Oncology Pipeline Progress And FAP Targeting Are Expected To Drive Long Term Upside

Catalysts

About Avacta Group

Avacta Group is a clinical stage oncology company developing tumor targeted chemotherapies using its proprietary pre|CISION drug delivery platform.

What are the underlying business or industry changes driving this perspective?

• Progression of faridoxorubicin into later stage development in high unmet need indications such as salivary gland cancer and triple negative breast cancer, alongside potential accelerated approval pathways, can expand the addressable market and support sustained revenue growth.
• Advancement of FAP-exatecan into first in human studies in early 2026, leveraging highly potent TOPO1 inhibition with durable responses in resistant tumor models, creates a second major value driver that can improve medium term earnings visibility.
• Growing external validation from key oncology conferences, the Tempus data collaboration and an expanding body of preclinical and clinical evidence around FAP targeted delivery strengthens Avacta's competitive positioning, which can underpin higher pricing power and long term margin expansion.
• Increasing interest from potential pharma partners in applying the pre|CISION platform to additional oncology assets, combined with Avacta's decision to retain full ownership of FAP-exatecan near to first patient dosing, provides optionality for milestone and royalty based income that could diversify and de risk future cash flows.
• Streamlining into a pure play oncology business, strengthening of the balance sheet through asset sales and bond renegotiation, and disciplined control of new Phase II spend until partnership support is secured, collectively enhance capital efficiency and support healthier net margins over time.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Avacta Group's revenue will decrease by 5.5% annually over the next 3 years.
• Analysts are not forecasting that Avacta Group will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Avacta Group's profit margin will increase from -35897.3% to the average GB Biotechs industry of 31.7% in 3 years.
• If Avacta Group's profit margin were to converge on the industry average, you could expect earnings to reach £30.2 thousand (and earnings per share of £0.0) by about December 2028, up from £-40.6 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 11934.3x on those 2028 earnings, up from -8.1x today. This future PE is greater than the current PE for the GB Biotechs industry at 10.3x.
• Analysts expect the number of shares outstanding to decline by 1.91% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.28%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Avacta is positioning faridoxorubicin and FAP-exatecan in high unmet need oncology indications with potential accelerated approval pathways. If forthcoming Phase Ib and Phase II data are strongly positive, this could lead to rapid value recognition and an upward re-rating of the share price driven by higher expected future revenue and earnings.
• The Tempus collaboration has highlighted that an estimated 90% of solid tumor patients show some level of FAP expression, suggesting a very large addressable market for the pre|CISION platform. If this market is effectively penetrated through partnerships or internal commercialization, it could materially increase long term revenue and expand operating margins.
• Management is explicitly targeting non dilutive or less dilutive funding via partnerships, joint ventures and industry investments. Successful execution on one or more sizeable deals would remove financing overhangs, lower perceived risk and support higher equity valuations through improved earnings visibility and stronger net margins.
• Durable complete responses seen in FAP-exatecan animal models that are resistant to standard TOPO1 therapy, together with encouraging early faridoxorubicin data in salivary gland cancer, indicate that Avacta’s technology could prove meaningfully differentiated versus competing peptide drug conjugate platforms. This would support premium pricing and structurally higher gross margins and earnings over time.
• The transition into a focused pure play oncology business, combined with asset disposals, bond renegotiation and tighter cash control, is progressively simplifying the capital structure and improving capital efficiency. If clinical catalysts land positively, this leaner setup could translate marginal revenue growth into disproportionately higher operating leverage and net profit.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of £0.81 for Avacta Group based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £1.11, and the most bearish reporting a price target of just £0.43.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be £95.5 thousand, earnings will come to £30.2 thousand, and it would be trading on a PE ratio of 11934.3x, assuming you use a discount rate of 7.3%.
  
• Given the current share price of £0.76, the analyst price target of £0.81 is 6.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.