Avacta: The UKs Next Biotech Giant
Full disclosure, Avacta (LON:AVCT) is my largest holding. And rightly so, in my opinion it has potential to be one of the most promising biotech plays over the next decade. I rarely see any discussion about here on Reddit, so figured I'd do a quick write up to share why I think this.
Who is Avacta?
Listed on AIM, Avacta is a biotech company based in West Yorkshire. At the core of the business is it's proprietary technology, the Affimer® and pre|CISION™ platforms.
Spotlight was on Avacta last year following the announcement of their Covid-19 Lateral Flow Antigen Test, however delays since the announcement last Spring and vaccine news hampered the price a bit, but excitement is back on the table following recent news flow and the government preparing to roll out mass testing to the public. On top of this, Avacta is an excellent cancer play with their tumour targeting precision therapy AVA6000, and subsequently in my eyes the real money, Affimer® and pre|CISION™ platforms.
I'll explain these 3 below:
Covid-19 Lateral Flow Tests (This is where short term excitement is)
What is a Lateral Flow Test?
These are quick tests you may have read about in the news, as the ones that give results in 15 mins. With Avacta, this involves an anterior nasal swab sample (not a brain tickler sample) being applied to a lateral flow test device, where the sample reacts with reagent, effectively changing colours on positive result. Simplest way to imagine this is similar to those Litmus Paper tests you might have done in school. Except it's housed in a device you can use at home.
Currently, the primary method of testing is called reverse transcription polymerase chain reaction (RT-PCR). PCR testing takes a few hours and requires professionals to take the sample and process them. PCR tests, test for genetic material (RNA) which can be detected early in the body, whilst you are infectious, and during recovery (i.e. you still have Covid, but are not infectious), generating a positive result through all these stages.
Lateral Flow Antigen Tests provide results in around 15 minutes, and can be self administered, at home, at work, at events etc... The test however isn't testing for genetic material, instead it is testing for antigens which can tell us when you are most infectious. The benefit to this is that it will greatly reduce the number of people needing to unnecessarily self-isolate after testing positive on a PCR, but testing negative on a LFT (i.e. you still have Covid, but are not infectious)
The issue to date has been that Lateral Flow tests simply aren't accurate enough for mass testing, just being 1% wrong on a 66 million UK population affects 660,000 people, with a lot of these tests being highly criticised in the media/scientists. The Innova test for example (which the government currently has stockpiles of) has an overall sensitivity of 76.8%, and overall specificity of the test was reported as 99.68%.
Step in Avacta, their Lateral Flow Test announced clinical results yesterday demonstrating a sensitivity of 96.7%, and specificity of 100%, what more this was based on samples with a Ct value below 26 which is the sweet spot we've been looking for on infectiousness. These results are very favourable compared to previous studies, showing that Avacta truly have developed the gold standard for Covid-19 testing.
Next steps are to complete full clinical validation and CE mark so they can bring the test in Europe around the end of Q1 2021.
What is unique to Avacta’s test, that no one else will be able to replicate, is the type of reagent used. In this case, Avactas reagent is known as Affimer, which Avacta own the IP to.
Timing could not be more perfect with the government set to lay out it's plan to end lockdown through mass testing (lateral flow based testing), even the papers today have leaked the next slogan - "Get ready, get testing, go"
I believe that Avacta is playing a critically central role in the government plans for ending lockdown, and are exactly what BoJo has been looking for when he's been babbling on about when he wants a sovereign test. I have no doubt that Avacta will probably sell every single test they make in what is a multi-billion pound market which isn't going anywhere.
Cancer Therapy (This is where medium term excitement is)
Avacta is looking to start in the UK Phase 1 studies on it’s targeted chemotherapy drug, AVA6000.
