Special Report

TICKERS: CYP

Delivering the Triple Whammy that Makes Stem Cell Therapies Commercially Viable: Cynata Therapeutics' Ross Macdonald

Ross Macdonald Stem cell therapies have been slowed by high production costs, batch-to-batch variability and limited seed material. Ross Macdonald, CEO of Cynata Therapeutics, tells The Life Sciences Report how his company's innovative manufacturing methods can generate robust, consistent and inexpensive stem cells, and how this technology is likely to accelerate the commercialization of stem cell therapies worldwide.

Management Q&A: View From the Top

The Life Sciences Report: Why do you, at Cynata Therapeutics Ltd. (CYP:ASX), believe a new way of developing mesenchymal stem cells (MSCs) from induced pluripotent stem cells (iPSCs) is needed?

Ross Macdonald: The current methods of manufacturing stem cell-based therapeutic products are likely to constrain their commercialization, largely because of the limitation imposed by the scarcity of stem cells from biologic sources.

Currently, mesenchymal stem cells—the therapeutic stem cell investigated most vigorously at the moment—are extracted from primary tissue, including bone marrow, adipose (fat) tissue, placentas or other donor-derived tissues. They're very, very rare. For example, a typical bone marrow aspirate contains around 20 thousand (20K) MSCs, yet one individual dose per patient often contains 150–250 million (150–250M) cells. Expanding cells from 20K to 250M is a huge challenge.

"We've come along, like Henry Ford, and developed a process that industrializes the manufacture of MSCs so they may become widespread for therapeutic use."

If stem cells reproduced themselves faultlessly forever, you could take a donation, expand it in the lab and make all the doses that are needed. But, unfortunately, stem cells are isolated from primary tissues and have a very limited expansion capability. If they are expanded too much, they become less potent. Consequently, many cells may be created, but they may not work as well as they should.

That's the problem the industry faces today. In fact, that phenomenon is now being borne out, we and many other industry commentators believe, in the somewhat disappointing results from late-stage clinical studies in which many doses have been made from a relatively small number of donations.

Getting more donors would seem to be the solution, but that has two major problems. One is that bone marrow donations pose a risk to the donor. Donating bone marrow is not like donating blood; it involves a very painful surgical procedure. The other is that each individual donor is different, so the products derived from those donors also are different. The regulatory agencies, however, expect the manufacturer to prove there is no variability with a product, regardless the starting material.

These limitations of donor-derived stem cells so constrain the industry that it could possibly not escape the type of bespoke, cottage-industry niche that constrained the motorcar industry more than 100 years ago. But we've come along, like Henry Ford, and developed a process that industrializes the manufacture of MSCs so they may become widespread for therapeutic use.

TLSR: Why do you believe Cynata is the company to solve MSC manufacturing challenges?

RM: We inlicensed some very exciting technology from the University of Wisconsin that is transforming the manufacture of stem cells. The University of Wisconsin is well known as the leading academic body, worldwide, for stem cell research and development. One of our inventors, Professor James Thomson, was the first scientist to identify and isolate embryonic stem cells (ESCs). That paved the way for the ongoing stem cell revolution. Cynata has exclusive rights to that manufacturing technology. We have not seen competing technology that comes close to the transformative power of our Cymerus technology.

TLSR: How does the Cymerus manufacturing process differ from other iPSC manufacturing processes?

RM: Cymerus technology combines iPSCs with mesenchymoangioblasts (MCAs), a recently identified precursor cell. The MCAs are an extremely important class of early clonal mesoendodermal precursor cells that evolve into both MSCs and endothelial cells, which are important in the formation of blood vessels. They also have the potential to differentiate into pericytes (contractile cells that wrap around the endothelial cells of capillaries and venules) and smooth muscle cells.

"We have not seen competing technology that comes close to the transformative power of our Cymerus technology."

Additionally, pluripotent stem cells provide us with limitless starting material, derived from essentially any tissue in the body—in our case, blood cells. We expect to source all the cells we will ever need from a single donor, thus eliminating product variability. This limitless starting material is the key to the Cymerus technology.

