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Biotech Stock Mailbag: Aastrom BioSciences

BOSTON (TheStreet) -- An email from Adman M. kicks off this early Thanksgiving edition of the Biotech Stock Mailbag: "What do you think of Aastrom Biosciences (ASTM) and their pipeline and reason you are not covering it?"

Two FDA panel live blogs kept me very busy last week, which is why I missed the release of results from a phase II study of Aastrom's stem cell therapy for patients with critical limb ischemia (CLI). Patients with chronic CLI have obstructed arteries and reduced blood flow in the arms and legs, which can lead to open wounds and amputation in the most severe cases.

A couple of reasons why Aastrom's stock fell about 40% despite what appeared to be headline-positive results from the phase II study:

First, a lot of investors (traders) sold the news because the stock had a huge run in the weeks before the data release. Aastrom was a $1.50 stock at the end of October but closed above $4 the day before the CLI data were announced.

It doesn't matter what the data looked like, with a chart like that, last week's CLI data announcement was a textbook sell-on-the-news event, especially because Aastrom hasn't even started a mandatory phase III study and the company has been open about the need to raise money.

Second, the study data were OK but not great, which adds additional risk to the phase III study.

If you've read my biotech coverage of clinical trial results, you know the importance I place on drugs that meet primary endpoints cleanly and without statistical gimmicks. Aastrom did just that, with its stem cell therapy demonstrating a 56% reduction in the time to treatment failure compared to control with statistical significance. Time to treatment failure is a composite endpoint that measures amputation, gangrene, wound size doubling and death.

Hitting a primary endpoint is ideal, but only when that endpoint is the one FDA uses to assess and measure a drug's clinical benefit. That's where Aastrom ran into trouble because for CLI patients, FDA is most concerned about reducing limb amputations.

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