[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 2 years, 2 months ago by Nick Hargrave.
• This topic was modified 2 years, 2 months ago by Iain Mars.
• This topic was modified 2 years, 2 months ago by Iain Mars.
• This topic was modified 2 years, 1 month ago by Nick Hargrave.
• This topic was modified 2 years, 1 month ago by Nick Hargrave.

Topic

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/board-change/16446386

Additional positive quotes from Christina in the separate board change announcement

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/full-year-results/16446502

Positive news. CEO transition expected and much needed with investors losing faith in Dr Smith to deliver commercially. Christina has made a positive impression since joining full time. Divestment of Diagnostics is also now firmly on the radar to focus the business although it is likely to deliver a loss on the investment. We would rather the board replaced a director rather than just adding anew one, but if a candidate with the expertise to help where it is sorely needed is found it will be welcome. Clinical trials continue to positively, but we now await news of the expanded preCISION pipeline

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/ava6000-abstract-release-by-aacr/16411103

Hopefully the updated data this week will provide some stimulus to the share price after the badly handled placing destroyed sentiment

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/update-on-ava6000-phase-1a-clinical-trial-progress/16387750

More positive news on the clinical data. It remains a mystery why positive news was not released before such a poorly executed raise. Still seeking answers but hopefully the share price can return to a reasonable valuation now the funding concern has been dealt with

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/avacta-announces-ava6000-poster-at-aacr/16363488

New data on the way. Incredible the company didn’t release any positive updates pre equity raise

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/result-of-placing/16354152

Not only do they undertake a raise at an awful price, they then decide to increase the size due to demand. Demand at these levels shouldn’t be hard and this is further evidence that the board do not have the expertise to continue in place

[Nick Hargrave]

https://polaris.brighterir.com/public/avacta/news/rns/story/xzej8px

This is obviously a shocking raise at a horrific discount. This is a very clear failure of management and governance where there was no investor relations to demonstrate value before a clearly leaked raise that put pressure on the price before an eye-watering discount. I am in contact with a number of shareholders and action against the company is being considered urgently

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/appointment-of-christina-coughlin/16295665

An excellent move by the company. Christina has clearly impressed and added value to the clinical strategy, perhaps responsible for the AVA6000 study re-design and overall acceleration of the FDA approvals. Obviously Christina has decided she wants to be ‘in’ rather than just a temporary consultant. The company has allowed, by its standards, quite incendiary language for them about the next frontier of oncology and game-changing platform, just as the company is expected to start announcing commercial deals

[Nick Hargrave]

https://www.investormeetcompany.com/meetings/review-of-the-ava6000-clinical-trials-phase-1a-data

Q&A from the December shareholder presentation published. Obviously there is a need to read between some lines but this once again highlights the potential value of the platform that remains seemingly well hidden from the market. Commercial deals licensing the Pre-Cision platform to generate non-dilutive funding to advance its own lead assets are the catalyst the market likely needs to take notice

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/als-6000-101-phase-1a-study-data/16249496

https://avacta.com/wp-content/uploads/2023/12/AVA6000-Data-Release-13-December.pdf

Continued positive news from Avacta with their detailed Phase 1a data release, confirming that the PreCision platform is working as intended while positive signs of efficacy have been seen even during the safety phase of the trial. With this release of data we hope to see some commercial activity in the coming months related to the PreCision platform, validating its value and providing non-dilutive funding for continued development

• This reply was modified 10 months, 1 week ago by Nick Hargrave.

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/interim-results-for-the-period-ending-30-june-2023/16143192

No surprises in the interims, although I have to note the language now being used by the CEO and Chairman, such as “ground-breaking”. They are clearly happy with more bullish language now whereas they have previously been very careful with their wording. More interesting was the investor presentation that has just concluded for some added colour:

Well funded into late next year with lots of optionality on non-dilutive funding

There is no diagnostics M&A currently being contemplated – they fully understand capital allocation implications and are focused on therapeutics where the transformative value is

Seeing efficacy in Phase 1a is a “huge landmark step” and all the clinicians in the study would also use the same word “remarkable” for the safety performance of AVA6000. They don’t need a lengthy and expensive Phase 1b expansion study to convince themselves of the efficacy, hence the change to a short fortnightly dosing study and then straight into a pivotal phase 2 registrational study in H2 24 rather than 2025

“preCISION works” – the CEO stated this simply as fact, based on the outstanding performance of AVA6000 in the clinic that had validated the platform in humans. This has led to increasing commercial interest for partnering the platform

CEO hinted at spinning out the diagnostics business to provide non-dilutive funding, stating that non dilutive funding is at the forefront of directors’ minds so “don’t worry about that”

[Nick Hargrave]

