[Nick Hargrave]

Valuation assumptions: Doxorubicin generated annual sales of $1.4bn in 2022. If AVA6000 is better than standard Dox it should become the standard of care ‘overnight’ and take 100% of the market, and even more, extend the market as treatment will be available to more patients than could not tolerate standard Dox. To be conservative we assume that AVA6000 captures just 75% of the current market and apply a 6x multiplier to the revenue to reflect a discounted patent lifetime and manufacturing costs. Given the already ‘blue sky’ valuation this implies we assume no value at all for the rest of the preCISION platform or diagnostics. For a risk price we simply assume zero for maximum conservatism in the margin of safety price, assuming all platforms fail.

[Nick Hargrave]

The Science Day last week added a lot of new detail suggesting that AVA6000 is well on track, attracting attention from leading global oncologsits. Link to pres and webcast below

https://avacta.com/wp-content/uploads/2023/02/MASTER-DECK-Avacta-Science-Day-23.02.23_compressed-1.pdf
https://stream.brrmedia.co.uk/broadcast/63d3f8211874497653f33965

[Nick Hargrave]

The CEO rarely posts publicly but has posted this morning on LinkedIn (link below) highlighting his article in the Times today, ahead of the Science Day announced for 23rd Feb where the company will be presenting to fund managers and financial analysts. This is seemingly suggestive of confidence in the company’s platforms and mounting frustration that UK investors have no appreciation of their potential value. All likely to fuel rumours of a NASDAQ listing in the not too distant future should the Science Day fail to register

https://www.linkedin.com/feed/update/urn:li:activity:7025777741383770113/

[Nick Hargrave]

https://www.voxmarkets.co.uk/articles/alastair-smith-of-avacta-successful-completion-of-fourth-dose-escalation-in-ava6000-phase-1-clinical-study-5e35ec7/

A worthwhile listen – interview with the Avacta CEO post today’s announcement

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/successful-completion-of-fourth-dose-escalation/15798209

This is hugely significant news from the company, effectively stating that it on the way to providing targeted chemotherapy without side effects

[Nick Hargrave]

Have to admit this is quite an unexpected acquisition, particularly given the current market environment for fund raising. However, momentum in deal making is critical and opportunities sometimes have to be taken when they can. A small equity placing minimises dilution with the majority of funding (to cover the acquisition costs and provide working capital to extend the therapeutics investment runway) through a convertible with a 25% premium initial conversion price. There is much to digest but the initial reaction is positive given that management see such potential value in their diagnostics division (and Affirmer platform) which has been flying under the radar as the market (me included) was focused on the upcoming AVA6000 trial results (which remain the most significant value driver). Adding a profitable business should also accelerate the group reaching a self-funding position

https://www.londonstockexchange.com/news-article/AVCT/proposed-acquisition-of-launch-diagnostics/15676698

[Nick Hargrave]

Interim results released this morning. Little new information with the company focused on the AVA6000 trial results in Q4. Cash levels ensure the company is funded into mid 2023, providing the runway to complete phase 1a of the AVA6000 trial and potentially license AVA3996. One to monitor for both of these pieces of material news

https://www.londonstockexchange.com/news-article/AVCT/interim-results-for-the-period-ended-30-june-2022/15649319

[Nick Hargrave]

More positive news from Avacta this morning as multi-billion dollar pharma company LG Chem extends license with a view to taking a second of Avacta’s platforms (Affirmers) into the clinic for in-human trials. A small payment in the grand scheme of things, but additional evidence of the potential value in the platforms

https://www.londonstockexchange.com/news-article/AVCT/lg-chem-renews-license-triggers-payment-to-avacta/15518475

[Nick Hargrave]

Dose escalation continues which is positive news, but the question remains over efficacy

https://www.londonstockexchange.com/news-article/AVCT/phase-i-study-of-ava6000-advances-to-fourth-cohort/15609061

[Nick Hargrave]

Positive news from Avacta this morning with the expected 2nd dose escalation news. While still not proof that the prodrug is ‘working’, it is good to see the trial continuing to move forward with good safety and tolerability

https://www.londonstockexchange.com/news-article/AVCT/second-dose-escalation-in-phase-1-trial-of-ava6000/15516302

[Nick Hargrave]

The Avacta AGM took place on Thursday and there was no material new news. The market, as usual, focused on the short term of a small delay (3 months) on AVA6000 data, which is not uncommon in oncology trials where volunteers are terminally ill. More importantly, there remains the lack of ‘bad’ news and the next dose escalation is likely in the coming weeks. The key is obviously whether the prodrug is ‘working’ i.e. releasing the doxorubicin in tumours. While I was unable to attend the AGM (though the presentation is available on their website), feedback suggests that while the company remain tight lipped on the subject of it working, there was apparent confidence in the room – we note this is nothing more than a body language read from bullish investors rather than substantive due diligence!

[Nick Hargrave]

In addition to our published ideas, we aim to share what we believe are other interesting and timely opportunities that members can research but which we believe are not yet ready for publication. We hope that members will be equally forthcoming with their own ideas (no price sensitive information please) in order to broaden the investment debates.

The first of these ideas is Avacta Group plc (AIM:AVCT). The company has 3 proprietary therapeutic/diagnostic platforms, with the greatest current valuation catalyst being the preCISION platform which aims to make chemotherapy pro-drugs inert as they flow through the body and then activate only in cancer tumours, greatly increasing the dosage patients can tolerate and improving outcomes without damaging healthy tissue and organs, specifically the heart. The company is currently in Phase 1B clinical trials of its first pro-drug (AVA6000) with a near term expectation of a 2nd dose escalation announcement (which would give a further indication that the drug is safe and working). If the platform proves successful, the company could come to dominate and expand the global chemotherapy market. On the other hand, as with any biotech undergoing trials in as yet unproven drugs/platforms, the outcome is binary and the value could be zero. In this case, with numerous drug conjugate candidates as well as the Affimer and TMAC platforms, alongside licensing deals and partnerships with multi-national pharma companies, the company has several shots on goal, each of which could be worth multiples of the current market value. With a current market cap of c.£300m (and a net cash position), this is a highly risky investment opportunity, but with a currently unquantifiable upside valuation potentially in the billions. We are investors in Avacta and would be happy to discuss our views on the business (recent history around COVID LFTs etc) and management, but we would like to see further progress and be able to quantify the potential valuation with some degree of accuracy before publishing an idea memo.

• This topic was modified 7 months, 1 week ago by Nick Hargrave.
• This topic was modified 7 months, 1 week ago by Iain Mars.
• This topic was modified 7 months, 1 week ago by Iain Mars.
• This topic was modified 6 months, 4 weeks ago by Nick Hargrave.
• This topic was modified 6 months, 4 weeks ago by Nick Hargrave.

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