Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
*Ladies and gents
:)
One point to note is, based on the latest investor presentation, Avacta is very well capitalised with runway to H2 2023 so has no need to raise again in the near future which is a very good thing given market conditions. Resilience in downturns like this is incredibly important and Avacta is well set up to face the industry headwinds.
Shown on slide 21 of the following:
https://avacta.com/wp-content/uploads/2022/02/Feb-2022-investor-presentation.pdf
Really interesting article in the FT on Biotech valuations falling recently that's worth a read. Feels like an industry-wide fall, which may well explain some of the shorts taking positions against the industry trend, not necessarily Avacta specifically.
https://www.ft.com/content/c90d17c6-6196-4c8a-88c2-e2cef9a692f2
Some key highlights:
- Dozens of biotech companies are running low on cash and face an uphill struggle to raise fresh funds after “tourist” investors who snapped up their shares during the pandemic abandoned the sector.
- Biotech groups, most of them lossmaking, raised a record $32.7bn in initial public offerings over the past two years, according to data from Refinitiv. But 83 per cent of recently listed US biotech and pharma stocks are now trading below their IPO price.
- Biotech groups that listed in 2021 are trading on average 37 per cent below their IPO price, compared with a 22 per cent fall for all newly US-listed companies.
- The biotech sell-off has been prompted by a confluence of factors, with investors seeking safer assets as central banks prepare to raise interest rates to fight soaring inflation. Others have concluded that industry stocks became overvalued at the peak of the pandemic, when positive news about Covid-19 vaccines and treatments helped lift the sector overall.
- "In the current economic environment, when not just our company but the biotech sector as a whole is undervalued"
- Big US and European pharma groups have up to $500bn of “dry powder” to spend on acquisitions but some bankers warn there is no guarantee that Big Pharma will turn on dealmaking and argue that low valuations are not the only factor when deciding whether to make an acquisition.
"I personally think that it could be next two weeks but a much higher likelihood next week."
One thing I have fast realised when researching is that those who put forth opinions on when news is due know nothing more than the rest of us. There is a huge amount of speculation around Avacta and very little, if any, has been accurate. You should ask yourself why people would share solid information on expected price movements with anonymous people on a bulletin board.
No one knows when the HUA is coming and if they do, they're highly unlikely to be sharing it here. It's all conjecture. But I really enjoy reading the board occasionally anyway!
One minor point is all approved 3 tests were approved on a Thursday (14/10, 14/10 and 21/10 respectively). Hard to take any comfort that it's a pattern from sample size of 3 but, given how process-drive government offices typically are, it wouldn't come as a surprise if Thursdays are the day for approvals. One to keep an eye on.
@GJE - very valid. Am speaking from inexperience of the process. You are right, as AS says, it may well be that they've been great and other issues have made it a little slower.
@Muck - true though the Novacyt share price is below where it was at April last year and has fallen from highs of 1,200 to around 250 now. Avacta's performance isn't a million miles off.
@Wyndrum - I don't know because I haven't seen sales figures or managed to have any reliable indication of them. Normally when investing, we'd have a seat on the board so we can track progress monthly. Here we only see results biannually and it sounds as though B2B sales only began in 2H21.
I can't comment on the reasons why sales may be good or bad - my theory is that the demand is there and growing so if I were doing a pre mortem and sales don't materialise, I'd guess it would be because of operational issues (approvals, manufacturing etc.) or a heavily competitive, price-driven market. Again, I think operationally things look and sound good. I also think we have enough to differentiate.
Overall, I see a good product and good team leaning heavily into a growing market so I'm hoping (and expecting) sales materialise.
I see plenty in Avacta that leads me to believe they have the ability to compete and succeed in the short- to mid-term in the LFT market and think there’s plenty of upside from that alone.
I don’t worry much about the trolls or the criticism – I’d be more surprised if things went smoothly to be honest. Inflection points will come over time as landmarks are achieved but the business has a solid base and should grow steadily. Personally, I wouldn’t worry about the short term share price (I appreciate margin calls dictate otherwise sometimes!).
Team continued:
• AS has been too quiet for many on here. To my mind he has no obligation to go above and beyond the standard AIM disclosure requirements and has only disclosed information when required to. A CEO should act in the long-term interest of shareholders and stakeholders – not in the interest of bumping up the share price on any small piece of news.
• They’ve engaged Medusa19 to handle D2C sales, putting faith in people who are experienced in manufacturing and distribution to consumers – an area well outside their expertise. The founders of Medusa19 are shareholders in Avacta so they’ve engaged people who are doubly incentivized to make a success of this.
• The slip-up here appears to be allowing Medusa19 to handle some of the regulatory burden such as HUA, an area they’re unlikely to be experienced in. Regardless, there’s clear, strategic expertise added to the team here though it’s likely to be a point-in-time problem that may not have to be faced again.
• Other key partnerships with Abingdon (manufacturing), BBI (manufacturing) and Mologic (commercial & manufacturing) show that there are plans in place to scale the business rapidly once the correct authorisations have been received and demand is in place.
All in all, the team is difficult to comment on and it’s hard to know what’s happening behind the scenes. Clearly there has been some overpromising but to my mind no big red flags. They’ve identified where they’re lacking and added strong expertise to address issues bringing products to market. They now look to have a good balance of science, business, manufacturing & distribution.
