Leading the Way – Adalta's East to West Roadmap

By Mark Pachacz Posted on February 18th, 2025

In April last year, antibody company Adalta (1AD: $0.016), announced its East to West program. Pivoting from the development of its internally generated i-bodies, the company announced that it was to open a new program which focuses on licensing cell therapy products from Asia (mostly China) for western markets.

Recently Adalta announced that aside from seeking to out-license its lead asset, AD-214, it has stopped its internal development program to concentrate of its East to West Program.

Why the pivot to Asia?

There are a number of factors for Adalta moving to work on this business opportunity. The first is the high level of T-cell therapies that are being developed in China that will also be need to be commercialised in western markets. According to the company, 41% of cellular immunotherapy developers are based in the Asia Pacific region, with that region accounting for 61% of clinical studies in that field being conducted globally.

The second reason is the background of Adalta's CEO, Tim Oldham, who was previously in charge of Cell Therapies in Melbourne. Cell Therapies will be the local manufacturing partner to produce material for the local clinical studies.

The third factor is its collaboration with Melbourne-based VC group, Synthesis Bioventures, which has considerable experience in operating in China. And a fourth feature of the business is the lower cost, and relative ease of conducting clinical studies in Australia, compared to the US.

AdCella's structure

The new business opportunity is structured as follows. All assets will be licensed into a company called AdCella, which is currently a 100% owned subsidiary of Adalta.

Adalta is currently identifying and undertaking the due diligence of potential assets, which is viewed as in-kind contribution for its equity stake in AdCella. As announced last week, Adalta has three potential assets from China for which non-binding term sheets have been signed, with the company having an exclusive 90-120 day due diligence period to assess and secure the assets.

Once term sheets have been agreed, AdCella (not Adalta) will raise the funds to conduct the development works. This first round is expected to be in excess of US$15 million upfront from VCs according to Oldham. Adalta's ownership in AdCella will reduce with the funds raised. It may also elect to make an equity investment in AdCella. However its cash balance is currently low, with just $1.6 million at the end of last year.

Oldham expects between three to six venture capital investors will participate in the first outside funding round of AdCella. At last month's JP Morgan event in San Franciso, Oldham said that the company received positive interest from at least 10 new VC investors, with the proposed structure being acceptable to potential investors. Adalta is in discussions with VCs from Australia, the US, Europe and Asia.

Bioshares' estimate is that Adalta's equity investment in AdCella is likely to be finish between 20% - 50% after the VC investments.

Business Model and Potential Upside

AdCella intends to in-license cellular therapy products which have already generated promising and sufficient Phase I data from Asia for commercialisation into western markets. Adalta will find the assets and conduct the due diligence. It will coordinate the technology transfer and manage the clinical studies in Australia. And it will seek to out-license the assets for considerably greater value than the costs involved in progressing the asset.

Oldham expects that this process will take four years from signing the original licensing agreement – one year for technology transfer, two years to conduct the study and then three to four months for the trial readout.

Adalta expects to initiate a clinical program each year with a new asset, beginning next year.

It's expected that AdCella will pay the originator between US$2 - US$6.5 million in upfront and milestone payments, which may also include for the supply of raw material and for additional clinical studies in Asia if the initial data is not sufficient in depth (patient numbers).

In return, Adalta expects that AdCella will receive between 40% - 65% of revenue for the asset from licensing deals, with the originator to receive the balance.

Adalta/AdCella may also seek to retain Australian and New Zealand distribution rights to the technologies being developed.

Citing six recent Phase I deals (by Adalta) in the CAR-T space, the upfront payment has ranged from US$10 million - US$325 million with an average upfront deal payment of US$80 million. The average total deal value was US$450 million (excluding royalties from product sales).

Private & Public Capital

The way the two companies are structured, there is the capacity to raise funds from public markets into Adalta, and to raise private capital (from VCs) into AdCella. Oldham believes that this structure can benefit from the current demand from both investment sectors. It also suits VC investors that prefer to invest in private rather than in public companies.

Last year Adalta received commitment for up to $3.7 million from New Life Sciences LLC in the US (which can only invest in public markets) and from Meurs Group in Australia, which is one of the largest shareholders in Dimerix (13.8%).

Timeline for In-Licensing Deals

Adalta's East to West initiative was announced at the end of April last year. In October the the first non-binding term sheet for the first CAR-T asset out of China was signed. And earlier this month two additional non-binding term sheets were signed for another two potential CAR-T assets from China. Adalta currently has an exclusive 90-120 day negotiation period for these assets.

Oldham expects the company to in-license at least one of the three assets currently under assessment. The company announced in July last year that there were 10 assets being assessed (but not under a non-binding term sheet). The company is aiming to have three assets in-licensed by the end of this year.

Assets in Due Diligence

Adalta is seeking to in-license T-cell therapies for the treatment of solid tumours. Whilst CAR-T treatments have been very successful for blood-based cancers, only two T-cell therapies (see next page) have been approved for solid tumour treatment.

