Is the Avacta (AVCT) share price about to explode?

The Avacta (AVCT) share price may be about to explode! Zaven Boyrazian takes a closer look at what’s got investors excited this month.

| 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.

The Avacta (LSE:AVCT) share price has been on a rollercoaster ride this year. Despite reaching its highest point in over a decade, the stock quickly crashed back down again a few months later. Today, its 12-month performance is a disappointing -20% return. But this month, Avacta is once again on the rise. So, what’s behind this latest growth spurt? And should I be adding this business to my portfolio?

The AVCT share price jumps on progress

I’ve previously explored why the Avacta share price has been on a downward trajectory this year. Long story short, its exceptionally lofty valuation came crashing down after the firm missed some key milestones. More specifically, management didn’t secure a CE mark for its antigen Covid-19 testing kit in May as initially anticipated.

This matter has since been resolved, allowing the AVCT share price to stabilise. But it doesn’t appear to be what’s behind the recent upward trend. Last month, the company announced that the first patient in its Phase 1 trial for AVA6000 Pro-Doxorubicin has been dosed. In other words, the trial is now under way.

The drug is a generic chemotherapy treatment used to combat various forms of cancer. While plenty of alternatives are already available, the potential market size is estimated to reach $1.38bn by 2024. That certainly seems like an excellent opportunity to pursue, especially since Avacta’s drug reduces the systemic exposure of healthy tissues to the treatment. So, it’s safer and reduces the intensity of the side effects of traditional chemotherapy. If the drug can make it to market, then the AVCT share price could see some explosive growth over the long term.

Taking a step back

As exciting as the prospect for a superior chemotherapy treatment may be, there’s a long road ahead. On average, it can take up to 10 years before a drug makes it to the market from phase-one trials. And that’s if it’s able to pass regulatory efficacy and safety requirements. Historically, around 90% of drugs fail at this stage. And the same outcome may occur for Avacta’s latest treatment.

The first stage of the phase-one trials is expected to finish by the second quarter of 2022 and the overall trial by Q2 2023. The purpose of these milestones is to determine the correct dosage to be used for phase-two trials and further evaluate safety and tolerability. If the firm manages to complete these milestones on schedule and uncovers positive results, then I wouldn’t be surprised to see the AVCT share price surge. But that’s a big ‘if’.

The Avacta share price has its risks

The bottom line

All things considered, Avacta continues to look like a promising company. And seeing it diversify away from Covid-related products is an encouraging sign for long-term growth. But with so many unknowns moving forward, the AVCT share price (even after this year’s decline) still looks too rich for my tastes. Therefore, I’m keeping this business on my watchlist.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Close-up of British bank notes
Investing Articles

Forget income bonds! I’d buy these 2 high-yield UK dividend shares

These two UK dividend shares offer significantly more attractive passive income than boring bonds, in my opinion.

Read more »

Family holding hands in a circle on a beach
Investing Articles

11% dividend yield! 1 FTSE 100 dividend share to buy today

I'm hunting for the best dividend shares in the FTSE 100 and this industry leader could be one of my…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

How I’d invest in UK dividend stocks to generate passive income for retirement

How I plan use the iShares UK dividend fund to invest in high-yield stocks in the UK to generate passive…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

GSK shares plummet 15% in a week! What’s going on here?

GSK shares had a bad time last week. They're down 15% as investors' sentiment soured ahead of litigation proceedings in…

Read more »

Burst your bubble thumbtack and balloon background
Investing Articles

Stock market recovery: have all the bubbles now burst?

Asset bubbles keep on coming, and here's what I'm doing to navigate through them and invest for the stock market…

Read more »

Shot of an young Indian businesswoman sitting alone in the office at night and using a digital tablet
Investing Articles

How I’d invest £290 a month in UK shares for a passive income that beats the State Pension

UK shares can offer a lucrative path for passive income. Our writer considers a plan to double his State Pension.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

3 of the best shares to buy now with £2,000

I reckon the best shares to buy now have strong growth in earnings and recent good news flow, such as…

Read more »

Young female analyst working at her desk in the office
Investing Articles

How I’m aiming for £500 a month in income from dividend stocks 

Here's my three-step plan for achieving a growing income from dividend stocks and three companies I'd use to help execute…

Read more »