Company Overview

Avacta (AIM: AVCT) is a UK-based company that specializes in proprietary diagnostic tools, consumables and reagents for life sciences.

It has developed the Affimer, an alternative to antibodies and aptamers, which is based on a small protein scaffold that can be engineered to bind with high specificity and affinity to a wide range of protein targets.

Affimer technology can be used for a wide range of applications in diagnostics, drug/biomarker discovery and biotech research & development. They can also act as therapeutic agents.In January 2020, Avacta and Korea's Daewoong Pharmaceutical formed an immunotherapy-focused joint venture to develop the next generation of cell and gene therapies incorporating Affimer proteins to enhance the immune-modulatory effects.

Financial Investment

On January 29 2021, Avacta Group issued 3,000 new ordinary sharesof £0.10 ($0.14) each in the company; this enlargedthe issued share capital by 0.01% to 252,655,554.

Avacta has attracted investment from several partners including LG Chem,which signed a multi-target development partnership and licensing deal worth up to $310 million with $2.5 million up-front, $5.5 million in near-term milestones, royalties on future products and full research costs.

In October 2019, Avacta entered a collaboration and option agreement with ADC Therapeutics, a clinical-stage oncology-focused biotechnology company pioneering thedevelopment of highly potent and targeted antibody-drug conjugates for patients suffering from hematological malignancies and solid tumors.

The agreement is to develop Affimer-drug conjugates combining Avacta’s Affimertechnology with ADC Therapeutics’ pyrrolobenzodiazepine (PBD)-based warheadand linker technologies.

ADCT will fully fund the project and provide undisclosed development milestones and single-digit royalties on future sales.

In 2015, Moderna established a multi-target research collaborationwith Avacta; the commercial option exercised in 1Q19 to take one or more Affimer lead molecules in clinical development.

On January 8, 2020, Avacta and Daewoong Pharmaceutical (KSX: 069620) established joint venture AffyXell Therapeutics, to develop novel mesenchymal stem cell (MSC) therapies.

On February 1 2021, AffyXell Therapeuticsclosed a Series A venture capital investment of $7.3 million to further develop its pipeline of next generation cell and gene therapies.

Avacta’s shares closed up 2.4% at 126 pence on the back of this news. As of February 25, 2021, Avacta (AVCT) has a market capitalization £482 million, with 253 million issued shares trading at 194p. In recent months, volatility has seen the share price range from 112p to 198p.

Avacta’s Share Price Performance, November 2020 - February 2021

Avacta's Financials

Income

Earnings

Cash Flow

Balance

Intellectual Property

Avacta has developed two proprietary platforms - Affimer biologics and pre|CISION tumor-targeted chemotherapies. The Affimer platform is an alternative to antibodies derived from a small human protein designed to speed up the time taken to generate new antibodies, improve specificity and reduce the cost of manufacture.

Avacta's pre|CISION targeted chemotherapy platform releases active chemotherapy in the tumor, limiting the systemic exposure and improving the safety and therapeutic window of the anti-cancer treatments.

Avacta has exclusive rights over the Affimer technology intellectual property through a number of granted global patents and patents pending.

Portfolio Analysis

Avacta's Therapeutics Division is combining its two proprietary platforms Affimer and pre|CISION, to develop durable anti-cancer immunotherapeutic agents. The company has adopted a two-pronged approach. Firstly, co-administering combinations of an immune checkpoint modulator (such as programmed cell death -1 (PD-1), or programmed cell death ligand 1 (PD-L1), with chemotherapy.

Secondly, developing novel tumor microenvironment activated (TMAC) drug conjugate where the pre|CISION substrate is incorporated into the linker that joins the chemotoxin (chemotherapeutic) and the Affimer immunotherapy (PD-1/PD-L1) into a single drug molecule; the linker is cut by the FAP enzyme in the tumor microenvironment releasing and activating the chemotherapy in the tumor alongside the Affimer immunotherapy.

Avacta has established drug development partnerships with pharma and biotech, including a research collaboration with Moderna Therapeutics (2015), a deal with LG Chem (2018) worth up to $400m, a partnership with ADC Therapeutics (2019) and a collaboration with Point Biopharma (2021) to develop radiopharmaceuticals based on the pre|CISIONplatform.

In June 2019, Avacta agreed a strategic partnership with Selexis, to develop a Chinese hamster ovary (CHO) cell line that will be used to manufacture Avacta’s first Affimer clinical candidate AVA004, a PD-L1 checkpoint inhibitor, for first-time in-human clinical trials. This partnership reinforces Avacta’s strategy to demonstrate safety and tolerability of the Affimer platform in humans and ultimately to combine AVA004 with other Affimer checkpoint modulators in bispecific cancer immunotherapies.

