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Cynata Therapeutics (ASX:CYP): Things are looking up in 2023

May 1, 2023

Cynata, Cynata Therapeutics, CYP


Cynata Therapeutics (ASX:CYP)

We spoke with Cynata Therapeutics (ASX:CYP) CEO Ross Macdonald about the company’s powerful stem cells platform, the great data in Graft-versus-Host Disease and the emerging opportunity in diabetic foot ulcers. We also spoke about why 2022 was such a bad year for Life Science sector investors, but why 2023 can be better.

Full transcription below.

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Stuart: Hello, and welcome to “Stocks Down Under.” My name is Stuart Roberts, and I’m one of the co-founders of our service. And joining me today on the afternoon of Thursday the 27th of April, 2023 is Dr. Ross MacDonald, who’s the CEO of Cynata Therapeutics (ASX: CYP). Ross, welcome back. It’s been too long.

Ross: It has been, Stuart. Nice to see you again and have a chat.

Stuart: And I’ll tell you what’s gratifying about catching up with you. For a while there, Graft-versus-host disease has been the big company maker for you. You’ve now got some outstanding albeit early-stage data on the effectiveness of your stem cells in GvHD. And you’re now in a position to move that into mid-stage clinicals. And we’re on track to have the first decent therapy for GvHD in a long time.

Ross: Exactly, Stuart. The Phase 1 clinical study met all safety and efficacy endpoints and broke new ground as being the first iPSC-derived cell therapy that had completed a clinical study front page article in “Nature Medicine” magazine. You know, very, very exciting foundation for us to contemplate the upcoming Phase 2 trial, which will be in 60 patients with acute GvHD, 30 placebo, 30 on product. So, you know, we’re getting now at the sharp end of the stick when it comes to demonstrating efficacy and ultimately bringing a product to market.

Stuart: Right. Graft-versus-host disease, a patient’s getting a stem cell transplant. If there’s not a good genetic mismatch, that leaves the patient in a whole lot of pain and potentially it can be lethal. The key is 100-day survival. And in your earlier study, you did reasonably well in terms of response and survival, right?

Ross: Exactly. You know, in that study we saw complete response that’s resolution of all the symptoms in over half of the patients. And an overall response that’s an improvement in the clinical grade of GvHD in nearly 90% of the patients. But looking out, that’s at day 100. What was really exciting was when we looked at the two-year survival data in these patients, and there we saw nearly two-thirds of them were still alive after two years compared to…

Stuart: That is extraordinary. Give yourself a medal for that one.

Ross: Thank you. Well, you know, typically the standard of care is less than 20%. So, the outlook for these patients is very, very poor, typically. But here we are seeing, you know, as I said, nearly two-thirds, 60% of them still alive after the 2-year follow-up. So, we were really excited about that. Look, it’s great to get patients out of a healthcare crisis, but it’s that long-term survival that really shows that you’ve got a robust and durable response to the treatment.

Stuart: And no surprises. For those of us who are true believers in the power of stem cells and particularly the iPSC that you’ve been pioneering, no surprises as to why. These cells have exquisite anti-inflammatory properties. And that’s been proved time and again across multiple clinical indications. You’ve got some of the more sharpest-edge data in a field that needs a bit of progress.

Ross: Yeah. Well, look, sometimes MSCs are described not as mesenchymal stem cells, but as medicine secreting cells. They’re little bags of goodness that modulate the immune system when it needs to be brought under control where the inflammatory response, that is the immune system overreacts, as is the case in GvHD, and in other areas where you want to try and redirect it and in tissue regeneration, for example, in our diabetic foot ulcer trial.

Stuart: Right. And so, we’re pretty much set to go with the right funding to go forward into Phase 2. And what I’m really gratified about is that… Oh, not so much gratified for the patients, but gratified for you is there’s really not been much that’s happened in the GvHD field. There’s a drug called Jakafi out there which is used in the area, but nowhere near the survival data you think you can get with your cells.

