AdAlta’s original plan to cure disease by injecting people with shark parts drowned pretty quickly.

Chief Sam Cobb says ten years ago AdAlta (ASX:1AD) discovered a shark antibody which was perfect for an experimental treatment platform for human diseases.

“If you get a virus your body will produce antibodies to protect you… sharks have similar antibodies, but they are smaller,” she said.

But pharmaceutical companies were leery of the idea of using non-human antibodies, fearful that it could create an immune response.

So AdAlta went back to the drawing board and came up with the i-body drug delivery platform: a modified human protein with the long loop design from the shark that gives it the stability of small molecules, but also the bonding affinity of large ones.

It’s a design not present in human antibodies.

AdAlta’s first i-body drug, the AD-114, is designed to treat fibrosis of the lung (idiopathic pulmonary fibrosis) — a chronic, fatal disease.

”When we started out, with a platform technology, the long loop of the i-body was really the key thing. We thought that to go after the antibody we needed [a disease] that’s undruggable,” Ms Cobb said.

Pre-clinical trials in animals have shown AD-114 to anti-fibrotic and anti-inflammatory activity. Results from the third, seven-day, toxicology study, released on Tuesday, showed it was “well-tolerated” when delivered via injection under the skin or intravenously, with no deaths or bad side effects.

AD-114 was given ‘orphan’ status by the FDA in January.

An orphan drug is designed specifically to deal with a rare disease, which may otherwise not be profitable enough for a drug company to deliver. It means shorter trials with fewer patients, and financial incentives to get the drug to market.

Getting an early deal

While analysts say the science is sound, it’s an extremely early stage technology for an ASX company: Phase 1 trials don’t start until the second half of next year.

That’s why the company, which listed at 25c, closed Tuesday at 22.5c and is currently worth $17.33 million.

AdAlta has to show it works in humans.

“It’s all going to come down to the Phase 1 trials,” Patersons analyst Jon Scholtz told Stockhead. “Phase 1 trials are a black box… That will be make or break.”

He says the company has good board experience and expertise, but the future rests on getting good results next year.

AdAlta listed in August 2016.

Ms Cobb AdAlta listed early for two reasons: they needed money to fund the phase one trial and drug manufacturing, and they could see a way to an early deal.

Instead of pursuing a cancer treatment, AdAlta focused on the smaller, less-crowded market of fibrosis.

“We could have looked for a cancer application but it doesn’t make sense for our shareholders’ point of view,” Ms Cobb said. “We’ve made a decision based on getting an earlier deal.”

Mr Scholtz says there have been “quite a number of deals” for fibrosis drugs after they’ve come through Phase 1 trials.

Ms Cobb says the average deal size is $100 million, with milestone payments of $400 million to $500 million.

That means AdAlta could be making money from its early stage technology in as little as two years.

If a deal doesn’t come through, Mr Scholtz says the $8 million in the bank is enough to get it through to Phase 2 trials, and there is enough interest in the Australian market to fund that next step.

Ms Cobb says that’s the plan if a deal doesn’t come through, but there are some on the board who also think it could be a better way forward than selling the technology early.

San Diego-based director Robert Peach has taken this kind of tech through Phase 2, and wants AdAlta to raise money to take the lung fibrosis drug through Phase 2 trials.

AdAlta’s shares closed at 22.5c yesterday, valuing the company at about $23 million. Its shares have traded between 16.5c and 32.5c over the past year.

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