Greetings ladies and gentlemen, and welcome to the Aastrom Biosciences Second Quarter Fiscal Year 2008 Investor Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instruction). As a remainder this conference is being recorded. It is now my pleasure to introduce your moderator Ms. Kris Maly, Director of Investor Relations at Aastrom. Thank you Kris Maly you may begin.

Thank you, Avert. Good morning and welcome to our conference call. Before we continue it’s important that you review our Safe Harbor statement. This conference call and webcast contain forward-looking statements including without limitation statements concerning clinical trails, plans and expectations, clinical activity timing, intended product development and commercialization objective, adequacy of existing capitals of core operations reflect by time, future capital needs and potential advantages and applications of tissue repair cell technology all of which involves certain risks and uncertainties. These and other significant factors are discussed in greater detail in Aastrom's annual report on Form 10-K and other filings with the SEC. Actual results may differ significantly from the expectations contained in these forward-looking statements. Now it is my pleasure to turn our call over to our CEO, George Dunbar. George Dunbar – Chief Executive Officer: Good morning everyone and thanks Kris. Thank you very much for participating on our call today. This morning we will briefly highlight Aastrom's clinical progress since our last quarterly call and we'll review our second quarter financial highlights. Then we'll open the call up to questions from the audience. First let me make a comment about the fact that Aastrom's stock has been trending below $1 a share for the last several months. I'm personally frustrated and I'm sure some of you are as well feel strongly that our stock price doesn't reflect our achievements during the last year and half. We have successfully met all of our clinical milestones in a timely fashion, demonstrated safety and shown promising signs of efficacy in our vascular and bone indications and we intend to continue meeting our milestones during 2008. With regard to our clinical milestones for cardiac regeneration, we recently reported the first patient treatment using cardiac repair cells, what we call CRC…

Thank you, Jerry. This morning I would like to review the clinical program accomplishment which we have achieved over the last several months. Let me start with cardiac. Furthermore, this patient experienced shortness of breath even at rest, coughing due to fluid retention in his lungs, chronic fatigue and poor memory because his brain had also been affected by the lack of blood circulation. The patient was not eligible for a heart transplant, because of his age. He had a very negative prognosis with only a slight chance of surviving for more than a year and a severely impaired quality of life due to advanced heart failure. This prompted this patient decision to undergo compassionate use CRC treatment which entailed the injection of extremely high-doses of seven progenerator cells into his heart. This first patient has in the meantime left the hospital and lived with his family. Currently heart transplantation is the only curative option for some fortunate end-stage DCM patient's, however, its availability is limited by the number of donors. Typically, it is only offered to younger patients and requires last-long medications with severe adverse side effects. The hope for this DCM patient's is to halt or to revert to cardiac disease probation with our CRCs to increase life expectancy and to improve their quality of life. Clinical data is being collected from the first patient treated for dilated cardiomyopathy and the use of CRCs in compassionate-use patient is ongoing in the European Union. It is anticipated that more comprehensive clinical followup data from the compassionate-use cases will be available during 2008. In addition, we expect that the compassionate-use cases of CRCs will provide useful experience towards the development of clinical protocols in future regulatory submissions targeting DCM. We are preparing a US IND and EU IMPD submissions to…

Thanks Elmar. We are very pleased with the progress we made in the clinic during fiscal year 2008. The Aastrom team is working very hard everyday to ensure that we are implementing and meeting our clinical and operational milestones. Our goal is to move our TRC-based cell products through the clinical trial and regulatory processes and enter the market as quickly as possible while continuing to maintain a strong safety record. We hope that you will continue to follow and support Aastrom’s progress as we move through fiscal 2008. Those are the prepared remarks we have. Everett, I would like to open it up to any questions from our listeners please.

Thank you ladies and gentlemen. (Operator Instructions) Our first question comes from the line of Ren Benjamin with Rodman and Renshaw. Please proceed with your question.