Ross: Yeah. It’s an interesting space. You know, often diseases, and GvHD is one, really didn’t receive a lot of attention from the pharmaceutical industry primarily because the commercial opportunity is not that high for companies whose R&D spend is vast. Whereas for companies like us, these sort of opportunities are very, very attractive because, of course, we’ve got, you know, very low entry price to getting a product into the market.

We do intend, however, to take this to market through a partnership, as opposed to taking it there ourselves because we do have a broad portfolio. We wanna ensure that we get our shareholders the most shots on goal, the best bang for their buck. And we feel that partnering this technology will…or this product will be the best way to ensure a return on shareholder funds.

Stuart: Right. What’s relatively new to me is the data you’ve got in diabetic foot ulcers. Now, there’s a heck of a lot of diabetes out there, unfortunately. And as that condition progresses, in many cases, it turns into these terrible foot ulcers that can lead in some cases to amputations. Talk to us about how potentially you’ve got something that could work.

Ross: Yeah. Diabetic foot ulcers are a real medical challenge. Patients, as you point out, ultimately advance to a point where the wound is so severe and infected that they end up with gangrene, which results ultimately in amputation, typically just below the knee if we’re talking about ulcers on the feet. And very little has changed in the treatment of diabetic foot ulcers in 100 years. Yes. There’s been advances in wound dressing technology, biodegradable polymers that absorb into the tissue and enhance healing. But really, these just represent, you know, bandages for want of a better term. And I’m not trying to disparage companies that are working serious.

Stuart: You’ve got this modifying and no one’s got [inaudible 00:06:22].

Ross: That’s right. Exactly. So, this trial, as you know, is currently underway. It’s intending to enroll 30 patients. We took a recent look-see because it’s an open-label trial. We are aware of the data, and in the first six patients that had completed the evaluation and where we’d undertaken the quantitative analysis of the wound size. And it was very clear that there was a distinction between the three patients who’d received just standard of care, that’s just the best available treatment, and the three that were on our product. And we announced some of that data a couple of weeks ago. And, you know, certainly very, very promising. I hasten to add, as you well know, Stuart, you know, these are small numbers and equal 6, and we are looking at a total of 30. But it is great to see that that sort of direction has started with the first six patients.

Stuart: Absolutely.

Ross: So, really, really exciting.

Stuart: I suspect the placebo effect is not really a factor. When one has diabetic foot ulcers there are other comorbidities involved. It’s kind of hard to put mind over matter to repair these wounds. So, something is probably going on.

Ross: Yeah. Look, there is a bit of placebo effect in wounds. You know, the patients when they’re in a trial, tend to be more interested in their outcome. And they’re complex patients, they’re obese, they’re diabetic, they have poor diet. They usually, you know, few too many of the Winfield Reds and the Coca-Cola and the Pizza Hut. And, you know, some suddenly when they’re in a trial, they do tend to take a bit more care of their health. So, these are, you know, factors that we have to consider, of course. And that’s why you have a randomized placebo-controlled study.

Stuart: Right. Right. Now, so all the good stuff that I’ve come to note from Cynata is still in place. You’ve got beautiful economics in terms of manufacturing pretty high-quality stem cells. And you’ve had the best part of a decade to optimize pretty good manufacturing techniques for, you know, producing heck of a lot of cells for not much cost, thanks to the joys of iPSC. You’ve got a great pipeline, and you’ve got products that are progressing through in the clinic. The one thing that hasn’t gone your way, and it hasn’t gone the way for any of us who were true believers in the life science sector is last year was a true [inaudible 00:08:40] in terms of the market. The equity market for life sciences stocks generally. Unfortunately, your stock’s been no exception to that.

