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Avacta Group Plc

CEO Q&A with Alastair Smith at Avacta Group (LON:AVCT)

Avacta Group (LON:AVCT) Chief Executive Officer Alastair Smith caught up with DirectorsTalk for an exclusive interview to discuss their agreement with ADC Therapeutics, the Phase I AVA6000 trial, commercial opportunities, the recent placing and the performance of the Affimer reagents business unit.

Q1: You recently signed an agreement with ADC therapeutics, can you talk us through that new partnership?

A1: That partnership is focussed on developing what we call drug conjugates and that is when an Affimer is used and linked to a chemotherapy and the Affimer is used to target that chemotherapy into the tumour.

ADC Therapeutics has a licence from AstraZeneca for a proprietary chemotoxin called PBD, in fact AstraZeneca strongly back ADC and have a Board seat so the deal is also good exposure to AstraZeneca which is important.

Developing drug conjugates based on Affimers leverages the benefits of small size, the Affimer is a small protein so you get deeper tissue penetration and the agreement basically establishes a collaboration where we generate the Affimers and ADC Therapeutics develop those Affimers through into the clinic. It’s around three targets, all of Avacta’s costs are covered so it’s fully funded and we receive development milestones and royalties in future.

At ADC’s request, we didn’t disclose the financial details but if you cast your mind back to the LG deal which was worth about $300 million to us over time, the ADC deal is of similar order, not quite the same but of similar order.

Q2: Interim results, on Friday you reported good progress across your in-house and partnered therapeutic programmes, in particular you will be entering the clinic with AVA6000 pro-doxorubicin next year which is well ahead of expectation. Could you explain what it is and what you hope to see from the Phase I clinical trial?

A2: That is the first drug arising from the collaboration we established with Tufts about 12 months ago so really rapid progress with that collaboration we’ve built with Tufts.

What that is is a chemotherapy which is only active in the tumour so when it is circulating around the body, it’s inactive and harmless. You’ll be aware obviously that chemotherapy, generally, normal chemotherapy has quite serious side effects because it kills cells all over the body. In the case of our pro-chemotherapies, the drug is harmless as it circulates the body and is only activated in the tumour using the IP from Tufts.

The first drug that we’ve chosen is doxorubicin which is a drug that’s used to treat soft tissue sarcoma like breast cancer, gastric cancer and so on but it has very very serious heart toxicity which limits its use. However, the pro-doxorubicin, Avacta’s AVA6000 we’ve shown in animals has a dramatic improvement in that safety profile so the damage caused outside of the tumour is very very low.

We hope in a Phase I trial next year to demonstrate that we get the same results in humans i.e. an efficacious, and now generic drug like doxorubicin which has very serious side effects can be made much much safer using the Tufts IP that we have licenced.

Q3: Now, you’ve highlighted the commercial opportunity for pro-doxorubicin, could you expand on that for us?

A3: Just take that one example of doxorubicin, that is a billion-dollar drug, it’s generic now and it’s a billion-dollar drug despite those very serious heart issues that I mentioned. The cardiotoxs limit the number of cycles of treatment a patient can be given so if you remove, or dramatically reduce, those safety issues, more cycles can be given to patients.

This is the objective but also a larger eligible patient population is created because you can start to treat patients with weaker hearts for example, older patients where, of course, many cancer occur.

So, we are able, from a commercial perspective, to take a billion-dollar drug and increase the number of cycles and increase the market size so it’s quite reasonable to assume that’s a 2/3/4/5 billion dollar market for AVA6000.

That, we will licence, or certainly aim to licence when we see that first Phase I data next year and the licence would almost certainly be accompanied by a $50 million, that sort of order, upfront payment.

So, really transformational, non-dilutive capital upfront next year which quite conceivably could mean we don’t come back to raise money again, that would fund all of our activities going forwards.

One extra point to make there is that although that is already exciting, just for doxorubicin, the technology we licence from Tufts can be applied to a whole range of other chemotherapies. So, that is just the first of many and we have a list of 14 or 15 where we can see this same technology improving the safety profile.

So, the value of that deal we did with Tufts last year is potentially phenomenal.

Q4: Now, you also announced a successful placing on Friday, could you talk us through the use of proceeds?

A4: The main focus of the use of proceeds from the £9 million placing that we completed last week is to deliver that Phase I data for pro-doxorubicin for obvious reasons because of the commercial value and obviously the potential to deliver that non-dilutive capital I talked about.

We will, of course, continue working with our partners so LG Chem, ADC Therapeutics and we have a pipeline of other potentially fully-funded partner programmes as well so that will also remain a focus.

We will continue to grow the revenues on the diagnostic side of the business of course.

Q5: Finally, could you update us on the performance of the Affimer reagents business unit?

A5: Last year, to July 2019, was a good year for Avacta Group in terms of growth in revenue and order books so to July ’18 compared with July ’19, we saw around 130% increase in revenue and order book with revenue and order book last year of £1.2 million so a really strong growth compared to the previous year.

We’re really beginning to see real signs of commercial traction in that business and we’ve got a strong pipeline of technology evaluations. The ones I would highlight are with diagnostic companies which all have the potential to deliver licence deals and we have 7 or 8 of those evaluations going on, 4 of which are with top 10 global diagnostic companies. So, very excited about the potential to convert those into licence deals over the coming months.

Beyond that, we have a strong business development pipeline to continue to fill the activities into next year so the focus going forward will be in diagnostics primarily and we’ve recently appointed a new Commercial Director to sit on the activities in Cambridge. David Wilson joined us with many many years of experience in the diagnostic sector and he’s already making a tangible difference to the commercial activities in that part of the business.

The final point I would make is that we have certainly seen that it takes a long time to get those licence deals arising from evaluations, for example, the deal we did with New England BioLabs, that took over 2 years to get from evaluation to a licence deal which is too slow.

So, whilst we will continue doing that, as I’ve just described, we also said last year that we would develop our own diagnostic tests using Affimers so we could licence those more quickly. We aimed to have two completed by the end of this calendar year and we will do that, one is a D-dimer test, a coagulation test, and the other is an estradiol test which is used in women’s health, in fertility treatment.

So, that side of the business is really beginning to gain momentum now.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.