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Agreed, RD. I thought Luke's posts were useful in identifying why the market might be underpricing this one. For example, underestimating the TAM.

I've thought a bit about competition, but i'm not really qualified to assess the risk. One big thing in Avacta's favour is that chemo is not that difficult to administer in terms of resources. Some of the potential oncology treatments talked about seem to be great science but totally beyond the reach of most health services worldwide in terms of cost and staffing.

Finally, i wonder how many II's are actually allowed to invest in AIM shares and how many of those have the nerve or surplus funds to do so. The UK market is pretty broken in terms of backing UK companies, but luckily the Americans do have the internet.

GLA

SB, thanks for your contributions and for raising the quality of discussion on here. I also use a lower multiple than RAH in my *** packet calc on the basis that interest rates are higher now than in the past decade which will lower acqn multiples paid. Gilead/immuno was 2020 from memory.

I also use a higher market size and allow for a small royalty payable to Tufts.

All this largely cancels out!

I remain a big fan of Avacta licensing all assets. If they took a 10% royalty on AVA6000 and got the licensee to fund everything going forward then the SP is a multiple of current just on that. (e.g. $150m pre-tax x12 / $1.20 at 300m shares = £5). No need for further dilution under the license model co SP gyrations become irrelevant.

I assume it is a bargaining ploy to say that Avacta will retain its lead asset. If so, not sure it's a good ploy.

ATB

Fair points, Neutronic. I don't understand why it's controversial to say there is a disconnect here between current SP and what we think it is worth - presumably the more bullish a poster is, the more glaring the disconnect must appear.

Fwiw, i think there is perceived risk around Avacta's small size/limited resources and their patchy comms history. I think it was a bit of an own goal to invite ii's to a presentation and not have say 15 mins from the CFO talking in broad terms about possible funding strategies. (Yes, it was a science day, but they are financial investors).

Also, why not say they are awaiting regulatory approval for DE5 due to a change in protocol if that is the case.

All very frustrating, but also perpetuates the image they are stretched a bit thin i feel.

I'm pretty sure there will be a data room. Can't see why they wouldn't have one. It's pretty straightforward to upload the docs and then it's just a matter of getting NDA's signed and issuing passwords. Routine stuff tbh.

It's a great read, and brought home to me how important it is having the oncologists like Dr Tap behind on your side.

I started The Song of the Cell, but stalled.....

ATB

Fair points, RD. I'm hopeful that data has been shared as the trial has progressed and that a licence deal could be "soon" (in the dictionary sense of the word rather than any other usage).

I'm confident that the first licence deal will unlock others - affirmation, FOMO etc. On that basis i don't think the company needs to extract every last penny from the first deal, more important to get it done.

Soros talks about reflexivity in SP's - strong SP's make it easier to raise equity and incentivise employees etc so i do think a CEO needs to think about the SP to some extent. I can easily derive a valuation of £20 a share here, but no company is going to pay that against the current SP. We a little vulnerable to a lowball offer.

Fingers crossed then for an early RNS.

Btw and off topic, just finished reading "For blood and money"; highly recommend it. Think someone on here mentioned it so thanks for that tip.

GLA

LG Chem was inked Dec 2018 and Affy Jan 2020. My point is why nothing since?

I'm not expecting anything on AVA3996 just yet (though it would be nice and might calm down the BB a bit), which is why i talked only about Affimers.

Things need to move faster if the full potential is to be realised and i just get the impression nothing happens that hasn't gone across Alan's desk. That doesn't scale.

It's not uncommon in the VC world for the founder to be moved to one side once the company reaches a certain size. Often they are poor delegators and this slows down decision making.

I think it is legitimate to ask why there aren't more commercial deals - I'm actually thinking mainly of Affimers here. The antibody market is worth over $100bn and they ain't all going into humans (where Affimers are still to be tested). So why so few deals?

Before i'm accused of being a deramper, AVCT is around 5% of my portfolio so i hold it with some conviction around the science (in Dr Tap we trust) but the fact is that there is an AS discount to the SP and there will be until the market sees some serious deals inked or a beefing up of the commercial management.

ATB

Spot on, Faulkes. Management need to take a long hard look at themselves and ask why the company's games are just not that much fun to play? There seems to be an emphasis on visuals and realism at the expense of gameplay.

That said, it would be hard to make a Warhammer RTS that isn't fun wouldn't it???

Could be a good re-entry point here, but i don't think any rush. They do say profit warnings come in threes...that just reflects the fact that it often takes management time to adjust. In blaming the consumer rather than the games themselves we can probably say that adjustment has further to run.

ATB

I like this bit: "and hear from selected key opinion leaders in the field of oncology".

It's pretty telling that they want to be associated with this trial, and to give up their time to be at little old Avacta's Science Day.

GLA

Personally i'd be quite happy for the company to drop good news into an illiquid market. I've seen directors on AIM recommend lowball offers in the past (most recently LOAD) with some lame boilerplate to the effect it's a 50% premium to the rolling average SP etc etc, so be nice to see the SP up sharply from these levels.

What i still struggle with is that the company raised £55m at a ridiculously low coupon, but don't seem to have any price sensitive info they feel the need to share with the market. That investor must possess spheres of titanium!

Anyway, it does feel increasingly unlikely we will see an RNS before 2023 now; happy to be wrong ofc.

DTW,

I agree, it seems odd that the company doesn't believe that it is in possession of price sensitive information that should be disclosed. I wonder if the Advisors are starting to feel a bit twitchy?

