Gerard Michel – CFO and VP, Corporate Development Dominick Colangelo – President & CEO David Recker – Chief Medical Officer Ross Tubo – Chief Scientific Officer

George McNicoll – Lewis & Vlak LLC

Ladies and gentlemen thank you for standing-by. Welcome to Aastrom Biosciences Second Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. I would also like to remind you that this call is being recorded for replay. I will now turn the conference over to Aastrom’s, Chief Financial Officer, Gerard Michel.

Thank you, operator, and good afternoon everyone. Welcome to Aastrom’s second quarter 2014 conference call to discuss our second quarter financial results and the progress of our commercial business and development programs. Before we begin, let me remind you that on today’s call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995. And all of our projections and forward-looking statements represent our judgment as of today. These statements may involve risks and uncertainties that are described more fully in our filings with the SEC, which are also available on our website. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. With us on today’s call are, Nick Colangelo, Aastorm’s President and Chief Executive Officer; Dr. David Recker, our Chief Medical Officer; and Dr. Ross Tubo, Aastrom’s Chief Scientific Officer. I will now turn the call over to Nick.

Thank Gerard, and good afternoon everyone. I’ll begin today’s call with an update regarding our restructuring and commercial activities since we acquired Sanofi’s cell therapy and regenerative medicine business on May 30th of this year. Through the acquisition we acquired worldwide commercial rates to three marketed autologous cell therapy products Carticel, Epicel and MACI manufacturing and production centers in U.S. and Denmark and the commercial organization based principally in the U.S. As we reported in June we’ve implemented an aggressive strategic plan entailing a number of initiatives to eliminate redundancies, reduce cost and expenses and improve operating efficiencies in order to maximize the profitability and growth potential of the acquired business, position the acquired product for sustainable long-term growth and effectively leverage our talented commercial team. I am pleased to report that as a result of these initiatives excluding certain items related to ongoing restructuring activities, our U.S. commercial business generated a positive contribution in the second quarter. Net revenues for June, our first month owning the acquired business were approximately $4.4 million. Although we will need to make some additional incremental infrastructure investments and incur some additional operating costs in specific areas to support the business as we discontinue utilization of certain Sanofi transition services, I am confident that through increases in gross margins ongoing rationalization of infrastructure and top-line growth will continue to increase the contribution from the acquired business. Gerard will provide further details related to the performance of the acquired business during his review of our second quarter financial results. The specific cost cutting measures that we began implementing in June, which include discontinuing production of MACI in Demark temporarily using cells MACI in Europe significantly reducing certain non-recurring MACI related R&D expenses and immediate actions to optimize research and development manufacturing and commercial operations in the U.S. resulted in a reduction of 80 global FTE positions and are expected to reduce annual operating expenses by approximately $20 million compared to the reported expenses of the acquired business for 2013. From a revenue perspective we believe that our two marketed products in the U.S. Carticel and Epicel while mature products have real growth potential based on current market penetration rates under the leadership of our Chief Commercial Officer, Dan Orlando, and our new national sales director Zac Taylor we’ve increased the number of sales representative supporting Epicel realigned sales territories for both products and implemented a new incentive compensation plan for the sales team to drive the growth and profitability of these products. We believe that both products warrant these actions. Epicel is a lifesaving therapy for severally burn patients. Currently more than half of Epicel sales come from just a few more than 125 specialized burn centers in the United States. Our goal is to expand the use of this life saving product to enhance sales and marketing support and outreach to additional leading burn centers across the country. With respect to Carticel we estimate that there is a target patient population of upwards of 60,000 younger interactive patients with larger cartilage defects you may benefit from Carticel treatment. We now have durability of repair data for Carticel out to 20 years which demonstrates long-term benefits of this product. Carticel represents a compelling treatment option for this patient population more excited about pursuing opportunities to expand Carticel utilization. We’re also very excited about the potential of MACI our Phase 3 product candidate in the United States. As Dave will discuss in a few moments we believe that MACI represents a substantial opportunity to expand the market for autologous cartilage repairs products in the United States and to drive further growth of our cartilage repair franchise. In the two months that we’ve only acquired business we’ve made a consorted effort to reach out to key physicians and institutions that utilize our products. Based on these interactions we’re confident that there is a dedicated physician customer base for both Carticel and Epicel and that we have acquired a business with sustainable revenues. As just described we also are moving aggressively to expand the commercial potential for Carticel, Epicel and MACI and we’re very pleased with the progress that we’ve made in the short period of time. Finally as part of our ongoing efforts to leverage our existing assets we initiated commercial sales to bone marrow in June through Marrow Donations LLC, our wholly owned bone marrow collection center in San Diego. Based on the significant interest across the biopharmaceutical industry and the use of bone marrow and bone marrow drive sales of drug discovery tools, we believe that this represents a promising new business platform for Aastrom. Now I’d like to turn the call over to Dave Recker for an update on our clinical programs, regulatory activity.

