Aastrom Bio (ASTM) Initiated with a Neutral; tgt $2.50

We are initiating coverage of Aastrom Biosciences (ASTM) with a Neutral rating and $2.50 price target. Aastrom is pioneering the research effort on adult stem cells for therapeutic applications, specifically for the treatment of cardiovascular diseases such as critical limb ischemia (CLI) and dilated cardiomyopathy (DCM).

Aastrom’s approach involves expansion of a patient’s own stem and progenitor cells outside of the body to generate a cell product with significantly increased numbers of highly functional early-stage cells. These autologous cell products can then be used for the repair or regeneration of multiple human tissues.

The company has developed a proprietary Tissue Repair Cell technology in which cells are derived from a small amount of bone marrow taken from a patient and expanded in culture to generate a unique cell mixture containing high doses of stem and progenitor cells. Due to the high number of stem and progenitor cells contained in a small volume, Aastrom’s strategy seems particularly suitable for direct injection into the affected limb or myocardium.

Two Potential Blockbuster Opportunities

Aastrom Biosciences has two clinical programs ongoing, one for vascular applications in critical limb ischemia (CLI), the most severe (end-stage) of peripheral arterial disease (PAD), and another for cardiac applications in dilated cardiomyopathy (DCM), the leading cause of heart transplantation.

  • For CLI, management has presented very encouraging proof-of-concept data, as well as statistically significant interim results from a phase IIb program, RESTORE-CLI, on FDA-validated endpoints for CLI – major amputation and amputation-free survival. We have also seen encouraging preliminary data from an investigator-sponsored program conducted in Germany.
  • For DCM, management has demonstrated promising trends from an interim analysis of IMPACT-DCM, which show meaningful improvements in NYHA function class for patients on therapy. The company has also made available encouraging case study data from compassionate use in Europe.

We view Aastrom Biosciences at the premier play for the application of adult stem cells for potential cardiovascular indications. While other stem cell companies such as Cytori Therapeutics (CYTX) (the market leader for cosmetic and reconstructive surgery) and Osiris Therapeutics (OSIR) (the market leader for inflammatory diseases) command higher market capitalizations, no other firm has as an advanced program for peripheral arterial disease or heart failure. Owning Aastrom is a must for investors looking to build a stem-cell basket approach.

Yet despite the firm’s advanced position for two potential billion-dollar “home run” indications, the market has yet to value Aastrom as a leader. We believe this is due to the company’s novel approach, the high-risk nature of the trials, and the fact that Aastrom must pave the way itself. As such, Aastrom Biosciences is in “show me” mode, and management must deliver before Wall Street will really start to pay attention. That being said, upside is significant and patient investors should be greatly rewarded if Aastrom meets its clinical goals.

AASTROM BIOSCI (ASTM): Free Stock Analysis Report

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