East Meets West: AdAlta navigates China–US divide to drive biotech value

• AdAlta subsidiary AdCella brings cutting-edge cellular immunotherapies from Asia – particularly China – into Western markets
• AdCella has backing of SYNthesis BioVentures Fund, which invests in therapeutics development
• The biotech fund believes AdCella’s East to West strategy is particularly appealing in current US-China trade war

As trade tensions between the US and China escalate, a small-cap ASX biotech could become a strategic gateway for bringing Asia’s next wave of cellular immunotherapies into lucrative Western markets.

AdAlta (ASX:1AD) and venture capital firm SYNthesis BioVentures Fund (SYNBV) launched AdCella in 2024 to bring cutting-edge cellular immunotherapies from Asia, particularly China, into Western markets.

SYNBV was co-founded by Professor Andrew Wilks, who, alongside Amplia Therapeutics (ASX:ATX) CEO Dr Chris Burns, received the 2024 Prime Minister’s Prize for Innovation for co-inventing momelotinib, an FDA-approved treatment for myelofibrosis.

Until recently AdAlta has been focused on treating fibrotic diseases with its lead asset AD-214 for kidney and lung fibrosis. The drug has demonstrated safety in phase I clinical studies and efficacy in multiple preclinical models of fibrotic disease.

Managing director and CEO Dr Tim Oldham said that while AD-214 remained a valuable asset with potential to be monetised through external partnerships, it became clear that expanding AdAlta’s pipeline would require looking beyond its drug discovery efforts.

“Our history of developing assets from scratch was too long, too slow and too expensive to be appropriate for a listed company,” he said.

“It was perfect for a private company but not a listed one.

“We needed to find assets we could in-licence that would be in clinical trials relatively quickly, then figure out where we could gain a sustainable edge, how to be competitive in securing those opportunities and add real value in the process.”

Rise of East to West cellular immunotherapy strategy

Leveraging Dr Tim Oldham’s deep expertise in cellular immunotherapies and extensive operational experience in Asia, AdAlta adopted an East to West strategy, aimed at identifying and advancing promising Asian cancer therapies into regulated Western markets.

Oldham said he’d been fortunate to witness firsthand the rapid evolution of China’s biotech sector and the remarkable progress in cellular immunotherapies for cancer treatment over the past 15 years.

He was previously CEO of Cell Therapies, a contract development and manufacturing organisation (CDMO) based at the Peter MacCallum Cancer Centre in Melbourne.

Cell Therapies has manufactured CAR-T therapies for nearly 20 years, including Novartis’s Kymriah, the first FDA-approved CAR-T treatment in 2017.

The East to West cellular immunotherapy strategy for cancer is now a core growth priority for AdAlta and a key driver of future pipeline growth and value creation.

“Cancer is the area where cellular immunotherapies are proving to have the greatest commercial impact and we know that the hotspot of innovation in this space is Asia, particularly China,” he said.

Oldham said 60% of global clinical trials into chimeric antigen receptor T-cell (CAR-T) therapy – a type of cellular immunotherapy – was in China.

He said Asia was overweight in its level of innovation in the field, with 40% of companies developing cellular immunotherapy products based in the region.

“The advantage we bring to the table is the ecosystem we have in Australia in cell and gene therapy, particularly CAR-T cell therapies, with decades of developmental experience,” Oldham said.

“In Australia we treated the first CAR-T patient in a commercial clinical trial outside of North America, which was for Novartis.

“We supply today as many CAR-T products per million of population as the US and that is five times the market penetration of Europe or Japan, so we’ve got some advantages here.”

Oldham said Australia runs more than 50 cellular and gene therapy trials with good manufacturing capabilities.

“We can also run clinical trials here for a much lower cost than in the US and that is before any available R&D tax incentive.”

China innovation meets Aussie expertise

Oldham said AdCella was now positioned to take advantage of a hotspot of innovation in China. It has secured non-binding term sheets for three CAR-T therapies targeting various solid cancer tumours, such as colorectal, lung, gastric, ovarian, and pancreatic.

The therapies have delivered encouraging results in early clinical trials, showing potential to be more effective than current treatment options.

They also include advanced features like safety kill switches, which enable doctors to shut down the therapy if serious side effects occur, secreted checkpoint inhibitor molecules that help overcome immune suppression, and non-viral vector manufacturing – a newer, potentially more efficient way to engineer the cells without using viruses.

“Our business model is to license cellular immunotherapy assets for solid cancers developed in China which are derisked to some degree with clinical data,” Oldham said.

“We bring those assets into an Australian legal entity and move manufacturing out of China into Australia because you can’t manufacture human cells in China for Western markets.

“We’re conducting the first clinical trial under a US Investigational New Drug (IND) application in Australia, which is significant for our Chinese partners, as it demonstrates that their work in China translates effectively to Western patients.”

Oldham said they’ve also removed many of the transaction costs for big pharma if they were to do similar deals, making their East-West projects more attractive.

“They know they’d have to go into China, do the translation of the work, due diligence, move manufacturing and a whole bunch of work which we are eliminating,” he said.

“Just as importantly, in the current geopolitical environment the intellectual property is sitting with a Western company that should be more immune to the effects of the Biosecure Act and US-China trade wars.”

AdAlta has appointed Dr Kevin Lynch MD as consultant CMO and is working with specialist partners such as Cell Therapies and Dark Horse Consulting to bring further market leading expertise to the opportunity.

As US and China relations deteriorate better strategy looks

SYNBV co-managing director Amir Zalcenstein said the AdCella East to West strategy was appealing to the fund, which invests in therapeutic development.

The fund is putting in $500,000 now and might add $1.5m later to own up to 25% of AdCella (through convertible shares).

They also have the option to put in more money (up to $5.5m) when AdCella raises its next big round of funding, but AdAlta will still own most of AdCella.

“We’ve been very impressed with the quality of diligence, and it’s been a very long and arduous process,” Zalcenstein told Stockhead.

“We’re convinced that these are the three best projects that matched ours and AdCella’s criteria and the management team can execute.”

Zalcenstein said the East to West strategy was highly attractive in the current geopolitical environment.

“The strategy itself has a unique element to it which is the worse things get in terms of geopolitics the better it looks,” he said.

“The more there’s a breakdown of trade relations between the US and China, there will be an increased desperation by Chinese biotech companies to find avenues to bring their therapies to the west.

“You don’t necessarily get rich selling medicines in China even if you’re Chinese, but you can certainly do that if you have a blockbuster in the west.”

Zalcenstein said establishing a conduit where you have a company like AdCella licencing drugs out of China then bringing them to Australia as a mid-way point to other Western jurisdictions makes sense.

Other US venture firms and big pharma companies also considering ways of getting biotech assets out of China for Western development.

“I’m not saying more trouble equals less risk, but I am saying more trouble equals more attractiveness to this strategy and that was a factor for us,” Zalcenstein said.

At Stockhead, we tell it like it is. While AdAlta is a Stockhead advertiser, the company did not sponsor this article.