at a public offering
price of $0.26 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 $0.3718 per share and
(iii) a Class B warrant to purchase 0.50 of a share of common stock at an exercise price of $0.26
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 52,077,100 units consist of an aggregate of 52,077,100 shares of our common stock, Class A
Warrants to purchase an aggregate of 39,057,825 shares of common stock and Class B Warrants to
purchase an aggregate of 26,038,550 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.
26
Substantial future sales of our common stock in the public market may depress our stock price.
As of February 2, 2010, there were 226,048,759 shares of our common stock outstanding. The
market price of our common stock could drop due to sales of a large number of shares or the
perception that such sales could occur. These factors also could make it more difficult to raise
funds through future offerings of common stock or warrants.
The exercise of our outstanding options and warrants will dilute shareholders and could decrease
our stock price.
The existence of our outstanding options and warrants, including any warrants to be issued
pursuant to the public offering underwritten by Oppenheimer & Co. Inc., may adversely affect our
stock price due to sales of a large number of shares or the perception that such sales could occur.
These factors also could make it more difficult to raise funds through future offerings of common
stock or warrants, and could adversely impact the terms under which we could obtain additional
equity capital. Exercise of outstanding options and warrants, or any future issuance of additional
shares of common stock or other equity securities, including but not limited to options, warrants
or other derivative securities convertible into our common stock, may result in significant
dilution to our shareholders and may decrease our stock price.
There is no public market for the Class A warrants or Class B warrants in the public offering
underwritten by Oppenheimer & Co. Inc.
There is no established public trading market for the Class A warrants or Class B warrants
being offered in the public offering underwritten by Oppenheimer & Co. Inc. and we do not expect a
market to develop. In addition, we do not intend to apply for listing the Class A warrants or Class
B warrants on any securities exchange or other trading market. Without an active market, the
liquidity of the Class A warrants and Class B warrants will be limited.
If we cannot attract and retain key personnel, our business will suffer.
Our success depends in large part upon our ability to attract and retain highly qualified
scientific and management personnel. We face competition for such personnel from other companies,
research and academic institutions and other entities. Further, in an effort to conserve financial
resources, we have implemented reductions in our work force on three previous occasions. As a
result of these and other factors, we may not be successful in hiring or retaining key personnel.
Our inability to replace any key employee could harm our operations.
On December 15, 2009, George W. Dunbar stepped down as our President, Chief Executive officer
and Chief Financial Officer and Timothy M. Mayleben assumed these roles. If we are unable to
integrate our new leadership, our operations may be harmed.
Failure to obtain and maintain required regulatory approvals would severely limit our ability to
sell our products.
We must obtain the approval of the FDA before commercial sales of our cell product candidates
may commence in the U.S., which we believe will ultimately be the largest market for our products.
We will also be required to obtain additional approvals from various foreign regulatory authorities
to initiate sales activities of cell products in those jurisdictions, including the E.U. under
regulation of the EMEA. If we cannot demonstrate the safety and efficacy of our cell product
candidates produced in our manufacturing system, we may not be able to obtain required regulatory
approvals or the FDA or other regulatory authorities could delay or withhold regulatory approval of
our product candidates.
Finally, even if we obtain regulatory approval of a product, that approval may be subject to
limitations on the indicated uses for which it may be marketed. Even after granting regulatory
approval, the FDA and regulatory agencies in other countries continue to review and inspect
marketed products, manufacturers and manufacturing facilities, which may create additional
regulatory burdens. Later discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on the product or manufacturer, including a withdrawal of the
product from the market. Further, regulatory agencies may establish additional regulations that
could prevent or delay regulatory approval of our products.
27
Any changes in the governmental regulatory classifications of our products could prevent, limit or
delay our ability to market or develop our products.
The FDA establishes regulatory requirements based on the classification of a product. Because
our product development programs are designed to satisfy the standards applicable to biological
licensure for our cellular products, any change in the regulatory classification or designation
would affect our ability to obtain FDA approval of our products. Each of these cell products (such
as our TRC-based products) is, under current regulations, regulated as a biologic which requires a
Biologic License Application (BLA).
