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    DLA Piper Rudnick Gray Cary US LLP

    1200 Prospect Street

    Suite 575

    La Jolla, California 92037-3654

    T   858.677.1443

    F   858.456.3075

    W   www.dlapiper.com

    YOUR FILE NO. 000-22025

    August 11, 2005

    OUR FILE NO. 332396-139747

    By Edgar

Mr. Jim B. Rosenberg

Senior Assistant Chief Accountant

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549

    Re:

    Aastrom Biosciences, Inc.

Form 10-K for the fiscal year ended June 30, 2004

File No. 000-2205

Dear Mr. Rosenberg:

On behalf of Aastrom Biosciences, Inc. (the “Company”), we are providing the following additional
information to supplement and update our response of July 14, 2005 to comment number 2 of the
staff’s comment letter of April 15, 2005.

The Company hereby provides the attached financial data (Exhibit A) summarizing the Company’s
inventory provisions related to the AstromReplicell System for the fiscal years ended June 30, 2002
and 2003, and for each of the quarterly periods of fiscal year 2004 and for each of the first three
quarters of fiscal year 2005. As requested, this information details the periods in which write
downs were recorded for the ARS inventories. For your convenience, the information has also been
reconciled to the total inventory balances reported at the applicable balance sheet dates in the
Company’s periodic filings on forms 10-K and 10-Q.

We have also attached a revised inventory accounting policy disclosure (Exhibit B) that the Company
proposes to include in its future filings, commencing with the filing of its Annual Report of Form
10-K for the year ended June 30, 2005.

Finally, as requested by the staff, the Company provides the following supplemental information:

    •

    The adjustments to the carrying value summarized in the attached financial data relate
to excess ARS inventories for which the estimated probability of sale declined over time.
The adjustments to the carrying value or the ARS inventories did not relate to a diminution
of value of the inventories due to obsolescence.

Serving clients globally

August 11, 2005

Page Two

    •

    The Company’s method of estimating the net realizable value of its ARS inventories was
not applied to any of the Company’s other inventories, because the characteristics of that
inventory and the Company’s market experience with those products provided management with
the ability to more precisely determine any necessary lower of cost or market conditions.

We appreciate the assistance of the staff in permitting us to understand and respond to the matters
raised in the comment letter. To assist in your review, we are providing a copy of this letter by
facsimile to Ms. Christine Allen of the staff. We look forward to receiving your confirmation that
the matters raised in the comment letter have been resolved.

Very truly yours,

DLA Piper Rudnick Gray Cary US LLP

Douglas J. Rein

Attorney

doug.rein@dlapiper.com

Admitted to practice in California

DJR:sar

Enclosure

cc: Gerald Brennan

GT\6455870.2

332396-139747

Aastrom Biosciences, Inc.

Inventory Detail

    Year Ended

    Year Ended

    Quarter Ended

    Quarter Ended

    Quarter Ended

    Quarter Ended

    Year Ended

    Quarter Ended

    Quarter Ended

    Quarter Ended

    Jun-02

    Jun-03

    Sep-03

    Dec-03

    Mar-04

    Jun-04

    Jun-04

    Sep-04

    Dec-04

    Mar-05

    ARS inventories at estimated net realizable value at beginning of period

    $
    1,444,000

    $
    1,073,266

    $
    250,015

    $
    —

    $
    —

    $
    —

    $
    250,015

    $
    —

    $
    —

    $
    —

    ARS inventories under evaluation at potential customer sites

    —

    86,314

    162,203

    162,203

    162,203

    162,203

    162,203

    162,203

    162,203

    162,203

    Net realizable value adjustment related to excess ARS

    (202,000
    )

    (748,296
    )

    (250,015
    ) (3)

    —

    —

    —

    (250,015
    ) (3)

    —

    —

    —

    Adjustment reflecting final resolution of evaluation units

    —

    —

    —

    —

    —

    —

    —

    —

    —

    (162,203
    ) (4)

    Reported ARS Inventories at end of period

    1,242,000

    411,284

    162,204

    162,203

    162,203

    162,203

    162,203

    162,203

    162,203

    —

    Other
Inventories (1)

    155,297

    394,373

    382,672

    466,166

    515,877

    226,602

    226,602

    470,604

    197,944

    225,794

    Total Reported Inventories at end of period

    $
    1,397,297

    $
    805,657

    $
    544,876

    $
    628,369

    $
    678,080

    $
    388,805

    $
    388,806

    $
    632,807

    $
    360,147

    $
    225,794

    Approximate equivalent ARS available for sale (2)

    16

    18

    18

    18

    18

    18

    18

    18

    18

    16

    (1)

    Other inventories consist principally of cell cassette and base medium
inventories which are sold to the Company’s existing ARS customers and clinical
sites for production of cells. In the quarter ended September 30, 2004 other
inventories also include $111,495 of equipment which was purchased during the
quarter. As disclosed in the Company’s 10-Q for the quarter ended December 31,
2004, management now expects that this equipment will be used to establish a
Company-owned cell production site and, accordingly it is reported as property
and equipment in the Company’s balance sheet at March 31, 2005.

    (2)

    Reflects equivalent units of ARS available for sale assuming a standard ARS
configuration. Because ARS inventories consist of purchased finished
components that are used to configure ARS only when they are ordered, and a
customer order may include a non-standard configuration, these amounts can only
be estimated. For example, the standard configuration of an ARS includes
four incubators, but a customer could elect to order an ARS with more than four
incubators.

    (3)

    The Company notes that actual charge recorded in the period was $253,000,
reflecting a difference of $2,985.

    (4)

    The net carrying value of ARS inventories reflected herein consisted of
three systems under evaluation by potential customers, all of which the Company
believed carried a high probability of being purchased by the respective
potential customers. During the third quarter of fiscal year 2005 (ended March
31, 2005), one of these systems was sold and the other two were returned, one
of which was re-deployed to a clinical site. The remaining carrying value of
the returned systems was written down to zero. This activity resulted in a
$72,000 charge to cost of sales and a $90,000 charge to research and
development expenses.

Exhibit B

Inventories — The Company values its inventories that consists primarily of finished components,
the AastromReplicell System and disposable cell production cassettes and base medium, at the lower
of cost (using the first in, first out method) or market. The Company regularly reviews inventory
quantities on hand and records a provision to write down obsolete and excess inventories to their
estimated net realizable values.

AstromReplicell System (“ARS”) Inventories— Based upon market conditions and the Company’s
historical experience with the ARS product line, the carrying value of its aggregate ARS
inventories is reduced if such inventories are held in excess of 12 months without sale because the
probability-weighted selling price of the aggregate inventories declines after inventory has been
on-hand for more than 12 months . The Company continues to reduce the aggregate carrying value of
ARS inventories over the ensuing six months if the inventories are not sold. The carrying value of
ARS inventories under evaluation at potential customer sites are not reduced so long as the
estimated selling price (less selling costs) exceeds the carrying value of the inventories under
evaluation. Pursuant to this accounting policy the Company recorded provisions to reduce the
carrying value of ARS inventories by $748,000, $253,000 and $99,000 in fiscal years 2003, 2004 and
2005, respectively. The 2005 provision, includes $90,000 of excess ARS inventories that were
re-deployed for clinical use.

Cell Cassette and Base Medium Inventories- The Company maintains cell cassette and base medium
inventories for sale to existing customers and clinical sites. The Company evaluates the net
realizable value of these inventories considering expected future sales quantities, prices and
timing, and considering the limited shelf life of these inventories.