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Aethlon Medical Releases Shareholder Letter to Discuss the Treatment of Hepatitis-C Virus (HCV)

Posted on: Wednesday, 10 June 2009, 06:47 CDT

SAN DIEGO, June 10 /PRNewswire-FirstCall/ -- Aethlon Medical, Inc., (OTC Bulletin Board: AEMD) disclosed today that its Chairman and CEO, James A. Joyce has issued the following letter to shareholders.

(Logo: http://www.newscom.com/cgi-bin/prnh/20090325/LA88762LOGO-b)

To our Shareholders:

On March 25th we announced a data driven strategy to improve Hepatitis-C virus (HCV) cure rates by combining the benefit of our Hemopurifier(R) with the interferon-ribavirin standard of care (SOC) administered to HCV-infected patients. Since disclosing our strategy, a candidate business partner has introduced us to clinical data that validates the mechanical removal of HCV through blood filtration in combination with SOC therapy can increase HCV cure rates by greater than 50%. Amazingly, the data also indicates that only small levels of viral filtration administered at the outset of SOC therapy are required to outperform the leading adjunct drug candidate, which represents a significant value component of a publicly traded company whose market capitalization exceeds $5 billion. If you are just learning about Aethlon Medical, our Hemopurifier(R) is a first-in-class medical device that selectively removes infectious viruses and immunosuppressive proteins from the bloodstream. In HCV care, the Hemopurifier(R) inhibits viral replication through selective adsorption of circulating HCV and augments the immune response by removing toxic proteins shed from HCV to kill-off immune cells.

More than ever, I believe the scientific principles underlying our Hemopurifier(R) will inevitably change the landscape for treating infectious disease and cancer. As we transition beyond the research and development phase of operations, our initial commercialization efforts related to therapeutic Hemopurifier(R) applications will focus on delivering our technology into India and other practitioner-driven medical device markets. Pending the outbreak of a pandemic or bioterror threat, our primary focus in these markets will be the treatment of HCV. Such focus is driven by previous Hemopurifier(R) treatment outcomes, the validation that viral filtration increases cure rates, and the magnitude of the HCV treatment opportunity.

Our goal in HCV care is to increase patient cure rates up to 90%. We envision two pathways to reach this goal:

1. Our Hemopurifier(R) as an adjunct treatment to enhance the benefit of SOC therapy; or
2. Our Hemopurifier(R) in combination with a candidate therapy to replace SOC therapy.

The achievement of our goal would significantly impact the HCV treatment industry as SOC therapy succeeds in providing sustained viral responses (SVR) in only 30% to 50% of patients who initiate treatment. HCV infection is considered cured when a SVR of undetectable viral load is maintained more than six months after completing treatment. Prior to discussing the clinical rationale supporting our treatment goals, I want to clarify the magnitude of the HCV treatment opportunity.

It is estimated that nearly 180 million people worldwide, or approximately 3% of the world's population, are infected with HCV. To provide perspective, this represents a patient population approximately 5-6 times larger than those infected with HIV/AIDS and over 100 times larger than the population of end stage renal disease (ESRD) patients who require kidney dialysis. However, unlike kidney dialysis and HIV therapeutics, we actually have the opportunity to participate in curing HCV-infected individuals. The global market for therapies to treat HCV is projected to reach $9.1 billion by 2015, and in the United States, the annual cost of advanced liver disease resulting from HCV infection is anticipated to jump to $85 billion in the next two decades. As a result, Medicare costs are anticipated to soar 500%, from $5 billion to $30 billion. As the stakes to treat HCV are high, the competition for new drugs is intense with more than sixty treatment candidates reported to be in development. As we target the use of our Hemopurifier(R) as a drug enhancement device in HCV care, we are positioned to improve treatment outcomes as an adjunct to both SOC therapy and new drug candidates that evolve to challenge SOC therapy in the marketplace.

Significant challenges exist for drugs seeking to supplant SOC therapy, as new candidates must demonstrate substantially greater patient benefit in order for the medical community to consider discontinuing administration of the SOC treatment regimen. As an example, Albuferon, an HCV treatment candidate from Human Genome Sciences (HGSI), recently demonstrated phase III treatment outcomes comparable to SOC therapy with half the number of required injections. As a result, the value of HGSI shares was reduced by 57% the day the study data was released. I can't help but wonder how Albuferon might have performed in combination with our Hemopurifier(R)? Regardless, a drug candidate wishing to supplant SOC therapy in the market will need to Bob Beamon (surpassed world long jump record by almost two feet at the 1968 Olympics) beyond the capabilities of SOC therapy.

