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Initiating Coverage of Aethlon Medical

Zacks Equity Research

We have initiated coverage of Aethlon Medical.  See below for access to our full 16-page report on the company.  

Brian Marckx, CFA

Aethlon Medical Inc. (AEMD.OB) is a medical device company which is engaged in the development of an extracorporeal (i.e. - outside of the body) blood filtration device designed to selectively remove harmful particles from the circulatory system.  Using the company's patent protected Adaptive Dialysis-Like Affinity Platform Technology (:ADAPT), Aethlon's lead product, the Hemopurifier, is a cylindrical cartridge encased with hollow fibers and affinity (i.e. - binding antibodies) agents which is used in conjunction with existing blood circulatory equipment (such as dialysis and CRRT machines already located in hospitals and clinics) to aid the body's ability to fight disease by removing viruses and other injurious substances from the blood.  The cleansed blood is then returned to the bloodstream.  Targeted applications are in the treatment of Hepatitis-C (:HCV), HIV, sepsis and cancer as well as for the suppression of bioterrorism agents.

Following encouraging results from a small study done in India with dialysis patients, in Q3 2010 Aethlon initiated a study protocol to demonstrate that the Hemopurifier can improve the benefit of standard of care drug therapy in genotype 1 HCV patients.  Issues, including problems with patient enrollment, caused delays but after tweaking the trial design based on feedback from the FDA (which may help support an eventual application to initiate U.S.-based trials), this second India-based study has been restarted and is currently ongoing.  Aethlon announced preliminary data from three patients in February 2012.  The company hopes to use data from the studies to support a soft launch in India as well as to supplement their Investigational Device Exemption application, which is already on file with the FDA.  If granted, the IDE will allow Aethlon to begin U.S. (in vivo) clinical studies for HCV and possibly other targeted conditions such as HIV.  While HCV is the initial therapeutic focus, Aethlon was given institutional review board approval in December 2011 to begin a small (ex vivo) cancer-related study at the (Santa Monica, CA) Sarcoma Oncology Center.  

In October 2011 Aethlon announced that the U.S. government's Defense Advanced Research Projects Agency (:DARPA) awarded the company a (up to) $6.8 million contract for the utilization of its ADAPT technology for a blood purification device to reduce the incidence of sepsis.  Aethlon billed ~$958k under the milestone-based contract through 12/31/2011 and is eligible to receive up to $1.97 million during the first 12 months of the contract.    

As Aethlon had been a development-stage (the company emerged from development-stage to revenue-generating following initial revenue under the DARPA contract) company requiring financing over the years to fund development of the Hemopurifier, typical of early-stage micro-cap companies, Aethlon's balance sheet is light on cash and reflects regular sales of debt and equity.  Although the company is in default on much of its $3MM+ in debt, management continues to be successful in raising operating capital and initial receipts from the DARPA contract have (at least temporarily) benefitted the cash balance.  Further development of the Hemopurifier will require even more capital, especially in order to pursue FDA approval which will need to come via PMA.  U.S. commercial launch for any of these indications, assuming it eventually happens, is likely to be at least a couple of years away - between now and then Aethlon will need to raise a substantial amount of cash, enter into partnering arrangements or score additional valuable contracts/grants in order to maintain operations.  Meanwhile, the initial commercial launch in India is expected to happen in the coming year.  The company is also currently requesting approval for use of Hemopurifier in compassionate use programs in the U.S. and has initiated discussions with potential clinical partners in Europe for an HCV related program.        

To view a free copy of our most recent research report on AEMD or subscribe to our daily morning email alert, visit Brian Marckx' coverage page at http://scr.zacks.com/.

Read the Full Research Report on AEMD

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