Hi Dan. I’ll begin by providing a brief update on our current clinical program for the treatment of advanced cardiac failure of ischemic dilated cardiomyopathy or DCM. The indication for which we have an orphan disease in the United States. As a reminder Phase 2b ixCELL-DCM study is a multi-center randomized double-blind placebo controlled trial evaluating the efficacy and safety of [inaudible] heart failure due ischemic DCM. The primary endpoint and composite of major adverse cardiovascular events defined as the number of oral [inaudible] cardiac hospitalizations and unplanned emergency department centers for the treatment of [inaudible] heart failure over 12 months. We continue to see strong enrollment with the study, we have now enrolled and treated more than half of the targeted 108 patients and we remain on track to complete enrollment of the study by the end of the year. Also with respect to ongoing clinical activities evaluated [inaudible] for the treatment of patient with craniofacial defects and undergoing reconstructive surgery. Enrollment is near in completion and the third of the NIH sponsored studies that is Phase I/II trial the patients affected by cleft palate or alveolar bone defects due to trauma. Finally as Nick mentioned we are preparing for our discussions with the FDA regarding the U.S. registration pathway for MACI. As an advanced third generation of cartilage repair products MACI offered the efficacy of Carticel with the improved ease of use for the surgeon, a reduced rehabilitation program for the patient, MACI is the first and only tissue engineered product approved as an advanced therapy and medicinal products by the European commission. Pivotal clinical trials supporting MACI registration in Europe, the 144 patients superiority of MACI Implant to Microfracture Treatment or SUMMIT that is demonstrated both statistically as well as clinically meaningful improvement in the core primary endpoints of pain and function for patients treated with MACI compared to microfracture. Based on the SUMMIT study results as well as the extensive clinical experience little up over 9,500 patient enrollment anticipation, we believe that MACI represents not just a potential replacement product for Carticel but an opportunity to expand the market for our autologous cartilage repair product. Physician feedback about MACI has been very positive. And our goal is to launch MACI in the U.S. market and we introduced MACI in selected European markets as soon as possible. I’ll turn the call back over to Nick.

Thank you Dave as you can see we have a number of important commercial and clinical activities underway, I’ll now turn the call over to Gerard to review our second quarter financial results.

