By Brian Marckx, CFA

Aethlon ( ( AEMD ) ) continues to make progress with increasing patient throughput in use of its Hemopurifier therapy in the treatment of HCV and this morning announced the protocol which will govern use under a compassionate use/expanded access program and mark their initial foray into commercialization.

As a reminder, Aethlon has been conducting a study at the Medicity Institute in India called Extract-1 with mostly hard to treat genotype-1 HCV patients. Goal of the study is to show that the Hemopurifier is able to safely and effectively accelerate viral load depletion of HCV when used during the first three days of standard of care drug therapy (peginterferon/ribavarin). The study expects to enroll up to 30 patients. Blood is pumped with the use of a dialysis machine, although only the Hemopurifier cartridge is used to filter the blood. In late July AEMD announced interim results on the first 10 patients treated - which we discuss in our July 31st update here; http://finance.yahoo.com/news/10th-patient-treated-extract-1-153442845.html

Relative to the compassionate use program (the protocol and patient inclusion/exclusion criteria for which AEMD outlines in this morning's press release), earlier this year AEMD had petitioned the Medicity IRB for permission to increase frequency of treatment up to seven days and to open up treatment under an expanded access program. The IRB gave the go-ahead to allow compassionate use for patients that have failed or relapsed on standard HCV therapy. This should provide AEMD with another revenue stream (albeit likely minimal, particularly at the outset) and potentially more importantly, will increase the overall patient experience and treatment volume which could bode well for increasing awareness of Hemopurifier therapy and further bolster credibility of the technology.

Treatment under this program is open to patients worldwide and could potentially draw individuals from outside of India, including the U.S. and Europe - AEMD notes Medicity is a leading center for medical tourism.

Next Big News Could Come In Late October

AEMD's current major revenue stream comes from the DARPA awards. As a reminder, in October 2011 DARPA awarded AEMD an initial contract worth up to ~$2.0 million over the first 12 months (and potentially up to $6.8MM over five years). Then in August AEMD announced that DARPA picked up the second-year option of the five-year $6.8 million DLT contract which will pay the company up to another $1.6 million if all of the eight related milestones are met. As we noted, DARPA picking up the year-two option is an obvious positive for AEMD and lends additional support for their Hemopurifier technology.

AEMD has also partnered with two larger (unnamed) organizations relating to a follow-on DARPA DLT "systems integrator" contract called DARPA BAA-12-36. Decision on award of the systems integrator contract, which could be worth up to $25 million, is expected later this month. As we noted in our August investor note, if AEMD scores the contract, this could offer revenue upside to our model.

Please visit Brian Marckx's coverage page at scr.zacks.com to access a free copy of the full research report.