1AD stock carries a dramatically undervalued profile against its blue-sky upside target
Emerging Growth Report on AdAlta (ASX:1AD)
Over time, medicine has evolved in waves to treat unmet medical needs. Think back to the time before the advent of penicillin when it was actually common to die from an infection. Once penicillin was discovered it ushered in a new wave of discovery that created a new universe of different antibiotics to treat all different types of infections. The next wave was arguably the discovery of statins to prevent or treat heart attacks and strokes. The current wave of discovery is centralized around the idea of using monoclonal antibodies to surgically target different diseases. Despite the explosion of monoclonal antibody therapies they don’t treat all maladies and that is where scientists are working on the cutting edge of discovery to develop a next-generation platform to treat chronic diseases using CAR-T cells.
The largest unmet medical needs are characterized by their debilitating nature. Topping the list are fibrotic conditions and of course cancer. For the better part of 2 decades little progress has been made in this arena towards developing disease modifying treatments to treat these debilitating chronic diseases. At the intersection of oncology and fibrosis is a company harnessing the best attributes of monoclonal antibodies and CAR-T technology to potential create the next wave in drug discovery.
Australian emerging growth opportunity AdAlta (ASX:1AD) may hold the keys to the treatment of a number of chronic diseases that include lung, kidney, and eye fibrosis with a product, AD-214, already in the clinic and Phase II ready. AD-214 is approaching potential licensing transactions where upfront payments could exceed $45 million and total milestones could exceed $1 billion.
The company also has very strong proof of concept in its immuno-oncology program and is partnered with Carina Biotech, another technology partner in the space. Their i-body platform technology has the ability to enhance most of the existing CAR-T technology out there targeting cancer. These i-CAR-T assets could soon be ripe for early licensing deals in a space that has a median value of $730 million along with a typical upfront $25 million license.
Not only does the company have multiple therapeutics, but it also has a diagnostic partnership with GE Healthcare, which if developed successfully could quickly bring in significant licensing revenue to help offset the dreaded dilution that most biotech’s face.
When evaluating a clinical stage biotech, certain elements need to be in harmony in order to achieve the major value inflection point investors look for in this sector. The team, the clinically and commercially proven technology, and the money to develop the therapeutics are those key elements that AdAlta has in place. The market cap is a paltry 8.8 million AUD despite multi-billion-dollar opportunities in fibrosis that have already demonstrated their promise in the clinic and four other active pipeline assets. Each indication at this stage of clinical trials is typically worth tens of millions, but the whole biotech sector is under pressure and has had a spillover effect on viable companies like AdAlta and therein lies the opportunity to get an extremely discounted stock.
AdAlta Potentially Ushers in a New Framework for Advanced Therapeutics
AdAlta is a clinical stage, drug discovery biotech with five programs in two therapy areas under development. The company is focused on expanding its pipeline of next-generation therapeutics. It stands out from the pack of thousands of other biotechnology firms by delivering patient outcomes in its clinical trials that are superior to the existing standard of care using its i-body platform technology.
According to AdAlta’s website, an i-body is a human protein that belongs to a class of next generation antibodies. A propriety innovation, AdAlta’s bioengineering team integrated a dual-looping structure atop the scaffold of a human protein. This unique construction – a hallmark attribute of the antibodies generated by the shark’s immune system in response to biological invaders – embodies the potential catalyst that may revolutionize the biotech paradigm.
Primarily, shark antibodies feature a remarkable reach that empowers the accessibility and specificity one-two punch involved in attacking foreign biological agents. Based on a review from The Scripps Research Institute, human antibodies feature six “complementarity determining regions” – or highly variable loops at the ends of the antibody framework – that recognize foreign antigens.
In contrast, shark antibodies have fewer of these complementarity determining regions; only two at the ends of the underlying structure. However, science journalist Jason Socrates Bardi noted that “…sharks are able to generate a diversity of antibodies with only these two because one of their complementarity determining regions is very long and may adopt widely different conformations, thus changing the shape and characteristics of the binding site on the antibody.”