Thanks Nick. Our second quarter financial results are the first financial results reported following the May 30, 2014 acquisition of Sanofi Cell Therapy and Regenerative Medicine business. For the second quarter ended June 30, 2014 Aastrom reported a net loss of $4.6 million or $0.94 per share compared to a net loss of $4.9 million or $2.72 per share for the same period a year ago. The results for the three months ended June 30, 2014 incorporated one month of operating results of the acquired business which generated $2.6 million of the reported capital loss for the period. The loss included restructuring charges of $3 million and expenses of approximately $200,000 for the Denmark business which is in the process of being closed. Adjusting for those charges the U.S. commercial business generated a positive contribution of approximately $600,000 in the second quarter. Net revenues for the quarter ended June 30, 2014 were $4.4 million and reflect one month of results with commercial operations in the U.S. Revenues were comprised of $3.4 million of net sales of Carticel implants and surgical kits just over $900,000 of net sales of Epicel grafts and biopsy kits and just under $100,000 of revenue from adjust initiated commercial sales of bone marrow by our marrow donation businesses in June 2014. June traditionally is one of the relatively stronger months for Carticel sales while Epicel sales generally are fairly volatile on a monthly basis given the nature of the patient population and the small number of burn centers performed in the bulk of Epicel graft procedures. Gross profit for the quarter ended June 30, 2014 was negative 577,000. Gross profit was significantly reduced by $2.4 million of charges in cost of goods sold associated with the recently announced restructuring of the acquired business. Research and development expenses for the quarter ended June 30, 2014 were $4.4 million versus $3.7 million for the same period a year ago. The increase in research and development expenses is due primarily to an increase in clinical trial expenses resulting from increased enrollment in the Phase 2b ixCELL-DCM clinical trial. General and administrative expenses for the quarter ended June 30, 2014 were $3.6 million compared to $1.6 million for the same period a year ago. The increase in SG&A expenses is due to an increase of approximately $400,000 in legal and other related expenses related to the acquisition of the acquired business, approximately $600,000 in restructuring expenses and approximately $800,000 in additional SG&A costs related to the acquired business in the U.S., and $200,000 in SG&A costs from the acquired business in Denmark which is in the process of being closed. Other income for the quarter ended June 30, 2014 was $3.9 million compared to $345,000 in 2013. The increase in other income is primarily due to a bargain purchase gain of $3.6 million recorded upon the closing of the acquisition of the acquired business. During the quarter we raised approximately $3.2 million in proceeds in the Lincoln Park equity line. We will continue to use this facility and others prudently as we consider additional financing options. As of June 30, 2014, the company has $7.3 million in cash and cash equivalents compared to $8.1 million in cash and cash equivalents at December 31, 2013. For the six months ended June 30, 2014 cash used for operations was $10.7 million. That completes my financial review. Now I’ll turn the call over to Nick.

Thanks Gerard. We’ve accomplished a great deal in the first half of 2014. We have transformed Aastrom into a fully integrated company with a sustainable U.S. commercial business and a high potential late-stage pipeline. We have also built an entirely new management team with significant experience in the development and commercialization of products in the United States. The growth and emerging profitability of our cell therapy business, the integration of our commercial and leadership teams and the new opportunities for pipeline expansion or encouraging demonstrations of our progress and continue to build Aastrom to a leading regenerative medicine company. Now, I’d like to ask the operator to open the call to your question.

Thank you. (Operator Instructions). And our first question comes from the line of Jason Kolbert of Maxim Group. Your line is now open.

Hi, good morning this is actually Jason McCarthy or Jason Kolbert. Thank you for the update and I just had a couple of questions. First regarding the DCM trial, and I was interested to know if the endpoints for the current trial will translate into a more pivotal trial going forward and what you see as the size and scope of the pivotal program.

Great. Question. Absolutely the endpoint of the volume, this is Dave Recker by the way, endpoints of the ongoing to be rather trial ixCELL-DCM, our designs to in fact predict outcomes for Phase 3 trial. As you probably know mortality cardiac hospitalization are part of the FDA’s recommendations and guidance document for clinical influence for Phase 3 trials. And so we have every expectation that we’ll be able to get information from that trial that we’ll help us better design in the Phase 3 program. To the second question, the design of that program was driven by a number of factors including the efficacy seen in the ongoing Phase 2b trial. Of course better the results of this ongoing trial of the ixCELL-DCM trial to cure patients that will be required. We are looking at a number of different factors that would affect the size of that trial and all of them depend on the results of the Phase 2b trial that’s currently underway.

Great. And also going over to the acquired business. What are the biggest obstacles right now to drive acceptance in the U.S. and the market share? And could you increase pricing in the U.S.?

