Avacta Group - Succeeding more than many believe
Updated: Apr 13, 2021
In bringing this new blog together, I was first and foremost keen to talk about the two shares that have not only been kindest to me but that I feel most passionate about.
One of those is of course Bushveld Minerals and the other Avacta Group.
However, right now it feels like Avacta's world is so wrapped up in the launch of their AffiDX® SARS-CoV-2 rapid antigen lateral flow test that attempting to discuss the wider Avacta business picture, could potentially fall on a great many deaf ears. Nonetheless, it is real and if anything the true success sought by Avacta in this whole unwanted Covid pandemic has actually already been delivered, 'successful' roll out of the LFT or not.
If we merely review the announcements made since Christmas, we see the following ;
License Agreement with Astrea Bioseparations
License Agreement with POINT Biopharma Inc.
AffyXell $7.3 Million Series A Financing
Phase I CTA for AVA6000 Approved by MHRA
Diagnostic Licensing Deal with Biokit
All non-Covid related, but a clear sign of the rapidly expanding acknowledgement of Avacta's technology that does not need Covid at its heart in order to be successful.
According to the 30th June interim accounts presentation, the group's cash balance on 30th June 2020 was £54.45m.
By the time we reached the business update on 24th February 2021 the position was as follows ;
"The Group's cash position at the 31 December 2020 was £48m slightly higher than market forecasts."
Meaning a loss of 'just' £6.5m during a period when the company was more active than it has been since its creation.
Here's a reminder of how the raised funds were allocated (see 4th June 2020 RNS).
Given what we now know about the expanded lab spaces being implemented, the development of the Covid test programmes, the ISO 13485 accreditation, I personally find it remarkable that Avacta could achieve such a strong cash balance as it kicked off 2021.
So we have multiple new deals - multiple new avenues - to succeed outside of Covid, including their pending AVA6000 phase 1 trial, which should see its first results before the year is out, with cash to feed it all and see the company through to at least 2023.
To this, I could easily add the deals with Moderna Therapeutics Inc and ADC Therapeutics, both of which could see progress at any point, and add substantial value for the company.
The above may feel like just a load of repetition, but given the extreme focus on the Covid test(s) right now, it is worth reminding ourselves that these deals are real. That they have the ability to dwarf any success on the Covid test front alone.
Already a $300m agreement, the expansion included Avacta’s Affimer XTTM technology and added over $100m in 'potential' milestone payments.
As I said at the time ;
"If this now +$400m deal wasn't demonstrating to LG Chem worthwhile progress, then why come back? Particularly in the middle of a Covid pandemic that was reportedly swallowing up all available resources."
It's important to stress that LG Chem closed this further deal with Avacta, approaching two years post their original deal. What does that say about their views on the technology and their expectation for success in this relationship?
Nothing is ever certain in the world of investing. Great ideas can always fall short. Even so, given this expanded list of opportunities and partnerships, there's a great deal to like about my own extended, supportive, long term investment in Avacta, with or without Covid test success.
However, I would be a fool to believe that the market has its eyes on this right now, but with my eyes on said longer time frame that is willing to accept some turbulence along the way, that doesn't truly matter.
Of course, all of that can be strengthened considerably by the successful rollout of their Covid related tests and in particular the AffiDX® SARS-CoV-2 rapid antigen lateral flow test. It's just that the level of success demanded/expected, for me really doesn't need to be achieved for this company to go on and reach its true capabilities.
I have said all along that my own personal goals were for the company to achieve two things ;
Successfully demonstrate that the tech is strong enough, and has a competitive advantage in terms of speed to produce/adjust and cost.
Generate sufficient income to allow them to further expand into the opportunities that they have on both the diagnostic and therapeutics side of things, without the need to return to the market.
Such a result potentially allows their then successful tech to be far better appreciated within the market, whilst creating the financial support to allow them to chase bigger and better deals along the way.
As far as I can see that opportunity remains intact and whatever the cause of the delays that have got us to where we are today, they have not removed it or indeed diminished it, be it that frustrations have been clear and at times deservedly so.
So there is nothing wrong with believing the evidence that lies before us. The latest of which comes from the UK Government's own website.
"The government wants to encourage the private sector to bring a number of testing products and services to market to meet the differing needs of businesses and individuals. The government is keen to encourage innovation and market growth whilst ensuring tests meet minimum performance standards."
With the conclusion of Brexit during the throws of such a significant and unexpected pandemic, the UK has clearly been forced to ensure that it has control of its own supply chains. To this, we can add in criticism of its handling of Covid test contracts, the scale of the cost, the risks demonstrated by its vaccine run-in with the EU etc. All of which makes it clear to me that quality UK based tests are going to be contracted in the manner laid out above.
That's what Avacta is busy doing as we speak.
From the 24th Feb Business Update ;
"The UK Department of Health and Social Care has also recently focused on nasal and other swab samples rather than saliva."
and on the ongoing analysis of performance against variants ;
"Work is ongoing with Public Health England to confirm this."
The connection is there and is consistent.
Does that mean that Avacta is going to be the go-to test for the UK Government? Possibly, possibly not.
Will they be the contract test for Omega Diagnostics? Possibly, but the point I am trying to make here is that they don't need to be in order to deliver the level of success required to take them to that next level.
Would I gladly have it all? Of course, but I would rather it was a blue sky nice to have, rather than a must-have or we fail. The width and breadth of the deals that Avacta already has in its stable outside of Covid clearly demonstrate to me that such success, even at these elevated valuations isn't necessary when maintaining a medium to long term viewpoint.
The key for me is to demonstrate the tech and generate those 'sufficient' incomes, and then let that all sink in, both financial market and industry-wise.
As I say, nothing is ever a given. Attention and focus must continue to be applied and respect to what can go wrong continued, but sufficient enough success on the diagnostics side of things (therapeutics chances of success respected) is perhaps much closer than many allow themselves to believe.
Such success has plenty of other opportunities waiting for it and will no doubt drive a great many new ones, still to be sort. All of which begins to be triggered, if and when Avacta deliver their test to its waiting market.
Note - This article represents the opinion and research of the author only and the author currently holds a position in one or more of the stocks mentioned. Nothing shared in this article is to be deemed financial advice. Where possible all facts have been checked and references provided, however it is the responsibility of the reader to check all details for themselves before making any financial decisions. Please also refer to the disclaimer policy