The regulatory requirements to market somatic cellular and ATMP products have changed
significantly with the approval of the E.U. ATMP regulation. Beginning January 1, 2008, a one year
transition time was put into effect. After December 31, 2008, any product that is considered
tissue engineered under the definitions provided in the ATMP regulation was granted a four year
grandfather marketing allowance if that product has been on the market on or before the end of
the transition period.
E.U. Directives and regulations (laws) have become effective, and have influenced the
requirements for manufacturing cell products and the conduct of clinical trials. For products that
are regulated as an ATMP, the E.U. Directive requires: (i) preclinical laboratory and animal
testing; (ii) submission of an IMPD to the Competent Authorities of the Member State where the
clinical trial will be conducted, which must be approved prior to the initiation of human clinical
studies; (iii) adequate and well-controlled clinical trials to establish the safety and efficacy of
the product for its intended use; (iv) submission to EMEA for a Marketing Authorization (MA); and,
(v) review and approval of the MA. Under the newly approved ATMP regulation for cellular products
only EMEA will be allowed to approve cell-based medicinal products to allow sales of such a product
in any of the E.U. member states (a centralized review of the submission) after December 31,
2008.
Germany had not required marketing authorization to distribute cultured expanded autologous
tissue products for tissue regeneration when the newly revised law became effective. We had
introduced a product into the German market by that time and we fall under the grandfathered
regulations.
Our inability to complete our product development activities successfully would severely limit our
ability to operate or finance operations.
In order to commercialize our cell product candidates in the U.S. and the E.U., we must
complete substantial clinical trials and obtain sufficient safety and efficacy results to support
required registration approval and market acceptance of our cell product candidates. We may not be
able to successfully complete the development of our product candidates, or successfully market our
technologies or product candidates. We, and any of our potential collaborators, may encounter
problems and delays relating to research and development, regulatory approval and intellectual
property rights of our technologies and product candidates. Our research and development programs
may not be successful, and our cell culture technologies and product candidates may not facilitate
the production of cells outside the human body with the expected result. Our technologies and cell
product candidates may not prove to be safe and efficacious in clinical trials, and we may not
obtain the requisite regulatory approvals for our technologies or product candidates and the cells
produced in such products. If any of these events occur, we may not have adequate resources to
continue operations for the period required to resolve the issue delaying commercialization and we
may not be able to raise capital to finance our continued operation during the period required for
resolution of that issue.
We must successfully complete our clinical trials to be able to market certain of our products.
To be able to market therapeutic cell products in the U.S. and across the E.U., we must
demonstrate, through extensive preclinical studies and clinical trials, the safety and efficacy of
our processes and product candidates. If our clinical trials are not successful, our products may
not be marketable.
Our ability to complete our clinical trials in a timely manner depends on many factors,
including the rate of patient enrollment. Patient enrollment can vary with the size of the patient
population, the proximity of suitable patients to clinical sites, perceptions of the utility of
cell therapy for the treatment of certain diseases, and the eligibility criteria for the study. We
have experienced delays in patient accrual in our previous and current clinical trials. If we
experience future delays in patient accrual, we could experience increased costs and delays
associated with clinical trials, which would impair our product development programs and our
ability to market our products. Furthermore, the FDA monitors the progress of clinical trials and
it may suspend or terminate clinical trials at any time due to patient safety, demonstrated lack of
efficacy or other considerations.
28
Our research programs are currently directed at improving TRC-based product functionality for
certain clinical indications, improving product shelf life, and decreasing the cost of
manufacturing our TRC-based products. These production process changes may alter the functionality
of our cells and require various additional levels of experimental and clinical testing and
evaluation. Any such testing could lengthen the time before these products would be commercially
available.
Even if successful clinical results are reported for a product from a completed clinical
trial, this does not mean that the results will be sustained over time, or will be sufficient for a
marketable or regulatory approvable product.