If AS is bogged down in DD then that would be a possible reason. The extension of that, as has been said before on this board, if that after the mother of all RNS's lands, there may be no opportunity to buy in. Accordingly, i've been nibbling (not chomping) on the shares of late.

GLA

Yes the price action suggests this is not a totally done deal. Hopefully the other II's will hold out for a better price.

Stockopedia has FY23 forecast eps of 27.7p so an exit multiple of 14.5. Seems very cheap given the long runway for growth in data centre and renewables.

Not easy finding good small caps like this so bit disappointed tbh, although i can see the strategic fit.

Starbright, there are a couple of different things going on here.

If Avacta sell the drug themselves then EV/revenue would be a useful shorthand to value the company. Operating profit would be a high percentage of revenue - if we assumed say 50% then 8.9 x's revenue is only 18 x's EBIT. Seems reasonable.

If instead Avacta licence the tech (my preference) then that is pretty much pure profit and the market would assign a similar multiple to that. So if we assume $150m royalties at 18x's give an EV of $2.7bn for dox alone.

Been holding here since 60p and topping up recently. I can't be certain they will be successful, but the £55m convertible is a massive clue IMO that they will be /have been.

ATB

Biglittle, as i said many moons ago i welcome dissenting views as it encourages me to regularly check my investment thesis. However, your posts don't seem to reflect the facts (the trade debtor position is clearly explained in their commentary plus see my post below on that and the cash position) so i too am kind of curious as to what your motivation is with respect to Frontier? Are you an ex-employee or something? I'm long the shares and happy with their performance to date, hence why i post here from time to time, but i'm struggling to understand why you continue to post (i'm assuming you don't own the shares!?)

The cash position was very clearly explained in the interims. Sales of Planet coaster were predominantly via Steam and therefore the cash from e.g. November sales would have been collected post period end (typically 30 - 60 days later). Debtors were £7m higher at end November than previous year end reflecting the high level of sales at launch. Not an issue as this will since have been received as cash. Interestingly, the new CFO has bought shares which i take as a very positive sign.

It's an interesting question as to what sales of Horizons might be. In terms of purchasers of ED I would guess that maybe one-third never got into it, one-third played for a while and moved on and a third are reasonably committed and will buy the expansion. Of course, since Horizons includes the original game plus next year's developments then it is far better value than the original ED and should attract some new players. The email update today states that in addition to planetary landings, it will include ship-launched fighters, multi-crew ships and customisable commander images. In addition, crafting will allow the creation of new equipment. That sounds like a more compelling game than the initial release. For what it's worth, my guess is that sales will be similar or possibly a little higher overall than ED. It's interesting that they are working closely with Valve on the VR side. I would expect Valve to really get behind the release as it seems like a game that's ideally suited for the VR market and Valve will be to keen to get critical mass with the first consumer-available hardware. Overall, I think things are moving in the right direction, and there seem to have a number of decent-sized buys in the last week or so which is encouraging, including some director buying. GLA

Revenue £22m, operating profit £1.25m, net cash increased, paid unit sales of E:D now in excess of 640k. Enough said! No doubt some will find fault with these numbers, but they look good to me. GLA

I will spell out my thoughts in a bit more detail to avoid any potential confusion. The screenshot shows revenue of £17.1m and unit sales of 614k giving an average unit revenue of £27.90. This is entirely consistent with initial sales achieving revenue of £33.33 and e.g. Steam sales at 70% of that i.e. £23.33 giving an overall average of £27.90. By revenue I mean gross revenue before any deductions. Card processing charges are likely treated as an overhead in my experience rather than a reduction in revenue. I would expect the company to pay around 1.5% on credit card transactions and perhaps 15 pence on debit card. Not peanuts, but not particularly material in the grand scheme of things. The beauty of software is that incremental costs are essentially zero so I am indifferent to them selling one unit at say £20 or 2 units at £10. GTA V was discounted in the Steam sale (and I assume Steam take some of the discount out of their cut) and the GTA franchise is the most successful in video game history in terms of sales value so I read nothing into ED being discounted similarly. If the discount results in a sufficient increase in sales to raise overall revenue then it is the right commercial decision. Frontier have bags of cash and this will likely have only increased since their half year results so they are in no financial difficulty. Really there is very little to say now until results are released late August/early September. See you all then and good luck all!

Are encouraging, and thanks to synthetic for posting those updates. Biglittle, those numbers sure look like sales figures to me (I'm assuming UK sales at £40 include VAT and therefore FDEV book revenue at £33.33 per unit on full price sales, so overall the average price achieved looks absolutely spot on to me). I've said previously that Frontier's success will be reliant on their ability to deliver ongoing development at a fast pace and it seems to me that they are doing so. The Mac release has happened, the Powerplay update has been generally well received and the Tournament mode (initially for Xbox) seems a good idea as a way of introducing console players to the steep learning curve in the game. From a business point of view they seem to have a clear roadmap to ensure that revenue remains strong. Sales to 31 May will have been boosted by the launch on Steam. Sales in the financial year starting 1 June 2015 will include Xbox sales and then going forward we have PS4 release, probably a paid expansion around planetary landing and then the rollercoaster game. As an investor in the business I am pleased that it is being managed as a business. A lot of the negative comments on various BB's and forums seem to have no concept of business at all! Overall then I feel the risks around this share have greatly diminished in the past 6 months whilst the upside is as strong as ever. The icing on the cake could be the uptake of VR such as Oculus etc as both E:D and the rollercoaster game appear ideal for VR.