RE: Research23 Apr 2020 14:41
Thanks Myles... who kindly wrote...
"Morning all, hope everyone is well.
There are a few new faces since I last posted here, so I thought I’d re-share my research on Avacta, for those who haven’t seen it.
Original investment thesis, 01/03/2020:
aimchaos.files.wordpress.com/2020/03/avacta-group-investment-thesis-3.pdf
Update note on the Company’s work on COVID-19 testing, 15/04/2020:
https://aimchaos.files.wordpress.com/2020/04/avacta-group-update.pdf
Frankly, I am astounded by the current share price. There seems to have been some concern about the placing shares hitting the market tomorrow – but there’s been no sell off since the GM results earlier so I think my suggestion on p.13 of my second note, about who the placees were, was correct. Any institutions who wanted to take some profits would likely have done so already, either by selling down their existing holdings (to then reload with the shares being issued tomorrow), or by selling their to-be-issued shares on extended settlement.
Whatever the case, it is largely irrelevant. The TVR is now 208m, and I can’t see that changing for the foreseeable. The Company has circa £11m net cash now, which is more than enough for global diagnostics players to be willing to collaborate.
The CEO could not have been clearer – there will be additional partnerships announced over the coming weeks. There will also be pre-orders of test in the millions by bodies such as PHE. I would also be surprised if there was not grant funding for Avacta, either from the UK gov of from a major charity such as the Gates Foundation.
If you read my research (esp. the bullet points on p.13 of my second note), all of these announcements should not come as a surprise, when they do come out. The wider market is however – in general – not well researched, and so will get excited and pile in when these announcements do steadily come one. The obvious move is, simply position in size before they do, and don’t be surprised WHEN they do.
I hold 2m shares at ~21p average, and don’t intend to sell any at all until we hit ~500p / ~£1bn mkt cap. My longer-term target is several billion pounds. The detailed rationale for this valuation is all in the first note. I am particularly excited by the TMAC platform, as I think it has the potential to generate drugs that will themselves generate tens of $billions in sales, each year.
Retrospectively, the main flaw of my research is underestimating just how many lateral flow tests that use Affimer-based reagents (Cytiva’s and those of other yet-to-be-named partners) could be sold globally. I estimated 1-3 billion per annum. Given the recent noise coming out of the US, I think it could be several multiples of my estimate."
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