Avacta Group PLC (LON: AVCT) shares soared on Monday after the firm said it has agreed on a development partnership and licence agreement with South Korea’s LG Group to develop Affimer therapeutics in several disease areas.
The AIM-listed developer of Affimer biotherapeutics and reagents said the multi-target therapeutics development agreement provides for upfront and near-term milestone payments, plus longer-term clinical development milestones totalling US$180 million.
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Avacta will also receive royalties on any future product sales and LG Chem Life Sciences will cover Avacta's costs of research and development associated with the collaboration. Avacta may receive an additional US$130 million in option fees and milestone payments should LG elect to exercise its options for additional targets.
Avacta will generate and carry out early-stage optimisation of Affimer drug candidates against multiple undisclosed targets. LG Chem and Avacta will work together to move these candidates through to drug candidate selection, with LG Chem responsible for pre-clinical and regulatory studies, clinical development and worldwide marketing of any resulting products.
Strong validation of Affimer platform
Alastair Smith, the chief executive officer of Avacta Group, said the partnership with LG Chem was a strong validation of the Affimer platform.
"This alliance is an exciting opportunity, not only to work with a partner who has first-class biologics manufacturing and clinical development capabilities, but who also has a pioneering vision to develop innovative therapies,” Smith said.
"This landmark agreement with LG Chem reflects the substantial progress that we have made in developing the Affimer technology as a therapeutic platform and I look forward to updating the market on future progress and other partnerships," he added.
In afternoon trading, Avacta shares topped the London market gainers board, up 35.8% at 31.50p.
In a note to clients, analysts at ‘house’ broker finnCap said: “Not only is this a significant endorsement of the therapeutic potential of Affimers, but it provides additional near-term cash to help progress its lead oncology programme, which is targeted to enter the clinic in 2020.”
They added: “With a rich pipeline of interest in the reagent portfolio and ongoing discussions with other pharma companies, we expect further licensing activity. We estimate the risk-adjusted NPV of this deal, based only on the potential milestones to be worth 12-17p. We retain a target price of 120p.”
-- Adds analyst comment, updates share price --