Looking further forward, Itaconix has a vast addressable...
Avacta Group Plc (LON:AVACT) has recently finalised a co-development partnership with Boston-based Bach BioSciences, to exploit the potential of the Affimer platform for the development of a novel class of drug conjugates.
This new kind of drug conjugate will allow for the release of potent drug therapies in the tumour micro-environment (TME) and will strongly benefit from Affimers' ability to bind specific targets selectively expressed by tumour cells.
The collaboration between Avacta and Bach Biosciences is now focusing on the conjugation of an Affimer anti-PD-L1 checkpoint inhibitor with an I-DASH inhibitor.
In fact, Avacta and Bach BioSciences are developing a truly novel drug conjugate concept. Up to now, antibody drug conjugates essentially worked with cellular targets that are frequently internalised, such as HER2 in breast cancer, so that an intracellular enzyme could then cut the linker between the antibody and the chemo drug, inside the cell.
Based on this "old" paradigm, PD-L1 would not be an ideal target for drug conjugates, as cancer cells don’t internalise it very often; however, Avacta and Bach BioSciences anti-PD-L1 Affimer drug conjugates will allow for the delivery of cytotoxic and immuno-modulatory agents, such as the I-DASH inhibitor, in the TME (rather than inside malignant cells). The linker between the Affimer and the drug is then severed by enzymes that are selectively overexpressed in the TME, allowing for the use of compounds with a toxicity profile that is too high for a traditional systemic administration.
The I-DASH inhibitor, an activator of a macrophage-driven inflammatory response meant to clean up cancer cells, has been selected because its pharmacological properties have already been well characterized, but of course Affimers could be conjugated with a fairly wide range of small molecules with cytotoxic or immuno-modulatory anti-cancer effect.
A broad patent protection covering this innovative Affimer-drug conjugates technology and its potential applications has been jointly filed by Avacta and TUFTS University.
Avacta retains exclusive rights for the commercialisation of the therapies coming out of this partnership.
In the coming months the collaboration will focus on the development of stable Affimer I-DASH conjugates. In-vitro data are expected to be available in the first half of 2019 followed by in-vivo efficacy data around the third quarter of 2019, paving the way for a lucrative pre-clinical licensing deal.
The IND filing for Avacta's leading Affimer therapeutic programme - a PD-L1 LAG-3 bi-specific blockade - remains on track for the back-end of 2019, following in-vivo studies that should complete early in 2019.
Furthermore, since our most recent report published in April, Avacta has reported a successful outcome for an in-vivo PoC (proof of concept) study run by FIT Biotech, where Affimers' production by the leg muscle in mice was obtained using FIT's unique gene delivery technology. After a single administration, clinically relevant levels of Affimers were detected in the blood stream for at least 30 days; the companies are now in the process of defining the optimal development plan for this project.
On the Moderna collaboration front, Avacta has delivered on its part and Moderna is currently evaluating the best use of Affimers for their high-priority pipeline programmes.
Figure 1: Avacta's target markets by segment
Source: Company presentation
The addressable market for Affimer-based targeted biologic therapies is already worth in excess of US$75bn and is growing rapidly. Despite no shortage of competitors, Avacta's Affimer platform’s unique features put the company in a favourable position to secure more partnerships of the kind recently signed with Bach BioSciences, and, we are confident, with big pharma too.
Figure 2: Key Affimers' competitive advantages
Source: Company presentation
With a cash balance of £8.3mln at the end of January 2018 and an estimated cash burn rate of around £8mln per year, we expect the company to raise capital before the year-end.
Proceeds would ideally cover research & development (R&D) and operating expenses for about two years, until the next key inflexion point, in the form of either a pre-clinical licensing deal or the first in-human data expected in 2020.
Figure 3: Comparable peers market cap
Source: CN analysis, Bloomberg (rounded, as of 25/7/2018)
While Avacta's stock price is probably being penalised by a widely expected rights issue in the coming months, we would argue that this may provide an extremely attractive entry point for investors interested in capitalising on the long-term commercial potential of the Affimer therapeutic platform.
