Investor backing for Avacta purchase of spin-out

Shareholders in Wetherby-based Avacta yesterday backed its placing to raise £4.8m after costs. The company said the fundraising means it is now “fully funded”, and has no need to return to investors for more money in future.

Investors at a meeting in Leeds yesterday gave the green light to its purchase of Aptuscan Ltd, a technology company spun out of the University of Leeds.

Avacta spent £1.5m of the placing proceeds on buying Aptuscan, which has developed unique binding agents for the diagnosis and treatment of disease.

“We’re sitting on a very exciting opportunity,” said Avacta chief executive Alastair Smith.

“Existing shareholders have been very supportive of the acquisition and have encouraged us to raise some more funds to be fully funded for a longer growth period.

“We know the business (Aptuscan) in some detail. I’ve no doubt whatsoever that if we had not come along with an offer they would have got funding, but in the current climate consolidation is a very sensible approach.”

Dr Smith said he has known Aptuscan for three years, and previously mentored its founder, Paul Ko Ferrigno.

He declined to quantify what Aptuscan will add to Avacta’s earnings, but said in time it could be substantial. Aptuscan is currently still at research and intellectual property stage, and does not yet earn revenues.

Aptuscan has developed proteins which act like antibodies, but are not prone to the weaknesses and damage which affect antibodies. Its ‘non-antibody affinity protein’ can be easily modified, and used in a wide range of scientific processes – including diagnosis, purifying and therapy.

Avacta added the acquisition will allow it to expand into the fast-growing $2bn protein microarrays market.

Remaining funds will be used to further develop its AX-1 veterinary diagnostics device, plus allow it to develop new opportunities in the diagnostics arena.

Shareholders who did not participate in the placing will be diluted by about 39 per cent, said Dr Smith. He admitted the placing price of 0.5p per share, a 36 per cent discount, was “pretty keen”.

However, he said a rights issue, giving all shareholders the chance to invest, would have been too expensive and time-consuming.

“My judgement was it was better to get the money in a quick and simple fashion and not be too distracted by a longer road show,” he said, adding longer-term value will “far outweigh” the short-term dilution.

IP Group, which invests in university spin-outs, has about 34 per cent of Avacta’s shares after the placing.

It has been granted a waiver by the Takeover Panel, excusing it from making a mandatory offer for Avacta.