Stated differently, the exceptional length and diminutive profile of the shark antibody loop enables the lock-and-key transmission associated with antigens and antibody receptors. A real-world analogy may be helpful in articulating the tremendous potential underlining the i-body platform.
According to a report by Ringsafe, four in ten married men in the U.S. will likely lose their wedding band. In some cases, this critical piece of jewelry may end up falling down a bathroom sink drain. In such a dreadful circumstance, the human arm is simply too big to fit through a typical drain. Not only that, the arm may not be long enough to reach down to where the ring is located.
In situations where retrieval is impossible through standard manual means, a plumber will need to be called, who can use a special device to reach down and recover the jewelry. Of course, key to the reclamation is the device’s structural attribute – both its length and small size. So it is then with the i-body, which can bind with antigens that traditional monocloncal antibody platforms cannot.
However, it’s not just the accessibility component that separates the i-body from other classes of pharmaceuticals such as small molecules and antibodies. Pertinently, AdAlta states that the i-body binds with high affinity and specificity to a drug target, delivering the core therapeutic effect while reducing the off-target side effects commonly associated with small molecule drugs.
Moreover, small molecule drugs may not be appropriate for certain conditions. As the British Journal of Pharmacology noted in part:
The use of small molecule drugs to treat disorders that involve signaling deregulation has one serious drawback: small molecules continuously activate or inhibit signaling proteins, but lack sensitivity to fine regulatory influences. As a result, they are prone to ‘on-target’ side effects (unwanted effects produced by the drug acting on the intended therapeutic target) and compensatory changes, such as drug tolerance, resistance and, in some cases, sensitization.
Here, the i-body platform may impart radical progress in addressing disease through its affinity and specificity. By reducing both off-target and on-target side effects while simultaneously delivering “kill” signals to disease-causing pathogens, the i-body could catalyze an entirely new class of targeted therapeutics.
AD-214: The Lead Program Generating Substantial Industry Buzz
While all clinical-stage biotechs initially originate from a compelling hypothesis, at some point, even the most promising enterprises must convert theory into action. For AdAlta, said action arrives in the form of AD-214, the company’s lead clinical program.
To provide a quick background, AdAlta’s bioengineers initially identified an i-body that binds to the drug target CXCR4. This binding demonstrated anti-fibrotic effects in several models of fibrosis, according to the company’s website. At first, AdAlta labeled this i-body as AD-114. However, through further development, the biotech improved the earlier identified i-body by adding an Fc domain from a human antibody. This so-called Fc-fusion protein is a common tool to enhance the performance of highly targeted molecules like i-bodies by increasing the strength of binding, increasing the time taken for the human body to break down the drug (which makes it inactive) and improves manufacturing. Therefore, AdAlta’s fusion protein structure is a vastly improved iteration of AD-114, demonstrating enhanced activity and providing the potential application for a wider range of fibrotic diseases. Logically, the biotech labeled this redesign AD-214.
To go back to the lost ring analogy, if the i-body symbolizes the specially structured device a plumber uses to retrieve the accidentally dropped jewelry, AD-214 represents a custom strengthened device specifically configured to retrieve wedding bands stuck in challenging environments like sinks.
From AdAlta’s website, AD-214 carries significant anti-fibrotic effects in treating a type of fibrosis of the lung known as idiopathic pulmonary fibrosis (IPF). According to Global Data, the global IPF treatment market size was $4.3 billion in 2022. Further, analysts project that between 2019 through 2026, the segment will expand at a compound annual growth rate (CAGR) of 12.7%.
Considering that 1AD stock only carried a market capitalization of 8.80 million AUD (about $5.86 million) at the end of the first half of 2023, AdAlta offers astounding upside potential for willing market speculators.
To be sure, all aspirational biotech investments incur significant risk and 1AD stock is no different on that baseline disclosure. However, three main factors provide exceptional confidence in AdAlta’s mission through AD-214.
