Cynata Therapeutics (ASX: CYP), founded by two clever stem cell researchers and one wise Australian techpreneur, is in the process of developing a treatment for COVID-19.

Using its in-house stem cell technology Cymerus, the ASX-listed biotech hopes to treat one of the deadliest complications of COVID-19 -acute respiratory distress syndrome (ARDS).

In doing so Cynata would achieve what competitor Mesoblast (ASX: MSB) couldn't with FDA approval.

By deploying an industrialised approach to stem cell therapeutics, Cynata CEO Ross Macdonald (pictured) is confident the clinical trial process won't leave the company hamstrung.

In 1981 scientists discovered a way to derive embryonic stem cells from early mouse embryos.

The discovery thrilled scientists, and eventually led to the development of a method to do the same in lab-grown human embryos by 1998.

While there have been plenty of discussions surrounding the ethics of using of embryonic stem cells, these major scientific movements have pushed researchers to discover new and inventive ways of treating a whole raft of diseases and infections.

One such researcher, Dr Ian Dixon, saw potential for the use of mesenschymal stem cells (MSCs) - a type of stem cell that can differentiate into a variety of cell types enabling the treatment of many diseases and infections.

However there was still an obstacle to overcome: how do you mass produce enough cells needed to commercialise a treatment?

Luckily, two researchers at the University of Wisconson, Professor Igor Slukvin and Dr Maksym Vodyanik, had invented a biotechnological breakthrough called Cymerus.

The technology was able to do exactly what Dixon needed: the consistent manufacture of MSCs on an ultra-large scale; basically what Henry Ford did to the industrialisation of the auto industry, but for stem cells.

So in 2003 Dixon partnered with the two researchers to start Cynata - now an ASX-listed biotechnology company trialing a number of different treatments for a wide variety of ailments.

Most recently, Cynata's focus has been on developing a treatment for a complication of COVID-19 called acute respiratory distress syndrome (ARDS).

The complication ravages COVID-19 infected patients, destroying their organs through what is known as a cytokine storm. The complication is estimated to kill up to half of COVID-19 patients that suffer from it.

Melbourne-based Cynata is currently in the very early stages of its investigation into whether its MSCs will be able to treat the coronavirus complication overwhelming hospitals globally.

If this all sounds familiar, you might be thinking of another ASX-listed biotech called Mesoblast (ASX: MSB).

In March last year Mesoblast, also based in Melbourne, saw its shares surge after announcing plans to evaluate its stem cell treatment solutions on COVID-19 patients.

The group commenced the arduous clinical trial process to see if its remestemcel-L therapy could treat ARDS by using bone marrow aspirate from healthy donors - a similar approach the company had already taken to treat a condition many suffer from after receiving bone marrow transplants.

Mesoblast was riding high on the ASX following positive announcements surrounding the clinical traila process, especially back in April 2020 when a trial at New York City's Mt Sinai hospital found its remestemcel-L therpay achieved "remarkable" results.

Serious attention gathered around Mesoblast, with the company even securing $138 in funds from investors to continue its important research.

The company went so far as to sign a commercialisation deal for the COVID-19 treatment with Novartis, and the US Food and Drugs Administration (FDA) fast tracked the approvals process for the potential game-changing treatment.

However, in December 2020, Mesoblast hit a stumbling block.

Mesoblast's COVID-19 treatment flunked the test - its remestemcel-L therapy failed to show a lower mortality rate for patients in the prescribed 30-day timeframe of treatment.

At that point Cynata had commenced research into its own ARDS treatment. But did Mesoblast's failure unnerve Cynata CEO Ross Macdonald? Not a chance.

"I'm more confident that our trial will be successful where theirs was a failure," Macdonald said.

"If you use a process like we have developed - we don't rely on multiple different [stem cell] donations. You start with exactly the same material every time."

To explain, Macdonald used the analogy of a local caf; you normally expect a coffee from one caf to taste more or less exactly the same every time you go there - the same beans are used every time.

Whereas Macdonald said Mesoblast's process is like going to the same caf every day, but each visit they use different beans from a different supplier which leads to inconsistency in taste and flavour.

Cynata's approach with its MSCs is in line with the first example - what you get the first time from them will be replicated in each and every dose of the drug - while MSB's is like the latter.

"Yes, you still got the coffee, but the experience of the taste is totally different than it was yesterday," he said.

"The FDA said to Mesoblast, well you've got a manufacturing problem that is reliant upon multiple donors prepared to donate bone marrow and that is flawed.

"So with that in mind it's perhaps not surprising that they had a pretty disappointing result in the clinical trials."

Additionally, Macdonald said the initial investor reactions to MSB's early COVID-19 trail results were overblown.

"The initial data from their trial that got everybody excited was, in my view, quite flawed, because they said "look at how many patients are dying in intensive care units with COVID compared the patients that we treated," he said.

"But the reality of the situation was quite different. The control group at that time - the death rate was way, way higher than you would typically see for ARDS, whether its COVID or anything else. And it was simply because of the chaos that existed in intensive care units in New York in the first wave.

"So we think that the initial enthusiasm was perhaps a little misguided."

When asked why Mesoblast is receiving so much attention compared to Cynata, especially considering the above, Macdonald said it was simply because MSB is bigger and has been around for longer. For context, MSB has a market capitalisation of $1.46 billion, whereas Cynata's is just $94.56 million.

"I'd love to know why there is less attention, and how we can get our market cap above a billion dollars," joked Macdonald.

"I think the answer though is that they've been around for a lot longer than we have, they have spent a hell of a lot more money than we've spent - their monthly spend is more than we've spent for pretty much our entire existence.

"But I think the fundamental reason why is that data drives value in biotech, so the more clinical data you generate that shows your product works, the more attention you attract from investors."

That's not to say Cynata is being totally ignored in favour of the larger Mesoblast.

The company secured a $15 million placement led by $10 million from healthcare investor BioScience Managers in December.

The funds will be used to expand Cynata's clinical development pipeline and scale their operations in Australia.

As such, the company is preparing to expand its clinical development pipeline to include idiopathic pulmonary fibrosis, renal transplantation, and diabetic foot ulcers.

"So we're starting to garner that attention now that says two things - one, cell therapies are definitely a medical revolution and two, Cynata is part of that new generation of companies," Macdonald said.

As for the company's pipeline, in addition to the COVID treatment trials, Cynata is planning on launching three new clinical candidates that will get under way this year.

There's also Cynata's osteoarthritis trial, which Macdonald describes as significant for the biotech company; with 2 million patients in Australia and 30 million in the United States the company is hoping to tap into an $11 billion plus addressable market.

"It will ultimately show whether MSCs are useful in that particularly devastating condition," he said.

"It doesn't just affect people who want to go and play golf or tennis, it affects, particularly manual labourers who can no longer work.

"So the cost to the economy of osteoarthritis is quite significant, which is of course one of the reasons why the Australian Government is funding this trial."

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Why Cynata is hopeful its COVID treatment trial will succeed where others have failed - Business News Australia