Avacta Group

Just a few days after we published our article on Avacta last month, the Group announced a small fund raising of £1.3 million. In our article we noted the need for a small fund raising as a negative point and thus, now completed, this negative is removed. We contacted Dr Alastair Smith, Chief Executive, for his comments:

‘Avacta has spent the last couple of years working intensively to develop our own innovative and novel products to address clearly identified needs in two substantial life sciences markets that will drive the long term value of the Group.’

‘We have established a direct sales capability through two market facing businesses that combine product and service revenues and now the company is genuinely at a pivotal point, going from an early stage product development focus to commercialisation focus. Although general market conditions are clearly tough and affecting the speed of roll out of our first product Optim, there is strong interest from customers and from large potential commercial partners. Avacta only needs to be given time in the current markets to capitalise on the hard work of the past couple of years.’

‘The recent fund raise has provided the Group with working capital to support it through the early commercialisation phase of its products and to expand the range of consumables to be used with these products which crucially drive the growth in recurring revenues and long term value of the Group. Alongside the delivery and commercialisation of these core products and services, Avacta has managed to maintain a strong element of innovation, typified by the novel approaches to data analysis for personalised medicine that are discussed in this article.’

Alastair continued ‘Whilst still “pre-profit”, much of the risk is mitigated through Avacta’s multiple product approach which makes it very far from a ‘one trick pony’ and I am confident that investors will be rewarded in the longer term with significant value growth from core products and the pipeline of future products’.

Broker’s note

In addition, a new comprehensive broker note from House Broker Xcap was issued on the 16 July 2010, setting a one year target of 1.6 pence.

Key financial metrics include estimated revenues of £2.2 million for 2010, £3.4 million for 2011 and £7.7 million for 2012, with respective operating losses of £1.8 million (2010), £0.5 million (2011) and an operating profit of £0.9 million (2012).

Most importantly, the note makes particular emphasis of these facts:

That Midas launches in the Autumn 2010
That Heads of Agreement have been finalised with “several global commercial partners and distributors for Optim and for its research and diagnostic services”
The broker also made performance comparisons between competing machines within Avacta’s Optim product space:- GW Healthcare’s Microcal VP DSC machines need a 0.5ml sample size, 500 more times than Optim requires and Perkin Elmer’s HT DSC takes 40 hours to analyse 96 samples, versus 4-5 hours for Optim and needs over 20x the sample size.

One final comment centres around the take up of Optim users. At the time of writing, 4 units have been purchased. Avacta has decided to offer early adopters a discounted price provided that a commitment is made to a consumable usage contract.

Aimzine believes that patience could favour the brave with Avacta and that more positive news on the official launch of Midas and further successes re sales of more Optim units may give the shares a long overdue lift.