Peel Hunt starts Avacta at 'buy' with 99p price target

21st Nov 2024 15:22

(Sharecast News) - Peel Hunt initiated coverage on Avacta on Thursday with a 'buy' rating and 99p price target as it pointed out three key aspects of the investment case.

Firstly, it argued that Avacta's pre|CISION and Affimer technology platforms have the ability to create the next generation chemotherapies.

It said they create drug conjugates, which reduce the current side effects of current cancer treatments, meaning the current therapies could replace them in the standard-of-care pathway.

Secondly, it said that clinical data from the lead asset AVA6000 looks very promising. Peel Hunt said it's currently in a phase I trial and has been able to reduce side effects such a cardiac and bone marrow toxicity in comparison to doxorubicin, which is the standard-of-care chemotherapy.

"We forecast that AVA6000 should reach commercialisation in FY28E, and use the revenue streams FOR AVA6000 in soft tissue sarcoma and salivary gland cancer indications initially, with breast cancer sales beginning in 2030E, to reach our risk-adjusted NPV valuation for the therapeutics division," it said.

Lastly, Peel Hunt said that as Avacta moves to become a pureplay oncology biotech, it expects the company to divest its diagnostics division and models a base case expectation of a 0.75x revenue multiple, valuing the diagnostics business at around £20m, but can see a bull case valuation of around 54m.

At 1540 GMT, the shares were up 7.8% at 47.69p.