Failure of third parties to manufacture component parts or provide limited source supplies, or the
imposition of additional regulation, would impair our new product development and our sales
activities.
We rely solely on third parties such as BioLife and Invitrogen to manufacture and supply
certain components, equipment, disposable devices and other materials used our cell manufacturing
process to develop our TRC-based cell products.
It would be difficult to obtain alternate sources of supply for many of these items on a
short-term basis. If any of our key manufacturers or suppliers fails to perform their respective
obligations or if our supply of certain components, equipment, disposable devices and other
materials is limited or interrupted, it would impair our ability to manufacture our TRC-based cell
products, which would delay our ability to conduct our clinical trials or market our product
candidates on a timely and cost-competitive basis, if at all.
Manufacturing our cell products in centralized facilities may increase the risk that we will not
have adequate quantities of our cell products for clinical programs.
We rely on third party manufacturers, Fraunhofer Institute for Interfacial Engineering and
Biotechnology in Stuttgart, Germany and the Institute of Laboratory and Transfusion Medicine at the
Heart Center in Bad Oeynhausen, Germany, to supply our TRC-based cell products for certain E.U.
clinical activities. Reliance on third party manufacturers entails risks including regulatory
compliance and quality assurance and the possible breach of the manufacturing agreement by the
third party. We are subject to similar regulatory and compliance risks at our site in Ann Arbor,
Michigan. All sites are subject to ongoing, periodic, unannounced inspection by regulatory agencies
to ensure strict compliance with GMP and Good Clinical Practices (GCP) regulations and other
governmental regulations and corresponding foreign standards. Our present and future manufacturers
might not be able to comply with these regulatory requirements. We do not have redundant cell
manufacturing sites in the U.S. In the event our cell manufacturing facilities are damaged or
destroyed or are subject to regulatory restrictions, our clinical trial programs and other business
prospects would be adversely affected.
Even if we obtain regulatory approvals to sell our products, lack of commercial acceptance could
impair our business.
We will be seeking to obtain regulatory approvals to market our TRC-based cell products for
tissue repair and regeneration treatments. Even if we obtain all required regulatory approvals, we
cannot be certain that our products and processes will be accepted in the marketplace at a level
that would allow us to operate profitably. Our products may be unable to achieve commercial
acceptance for a number of reasons, such as the availability of alternatives that are less
expensive, more effective or easier to use; the perception of a low cost-benefit ratio for the
product amongst physicians and hospitals; or an inadequate level of product support from us or a
commercial partner. Our technologies or product candidates may not be employed in all potential
applications being investigated and any reduction in applications would limit the market acceptance
of our technologies and product candidates and our potential revenues.
The market for our products will be heavily dependent on third party reimbursement policies.
Our ability to successfully commercialize our product candidates will depend on the extent to
which government healthcare programs, such as Medicare and Medicaid, as well as private health
insurers, health maintenance organizations and other third party payors will pay for our products
and related treatments. Reimbursement by third party payors depends on a number of factors,
including the payors determination that use of the product is safe and effective, not experimental
or investigational, medically necessary, appropriate for the specific patient and cost-effective.
Reimbursement in the U.S. or foreign countries may not be available or maintained for any of our
product candidates. If we do not obtain approvals for adequate third party reimbursements, we may
not be able to establish or maintain price levels sufficient to realize an appropriate return on
our investment in product development. Any limits on reimbursement from third party payors may
reduce the demand for, or negatively affect the price of, our products. For example, in the past,
published studies suggested that stem cell transplantation for breast cancer, which constituted a
significant portion of the overall stem cell therapy market at the time, may have limited clinical
benefit. The lack of reimbursement for these procedures by insurance payors has negatively affected
the marketability of our products for this indication in the past.
29
Use of animal-derived materials could harm our product development and commercialization efforts.
