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Avacta - Part Two: the Korean Connection

By Malcolm Stacey | Wednesday 12 December 2018

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello, Share Pickers. Occasionally, limits of space curb doing justice to a share I’ve high hopes of. This was the case with Avacta (AVCT), which I dragged to your attention this week. Allow me to add two further aspects to my view of this thrilling share...

Avacta is a medical pioneer which this week attracted interest from a big South Korean pharma. Avacta says this Asian giant has agreed on support of up to $180 million for the Wetherby-based company. On top of that, royalties on Avacta products will go to Yorkshire.

This is a big step for a relatively small company. It says two things: that a big pharma likes Avacta’s research and development and that it must think the technology has a good chance of coming good. And it means we shareholders will not have to stump up so much here for medical pioneering, which is nearly always unpredictable.

The other omission yesterday is that I hadn’t the space to explain what Avacta does. The company develops affimers. These are substitutes for antibodies. Anyone who did senior school biology knows how important antibodies are to health.

Avacta has developed a novel alternative to these germ-bashers. They can be used instead of antibodies in helping to diagnose and cure illnesses. There are various snags associated with using antibodies to fight disease. These include the time taken to generate new antibodies, the reliance on an animal's immune response (used to develop antibodies) and batch to batch variability. Avacta says that affimers can overcome these difficulties. And if they are taken up big time, then they will make inroads into a market worth £100 billion. That’s right billions, not millions.

The shares rose by a third on news about the Korean partnership. Then they fell by about 5% on profit-taking. I would not be surprised if the share did not rise substantially again once the penny has really dropped. But what do I know?

And now it’s time to rejoin the Punter’s Return.

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