Dear Friends of Aastrom,

Over one million people in the U.S. are living with critical limb ischemia (CLI), a severe form of peripheral arterial disease (PAD).  CLI is a devastating and often fatal disease where blood flow to extremities is restricted, resulting  in debilitating pain, life-threatening infections, loss of limbs, and death. There are currently no FDA-approved therapies to treat CLI; the most frequent treatment option is revascularization surgery to restore blood flow to affected areas.  However, all too often, especially for very ill CLI patients, revascularization surgery is not effective.  At Aastrom we are applying our proprietary cell-processing technology to develop an entirely new approach to the treatment of CLI.

The Challenge in Treating CLI

CLI is caused by chronic inflammatory processes associated with atherosclerosis. In patients with CLI, arterial plaque restricts blood flow to the legs, feet and hands, leading to pain, numbness, open sores, skin infections, ulcers, and gangrene. Major amputation is often the only treatment alternative when overwhelming infection threatens a patient’s life, rest pain cannot be controlled, or there is extensive skin and tissue loss.

The risk of CLI is higher among people with diabetes, high cholesterol levels (dyslipidemia), and renal failure. The elderly and people who are smokers, sedentary, or overweight are also more likely to develop CLI.  There are few treatments for CLI today; patients are generally prescribed medications to relieve pain and instructed to improve some risk factors. While revascularization surgery to restore blood flow is an option for some, up to 40% of CLI patients are not candidates for surgery and are considered “no-option.”  In addition, revascularization surgery is often unsuccessful. From 35% to 85% of surgeries for no-option CLI patients are unsuccessful, depending on the presence of other risk factors (such as diabetes or renal failure). Researchers are studying a range of options to treat CLI, including the use of growth factors, protein therapies, and cell-based therapies.

A Strong Fit for Aastrom’s Cell-Processing Technology

As the leader in the development of patient-specific, expanded multicellular therapies to treat severe, chronic cardiovascular diseases, Aastrom is committed to finding an effective therapy for patients with CLI who have no other treatment options. We believe our proprietary cell-processing technology and investigational product, ixmyelocel-T, are unique among cell therapies because we start with the patient’s own cells.  Our production process expands the numbers of certain key cell types found in the patient’s bone marrow stem cells, including CD14+auto+ monocytes and alternatively activated macrophages to reduce chronic inflammation, and CD90+ mesenchymal stromal cells for tissue remodeling and growth of new blood vessels.  The resulting therapy includes the optimal range and ratio of these and other cells to treat the multi-factorial disease that is CLI.

While ixmyelocel-T is not yet approved for use in the United States, more than 200 patients have been treated thus far in our clinical trials, and initial results are encouraging. In November 2011, we presented the results of our Phase 2b RESTORE-CLI clinical trial, which demonstrated that treatment with ixmyelocel-T improved time to treatment failure by 62% in patients with CLI compared to the control group. Equally important, the most severely ill CLI patients – those patients with wounds at baseline – demonstrated an improvement in amputation-free survival. In the first quarter of this year, Aastrom initiated the REVIVE Phase 3 clinical trial for ixmyelocel-T.  In this study, 594 CLI patients will be treated at 80 treatment centers in the United States.

Targeting a Major Commercial Opportunity

Without treatment, many “no-option” CLI patients will die or undergo a major amputation of a limb, which reduces their quality of life and ability to participate in many daily activities. According to The Amputee Coalition, nearly half of all people who have an amputation due to vascular disease will die within five years, a higher five-year mortality rate than breast cancer, colon cancer, or prostate cancer patients. Nearly 60% of amputations are paid for by Medicaid and Medicare, costing taxpayers more than $5.2 billion in 2008. In 2009, hospital costs associated with amputation totaled more than $8.3 billion.[i]

We look forward to completing our Phase 3 testing program in CLI and finding other unmet medical needs where we can apply our innovative cell-therapy technology and drug development expertise to develop new treatment options for patients and sustainable long-term value for our shareholders.

