Shares in life sciences company Avacta Group (LON:AVCT) climbed by as much as a quarter after it told investors it had signed a deal with US biotech firm Moderna Therapeutics.
Under the terms, Massachusetts-based Moderna will make an upfront payment of US$500,000 giving it exclusive access to Affimers, Avacta’s engineered proteins which work as a high-tech alternative to antibodies.
Moderna caught investors’ attention in January after it told the market it had successfully raised US$450mln - the largest private biotech fundraise on record.
The business researches and develops protein therapies based on novel messenger Ribonucleic acid (RNA) technology and already has major development deals with AstraZeneca (LON:ANZ) and Alexion.
The Avacta deal will see Moderna make certain payments for Avacta’s research services to deliver pre-clinical development milestones.
Moderna also has the option to enter into exclusive license agreements for selected therapeutic Affimer candidates for clinical development.
In each case, Avacta will be entitled to milestone payments and the firm reckons the total value of these payments could reach “several tens of millions of dollars”.
Earlier this year Avacta sold Optim, a machine designed to speed up and reduce the cost of drug development, for up to £3.3mln in order to focus on Affimers.
Alastair Smith, Avacta's chief executive, described the deal as "transformational".
"The Moderna agreement represents a significant opportunity for Avacta with tangible, near term revenues from upfront payments and research services, with additional milestone payments and royalties on future sales of therapeutics," he said.
Analysts at Numis upgraded their price target on Avacta shares to 1.7p, from 1.5p.
“Assuming Moderna chooses to take four Affimers into full pre-clinical development, we estimate that its current highly-discounted value to Avacta is £10mln (0.2p/share),” said the broker.
It added that the deal is also evidence of major biotechnology interest in Affimer technology, “de-risking the technology, and providing Avacta with newsflow that we would expect other potential customers to investigate.”
Shares were 25% higher at 1.1p and have risen 70% year-to-date.