Induced pluripotent stem cells are a laboratory creation. They are, essentially, cells reprogrammed to return to the embryonic state, and then to become other types of cells. Our genomes contain the memory of our origins as an embryo. That genomic background doesn't go away just because the cells differentiate into skin, bone, heart tissue, renal tissue and so on. The memory exists. The process of iPSC derivation coaxes a cell back to that pluripotent state.

The process that led to iPSC derivation was the subject of a Nobel Prize in 2012, awarded to Professor Shinya Yamanaka in Japan. Professor Thomson at the University of Wisconsin published on iPSC generation at around the same time, but Yamanaka was slightly ahead, so he was awarded the Nobel.

iPSCs can be used to create the numbers required for widespread therapeutic applications to millions of people worldwide who suffer from stroke, or millions of patients worldwide who suffer from osteoarthritis, for example. The therapeutic potential of MSCs is very exciting for both these conditions.

In contrast, the industry's current MSC manufacturing methods, in which stem cells are extracted from primary tissues, severely limits the number of patients who can be treated.

TLSR: What are the benefits of your approach?

RM: Lower cost and manufacturability are huge advantages. The commercial success of any pharmaceutical product, from pills to recombinant proteins and cell-based therapeutics, depends on three simple elements. First, the product must be effective. Second, it must be safe. Third, it must be able to be manufactured economically and consistently.

The advantage of our technology is that it delivers that final piece of that triple whammy jigsaw puzzle: the ability to manufacture the product economically, consistently and robustly.

A product that can't be manufactured isn't a commercial product; it's an academic curiosity. Many interesting molecules sit on the shelf in pharmaceutical companies waiting for solutions to the manufacturing challenge. This is the advantage of the Cymerus technology: It provides for the commercial-scale manufacture of stem cells.

TLSR: You mentioned manufacturing cost is a huge advantage. Can you quantify that cost?

RM: As a rule, the process of manufacturing cell-based therapeutics is much more expensive and has lower gross margins than for a typical small molecule drug. Nonetheless, we expect our method will be less expensive than the current MSC manufacturing process by orders of magnitude.

We feel our manufacturing process will be relatively straightforward, but there will be challenges, such as reducing the space and human involvement required for manufacturing MSC-based medicines.

TLSR: How far along in development are you?

RM: Our preclinical safety program already is underway. We have completed one proof-of-concept study in a condition called critical limb ischemia. We have another proof-of-concept study underway in graft-versus-host disease (GvHD). We expect our Phase 1 clinical trial in GvHD to commence in 2016.

"The advantage of our technology is that it delivers the ability to manufacture the product economically, consistently and robustly."

Much of the hard work already has been done by the other MSC companies like Athersys Inc. (ATHX:NASDAQ) and Mesoblast Ltd (MSB: ASX), which have identified the potential utility of MSCs. Therefore, we don't have that burden of proof. We are just adding a method of manufacture to that body of work. As an analogy, they explored the forest, and we are bringing the road-building equipment.

TLSR: Why did you choose GvHD for the Phase 1 trial?

RM: GvHD is a particularly devastating condition, so the burden of starting a clinical study is relatively low compared to a condition that is not life threatening. We also know from the literature that GvHD responds very well to stem cell therapy. If our cells work, we'll see efficacy in this indication.

By choosing GvHD, the trials can be very short. Unlike other clinical indications, GvHD responds rapidly to treatment, so the study endpoints can be achieved very quickly.

The primary endpoint of a Phase 1 trial, of course, will be safety. But we also expect to see secondary endpoints of efficacy. That lets us complete the study to the satisfaction of our shareholders relatively soon, which also is an important consideration.

Commercially, GvHD isn't particularly attractive because, fortunately, it's quite rare. From a clinical proof-of-concept perspective, however, it's an extremely useful model.

TLSR: Stem cells therapies have the potential for several other indications as well. Do you plan to pursue them?

RM: We have collaborations underway with leading centers worldwide in cardiovascular disease and in lung fibrosis. We also expect to announce a collaboration in cancer in the near future.