Doxorubicin is a commonly used chemotherapy drug that comes with unpleasant side effects. I won’t go into too much details but in layman terms it’s effectively a destructive drug, designed to destroy tumours, but it hurts the body in the process. Regardless, it still stands as one of the most commonly used and effective treatments for cancer, including Leukaemia and Hodgkin’s Lymphoma among several other types.
Avacta has taken Doxorubicin, and modified it to become AVA6000. This modification is achieved using Avacta’s pre|CISION™ platform which renders the drug inactive in the circulation until it enters the tumour. It’s activated within the tumour by an enzyme called fibroblast activation protein (FAP) which is in high abundance in most solid tumours but not in healthy tissue such as the heart.
AVA6000 has been shown to significantly increase the amount of active drug in a tumour compared with the heart and should thereby improve tolerability and achieve better clinical outcomes for patients.
Affimer® and pre|CISION™ (This is why this is a long term hold)
This is where the big money is. Avacta own the IP to both Affimer and pre|CISION.
The idea is, that if either or both of these platforms are successful then Avacta can easily achieve a multi-billion valuation.
Success is already beginning to be seen with Affimers via their Covid-19 diagnostics, opening the door to many more future applications. If the AVA6000 study shows that the pre|CISION chemistry is effective in reducing systemic toxicity of Doxorubicin in humans, then it can be applied to a range of other established chemotherapies to improve their safety and efficacy.
I've been holding 20,000 shares since last Spring, and intend to hold for the next decade+
Edit: Typo
Share Price at Time of Post: 187p
Posted Feb 17, 2021, 4:09 PM UTC · edited
Honestly this reads more like shilling/marketing than analysis - it's hard to take anyone's post seriously when they don't at least consider the business's downsides and business/financial risks etc.
How has Brexit affected them? Isn't the market already saturated for lateral flow testing, when I can buy them online for a fiver a pop? What about the fact that LFTs are likely to be short lived unless we find vaccine-avoiding strains of the virus?
And more importantly, why aren't you considering (or mentioning) the fact that only about 5% of Phase 1 trials actually result in regulatory approval? That seems like a huge risk for their business, when their drug isn't even in Phase 1 trials yet
There's potential here, but it's fairly speculative
Sorry if it has come across that way. I wanted to share an overview of their products and future.
Given the recent confirmation (see yesterdays RNS) that Affimers work in a diagnostic setting, there is a reason to be excited.
Antibodies currently dominate the drug markets forecast to be worth over $125bn. If like diagnostics, we can get confirmation that Affimers can be used in a Therapeutic setting, then Avacta and their platform can be considered a serious contender in the antibody drug market where there is no doubt plenty of commercial opportunity.
You still seem laser focused on “what if?” speculative upside, not the risks
It is important to note that final approvals for new drugs is low - however it is important to understand that the avacta precision therapeutic ava6000 is a carrier for already used drugs. It is being used to deliver higher doses of chemo drugs directly to the tumour without negativity affecting organs such as the heart - which would otherwise be damaged by higher doses. There are many presentations on their website - DYOR. There is always risk - without risk there would be no reward.
Indeed, and that's just the nature of investing - but I still think the original post is far closer to an "Invest in the thing I'm invested in!" rather than a fair analysis of the company.
It doesn't just gloss over the risks, it avoids mentioning them entirely, and that's not great
Well I think that is pretty much rife all over the bloody internet. Call it an advert if you like... do your own research and risk assessment. I’ve spent nearly a year researching and following Avacta. The amount number of larger pharma’s that they have made partnerships is promising. There initial results for their LFT is also very promising and is a lot better than is currently being used by the government in the UK and maybe 6 weeks away from launch - with many manufacturing agreements in place with 3 of the UK’s major LFT producers (possibly another in the pipeline). Risks are longevity of the market- but with regards to variants of the future the new affimers can be quickly developed. AVA is a bigger risk - but probably the biggest reward.
It's common, but I believe in pointing it out where I see it. If nothing else, it might give a newbie pause for thought and encourage them to do further DD