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Thanks CO even better then , my calculation ignored initial stakes "My thinking : Avacta's shareholding in the joint venture was 45% for £217k which implies LG paid £265 =£482K -Leaving aside that initial £482k -) Future value is what really matters .
Mute points but worth considering.
- As Avacta’s equity stake is below 25% then Affycell’s annual accounts do not have be grouped with Avacta’s, this will suit Avacta.
- It’s quite normal to structure this way and then have warrants to bring your equity back up, I don’t think Avacta would even have to disclose the warrants.
Gmcc, think your calcs don’t recognise that the $7.3m only bought a 73% stake, assuming dilution was pro-rated between Avacta and Daewoong’s original 45 and 55% stakes. So 12% would now be 1.2m, not 876k.
Of course, the 12% could have been pre-raise, which would throw these calcs out the window, and value the company, and Avacta’s share of it, entirely differently.
My thinking : Avacta's shareholding in the joint venture was 45% for £217k which implies LG paid £265 =£482K
Leaving aside that initial £482k -
If Avacta now own 12% after $7.3m raise ( assume Avacta did not participate ) Value to Avacta now $876k and
"Under the terms of the collaboration and licence agreement, Avacta's research and development costs associated with the generation of the Affimer proteins are funded by AffyXell whilst Avacta retains the rights to commercialise the Affimer proteins outside the field of cell therapies."
Looks like a good deal for Avacta .
Obviously there’s no loss to Avacta - especially with their contribution funded, just less potential gain in the end.
I guess where I am coming from is wondering whether this joint ownership of AffyXell could eventually be more profitable than a straight royalty deal - as I see it, only if we maintain a % of ownership above “low single digits” (typical royalty), or if the JV is sold for a profit on our initial investment.
If you are right and that 12% is simply the original 45% diluted by an injection of $7.3mln, then that would value the whole entity at $10mln, of which our 12% stake would represents a notional value of $1.2mln. Not a bad return on £217k, and obviously peanuts compared to the ultimate value if they succeed with any of their developments.
Agree with Sang- I was typing;
Was Affyxell set up as an idea/venture by Daewoong and AVCT specifically for AVCT to draw in more interest for affimer tech and future licence use of affimers. It is all extra for as AVCT want big pharma to take up the tech. Dilution was inevitable if drug development is to proceed unless AVCT have the LFT cash to inject. 12% represents a bigger capital amount than was used to launch so we have held our corner well.
It's an interesting question. I think the 12% is after the funding round. No doubt there will be others if taken forward. If going well and Avacta have cash to hand they could possibly invest more.
It is financing all the research Avacta are doing in that area and it is worth taking into account that it could end up being worth billions if successful.
Without the partnership, funding and Daewoongs MSC tech it wouldn't be happening so it's something of a free hit.
Don't see a problem myself
Really hoping it’s the latter, because if it’s the former, are we just being diluted out of our interest for every dollar that Daewoong injects?
Unless anyone can shed any light on this, might be a good question for the next investor Q&A.
Firstly, this isn’t rampy at all so apologies if you’re just looking for a hit of the good stuff!
I did a little digging as I was interested in how much dilution was incurred by the $7.3mln raise in AffyXell…
At the establishment of the joint venture, announced by RNS dated 8 January 2020, it was stated that:
“Avacta's shareholding in the joint venture is 45%.”
https://www.lse.co.uk/rns/AVCT/avacta-and-daewoong-establish-joint-venture-svhid8xoh5e2w7b.html
The next we heard about funding into the JV was on 1st February 2021, with the RNS announcing that a Series A funding had raised $7.3mln for AffyXell, but with no statement about dilution.
https://www.lse.co.uk/rns/AVCT/affyxell-73-million-series-a-financing-0n90z8vwqwebdjn.html
In the 2020 annual report, on p.120 it states:
“During the year ended 31 December 2020, the Group formed an entity with Daewoong Pharmaceutical, AffyXell Therapeutics Co., Ltd based in South Korea, through an initial contribution of £217,000. The Group has significant influence and, at 31 December 2020, a 12% ownership interest.”
https://avacta.com/wp-content/uploads/2021/05/Avacta-ARA-2020.pdf
Which begs the question, were we at 12% before an extra $7.3m we’re raised, or was the money raised in whole or in part prior to 31 Dec 2020, but not announced until 01 Feb 2021?