Ross: That’s correct, Stuart. And look, you know, sentiment as we know, plays a big role. Yes. You know, we are very conscious of the fact that shareholders want to see results, and we do our utmost to generate data as quickly as possible. But at the end of the day, when you’re conducting clinical trials, it’s not the company itself that’s managing the patients and treating the patients, and enrolling the patients. These patients have to be enrolled by hospitals and by doctors that are engaged by us to conduct the clinical study. So, you know, some of the factors that have impacted upon getting data quickly or as quickly as we would’ve liked, obviously being the healthcare crisis that besets not only the system in Australia but pretty much in all developed countries at the moment.

Stuart: That’s right.

Ross: So, yeah. You know, we are a victim of that. I won’t blame all of our share price decline on just the overall market. But I mean, you look at the U.S., for instance, and stocks that were two years ago trading at evaluations of several billion dollars, you know, less than 1/10th of that today. And we are the same. You know, we bid $2 a share back in 2019, and here we are, you know, some 20 cents at the moment.

Stuart: Right. Now, you know, me, I’m one of the great optimists for this sector. I think we’ve reached the low point for your stock and for the whole sector in terms of the market settlement moving away. And part of the reason investors should come back and take a look is you haven’t been taking a break since COVID started. You’ve been working as hard as you can to move the products forward and into the clinic. This company, in many ways, is much more mature just in terms of our understanding of what these cells are good for and the way to move more quickly than you have through the clinic.

Ross: Yeah. As you know, the enormous data package behind the utility of MSCs continues to grow. And so, it’s very clear that these have very powerful biologies in potential medical applications and will ultimately be a new paradigm in medicine. But, you know, ultimately you’ve still got to get the data, you’ve still got to satisfy regulatory authorities. But what we saw a couple of years ago was very clear guidance from the FDA on what they wanted to see in relation to consistency and potency. Two issues that our manufacturing platform address as one and a fact that is now being recognized by many other cell therapy companies as well, who are pursuing a similar manufacturing strategy for their own particular type of cell, not in this business, Stuart.

Stuart: You and your colleagues were well ahead of the curve in this one.

Ross: And we remain the leading company worldwide. We are the only company that’s in late-stage clinicals Phase 3 in osteoarthritis, using an iPSC-derived cell therapy of any kind. Yes. So, you know, there’s many other companies that are now blazing a trail behind us but we are ahead of the pack.

Stuart: Let’s talk about osteoarthritis because some people might even be surprised to learn that you’re really at Phase 3. This was a huge free kick that you got, thanks to a relationship you have with the laboratory at the University of Sydney, where they’ve taken a view that you are one of the potential game changers in osteoarthritis. Talk to us about the study you’re working on there.

Ross: Well, the notion of using stem cells in osteoarthritis is not new. But what has frustrated many of the observers and participants in that field is that the clinical studies to demonstrate efficacy and safety have been very small in numbers, patient numbers. So, you know, the statistical power is not great, and the endpoints are not really robust. So, the group at the University of Sydney set about designing a trial that really once and for all, tested the hypothesis of whether MSCs are useful in treating OA and in modifying the outcome of the disease as opposed to just masking the symptoms. You can mask symptoms with paracetamol, with Panadol.

Stuart: And look, Voltaren gel is still a big thing because of…

Ross: Exactly.

Stuart: …arthritis. Yeah.

Ross: Yeah. But it’s like writing a check. Eventually, you’re gonna have to pay for it. And that’s what happens with pain, just addressing the pain in no way, it does nothing for the outcome of the disease. So, this study then was funded by NHMRC because it was such a powerful study in, you know, around 440 patients. And realizing that’s not the…

Stuart: [inaudible 00:13:15] is not in Australia. That’s our equivalent of the NIH, basically. The National Medical Research Council, the Australian taxpayers’ written check on a Phase 3 study.

