REG - Avacta Group PLC - Full Year Results
30/04/2024 07:15
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RNS Number : 5620M Avacta Group PLC 30 April 2024
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30 April 2024
Avacta Group plc
("Avacta", the "Group" or the "Company")
Preliminary Results for the Year Ended 31 December 2023
Avacta appoints new Chief Executive Officer Christina Coughlin, MD PhD
Clinical proof-of-concept demonstrated for Avacta's lead programme AVA6000 and
proof-of-mechanism for the pre|CISION(TM) platform presented this month at the
American Association for Cancer Research (AACR) Annual Meeting
New leadership and strong clinical momentum positions Avacta well for its
evolution into a therapeutics-focused business
Avacta Group plc (AIM: AVCT), a life sciences company developing innovative,
targeted oncology drugs and powerful diagnostics, is pleased to announce its
preliminary results for the twelve months ending 31 December 2023 ("FY23").
Operating highlights
Therapeutics Division - Encouraging clinical data for AVA6000, the Company's
lead pre|CISION™ peptide drug conjugate
· Data from the three-weekly study confirm the ability of the
pre|CISION(TM) platform to concentrate a therapeutic warhead in the tumour
microenvironment (TME) to transform the safety profile of in patients with
advanced cancers
· The results to date show that AVA6000, the first peptide drug
conjugate in the Avacta pipeline, has a favourable safety profile with
concentration of the warhead in the TME resulting in multiple responses in
patients with high levels of Fibroblast Activation Protein (FAP(high)), thus
delivering clinical proof-of-concept for AVA6000 and proof-of-mechanism for
the proprietary pre|CISION(TM) drug delivery platform
· In the three-weekly dose escalation study for AVA6000 the seventh
dose cohort was successfully completed and, in light of the highly positive
safety data, patients are now being dosed in a two-weekly dose escalation
study with the aim of defining the recommended Phase 2 dose (RP2D), allowing
dose expansion cohorts to begin in H2 2024 followed by the Phase 2 efficacy
study in a selected orphan indication
· AffyXell Therapeutics ("AffyXell"), the joint venture between
Avacta and Daewoong Pharmaceutical ("Daewoong") continued to progress well
with the triggering of a second milestone payment. This has resulted in an
increase in Avacta's shareholding in AffyXell to 25%
· The growing body of clinical and pre-clinical data validating the
pre|CISION(TM) platform has supported an acceleration in the Group's
commercial activities including the appointment of Dr Simon Bennett as Chief
Business Officer of the Therapeutics Division
Events after the reporting period
· Appointment of Christina Coughlin MD, PhD as Chief Executive
Officer, effective May 1 2024, replacing Dr Alastair Smith. Chris was
appointed to the position of Head of Research & Development in February
2024.
o Dr. Coughlin has served as a Non-executive Director of Avacta Group
plc since March 2022 and Head of Research & Development. She trained as
an oncologist and immunologist and has been pivotal in driving the clinical
development strategy for AVA6000, Avacta's lead pre|CISION™ tumour
targeted therapy, and the broader drug pipeline strategy at the Company.
· The Board will also evolve to meet the increased demands of being
a clinical stage oncology company alongside the need to more clearly
communicate with shareholders and other key stakeholders. An individual with
sector, commercial and listed company experience will be the ideal addition.
· Data from the AVA6000 Phase 1 clinical trial three-weekly dose
escalation study reported at the AACR annual meeting in San Diego, USA,
providing Clinical Proof of Concept for AVA6000 with multiple patient
responses and a favourable safety profile.
· AVA6000 update
o The Company announced that patients are now being dosed in a two-weekly
dose escalation study with the aim of defining the recommended Phase 2 dose
(RP2D), allowing dose expansions to begin in H2 2024 followed by the Phase 2
efficacy study in a selected orphan indication
o Avacta receives approval to enrol patients in the UK in the ongoing
two-weekly dose escalation study
o Patients in the two-weekly study in each cohort can be dosed in parallel
allowing the Company to remain on track to begin the dose expansion studies in
the second half of 2024.
Diagnostics Division - Second acquisition completed and integration
progressing to build a profitable Diagnostics Division
· Avacta's Diagnostics Division completed the acquisition of
Belgium-based Coris Bioconcept SRL ("Coris"), a developer and manufacturer of
rapid tests focused on infectious diseases, on 1 June 2023 for an upfront
consideration of £7.3 million with an earnout based on future business
performance of up to £3.0 million payable in cash, adding a broad range of
marketed professional-use rapid tests to the Diagnostics Division.
· The Diagnostics Division, which also includes Launch Diagnostics
("Launch"), a leading UK IVD distributor that was acquired in October 2022,
reports revenue of £21.2 million (2022: £4.2 million) and an adjusted EBITDA
loss of £1.18 million (2022: £5.13 million).
· The Group continues its focus on consolidating the Diagnostics
Division post the Launch and Coris acquisitions. After the period end Avacta
announced that it is exploring strategic options for the division in a manner
which maximises shareholder value and benefit for the Company in creating a
pure-play oncology biopharmaceutical company that the Board expects will be
more attractive to specialist international biotech investors.
Financial and corporate highlights
· Revenues increase to £23.25 million (2022: £9.7 million).
· Adjusted EBITDA loss (before non-cash and non-recurring items)
of £20.14 million (2022: £15.1 million).
· Operating loss reduces to £28.36 million (2022: £32.6
million).
· Reported loss from continuing operations of £24.95 million
(2022, restated: £37.0 million).
· Loss per ordinary share from continuing operations of 9.15p
(2022, restated: 14.48p).
· Cash and short-term deposit balances at 31 December 2023 of
£16.6 million (31 December 2022: £41.8 million).
· Shaun Chilton joined Avacta's Board of Directors as
Non-executive Director in June 2023.
Events after the reporting period
· Fundraise completed in March 2024 raising £31.1 million (gross
proceeds) from quality institutions, including a European healthcare
specialist investor, and private shareholders to significantly extend the
Group's cash runway.
Outlook
During the reporting period and after the period end, the ongoing Phase 1a
clinical study of AVA6000, demonstrated Clinical Proof of Concept, with
multiple patient responses and a favourable safety profile. This not only
builds confidence in AVA6000 but underpins future clinical development of this
peptide drug conjugate in orphan and other indications and validates
investment in a broader pre|CISION(TM) peptide drug conjugate and ADC/AffDC
pipeline.
The recent growing body of clinical data is critical to the realisation of
significant commercial opportunities with major partners in order to monetise
the pre|CISION(TM) platform.
Based on this favourable three-weekly dosing safety profile, Avacta continues
to enrol patients in a two-weekly dosing safety study in order to determine
the dosing regimen for the expansion studies, planned to start in the US in
the second half of 2024 to be followed by the Phase 2 efficacy study, once
agreed with regulatory authorities.
The appointment of Christina Coughlin MD as Chief Executive Officer, effective
May 1 2024, signals a new period of focus on Avacta's Therapeutics division
and on driving forward AVA6000 and the wider pre|CISION(TM) peptide drug
conjugate and ADC/AffDC pipeline. As indicated, Avacta plans to focus its
resources on its therapeutic programmes and will therefore look to divest the
Diagnostics Division in a manner that maximises value for shareholders and the
strategic benefits of a focused biotech strategy.
Dr Eliot Forster, Chairman of Avacta Group plc, commented:
"As a Board and Company, we are dedicated to improving the treatment outcomes
of patients with cancer through focused investment in the lead programme
AVA6000 and the growing oncology pipeline which we believe is a driver of
significant value.
"The clinical momentum demonstrated by AVA6000 during the reporting period and
into the post-period has significantly enhanced our confidence in AVA6000 and
the broader pre|CISION(TM) platform.
"We're delighted to welcome Chris as Chief Executive Officer of Avacta. Chris
brings many years' experience and training as an oncologist and immunologist
and has worked in significant senior development roles in leading biopharma
companies. She has also been closely involved in the clinical journey of
pre|CISION(TM) and has deep insight into the peer landscape and the
opportunities.