Product:
• LFTs are a broadly homogenous product. Competitive advantage can be achieved through 2 areas: cost leadership (e.g. superior manufacturing) or differentiation (e.g. accuracy, more pleasant testing method, better operations). I have no insight as to whether Avacta would be a cost leader but they have three points of differentiation (no brain tickling, very accurate, UK manufactures).
It remains to be seen how the market values their differentiators but, personally, I’m placing a bet that they’ll be viewed positively and help Avacta win out against others.
Summary:
When I look at all the issues and delays so far, I see operational blips in a highly regulated market which I’d expect. I don’t see anything that undermines the fundamentals of this investment case. It’s a large, growing market where brand counts for little and first mover advantage counts for little. Success is likely to depend on long-run operational excellence through manufacturing and distribution and hopefully from product performance as well as ability to bring new products to market in the face of new variants and new viruses. They appear to be underpinned by exceptional science which has led to a better, more accurate, more credible product than others too.
For what it’s worth, I decided to write down some of my thoughts on Avacta below focusing on Diagnostics. I’m not a regular AIM investor but I do work in venture capital so invest in lots of early stage business (admittedly usually pre-product or pre-revenue) so have some experience in assessing high-potential businesses. We usually look across 3 key areas, product, market & team. I’m not going to touch on AVA6000 for now because the economics of drug development are well out of my wheelhouse.
Market:
• They play in a large global market estimated around $7bn that’s growing fast with growth estimates around the high single digit area (6% - 9%). There’s a clear risk that the market will not exist once the pandemic is dealt with but there are plenty of indicators that point to the idea that the market will exist for the foreseeable 5 years+.
• The government is moving away from costly inaccurate PCRs to cheaper more readily available lateral flows which look as though they’re here to stay. A huge shift in Avacta’s favour.
• There are shortages of supply in the market, partly as a result of supply chain disruption. Avacta have a product manufactured in the UK which reduces some of the supply chain risk.
• A large part of the buying in this space is likely to be from public bodies and they’ve achieved a level of approval through the NHS Microbiology Framework already.
So to my mind, they’re playing in a very big market, that is facing acute and immediate problems, they have potential differentiators in a busy space, they have some (unproven) differentiators and have already begun making relationships with public bodies to access large buyers in the space. On the flipside, it’s wildly competitive, the consumer market will likely be entirely price-driven and, if they’re not included in approved government lists, they won’t have access to a key distribution channel that others will.
We can’t change the intense competition nor the pricing but getting approvals and getting in the right channels are really dependent on the ability of the team to execute. To my mind it would be great if the team had brilliant eCommerce/D2C experience to ensure they have a strong go-to-market strategy…
Team:
• AS & team are scientists developing amazing biotech that clearly has a variety of use cases. I can’t comment on their scientific credentials but can comment on a couple of things.
• They have listed on the AIM and raised significant capital and have a few reputable institutions amongst their shareholders. None of that is easy and alone, that is a positive and an indicator of credibility. I think AS speaks and presents well at results too.
Templar, are you saying you've heard it's due this week or just saying you hope it comes this week?
Annoyingly Wyndy & NDN have done exactly what they wanted and diverted attention away from the initial discussion which is interesting.
Do we know if that page is new or when it was added? Timster, you mentioned September 7th - is that the date the page shared by Energyshares was edited? How did you determine that out of curiosity?
In what way is this relevant to Avacta??
https://www.linkedin.com/posts/helenreynoldsresearch_achievement-of-pre-clinical-development-milestone-activity-6849257204046950400-CAIx
Posted yesterday. Good to see:
"More exciting news from Avacta. Please do contact me to confidentially find out more about new leadership and senior #opportunities within the Therapeutics business - both #drugdiscovery & #clinicaldevelopment teams. helen@vitaresearch.co.uk"
Code Junkie, how is it lazy? I'm assuming I'm not the only one who didn't find a way to see attendees. All I'd like to know is how to see them
Hi both, how did you see who was attending and can you clarify names of the big pharma companies who were please?
What are you on about?
"With the CE marked product registered in Europe we are pleased to be able to launch the test commercially across Europe"
Is this part news or is this just a repetition of what we already know? Feels like a low-key way to announce if news...
First time I saw this posted was early August on Avacta's Twitter feed. Firstly, good to see them sponsoring something (this is paid-for rather than an invite slot) which hopefully means they have a product to actively sell to the industry. I see they're now using the Avacta Diagnostics logo on the website instead of Avacta's standard one. Not a big deal but clearly actively pushing Diagnostics as its own division now. Will be interesting to hear them speak about their own LFTs.
Secondly, AS is signed up to speak at the Biocap Conference at 1.25pm on Sept 30th on life as a CEO of a listed Life Sciences Company. Perhaps ambitious but you'd like to think that given interim results are being given at 1030am, he's not anticipating a huge backlash/fire to fight off the back of it and, hopefully, will be wanting to go into that conference off the back of good news. Can't be a good look releasing bad results with an SP fall before going to a conference to discuss life as a listed business...
https://bionow.co.uk/event/BIONOW099/2021-biocap-conference