The latest Investing Matters Podcast episode with London Stock Exchange Group's Chris Mayo has just been released. Listen here.
"Three solid day of meetings at the Biotech Showcase Conference during the JP Morgan Healthcare week in San Francisco. Lots of interest in Affimers. Looking forward to a great 2019!"
https://twitter.com/Affimers/status/1082928417132154881
Summary of investment case from 16:22 is very good:
https://www.youtube.com/watch?v=MlwtMlCts5Q
"I suppose one has to be careful not to start getting hyperbolic, because what we have is a platform technology which means we are not a single asset drug company. There isn't one drug that we are developing. We have the ability to produce a very large pipeline of different Affimers because we have a platform to generate them from."
"So the potential value is genuinely enormous."
https://www.youtube.com/watch?v=MlwtMlCts5Q - from 7:54
The finnCap note provides a breakdown:
- An upfront payment, not yet disclosed at the request of LG Chem, but to be made public at a later date. Expected to be in low single digit millions of dollars.
- Near-term milestone payments probably also in the low single digit millions of dollars.
- Longer-term clinical development milestones totalling $180m.
- Undisclosed royalties on any future product sales.
- Option fees and milestone payments totalling $130m.
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And of course all of this is from just 1 single deal.
Multiple further deals are expected in coming months.
The company is currently cashed up. From the recent broker notes:
Capital Network - "After the recent fundraising the company is well funded for the next 18-24 months".
Hardman & Co. - "AVCT has sufficient cash resources to identify an Affimer lead to be ready for first-in-man trials in 2020"
Additionally, the recent LG Chem deal will provide near term cash. And of course multiple further deals are expected, each of which will potentially add further near term cash.
Quite a bit of buying coming in today and the close price is the highest in a few months.
Still a bit of offloading going on with 25k and 50k block sells, but they can't last forever. If it hadn't been for the background seller the price would have been a lot higher by now.
The comparatives in the Turner Pope presentation suggest a large amount of upside if things go to plan.
M&A also appears to be picking up in the sector so that could draw interest, both from new investors and potential predators.
Instis keen buyers at the current level too which is a plus.
Turner Pope Investments Investor Evening presentation well worth viewing:
https://www.youtube.com/watch?v=zS3RF7xV1_c&t=1s
"There is a significant opportunity for a value uplift in Avacta. In my view...it's woefully undervalued at the moment when you look at some of the comparators." - 16:27
"Pieris, Nasdaq-listed, has drugs in Phase 1 / Phase 2, so really only 18 months or so away from where we are and yet there's a roughly 10x increase in valuation." - 16:52
The recent broker notes from finnCap, Hardman & Co. and Capital Network all provide a flavour of the potential here and are well worth reading:
finnCap
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"With a rich pipeline of interest in the reagent portfolio and ongoing discussions with other pharma companies, we expect further licensing activity."
"We expect this to be the first of many licences, the value of which should increase as data packages build further."
"With probably close to 50 companies that have or are undertaking evaluations we expect further licence deals to be announced in 2018 and onwards, all of which should generate incremental value."
"the potential uplift for Avacta is clearly very significant as it meets this milestone in the next two years."
"We retain a target price of 120p."
"We retain an EV of c.£125m as our target valuation, which is based on a comparable analysis of similar companies and implies a target price of 120p."
"The risk-reward profile at this level is materially skewed to the upside in our opinion."
Hardman & Co
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"[LG Chem] is an excellent and valuable partner for AVCT, and likely paves the way to further major deals."
"The rising number of collaboration deals being discussed and signed is a clear indication of the long-term value of its Affimer technology, which the market is currently only just beginning to recognise."
"This may well be the trigger for many more deals with potential partners that are currently undertaking validation testing of specific Affimer molecules of interest."
"Given the potential size of this first significant deal, we believe that it is time the market started to wake up to the long-term value of AVCT’s Affimer technology."
"this collaboration agreement represents a major step for AVCT and a huge endorsement of the Affimer technology platform by a major pharmaceutical player."
"in the context of this deal, the current value represents an enormous opportunity that the market is totally overlooking. This deal looks set to be a wake-up call for the market."
Capital Network
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"Avacta's market cap is well below comparable peers; key inflexion points over the coming 2-3 years point to significant upside."