With regards,

Tim

Dear Friends of Aastrom,

The financial turmoil of the past three years has made fundraising especially difficult for capital-intensive biotechnology companies that must rely on investors or partners to fund their operations and keep promising development programs on track.  During this period of economic uncertainty, we have seen venture capitalists, institutional investors and pharmaceutical companies shift their risk tolerance in favor of proven technologies (i.e., small molecules and antibodies) and later-stage product candidates.  There are also fewer of these investors compared to several years ago, which has made it more difficult for companies with novel technologies and/or earlier-stage programs to raise capital or partner on reasonable terms.

 During the past few years, we have seen many biotech companies be forced to raise money by selling their stock at a significant discount and by issuing warrants worth 50 to 100 percent of the stock being purchased.  These discounts and warrants are effective in attracting certain investors to fund a company’s operations.  However, they are very expensive inducements and, as we have found, often have long-term negative consequences for existing investors.

Aastrom has worked aggressively to address these challenges by managing costs, focusing its development efforts, maximizing clinical productivity and pursuing a variety of less-dilutive sources of capital. For example, we recently raised $40 million from Eastern Capital Limited, a large institutional investor, through a private placement of redeemable preferred stock, which is convertible into our common stock in five years at $3.25, a substantial premium to our current share price.

This investment is transformative for Aastrom for a number of reasons: it is the largest single fundraising in Aastrom’s history; it has no dilutive warrants or expensive discounts; it significantly improves our financial position and gives us the capital to advance our pivotal Phase 3 CLI clinical program, Phase 2b DCM program and partnering discussions; and it is a strong endorsement of our team, novel products, and late-stage clinical programs.  Perhaps most important, it represents a long-term commitment to our company by one of the leading independent investors in the industry.

We are obviously delighted to have the strong support of Eastern Capital, a well-known investor with a history of success in biotechnology investing.  Their investment comes at the culmination of an enormously productive period for Aastrom, which included the completion of the Phase 2b RESTORE-CLI clinical study, the presentation of positive results from that study at the American Heart Association Scientific Sessions last November, the creation of a Phase 3 steering committee for our pivotal CLI clinical trial, FDA approval of a Special Protocol Assessment and fast-track status for our Phase 3 CLI program and the launch of the Phase 3 REVIVE-CLI study last month.

We will continue to build on this record of success and seek other high-quality investors and partners as we work to realize the clinical and commercial potential of ixmyelocel-T as a treatment for severe, chronic cardiovascular diseases.  I am confident that with the support of investors like Eastern Capital, our team has an excellent opportunity to realize this goal.

With regards,

Tim

Dear Friends of Aastrom,

The issue of safety associated with stem-cell therapies has been in the news recently. Last month, the FDA issued a consumer update describing potential risks associated with the use of stem-cell therapies that have not yet been approved. Also recently, 60 Minutes ran a story about patients with severe illnesses who sought treatment with unapproved stem-cell therapies when no approved treatment options were available. In many cases, these patients paid vast sums of money and traveled to other countries to be treated with potentially dangerous and unregulated cell therapies.

These reports highlight the value of appropriate safety standards in the development of cellular therapies, standards which Aastrom maintains in all of its development, manufacturing and shipping procedures. These stories also raise an important issue about the different types of stem cells used in medical research and drug development, and the need to define clearly which cell types are being used. In many cases, the ethical or safety concerns associated with cell therapies relate to the use of embryonic stem cells, not the use of adult or autologous (“patient-specific”) stem cells which we use at Aastrom. Therapies derived from non-embryonic stem cell therapies are now approved for use in treating more than 70 medical conditions. ^{1, 2}

In the development of our cellular-medicine product, Aastrom uses the patient’s own bone marrow, which is collected in an outpatient setting. After the sample arrives at our laboratory in Ann Arbor, each step of the production process is carefully monitored to meet or exceed the safety and quality standards established by the FDA. After production, the final product, known as ixmyelocel-T, is then shipped back to the doctor for administration to the patient. While ixmyelocel-T is not yet approved for use in the United States, more than 400 patients have been treated with our product candidates in clinical trials.

This quarter we are advancing ixmyelocel-T to a Phase 3 clinical trial for the treatment of critical limb ischemia (CLI) and next quarter a Phase 2b trial for the treatment of dilated cardiomyopathy. Our Phase 3 REVIVE clinical trial in CLI will include 594 patients who have no option for revascularization and who have existing tissue loss. We have worked closely with the FDA, the Center for Biologics Evaluation and Research (CBER) and physician experts to design this trial and ensure that our production process and safety standards comply with all state and federal regulations.

