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Research AreaFusion Antibodies Research Note Part 1

Fusion Antibodies (LSE:FAB)

29th April 2020

Market Cap: £25M / 100p

Current Share Price

Key Highlights 

  • Leaders in antibody discovery, development and supply 
  • Active COVID-19 programme targeting end solution by summer that can be licensed
  • Participation in the NICADA consortium to find antibody to neutralise COVID-19
  • Revenue generation underpins business with year on year growth 
  • Leading Humanisation technology succeed where others fail
  • Antibody Library that has potential to bring drugs and therapies to market faster
  • Acute Respiratory Disease Syndrome partnership with Aqualung

Pharma comes into focus

I’m pretty new to the world of Pharma and like many others have been bowled over by the interest especially on the  AIM market recently.  The interest has been largely driven by the development of COVID-19 with a number of companies looking at vaccines and a variation of diagnostics and potential treatments.

I do not profess to be an expert in this sector by any means and it can be difficult to differentiate between the various offerings and determining which companies may or may not benefit from CV19.  

With this in mind it’s useful in my opinion to identify some of the companies that do not rely on CV19 but could see substantial upside, should they play a major role in a given solution, whether that be testing, therapies or indeed vaccines.

Finding exposure to the potential CV19 upside whilst backed by a robust existing business from core offering could be a less risky way to approach this as an investor. 

There are some good examples of these types of plays including AVCT and ORPH to name a couple, for example ORPH progressing with their HVivo universal flu vaccine offering

It’s also worth noting that many of the junior pharma companies have made significant moves already with the backdrop of CV19  in terms of share price appreciation so identifying companies where potential upside that may not yet be priced in is a consideration.  That doesnt mean by the way that those companies wont go on to further deliver multiple returns, this is the reality of pharma!

Hence in this brief research note, I’m going to focus on Fusion Antibodies given it has a current market cap of £25m at time of writing largely under-pinned by its core business given it IPO’d at 82p per share and is currently trading at 100p per share.

The company has recently executed a fundraise (I did not participate in this) but have bought shares on market since the raise.  The raise is primarily to advance the Mammalian Antibody Library (more on this in a bit) to validate the library for commercialisation.  

The company is confident that incorporating CV19 into the library validation will not only help bring this to commercialisation faster but accelerate finding a solution to CV19, an interesting proposition for investors on both fronts.

About Fusion

Fusion Antibodies offers a complete range of antibody-related services in Discovery, Engineering and Supply and have guided hundreds of projects through critical preclinical stages.

Fusion have established a strong blue-chip client base including 8 out of the top 10 Pharma by revenue

As mentioned previously the business is already revenue generating with revenues expected to reach circa £3m in 2020. Importantly this revenue is growing year on year  as they build out their offering and become a key player in the space.

The company is involved in many aspects of antibody discovery, engineering and supply but in this brief note I’m just going to touch upon a couple of streams that have interested me and I believe could offer material and potentially game-changing upside whilst still running a growing core business.

Most notably and of current relevance, the company is already working on a number of solutions related to COVID-19 and as recently communicated  are receiving a number of new enquiries from clients for its services to assist them in this space!

Antibody Humanisation

The company has developed a proprietary platform CDRx which is used to ‘humanise’ antibodies. The platform can be used by pharma companies wishing to develop therapeutic and diagnostic drug candidates for drug trials.  In fact, Fusion has been approached by large pharma companies in the past to utilise their platform where the company itself could not achieve humanisation.

The humanised antibodies are derived from animal hosts so they can be safely used on humans.  This is a critical process for moving to human trials and Fusion have successfully humanised over 150 targets with an overall 90% success rate.  Many of the targets have reached clinical trials

Fusion makes their money in humanising the antibodies charging a fixed development cost along with milestone payments as the candidate drug progresses.

With the ever increasing emphasis on development of antibodies to tackle a raft of diseases and with the advent of CV19, I would expect Fusion to see significant  growth in this business area as global attention turns to how to tackle and eradicate dangerous diseases and variants  quickly.  

Basically the world can’t afford to go into repeated lock-down and I expect significant  investment in this area of pharma in the future personally.

Mammalian Antibody Library and COVID-19

This is the exciting part !