Yeah, so I’ll answer this is Nick I’ll answer the second question first. Historically both of these products had seen healthy price increases year-over-year and there is no reason to expect that will change. With respect to Carticel I think as we talked about previously some of the obstacles related to the ease of use of the procedure for Carticel, the label indication requires the periosteal harvest and suturing and injection of the cells under the periosteal flap and that’s a little bit outside of kind of the normal – I won’t say practice but procedures that orthopedic surgeons do, that’s why MACI represents such a substantial growth opportunities for us where the cells aren’t implanted on oncology membrane that’s entering to the size of defect and glued in with fiber glue. So, we think that ease of use will certainly enhance market expansion in the U.S. But we do think again the penetration rates for Carticel currently are pretty low in the U.S. given the target patient population that I mentioned during the call. And so, we do think there is an opportunity to increase the penetration rate with Carticel this is compelling treatment option for younger or more active patients who are not prime candidates for total knee replacements and so, the durability of repair data up to 20 years really allows these patients to regain normal function overtime and so, we certainly believe there is growth opportunities for Carticel in another cell. Finally, with respect to Epicel this is a product that basically receives no promotional or reimbursement support to-date and we think again as lifesaving product that there is substantial growth opportunities for this product which is why we’ve reallocated some of our commercial resources to support Epicel going forward.

Great, thank you very much.

Thank you. And our next question comes from the line of Jason Napodano of Zacks Investment. Your line is now open.

Hi, this is David I am dialing-in for Jason this morning. Thanks for taking my questions. I was wondering if you can provide some additional detail on the past board for approval of MACI in the U.S. basically I am wondering what the FDA is going to want to see and also as far as resuming sales of MACI in Europe are there any issues that would need to dealt with for doing that.

I’ll take the first part of that. This is Dave Recker again. We are underway right now in preparing to negotiate – down to the question that you’re asking with the FDA. You know that – had some interactions with the FDA we’ve got transcript from those meetings. There is transcripts and the transcripts understanding exactly what the FDA is looking for at this point remain somewhat enigmatic. So, we’re actively pursuing we’ve got our own ideas of what we can do to get things moving but right now we’re looking to have discussion with the FDA in the upcoming quarter.

I think we have mentioned David on our last call that the basis for approval of this product in Europe was the study that David mentioned the 144 patient solid study that demonstrated superiority of MACI versus microfracture so we have one what would be considered to pivotal trial complete whether that’s enough. I think with together with patient experience of 10,000 patient outside of the U.S. to move forward remains to be discussed. We believe that if another study is required it would be a relatively smaller study as a confirmatory or supportive study so, those are kind of the boundaries and we will engage with the FDA in a pretty short order and really get a better understanding of the path forward in the U.S. With respect to Europe we are in the process of transferring the license we expect that to be completed from Sanofi to Aastrom in very short order. Once that occurs with the closing of the facility in Denmark we will spending tail to gear up, there is a three year window to reintroduce the product in Europe, our intention is in combination with the finding the regulatory path less to determine exactly when and where we will fund to relaunch the product in Europe. There are certainly some reimbursement challenges in countries in Europe but there are also a number of countries where we think the product has got great potential so, we will keep you informed as we go forward.

Okay, great. And I know you have talked a little bit about the target population for Carticel and eventually MACI. I was wondering if you can provide just a little bit more detail another younger are these worth of entries or are they at a defect so, basically if you can provide a little more about those patients and then where in the – on the treatment higher [inaudible] treatment ordered fall somewhere higher than that.