"we expect Avacta to announce multiple royalty-bearing deals over the coming months"
"the current stock price may provide an extremely attractive entry point for those who want to maximise their upside, already persuaded by Affimer's strong scientific rationale and pre-clinical evidence"
"With probably close to 50 companies that have or are undertaking evaluations we expect further licence deals to be announced in 2018 and onwards, all of which should generate incremental value." - finnCap
Makes sense to follow the instis who have been loading up and buy in cheaply before the newsflow takes the share price very much higher.
"Jose joins Avacta at a hugely exciting time as we progress towards the first Affimer® clinical studies, which is a significant value inflection point for both the technology and group."
https://www.businessweekly.co.uk/news/recruitment/roche-ace-joins-avacta
"Affimer reagents are being evaluated by a number of third-parties, with licensing deals anticipated near-term."
https://www.businessweekly.co.uk/business-awards/awards-news/avacta-targets-disruptive-technology-and-life-science-innovation-awards
- Multiple institutions loading up at current prices.
- Multiple licencing deals expected in the near term.
- Consolidation in the sector.
- Potential takeover target.
- Fully cashed up until 2020 so no placing required.
- Broker target of 120p (vs mid of 30p so a huge 4x current price to Finncap target).
"In this respect it is also worth mentioning Ablynx’s US$4.8bn takeover by Sanofi in January 2018. The valuation of Ablynx, the leading non-antibody therapeutic platform, at the time of the deal reflected, of course, the fact that their lead drug was already under regulatory review, but a large portion of it was in our view related to the value attributed to their rich pipeline and their platform technology called Nanobodies. It is well known that Novo Nordisk was also looking at Ablynx and therefore it is likely that they continue to have interest in an alternative therapeutic platform like Avacta’s Affimer."
https://www.capitalnetwork.com/companies/research/110626/avacta-group-maximising-affimer-s-potential-across-therapeutics-and-diagnostic-applications-110626.html
AVCT a potential takeover target.
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Celgene deal a ‘catalyst’ for pharma takeovers - https://www.ft.com/content/d78fe796-0f70-11e9-a3aa-118c761d2745
https://realmoney.thestreet.com/investing/jim-cramer-the-long-awaited-drug-company-consolidation-has-begun-14824254
A bid got to be an increasing possibility whilst the shares remain so cheap and larger players have the opportunity to buy the assets at a bargain basement price.
"The cheapest thing we could buy in the North Sea right now is ourselves."
https://www.malcysblog.com/2018/12/core-finance-interview-andrew-austin-of-rockrose-energy/ (from 6:38)
"An update from RRE this morning which confirms many of the things that Chairman Andrew Austin and I spoke about at our recent interview. Production in December reached 11,200 b/d and guidance for this year is 10-12/- b/d. Cash is very strong at $121.4m of which only $53.8m is in DSA’s. With the company throwing of cash and increasing their chances of more deals the outlook is bright, with the Arran deal shoring up the medium to long term for RRE opportunities are significant. If you missed the interview it can be seen here."
https://www.malcysblog.com/2019/01/oil-price-amerisur
A real potential turning point for the company here as the solid work done to date begins to bear fruit.
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"We've built a substantial pipeline of evaluations like this over the last 18 months or so, and this I hope is the beginning of a number of these deals being done."
http://goo.gl/3KxoBW
From 2:37
Clearly the instis are aware of the potential and buying in before further licencing news drives the price much higher.
Lombard Odier - up to 6.43% from 4.63%.
JO Hambro - up to 10.91% from 5.03%
Mole Valley - up to 3.01%
A number of further licencing deals in the near term likely. The cumulative size of these could dwarf the current market cap.
Capital Network - "The Affimer reagents business is being built around external technology evaluations, of which many are in progress, and an internal pipeline of assays readily available for license. From this basis, we expect Avacta to announce multiple royalty-bearing deals over the coming months."
FinnCap - "We expect this to be the first of many licences, the value of which should increase as data packages build further." ... "With a rich pipeline of interest in the reagent portfolio and ongoing discussions with other pharma companies, we expect further licensing activity."
Hardman - "[LG Chem] is an excellent and valuable partner for AVCT, and likely paves the way to further major deals."