In this respect it is also worth mentioning Ablynx’s US$4.8bn takeover by Sanofi in January 2018. The valuation of Ablynx, which has the leading non-antibody therapeutic platform, at the time of the deal reflected, of course, the fact that their lead drug was already under regulatory review, but a large portion of it was in our view related to the value attributed to their rich pipeline and their platform technology called Nanobodies.
We have updated our chart showing the key milestones expected in the near term for the numerous in-house and external programmes.
Overall the key inflexion points for Avacta's valuation would be a pre-clinical licensing deal with big pharma (possibly following the PD-L1/I-DASH drug conjugate's in-vivo data in the third quarter of 2019) and the first in-human data for the PD-L1/LAG-3 programme in the course of 2020.
Figure 4: Key upcoming milestones
Source: Company data, CN analysis
LEGAL NOTICE – IMPORTANT – PLEASE READ:
Proactive Research is a trading name of Proactive Investors Limited which is regulated and authorised by the Financial Conduct Authority (FCA) under firm registration number 559082. This document is published by Proactive Research and its contents have not been approved as a financial promotion by Proactive Investors Limited or any other FCA authorised person. This communication is made on the basis of the 'journalist exemption' provide for in Article 20 of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and having regard to the FCA Rules, and in particular PERG 8.12.
This communication has been commissioned and paid for by Avacta Group PLC and prepared and issued by Proactive Research for publication. All information used in the preparation of this communication has been compiled from publicly available sources that we believe to be reliable, however, we cannot, and do not, guarantee the accuracy or completeness of this communication.
The information and opinions expressed in this communication were produced by Proactive Research as at the date of writing and are subject to change without notice. This communication is intended for information purposes only and does not constitute an offer, recommendation, solicitation, inducement or an invitation by, or on behalf of, Proactive Research to make any investments whatsoever. Opinions of and commentary by the authors reflect their current views, but not necessarily of other affiliates of Proactive Research or any other third party. Services and/or products mentioned in this communication may not be suitable for all recipients and may not be available in all countries.
This communication has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Before entering into any transaction, investors should consider the suitability of the transaction to their individual circumstance and objectives. Any investment or other decision should only be made by an investor after a thorough reading of the relevant product term sheet, subscription agreement, information memorandum, prospectus or other offering document relating to the issue of securities or other financial instruments.
Nothing in this communication constitutes investment, legal accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate for individual circumstances or otherwise constitutes a personal recommendation for any specific investor. Proactive Research recommends that investors independently assess with an appropriately qualified professional adviser, the specific financial risks as well as legal, regulatory, credit, tax and accounting consequences.
Past performance is not a reliable indicator of future results. Performance forecasts are not a reliable indicator of future performance. The investor may not get back the amount invested or may be required to pay more.
Although the information and date in this communication are obtained from sources believed to be reliable, no representation is made that such information is accurate or complete. Proactive Research, its affiliates and subsidiaries do not accept liability for loss arising from the use of this communication. This communication is not directed to any person in any jurisdiction where, by reason of that person's nationality, residence or otherwise, such communications are prohibited.
This communication may contain information obtained from third parties, including ratings from rating agencies such as Standard & Poor's, Moody's, Fitch and other similar rating agencies. Reproduction and distribution of third-party content in any form is prohibited except with the prior written consent of the related third-party. Credit ratings are statements of opinion and are not statements of fact or recommendations to purchase, hold or sell securities. Such credit ratings do not address the market value of securities or the suitability of securities for investment purposes, and should not be relied upon as investment advice.
Persons dealing with Proactive Research or members of the Proactive Investors Limited group outside the UK are not covered by the rules and regulations made for the protection of investors in the UK.
Notwithstanding the foregoing, where this communication constitutes a financial promotion issued in the UK that is not exempt under the Financial Services and Markets Act 2000 or the Orders made thereunder or the rules of the FCA, it is issued or approved for distribution in the UK by Proactive Investors Limited.