Hi, good morning guys, and thanks for taking the question. I guess, I have just one main one and that is, what are milestones for 2008 that we can expect from Aastrom? It seems like all the Phase III trials are ongoing, we probably won’t see anything from those trials and what’s the interim analyses planned until 2009 or so. So, can you tell us what sort of drivers are in place for 2008? What consensus we may see from that act and what additional trials will be initiated in 2008? Thank you.

Sure, Ren. This is George. I think if you look at our website and the public presentations that we are giving on milestones, what we started doing last year was to layout what we saw as the significant milestones over the next 12 to 24 months. And then each time we report either at a meeting, at a conference, or on calls like this disclose and tell you where we are. I think the current update is that we’ve achieved 6 or 7 milestones during the ‘07 period, we have a similar number going forward for the 2008 time period for example in the bone regeneration area, one of the milestones we have for ‘08 is to complete the 10 pension enrollment for the osteonecrosis clinical trials in Spain. We are going to review the interim osteonecrosis data -- patient data in the US in 2008 or when we get to critical mass and patients were trying to identify to be able to do that. The RESTORE-CLI trial, the Interim data 12 months after the 30th patient treatment we’re not giving guidance on exactly when that will be but you’ll hear more as we get closer to the time. In cardiac, we announced, as you know, the treatment of the first patient because that was a milestone that we had indicated that we did we were going to achieve and we will continue to report the interim data 6 months or so after a number of patients have been treated. So you will end and this is going to be the submission of the US IND and the submission as Elmar had indicated of the INPD in Europe for Phase I/II clinical trials in ‘08. And the last but not least, similarly in this spinal cord area where we intend to initiate European clinical trial activity. So, I think there is a lot of activities that we look forward to presenting and we’ll be giving you guidance on the conferences where we think that this data can be talked about.

So, then I guess another question -- another question is, at one point you guys were debating a reverse stock split, can you give us an update as to what your thoughts are now on fixing the corporate structure?

Sure. So, yeah Ren we are looking at a number of alternatives to fix the corporate structure, one of them is the reverse stock split, but we don’t want to do that unless we’re sure that we have additional data that will support the stock price, so we’re continuing to look at that. We do not plan on being to listed by NASDAQ but we’re going to do everything we can to keep the stock price up.

And you mentioned that you are looking at other options, can you discuss some of other options?

Well, I think other options would be additional ways to increase the price of the stock price by hoping to unlock the value of the company. We’ve mentioned in some of our press releases that we’re looking at partnering opportunities as well as licensing opportunities and we think that there may be ways to demonstrate the value of the company and increase the stock price by doing that as well. For instance.

Can you characterize for us how the conversations have been going with parts, it is more of a -- is it early stage or have there been meaningful discussions such that now multiple around have already occurred and some serious discussions will take place?

Sure. This is George. That’s a difficult question to answer without setting off expectations one way or another. So, let me just try to -- let me try to give you some guidance on that. Recognizing that this a new field, recognizing that the adoption process and the commercialization precess is going to require the help of partners, we began a focused effort over a year ago to being an outreach program at scientific meetings, at partnering meetings to not only tell the Aastrom story for the first time in the way that’s being presented now, but to being to have exchanges and dialogues with a number of companies, some who are already in regenerative medicine, others who are trying to educate and understand more about it. And, this process takes a very, very long time. So that process continues taking to reflect on what Gerry Brennan said a few minutes ago. We believe that not only our partnerships are integral to the strategy, but also would be viewed by people like yourselves as a significant external event, not unlike some of the clinical news that we generate. So, we will -- we are continuing to work on this, but I am not prepared to provide any guidance on exactly who we’re talking to or where we are.

Perfect. Thanks and good luck in 2008.

Thank you.

Thanks Ren.

Thank you. Our next question comes from the line of (Jose Horeska) with Merrill Lynch. Please proceed with you question.

Hi Jose.

