Cellar boy
3.9K posts
Cellar boy
@boy_cellar
Derivatives trader. AIM investing with a focus on Biotech.
Pharmacyclics was acquired by AbbVie for $21Bn in 2015. Sales of Imbruvica are now taking a hit from BeiGene’s drug, Brukinsa. It happens. It’s pharma. Pharmacyclics did x200 from its low for these projected sales. #AVCT can too. It’s not the stretch it appears if you understand preCISION. Here’s just one (actually quite conservative) route: ➡️ AVA6000 replaces the benchmark (which is currently a cocktail of drugs) in salivary gland cancer (SGC) and runs £400m sales pa in 3/4 years (assume pharma pay x4 for those sales in said indication), £1.6Bn. Beating the benchmark now “very likely” according to the CEO. Avacta could be billing its entire current market cap in yearly SGC sales in 2027/8. ➡️ AVA6000 replaces doxorubicin in the Keynote 522 regimen (which is Keytruda plus doxorubicin) in triple negative breast cancer (TNBC) and runs £750m sales pa in 5/6 years (assume pharma pay x5 for those sales in TNBC), £3.75Bn. ➡️ AVA6000 replaces the benchmark in soft tissue sarcoma (currently, doxorubicin). Assume £200m pa sales in 4/5 years. Assume pharma pay x4 those sales, £800m. ➡️ AVA6103 works in human just as it has in pre-clinical studies to date. That would make it a genuine blockbuster. Assume just £2Bn pa sales (which would be very conservative if it works in human and produces the same type of complete responses as seen in animals to date). For perspective, Enhertu (the ADC) is forecast to bill £10Bn in a single year come 2030. Assume x5 future sales of £2Bn. That’s £10Bn. ➡️ preCISION can be applied to nearly any warhead (assuming AVA6103 repeats what has been seen with AVA6000 that’s very likely possible). That platform would be worth an eyewatering amount. But let’s conservatively call it £2Bn. And throw in the rest of the future pipeline (AVA7103) at zero value. As soon as AVA6103 shows replication in human is possible, the game changes again. Assume AVCT retain everything and have 600m on issue (rather than 500m if they go down the partnership route) £18Bn / 600m = £30 per share. That’s c.x100 from today’s SP. Could quite easily be north of £20Bn with total issuance closer to 500m than 600m, if done right. The market currently assumes a <1% chance of all these events happening. If you assume it’s about 7.5%, that’s 225p per share. However that shackles AVA6000’s chance of success to AVA6103’s which is not fair. Just a 51% chance of success for AVA6000 in salivary gland cancer is worth 222p today (valuing everything else at zero). Recall, Alastair Smith was able to fund preCISION at 50p, without a cornerstone investor(!) We now have another year of data and require 80% to get back to this placing price. The market has gone absolutely mad as the data goes from strength to strength. If the board’s financial ambition for shareholders matched their excitement for preCISION, AVCT would be viewed through a very different prism today. Case in point: what’s ‘the beast’…. ‘that dent in cancer I’ve been looking for’ actually worth? “Oh about £2-4m”… this patently from someone who cares a lot more about “the dent” than shareholders’ equity. Which is fine, it’s just not a logical value to place on such ambition. Perceptions matter. AVA6000 is not just another P1b drug. It’s disruption of a multiple billion dollar landscape, with the ability to attach the IP to almost anything. That’s a lot more exciting than anything Pharmacyclics ever owned. The difference is Pharmacyclics had a Bob Duggan. The man who sold cookies and everyone ridiculed for not being cut from the same Big Pharma cloth. He then went and did it all again with Summit Therapeutics. Not a scientist. Just a very hungry, deeply commercial man with a plan. I suspect there’s a lesson in the Bob Duggan story that Avacta’s science-heavy and nouse-light board could heed. But can AVCT still do x100 from here? Yes. Anyone who rules this out so casually simply doesn’t understand pharma, the investment proposition, nor the IP.
The talking point from Leerink isn’t the grey box. Anyone who follows #AVCT knows there are multiple partnering opportunities. The significant point is STS has been removed from the Co’s pitch deck, suggesting they don’t need to pitch what was once their lead indication any further. As @AM231982 has been suggesting for months, I suspect they will forgo rights to STS to fund SGC and TNBC (the latter being partnered when P1b data is in, the former remaining 100% owned). Away from STS, they are already beating SGC’s PFS. The reason the investigators are so excited (these are the very best SGC clinicians in the world) is the responses being observed are durable. Note the change from meaningful to durable in the title. There is c. 2m between these waterfalls. The cancers are simply not growing. Even in those patients where treatment has stopped. That’s because of the bystander effect preCISION enables. All about trend. There’s good reason they will use a major conference to unveil PFS data on SGC. They know exactly what they are sat on. They know they have already beaten the benchmark. Data. Partner. Data. Takeover.