First, AD-214 underwent a Phase 1 safety and tolerability study. It was the first in human (FIH), multi-center, dose escalating study to evaluate the safety, tolerability, pharmacokinetics (PK), pharmacodynamics (PD) and immunogenicity of AD-214 when administered to healthy volunteers (HVs). Throughout the clinical evolution, AdAlta has been encouraged with the therapeutic platform raising no material safety concerns.
Second, while safety in humans and efficacy in animals is important, it is critical that AD-214 be given at intervals between doses that are convenient for patients (at least two weeks for IV infusions) … and AdAlta has now generated new data showing that the PK and PD observed at these convenient dose intervals is sufficient to inhibit a key biological process involved in fibrosis. This substantially reduces the risk for AdAlta and its partners in proceeding to Phase II clinical studies.
AdAlta recently received Human Research Ethics Committee (HREC) approval to extend the Phase 1 clinical study of AD-214. “The AD-214 Phase I extension study aims to confirm safety and pharmacokinetic and pharmacodynamic trends of multiple doses of AD-214 using higher doses than in the previous study,” AdAlta director of clinical and regulatory operations Darryn Bampton explained.
“This data is important to establish the safety and to better inform the target dosing schedule of AD-214 at the doses planned for Phase II studies,” Bampton added.
Third, AdAlta has generated international regulatory momentum. For example, earlier this year, The Market Herald reported that AdAlta was granted its second patent by the Japanese Patent Office for AD-214. The news represents a valuable addition to protecting the intellectual ownership integrity of the lead program while also providing hope for fibrosis patients.
“Japan is the third largest pharmaceutical market in the world and remains important to our partnering and commercialization strategy,” CEO and Managing Director Tim Oldham said.
Notably, the patent will expire on Jan. 9, 2036 and adds to the list of patents received by the company in the U.S., Europe, China, Singapore and Australia, per The Market Herald. While AdAlta remains an unknown to most investors outside biotech circles, the company is undeniably gaining substantive fundamental momentum. Therefore, the lowly per-share price tag (only 0.025 AUD at time of writing) may turn out to be a monumental opportunity.
The IPF indication utilizing AD-214 represents the most advanced drug in their pipeline. An interesting anecdote is the exact cause of IPF remains unknown because it’s idiopathic. For the moment no cure for IPF presently exists, according to the National Institutes of Health.
Based on the Standard of Care (SOC), approved treatments and certain procedures such as pulmonary rehabilitation may slow down the rate of lung damage and improve quality of life , but they are doing little to lower the median survivability rate of IPF which ranges from two to five years. This is why a much more viable solution is urgently needed. Therefore, both the financial and humanitarian potential for AD-214 rings loudly.
CAR T-Cell Therapy: The Ultimate Blue-Sky Opportunity for 1AD Stock
Just with targeting IPF and other fibrotic diseases, AdAlta may entice the retail investment community as the biotech firm generates rising attention, mostly from the encouraging progress of clinical trials. However, the true blue-sky opportunity centers on the i-body platform’s implications for CAR T-cell therapy.
Formally known as chimeric antigen receptor (CAR) T-cell therapy, this treatment involves the extraction of a cancer patient’s T-cells – a type of immune system cell – from the blood for eventual modification in the laboratory to insert the gene for a special receptor that binds to a specific protein [antigen] on the patient’s cancer cells. This special receptor is the CAR and it enables the T cells to find and attack cancerous cells previously invisible to them. According to the National Cancer Institute, large numbers of the CAR T-cells are then grown in the lab and given to the patient by infusion.
The result is a living drug that could potentially cure cancer in patients who have failed multiple other treatments with a single dose. Currently, CAR T-cell therapy is used to treat certain blood cancers, although studies are ongoing regarding applications for treating other types of cancer including solid tumors.