Hi. Good morning guys. Elmar, this is a question for you, on the European front, could you give us a little bit more or actually just on the cardiac side, can you just give a little bit more insight on the kind of patients you are treating, specifically can you give us some insight into the kind of other or catastrophe or treatments that they are having in conjunction with yours. For example are they on amiodarone, are they have ICDs implanted? Can you give us a little bit of a profile of these patients?

Yeah and I think these are really end-stage on DCM patients that’s the general good question and you are already asking the right questions. Most of these patients will have an ICD implanted because the heart triggers a disease caused arrhythmia, so the heart doesn’t beat regularly but there is great risk actually of going into ventricular arrhythmias which then can end up as a disaster. So, many of these patients prophylactically have an ICD implanted. But even with…

Was it before or afterwards?

I am sorry.

Was it before or after?

Before. We are really going after the very end-stage patients here. So, typically we gave this example of the first patient we have treated with an ejection fraction of 12%. These patients aren’t very much perfect (Inaudible) was encouraged as you can imagine. We just have heart function that is early minimal. If you look at this patient, the heart was extremely enlarged. Normal volume is 300 milliliter, if it were at 615 milliliter that’s a reflection that it just couldn’t cope with the amount of blood that would rush in but the heart couldn’t pump it away. So, these patients have all kinds of problems. Third, I would say the first patient was typically example of a patient who didn’t even make it to the transplant thus because he was beyond this.

Yeah.

And this is the kind of patient population we are looking at. It's basically transplanted patients and beyond.

.:

, :

Yeah let me, this is George. Let me try to give you some guidance on that. I think what you said is accurate in many cases with autologous cells that are deemed to be safe by all concerned, it’s actually easier to treat patients than it is to get go through the approval process in terms of having and that’s the fundamental basis behind why we are treating patients there first to help give us early guidance on the likelihood and the probability of procedural and trial applications here in the U.S. and also should we go forward in the EU. At the end of the day, having the approval is one thing, having the clinical data and the standard of care worked out for treatment and reimbursement is quite another and so I think that we would be getting the cart before the horse to try to go into commercialization before the other pieces of the infrastructure were put in place for example, but clearly it's something that is an opportunity that can be taken advantage of.

Okay. Great. Thank you very much.

Our next question is from the line of Amy Stevens – Susquehanna Financial Advisors. Please proceed with your question.

Yes. Good Morning. Thanks for taking the question. Just quickly in terms of the Phase III trial, the 120 patients, enrollment of those patient's. Can you just let me know -- is there a control arm in terms of this study, how is it structured and then just a little more deep how in terms of how quickly you think it will involve from a quarter-to-quarter perspective.

Yeah - I think you are two questions. Number one is with regard to the controlled arm. Basically what it is, it’s a standard procedure. It’s got a core tract that is drilled into the patient. It’s basically a pressure release surgery that helps to release some of the pain due to pressure build up in the femur head. So that’s done but within the treatment and the control arm, the difference between the two treatments is that we are in the control arm, putting a matrix material into the core tract while we are placing a cell matrix mixture into the treatment arm. So, the difference between the two treatments is essentially that the hole, so to speak, is filled just with a matrix material in the control arm while in the treatment arm it’s filled with the matrix mixture that contains cells.

So the matrix that’s being put in the control arm has no additional agents, no BNP, nothing like that, it’s just nothing except the matrix?

That’s the nature -- that’s what, in my opinion, a very keen trial because the same matrix material is used for both the control group as well as for the treatment group. The add-on is just the cells that are contained in the cell matrix mixture in the treatment group.

Okay. And then time for enrollment, what --how are you thinking about that?

We can say that we are enrolling 120 patients in total. There are five sites open at this point and there will be a 24 months follow up for this patient's. So after we have enrolled last patient, there will still be at least 24 months followup period where we have to follow the patient and see if patient progresses in fracture or not.

And that is based on your conservations with FDA in terms of what you think you need to have?