Ross: Yep. Which, you know, if we had funded the study, would’ve been substantially more expensive. So, recognizing that we had, you know, the best cells in town, we initiated discussions with the NIH and ended up providing the cells as part of that trial. So, we get all the data. And if it’s a successful study, of course, it’ll be, you know, just completely a transformative for Cynata and transformative for patients with OA. Where, you know, potentially they can get another few good years out of the joint before they have to go for a joint replacement, or, you know, no longer really worry about it because they’re not as mobile as they were anyway. But, you know, really, if we are able to demonstrate that this modifies the outcome in these patients, it will be a huge breakthrough.

Stuart: Right. And how far along with the journey are we in terms of recruitment for that study?

Ross: Well, we’re over halfway there, and in terms of patient numbers. Bear in mind that it’s a University of Sydney study. It’s not our study. They’re the sponsor, so really the updates are up to them. We can’t sort of jump in and start telling the market, oh, we’re at this level and that level. But, you know, we have to be mindful of the fact that it is the university study. Yes, we get the data but, you know, they control it.

Stuart: That’s fair. And what are the endpoints that we’re looking for here?

Ross: The endpoints are several. The most important one is assessing the degree of joint degeneration, and that’s using MRI, which is a very quantitative measure of the degradation of the joint. So, instead of relying on patient-centric measures, like how do you feel today? Were you more mobile? How’s your pain? All of which are important, and they are part of the endpoints of this study, but they’re very subjective. Whereas an objective measure of how badly the joint has advanced or not, as the case may be if the treatment’s successful, is really what will convince regulators that this is a game-changing treatment.

Stuart: Right. So, we’ve got hard endpoints. We’ve got Sydney doing fairly well in terms of recruiting patients. Admittedly, it’s just an Australian study but you’ve got to imagine that pharma companies from here to California and all the way around are gonna be paying very close attention once the data is available.

Ross: Yeah. And obviously, we’ve initiated those discussions so that we ensure that they’re ready if the results are successful, and we’re quite happy to do a deal before then too, as long as the terms are right. You know, there’s another point that I’m sure shareholders would appreciate, that we’re not gonna do up deal just because a deal is offered to us. We wanna make sure that whatever deal we do, represents true value of the asset and a real validation of the technology in the eyes of our shareholders.

Stuart: Right, right. Well, Ross, I don’t know what song to play for you at the moment, whether it’s Bon Jovi, whoa, we’re halfway there “Livin’ on a Prayer.” Or it’s Elton John, “I’m Still Standing,” but either way, they both apply to you. You’ve been a true believer, not just in your company, but in this sector as a whole. And Cynata is still in there fighting in spite of some difficult market conditions, namely COVID and an equity market that was against you. Feels to me like better days were ahead.

Ross: I think so. You know, you really look at a rich portfolio as we have, and clinical-stage assets. You know, we are beyond curing rats and mice. We’re at the stage now where we’re actually, you know, as I mentioned before, at the sharp end, where we are treating actual patients. And in the case of GvHD, have very, very good data.

Stuart: Right. Now, we’ll conclude with this. For investors who don’t know you, tell us a bit about your background. You and I have known each other for the best part of 10 years. I’ve seen you with a number of small companies before you joined Cynata. If you go way back in time, you were part of the dream team that helped Ed Tweddell build Faulding into a global powerhouse.

Ross: Yes. And I was involved then in the acquisition of Faulding by Mayne at the time and then moved to California where I joined a biopharma company that we ultimately grew to a very large dermatology company that was acquired in several rounds of acquisition, first by Stiefel and then by GSK. So, yeah. My background’s mostly been business development and licensing corporate strategy in mid-cap and small-cap pharma.

Stuart: Right. Well, Ross MacDonald, good luck on the next stage of the journey. Thanks for being a friend of “Stocks Down Under” with Pitt Street Research. And for investors that don’t know, so now go dig up some of the old research we did at Pitt Street Research because the story was compelling then at a somewhat high price. It’s even more compelling now.

Ross: It’s all on our website.

Stuart: Stay well, Ross. See you soon.