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Hardman & Co

Avacta Group Plc Wake-up call for the market

Hardman & Co Report Report DownloadsAvacta Group Plc (LON: AVCT) is a pre-clinical stage biotechnology company and the proprietary owner of Affimer technology. Affimers represent a radical alternative to the established antibody technology. The significant technical and commercial benefits of Affimers are being recognised increasingly through corporate and academic interest, ongoing evaluations, and deal flow. AVCT has just concluded an Affimer therapeutics development and commercial agreement with the global pharma company, LG Chem, worth up to $310m in upfront and milestone payments. This represents a huge endorsement of the Affimer platform.

Strategy: AVCT is aiming to commercialise its Affimer technology through licensing for research and diagnostics, and by identifying and developing its own proprietary therapeutic pipeline for partnering. AVCT has sufficient cash resources to identify an Affimer lead to be ready for first-in-man trials in 2020.

Major licensing agreement: AVCT has announced a licensing deal with LG for the discovery and development of Affimer therapeutics in oncology and inflammatory disorders, potentially worth up to $310m in upfront payments and near-term and long-term milestones. Royalties would also be payable on net product sales.

LG Chem: Part of the multinational conglomerate, LG Group, this Korean-based company has a strong position in marketed life science products and in developing new biologicals through to commercialisation. It is an excellent and valuable partner for AVCT, and likely paves the way to further major deals.

Risks: Affimers represent a new disruptive technology, and the potential customer base has taken some time to recognise their advantages. While all new drug development carries a high risk, AVCT has hit a number of important milestones over the last two years which have reduced the risk profile greatly.

Investment summary: AVCT has made considerable progress towards its goal of having a number of commercial partnerships for its Affimer technology, as well as developing its own proprietary Affimer-based drugs and growing a separate profitable reagents business. 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.