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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

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.

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 assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »