Avacta Group Plc Jumps After Transformational Moderna Therapeutics Deal

Avacta Group Plc (LON: AVCT) jumps after announcing collaboration agreement with Moderna Therapeutics Inc.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shares in life sciences group Avacta (LSE: AVCT) have jumped by as much as a quarter today after the company announced that it had entered into a collaboration, licensing and option agreement with Moderna Therapeutics Inc.

The deal will see Moderna make an upfront payment of $500,000 to Avacta in order to gain access to Avacta’s Affimers range.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Affimers are engineered proteins that mimic the specificity and binding affinities of antibodies. Avacta has developed over 90 Affimer products that it currently offers for sale. Total order intake for Avacta’s custom Affimers to the end of April was £0.25m. However, to the end of April, revenue contribution from Avacta’s Affimer business was negligible

Big news

It’s clear that today’s deal is big news for Avacta as it effectively triples the company’s order backlog. 

Further, in addition to the $500,000 upfront payment, Moderna will also make pre-clinical development milestone payments to Avacta under the deal.

According to Avacta’s Chief Executive, Alastair Smith: “This agreement represents a significant opportunity for Avacta with tangible, near-term revenues from upfront payments and research services, with additional milestone payments and royalties on future sales of therapeutics. It is a transformational deal for Avacta and Affimers.”

Building momentum 

Avacta’s Affimers are not the company’s only revenue-generating asset, but they are the company’s most exciting. Avacta also runs an Animal Health business that reported revenues of £0.73m for the six months to 31 January 2015. 

But it’s Avacta’s Affimer business that’s really set to generate growth over the next few years. Over the past twelve months, the businesses momentum has really started to build. A number of deals have been signed with other biotechs and Avacta has doubled the number of Affimer products it has on offer for sale. 

Avacta is focused on providing Affimers to address gaps in the antibody. These gaps have been created by poor existing antibody performance. And the size of Avacta’s potential market is huge. 

It’s believed that the global antibodies market was worth around $60bn during 2012. The market has been growing at a rate of around 15% per annum since and is expected to continue to grow at this rate until 2018.

So by 2018 Avacta could be trying to take on a $150bn market with its Affimer products. Even if the company manages to grab a 0.01% share of this market, group revenue could exceed $1.5bn.

Target market

Right now, Avacta is focused on the cancer-fighting death-ligand 1 (PD-L1) as its initial target of interest.

Management believes that this product, being tested by a number of international pharma groups, could be greatly improved by the use of Affimer products. Sales from this one treatment alone could top $35bn per annum at its peak

High risk

Still, like all early-stage pharma groups, Avacta is a high-risk play. The company reported a loss from continuing operations of £1.5m for the six months to 31 January 2015.

According to current analyst figures, the company is unlikely to report a profit any time soon. Losses are expected to continue for the next two years and, as of yet, it’s unclear how today’s deal will change these figures. 

That being said, at the end of January Avacta reported a positive cash balance of just under £8m. So the company has some wiggle room.

More on Investing Articles

Portrait of construction engineers working on building site together
Investing Articles

Is this FTSE 100 stock the best housebuilder to invest in?

One FTSE 100 housebuilding stock has outperformed all of its industry peers by a big margin this year. Should I…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

2 cheap dividend growth stocks I’d buy as the economy sinks

I'm searching for the best bargains to buy following recent market volatility. Here are two top dividend growth stocks I…

Read more »

estate agent welcoming a couple to house viewing
Investing Articles

Here’s 1 FTSE stock primed to benefit from the current housing market!

With the current housing market as it is, Jabran Khan explores a related FTSE stock that could provide stable and…

Read more »

Portrait of construction engineers working on building site together
Investing Articles

Here’s why this AIM-listed stock could be one of the best shares to buy!

This Fool is looking for the best shares to buy. Despite macroeconomic issues, this stock could be a great long-term…

Read more »

Elderly father and adult son work in the garden
Investing Articles

This penny stock could be set to soar! Should I buy shares?

This Fool looks closely at a penny stock operating in an exciting growth market that could see its shares rise…

Read more »

Illustration of bull and bear
Investing Articles

The next stock market recovery looks imminent

As the stock market bear gives way to the bull, some stocks are already turning up and I'm ready to…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

2 dividend shares to protect me from soaring inflation

Dividend shares can be an excellent way to keep up with inflation. Our writer explores several options to protect his…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Is it time to buy Unilever stock?

Unilever stock has underperformed in the last five years. But with its portfolio of powerful brands, should I buy now…

Read more »