Can Avacta shares recover from recent lows?
The life sciences company’s shares have fallen by 40% in the last one month, despite a string of positive developments for its Covid-19 flow tests.
- Avacta Group PLC (LON: AVCT) share price spikes up 6% on Wednesday morning (14 July 2021)
- The rally came on the back of its diagnostic division’s ISO 13485 certification
- This is a stark contrast from the stock’s performance in the last one month, in which share price has fallen 40%
- Last month, the life sciences company also entered into a non-exclusive distribution agreement with Calibre Scientific for its proprietary Covid-19 flow tests
- Avacta has yet to turn in a profit for the tests, having made just £3.64 million in revenue in 2020 against losses of over £18 million.
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AVCT share price: what’s the latest?
Avacta Group shares rose over 6% in early trading on Wednesday, after its diagnostic division was awarded an ISO 13485 certification.
The company announced earlier in the day that the Life Sciences’ diagnostics division received the certification for the management, manufacturing and distribution of its proprietary Affimer® reagents for use in lateral flows, ELISA screening tests and immunodiagnostic in-vitro diagnostic devices.
An ISO 13485 certification means that the CE mark for the AffiDX® SARS-CoV-2 antigen lateral flow test can now be transferred to Avacta from its partner, Mologic.
Additionally, Avacta will also become the legal manufacturer of all future in-vitro diagnostic products.
The certification provides a practical foundation for Avacta to address the regulatory requirements of its products, as well as ensure their safety and quality.
In late June, the developer of diagnostics and innovative cancer therapies also unveiled the results of a study on the efficacy of the AffiDX SARS-CoV-2 antigen lateral flow test in detecting the Delta variant of the SARS-CoV-2 virus (Covid-19).
The study revealed that the AffiDX outperformed two commercially available lateral flow antigen tests in Europe. Lateral flow antigen tests are cost-effective and rapid means of identifying individuals with high viral loads.
The clinical data for Avacta’s AffiDX® SARS-CoV-2 antigen lateral flow test demonstrated 100% sensitivity for identifying infectious individuals with viral loads measured by PCR of Ct<27, which is considered infectious.
Why are shares down 40% in the last one month?
Despite the string of positive developments, AVCT shares have plunged by 40% in the last one month.
It is unclear what the exact cause of this is, considering that Avacta had also entered into a non-exclusive distribution agreement with Calibre Scientific Inc. for its AffiDX antigen lateral flow test for professional use in the UK and European Economic Area (EEA) on 21 June 2021.
During the same period, however, UK blue-chip equity benchmark FTSE 100 also posted its biggest fall in a month, after markets were spooked by the possibility of the US central bank slowing down its stimulus package.
The index had closed 1.6% lower in the week ending 18 June, which was its worst weekly performance since February 2021.
Prior to this recent underperformance, the Yorkshire-based company had more than doubled year to date to a peak of £275, thanks to higher accuracy levels from its tests.
Few people would have heard of Avacta Group prior to February 2020. But as the coronavirus emerged, the life sciences company then decided to pivot away cancer treatments and diagnostics toward developing Covid-19 tests.
This strategy has proven to be successful, as evident by the stock’s 500% rally since then.
Nevertheless, there are risks for investors to consider ahead. One of it is how Avacta has yet to make a profit from its Covid tests, having raked in just £3.64 million in revenue in 2020 against losses of over £18 million.
Meanwhile, Avacta's £650 million market cap is more than 140 times higher than its expected revenues for the whole of 2021, which are expected to reach £4.5 million.
What's your call on Avacta shares?
*Based on revenue excluding FX (published financial statements, June 2020).
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