As a developer of new cellular medicines, we believe stem-cell therapies have enormous therapeutic potential and can have a major positive impact on patients with serious, untreatable health problems. We also believe rigorous laboratory and clinical standards are essential to ensuring patient safety and public trust in our products. Aastrom is committed to employing the highest standards of pharmaceutical and medical practice as we advance our therapy toward final regulatory review.

As the field of cellular medicine continues to flourish, we have an obligation to distinguish the different types of stem cells used in the production process and support regulatory requirements for research, manufacturing and patient care that reflect these differences. Only those companies that maintain their commitment to the highest standards of safety and product quality warrant our support.

With regards,

Tim

*For information about the FDA consumer update on stem-cell therapies, visit: http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm286155.htm
**To see the 60 Minutes story about use of unapproved therapies, visit: http://www.cbsnews.com/video/watch/?id=7394380n
1. http://www.americansforcures.org/article.php?uid=1000
2. http://www.visionandvalues.org/2009/07/crucial-differences-between-non-embryonic-and-embryonic-stem-cells/

Dear Friends of Aastrom,

Regenerative medicine is the term most often used to describe research and drug development involving the use of stem cells to stimulate the body to rebuild and repair damaged tissue.  Based on the results of multiple research programs in the U.S. and other countries, regenerative medicine has the potential to cure or reverse the symptoms of many diseases that affect different tissues in the body, including vascular, muscle, organ, bone and nerve tissues.

Today, the field of regenerative medicine encompasses many approaches to treatment, including:

• therapies administered by injection to promote tissue healing and organ regrowth;
• the growth of new tissue and organs in a laboratory for implantation in patients; and
• the use of biocompatible materials or small molecules to support the body’s natural ability to regenerate tissue.

At Aastrom, our approach to regenerative medicine is to use a patient’s own cells to develop a therapy that includes the optimal range and ratio of cells to treat severe, chronic ischemic cardiovascular diseases such as critical limb ischemia (CLI) and dilated cardiomyopathy.  The product we are developing, ixmyelocel-T, is personalized and custom-made for each patient from a small amount of his or her own bone marrow cells.  Our production process expands the numbers of certain key cell types – CD90+ mesenchymal cells, CD14+auto+ monocytes and alternatively activated macrophages – which, according to our research, seem to play an important role in tissue remodeling, immunomodulation and the growth of new blood vessels.

At the November 2011 American Heart Association Scientific Sessions, Aastrom reported positive results from the RESTORE-CLI Phase 2 clinical trial for ixmyelocel-T.  In this study, patients in the treatment arm showed a 62% reduction in risk relative to placebo in the primary efficacy endpoint of time to first occurrence of treatment failure (p = .0032) (Click here to read more about these results).  We plan to initiate the REVIVE Phase 3 clinical trial for ixmyelocel-T this quarter, making Aastrom the leading regenerative medicine company in the field of CLI and one of the few companies to have successfully advanced a cell therapy product to late-stage clinical development.

While there have been many important advances in regenerative medicine in recent years, developing new therapies in this field has been challenging.  Aastrom’s success in advancing ixmyelocel-T is the result of a number of key decisions and efforts by the Aastrom team:

• We are developing ixmyelocel-T as a treatment for severe, chronic ischemic cardiovascular diseases for which there are no other treatment options.
• We use only adult human stem cells from each patient’s own bone marrow.  As a result, our production process is not associated with the ethical issues surrounding the use of embryonic stem cells.  In addition, because we use the patient’s own cells to develop ixmyelocel-T, there is minimal risk of rejection.
• We collect a small amount of bone marrow and administer ixmyelocel-T rapidly in an out-patient procedure.
• We use a proprietary production process and a centralized cGMP manufacturing facility to ensure that every patient receives a safe, consistent, high-quality product derived from his or her own cells.
• Our development team is following a clear regulatory path established by other autologous cellular therapies that have been approved by the FDA in recent years.