"I would also like to extend my thanks to Alastair for the huge role he has
played in the foundation and development of the Company. On behalf of the
entire Board, we wish him the best for the future."
For further information from Avacta Group plc, please contact:
Avacta Group plc Tel: +44 (0) 1904 21 7070
Christina Coughlin, Chief Executive Officer designate www.avacta.com (http://www.avacta.com/)
Tony Gardiner, Chief Financial Officer
Michael Vinegrad, Group Communications Director
Stifel Nicolaus Europe Limited (Nomad and Joint Broker) Tel: +44 (0) 207 710 7600
Nicholas Moore / Nick Adams / Samira Essebiyea / Nick Harland / Ben Good www.stifel.com (http://www.stifel.com/)
Peel Hunt (Joint Broker)
James Steel / Chris Golden / Patrick Birkholm www.peelhunt.com (http://www.peelhunt.com)
ICR Consilium
Mary-Jane Elliott / Jessica Hodgson / Sukaina Virji avacta@consilium-comms.com (mailto:avacta@consilium-comms.com)
About Avacta Group plc - www.avacta.com (http://www.avacta.com/)
Avacta Group is a UK-based life sciences company focused on improving
healthcare outcomes through targeted cancer treatments and diagnostics.
Avacta Therapeutics is a clinical stage oncology biotech division harnessing
proprietary therapeutic platforms to develop novel, highly targeted cancer
drugs.
Avacta Diagnostics focuses on supporting healthcare professionals and
broadening access to diagnostics.
Avacta has two proprietary platforms, pre|CISION™ and Affimer(®).
The pre|CISION™ platform is a highly specific substrate for fibroblast
activation protein (FAP) which is upregulated in most solid tumour compared
with healthy tissues. The pre|CISION™ platform harnesses this tumour
specific protease to activate pre|CISION™ peptide drug conjugates and
pre|CISION™ antibody/Affimer® drug conjugates in the tumour
microenvironment, reducing systemic exposure and toxicity, allowing dosing to
be optimised to deliver the best outcomes for patients.
The lead pre|CISION™ programme AVA6000, a peptide drug conjugate form of
doxorubicin, is in Phase 1 studies. It has shown a dramatic improvement in
safety and tolerability in clinical trials to date compared with standard
doxorubicin and preliminary signs of clinical activity in multiple patients.
To register for news alerts by email go
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Chairman's Statement
I believe that Avacta has reached a pivotal point in its history. The clinical
progress of the pre|CISION™ platform and of AVA6000 enable the company to
bring singular focus to the therapeutics division, though clinical development
and partnering.
We are also aware of the need to continue to evolve the Board of Directors to
best suit the needs of an AIM-listed clinical stage cancer treatments company,
to strategically manage the diagnostics division for the best outcome for our
staff, customers and shareholders alike and, to create financial optionality
with respect to the company bond. The Board of Directors and I are excited
about what is to come for Avacta.
The AVA6000 clinical data continue to impress. As we begin to progress into
the expansion cohorts and Phase 2 study and hopefully continue to demonstrate
clear patient benefits, I am confident this will further open up the
commercial partnering opportunities for AVA6000 and the pre|CISION™
technology platform.
During the year there have been some changes to the Board, including the
appointment of Shaun Chilton as Non-executive Director in June 2023. Shaun has
held a number of senior and executive commercial positions, with more than 30
years' experience in the pharmaceutical and pharmaceutical services
industries, most recently as Chief Executive Officer of Clinigen. We believe
he will bring invaluable experience to the Company.
Christina Coughlin MD, who joined the Board as a Non-executive Director in
March 2022 and acted as Medical Advisor in the latter half of the year has now
joined the Board on a full-time basis as Head of Research and Development in
February 2024 and more latterly was appointed as Chief Executive Officer.
Chris, a talented oncologist and immunologist, has been pivotal in driving the
clinical development strategy for AVA6000 and will be responsible for all
pre-clinical research and clinical development activities. Her appointment
signals a new period of growth for Avacta.
The Board will need to continue to evolve to meet the demands of being a
clinical stage oncology Company and to more clearly communicate with
shareholders and other stakeholders.
Dr Eliot Forster
Chairman
29 April 2024
Chief Executive Officer's Statement
The clinical data emerging from the AVA6000 Phase 1 study during 2023 clearly
validate the pre|CISION(TM) platform as a leading tumour targeting
mechanism. Targeting tumour tissue and reducing systemic exposure are key
objectives in oncology drug development allowing more potent therapies to be
utilised. The potential of a successful tumour targeting platform is huge.
AVA6000, Avacta's first pre|CISION(TM) peptide drug conjugate, has been shown
to target doxorubicin to FAP-rich tumour tissue, dramatically improving the
safety and tolerability of this well-established chemotherapy. Early signs of
anti-tumour activity have been seen in a number of patients on the trial
meaning that clinically effective levels of the drug are being released in the
tumour microenvironment. This also reflects the tumour biopsy data which show
doxorubicin being present in the tumour tissue at many times the level
measured in the blood stream at the same timepoint showing effectiveness in
the tumour whilst minimising the debilitating side effects characteristically
experienced with chemotherapy.
Avacta has been able to leverage this excellent progress in the clinic to
progress conversations with potential commercial partners. The commercial
strategy is to continue to develop AVA6000 through the Phase 2 efficacy study
to maximise value. However, there are significant partnering opportunities for
the broader pre|CISION(TM) platform. The body of positive clinical data we
have seen will support our commercial activities.
The Group's focus is on growing shareholder value through its oncology drug
programmes. The Diagnostics Division has been executing the plan that was set
out to shareholders in October 2022 to build a valuable in-vitro diagnostics
business serving the needs of healthcare professionals. It has grown through
two acquisitions, resulting in a combined revenue of £21.2 million, and is on
a trajectory to become EBITDA positive in the near future with the acquired
businesses showing 10% growth during 2023.
The fundraise completed post-period end in March 2024 amounting to £31.1
million (gross proceeds) from new and existing institutional and private
shareholders has enabled us to significantly extend the Group's cash runway,
creating a strong negotiating position in future commercial discussions and
providing the funds to progress AVA6000 into Phase 2 clinical trials, subject
to FDA approval.
Dr Alastair Smith
Chief Executive Officer
29 April 2024
Avacta Therapeutics Division Update
The pre|CISION(TM) Platform
In the form of a peptide drug conjugate with a chemotherapy, the
pre|CISION(TM) platform prevents the chemotherapy from entering cells
rendering it relatively harmless until the drug conjugate encounters
fibroblast activation protein (FAP) which is upregulated in many solid tumours
compared with healthy tissues. preCISION(TM) is cleaved by FAP, releasing the
chemotherapy warhead in the FAP-rich tumour microenvironment, thus
concentrating the chemotherapy in the tumour and reducing the exposure of
healthy tissues. This leads to improved safety, tolerability and the ability
to therefore improve the dosing schedule, in terms of dose, dose frequency and
number of cycles, with the aim of improving the efficacy of these potentially
powerful anti-cancer agents and delivering better outcomes for patients and
quality of life whilst on treatment.
pre|CISION(TM) can further be incorporated into the linker in an
antibody/Affimer drug conjugate (ADC/AffDC) producing dual targeting of potent
warheads both to a tumour specific antigen and to FAP-rich tumour tissue with
several advantages over conventional ADCs. The clinical validation of the
pre|CISION(TM) platform with AVA6000 now justifies investment in a broader
pipeline of peptide drug conjugates and ADCs/AffDCs.
AVA6000 FAPα-activated doxorubicin - the lead pre|CISION™ programme
Avacta's lead programme, AVA6000, is a pre|CISION™ targeted form of
doxorubicin, an anthracycline that is used as part of standard of care in
several tumour types including soft tissue sarcoma. Its dosing schedule and
long-term use is limited by severe systemic toxicities, in particular, by
haematological toxicities and cardiotoxicities.