Background and Development for lead assets

AVA6000 (Pro-doxorubicin)

On February 18 2021, Avacta received approval from the Medicines and Healthcare Products Regulatory Agency (MHRA) for a Phase 1 Phase 1 first-in-human, open label, dose-escalation and expansion study of AVA6000 Pro-doxorubicin, the Company's lead pre|CISION prodrug, in patients with locally advanced or metastatic selected solid tumors.

The dose-escalation phase of the study, will be carried out in between 15 and 20 patients, to evaluate the safety of AVA6000 in humans and establish the appropriate dosing levels for the dose expansion phase of the study. The dose expansion phase would consist of up to three studies in specific tumour types to further evaluate safety and tolerability, and to explore the anti-tumour activity of AVA6000 when administered as a monotherapy; this phase of study would comprise between 45 and 60 patients in total.

Avacta believes that AVA600, pro-drug of doxorubicin could offer a safer and more tolerable profile than traditional and liposomal doxorubicin formulations allowing it to be used more widely in a broad range of patients including those with age-related risks and who cannot currently tolerate high chemotherapeutic loads. In addition the pro-drug formulation may lend itself to be combined with approved immunotherapeutic agents including the checkpoint inhibitors (PD-1/PD-L1 – AstraZeneca/MedImmune, BMS, Merck, Roche/Genentech/Pfizer and CTLA-4 – BMS/AstraZeneca/MedImmune) inhibitors and tyrosine kinase inhibitors (Bevacizumab, Genentech, Cetuximab – Eli Lily/Merck KGaA, Trastuzumab - Roche/Biocon/Mylan), potentially expanding AVA600’s therapeutic use in a wide variety of solid tumors.

Current Competition

Doxorubicin is a well-established chemotherapy agent that is generically available and marketed by leading companies including Abraxis, Bristol-Myers Squibb and Pharmachemia (Adriamycin/Adriamycin RDF/Adriamycin PFS, Rubex). Doxorubicin is also available as liposomal formulation from Johnson & Johnson (Doxil/Caelyx), Sun Pharma (lipodox) and Teva (Myocet) and others, which offers improved safety and tolerability compared to standard formulations however its use may still be limited due to age-related risks and cardiotoxicity.

The global liposomal doxorubicin market size was valued at $1.08 billion in 2020 and US liposomal formulations account for around 50% of sales Doxorubicin use is forecast to increase due to rising breast and ovarian cases and growing awareness of the benefit of novel formulations over traditional doxorubicin.

U.S. liposomal doxorubicin market, by product, 2013 - 2024 (USD Million)

Several other companies are working on prodrug doxorubicin formulations including NantKwest, Inc. Aldoxorubicin (INNO-206 – Phase 3), and Bristol-Myers Squibb Matrix metalloproteinase-activated doxorubicin prodrugs.

SARS-CoV-2 rapid antigen test for Covid-19

Avacta’s lateral flow SARS-CoV-2 rapid antigen test for Covid-19 preliminary data suggests the test has 96.7% sensitivity and 100% specificity based on anterior nasal swab samples from 30 Covid-19 positive patients and 26 negative individuals. Avacta is now progressing to a full clinical validation with a larger number of patient samples in order to obtain a CE-mark for the test for professional use, aiming to bring the test to market in Europe around the end of the first quarter 2021.

Current Competition

In 2020, the lateral flow assay (LFA) test market was estimated to be worth around $6.51 billion and is dominated by major manufactures including Abbott, BioRad Laboratories, Danaher Corporation, F. Hoffmann-La Roche, Johnson & Johnson and ThermoFischer.

In order to allay recent government speculations regarding the tests sensitivity and specificity Avacta will need to provide greater transparency to maintain investor confidence, and provider full clinical validation of the test particularly with respect to the risk of false positive and obtain a CE marking enabling it to be market in the UK and for broader commercialisation.

Avacta SWOT analysis

Senior Management

Alastair Smith Chief Executive Officer, Executive Director

Alistair is the founder of Avacta, a biotech start-up with around 80 staff in two sites in Wetherby and Cambridge, and has been responsible for leading the management, strategic development and fund raising for the company since IPO on AIM in 2006. Since 2012 Alastair has raised over £50m for Avacta to develop and commercialise Affimer proteins. Avacta is focused on novel immunotherapies for cancer and will be in the clinic with its first programme in 2020. Alastair has a degree and PhD in Physics from Manchester University and, after working in the US for a period, took up a position at Leeds University in 1995. At the age of 38 he was awarded the Chair of Molecular Biophysics and grew, over ten years, one of the leading biophysics research groups in Europe. He left his academic career in 2007 to focus full time on building value for Avacta shareholders.

