The stars are aligning for Avacta AVCT , a clinical stage, cancer therapeutic & medical diagnostics firm.
Why?Well today the group completed the last part of its £64m (gross) fund raise in order to finance the transformational £24m (excluding a max £13m earnout) acquisition of Launch Diagnostics (LD, a distributor of medical testing kits & lab equipment), possible future M&A and continued development of its proprietary Affimer & pre|CISION platforms.The capital coming from a £2m Open Offer and £7m placing at 95p/share (4% discount), alongside the issue of a 6.5% £55m (net £52.25m) 5 year, unsecured bond (convertible at 118.75p) to Heights Capital - which is part of Susquehanna International, a global institutional investor & trading house.To me, this is incredibly encouraging on numerous fronts.
Firstly, the LD acquisition (60 employees) provides #AVCT’s diagnostics division with scale & critical mass at an attractive entry price (equivalent to a 1.35x EV/sales). Adding an est £17.9m of turnover (£14.2m IVD tests + £3.7m Covid) at 44%-50% gross margins. On top of EU-wide distribution across the UK, France & Benelux, where its supplies a range of 4,012 products to >500 customers. Typically, these contracts are with the NHS, hospitals, clinical trial / cancer centres and commercial laboratories - last between 3 to 5 years and generate 95% repeat revenues.
The strategy ultimately being to create a major European diagnostics business - selling both 3rd party & in-house products, covering respiratory infections, cardiovascular disease, cancer and general health & well-being.
Next, attracting such an accomplished, technology investor like Heights Capital – who has probably also performed substantial amounts of due diligence – provides enormous confidence in Avacta’s prospects. Not only in the efficacy of its Affimer platform, but also the groundbreaking pre|CISION technology, which is scheduled to release key Phase 1a clinical trial data shortly wrt its flagship cancer busting AVA6000 Pro-doxorubicin drug.
Lastly, the fund raise will provide a much longer cash runway for the group. In fact, at the end of June, #AVCT reported net cash of £17m. Meaning that I estimate there will still be circa £40m+ in the bank at Dec’22 - providing ample firepower to execute on its extensive R&D efforts, 3rd party licensing deals and commercialisation plans.
CEO Alastair Smith commenting: "This financing allows us to progress our M&A-led growth strategy for Avacta's diagnostics division and a pipeline of potential acquisitions in the European diagnostics sector to build a fully integrated and differentiated diagnostics business with global reach. Alongside the continued funding of Avacta's Therapeutics division to progress AVA6000 through the clinic and further develop the broader oncology pipeline."