Fusion has been developing what they call a Mammalian Antibody Library which is in POC (Proof of Concept) stage.  With the global focus on COVID-19 and the race for pharma companies to find vaccines, treatments and diagnostics, Fusion have by way of the recent fundraise allocated significant funding to fast-track and expand the scope of the work to validate their library and include COVID-19 

Expanding the scope of the POC to include COVID-19 alongside other planned oncology targets should allow the company to validate the platform faster than planned whilst also potentially making a breakthrough in the CV19 space. In fact the company is confident they will and that successful use of the library for COVID-19 would substantially reduce the time needed for antibody drug development compared to conventional practices.  Clearly working with partners and achieving this would have game-changing upside for the company and investors.

The Library itself had been targeted towards other oncology targets including cancer so in itself, once validated and used in development of various drugs and therapies that can achieve faster time to market, would be a game-changing development regardless.

The addition of CV19 into the equation has a two-fold benefit in that the platform will be validated faster whilst, as previously discussed, potentially finding solutions applicable to CV19.

In fact, fusion recently announced a research alliance with Queen’s University Belfast for CV19 antibody development. This is part of the wider NICADA consortium and gives Fusion access to the CV19 virus and importantly grant funding.

The aim will be to develop new therapeutic molecules that can be evaluated for their ability to neutralize SARS-CoV-2 (CV19)

Fusion will prepare antibodies that will potentially neutralise the virus  by exposing the virus to the library and are confident of being able to identify a specific antibody for it.  That’s clearly a huge result for Fusion and shareholders given there currently hasn’t been one discovered.

And if they succeed?

Upon identification of an antibody Fusion could license it to large pharma’s to develop the end treatments including vaccines or therapy, clearly this would be transformative for Fusion and its shareholders.  

At the minute we are focused on CV19 but remember the original intention of the library was for other applications so just as significantly, development of antibodies for other applications like cancer  and other diseases would yield the same transformational rewards via either licensing or royalties.  

Validating the library really would be a game-changer much wider reaching than CV19

There is another angle too!

As reported in the media recently, post CV19 complications occur such as ARDS (Acute Respiratory Disease Syndrome). It can take patients up to 15 years to recover from CV19 related lung damage and/or ventilator use. 

ARDS itself though isn’t restricted to CV19 and can be caused by other lung conditions such as severe asthma etc.

Fusion have partnered with Aqualung who are planning on running its IND drug trial for ARDS. Fusion has developed the antibody via its humanisation process. I have no details of the commercial relationship here but one would imagine fusion could have a royalty or licensing agreement or future benefit  in place here so one to keep an eye on for sure.


So before I highlight all the fluffy bits and why those invested  could be sitting on significant returns we need to be aware that pharma itself and small cap  companies in general carry high risk so don’t be throwing the kitchen sink in, manage your risk !

Now back to business…

So hopefully in this brief research note I’ve helped you understand a bit more about Fusion’s business (at least as how I understand it).  Remember, i didn’t cover everything they do here, just touched upon the key points that interest me, if you want further info go to their website where there is a lot more info on what they do.

Personally I think the landscape is going to change and Governments are going to throw money at R&D in the pharmaceutical space which should benefit pharmaceutical companies generally. 

If you think about it, what has the cost been to shut and lock-down the world’s largest economies?  It runs into the trillions and my view is countries that can develop an elite-force in fighting any future invisible enemies will be at an economic advantage.

Back to Fusion…

Fusion does seem to be in a pretty unique space in that they clearly have the technical expertise in the antibody discovery, development and supply arena which is pretty much what all end pharmaceutical companies need to get end products to market, especially if partnering with Fusion means their time to market could be quicker.

I’m going to be keeping a close eye on the Mammalian Antibody Library developments which given the stage could yield a CV19 break-through anytime given the solutions they are working on which could be vaccine/treatment or diagnostic related, but as I said not limited to given other target diseases.

In addition there is the Aqualung partnership  in ARDS trials which if successful could prove very lucrative  for Fusion.

All this against the back-drop of a growth business anyway  on the services and humanisation side.

At £26m market cap and a share price not far from original IPO, backed by a revenue generating business that is growing as the company are recognised for their technical expertise and given that the company seem yet to make a move like other peers involved in the CV19 space yet they seem like they could be playing a significant role in this space, I reckon it’s a compelling buy, certainly if you consider other pharmas have travelled 4-5x from similar market caps on CV19 projects 

Food for thought…

You can read Part 2 here


Research materials prepared based upon my own analysis and research. Accuracy cannot be guaranteed and research notes should not be taken as investment advice. Please always do your own research.


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