For this reason, the primary strategy for most HCV drug candidates is to incrementally improve treatment outcomes as an adjunct to SOC therapy. The challenge facing these candidates is the effect of stacking new drug toxicity on top of established SOC toxicity, which is known to trigger fatigue, bone marrow suppression, anemia and neuropsychiatric effects. Many patients fail SOC therapy because they are unable to endure the toxicity of the 24-48 week regimen on its own. Based on clinical data, Telaprevir, a 3x-day oral drug from Vertex Pharmaceuticals is considered the leading adjunct candidate based on outcomes of a recent phase II study, which documented that 51% of patients that previously failed SOC had a sustained virologic response (SVR) when retreated with SOC and Teleprevir in combination. When considering that only 14% of patients in the study control arm responded to SOC alone, there is certainly valid justification for Telaprevir to be considered the lead adjunct drug candidate by the medical and the financial community. This is reinforced by the reality that Telaprevir represents a significant value component of Vertex (VRTX), which as I write this letter is valued at more $5 billion in the public markets. In regards to deal values in the HCV space, VRTX paid almost $400 million in March to acquire ViroChem, a drug developer with two experimental stage HCV drugs. TheStreet.com, who provides excellent HCV market coverage, reports the following on the Telaprevir clinical outcome; "The data keeps Telarevir ahead of its hepatitis C rivals because no other drug has yet shown the ability to improve the cure rates for both patients new to therapy as well as those who have failed prior therapy." The key phrase in that statement is "no other drug".

I suspect most individuals following the HCV treatment industry are not yet aware of a medical device study that demonstrated the mechanical removal of HCV through blood filtration outperforms Telaprevir as an adjunct to SOC therapy. The insight provided by this clinical validation should significantly benefit our endeavors. In a 63 patient study conducted in Japan, Asahi Kasei Kuraray Medical (Asahi) demonstrated that double filtration plasmapheresis (DFPP) when administered at the outset of SOC therapy provided a 77.8% SVR in HCV-infected patients. In patients who previously failed SOC, DFPP treatment provided an average SVR of 71.4% versus the 51% previously referenced in Telaprevir clinical studies. On average, each patient in the Asahi study received three DFPP treatments each lasting 3.14 hours. In the study, DFPP was administered once daily for three consecutive days at the outset of SOC therapy and provided an average viral load reduction of 26.1% during each treatment period. Amazingly, the 71.4% and 77.8% cures rates were achieved without any additional DFPP during the remaining SOC treatment regimen. As a result of DFPP treatment outcomes, Asahi has advanced DFPP beyond treatment candidate status to actively marketing the treatment in Japan as the V-RAD system, which Asahi derives from the phrase "Virus Removal and Eradication by DFPP". Additional information can be accessed online at: www.v-rad.jp/en/index.html. I shall keep my comments directed towards the science underlying the V-RAD system and not the animation you will encounter at this website. Regardless, the website is quite informative.

However, there are significant limitations for DFPP as compared to our Hemopurifer(R). Like other approaches to therapeutic filtration, DFPP relies on multiple pumps and filters to indiscriminately remove particles by molecule size. For this reason, DFPP also extracts particles beyond HCV that are required for patient health. The safety profile of DFPP can be further diminished by the need for replacement fluids. In combination, these factors limit the time an HCV-infected patient can be exposed to DFPP treatment.

The advantages of our Hemopurifier(R) as compared to DFPP include the following:

1. The Hemopurifier(R) provides a greater reduction of HCV from circulation during treatment. Our data resulting from over 20 HCV treatments indicates an average viral load reduction of 41% during four-hour treatment applications of the Hemopurifier(R).
2. The Hemopurifier(R) augments the immune response by removing toxic proteins shed from HCV to kill-off immune cells. These proteins are too small to be captured by DFPP.
3. The Hemopurifier(R) is designed to selectively capture HCV and immunosuppressive proteins versus the indiscriminate removal of particles by DFPP.
4. The Hemopurifier(R) is one single-use disposable cartridge versus the requirement for two cartridges and multiple pumps with DFPP.
5. The selective ability of the Hemopurifier(R) to capture targeted viruses and immunosuppressive proteins (versus the removal of needed blood components) allows for a continuous Hemopurifier(R) treatment strategy to rapidly reduce viral load to low to undetectable levels. Thus, increasing the likelihood that HCV infected individual can be cured by SOC therapy.

