The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
I’ll have a go at this.
The UK is looking for in the order of 100m tests a week for a minimum of two years (for population of 60m testing 2x per week).
If we assume similar rates across US, Canada, EU, etc - say 1bn people total, maybe 2bn tests a week for two years - 200bn
tests total there or thereabouts.
I find it much harder to think about the demand in other markets - Asia, Africa, Latin America, I suspect smaller but still substantial and 6x the population above. For arguments sake let’s call it another 200bn tests though it could easily be higher.
So we’re at 400bn tests if we assume demand drops to exactly zero in two years time, I find that unlikely although I suspect it will reduce, maybe we get down to 20bn as year on an ongoing basis - call it a further 10 years so 600bn total demand in the next 12 years (note there were nearly 5bn airplane passengers in 2019 so flight testing alone could get close to this if they take multiple tests per flight never mind every other use case).
So 600bn total demand at let’s say £5 per test = £3 trillion on LFTs over the next decade and a bit globally (note the global costs of one year of the pandemic were more than 10x than number so still an excellent investment case if it brings it under control).
If, on a conservative basis, we assume the owners of the IP of those test generate £1.50 profit per test that is a £900bn potential profit pool over 12 years before tax.
If Avacta could take even 10% of that and no value was given for anything else in the business that’s a £90bn valuation (£333 SP) before tax and depreciation. Let’s halve that and say £160 SP potential after tax and depreciation if the above scenario played out and Avacta took 10% of the global LFT profit pool.
I admit this sounds hugely rampy and I don’t expect things will play out as neatly as this (assumes lots of extrapolation, large populations happy to test twice a week for two years, etc) but even if you don’t buy anything like these assumptions you can see how easy it is to get very excited about the global potential of a best in class LFT.
Mondays are by far the day when Avacta typically release big news (check dates of previous RNSs, not exclusively Mondays but often are).
I’m pretty certain they will want some space between announcing clinical validation and annual results, I just cannot see them being announced at the same time. We must be there or there abouts with the CV data. If I were a betting man I’d say Monday looks the most likely day and that we’ll have good (excellent) news, an interview about the LFT then clear the way for a broader business update on the Thursday. Exciting times!
For a detailed overview Myles McNulty(a former professional small cap analyst turned investor) wrote some excellent papers last year. I’d strongly recommend the update two part three as a comprehensive overview of the value in Avacta. Myles admits he got his timing wrong but also dramatically undercalled the scale of the LFT potential, best that in mind when you look at the valuations:: https://aimchaos.com/category/investment-notes/
Finally if you do nothing else definitely, definitely watch this recent interview with the CEO: https://youtu.be/lzenLmpNhxs
Oh and check out this article from a few weeks ago: https://www.huffingtonpost.co.uk/entry/five-minute-covid-test-nightclubs-moonshot-plan_uk_602fee6fc5b67c32961d49a
Stand by this and not long to go now:
£5+ with market leading CV
£7+ with 10m a month volume
£10+ as the sovereign test
£15+ if exporting reagents to other markets
£20+ if selling 50m or more tests a month
£30+ in a couple of years with covid revenue paying for all therapeutics pipeline with no further dilution
Or quite possibly diagnostics sold off for somewhere between £5-10bn then a world beating therapeutics business developed independently
Whatever way you look at it the path is clear to massive, massive upside from here and the CV expected any day now is the key
£5+ with market leading CV
£7+ with 10m a month volume
£10+ as the sovereign test
£15+ if exporting reagents to other markets
£20+ if selling 50m or more tests a month
£30+ in a couple of years with covid revenue paying for all therapeutics pipeline with no further dilution
Or quite possibly diagnostics sold off for somewhere between £5-10bn then a world beating therapeutics business developed independently
Whatever way you look at it the path is clear to massive, massive upside from here and the CV expected any day now is the key
It’s definitely a buy. It’s the highest priced transaction for more than an hour and significantly higher than the obvious sells going on towards the close. You don’t sell that many shares and get a much better price.
Whoever made that trade was happy to shell out £380k at a great price at the end of a slow day when the price had slid. They’ve done well
Totally agree.
Nothing at all to suggest anything other than finishing validation and nothing remotely to suggest it won’t be as good as the initial validation which would make it world class - especially given the sample collection method.
I also agree, it’s obviously the manufacturers are waiting to be told which test to produce (in fact, not just obvious but announced by ODX) seems a near certainty to me that’s because Avacta’s results are so close and expected to be best in class.
Any day now Avacta will announce results of CV and CE mark and I believe (very substantial) contracts will follow very soon afterwards. It’s also not inconceivable that results and orders could be announced on the same day and I can’t wait to see the gap up on open if that does happen - it could be measured in pounds!
Pretty certain we will hear about the LFT before the results.
They will want to get that news out, give it time to breath then give themselves time to prepare for full results, analysts briefings, etc which will be about much more than the LFT.
I still think LFT news this week or Monday at latest
Here’s my thinking:
Avacta didn’t need to announce next week for results, as commented elsewhere they could do this any time in the next two and a half months.