2 announcements this morning suggesting that activity is ramping up, perhaps ahead of expectations. Commercial opportunities appear to require a NED to step in on an interim basis as the full time role is filled and an additional broker would suggest the company is keen now to focus on driving interest in the shares and improving the valuation to reflect the success of the business

https://www.londonstockexchange.com/news-article/AVCT/peel-hunt-appointed-as-joint-broker/16131502

https://www.londonstockexchange.com/news-article/AVCT/appointment-dr-christina-coughlin-as-a-consultant/16131382

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/successful-completion-of-sixth-dose-escalation/16129402

Difficult to comprehend the potential significance of this announcement. They have confirmed efficacy with tumour volume reduction and are aiming to bring forward the Phase 2 study on the back of an accelerated Phase 1b study to run in parallel with cohort 7. The CEO notes they are “on the verge of a paradigm shift in how chemotherapy is delivered to cancer patients”. We will looking to be adding a substantial position to the model portfolio this morning, moving to an overweight position

[Nick Hargrave]

I attended the AGM yesterday and you can see the full replay of the streamed presentation here. Questioning from yours truly begins at 32 mins as I tried to tease out very simple confirmations on the key messages

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/completion-of-fifth-dose-escalation-in-ava6000/16007272

This is an excellent update by Avacta. The key phrase is “several patients in cohort 5 and earlier cohorts remain on treatment as their disease has not progressed”. This is still a Phase 1a safety study, but this is first explicit confirmation from the company that AVA6000 is efficacious and is aiding patients who have not previously responded to treatment, without the usual chemo side effects

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/second-milestone-in-affyxell-joint-venture/15984144

Further progress on one of AVCT’s ‘forgotten’ assets continuing to bolster the value in the company’s IP

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/posting-of-annual-report-and-notice-of-agm/15982291

I am aiming to go along to the AGM and have requested a seat. I have several, but if anyone has any specific questions please let me know and I will try to get them answered

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/avacta-acquires-coris-bioconcept/15980091

We are a bit disappointed to see the company allocate cash to lower margin diagnostic acquisitions given the potential value in therapeutics. Shareholders will likely want to hear a very strong rationale at the upcoming AGM (to be announced)

[Nick Hargrave]

Just watched the prelim results presentation – some extra colour vs. the results:

Confirmed cash runway into H2 24 though dependent on the level of clinical trials they undertake. Helped by £2.8m R&D tax refund received in Jan-23.

Not looking to license out their lead drug candidates (plural) i.e. AVA6000 & AVA3996. Committed to developing them in-house to maximise value. Opportunity to monetise the PreCISION platform outside of those assets with companies that have other ‘warheads’.

AVA3996 could open up the possibility of treating solid cancers with proteasome inhibitors for the first time – it would not compete with current multiple myeloma drugs and open up a new market. Proteasome inhibitors are so effective as a broad cell killing instrument that you currently can’t dose at high enough levels to treat solid tumours. This generated a lot of interest at the recent AACR seminar.

Plan to talk about Affimers and diagnostics in more detail at the AGM.

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/preliminary-results/15929630

No surprises in the preliminary results just released, with decent summaries of operational progress included. We look forward to the investor presentation later for any new insights that might drive the valuation

[Nick Hargrave]

I submitted the following questions ahead of the company’s FY results presentation & Q&A next week in the hope of eliciting some much needed clarity for the wider market:

1. What is the commercialisation strategy for the pipeline of PreCISION drugs?

2. What happened to the redesign of the COVID LFT? Is the company now able to produce LFTs based only on Affimers?

3. What is the strategy for the diagnostics division? What is your pipeline of products?

4. Is the diagnostics division now profitable and able to fund the Therapeutics division to some extent?

5. Are you able to licence the PreCISION substrate itself, rather than your own pipeline of PreCISION drugs? Do you have any intention of licensing the current pipeline?

6. What is the funding strategy for the group beyond 2023?

7. Are you able, by extrapolation or examples of third party data, to provide guidance on your view of the chance of success for AVA6000 (and AVA3996) successfully completing their trials and gaining regulatory approval?

8. Can you provide a range of the total addressable market for AVA6000, AVA3996 and the PreCISION platform, both current and potentially extended given the greater tolerability allowing for more patients to be treated, assuming successful trials?

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/ava3996-data-poster-presented-at-aacr/15917614

The video in the link highlights in layman’s terms just how well the PreCISION platform is working and the potential value of the platform. We don’t believe the market attributes anything close to the value of the business based on the results achieved to date

[Nick Hargrave]

More good progress on the AVA6000 trial with US sites now operational

https://www.londonstockexchange.com/news-article/AVCT/1st-us-clinical-investigator-ava6000-sites-opened/15907612

[Nick Hargrave]

https://www.londonstockexchange.com/news-article/AVCT/first-patient-dosed-in-fifth-cohort-of-ava6000/15905590

First C5 patient dosed having had the trial change approved in order to increase the dosing levels given safety profile to date

[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!

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