Absolutely. There was a end-point discussion with the FDA about the nature of the endpoint and it's a hard endpoint that progression to fractures. It’s basically the question whether the femur has collapses or not, this being entered here. Let me also tell you little bit one additional piece of information that may be important in terms of youth flow. This is an open label trial. So we will be able to -- from time-to-time, when it makes sense and when the body of evidence suggest is meaningful to report data, we will do soon and we will report on the progress with the clinical trial and on the interim results.

Okay. And in terms of the incident of fracture that you would expect to see in the patient population you are looking at, around what is that.

It's anywhere between 60% and 80% in the kind of patient population we are looking for. Over a one-to- two year period, for two years, it's expected to be around 80% in the clinical.

Okay. Can you hear me?

Yes.

Okay. Thank you and how would you expect that to compare to what's out there right now, BMP's or other agents attempt similar attempts to get to the same point. Is there any data that you’ve seen at conferences that sets a bar for you at all?

.:

Then are there any important exclusion criteria we should be aware of?

There are -- there is of course a list of exclusion criteria and I will just give you a couple. First, these patients should not be on angiogenic drugs because we believe a large portion of the effect of the cells comes from the ability to improve and restore blood flow in the femur head, so we don’t want for example – that interfering there for example, an anti-VGF (Ph) agent. That’s an important exclusion criteria.

Okay. And the average age of the patient population you are looking at?

Okay. And, in terms of the dilated cardiomyopathy studies -- unfortunately any of the patients pass-on. Do you have the ability to look at the tissue post mortem, in fact part of the -- the point to be structured what they have might find?

But we hope not that the answer, I mean.

Yeah, yeah.

The idea is to half or reverse disease progression and I mean, we are very early as you know on the process. And the decision of the family interpretation since something should happen be it related to the natural course of the disease or it will be.

So, that is that way at that bad time.

Yeah, that’s (Inaudible).

Okay.

But, we don’t have any provisions in their -- that that they would have to donate the….

Right.

The organ or something that’s not what is intended to cure, the true compassionate use case where we are trying to save these patients. Amy Stevens Okay. Alright, thank you very much. Operator Thank you ladies and gentlemen. Our next question comes from the line of Aaron Lindberg with William Smith & Company. Please proceed with your question.

Hello. Have you evaluated other delivering methods or is that always injections, are there opportunities for sustained allusion profile if you were to build the cells into a metrics or (Inaudible)

Yeah. That’s a very good question and of course we are looking into these kinds of things that really at this point there are clear advantages going to direct rows. It’s far easier regulatory process. We are not into combination product category. The -- there are no other confounding variables associated with procedure. It’s really a very simple kind of question we are asking, and that is, “do these cells when we are injecting them into patients have a positive effect on the patient’s outcome.” So, there are no confounding variables and there are a number of -- there is a very high number of patients actually waiting for the solution in this indication. There is really as I expected (Inaudible) with the exception of heart transplantation.

So, that’s a topic for future time after that’s already been established?

Absolutely. I think there is -- once we have established the cells are about logically active and help these patients. I think there is ample opportunity for extending the technology platform for other delivery methods as well.

Okay, thank you.

That is a question -- I think the practical aspect is in these patients that we are trying to decide whether they benefit from our sales and, therefore, do we take them further in the clinical trial process is do the cells work clinically and the purest way to do that is to quit these cells directly into the repair side in the case of the heart by direct injection. I think the next step of ease of use and the regulatory implications, devices and catheters for example is another matter. But first we have to establish whether it is efficacy with our cells directly or not.

Got it. Thanks.

Thank you. Our next question comes from the line of Scott Smith. Please proceed with your question.

Yes, hello gentlemen. How are you doing? I’ve got a number of questions for you. The first question I would like to ask is can you give us an update on your (Inaudible) cells platform? What is occurring at Stanford and Duke with respect to the DCV-I and the DCV-II trials, is there any updates, what phase of clinical trials are those in, when do you expect to hear results out of those trials, I realized that Aastrom is not directing those?