While we believe our Hemopurifier(R) has obvious advantages over the DFPP system, I wish to expand on point #5 as it provides a foundation to support our treatment goal of increasing HCV cure rates up to 90%. Based on published treatment literature, it is well established that patients who initiate SOC and achieve a rapid viral response (RVR) have significantly higher cure rates. RVR is defined as undetectable viral load at day 30 of SOC treatment. In fact, published literature indicates the small percentage of patients who do achieve a RVR have cure rates that range from 86-92%. Based on our Hemopurifier(R) data, we believe it is possible to achieve undetectable levels of HCV in week one of SOC therapy, not day 30. Based on data analyzed from four-hour Hemopurifier(R) treatments, we project that a patient with a high viral load of 7 million iu/ml might be reduced to undetectable HCV levels after approximately three days of continuous Hemopurifier(R) treatment. This corresponds to a 4.06 log reduction or a 11,000-fold decrease in viral load. An HCV patient with a moderate viral load of 2 million iu/ml would be projected to reach undetectable levels in approximately 2.5 days of continuous treatment. Such outcomes would position us to achieve our 90% cure rate goal and may allow for decreased dosages and duration of SOC therapy.

To leverage our opportunity in HCV care, we are pursuing strategic relationships that will broaden our ability to commercialize in practitioner driven markets, or accelerate our clinical opportunities in the U.S. and European Union. Additionally, we have responded to a grant opportunity to advance a diagnostic based Hemopurifier(R) and have been working on a candidate clinical protocol for a grant proposal related to the use of our Hemopurifier(R) as an adjunct cancer treatment to remove tumor secreted exosomes known to suppress the immune system of cancer patients. The data from these cumulative activities, including recent HIV and HCV treatment outcomes, will cause us to update the investigational device exemption (IDE) we have previously filed with the FDA related to use of our Hemopurifier(R) as a treatment countermeasure against bioterror and pandemic threats. In this regard, we were recently advised that we were a candidate being considered for a contract award from the Biomedical Advanced Research and Development Authority (BARDA). This was related to a multi-agency contract solicitation known as DMID-NIAID-NIHAI20080022BARDA. We have since been advised by BARDA that they will not be granting awards under this solicitation. BARDA has encouraged to update our data collected since our original submission and resubmit a new proposal to a BARDA specific contract solicitation known as BAA-BARDA-09-34. As we believe our Hemopurifier(R) represents the most advanced broad-spectrum treatment strategy to protect our military and civilian populations from viruses considered bioterror and pandemic threats, we plan to provide BARDA our new submission no later than July 31st. Regardless of these opportunities, our primary focus moving forward will be the treatment of Hepatitis-C.

On behalf of our dedicated team at Aethlon Medical, I thank you for your continued support.

Very truly yours,

James A. Joyce

Chairman, CEO

Certain of the statements within this shareholder letter may be forward-looking and involve risks and uncertainties. Such forward-looking statements involve assumptions, known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Aethlon Medical, Inc to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Such potential risks and uncertainties include, without limitation, the Company's ability to raise capital when needed, the Company's ability to complete the development of its planned products, the ability of the Company to obtain FDA and other regulatory approvals permitting the sale of its products, the Company's ability to manufacture its products and provide its services, the impact of government regulations, patent protection on the Company's proprietary technology, product liability exposure, uncertainty of market acceptance, competition, technological change, the capability of the Company's product compared to other medical devices and drugs and other risk factors. In such instances, actual results could differ materially as a result of a variety of factors, including the risks associated with the effect of changing economic conditions and other risk factors detailed in the Company's Securities and Exchange Commission filings.

Contacts: Dave Gentry or Jon Cunningham RedChip Companies Inc. (407) 644-4256 (407) 491-4498 -cell Dave@redchip.com or Jon@redchip.com Jim Joyce Chairman, CEO 858.459.7800 x301 jj@aethlonmedical.com Jim Frakes Senior VP Finance 858.459.7800 x300 jfrakes@aethlonmedical.com

SOURCE Aethlon Medical, Inc.

Source: PR Newswire

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