We rate Aethlon Medical a Speculative Buy with a 12-month price target of $1.00 per share, based on its unique blood filtration device, the Hemopurifier®, which has made promising early progress as a novel approach to the treatment of hepatitis C infections, and could also find use in the treatment of other viral infections, bio-terror agents, and cancer. During the final months of 2009, Aethlon continued to seek to build value within the constraints of its limited financial resources. Chief achievements were the initiation of a pilot production run of Hemopurifier cartridges using Good Manufacturing Practices, the start of work on less expensive production of the Hemopurifer’s affinity agent in plants, and the establishment of a subsidiary to develop a non-core, potential use of the device in cancer. We expect the stock to be driven by incremental validation of the device’s potential in the form of partnerships and/or clinical data. During the fall of 2009, Aethlon made progress on production processes for the Hemopurifier, presented data at a medical conference, formed a subsidiary to develop a non-core use for the device, and raised additional capital. According to management, talks continue with potential partners. As it is not clear when to expect the next substantial increment of clinical data, we consider news of a partnership, should that occur, the potential event with the best chance of moving the stock towards our price target during the next year.
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Presentation from the RedChip
2009 New York Equities Conference

James Joyce CEO of AEMD

Aethlon Medical, Inc. (“AEMD” or the “Company”) is establishing the industry to treat infectious disease & cancer with therapeutic filtration devices. The Company has developed a medical device called The Hemopurifier®, which selectively removes infectious viruses and immunosuppressive proteins from the bloodstream, even before the occurrence of cell and organ infection.

The Hemopurifier® is a candidate first-line therapy for the vast majority of viral pathogens that are resistant to or untreatable with drug or vaccine therapy. The device also serves as an adjunct therapy to enhance and extend the benefit of both established and candidate drug therapies. In either application, the Hemopurifier® provides a dual benefit of action; an antiviral benefit by inhibiting viral replication through the direct removal of infectious viruses, and an immunotherapeutic benefit by removing proteins known to kill-off immune cells required to fight infection. In human studies, the Hemopurifier® has demonstrated safety and effectiveness against Hepatitis-C Virus (HCV) and Human Immunodeficiency Virus (HIV). The device has also been documented to capture a broad spectrum of bioterror and pandemic threats, including the H1N1 influenza virus. Aethlon has also discovered the Hemopurifier® captures exosomes that are secreted by tumors to kill-off immune cells in cancer patients.

AEMD’s Hemopurifier® focuses on hard to treat pathogens such as HCV, and incurable targets such as HIV, bioterror and pandemic threats, and cancer. This huge market for diseases not cured with a vaccine provides an enormous opportunity for the Company’s Hemopurifier to reduce a patient’s viral load so that standard of care treatments can be extended with increased effectiveness.

HCV and HIV represent huge global patient populations at over 170 million people and 33 million infected respectively. Human studies show the use of the Hemopurifier is effective in successfully reducing viral loads in both HCV and HIV patients presenting a proven treatment strategy for not just HCV and HIV sufferers, but also for the 8 to 11 million people that are infected with both diseases. Additionally, the market for the Hemopurifier is constantly expanding, as evidenced by the recent outbreaks of H1N1 influenza or “swine flu”, H5N1 influenza or “bird flu”, West Nile Virus, and other evolving pandemic threats.

To give an idea of the potential of AEMD’s Hemopurifier treatment, consider the latest deal between Vertex and ViroChem Pharma, consummated on March 12, 2009. Vertex paid ViroChem Pharma $376.8 million ($100 million cash, 10.7 million VRTX shares) to gain access to Vertex’s experimental stage HCV drug candidates VCH-222 and VCH-759.

• Hepatitis C program: Aethlon made progress on developing commercial production processes for the Hemopurifier with the start of a pilot production run of cartridges in conformance with Good Manufacturing Practices, a set of quality control standards necessary for regulatory approval, and the start of work on a plant expression system for the protein used to bind to and remove virus particles from blood as it passes through the cartridges.
• Swine flu program: In a laboratory study, the Hemopurifier was able to remove 96% of H1N1 swine flu virus particles from blood plasma in six hours, consistent with results seen earlier in similar studies with H5N1 avian flu and 1918 Spanish flu virus.
• Broader scientific initiatives: Aethlon established Exosome Sciences, Inc., as a wholly owned subsidiary to develop the use of the Hemopurifier to remove exosomes from the blood of cancer patients. Growing evidence points to a role for exosomes in the suppression of patients’ immune response to certain types of tumors. Separately, Aethlon is helping fund an investigation at Boston University using the Hemopurifier to look for dormant viruses in the brain, hypothesized to be a predisposing factor in the degenerative brain disorder associated with early dementia and death in some former athletes who suffered repeated brain trauma.
• Partnership outlook: Management says it continues to talk with potential partners for the development of the Hemopurifier, making a partnership, should one occur, the potential event with the best chance of moving the stock price significantly, in our opinion.
• Financial condition: Aethlon’s finances remain hand-to-mouth, with cash of $92,000 and negative working capital at the end of 1QFY10 (September). The company raised $430,000 in 1QFY10, however, and believes it will be able to continue raising enough new capital to fund operations until at least the end of FY10.