This is a program Scott that I inherited prior to joining the company and focus of the company since I’ve been here has been to really focus single-mindedly on what we can take into the clinic and into clinical trials where there is tremendous commercial opportunity ahead of us. We will continue to work with groups just like you mentioned on an individual case by case basis to explore other applications of our core platform and then evaluate whether there is a commercial opportunity or clinical opportunity or not for us. So, that work will continue and you may see more of this in the future, but not to be confused with that we are taking this to market in the way that your question might have suggested.

Okay.

Scott, in the sales number that I mentioned earlier is made up of sales both of products to collaborators that are working in these general areas and as well as some small sales of cell-based products of our own. So, that’s one way to sort of track the activity level in this area by looking at the amount of sales in the sales line.

Okay. But can you tell me what phase of trials those are in at -- for the DCI -- DCV-II and DCV-II, I mean, are they -- or are these just research efforts going in right now whether just using the Repair Cells as a tool basically right now?

No. I would look at it just as a research use application of our cells. And again as I said, we will do more of this in the future. Elmar, you want to make a comment?

Yeah. It’s basically Phase I, II trials that are very early trials.

Okay, they are Phase I, Phase II, okay. Okay, the next question I have is regarded to your patent portfolio. There has been on the US government patent site a note regarding Aastrom some 3D systems, can you give us an update on what the 3D system might entail regarding the patents and where you add with the general US and EU Patent Submissions, and where the FDA and the European Commission might be at?

So, there is a lot of questions involved in what you just asked Scott. So, I’ll try to answer in pieces. With -- the 3D system is basically a research level application or a bioreactor. And as we think it’s an interesting research tool, it may have some potential as a research tool and we patent it, we’ve received a patent. I believe that’s been issued. That technology we would look at licensing to somebody that would have more of a research focus rather than trying to develop ourselves. In our overall patent portfolio in the last year-and-a-half, we’ve done extensive work to update our patents and to file the number of applications to extend the patent life and the scope of the patent that cover our products. We don’t know whether those patents will be granted or not. But we are -- it’s an area we are actively pursuing.

Okay, okay. The next question I have for you is with regards to your bone technology, you have right now the (Inaudible) Process trial in Phase III. Can you tell me will you be assuming that the osteonecrosis trials does prove successful and get through the FDA’s, we also be pursuing the non-union bone market and specifically the jawbone reconstruction market. Is there enough demand for that particular kit to go after that particular market?

Bob, this is George. Let me give you some insight there. Again going back to the focus of the programs that we have today, we felt that the osteonecrosis trial in the US was where we could have a clear hard endpoint on inmate US with the FDA on whether these products work or not in this condition of osteonecrosis of the femoral head. As you know from the long bone fracture trials and other trials, the bone does heal. The case is that we have identified and been extremely successful in that we are very proud of are those non-unions that have not healed, so we have the opportunity to really improve the quality of life in these patients. But if you then look at the – if you look at where we place our clinical trial efforts and activities, it’s going to be in those that we think can give us the near-term advantage to get us on the market. As you know, we do not have any products yet approved in the US and our goal is to get through – to and through the FDA in the most expeditious way possible. You’ve heard me say in the past that the fracture data from that trial what you refer to and other bone work that has taken place really is the base body of safety evidence and data that is supportive of other trials that we are doing outside of the bone area also to really demonstrate the huge safety advantages that our cells do have. So we have sort of a very useful purpose today and we will evaluate where we are clinically and economically as the osteonecrosis trial matures and makes the decision about these other trials at that time.

And can you also tell me if the Replicell is approved for say the osteonecrosis in Phase III, will it be approved for the other kits to go to the market with or each indication need to be approved separately by the FDA?

