Avacta Group Plc (LON:AVCT) is a life science company providing high quality and highly specific tools to the biopharmaceutical industry to help in the diagnosis and treatment of humans and animals. The group’s Affimer technology is a revolutionary alternative to the established antibody technology which dominates the drug industry despite its limitations. During 2015 Avacta focused all activities on the commercialisation of Affimers initially via a bespoke service and an on-line catalogue, with a longer-term view to develop its own bio-therapeutics for out-licensing. There is a clear mismatch between the EV of ca.£50m and the long-term potential of Affimers.
► Interims: Publication of interim results is more about updating the market about progress in the identification and development of therapeutic Affimers than the actual numbers themselves. The most important figure is that, following the £21.0m (net) cash injection in 2015, £25.0m remains on deposit.
► Immuno-oncology: Avacta has delivered on a number of Affimer candidates in 1H’16 that bind to and inhibit activity of the PD-L1 checkpoint protein, proving the company’s ability to find Affimers with activity against specific drug targets. Some candidates have entered pre-clinical testing to identify the best leads.
► Blood clotting disorders: Avacta has commenced a two-year pre-clinical study to examine the effects of Affimer candidates on clot formation and prevention. Once in-vitro & in-vivo data are available, the best candidates will be considered for clinical studies as potential drugs for clotting disorders or anti-thrombotics.
► Risks: Although Affimers have significant advantages over traditional antibody technology, the customer base might take time to realise these advantages and adapt to a new disruptive technology. Avacta is minimising this risk by initially focusing on areas where antibodies are unavailable or perform poorly.
► Investment summary: The enterprise value of Avacta Group Plc does not reflect the value that big pharma is prepared to pay for new technologies and assets. The median up-front paid is US$17m and US$40m for pre-clinical and Phase I assets respectively. These figures were exemplified superbly by the deals that Molecular Partners secured for its comparable DARPin technology.
