Avacta reduces losses as it exceeds target for sales

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DIAGNOSTICS specialist Avacta Group said its commercial strategy is gathering pace, helping it to grow revenues and shrink losses.

Avacta designs and makes devices to speed up and reduce the cost of drug development and sample analysis.

The Wetherby-based company has already sold eight of its Optim devices since August, putting it on course for its target of 27 sales for the year. It claims Optim delivers vital information for pharmaceutical firms much faster than other approaches, thus slashing the cost of drug development.

Chief executive Alastair Smith said: “2011 was a good, solid year, but we shouldn’t get ahead of ourselves. 2010 was a slow year for lots of reasons but in 2011 we certainly hit and slightly exceeded our Optim sales targets.

“The first quarter (of 2011) has been very good for Optim.”

The Alternative Investment Market-listed company, spun out of the University of Leeds in 2004, sold 14 Optim devices during the year to the end of July, compared with just two a year earlier.

This helped Avacta grow underlying revenues 42 per cent to £2.45m. Its devices use consumable cartridges, ensuring a stream of recurring revenues. These contributed £0.81m to sales, up from £0.05m a year earlier.

Avacta’s pre-tax losses decreased to £1.1m from £2m in 2010. The market expects an operating loss of about £400,000 this year, added Mr Smith, and expects the group to reach breakeven on a monthly run rate by the end of this financial year.

“That forecast is a sensible forecast and we will be there or thereabouts,” he said. “The company has clear visibility on its short and long-term commercial, technical and financial objectives.”

The company moved to its new 7,000 square foot manufacturing facility at Thorp Arch, Wetherby, earlier this year to equip it for a pick-up in sales. It has had to contend with production problems with the plastic disposable cartridges for its AX-1 diagnostics device, aimed at the $1.5bn veterinary market.

“Thankfully that’s now all resolved,” said Mr Smith, adding the company should now be able to produce about one Optim and five AX-1 units per week.

“It’s obviously a time of austerity but the way one sells both of these products is on the cost benefit to the customer.”

He said Avacta is pleased with its network of global distributors, which include Pall Corporation, Isogen Life Sciences, Cold Spring Biotech and DKSH. Between them they sell Optim in counties and territories including the United States, Canada, China, South Korea, Australia, and Europe.

“We are very happy with all of them,” he said. “Some are doing better than others but Pall is doing particularly well. (Distributors) are constantly under review.”

Avacta ended July with £1.77m in cash, versus £1.43m a year earlier. That followed its share placing to raise £1.95m earlier this year.