Avacta Group (LSE: AVCT), the developer of diagnostics and cancer therapies based on its proprietary Affimer and pre|CISION platforms, continues to build on its successes of last year when shares surged more than 800% in six weeks to mid-May, as the Covid pandemic broke. So far this year, in calmer times, shares have risen 109.6% to reach 239p today (26 April), with a one-year return of 206.4%.
Last week, Avacta issued its full year results, which reveal a net loss of £18.9m based on revenues of £3.6m for the year ended 31 December 2020 (as against £5.5m for the 17-month period to 31 December 2019), an operating loss of £21.3m for the period (against a loss of £18.0m for the 17-month period to 31 December 2019), and a loss per ordinary share of 8.4p (17-month period to 31 December 2019: 13.0p).
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A higher-than-expected adjusted net loss of £14.0m was due largely to research and development costs. However, Avacta raised £53.8m to ensure the continued expansion of its diagnostics and therapeutics programmes, bolstered by three new senior hires. The cash balance stands at £47.9m, as against the previous year’s £8.8m, a comfortable cushion for ongoing operations through to 2023.
Encouraging news on Covid testing applications
A number of developments have reassured investors. Last week saw Avacta announce the encouraging news that its AffiDX SARS-CoV-2 antigen lateral flow test showed a 98% sensitivity in the clinical validation, correctly identifying 96 out of 98 positive samples of virus and 101 out of 102 negative samples, across a broad range of viral loads.
The previous week, on 6 April, Avacta established a global route to market for its SARS-CoV-2 Affimer reagents by signing a distribution agreement with ABCAM (LSE: ABC; Nasdaq: ABCM), one of the world’s leading suppliers of biological reagents and kits. Affimer reagents can be used in a high-performance ELISA laboratory test to detect the SARS-CoV-2 spike protein, with high sensitivity and specificity for the spike protein of the original strain of the virus and other dominant variants such as B117 (‘Kent’ strain) and D614G.
The outlook is positive. Avacta will soon be dosing the first patient in the AVA6000 clinical trial and is expecting the first pharmacokinetic data for AVA6000 before the end of the year, which will give the first indication of the effectiveness of the pre|CISION™ chemistry in humans. More imminent is the expected CE marking and launch of its antigen lateral flow test in May, with commercial deals and distribution throughout Europe to follow.
Most sensitive lateral flow testing available so far
If CEO Dr Alastair Smith is right, Avacta’s AffiDX SARS-CoV-2 antigen lateral flow test is the most sensitive available so far, representing a commercial opportunity with real potential. And, in ABCAM, they have a world-leading partner capable of maximising that potential. Though last year’s fall in revenues is a worry, stockbroker finnCap estimates they will pick up again this year to £5.1m and £5.7m in 2022.
Last year was indeed, as Smith says, a ‘momentous year’ for Avacta, making a repeat this year unlikely, not least because of the growing competition. But prospects are good.
As finnCap says: “We remain very excited by the opportunities and reiterate our 310p target price.” The current Covid crisis in India, with the possibility of similar developments elsewhere in the world, surely tells us that the fight against this pandemic is a long way yet from being won.