The Avacta (LSE:AVCT) share price has been a rollercoaster ride for many shareholders, often surging and then collapsing. Between 2020 and mid-2021, the clinical-stage biotech group exploded by over 1,200%, only to quickly tumble over 50% shortly after. This seesaw motion has continued into 2025. And in the last six months, the stock has once again started surging.
Fun fact: a £1,000 investment back in May is now worth £2,150 today. But is this just the beginning of another round of volatility? Or is it the start of another quadruple-digit explosion like the one we saw in 2020?
Encouraging clinical progress
As a quick crash course, Avacta’s focused on developing innovative cancer therapies using its proprietary pre|CISION platform. This novel approach allows drugs to be targeted directly at tumours, reducing overall toxicity and nasty side effects for patients.
Over the last six months, management’s been publishing and presenting some pretty encouraging results from its ongoing clinical trials, particularly when it comes to its flagship AVA6000 targeted cancer drug.
The early data from ongoing Phase 1 trials have started showing evidence that AVA6000 is successfully reducing tumour sizes while also causing far fewer side effects compared to existing cancer therapies. As such, the company successfully raised additional funding from investors, extending its financial runway beyond the first quarter of 2026.
Given the multi-billion-dollar size of the cancer therapy market, Avacta’s looking increasingly more like a biotech disruptor. And if the firm continues making promising progress, the long-term growth potential of this currently £320m market-cap company could be enormous.
So should investors start thinking about investing at this early stage to maximise their potential returns?
Risk versus reward
As exciting as Avacta’s progress has been, it’s important not to get carried away. Phase 1 clinical trials are still ongoing. And even once they’ve been completed, there’s Phase 2 and Phase 3 to follow.
Put simply, AVA6000 is still at the start of its journey. And it could be up to a decade before it enters commercial production, assuming it doesn’t fail somewhere along the journey. Don’t forget that around 70% of drug candidates fail in Phase 2 trials either due to safety concerns or a simple lack of effectiveness.
With no meaningful revenue stream, Avacta’s entirely dependent on financial support from investors. And if the slightest hiccup emerges during clinical trials, that essential pool of capital could dry up very quickly.
Even if it doesn’t, by continually raising money through equity, shareholders will continue getting diluted. And the number of shares outstanding has already increased by 55% since 2020.
Equity dilution may prove irrelevant if Avacta’s flagship drug candidate is successful. But that’s a very big ‘if’ at this stage. Put simply, this company is a classic case of high-risk, high-potential reward.
Personally, buying the shares today feels more like speculation than an investment. It’s definitely a story to watch carefully, especially if more clinical trial results point towards strong progress. But for now, I’m hunting other, more established opportunities in the biotech space.