The ALS-6000-101 Phase 1 clinical trial involves a dose-escalation Phase 1
study in patients with locally advanced or metastatic solid tumour, known to
be Fibroblast Activation Protein α (FAP) positive, in which cohorts of
patients receive ascending doses of AVA6000 initially at three-weekly
intervals to determine the maximum tolerated dose. For more information visit
www.clinicaltrials.gov (http://www.clinicaltrials.gov) (NCT04969835).
The Phase 1a three-weekly dose escalation study has been carried out at
several sites in the UK and United States and completed the seventh and final
dose escalation cohort at 385 mg/m(2), which is approximately 3.5 times the
normal dose of doxorubicin. A number of patients in several different cohorts
remain on the trial.
The data emerging from the three-weekly dose escalation study show an
excellent safety profile and that the pre|CISION platform is functioning as
expected. The key findings of the study are:
· The pre|CISION(TM) platform targets the release of a
chemotherapy to the tumour as intended. The data show that the pre|CISION(TM)
modification is cleaved specifically by FAP, an enzyme present in high
concentrations in many solid tumour compared with healthy tissue. In the case
of AVA6000, this targets the release of doxorubicin to the
tumour microenvironment, concentrating the active cytotoxic drug within the
tumour microenvironment and limiting systemic exposure to the chemotherapy.
· AVA6000 has significantly improved the safety and tolerability of
doxorubicin. A significant reduction in the frequency and severity of the
known doxorubicin toxicities has been observed across the dosing range. A
maximum tolerated dose has not been reached in the three-weekly dose
escalation study despite dosing approximately 3.5x the normal level of
doxorubicin in the highest and final dose cohort in this part of the Phase 1a
study.
· AVA6000 has shown encouraging preliminary clinical signs of
anti-tumour activity. Preliminary results in the Phase 1a trial demonstrate
activity of AVA6000 in patients with tumour with high FAP activity and
anthracycline sensitivity, validating the mechanism of action of AVA6000.
Post-period end the Company announced that patients are now being dosed in a
two-weekly dose escalation study with the aim of defining the recommended
Phase 2 dose (RP2D), allowing dose expansions to begin in H2 2024 followed by
the Phase 2 efficacy study, subject to FDA approval, in a selected orphan
indication.
Pipeline of pre|CISION™ chemotherapies
The next most advanced pre|CISION™ pre-clinical candidate is AVA3996, a
tumour-activated proteasome inhibitor based on an analogue of Velcade.
Avacta is developing other pre|CISION™ drugs incorporating more potent
toxins, the details of which have not yet been made public, but which the
Company intends to disclose during 2024.
POINT Biopharma Inc.
Early in 2021, Avacta signed a licensing agreement with POINT Biopharma Inc.
("POINT"), to provide access to Avacta's pre|CISION™ technology for the
development of tumour-activated radiopharmaceuticals.
Under the terms of the agreement, Avacta received an upfront fee and will
receive development milestone payments for the first radiopharmaceutical
FAPα-activated drug totalling $9.5 million. Avacta will also receive
milestone payments for subsequent radiopharmaceutical FAPα-activated drugs of
up to $8 million each, a royalty on sales of FAP-activated
radiopharmaceuticals by POINT and a percentage of any sublicensing income
received by POINT.
Avacta is bound by confidentiality clauses in the license agreement with POINT
and is therefore unable to provide a detailed update on progress outside of
the information that has been placed in the public domain by POINT (POINT has
named its pre|CISION™ based programmes CanSeek(TM)).
POINT's acquisition by Eli Lilly has not affected the licensing arrangements.
Affimer(®) Immunotherapy Programmes
Avacta has also developed Affimer(®) immunotherapies, the most advanced of
which (AVA032) is in pre-clinical research phase and is a bispecific molecule
comprising an anti-PD-L1 Affimer(®) fused to IL-15, a cytokine that regulates
the activation and proliferation of immune cells (T-cells and natural killer
(NK) cells). Data presented at the AACR AACR-NCI-EORTC International
Conference on Molecular Targets and Cancer Therapeutics in October 2023
demonstrate encouraging in-vitro and in-vivo efficacy.
Translation of the Affimer(®) platform into the clinic to demonstrate the
safety and tolerability of this novel therapeutic protein platform represents
a key value inflection point for the Affimer(®) technology. Limited resources
for internal Affimer programmes are complemented by external partnerships for
the Affimer platform with Daewoong Pharmaceutical and LG Chem Life
Sciences.
AffyXell Therapeutics
AffyXell was established in January 2020 by Avacta and Daewoong as a joint
venture to develop novel mesenchymal stem cell ("MSC") therapies. AffyXell
combines Avacta's Affimer(®) platform with Daewoong's MSC platform such
that the stem cells are genetically modified to produce and secrete
therapeutic Affimer(®) proteins with immuno-modulatory effects in situ in
the patient. The Affimer(®) proteins are designed to enhance the therapeutic
effects of the MSC creating a novel, next generation cell therapy platform.
Avacta has successfully developed and characterised Affimer(®) proteins
against the second target of interest for AffyXell and has filed a patent
application for the associated intellectual property triggering the second
milestone in the agreement during the reporting period. The second milestone
resulted in an increase in Avacta's shareholding in AffyXell, from 19% to 25%.
LG Chem Life Sciences
Avacta has a strategic partnership with LG Chem Life Sciences focused on the
development of Affimer(®) based therapeutics. The partnership provides LG
Chem with rights to develop and commercialise a number of Affimer(®) and
non-Affimer biotherapeutics combined with Affimer XT(®) half-life extension
for a range of indications.
The Company will provide further updates on the partnership with LG at the
next material milestone.
Avacta Diagnostics Division Update
Avacta's Diagnostics Division is focused on supporting healthcare
professionals and broadening access to high quality diagnostics.
In October 2022 Avacta set out a strategy to grow its Diagnostics Division
through acquisitions to build a stand-alone in-vitro diagnostics ("IVD")
business taking advantage of post-pandemic opportunities to develop products
in-house and to capture proprietary routes to market to maximise
profitability. The focus of the Division is on professional healthcare in
both the centralised setting such as hospital pathology laboratories and the
decentralised setting such as primary healthcare, clinics and pharmacies. The
strategy also has the potential to benefit from the competitive advantages of
the Affimer(®) platform to differentiate immunodiagnostic products, such as
lateral flow tests, in what is a competitive market. Avacta has focused its
acquisitions on businesses with clear growth opportunities through product
portfolio or geographic expansion, improved commercial processes and partners.
Avacta has successfully executed two acquisitions of businesses that fit with
this strategy: Launch Diagnostics Ltd ("Launch"), a leading independent
distributor of IVDs to the professional, centralised hospital laboratory
testing market in the UK and France, and Coris Bioconcept SRL ("Coris"), a
developer and supplier of rapid diagnostic test kits, mainly lateral flow
tests. These acquisitions have allowed the Division to build scale and put it
on a trajectory to become EBITDA positive in the near future
The Diagnostics Division now has well-established routes to market in the UK
and France and is expanding into other European countries including Germany.
Alongside third party products it has a market leading portfolio of AMR test
products that form part of the clinical workflow in many countries. From
this base it is possible to build a significant, full spectrum, European IVD
business through organic growth which is likely to be attractive ultimately to
both strategic and financial acquirors.
As announced on 28 February 2024, the Avacta Board has taken the strategic
decision to focus its cash resources on growing the Therapeutics Division
which the Board believes is now the main value driver of the Group. Whilst the
Diagnostics Division is expected to be cash generative in the near future, it
is strategically important for the Group to simplify its structure in order to
attract specialist healthcare investors with the ability to support the
growing pre-clinical and clinical pipeline of pre|CISION(TM) and Affimer(®)
therapeutics and it will do so in a manner which maximises value for its
shareholders.
Financial Review
Reported Group revenues for the year ended 31 December 2023 increased to
£23.25 million compared to £9.65 million for the year ended 31 December 2022
('2022').
