Avacta Group has high hopes after test device breakthrough

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DIAGNOSTICS specialist Avacta Group has high hopes for its latest device AX-1 now that a number of delays and manufacturing issues have been overcome.

The Wetherby-based company said the new device, which is on trial with six selected vets, will offer blood tests for a range of dog, cat and horse illnesses.

Avacta’s chief executive Alastair Smith said: “We’ll target the vet market initially, then we’ll translate it to humans.

“We had significant delays in getting it to market with a number of technical challenges, but now the first units are being used by vets and the feedback is very good.”

The trials are due to go on for a couple of months before the AX-1 is marketed to vet surgeries.

The AX-1 will test for a number of disorders including allergies and the early detection of acute inflammation or infection.

Mr Smith said the device will include a range of other tests that aren’t available elsewhere, but he could not mention them for competitive reasons.

He was speaking yesterday as Avacta announced a rise in annual losses in challenging economic conditions.

Annual revenue grew by 28 per cent to £3.13m in the year to July 31, but the group reported a pre-tax loss of £1.6m, up from £1.12m last year.

In its human diagnostic market, Avacta is facing pressure on capital budgets, while in the animal market it has been hit by reduced vet footfall and lower take-up of insurance policies.

Avacta’s flagship product is Optim, a machine designed to speed up and reduce the cost of drug development.

Avacta claims it can deliver vital information ten times faster than other approaches using much smaller samples.

Analyst Tom Kemp, at house broker Panmure Gordon, said: “Avacta’s flagship product, Optim 1000, has the potential to improve biopharmaceutical drug development. Speed and testing costs are vastly improved with the Optim, taking timelines down to seven days from six months and costs down to £5,000 per molecule from £50,000.

“A number of machines have already been sold and a rapidly-growing worldwide distributor base should provide a stable platform on which to grow,” he added.

The high-tech devices sell for around £92,500, with Avacta earning £55,000 of this and distributors taking the rest.

It sold 21 Optim units in its latest financial year, compared with 14 the year before. Optim revenues rose by 59 per cent to £1.29m.

“We could have done better and sold a few more,” said Mr Smith.

“There were issues with shipping without damage, but we’ve dealt with that. The size was also an issue and we’ve made it two thirds the size it was. Optim is now considerably smaller, lighter and more robust.”

There will be some future slowdown due to the transfer of sales and support to ForteBio, a California-based supplier, but once this is done Avacta is confident sales will pick up.

Panmure Gordon downgraded the number of Optims it expects the group to ship this year from 37 to 30.

“Similarly, we downgrade our forecast on AX-1, which we now expect will ship 40 units versus 50 previously,” said Mr Kemp.

“This results in an overall revenue downgrade to £3.9m from £4.1m and £4.4m from £5.1m in 2013 and 2014 respectively.”

The company is working on a third product based on its recently acquired Affirmer technology.

This technology can produce man-made antibodies that are more resilient, cheaper and stronger than animal antibodies.

Avacta, which was spun out of the University of Leeds in 2004, believes it will make its maiden profit in 2014/15.