It’s Brennan. Let me answer it this way. The manufacturing process, which you are referring to, I mean the ARS is the – was originally intended, I think, historically to be a standalone medical device that in and of itself would have to have an FDA approval. With the regulations as they are, and the cells are regulated both drug like as a biologic, the facility, the GMP environment in which the cells are produced and indeed however those cells are made using the ARS system or other ancillary technology is all part of the submission process that we make to the FDA. So it’s not ARS-specific in the way your question (Inaudible).

Okay. And now you pulled in those units, originally those units were setup like (Inaudible) and a number of facilities and then at some point in time I believe that’s under Dr. Armstrong’s rein. You pulled in the Replicells in-house and decided to go with a prescription-based approach toward manufacturing these cells. Have you looked into any, I know you are setting up a number of centers in the United States and in overseas, have looked in any type of way of getting those prescription with a faster turnaround or even having like local site setup at some medical centers because there are some other competing 41 technologies out there that they have been talking about 15 minutes or half-an-hour sort of setup and they have the cells in place?

Well, there is multiple parts to your question, I will admit that the things that you are talking about really predate me. I can only really talk about the program that we have in place today, the logic behind it and the path that we are taking. I think the shift in emphasis that you are seeing in Aastrom today is we are not a device company, I mean full stop. Rightly or wrongly, the FDA made changes in the law that requires us to be regulated as a biologic and actually we welcome that and we welcome it for a reason that another question were asked earlier about commercializing in Europe or elsewhere. This process not only requires us and we welcome that to generate very very detailed statistically significant and relevant clinical data throughout the process of the multiple trials that we undertake. That data not only will help us achieve the regulatory approval but would also begin to build the body of evidence that will be clinically significant and statistically significant as part of a commercial and educational campaign to convince doctors and payers and providers to begin to adopt our approach as a standard to payer. I am not certain how you would do it any other way.

Okay. I guess…

I’ll address one other part of your question as you referred to people that have 15 minute turnarounds. It takes approximately 12-day. So putting the system at the site to get a faster turnaround is not significant, but we deliver a very high dose of cells and we are focusing on severe unmet medical needs typically chronic conditions where a really fast processing time is not really a significant factor. The quality of the cells that are delivered is the most significant factor and that’s why we are focusing on the product.

Okay. Okay. And then the last question I have is can you tell me in terms of insider ownership and institutional ownership, what are the figures right now and are Aastrom management and your Board of Directors planning on increasing the ownership percentage that you have of Aastrom to maybe offset some of the price decline that has been occurring, maybe stabilize share price with having more shares in the hands of insiders and institutions?

That question is similar to question that we get asked a lot on the message board and this gives me a good opportunity to address one of the factors that needs to be taken into account that is there is typically a blackout period with regard to the time that insiders can purchase our shares; it’s on an SEC rule. For instance, we could not by any shares between approximately the middle of December and essentially next Monday. But a number of us purchased shares in early December. George and I both purchased 20,000 shares at that point in time. We think the stocks are a very good value and we’ll continue to purchase shares when we are allowed to in the open market. We have encouraged other management and Board members, our Chairman Nelson Sims has also purchased shares as well as Stephen Sudovar, our Former Chairman, and we spent a lot of time with institutions to encourage them to buy shares as well.

Excellent. Okay, I appreciate your help and wish you the continuing success. Thank you for answering all of my questions.

You are welcome.

Thank you. (Operator Instructions). There appear to be no further audio questions at this time. I would like to turn the call back to Mr. George Dunbar for closing comments.

First off, I’m going to appreciate the number and quality of the questions that has been asked. We stand ready to address anything and everything that we can about what we are doing. So we welcome all comers to ask and try to better understand the programs that we have. We are not going to talk about what we think our competitors are doing and speculate. We can only tell you what we are doing and encourage you to support the company as I know many of you are, and we look forward to providing you with updates as we go forward and talking to you either in conferences on our next scheduled quarterly call. Thanks very much.

Thank you. Ladies and gentlemen, this concludes today’s teleconference and you may disconnect your lines at this time. Thank you for your participation.