Alpha vs Beta? It’s all Greek to many investors. Instead, what most people really want to know is whether a stock will go up or down. 

Clearly, in the short term that’s impossible to say. However, after today's hugely promising H1 2023 results - which saw an EBITDA loss of -£7.9m os sales of £11.9m - I'm growing increasingly confident that ultimately Avacta (AVCT) could become a £1bn+ market cap business.

You don't need to be Aristotle to understand why. The company has numerous ‘shots on goal’, several of which could single-handedly be worth more than Avacta’s current £342m market cap. The first, of course, is AVA6000., its lead soft tissue sarcoma (STS) candidate which has already demonstrated outstanding safety and efficacy data during Phase 1a clinical trials, albeit across a relatively small sample of cancer patients.

The trial found that “analysis of a number of tumour biopsies has confirmed the release of the active chemotherapy (doxorubicin) in the tumour, which are much higher than the levels being detected in the bloodstream.” Whilst also seeing “a significant reduction in tumour size in a patient on the trial with a sub-type of STS”, alongside “several other patients who showed positive responses to the treatment.”

Importantly, too, AVA6000’s excellent safety profile opens the door to potentially “dose patients more frequently, as well as at higher doses or more treatment cycles.”

Looking ahead, Avacta plans to release detailed Phase 1a data in Q4 23 following completion of cohort 7. If positive, this should validate the whole preCISION platform, and allow the same technology to be applied “across a broad range of existing chemotherapies (eg Velcade) and new, more potent cytotoxins”.

Indeed Avacta’s secoprodnd lead drug, AVA3996, a FAP-activated proteasome inhibitor, is slated to enter clinical trials in 2024.

The company also has plenty of exciting third party licensing agreements with the likes of LG Chem, POINT Biopharma, and AffyXell Therapeutics, a fast growing European diagnostics arm, and a very high potential Affimer therapeutic platform.

Broker Singer Capital Markets has a BUY rating on the stock with a 154p a share target price, whilst broker Trinity Delta has an even higher target of 228p. Nonetheless, I suspect these estimates might be materially understated as eventually Avacta could be worth many multiples of this given it's addressing high margin, multi-billion dollar global markets.

Heading back to the first half results, there was an operating cash outflow of £11.2m, leaving £26m of available funds as at the end of June. Also going forward, £43m of convertible debt will probably be exchanged for equity at 118.75p a share, equating to the issue of 36.5m new shares, or 10.7% dilution.

So assuming things go to plan, I’m confident Avacta will have several attractive options - both internal and external - to finance its exciting R&D pipeline and product launches for many years ahead. The diagnostics division should become EBITDA positive anyway over the next 6-12 months.