REG - Avacta Group PLC - Interim Results for the Period Ended 30 June 2022
29/09/2022 07:00
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RNS Number : 0770B Avacta Group PLC 29 September 2022
29 September 2022
Avacta Group plc
("Avacta", the "Company" or the "Group")
Interim Results for the Period Ended 30 June 2022
Strong momentum in Therapeutics; Diagnostics continues to focus on developing
a pipeline of IVD products for professional and consumer use
Avacta Group plc (AIM: AVCT), a clinical stage oncology drug company and
developer of powerful diagnostics based on its innovative Affimer(®) and
pre|CISION™ platforms, announces its interim results for the period ended 30
June 2022.
Operating Highlights
Therapeutics - Strong progress as a clinical-stage business
· The first-in-human Phase I clinical trial (ALS-6000-101) of
AVA6000, a FAPα-activated doxorubicin, progressed through the first and
second cohorts (80 mg/m2 to 120 mg/m2 respectively) and initiated the third
cohort at 160mg/m2.
· The next pre|CISION™ drug candidate, AVA3996, was selected for
pre-clinical development with potential for an Investigational New Drug
Application in 2023.
· Pre-clinical data regarding AVA6000 was presented at the American
Association for Cancer Research (AACR) 2022 Annual Meeting as a poster
entitled 'AVA6000, a novel precision medicine, targeted to the tumor
microenvironment via Fibroblast Activation Protein (FAP) mediated cleavage'.
· AffyXell Therapeutics ("AffyXell"), the joint venture between
Avacta and Daewoong Pharmaceutical ("Daewoong"), entered into collaborations
with Biocytogen, a Chinese company specialising in developing new biological
drugs, and with the Korea Non-Clinical Technology Solution Center ("KNTSC").
It also expanded its strategic partnership with GenScript ProBio, a leading
biopharmaceutical manufacturer.
· Avacta's shareholding in AffyXell Therapeutics ("AffyXell")
increased to 21% following the triggering of a milestone equity payment.
· LG Chem Life Sciences (LG Chem), the life sciences division of the
South Korean LG Group, exercised its renewal option as part of the ongoing
collaboration with Avacta, triggering a license renewal fee payment to Avacta
of $2 million.
· The Therapeutics Division relocated to new facilities at Scale
Space, in Imperial College's White City Campus in London, bringing together
the research and the development teams in a single site.
Post-period Highlights
· ALS-6000-101 study advanced to dosing the fourth dose cohort of
patients following a positive review in August of the safety and tolerability
data from the dosing of the third cohort.
· The US Food and Drug Administration (FDA) granted Orphan Drug
Designation (ODD) to AVA6000 for treatment of soft tissue sarcoma.
· AffyXell successfully completed a funding round to advance its lead
mesenchymal stem cell (MSC) programme towards the clinic, and to develop its
wider pre-clinical pipeline of cell therapies.
Diagnostics - Building a portfolio of products in an ISO13485 accredited
in-vitro diagnostic products business
· The Company continues to execute on its strategy of building an
in-vitro diagnostics (IVD) product portfolio for professional and consumer use
including those against infectious respiratory diseases.
· In January, the Company announced that it had independently taken
the decision to pause sales of the AffiDX® SARS COV-2 antigen lateral flow
test whilst it sought to replace the antibody in the product to ensure that
its performance with the Omicron variant matched the high performance of the
product with previous mutations. Work to ensure the high performance of this
test against emerging mutants of the virus continues.
Financial and Corporate Highlights
· Revenues increased to £5.5 million (6 months to 30 June 2021:
£1.5 million; year ended 31 December 2021: £2.9 million).
· Operating loss from continuing operations reduced to £9.0 million
(6 months to 30 June 2021: £10.2 million; year ended 31 December 2021: £26.4
million).
· Reported losses reduced to £7.9 million (6 months to 30 June
2021: £10.2 million, year ended 31 December 2021: £26.4 million).
· Cash and short-term deposits of £17.0 million (30 June 2021:
£37.0 million; 31 December 2021: £26.2 million).