David this is Ross Tubo, CSO, Answer the question on Carticel the last part of your question about being the last ditch effort. Carticel is a treatment that can be utilized earlier on and there is actually some publications back in 2009 which looks at the use of Carticel as a first line that’s not what it’s approved by the FDA but there is the publication that discusses that. The current treatment paradigm is for these young patients that have worst induced injury to be treated with a microfracture with this a little bit of a fracturing into the subchondral bone and inducing a fibers tissue performing to that defect. That progress tissue is biochemically and biomechanically in adequate to last long period of time simply last one to three years and subsequent procedures in using a microfracture or an osteochondral autograft followed by a partial knee replacement and a total knee replacement so, that proceeds over a period end of 10 to 15 years and Carticel is intended to treat the contained vocal defects in these – injuries are traumatically induced cartilage injuries but then gives a robust biochemically and biomechanically correct repair tissue that we have data out in 20 year showing that this is in having the correct cartilage there you have the correct biomechanic and the correct function for these patients. So we believe that there is a great deal of potential for Carticel broadening and then also for MACI which make this easier to administer these cells on a membrane

Okay, great. Thanks for your time.

Thank you. (Operator Instructions). And our next question comes from the line of George Zavoico of MLV. Your line is now open. George McNicoll – Lewis & Vlak LLC: Hi thank you and good morning. First question I have with regards to the mild cell – a trial. You’ve now guided to finishing enrollment to the end of the year. Can you provide any guidance as to when you might expect the top-line results?

As you know the trial has a one year evaluation period for enrollments by the end of 2014 that would mean the last patient that last observation refer at the end of 2015 with the period of time for collection on final data and hospital et cetera looking to be able to have top-line results sometime in early 2016. George McNicoll – Lewis & Vlak LLC: Okay thanks for that. With regard to your expenses related to the acquisition. It seems like you’ve managed to put a lot of the cost of that into 2Q. And you’ve put out the tantalizing note that without those cost you would had more than a $0.5 million positive contribution. How many – how much more cost related to the acquisition do you expect in 3Q?

So there are probably two categories of cost related to the acquisition still to come or three for categories actually. One is some additional restructuring cost related to servants and shutting down at Cicely and Denmark. That should all be finished in the third quarter. The amount of that probably be roughly a third of what we reported this quarter. In terms of incremental cost to build infrastructure to support this brand of business, that probably will go on for a couple of quarters that haven’t started yet. I’m not going to guide exactly what that is but it seems such as servers and increased IT cost just to help as we – Sanofi and then on a running basis they’ll probably see some marginal increase in G&A again as we – Sanofi. I think you’ve been taking into account those that later category will see improved contribution overtime from the acquired business as other management team works increased efficiencies and increased the gross margins as well as hopefully some increase in the top-line.

Yeah I think that’s a fair summary George things and I guess I would just add the comment that we’re reporting these results essentially for one month of June.

Right.

We’ve announced our restructuring plant in mid-June. So it’s a partial month of the cost cutting measures and prior to implementing any of the efforts on the commercial side all of which occurred on July 1st. So we think there is plenty of room for improvement moving forward. George McNicoll – Lewis & Vlak LLC: Okay thanks. And with regard to Carticel and Epicel sales, could you maybe you mean you can’t I don’t know if this is a fair question or not. $2.4 million of net sales of Carticel, how many actual product implants does that represent, or can you say?

I think I’m doing the math on top of my head I haven’t looked at the implants. I am guessing that’s 100 implants, I’m looking around the table here to see that order magnitude is that right yet on close. George McNicoll – Lewis & Vlak LLC: Also I mean you have I mean was that 60,000 that you said earlier was that related to potential market for Carticel or...

Yes. George McNicoll – Lewis & Vlak LLC: Yes that was referral. So you’re – that’s for the whole year so yes, so you’re looking at a – you’re build the penetrating where you believe is eligible patient population. Is that a fair statement?

Yes that’s the basis for our statements that we think there is expansion opportunities based on low penetration, right. George McNicoll – Lewis & Vlak LLC: Okay. And you also mentioned on Epicel that there has or was it Carticel, there was basically no – it was Epicel. Basically no reimbursement strategy by Sanofi. I mean and then you still had almost $1 million in sales. This seems to me to be as well an opportunity. Could you describe a little bit where you think the potential might be for that.