These attributes distinguish ixmyelocel-T from other experimental cell therapies and have contributed to our success to date, but much work remains to be done.  To unlock the potential of regenerative medicine to improve human health in the years ahead, we believe swift action in several key areas is needed:

• We must encourage closer collaboration among leading academic research centers to identify and advance promising early-stage drug candidates to clinical-stage research conducted by industry partners.
• Additional sources of non-dilutive federal funding are needed to support research, early-stage drug development and job creation.
• We must continue to clarify and expedite the regulatory process for regenerative medicines by taking into account the unique production requirements and mechanisms of action of these therapies.
• Finally, we must continue to expand science education in the U.S. to train the next generation of innovators in cellular and regenerative medicine.
• Action will require careful planning, coordinated efforts and government action to be effective.  But if we take action now, I feel confident that we can realize the full potential of regenerative medicine in the coming decade and position the U.S. to maintain and expand our global leadership position in this rapidly evolving and highly promising field.

With regards,

Tim

Dear Friends of Aastrom,

As you may have noticed, we recently redesigned the Aastrom website to help visitors access more information about our company. We hope this redesign makes it easier to learn about our work, mission and progress. To support the new site, we are also introducing a new blog about Aastrom where we will offer perspectives on important issues associated with our work and industry. I am very pleased to begin this new series with some comments on the disease that has been a primary focus of our work and research at Aastrom for the past several years—critical limb ischemia (CLI). (Learn more about critical limb ischemia or Aastrom’s CLI clinical trials, or watch the Living with CLI video.)

The importance of our CLI program cannot be overstated, as the need for a new treatment to help the millions of people affected by this terrible disease has never been greater. Having just returned from our clinical investigators’ meeting to prepare for the launch of our Phase 3 REVIVE clinical trial, I can attest to their excitement about evaluating our product candidate, ixmyelocel-T, as a potential treatment for people living with CLI who have no other treatment options. We are equally excited about the clinical and commercial potential of ixmyelocel-T following the positive results of our Phase 2b RESTORE-CLI clinical trial, which were presented in November 2011 at the American Heart Association Scientific Sessions.

CLI is a devastating and often fatal disease with few or even no treatment options available for many patients. In people with CLI, an obstruction of the arteries causes a decrease in blood flow to the extremities (hands, feet and legs). CLI is the most severe form of peripheral arterial disease (PAD). Currently, there are more than 10 million people living with PAD in the United States and one million people living with CLI.

In many cases, CLI results in a series of increasingly painful and challenging symptoms that can have a profoundly negative impact on a patient’s quality of life. These include:

• pain or numbness
• shiny, smooth, dry skin in the extremities
• nail thickening
• reduced pulse and blood pressure in the extremities
• development of sores, skin infections or ulcers that will not heal
• gangrene

These symptoms can lead to devastating health consequences, especially if they are not diagnosed early. Patients describe the pain associated with CLI as debilitating, making it impossible for them to complete many of the activities of normal life. People with CLI are often unable to sleep or relax without the use of the most powerful pain medications. In addition, the sores associated with CLI typically do not respond to conventional wound-healing treatments. As these wounds linger and progress, patients often develop gangrene and eventually require amputation—first minor amputations, but often ultimately leading to major amputation of the leg.

While there are many risk factors associated with CLI, the most prominent are a history of smoking, diabetes, obesity and atherosclerosis. Treatment options for earlier stages of CLI can include medications (statins, metformin, etc.), lifestyle changes including efforts to stop smoking, and open and endovascular surgical procedures to try to restore blood flow to the lower extremities.

My Aastrom colleagues and I are committed to finding a treatment for CLI and improving the lives of people afflicted by this devastating disease. Throughout our research we have been fortunate to meet and work with many of the world’s leading experts in vascular surgery and other specialties, as well as many CLI patients and their families, all of whom have helped us better understand the impact of this disease. During the past year, we have also worked closely with the FDA and key medical opinion leaders to develop the protocol for the Phase 3 clinical program we will be launching shortly. The REVIVE clinical trial will be the largest of its kind and an important test and milestone for ixmyelocel-T.

Thank you for visiting our site and taking time to learn more about Aastrom. We look forward to sharing new insights about our company and the patients we are committed to helping in the months and years ahead.

With regards,

Tim