Global markets, including the Footsie, have been decimated by the Covid-19 pandemic.
But there are companies out there that will attempt to combat the issue and a small-cap company doing just is Avacta (LSE:AVCT).
Avacta is listed on AIM and may be little known, but it has a fairly long history (it’s been AIM-listed for close to 15 years). That’s an important point to note so don’t think it’s a ‘here today-gone tomorrow’ type of business.
Biotech and health companies are at the forefront of attempting to tackle this virus and AVCT has established products that it’s now attempting to use in battling Covid-19.
Avacta is a biotech company with two specific proprietary platforms. One of these is a targeted chemotherapy platform. And the other, which is relevant to Covid 19, is called Affimer. This platform offers an alternative to traditional antibodies and is derived from small human protein.
AVCT has collaborated with two other organisations for separate products using its Affirmer platform. One of these has been to create a rapid testing solution. The other is to develop an antibody test. Both projects could be crucial in the fight against Covid 19.
Being a small organisation, Avacta’s work consists of a lot of collaboration with larger companies that need its platforms. In turn Avacta uses these other companies’ infrastructure and reach in certain areas. This is exactly what it has done for its Covid projects.
Avacta has seen an increase of nearly 500% in its share price since the turn of the year. From 18.5p per share, it currently trades closer to 110p. That echoes the share price performance of some other Covid-19-linked small companies.
Earlier this month it released results for the 17 months to 31 December 2019 (17 months due to a change in its reporting period). The results looked promising to me. Revenue almost doubled compared to the previous full year, and its cash balance was up a healthy 70%. It also received a “milestone upfront payment” of $2.5m from one of its collaborators on a project that could be worth over $1bn long term.
Short-term risk or long-term reward?
What really excites me is the Affirmer platform in the fight against Covid-19. My research indicates its new method is groundbreaking in respect of antibodies. Such a platform could see AVCT’s standing in the industry grow rapidly.
This is a small-cap stock with some excellent projects in the pipeline. Some of these are directly related to a the Covid-19 pandemic.
It would be foolish of me not to note the risk involved here. Share prices have been surging for the many companies out there attempting to create Covid-19 vaccines and other solutions. Not all of these companies will succeed and prices could fall as fast as they’ve risen. The reason I like Avacta is that its original work on cancer treatment solutions will continue even if Covid-19 solutions don’t succeed. Avacta has many other projects in the pipeline so isn’t just banking on the coronavirus programmes. With the shares trading at just over 100p, I feel a small amount of money invested in this burgeoning small-cap could reap longer-term rewards.
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Jabran Khan 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.