Some of the manufacturing materials and components we use in, and are critical to,
implementation of our TRC technology involve the use of animal-derived products, including fetal
bovine serum. Suppliers or regulatory changes may limit or restrict the availability of such
materials for clinical and commercial use. We currently purchase all of our fetal bovine sera from
protected herds in Australia and New Zealand. These sources are considered to be the safest and
raise the least amount of concern from the global regulatory agencies. If, for example, the
so-called mad cow disease occurs in New Zealand or in Australia, it may lead to a restricted
supply of the serum currently required for the TRC-based product manufacturing processes. Any
restrictions on these materials would impose a potential competitive disadvantage for our products
or prevent our ability to manufacture TRC-based cell products. Regulatory authorities in the E.U.
are reviewing the safety issues related to the use of animal-derived materials, which we currently
use in our production process. The FDA has issued draft regulations for controls over bovine
materials. These proposed regulations do not appear to affect our ability to purchase the
manufacturing materials we currently use. However, the FDA may issue final regulations that could
affect our operations. We do not know what actions, if any, the authorities may take as to animal
derived materials specific to medicinal products distributed in the E.U.. Our inability to develop
or obtain alternative compounds would harm our product development and commercialization efforts.
There are certain limitations in the supply of certain animal-derived materials, which may lead to
delays in our ability to complete clinical trials or eventually to meet the anticipated market
demand for our cell products.
Given our limited internal manufacturing, sales, marketing and distribution capabilities, we need
to develop increased internal capability or collaborative relationships to manufacture, sell,
market and distribute our products.
We have only limited internal manufacturing, sales, marketing and distribution capabilities.
As market needs develop, we intend to establish and operate commercial-scale manufacturing
facilities, which will need to comply with all applicable regulatory requirements. We will also
need to develop new configurations of our cell manufacturing system for these facilities to enable
processes and cost efficiencies associated with large-scale manufacturing. Establishing these
facilities will require significant capital and expertise. We may need to make such expenditures
when there are significant uncertainties as to the market opportunity. Any delay in establishing,
or difficulties in operating, these facilities will limit our ability to meet the anticipated
market demand for our cell products. We intend to get assistance to market some of our future cell
products through collaborative relationships with companies with established sales, marketing and
distribution capabilities. Our inability to develop and maintain those relationships would limit
our ability to market, sell and distribute our products. Our inability to enter into successful,
long-term relationships could require us to develop alternate arrangements at a time when we need
sales, marketing or distribution capabilities to meet existing demand. We may market one or more of
our TRC-based products through our own sales force. Our inability to develop and retain a qualified
sales force could limit our ability to market, sell and distribute our cell products.
The issuance of additional common stock for funding has the potential for substantial dilution.
As noted above, we will need significant additional equity funding, in addition to the public
offering underwritten by Oppenheimer & Co. Inc. and the transactions with Fusion Capital, to
provide us with the capital to reach our objectives. We may enter into financing transactions at
prices which are at a substantial discount to market. Such an equity issuance would cause a
substantially larger number of shares to be outstanding and would dilute the ownership interest of
existing shareholders.
Our stock price has been volatile and future sales of substantial numbers of our shares could have an adverse affect on the market price of our shares.
The market price of shares of our common stock has been volatile, ranging in closing price
between $0.26 and $0.73 during the twelve month period ended December 31, 2009. The price of our
common stock may continue to fluctuate in response to a number of events and factors, such as:
|
|
|
clinical trial results |
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|
|
|
the amount of our cash resources and our ability to obtain additional funding |
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|
|
announcements of research activities, business developments, technological innovations or
new products by us or our competitors |
|
|
|
|
entering into or terminating strategic relationships |
30
|
|
|
changes in government regulation |
|
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|
disputes concerning patents or proprietary rights |
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|
changes in our revenues or expense levels |
|
|
|
|
public concern regarding the safety, efficacy or other aspects of the products or
methodologies we are developing |
|
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|
news or reports from other stem cell, cell therapy or regenerative medicine companies |
|
|
|
|
reports by securities analysts |
|
|
|
|
status of the investment markets |
|
|
|
|
concerns related to management transitions |
|
|
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|
delisting from the NASDAQ Capital Market |
Any of these events may cause the price of our shares to fall, which may adversely affect our
business and financing opportunities. In addition, the stock market in general and the market
prices for biotechnology companies in particular have experienced significant volatility that often
has been unrelated to the operating performance or financial conditions of such companies. These
broad market and industry fluctuations may adversely affect the trading price of our stock,
regardless of our operating performance or prospects.