I’ll give a little background and then Gerard can jump in as well. Both of these products in the U.S. Epicel and Carticel had been on the market for some time since the late 90s and in the 2000 the FDA required clinical studies to, for these products suite and other cell therapy products to read main on the market. So Genzyme [Randar] study which supported approval of the BLA for Carticel in the U.S. With respect to Epicel, they took a different path which was gaining approval of the product is a humanitarian used device. So the product was made available, they basically would take orders that came in, but again no promotional effort and no real reimbursement effort as well or I should say very small promotional effort. So, we do think again this is a lifesaving product, there is no other product out there that’s permanent knee replacement. And we think there is opportunity to significantly enhance utilization on the product.

Yes I think it’s just important to note that most of our business comes from a handful of burn center. And then over a 120 dedicated burn centers in the U.S. If you go by number of burn bed probably have under 5% share as well. So look at a number of ways, and it is a lifesaving therapy but because this was never something that was focused upon, it hasn’t gotten a great amount of use that we’re looking forward to teaching physicians how to use product and showing of the benefit. George McNicoll – Lewis & Vlak LLC: If it is such indeed such a lifesaving effort, why do you think Genzyme Sanofi went to humanitarian used path.

I think its products that has been on the market since the actually for Epicel since 1988. And the product has been on the market and they went to humanitarian used path because that was kind of experience to get the approval. At the time, Genzyme was really I guess less interested in cell therapies going forward so in going the humanitarian used route they were able to at least attempt to recoup cost of manufacturer and keep this life saving product on the market. George McNicoll – Lewis & Vlak LLC: So with more than 20 years of experience on the market, what do you need to do to convert from humanitarian use to commercial use basically?

Yes that’s a great question George. So in 2012 legislation was passed called the FDA, the SIA or Safety and Innovation Act and that act certainly expanded the opportunities to sell humanitarian used devices at a profit. So we are actively engaged in evaluating our strategy for approaching the FDA on that. It’s an interesting process in that, it’s a 75 day review period, since we’re approved under the humanitarian device exemption regulations we have to submit an [HT] supplement. And again it has a 75 day review period. So Dave and his regulatory team are currently putting together our strategy in the package that will approach the FDA with.

Yes that legislation actually as Nick’s described it allows for an HTE to be converted before profit with pediatric use. It’s interesting the rollout for conversion of there is a pediatric use or if there is a pediatric label on it. Obviously for Epicel there is a substantial number of skills and the benefit from the product. And so as Nick described we’re underway right now with preparing a discussion with the FDA looking at data that Sanofi had in their file with respect to pediatric use hopefully coming to an agreement when they’re – very quickly be able to convert this to a for-profit entity. George McNicoll – Lewis & Vlak LLC: Everything goes well if you get the report in say within a month or two, so you’re talking about three conceivably and I am just starting this out speculating entirely you might be able to get a conversion by the end of the year and – don’t play guidance.

The rate limit here, unfortunately for us is the FDA often times is the case was with MACI trying to understand what the agency wants, this has only been done five times, six times in the past because those are amendments and not true new application, we don’t know what the products were, and so it’s not something that the FDA has tremendous experience with. We believe there is some of our discussions with outside, first we know what they’ll be looking for, we plan to tailor off submission and discussion with them that was we believe satisfy their needs but I do had to take but a timeline on it again just because of the unknown of our dealing with the FDA. George McNicoll – Lewis & Vlak LLC: That’s probably the safer route to take providing guidance and not meeting, it is not the desirable, well good luck going forward with that for sure and I look forward to full quarter sales numbers for 3Q at the next call.

Great. Well, thank you George. George McNicoll – Lewis & Vlak LLC: Thank you.

Thank you. And I am showing no further questions at this time. I would like to turn the call back over to Mr. Nick Colangelo for any closing remarks.

Great. Well, thank you for your questions and continued interest in Aastrom as we discussed on our call today, we have several value creating commercial clinical development milestones ahead of us over the coming quarters. We’re excited about these opportunities and look forward to reporting on our progress on our next call. Have a great day.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Have a great day everyone.