· Animal Health Division sold to Vimian Group AB in March 2022 for
an upfront payment of £0.9 million and additional deferred contingent
consideration of up to £1.4 million dependent on the combined performance of
the consolidated business.
· Dr Christina Coughlin, a medical oncologist and immunologist and
Chief Executive Officer of CytoImmune Therapeutics, Inc., appointed as
Non-executive Director to the Board of Directors of Avacta.
Dr Alastair Smith, Chief Executive of Avacta Group plc, commented:
"The strong momentum in the Group seen during the first half of 2022 has
continued post-period end. Most notably the Phase I clinical trial evaluating
the safety and tolerability of AVA6000 is making excellent progress and is now
recruiting patients into the fourth dose escalation cohort, at a dose of 200
mg/m(2), equivalent to more than double the normal dose of doxorubicin.
"I believe success in the ongoing Phase Ia study will be a major value
inflection point for the Group as, not only is it important for the continued
development of AVA6000, but it will also provide validation of the pre|CISION
mechanism of action, and therefore the platform as a whole. If then applied
more broadly, the validated platform would create a promising pipeline of
chemotherapies with the potential to significantly improve patients' lives. It
is also exciting to see AVA3996, the next pre|CISION drug candidate, selected
for pre-clinical development. We look forward to providing future updates on
this."
"We continue to progress our Diagnostic Division, as an ISO13485 certified
business, with all the necessary product development functions established
in-house, removing the need to rely on multiple external partners. It is now
focused on developing a pipeline of IVD products that will underpin a future
profitable IVD business."
-Ends-
This announcement contains information which, prior to its disclosure, was
considered inside information for the purposes of Article 7 of Regulation (EU)
No 596/2014 (MAR).
For further information from Avacta Group plc, please contact:
Avacta Group plc Tel: +44 (0) 844 414 0452
Alastair Smith, Chief Executive Officer www.avacta.com (http://www.avacta.com)
Tony Gardiner, Chief Financial Officer
Michael Vinegrad, Group Communications Director
Stifel Nicolaus Europe Limited (Nomad and Broker) Tel: +44 (0) 207 710 7600
Nicholas Moore / Nick Adams / Fred Walsh / Nicholas Harland www.stifel.com (http://www.stifel.com/)
FTI Consulting (Financial Media and IR) Tel: +44(0) 203 727 1000
Simon Conway / Alex Shaw / George Kendrick Avacta.LS@fticonsulting.com (mailto:Avacta.LS@fticonsulting.com)
Zyme Communications (Trade and Regional Media) Tel: +44 (0)7891 477 378
Lily Jeffery lily.jeffery@zymecommunications.com
(mailto:katie.odgaard@zymecommunications.com)
About Avacta Group plc - https://www.avacta.com (https://www.avacta.com/)
Avacta Group is developing novel cancer immunotherapies and powerful
diagnostics based on its two proprietary platforms - Affimer(®) biologics and
pre|CISION™ tumour targeted chemotherapies.
The Affimer(®) platform is an alternative to antibodies and is derived from a
small human protein. Affimer(®) technology has been designed to address many
of the negative issues of antibodies, principally: the time taken to generate
new antibodies, the reliance on an animal's immune response; poor specificity
in many cases; in addition to, the complexity and high cost of manufacture.
Despite these shortcomings, antibodies currently dominate markets, such as
diagnostics and therapeutics, which are worth in excess of $100bn.
Avacta's pre|CISION™ targeted chemotherapy platform is designed to
selectively release active chemotherapy in FAP rich tumour tissue to limit the
systemic exposure that causes damage to healthy tissues, and thereby aims to
improve the overall safety and therapeutic potential of these powerful
anti-cancer treatments.
The Avacta Group comprises two divisions: The therapeutics development
activities are based in London and Cambridge, UK and a separate diagnostics
business unit is based in Wetherby, UK. The Group is generating near-term
revenues from Affimer(®) reagents for diagnostics, bioprocessing and
research.
Avacta's Diagnostics Division is developing an in-house pipeline of
Affimer-based diagnostic assays, including the AffiDX(®) SARS-CoV-2 Lateral
Flow Rapid Antigen Test, and works with partners world-wide to develop bespoke
Affimer(®) reagents for third party products.