Tony Gardiner Group Chief Financial Officer

Tony joined Avacta from AHR, an international architecture and building consultancy practice, where he has held the role of Finance Director since 2011.Between 2007 and 2011, Tony was the Chief Financial Officer of AIM listed Fusion IP plc, an IP commercialisation company, which was subsequently acquired by IP Group plc in 2014. There, he played a key role in supporting the Chief Executive Officer in growing the business and oversaw all finance activities as well as directly supporting life sciences and health technology companies in Fusion’s portfolio. Tony has also held senior finance roles within Eversheds LLP, KCOM Group Plc, Eldon Electric Ltd and Hickson International Plc.

Neil Bell Chief Development Officer

Neil is responsible for late stage pre-clinical and early clinical development of Avacta’s pipeline of pre|CISION pro-drugs and Affimer immunotherapies. Neil has over 30 years’ experience in the drug development industry, having held senior positions in global pharmaceutical companies and innovative biotechs. The early part of his career was spent in clinical development at Eisai and Pfizer before becoming Therapeutic Area Head for Gastroenterology and Neurology at Ipsen. In each of these roles he led numerous Phase I to III clinical studies, gaining significant experience across all facets of drug development; from strategy to pre-clinical development, manufacturing and regulatory, to clinical study design and implementation. In his role as Head of Global Clinical Operations for Teva Pharmaceuticals, Neil led an international team responsible for the delivery of clinical programmes in neurology, autoimmune and oncology therapeutic areas. Most recently, Neil held the role of Senior Vice President, Head of Global Clinical Operations at Autolus, a UK cell and gene therapy company backed by Syncona, which listed in the US in 2018 (NASDAQ: AUTL); a process in which Neil played a key role. At Autolus Neil was responsible for building a fully functional global clinical operations team delivering Phase I/II clinical studies across the UK, Europe and US in acute lymphoblastic leukemia, multiple myeloma, B-cell lymphoma, and T-cell lymphoma, and implemented the first commercially sponsored CAR-T study in the UK.

Amrik Basran Chief Scientific Officer

Dr Amrik Basran has over 14 years’ experience of both the biotech and pharma industries. He completed his degree and PhD at the University of Leicester and has a background in protein biochemistry/engineering. He then spent 6 years as a post-doctoral researcher at the Institute of Biotechnology, Cambridge University isolating novel bacterial pathways involved with the metabolism of illicit drugs and high explosives. In 2002, Amrik then joined Domantis, a start-up biotech company based in Cambridge developing domain antibodies (dAbs), a novel antibody fragment technology.  As Director of Protein Sciences, he was responsible for characterising the lead dAbs from early discovery for their suitability for drug development, supporting pre-clinical evaluations and tech transfer to CMOs. Domantis was acquired by GSK in 2006, after which he became Head of Topical Delivery (Biopharm Discovery Unit), supporting the development of biotherapeutics across the GSK portfolio. The group focused on discovering and developing a wide range of therapeutic antibodies, dAbs and proteins for delivery into the eye, skin and lung. This included developing formulation and delivery strategies for biotherapeutics for Phase I clinical studies. Amrik left GSK in 2012 and joined Avacta in 2013 as Chief Scientific Officer to develop the Affimer platform for therapeutic use, focusing on immuno-oncology where there is a high unmet medical need for new novel drugs to improve the long-term clinical outcome for cancer patients.

CEO Quotes

"Our Mission is to shape the future of medicine by developing novel cancer therapies and powerful diagnostics using our proprietary Affimer and pre|CISIONTM platforms.
With these platforms the company is able to develop novel cancer therapies to address the well-known lack of response of most patients to standard immunotherapies, and to develop powerful diagnostics for a wide range of diseases.

Avacta will take its first pre|CISIONTM pro-drug, AVA6000 pro-doxorubicin into the clinic in mid-2021. Positive pharmacokinetic (PK) data before the end of 2021 will not only create a value drug asset in the form of AVA6000 but also open up a very valuable pipeline of safer chemotherapies modified with the pre|CISIONTM chemistry.

The company expects to generate multiple additional Affimer and pre|CISIONTM drug candidates in 2021 which will be developed and taken into the clinic.

Avacta has also created a significant commercial opportunity in Covid-19 testing through the development of a rapid antigen test using Affimer reagents that detect the SARS-CoV-2 virus spoke protein. The company expects to CE mark the AffiDX SARS-Cov-2 test for professional-use around the end of Q1 2021 and to begin generating substantial revenues from sales of the test in Europe shortly after."