MSCs home in on tumor sites, making this a new and potentially very useful treatment for solid tumors. MSCs localize quite preferentially in solid tumors. They themselves are not therapeutic, but they can be engineered to carry a molecule or other toxic element that destroys the tumor. This is an area we're investigating very aggressively at the moment, and we hope to have an announcement shortly.

[Editor's Note: Following publication of this story on Oct. 14, Cynata announced a collaboration with Massachusetts General Hospital/Harvard Medical School to develop modified MSCs to treat cancer using its Cymerus platform technology. Ross Macdonald's commentary on the collaboration follows.

"This exciting new collaboration with MGH/Harvard, one of the most prestigious and important medical centers in the world, opens up an entirely new dimension in the commercial opportunity for Cynata’s unique Cymerus technology. It also underscores our strategy to ensure that our Cymerus MSCs are being investigated by leading researchers worldwide in a range of economically and medically important diseases.

"The potential use of cells to treat cancer is one of the most intensely researched areas of medicine today and MSCs may prove to be especially useful based on their unique properties. This particularly applies to solid tumors, the most prevalent type of cancer. The scientist leading the collaboration is Dr Khalid Shah; please take a look at this article on one aspect of his research.

"Our recent successful capital raising provided funds to, among other things, investigate this highly promising new application for our Cymerus MSC product, and we look forward to updating our supporters with progress."]

TLSR: Are there any particular regulatory hurdles?

RM: This is a very new approach, of course. That's why we're the leaders in using iPSCs as the starting material. There is certainly a higher burden on proof of safety for our cells than there may have been for earlier therapeutics.

"We expect our Phase 1 clinical trial in GvHD to commence in 2016."

We have approached this very cautiously and methodically. From our interactions with both European and the U.S. regulators, we're quite confident that we have a very robust safety plan. So there are no particular barriers.

TLSR: You have the technology. Do you also have the management expertise to make it successful?

RM: We're a very tight management team. My own background in the pharmaceutical industry for the past 25 years has focused on business development, licensing, and mergers and acquisitions. I've successfully built and exited a range of pharma companies worldwide—in Australia, the U.S. and Europe. I've also been involved in joint venture companies in Japan. Our business strategy is very much partner driven, so my experience is very relevant to that.

Kilian Kelly, Ph.D., vice president of product development, has experience particularly relevant to the development of stem cell-based therapeutics. He previously was the head of regulatory and clinical at Mesoblast, the leading stem cell company worldwide in terms of market capitalization, and one of the more advanced in product development in the stem cell field. Dr. Kelly has immense experience in the development of stem cell-based therapeutics.

We have close associations with eminent stem cell scientist Professor Igor Slukvin, one of the inventors of our technology. Our product is manufactured by Waisman Biomanufacturing at its GMP-compliant facility in Madison, Wisconsin. Waisman is a leader in translational manufacture of cell-based therapeutics. We also have a number of advisers who assist us, rounding out a very solid, experienced team.

TLSR: Why is the time right for this approach in manufacturing stem cells?

RM: We're on the crest of the revolutionary wave of stem cell-based therapeutics. That wave will crash, frankly, if we don't address the manufacturing issues.

Those issues are twofold. There are the practical constraints of getting enough cells, followed by reduced efficacy as those cells are expanded. Those cells are alive and may look fine, but may not work well.

The late-stage clinical studies underway at the moment may fail because the cells are suboptimal. If they fail, the world will turn its back on stem cell-based medicines. That would be a disaster. If you're using suboptimal material, you risk throwing the baby out with the bath water, as the saying goes.

TLSR: Wouldn't researchers know the material was suboptimal?

RM: That's the elephant in the room. The mechanism of action of MSCs is still very unclear. If we don't know the mechanism of action, we can't objectively measure stem cells' effectiveness before injecting them into a patient.

All sorts of surrogate markers are being proposed to determine potency, but their correlations with clinical outcomes are still unknown. Assays may indicate that particular stem cells are quite potent in the test tube, yet they still may not work in the patient.