They aren’t going to will fully go into results with so much open speculation around the LFT when they don’t need to.
Full results take a lot of prep time. I imagine next week will be filled with getting ready for it, rehearsals, etc.
Strongly suspect therefore that LFT news will come this week, do the interviews, etc around that then have a clear run next week at the results with that big distraction out of the way.
I hold TILS in both an ISA and SIPP with Barclays. Neither allows me to hold US listed shares.
Anyone know what will happen with my Accustem shares given the above. Assume I will still get them but will miss out on the benefits of them being in those wrappers?
Given recent news on LFTs, how close we are to major announcements, etc, I suspect we have a number of new potential investors looking at Avacta. Here’s a quick summary:
Avacta have two divisions, testing / diagnostics (principally focussed on Covid-19 right now) and therapeutics (principally focussed on cancer). We have three Covid tests, BAMs and Elisa have some potential but its the lateral flow tests that are most of interest right now. We announced early results a month or so ago showing our LFT to be much higher quality than the Innova test that is currently being bought for £billions by the UK government. The Innova test is also Chinese and the UK government are committed to a UK / sovereign test. CE marking and final validation are expected any day then the door could be open to millions of sales a week. The anticipated sales price is circa £5-7 (more to private organisations) and analysts have quoted a 35% margin expectation. The reason the test should be so good is that it uses our proprietary Affimer technology (put simply like antibodies but much smaller, better and cheaper), no one else can produce a test using this tech so there is also lots of potential to licence it around the world.
The therapeutics division is even more exciting though not as immediate. It is based on two platforms, Affimers (as above) and Precision. Both have rock solid IP. The most exciting use cases are making existing chemotherapies better. Basically the tech allows a drug to be much more targeted in the cells it attacks so existing drugs could be used in higher doses and for much longer. A huge advantage here is the scalability and the relatively fast time to market as it makes existing drugs much better. Many (myself included) believe the therapeutics business could / should be worth many billions in the years to come,
In addition to the above we have numerous partnerships worth £hundreds of millions with major pharma companies keen to use our IP in numerous areas. Check out LG Chem and Daewong (two huge multi billion South Korean pharmas for examples). We also have £50m cash in the bank and the expectation that LFT revenues will mean no further fundraisers ever needed.
That’s a summary. Now check out these Twitter feeds for high quality analysis:
BBN: twitter.com/bigbitenow
Myles McNulty: twitter.com/MylesMcNulty
Ophidian: twitter.com/Ophidian18
For a detailed overview Myles (a former professional small cap analyst turned investor) wrote some excellent papers last year. I’d strongly recommend the update two part three as a comprehensive overview of the value in Avacta: https://aimchaos.com/category/investment-notes/
Finally if you do nothing else definitely, definitely watch this recent interview with the CEO: https://youtu.be/lzenLmpNhxs
Oh and check out this article from a few weeks ago: https://www.huffingtonpost.co.uk/entry/five-minute-covid-test-nightclubs-moonshot-plan_uk_602fee6fc5b67c32961d49a
I would love a positive update and immediate suspension.
Imagine where we could get to if we announce the best test in the world then suspend, no-one would be able to sell on the news, no-one could manipulate the SP and Avacta could put some deals together over a month or two announce then them unsuspend with a massive increase in SP.
If I remember correctly EUA went into a suspension at around 3p then came out at 18p or there or thereabouts. Imagine if we went into suspension at £2.70 and came out at >£10.
I don’t think it’s likely but it would be wonderful to see
Hi, I’m aware results are due tomorrow and can see the value in the EBITDA / EV ratio and that this is significantly undervalued.
I’m looking at investing today ahead of results but just trying to work out position size.
Someone below mentioned that the next chapter of Tharisa is about to begin with results tomorrow. Would you mind enlightening me on what is about to change please - I’m seeing a strong undervalued business but not sure if there is another catalyst that I’m missing. Thanks
Not being funny but anyone describing BBN as poorly researched is way off the mark. He is probably the best researched poster on Twitter across all of fintwit and he is excellent on Avacta. I’ve been very impressed with his new blog - Bushveld Minerals themselves even complemented him on his blog about them
All falling into place.
This is a really important step as we know QR codes are on the essential list of government demands. Interesting timing too coming out just after the market closed on Friday. Ready for a Monday RNS from one of their partners perhaps!
Tell me about it Spacetomato - I’m in both!
4D and TILS are both awesome businesses and valued well below their peers despite being well ahead of them but caught up in the Woodford sell of and SPs not yet recovered. Both dual listed with Nasdaq and certainly not a silver bullet although I like to think with the right catalyst it could help them fly.
I have a much bigger position in Avacta and am not convinced we need Nasdaq although if we did a merger with a SPAC seems to be the quickest and simplest way to go about it
Yes. 4D ‘merged’ with the SAPC LOAC which gave them a US listing and access to the cash in the LOAC shell.
It’s definitely the fastest way to get to a Nasdaq listing although some 4D holders got very excited about the money that would flood in when on Nasdaq and the SP hasn’t moved much since. Does set them up very well for the future but it’s not a short term shot in the arm for the SP