Avacta Group - Exciting partnership with Bach BioSciences

Written by Riccardo Lowi


  • Key collaboration signed with Bach BioSciences gets the second Affimer therapeutic programme on the way based on ground-breaking new drug conjugate concept
  • Leading Affimer therapeutic programme (bispecific PD-L1/LAG-3) is on track for an IND filing by end 2019
  • Further pharmaceutical licensing deals are expected in next twelve months and Affimer reagents' partnership(s) could be announced before the year-end
  • A rights issue is widely expected in the coming months
  • Avacta's market cap is well below comparable peers, key inflexion points over the coming 24 months suggest significant upside


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



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