The first CAR-T asset under review has the most extensive data, from a 32-patient Phase I study. A decision on this deal should be expected shortly given it will be approaching the end of the 120 day exclusive negotiation period. This has promising results from a range of solid cancers and uses a non-viral manufacturing process.

The second CAR-T asset has data from nine patients with colorectal cancer including two who achieved complete resolution of 'malignant ascites', the existence of which generally signifies a terminal stage of disease.

The third CAR-T asset is for the treatment of solid tumours with data from 10 patients so far.

Oldham said that if there is insufficient early data, then an option may be taken out to treat additional patients in China before completing a licensing agreement.

China's Biopharma Deal Rush

Adalta's timing for its foray into accessing Chinese T-cell assets has been excellent. At the biotech JP Morgan event last month in San Francisco, the interest in acquiring Chinese biotech assets was one of the key trends to emerge, as acknowledged by BioCentury and Endpoints News. Last week news outlet CNBC ran a story titled "China's Biopharma Deal Rush", citing less capital available in China for such programs. It explains the strong interest Adalta has been receiving from venture capital groups, with Adalta an early mover with its strategy that was implemented almost a year ago.

Specific T-Cell Therapies Being Sought

Adalta is seeking T-cell based therapies which Oldham said are the most potent immunotherapy approaches. This includes CAR-T treatments and T-Cell receptor (TCR) therapies.

It is seeking therapies against solid tumours only, with autologous therapies being the focus. Differentiating features being sought include a 'kill switch', whereby the therapy can be shut down if a negative outcome is developing, whether the therapy can be manufactured without a viral vector (less expensive process), and whether the therapy can be delivered without the need for chemotherapy in advance (giving the option for multiple doses of the CAR-T therapy).

Another area of interest in emerging CAR-T therapies is 'in-vivo CAR-T', whereby the engineered CAR-Ts are generated by the patient.

Other factors being considered by Adalta in selecting potential assets include whether the development team behind the technology in China has previously gained experience in the US biotech sector or academia.

Approved	Company	Product	Solid tumour	Therapy	Pivotal study size	Results
Aug 2024	Adaptimmune	TECELRA	Synovial sarcoma	Autologous modified ex-vivo TCRs against MAGE-A4-antigen	n = 52	43% ORR
Feb 2024	Iovance Immunotherapeutics	AMTAGVI	Metastatic melanoma post- PD-1 therapy	Autologous tumour-derived ex-vivo T-cell therapy	n = 73	31.5% ORR

First T-Cell Therapies Approved for Solid Tumours

Whilst there has been considerable success in CAR-T therapies against blood-based cancers, the first autologous T-cell therapies against solid tumours were approved just last year. The first was Amtagvi (from Iovance Biotherapeutics) for the treatment of melanoma (for patients who have failed checkpoint inhibitor and other therapies).

The second autologous T-cell therapy was from Adaptimmune, called Tecelra, for the treatment of synovial (soft tissue) sarcoma. (See table.)

Adalta's I-body platform

Adalta will now halt its internal i-body development program and seek to out-license its lead asset AD-214. The company indicated that at least 20 potential partners have expressed interest in the asset.

Summary

Adalta is capitalised at $10 million. Whilst the company has a low cash balance ($1.6 million), it is embarking on a new business direction that appears to be well considered. Adalta has been early to adopt an emerging trend of scouring Asia for novel biotech therapies. The ability to secure investor interest in AdCella is obviously a major hurdle, although there appears to be strong interest in the approach according to the company.

Timing the securement of high quality assets to be in-licensed with investment from VC groups will also be important.

Bioshares recommendation: Speculative Buy Class B

Disclaimer:
Information contained in this newsletter is not a complete analysis of every material fact respecting any company, industry or security. The opinions and estimates herein expressed represent the current judgement of the publisher and are subject to change. Blake Industry and Market Analysis Pty Ltd (BIMA) and any of their associates, officers or staff may have interests in securities referred to herein (Corporations Law s.849). Details contained herein have been prepared for general circulation and do not have regard to any person’s or company’s investment objectives, financial situation and particular needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without consulting their investment adviser (Corporations Law s.851). The persons involved in or responsible for the preparation and publication of this report believe the information herein is accurate but no warranty of accuracy is given and persons seeking to rely on information provided herein should make their own independent enquiries. Details contained herein have been issued on the basis they are only for the particular person or company to whom they have been provided by Blake Industry and Market Analysis Pty Ltd. The Directors and/or associates declare interests in the following ASX Healthcare and Biotechnology sector securities: Analyst MP: 1AD, ACR, AVR, CGS, CUV, CYC, DXB, IMM, LBT, MX1, OPT, NEU, PAB, PXS,RNO,SOM. These interests can change at any time and are not additional recommendations. Holdings in stocks valued at less than $100 are not disclosed.

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Leading the Way – Adalta's East to West Roadmap

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