If we do not keep pace with our competitors and with technological and market changes, our products
will become obsolete and our business may suffer.
The markets for our products are very competitive, subject to rapid technological changes, and
vary for different candidates and processes that directly compete with our products. Our
competitors may have developed, or could in the future develop, new technologies that compete with
our products or even render our products obsolete. As an example, in the past, published studies
have suggested that hematopoietic stem cell therapy use for bone marrow transplantation, following
marrow ablation due to chemotherapy, may have limited clinical benefit in the treatment of breast
cancer, which was a significant portion of the overall hematopoietic stem cell transplant market.
This resulted in the practical elimination of this market for our cell-based product for this
application.
Our cell manufacturing system is designed to improve and automate the processes for producing
cells used in therapeutic procedures. Even if we are able to demonstrate improved or equivalent
results, the cost or process of treatment and other factors may cause researchers and practitioners
to not use our products and we could suffer a competitive disadvantage. Finally, to the extent that
others develop new technologies that address the targeted application for our products, our
business will suffer.
If our patents and proprietary rights do not provide substantial protection, then our business and
competitive position will suffer.
Our success depends in large part on our ability to develop or license and protect proprietary
products and technologies. However, patents may not be granted on any of our pending or future
patent applications. Also, the scope of any of our issued patents may not be sufficiently broad to
offer meaningful protection. In addition, our issued patents or patents licensed to us could be
successfully challenged, invalidated or circumvented so that our patent rights would not create an
effective competitive barrier. Certain patent equivalents to the U.S. patents have also been issued
in other jurisdictions including Australia, Japan, the Republic of Korea, Canada and under the
European Convention. Furthermore, we rely on exclusive, world-wide licenses relating to the
production of human cells granted to us by the University of Michigan for certain of our patent
rights. If we materially breach such agreements or otherwise fail to materially comply with such
agreements, or if such agreements expire or are otherwise terminated by us, we may lose our rights
under the patents held by the University of Michigan. Currently, each of these licenses will
terminate when the patent underlying the license expires. The first of these underlying patents
will expire on March 21, 2012. We also rely on trade secrets and unpatentable know-how that we seek
to protect, in part, by confidentiality agreements with our employees, consultants, suppliers and
licensees. These agreements may be breached, and we might not have adequate remedies for any
breach. If this were to occur, our business and competitive position would suffer.
31
Intellectual property litigation could harm our business.
Our success will depend in part on our ability to develop commercially viable products without
infringing the proprietary rights of others. Although we have not been subject to any filed
infringement claims, other patents could exist or could be filed that would prohibit or limit our
ability to market our products or maintain our competitive position. In the event of an
intellectual property dispute, we may be forced to litigate. Intellectual property litigation would
divert managements attention from developing our products and would force us to incur substantial
costs regardless of whether we are successful. An adverse outcome could subject us to significant
liabilities and force us to curtail or cease the development and sale of our products and
processes.
The government maintains certain rights in technology that we develop using government grant money
and we may lose the revenues from such technology if we do not commercialize and utilize the
technology pursuant to established government guidelines.
Certain of our and our licensors research have been or are being funded in part by government
grants. As a result of such funding, the U.S. Government has established guidelines and have
certain rights in the technology developed with the grant. If we fail to meet these guidelines, we
would lose our exclusive rights to these products, and we would lose potential revenue derived from
the sale of these products.
Potential product liability claims could affect our earnings and financial condition.