Revenues for the Therapeutics Division were £2.06 million (2022: £5.48
million), with the achievement of a further milestone in the collaboration
with AffyXell (realised in additional equity in the joint venture). The
reduction from the prior year is because milestones were received from both
AffyXell and LG Chem in 2022.
Revenues for the Diagnostics Division were £21.19 million (2022: £4.17
million). This significant increase reflects both a full year impact of Launch
Diagnostics (acquired in October 2022), contributing £17.87 million, and the
acquisition of Coris BioConcept in May 2023, contributing £3.27 million in
the post-acquisition period. On a like-for-like annualised basis, revenues of
the acquired businesses grew by approximately 10% in 2023.
Acquisitions
On 31 May 2023, the Group acquired 100% of the shares and voting interests in
Coris BioConcept SRL. Coris, established in 1996, develops, manufactures and
markets rapid diagnostic test kits, mainly lateral flow tests, for use by
healthcare professionals. Coris is ISO13485 certified and markets its products
through distributors in Europe, Asia, South America, Africa and Oceania. Total
consideration for Coris included an initial consideration of £7.31 million in
cash payable upon completion of the acquisition, in addition to £2.80 million
for other short-term non-operating assets and an additional deferred earn-out
element. The earn-out element provides additional consideration of 100% of the
revenue achieved in excess of €5.5 million for the year ended 31 December
2023, and 90% of the revenue achieved in excess of €6.5 million for the year
ended 31 December 2024, with the total earn-out payment capped at €3.5
million. The additional consideration to be paid based on future gross margin
was estimated to be £nil at 31 December 2023.
The acquisition of Coris is part of building critical mass in the Group's
Diagnostics Division, which is aiming to build an integrated and
differentiated IVD business with a global reach serving healthcare
professionals.
For the period from acquisition to 31 December 2023, Coris contributed revenue
of £3.27 million and a reported loss of £0.28 million to the Group's
results. Further details on the acquisition are provided in Note 26 to the
Financial Statements.
Research costs
During the year, the Group expensed through the income statement £14.53
million (2022: £11.10 million) research costs relating to the preCISION(TM)
and Affimer® therapeutic programmes, which are expensed given their early
stage in the development pathway, in addition to the expansion and enhancement
of the Group's existing diagnostic test offering.
Selling, general and administrative expenses
Administrative expenses have increased during the year to £16.86 million
(2022: £11.23 million). This reflects a full year of Launch Diagnostics,
£6.89 million, and the acquisition of Coris, £1.13 million.
Amortisation and impairment expense
Amortisation charges of £1.03 million (2022: £1.05 million) have been
recognised in the period, with a full year of amortisation recognised on
acquired intangible assets arising from the Launch acquisition, £0.84
million, and amortisation of Coris acquired intangible assets, £0.16 million.
The 2022 amortisation expense, £0.82 million, was recognised on Affimer(®)
development costs that were fully impaired in the prior period.
Share of loss of associate
The share of loss of associate of £0.85 million (2022: £1.15 million) arises
from the Group's equity-accounted investment in AffyXell Therapeutics Co.,
Ltd. The share of losses reflects the Group's 25% ownership share of the
losses accumulated in the year. The Group investment increased from 19% to 25%
at 31 December 2023 as a result of additional equity issued due to the Group
achieving its second technical milestone for the collaboration.
Share-based payment expense
The non-cash charge for the year decreased to £2.91 million (2022: £7.49
million), due to a limited number of new options being issued in the prior
year, and the prior year charge being increased by changes to the assumptions
around the likelihood of vesting of options.
Convertible bond
In October 2022, the Group issued senior unsecured convertible bonds ('the
Bonds') of £55.00 million to a fund advised by Heights Capital Ireland LLC, a
global equity and equity-linked focussed investor. The Bonds were issued at
95% par value with total net proceeds of £52.25 million and accrue interest
at an annual rate of 6.5% payable quarterly in arrears.
The Bonds contain various conversion and redemption features. The Bonds have a
maturity of five years, and are repayable in 20 quarterly amortisation
repayments, of principal and interest over the five-year term, in either cash
or in new ordinary shares at the Group's option. The bondholder also has the
option to convert Bonds in full outside of the usual quarterly amortisation
repayments. This has occurred twice during the period with a total principal
amount converted of £3.7 million. For all repayments to date, the Group has
elected to settle through the issue of shares. The share price underlying the
quarterly amortisation repayment is the lower of the conversion price
(118.75p) or a 10% discount to the volume weighted average price ('VWAP') in
the five- or ten-day trading period prior to conversion date. For other
conversions, shares are issued at the conversion price, which may reset
downwards at 18 months depending on share price performance, subject to a
reset price floor of £0.95.
The bond agreement contains embedded derivatives in conjunction with an
ordinary host debt liability. The derivative element is measured at fair value
using a Monte-Carlo option pricing model, which estimates the fair value based
on the probability-weighted present value of expected future investment
returns, considering each of the possible outcomes available to the
bondholders. The fair value of the derivative liability has reduced during the
year to £18.32 million (2022: £39.10 million) as a result of fluctuations in
the share price during the period and a reduction in the principal amount
remaining from £55.00 million to £40.80 million. This has resulted in a gain
on revaluation of derivative of £15.68 million (2022: charge of £4.10
million).
The host debt liability is measured at amortised cost, being adjusted to
reflect revisions in estimated cashflows arising from early conversion events,
resulting in an implied interest charge of £14.73 million (2022: £2.61
million) and a liability at year-end of £16.10 million (2022: £18.73
million). The increased interest charge reflects a full year charge following
the issuance of the bonds in October 2022.
Net finance costs
Finance income increased to £0.66 million (2022: £0.09 million) due to an
increase in interest rates and a higher average cash balance during the year
following the fundraise in October 2022.
Other finance costs of £0.57 million (2022: £0.01 million) relate primarily
to IFRS 16 interest charges.
Losses before taxation
Losses before taxation from continuing operations for the year were £27.32
million (2022: £41.64 million).
Taxation
The taxation credit has decreased to £2.37 million (2022, restated: £4.66
million). The Group claims each year for research and development tax credits
and, since it is currently loss-making, elects to surrender these tax credits
for a cash rebate, resulting in a credit of £2.05 million (2022: £2.23
million). The larger credit in the prior year reflects the recognition of a
previously unrecognised deferred tax asset of £2.56 million in relation to
tax losses, on acquisition of Launch Diagnostics.
Loss for the period
The reported loss for the period was £24.95 million (2022, restated: £36.63
million). The loss per ordinary share reduced to 9.15p (2022, restated:
14.34p) based on a weighted average number of shares in issue during the
period of 272,683,485 (2022: 255,369,066).
Cash flow
The Group reported cash and cash equivalent balances of £16.63 million at 31
December 2023 (2022: £41.78 million).
Operating cash outflows from operations amounted to £21.85 million (2022:
£15.95 million).
During the year, research and development tax credit cash rebates were
received in relation to the years ending 31 December 2022 and 2021, resulting
in a cash inflow of £6.63 million from income tax received (2022: £0.17m
paid).
Net cash outflow from investing activities amounted to £9.00 million (2022:
£25.04 million) arising principally from the acquisition of Coris, an outflow
of £6.93 million net of cash acquired. In 2022, the acquisition of Launch
resulted in an outflow of £24.88 million net of cash acquired. Other
investing cash outflows include purchase of property, plant and equipment of
£1.12 million (2022: £0.56 million).
There was a net cash outflow from financing activities of £1.30 million
(2022: inflow of £56.90 million), arising primarily from the principal
elements of lease payments of £1.45 million (2022: £0.80 million). In the
prior period, the inflow arose from the proceeds of issue of share capital,
£9.02 million, and the issue of convertible bonds, £52.25 million, in
October 2022. There were also proceeds from the exercise of share options of
£0.40 million (2022: £0.47 million).