There was a published analysis of the failure of a stem cell-based product some years ago called Prochymal (remestemcel-L, human mesenchymal stem cells for intravenous infusion). The analysis proposed that these cells had been expanded too far and were no longer effective. Osiris Therapeutics Inc. (OSIR:NASDAQ), Prochymal's developer, would have argued that the cells passed their tests, but the scientists who published this paper said the company didn't test the right markers. No one quite knows what, exactly, to test to ensure that assays indicate clinical outcomes.

"We have collaborations underway with leading centers worldwide in cardiovascular disease and in lung fibrosis."

We're subject to exactly the same issue, of course. We don't have any secret formula for the success of our stem cells, but we can say that our stem cells are more robust and consistent and less expensive. That makes them better in a different context.

Clinical trials will be the ultimate test of the potency of our cells. We're quite confident that the manufacturing process yields a very potent, effective product.

TLSR: You mentioned clinical trials that will begin in 2016. Are there other milestones that you would like to mention?

RM: We hope to make an announcement regarding the cancer therapy application of our cells. This is an exciting area that we must inform the market about fairly soon.

We have a partner-driven business strategy. Rather than building a fully integrated biotech company and manufacturing millions of stem cells for hundreds of clients worldwide, we have a philosophy of outlicensing our technology relatively early to provide the manufacturing know-how to companies in the field. We anticipate making some partnering announcements in the near future. That obviously is a very important step in our evolution, as it provides external validation to investors.

TLSR: Shall we talk about the financial position of the company?

RM: We recently raised AU$5M in a placement to U.S. investors, and have about two years of cash at the current burn rate. We're currently ASX-listed, but the company is considering alternatives, such as a possible dual listing in another capital market, perhaps on the NASDAQ.

TLSR: Is there anything else you'd like investors to know about Cynata?

RM: It's important to put our risk profile into context. The cookie cutter approach to assessing risk in the biotech industry is that preclinical companies have high risk that is only reduced when they've completed Phase 2 trials showing efficacy in humans. Many drugs fail in Phase 2. Investors, therefore, are wary of early-stage companies that claim to have the best technology for a particular disease.

Cynata doesn't follow that risk model. We are following on other companies that have demonstrated the effectiveness of MSCs. We're developing a manufacturing process that enables the commercialization of those therapeutic products.

We're not trying to reinvent the wheel or find new applications for MSCs. We've just solved a problem that prevents those breakthroughs from being commercialized. That derisks investment in Cynata quite considerably.

The other important point is that many stem cell companies have skyrocketed in value once they've undertaken a commercial partnership. We have yet to ink a collaborative deal, but we hope to announce one fairly soon. There's a lot of upside potential in our stock.

TLSR: Thank you very much.

Ross Macdonald, Ph.D., managing director and CEO of Cynata Therapeutics, has more than 20 years' experience and a track record of success in pharmaceutical and biotechnology businesses. His career history includes positions as chief executive officer of Hatchtech Pty Ltd, vice president of business development for Sinclair Pharmaceuticals Ltd., a UK-based specialty pharmaceuticals company, vice president of business development for Connetics Corp. of Palo Alto, California, and vice president, corporate development for Stiefel Laboratories Inc., the largest independent dermatology company in the world, acquired by GlaxoSmithKline in 2009. Dr. Macdonald has also served as vice president of research and development of F H Faulding & Co. Ltd. and CEO of Living Cell Technologies Ltd. His other positions have included non-executive director roles at iSonea Ltd., Telesso Technologies Ltd., Hatchtech Pty Ltd. and Relevare Pharmaceuticals Ltd. Dr. Macdonald currently serves as a member of the Investment Committee of UniSeed Management Pty Ltd. Dr. Macdonald holds a Ph.D. in biochemistry from Monash University, a graduate diploma in business administration from Swinburne University, and is a member of the Licensing Executives Society.

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DISCLOSURE:
1) Gail Dutton conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report and provides services to Streetwise Reports as an independent contractor. She owns, or her family owns, shares of the company mentioned in this interview: None.
2) Cynata Therapeutics Inc. is a sponsor of Streetwise Reports.
3) Ross Macdonald had final approval of the content and is wholly responsible for the validity of the statements. Opinions expressed are the opinions of Ross Macdonald and not of Streetwise Reports or its officers.
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