We face an inherent business risk of exposure to product liability claims in the event that
the manufacture or use of TRC-based products during clinical trials, or after commercialization,
results in adverse events. As a result, we may incur significant product liability exposure, which
could exceed existing insurance coverage. We may not be able to maintain adequate levels of
insurance at reasonable cost or on reasonable terms. Excessive insurance costs or uninsured claims
would increase our operating loss and affect our financial condition.
Our corporate documents and Michigan law contain provisions that may make it more difficult for us
to be acquired.
Our Board of Directors has the authority, without shareholder approval, to issue shares of
preferred stock and to fix the rights, preferences, privileges and restrictions of these shares
without any further vote or action by our shareholders. Michigan law contains provisions that make
it more difficult for a 10% shareholder and its affiliates to acquire a Michigan corporation. These
provisions may have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire control of us. This effect could occur even
if our shareholders consider the change in control to be in their best interest.
We are required to evaluate our internal control over financial reporting under Section 404 of the
Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could have a negative
market reaction.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), we are required to
furnish a report by our management on our internal control over financial reporting. That report
must contain, among other matters, an assessment of the design and operating effectiveness of our
internal controls over financial reporting as of the end of the fiscal year. This assessment must
include disclosure of any material weaknesses in our internal control over financial reporting
identified by management. That report must also contain a statement that our independent registered
public accounting firm has issued an attestation report on the design and operating effectiveness
of our system of internal accounting controls over financial reporting. If in the future we are
unable to assert that our internal control over financial reporting is effective as of the end of
the then current fiscal year (or, if our independent registered public accounting firm is unable to
express an unqualified opinion on the design and operating effectiveness of our internal controls),
we could lose investor confidence in the accuracy and completeness of our financial reports, which
would have a negative effect on our stock price and our ability to raise capital.
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
December 31, 2009.
During the quarter and six months ended December 31, 2009, 2,196,953 and 13,748,439 shares of
the Companys common stock, respectively, including 64,538 and 411,467 shares issued as payment of
the Companys commitment fee, respectively, were issued to Fusion Capital for net proceeds of
$800,000 and $5,100,000, respectively. 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.
32
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
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(a) |
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The Annual Meeting of Shareholders of the Company was held on December 14, 2009. |
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(b) |
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At the 2009 Annual Meeting of Shareholders, votes were cast on matters submitted to
the shareholders, as follows: Proposal 1: As a result of shareholder approval of Proposal
1, the election of six directors to serve for one-year terms expiring at the 2010 Annual
Meeting of Shareholders or until his successor shall have been elected and qualified. |
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NOMINEE |
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FOR |
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WITHHELD |
George W. Dunbar
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118,262,910 |
|
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15,960,579 |
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Timothy M. Mayleben
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120,867,252 |
|
|
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13,356,237 |
|
Alan L. Rubino
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118,456,071 |
|
|
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15,767,418 |
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Nelson M. Sims
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120,984,833 |
|
|
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13,238,656 |
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Harold C. Urschel, Jr.
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121,419,197 |
|
|
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12,804,292 |
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Robert L. Zerbe
|
|
|
119,262,585 |
|
|
|
14,960,904 |
|
Proposal 2: Approval to amend the Companys Restated Articles of Incorporation, as amended, to
increase the number of authorized shares of common stock from 250,000,000 to 500,000,000.
|
|
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FOR
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AGAINST
|
|
ABSTAIN |
|
|
|
|
|
89,418,787
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|
42,742,896
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|
2,061,806 |
Proposal 3: Approval to grant discretionary authority to Aastroms Board of Directors to amend the
Companys Restated Articles of Incorporation, as amended, to effect a reverse stock split of
Aastroms authorized, issued and outstanding common stock at any time within four months after the
date shareholder approval is obtained regarding the reverse stock split, at any whole number ratio
between one for five and one for eight, with the exact exchange ratio and timing of the reverse
stock split (if at all) to be determined at the discretion of the Board of Directors (the Reverse
Stock Split). The Reverse Stock Split will not occur unless the Board of Directors determines that
it is in the best interests of Aastrom and its shareholders to implement the Reverse Stock Split.