Now, to fully appreciate the radical upside potentiality of 1AD stock, investors must recognize the core baseline science involved. First, as mentioned earlier, the unique structure of the i-body enables the lock-and-key relationship between the foreign (cancerous) agent’s antigen and the countervailing immunoreceptor. Second, the small size of the i-body makes it possible to make more than one modification to the T cells and this is key to extending the same hope blood cancer patients now have to those with solid tumors.
Other applications for the i-body platform: going where antibodies cannot
Finally, the advantages that the i-body platform offers for CAR T-cell therapy apply to other treatment avenues. For example, AdAlta is currently conducting research on the opportunities associated with G-protein-coupled receptors (GPCRs). Representing the largest and most diverse group of membrane receptors in eukaryotes, according to Nature Journal, GPCRs are involved in an array of diseases, including diabetes and obesity. It’s also the most heavily investigated class of drug targets … but one that antibodies have not been able to address because these receptors are buried in cell membranes, or down the plug hole to return to our ring recovery analogy.
Compellingly, AdAlta has screened its i-body library against ten GPCR targets and identified i-bodies that bind to the target of interest in each instance, according to the company’s website. With the GPCR market alone likely to hit a valuation of $3.8 billion by 2028 – and the Asian market likely to print lucrative growth during the next several years – 1AD stock is aligned to an exceptional upside opportunity.
Market Risk and Reward for 1AD Stock
As with any endeavor involving the capital markets, prospective investors must conduct their due diligence. For the clinical-stage biotech subsegment, the main concern focuses on the progress (or lack thereof) within the developmental spectrum.
According to data from Nature Reviews, the likelihood of approval (LOA) for a therapeutic from Phase I for all indications came out to 9.6%. However, different indications have different magnitudes of LOA. For hematology, this metric stood at 26.1%. For oncology, the figure sat at 5.1%.
Also, it’s worth pointing out that per McKinsey & Company, compounds developed between 1996 and 2014 revealed that biologics had an overall success rate of 18%, twice that of the 9% success rate for small-molecule drugs.
Having disclosed key concerns for 1AD stock, it’s crucial to consider the benefits associated with well-researched exposure to AdAlta. Given the underlying i-body platform’s revolutionary potential to facilitate access to previously unreachable antigens, it’s difficult to make an apples-to-apples comparison to other biotech enterprises.
Further, while 1AD stock may have gotten off to a tough start this year, as the retail investor community learns about the blue-sky runway inherent in the i-body therapeutic’s wide applications, it shouldn’t take much for shares to blossom.
Further, data from Yahoo Finance notes that the average trading volume for 1AD stock stands at a surprisingly robust 175,594 shares. Typically, securities priced in the pennies tend to have very low share volume, usually a thousand shares or fewer. With 1AD’s comparatively stout volume, the figure adds confidence – and a sense of urgency – that the retail investor community is steadily catching on.
Lastly, AdAlta’s partnership streams help maximize its footprint. Through licensing AD-214, partnering with other biotech firms to develop the i-body platform – including inking a collaboration with GE Healthcare – and evaluating complementary technologies stemming from i-bodies, AdAlta stands poised to spark a new era of pharmaceutical innovation.
The Bottom Line: A Compelling Prospect in the Biotech Space
While the biotechnology arms race generated a vast range of advanced solutions, the global healthcare system still facilitates a massive total addressable market due to significant unmet needs. However, prior antibody drug developments – especially in the fibrotic diseases and oncology sectors – smashed into a wall because of issues with access – antibodies could not get to the targets needed or were simply too big to use.
However, AdAlta commands the potential to tear down this obstacle with its revolutionary i-body platform. Featuring a unique long-loop structure, the i-body can reach some of the most problematically positioned antigens and receptors. As well, its high affinity and specificity delivers highly targeted therapeutics to minimize the probability of adverse effects, and the i-body can be coupled with other technologies such as CAR-T cells to create truly unique products.
Naturally, wagering on groundbreaking innovators carries inherent risks. However, given the paradigm-shattering potential of the i-body platform, investors should at least consider conducting their due diligence on this remarkable biotech enterprise.
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