Financial position
Net assets as at 31 December 2023 were £21.80 million (2022, restated:
£21.00 million) of which cash and cash equivalents amounted to £16.63
million (2022: £41.78 million).
The IFRS 16 Leases presentation results in the recognition of right-of-use
asset amounting to £7.07 million (2022: £5.42 million) in relation to the
Group's leasehold properties and other leased assets, together with a
corresponding lease liability of £7.03 million (2022: £5.11 million) with
the increase arising due to the acquisition of Coris.
Intangible assets increased to £30.84 million (2022: £26.32 million) due to
the acquisition of Coris and the recognition of £2.82 million of goodwill.
Further details on the acquisition accounting are detailed in Note 26 to the
Financial Statements.
Liabilities in relation to the convertible bond have been recognised with
£18.32 million (2022: £39.10 million) relating to the fair value of the
derivative element at 31 December 2023 and £16.10 million (2022: £18.73
million) relating to the debt liability element.
Dr Eliot Forster Dr Alastair Smith
Chairman Chief Executive Officer
29 April 2024 29 April 2024
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the Year Ended 31 December 2023
2023 2022 (restated)*
£000 Note
Continuing operations
Revenue 3 23,247 9,653
Cost of sales (12,003) (2,410)
------------- -------------
Gross profit 11,244 7,243
Research costs (14,529) (11,100)
Selling, general and administrative expenses (16,855) (11,232)
------------- -------------
Adjusted EBITDA (20,140) (15,089)
Impairment charge (512) (5,225)
Depreciation expense (2,638) (1,904)
Amortisation expense (1,033) (1,050)
Share of loss of associate (847) (1,152)
Acquisition-related expenses 7 (282) (735)
Share-based payment expense (2,906) (7,490)
------------- -------------
Operating loss (28,358) (32,645)
Convertible bond - professional fees 5 - (2,287)
Convertible bond - interest expense 5 (14,730) (2,606)
Convertible bond - revaluation of derivative 5 15,684 (4,100)
Finance income 655 91
Other finance costs (568) (95)
------------- -------------
Loss before tax (27,317) (41,642)
Taxation 2,370 4,659
------------- -------------
Loss from continuing operations (24,947) (36,983)
------------- -------------
Discontinued operation
Profit from discontinued operation - 351
------------ ------------
Loss for the period (24,947) (36,632)
Foreign operations - foreign currency translation differences 1 46
----------- -----------
Other comprehensive income 1 46
------------ ------------
Total comprehensive loss for the period (24,946) (36,586)
----------- -----------
Loss per share:
Basic and diluted 4 (9.15p) (14.34p)
Loss per share - continuing operations:
Basic and diluted 4 (9.15p) (14.48p)
* The comparative information is restated on account of correction of an error
relating to deferred taxation, see Note 8.
Consolidated Statement of Financial Position as at 31 December 2023
2023 2022 (restated*)
Note £000 £000
Assets
Property, plant and equipment 2,921 2,380
Right-of-use assets 7,065 5,418
Intangible assets 30,837 26,324
Investment in associate 4,079 2,976
Deferred tax asset 253 274
------------- -------------
Non-current assets 45,155 37,372
------------- -------------
Inventories 2,585 1,681
Trade and other receivables 6,585 5,579
Income tax receivable 2,239 6,510
Cash and cash equivalents 16,627 41,781
------------- -------------
Current assets 28,036 55,551
------------- -------------
Total assets 73,191 92,923
------------- -------------
Liabilities
Lease liabilities (5,735) (3,753)
Financing liabilities (219) -
Deferred tax liability (323) (562)
------------- -------------
Non-current liabilities (6,277) (4,315)
------------- -------------
Trade and other payables (9,225) (8,423)
Lease liabilities (1,295) (1,361)
Financing liabilities (166) -
Convertible bond - debt 5 (16,098) (18,729)
Convertible bond - derivative 5 (18,325) (39,100)
------------- -------------
Current liabilities (45,109) (67,613)
------------- -------------
Total liabilities (51,386) (71,928)
------------- -------------
Net assets 21,805 20,995
------------- -------------
Equity
Share capital 28,501 26,685
Share premium 83,220 62,184
Reserves (4,163) (4,434)
Retained earnings (85,753) (63,440)
------------- -------------
Total equity 21,805 20,995
------------- -------------
* The comparative information is restated on account of correction of an error
relating to deferred taxation, see Note 8.
Approved by the Board and authorised for issue on 29 April 2024.
Dr Alastair Smith Tony Gardiner
Chief Executive Officer Chief Financial Officer
Consolidated Statement of Changes in Equity
for the Year Ended 31 December 2023
Share capital Share premium Other reserve Translation reserve Reserve for own shares Retained earnings Total equity
£000 £000 £000 £000 £000 £000 £000
------------ ------------- ------------- ------------- ------------ ------------- ---------
Balance at 1 January 2022 25,472 54,530 (1,729) 4 (2,961) (34,093) 41,222
Loss for the period* - - - - - (36,632) (36,632)
Other comprehensive income for the period - - - 46 - - 46
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total comprehensive loss for the period - - - 46 - (36,632) (36,586)
Transactions with owners of the Company:
Issue of shares 949 7,448 - - - - 8,397
Exercise of share options 264 206 - - - - 470
Transfer of own shares - - - - 206 (206) -
Equity-settled share-based payment - - - - - 7,490 7,490
------------ ------------- ------------- ------------- ------------ ------------- -------------
1,213 7,654 - - 206 7,284 16,357
------------ ------------- ------------- ------------- ------------ ------------- -------------
Balance at 31 December 2022 (restated*) 26,685 62,184 (1,729) 50 (2,755) (63,440) 20,995
Loss for the period - - - - - (24,947) (24,947)
Other comprehensive income for the period - - - 1 - - 1
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total comprehensive loss for the period - - - 1 - (24,947) (24,946)
Transactions with owners of the Company:
Convertible bond - issue of shares 1,563 20,890 - - - - 22,453
Exercise of share options 253 146 - - - - 399
Transfer of own shares - - - - 270 (270) -
Equity-settled share-based payment - - - - - 2,904 2,904
------------ ------------- ------------- ------------- ------------ ------------- -------------
1,816 21,036 - - 270 2,634 25,756
------------ ------------- ------------- ------------- ------------ ------------- -------------
Balance at 31 December 2023 28,501 83,220 (1,729) 51 (2,485) (85,753) 21,805
------------ ------------- ------------- ------------- ------------ ------------- -------------
* The comparative information is restated on account of correction of an error
relating to deferred taxation, see Note 8.
Consolidated Statement of Cash Flows
for the Year Ended 31 December 2023
Note 2023 2022
£000 £000
Operating cash outflow from operations 6 (21,845) (15,953)
Interest received 655 75
Interest elements of financing liabilities (11) -
Interest elements of lease payments (304) (202)
Income tax received / (paid) 6,633 (168)
Withholding tax paid - (184)
------------- -------------
Net cash used in operating activities (14,872) (16,432)
------------- -------------
Cash flows from investing activities
Purchase of property, plant and equipment (1,124) (558)
Proceeds from sale of property, plant and equipment 60 50
Acquisition of subsidiary, net of cash acquired 7 (6,931) (24,878)
Disposal of discontinued operation, net of cash disposed of - 705
Payment of deferred consideration on past acquisition (868) -
Transaction costs related to disposal of discontinued operation - (160)
Acquisition of right-of-use assets (42) (165)
Purchase of intangible assets (96) (36)
------------- -------------
Net cash used in investing activities (9,001) (25,042)
------------- -------------
Cash flows from financing activities
Proceeds from issue of share capital - 9,016
Transaction costs related to issue of share capital - (618)
Proceeds from exercise of share options 398 470
Principal elements of lease payments (1,450) (800)
Repayment of financing liabilities (246) -
Proceeds from issue of convertible bonds 5 - 52,250
Transaction costs related to issue of convertible bonds 5 - (3,414)
------------- -------------
Net cash (used in) / from financing activities (1,298) 56,904
------------- -------------
Net (decrease) / increase in cash and cash equivalents (25,171) 15,430
Cash and cash equivalents at 1 January 2023 41,781 26,191
Effects of movements in exchange rates on cash held 17 160
------------- -------------
Cash and cash equivalents at 31 December 2023 16,627 41,781
------------- -------------
Notes to the Preliminary Results to 31 December 2023
1 General Information
These preliminary results have been prepared on the basis of the accounting
policies which are set out in Avacta Group plc's annual report and financial
statements for the year ended 31 December 2023.