|
|
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|
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FOR
|
|
AGAINST
|
|
ABSTAIN |
|
|
|
|
|
90,845,921
|
|
41,609,387
|
|
1,768,181 |
Proposal 4: Approval of the 2009 Omnibus Incentive Plan.
|
|
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|
|
|
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FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
BROKER NON-VOTES |
|
|
|
|
|
|
|
18,825,885
|
|
10,645,704
|
|
1,519,788
|
|
103,232,112 |
Proposal 5: Ratification of the appointment of PricewaterhouseCoopers LLP as the Companys
independent registered public accounting firm for the year ending June 30, 2010.
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN |
|
|
|
|
|
123,351,860
|
|
5,358,848
|
|
5,512,780 |
Item 5. Other Information
None.
Item 6. Exhibits
See Exhibit Index.
33
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.
Date: February 24, 2011
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|
AASTROM BIOSCIENCES, INC.
|
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/s/ Timothy M. Mayleben
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|
|
Timothy M. Mayleben |
|
|
President and Chief Executive Officer
(Principal Executive Officer) |
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|
|
|
|
/s/ Scott C. Durbin
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|
|
Scott C. Durbin |
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|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
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34
EXHIBIT INDEX
|
|
|
Exhibit Number |
|
Description |
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
35
GLOSSARY
|
|
|
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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|
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AEMPS Agencia Española de Medicamentos y
Productos Sanitarios
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Spanish Drug Agency |
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|
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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
|
|
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
|
|
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
|
|
A vascular disease characterized by insufficient blood flow in the extremities that causes
severe pain, tissue loss or both. |
|
|
|
Controlled Clinical Trial
|
|
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. |
|
|
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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
|
|
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. |
|
|
|
Double-Blind Clinical Trial
|
|
Clinical trials in which neither the patient nor the physician know if the patient received
the experimental treatment or a control/placebo. |
|
|
|
EMEA European Medicines Agency
|
|
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). |
36
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TERM |
|
DEFINITION |
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. |
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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. |
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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. |
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Hematopoietic Stem Cells
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|
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). |
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IMPACT-DCM
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Aastroms U.S. Phase II surgical clinical trial evaluating the
use of CRCs in the treatment of dilated cardiomyopathy. |
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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. |
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|
|
In vitro
|
|
In a laboratory dish or test tube; in an artificial environment |
37
|
|
|
TERM |
|
DEFINITION |
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. |
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|
|
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. |
|
|
|
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. |
38
|
|
|
TERM |
|
DEFINITION |
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) |
39
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. for the
quarter ended December 31, 2009;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared; and
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles; and
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting.
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting.
|
|
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|
|
|
|
|
|
/s/ Timothy M. Mayleben
|
|
|
Timothy M. Mayleben |
|
|
President and Chief Executive Officer
(Principal Executive Officer) |
|
|
Date: February 24, 2011
exv31w2
EXHIBIT 31.2
CERTIFICATION
I, Scott C. Durbin, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q/A of Aastrom Biosciences, Inc. for the
quarter ended December 31, 2009;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared; and
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles; and
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting.
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting.
|
|
|
|
|
|
|
|
|
/s/ Scott C. Durbin
|
|
|
Scott C. Durbin |
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
|
Date: February 24, 2011
exv32w1
EXHIBIT 32.1
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 December 31, 2009, as filed with the Securities and Exchange
Commission on the date hereof (the Report), each of the undersigned officers 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), the following:
(1) The Report fully complies with the requirements of Section 13(a) and 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
|
|
|
|
|
|
|
|
|
/s/ Timothy M. Mayleben
|
|
|
Timothy M. Mayleben |
|
|
President and Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
|
|
/s/ Scott C. Durbin
|
|
|
Scott C. Durbin |
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
|
Date: February 24, 2011
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.