Update: Avacta

It was just as well that when we tipped this biotech company in November 2020 we acknowledged the riskiness of the sector and advised readers to see the stock as a “candidate for a small punt”.

This is because on Monday it told investors that it was taking its lateral flow tests off the market while it adapted them to detect the omicron variant more reliably. The shares fell by a third on the news and our tip is in the red to the same degree.

Fortunately, as we mentioned at the time, Avacta has a second string to its bow: it makes an innovative cancer treatment that becomes active only once it is actually in a tumour, which means that it causes less collateral damage and can therefore be tolerated in higher doses.

Analysts at Stifel, the company’s broker, decided to attribute no value at all to its lateral flow business after Monday’s announcement and instead reiterated their “long-held investment case that Avacta is an oncology company developing some exciting and unique assets based around its [proprietary] technologies”. The change resulted in a fall in its target price from 200p to 155p, which is more than twice the current 75p.

While brokers’ targets are hardly a guarantee, Questor sees at least some recovery in the share price as likely. The stock remains speculative but we will hold on.

Questor says: hold

Ticker: AVCT

Share price at close: 75p

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