The consolidated financial statements of the Group for the year ended 31
December 2023 were prepared in accordance with UK adopted international
accounting standards.
The financial information set out above for the year ended 31 December 2023
and the year ended 31 December 2022 does not constitute the Company's
statutory accounts for those years.
Statutory accounts for the year ended 31 December 2022 have been delivered to
the Registrar of Companies and distributed to shareholders. The statutory
accounts for the year ended 31 December 2023 will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
The auditors' report on the accounts for the year ended 31 December 2023 and
the year ended 31 December 2022 was unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under 489(2) or
498(3) of the Companies Act 2006.
Basis of preparation
The Group's consolidated financial statements have been prepared in accordance
with UK adopted international accounting standards.
The financial statements have been prepared on the historical cost basis.
Functional and presentation currency
These consolidated financial statements are presented in pound sterling, which
is the Company's functional currency. All amounts have been rounded to the
nearest thousand, unless otherwise indicated.
Going concern
These financial statements have been prepared on a going concern basis,
notwithstanding a loss of £24.95 million and operating cash outflows from
operations of £21.8 million for the year ended 31 December 2023. The
Directors consider this to be appropriate for the following reasons.
The Directors have prepared detailed cash flow forecasts that extend to at
least twelve months from the date of approval of the financial statements. The
forecasts take into account the Directors' views of current and future
economic conditions that are expected to prevail over the period. These
forecasts include assumptions regarding the status of therapeutic development
collaborations, the AVA6000 clinical trials, and product development projects
together with the Launch and Coris sales pipelines, future revenues and costs,
together with various scenarios which reflect growth plans, opportunities,
risks and mitigating actions. The forecasts also include assumptions regarding
the timing and quantum of investment in the therapeutic development
programmes.
Whilst there are inherent uncertainties regarding the cash flows associated
with the development of both the therapeutic platforms, the Directors are
satisfied that there is sufficient discretion and control as to the timing and
quantum of cash outflows to ensure that the Company and Group are able to meet
their liabilities as they fall due for at least twelve months from the date of
approval of the financial statements. The key factors considered in reaching
this conclusion are summarised below:
· As at 31 December 2023, the Group's cash and cash equivalents
were £16.6 million (2022: £41.8 million).
· The Group completed an equity fundraise in March 2024, which
raised gross proceeds of £31.1 million (£29.4 million net proceeds)
· While the Group does have external borrowings in the form of a
convertible bond with principal amount remaining of £40.8 million, this
liability can be settled by the issue of new equity, rather than cash, at the
discretion of the Group.
· The Directors have considered the position of the individual
trading companies in the Group to ensure that these companies are also in a
position to continue to meet their obligations as they fall due.
The Directors continue to explore additional sources of income and finance
available to the Group to continue the development of the therapeutic
platforms beyond 2024. The sources of income could come through the licensing
of assets/targets from the proprietary Affimer(®) and pre|CISION™ platforms
or through additional therapeutic collaborations, similar to the LG Chem and
Daewoong collaborations, which may include up-front technology access fees and
significant early-stage development income, or through additional equity
fundraises.
Based on these indications, the Directors are confident that the Company will
have sufficient funds to continue to meet its liabilities as they fall due for
at least twelve months from the date of approval of the financial statements
and therefore have prepared the financial statements on a going concern basis.
Use of judgements and estimates
In preparing these consolidated financial statements, management has made
judgements and estimates that affect the application of the Group's accounting
policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to estimates are recognised prospectively.
Information about judgements and estimates made by management that have the
most significant effects on the amounts recognised in the financial statements
is given below.
The Directors consider that the key judgements made in preparation of the
financial statements are:
Going concern - The judgement of whether or not the accounts should be
prepared on a going concern basis has been disclosed above.
Revenue recognition - Judgements arise from the application of IFRS 15 to the
Group's revenue streams, as disclosed in Note 1C of the financial statements,
as to the timing and nature of revenue recognised in relation to the
achievement of milestones.
The Directors consider that the assumptions and estimation uncertainties at 31
December 2023 that have a significant risk of resulting in a material
adjustment to the carrying amounts and liabilities in the next financial year
are:
Impairment - Impairment tests have been performed on the carrying amounts of
the Group's cash-generating units. Further information on the key assumptions
underlying these tests is disclosed in Note 10 of the financial statements.
Acquisitions - Estimation uncertainty is inherent in the methods used to
determine the fair value of consideration and of the assets acquired and
liabilities assumed, as set out in Note 7. These include the valuation of
acquired intangible assets and the estimate of deferred consideration payable.
Convertible bond - Determining the fair value of the embedded derivative
within the convertible bond, both at conversion dates and at the reporting
date. See Note 5.
Significant accounting policies
The Group has consistently applied the accounting policies to all periods
presented in these preliminary statements. Whilst there are a number of new
standards effective from periods beginning after 1 January 2023, the Group has
not early adopted the new or amended standards and does not expect them to
have a significant impact on the Group's consolidated financial statements.
This Group presents an alternative performance measure ('APM'), adjusted
EBITDA, in the Consolidated Statement of Profit or Loss. Adjusted EBITDA is
presented to enhance an investor's evaluation of ongoing operating results, by
facilitating both a meaningful comparison of results between periods and
identification of the underlying cash used by operations within the business.
Items of expenditure included from the adjusted EBITDA measure are those where
the relative magnitudes year-on-year are not directly reflective of
year-on-year performance, or are not closely linked to the underlying
cashflows from operations. There is a clear reconciliation between adjusted
EBITDA and operating loss in the Consolidated Statement of Profit or Loss. It
is noted that the above APM is not a substitute for IFRS measures, and may not
be directly comparable to similarly titled measures used by other companies.
2 Segment reporting
Operating segments
In the view of the Board of Directors, the Group has two (2022: two) distinct
reportable segments, which are Diagnostics and Therapeutics (2022: Diagnostics
and Therapeutics), and segment reporting has been presented on this basis. The
Directors recognise that the operations of the Group are dynamic and therefore
this position will be monitored as the Group develops.
The principal activities of each reportable segment in the current and prior
year are as follows:
Diagnostics: development and sale of innovative, next generation diagnostic
solutions and disruptive immunodiagnostic products
Therapeutics: development of novel cancer therapies harnessing proprietary
technology
Segment revenue represents revenue from external customers arising from sale
of goods and services, plus inter-segment revenues. Inter-segment transactions
are priced on an arm's length basis. Segment results, assets and liabilities
include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
The Group's revenue to destinations outside the UK amounted to 45% (2022: 74%)
of total revenue. The revenue analysis below is based on the country of
registration of the customer:
2023 2022
£'000 £'000
UK 12,750 2,532
France 4,120 1,296
Rest of Europe 3,688 158
North America 21 179
South Korea 2,055 5,481
Rest of World 613 7
------------- -------------
23,247 9,653
During the year, transactions with one external customer in the Therapeutics
segment amounted individually to 10% or more of the Group's revenues from
continuing operations, being £2,054,000. In the year ended 31 December 2022
transactions with two external customers, both in the Therapeutics segment,
amounted individually to 10% or more of the Group's revenues from continuing
operations, being £3,798,000 and £1,682,000 respectively.
Operating segment analysis 2023
Diagnostics Therapeutics Central overheads(1) Total
£000 £000 £000 £000
Revenue 21,192 2,055 - 23,247
Cost of goods sold (11,988) (15) - (12,003)
------------- ------------- ------------- --------
Gross profit 9,204 2,040 - 11,244
Research costs (1,421) (13,108) - (14,529)
Selling, general and administrative expenses (8,963) (2,489) (5,403) (16,855)
------------- ------------- ------------- --------
Adjusted EBITDA (1,180) (13,557) (5,403) (20,140)
Impairment charge (512) - - (512)
Depreciation expense (1,359) (1,271) (8) (2,638)
Amortisation expense (1,020) (10) (3) (1,033)
Share of loss of associate - (847) - (847)
Acquisition-related expenses - - (282) (282)
Share-based payment expense (359) (1,739) (808) (2,906)
------------- ------------- ------------- -------------
Segment operating loss (4,430) (17,424) (6,504) (28,358)
------------- ------------- ------------- -------------
(1)Central overheads, which relate to operations of the Group functions, are
not allocated to the operating segments.
Operating profit/loss is the measure of profit or loss regularly reviewed by
the Board. Other items comprising the Group's loss before tax are not
monitored on a segmental basis.
The information reported to the Board does not include balance sheet
information at the segment level. The key segmental balance sheet information
is considered to be the segment's non-current assets.
All material segmental non-current assets (excluding goodwill and deferred tax
assets) are located in the UK, except for £1,838,000 located in France and
£5,150,000 located in Belgium.
Operating segment analysis 2022
Diagnostics Therapeutics Central overheads(1) Total Animal Health (discontinued)
(continuing)
Revenue 4,172 5,481 - 9,653 412
Cost of goods sold (2,282) (128) - (2,410) (118)
------------- ------------- ------------- -------- -------------
Gross profit 1,890 5,353 - 7,243 294
Research costs (2,309) (8,791) - (11,100) -
Selling, general and administrative expenses (4,706) (2,403) (4,122) (11,231) (240)
------------- ------------- ------------- -------- -------------
Adjusted EBITDA (5,125) (5,841) (4,122) (15,088) 54
Impairment charge (5,225) - - (5,225) -
Depreciation expense (627) (1,269) (9) (1,905) (11)
Amortisation expense (1,033) (8) (9) (1,050) -
Share of loss of associate - (1,152) - (1,152) -
Acquisition-related expenses - - (735) (735) -
Share-based payment expense (1,438) (2,713) (3,339) (7,490) -
------------- ------------- ------------- ------------- -------------
Segment operating loss (13,448) (10,983) (8,214) (32,645) 43
------------- ------------- ------------- ------------- -------------
(1)Central overheads, which relate to operations of the Group functions, are
not allocated to the operating segments.
Operating profit/loss is the measure of profit or loss regularly reviewed by
the Board. Other items comprising the Group's loss before tax are not
monitored on a segmental basis.
The information reported to the Board does not include balance sheet
information at the segment level. The key segmental balance sheet information
is considered to be the segment's non-current assets.
All material segmental non-current assets (excluding goodwill) are located in
the UK, except for £2,281,000 located in France.
3 Revenue
See accounting policy and discussion of main revenue streams in Note 1C of the
financial statements. The Group's revenue is all derived from contracts with
customers.
a) Disaggregation of revenue
In the following table, revenue is disaggregated by both its nature and the
timing of revenue recognition. The table also includes a reconciliation of the
disaggregated revenue with the Group's reportable segments (see Note 2).
Year ended 31 December 2023
Diagnostics Therapeutics Total
£000 £000
Nature of revenue
Sale of goods 20,019 - 20,019
Provision of services 1,173 3 1,176
Licence-related income - 2,052 2,052
21,192 2,055 23,247
Timing of revenue recognition
Products or services transferred at a point in time 20,019 2,052 22,071
Products or services transferred over time 1,173 3 1,176
21,192 2,055 23,247
Year ended 31 December 2022
Diagnostics Therapeutics Continuing operations Animal Health (discontinued) Total
£000 £000 £000 £000
Nature of revenue
Sale of goods 3,779 - 3,779 259 4,038
Provision of services 393 229 622 153 775
Licence-related income - 5,252 5,252 - 5,252
4,172 5,481 9,653 412 10,065
Timing of revenue recognition
Products or services transferred at a point in time 3,779 5,252 9,031 391 9,422
Products or services transferred over time 393 229 622 21 643
4,173 5,480 9,653 412 10,065
4 Earnings per ordinary share
The calculation of earnings per ordinary share is based on the profit or loss
for the period and the weighted average number of equity voting shares in
issue excluding own shares held jointly by the Avacta Employees' Share Trust
and certain employees and the shares held within the Avacta Share Incentive
Plan ('SIP').
At 31 December 2023, 25,491,642 options (2022: 20,444,462) have been excluded
from the diluted weighted-average number of ordinary shares calculation
because, due to the loss for the period, their effect would have been
anti-dilutive. Further details on share options are set out in Note 5.
At 31 December 2023, no potentially dilutive shares relating to the
convertible bond (2022: 5,314,010) have been excluded from the diluted
weighted-average number of ordinary shares calculation because, due to the
loss for the period, their effect would have been anti-dilutive. Further
details on the convertible bond are set out in Note 22.
2023 2022 (restated)
Continuing operations Continuing operations Discontinued operation Total
Loss (£000) (24,947) (36,983) 351 (36,632)
--------------------- --------------- --------------- -----------------
Weighted average number of shares (number) 272,683,485 255,369,066
-------------------- --------------- -------------- ----------------
Basic and diluted loss per ordinary share (pence) (9.15p) (14.48p) 0.14p (14.34p)
-------------------- --------------- -------------- ----------------
In January 2024, 3,425,373 new ordinary shares of 10p each were issued in
settlement of the quarterly principal of £2.55 million and interest repayment
of £0.66 million in respect of the unsecured convertible bond.
On 4 March 2024, 27,390,485 ordinary shares of 10p each were allotted and
issued at 50p further to a placing of shares, with a further 130,000 ordinary
shares of 10p each being allotted and issued in relation to a management
subscription of shares. On 19 March 2024, a further 23,879,124 conditional
placing shares and 10,896,948 REX offer shares of 10p each were allotted and
issued at 50p.
In April 2024, 7,529,825 new ordinary shares of 10p each were issued in
settlement of the quarterly principal of £2.55 million and interest repayment
of £0.62 million in respect of the unsecured convertible bond.
5 Convertible bond
In October 2022, the Group issued senior unsecured convertible bonds ('the
Bonds') of £55 million to a fund advised by Heights Capital Ireland LLC, a
global equity and equity-linked focused investor. The Bonds were issued at 95%
par value with total net proceeds of £52.25 million, and accrue interest at
an annual rate of 6.5% payable quarterly in arrears.
The Bonds contain various conversion and redemption features. The Bonds have a
maturity of five years, and are repayable in 20 quarterly amortisation
repayments, of principal and interest over the five-year term, in either cash
or in new ordinary shares at the Group's option. The bondholder also has the
option to convert Bonds in full outside of the usual quarterly amortisation
repayments, which has occurred twice during the period with a total principal
amount converted of £3,700,000. For all repayments to date, the Group has
elected to settle through the issue of shares. The share price underlying the
quarterly amortisation repayment is the lower of the conversion price
(118.75p) or a 10% discount to the volume weighted average price ('VWAP') in
the five- or ten-day trading period prior to conversion date. For other
conversions, shares are issued at the conversion price, which may reset
downwards at 18 months depending on share price performance, subject to a
reset price floor of £0.95.
The bond contains embedded derivatives in conjunction with an ordinary host
debt liability. The derivative element is measured at fair value using a
Monte-Carlo option pricing model, which estimates the fair value based on the
probability-weighted present value of expected future investment returns,
considering each of the possible outcomes available to the bondholders. This
falls under Level 3 of the fair value hierarchy.
Significant assumptions used in the fair value analysis include the volatility
rate. A volatility of 84.7% was used in the determination of the fair value of
the derivative element. A reduction of 25% would have resulted in a reduction
in the fair value at inception by £1,839,000, corresponding increases in
volatility do not have a significant impact on the valuation.
The host debt liability is measured at amortised cost, being adjusted to
reflect revisions in estimated cashflows arising from early conversion events,
resulting in an implied interest expense of £14,730,000.
In the comparative period, transaction costs of £3,413,000 were apportioned
between the derivative and debt liability components according to the relative
inception values. This resulted in £2,287,000 of transaction costs being
recognised as an expense at acquisition, with £1,127,000 adjusted for in the
carrying amount of the debt liability at acquisition.
Convertible bond - derivative Convertible bond - debt
£000 £000
At 1 January 2023 39,100 18,729
Repayments (1) (5,091) (17,361)
Interest expense 14,730
Revaluation of derivative (15,684) -
----------- -----------------
At 31 December 2023 18,325 16,098
----------- -----------------
(1) Repayments relate to the issue of new ordinary shares in settlement of the
liability.
6 Operating cash outflow from operations
2023 2022
(restated)
£000 £000
Loss for the period (24,947) (36,632)
Adjustments for:
Amortisation expense 1,033 1,051
Impairment losses 512 5,225
Depreciation 2,638 1,961
Net loss on disposal of property, plant and equipment (2) 52
Deferred income movement 28 -
Share of loss of associate 847 1,152
Equity-settled share-based payment transactions 2,906 7,490
Profit on lease modification 1 (31)
Gain on sale of discontinued operation - (308)
Net finance costs (1,277) 9,000
Increase in investment in associate (1,950) (4,127)
Taxation (2,370) (4,659)
------------- -------------
Operating cash outflow before changes in working capital (22,581) (19,826)
Decrease in inventories 196 52
Decrease in trade and other receivables 841 2,225
(Decrease) / increase in trade and other payables (301) 1,596
------------- -------------
Operating cash outflow from operations (21,845) (15,953)
------------- -------------
7 Acquisition of subsidiary
On 31 May 2023, the Group acquired 100% of the shares and voting interests in
Coris Bioconcept SRL ('Coris'). Coris develops, manufactures and markets rapid
diagnostic test kits, mainly lateral flow tests, for use by healthcare
professionals. Coris is ISO13485 certified and markets its products through
distributors in Europe, Asia, South America, Africa and Oceania.
For the period from acquisition to 31 December 2023, Coris contributed revenue
of £3,270,000 and loss of £278,000 to the Group's results. If the
acquisition had occurred on 1 January 2023, management estimates that
consolidated revenue would have been £24,499,000 and consolidated loss for
the year would have been £25,666.000. In determining these amounts,
management has assumed that the fair value adjustments that arose on the date
of acquisition would have been the same if the acquisition had occurred on 1
January 2023.
A. Consideration transferred
£000
Cash (1) 10,116
Deferred consideration 22
-----------
Total consideration transferred 10,138
-----------
(1) Of which, £7,312,000 relates to the agreed initial consideration before
net working capital amounts, and £2,804,000 relates to amounts paid in
relation to net working capital balances net of financing liabilities.
In addition, the Group has agreed to pay the selling shareholders additional
consideration of one times the sales exceeding €5.5 million in the year
ending 31 December 2023 and 0.9 times the sales exceeding €6.5 million in
the year ending 31 December 2024, capped at a total of €3.5 million . Based
on an assessment of forecast future sales, the fair value of this contingent
consideration at the acquisition date is £22,000. At 31 December 2023, the
contingent consideration estimated has been revised to £nil.
B. Acquisition-related costs
The Group incurred acquisition-related costs of £282,000 on legal fees and
due diligence costs. These costs have been included in 'Acquisition-related
expenses'.
C. Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and
liabilities assumed at the date of acquisition.
£000
Property, plant and equipment 368
Right-of-use assets 1,405
Intangible assets - brand 631
Intangible assets - customer relationships 1,716
Intangible assets - development projects 753
Intangible assets - other 60
Deferred tax asset 198
Inventories 1,103
Trade and other receivables 1,479
Cash and cash equivalents 3,208
Trade and other payables (1,585)
Lease liabilities (1,394)
Financing liabilities (628)
----------
Total identifiable net assets acquired 7,314
----------
Trade receivables comprises gross contractual amounts of £1,033,000 with
£nil expected to be uncollectable at the date of acquisition. Amounts
receivable from selling shareholders were settled at acquisition at their
gross contractual amount.
D. Goodwill
Goodwill arising from the acquisition has been recognised as follows:
£000
Consideration transferred A 10,138
Fair value of identifiable net assets C (7,314)
-----------
Goodwill 2,824
-----------
The goodwill is attributable mainly to the skills and technical talent of
Coris' work-force and the synergies expected to be achieved from integrating
the company into the Group's wider Diagnostics business. None of the goodwill
recognised is expected to be deductible for tax purposes.
8 Restatement of comparative information
During 2023, the Group identified an error in the 2022 financial statements.
On acquisition of Launch Diagnostics in 2022, a deferred tax asset should have
been recognised in relation to previously unrecognised losses in different
taxable entities but within the same taxation authority as the Launch
Diagnostics UK taxable entity. This asset should have been recognised to the
extent that the losses offset taxable temporary differences of the Launch
Diagnostics UK taxable entity.
This error has been corrected by restating each of the affected financial
statement line items in the comparative period. The following tables summarise
the impacts on the Group's consolidated financial statements.
In the restated consolidated statement of financial position this leaves a net
deferred tax asset relating to the UK taxation authority, and a net deferred
tax liability relating to the French taxation authority, which cannot be
offset against one another.
A. Consolidated statement of profit or loss and other comprehensive income
Year ended 31 December 2022
As previously reported Adjustment As restated
Loss before tax (41,642) - (41,642)
Taxation 2,102 2,557 4,659
------------- ------------- ------------
Loss from continuing operations (39,540) 2,557 (36,983)
------------- ------------- ------------
Loss for the period (39,189) 2,557 (36,632)
------------ ------------ ------------
Total comprehensive loss for the period (39,143) 2,557 (36,586)
----------- ----------- -----------
Loss per share:
Basic and diluted (15.34p) 1.00p (14.34p)
Loss per share - continuing operations:
Basic and diluted (15.48p) 1.00p (14.48p)
B. Consolidated statement of financial position
At 31 December 2022
As previously reported Adjustment 2022 (restated*)
£000 £000
Assets
Other non-current assets 37,098 - 37,098
Deferred tax asset - 274 274
------------- ------------- -------------
Non-current assets 37,098 274 37,372
------------- ------------- -------------
Current assets 55,551 - 55,551
------------- ------------- -------------
Total assets 92,649 274 92,923
------------- ------------- -------------
Liabilities
Other non-current liabilities (3,753) - (3,753)
Deferred tax liability (2,845) 2,283 (562)
------------- ------------- -------------
Non-current liabilities (6,598) 2,283 (4,315)
------------- ------------- -------------
Current liabilities (67,613) - (67,613)
------------- ------------- -------------
Total liabilities (74,211) 2,283 (71,928)
------------- ------------- -------------
Net assets 18,438 2,557 20,995
------------- ------------- -------------
29 Events after the reporting period
On 22 January 2024, 3,425,373 new ordinary shares of 10p each were issued in
settlement of the quarterly principal of £2.55 million and interest repayment
of £0.66 million in respect of the unsecured convertible bond.
On 4 March 2024, 27,390,485 ordinary shares of 10p each were allotted and
issued at 50p further to a placing of shares, with a further 130,000 ordinary
shares of 10p each being allotted and issued in relation to a management
subscription of shares. On 19 March 2024, a further 23,879,124 conditional
placing shares and 10,896,948 REX offer shares of 10p each were allotted and
issued at 50p. Placing costs of £1.73 million were incurred and offset
against the share premium reserve.
On 22 April 2024, 7,529,825 new ordinary shares of 10p each were issued in
settlement of the quarterly principal of £2.55 million and interest repayment
of £0.62 million in respect of the unsecured convertible bond.
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