Avacta's Therapeutics Division is working to generate more tolerable and
durable treatments for oncology patients who do not respond to existing
therapies. By combining its two proprietary platforms the Group is building a
wholly owned pipeline of clinically differentiated cancer therapies. In 2021
Avacta transitioned to become a clinical stage biopharmaceutical company, when
it commenced a phase I trial in patients with locally advanced or metastatic
selected solid tumours. The study was a first-in-human, open label,
dose-escalation and expansion study of the Group's lead pre|CISION™ prodrug,
AVA6000 (a pro-doxorubicin).
Avacta has established drug development partnerships with pharma and biotech,
including a multi-target deal with LG Chem worth up to $400m, a joint venture
in South Korea with Daewoong Pharmaceutical focused on cell and gene therapies
incorporating Affimer(®) immune-modulators and a recent license agreement
with Point Biopharma for them to develop radiopharmaceuticals based on the
pre|CISION™ platform.
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Chairman and Chief Executive Officer's Statement
Avacta Therapeutics Division
In April 2022, the Avacta Therapeutics Division relocated its research
activities from Cambridge to White City in London which has brought together
both the research and drug development teams into a single site. The
relocation was completed on schedule with almost no down-time and the
Therapeutics Division has rapidly settled in to its new, world-class
facilities.
AVA6000 FAPα-activated Doxorubicin
Anthracyclines such as Doxorubicin, a generic chemotherapy for which the
broader market is expected to grow to $1.38 billion by 2024, are widely used
as part of standard of care in several tumour types, but their use is limited
by cumulative toxicity, and, in particular, cardiotoxicity. Avacta's
pre|CISION™ FAPα-activated approach is designed to reduce the systemic
exposure of healthy tissues to the active chemotherapy, leading to improved
dosing regimens, and potentially improved safety and therapeutic profiles.
The ALS-6000-101 Phase I clinical trial involves a dose-escalation Phase I
study in patients with locally advanced or metastatic selected solid tumours,
known to be FAPα-positive, in which cohorts of patients receive ascending
doses of AVA6000 to determine the maximum tolerated dose and establish a
recommended Phase II dose. The second part of the study is an expansion phase
where patients receive AVA6000 to further evaluate the safety, tolerability
and clinical activity at this recommended Phase II dose across selected tumour
types. For more information visit www.clinicaltrials.gov
(https://clinicaltrials.gov/ct2/show/NCT04969835) (NCT04969835).
Having seen the first dose of AVA6000 administered at The Royal Marsden NHS
Foundation Trust in August 2021, clinical trial sites have been added at the
Christie NHS Foundation Trust in Manchester, St James' Hospital in Leeds, The
Beatson in Glasgow and The Freeman in Newcastle and continue to recruit.
The starting dose with cohort 1 was 80 mg/m(2) of AVA6000 which is equivalent
to 54 mg/m(2) of Doxorubicin. The Safety Data Monitoring Committee (SDMC)
reviewed the data from cohort 1 in February 2022 and recommended that the dose
was escalated to 120 mg/m(2), and subsequently recommended that the trial
progress to the third cohort in June 2022 at a dose of 160 mg/m(2).
Post-period end, in August 2022, the third cohort was completed and the SDMC
approved dose escalation to 200mg/m(2) in the fourth cohort which is now
recruiting patients in the UK. The fourth cohort is expected to be completed
during Q4 2022.
The ALS-6000-101 protocol has been designed as a data-rich clinical study that
will provide the Company with detailed insights into the safety and
pharmacokinetics of AVA6000. The presence of Doxorubicin in the tumour tissue
is also a key indicator that the proposed mechanism of FAPα-activated release
of Doxorubicin is working. This information can only be obtained from tumour
biopsies, which are not mandatory in the Phase I study, but the Company
remains confident of gathering some biopsy data from the Phase Ia dose
escalation study. The Company has worked with partners at a UK based,
world-leading pathology laboratory to put in place the validated assays to
analyse biopsy samples.
Following approval by the US Food and Drug Administration (FDA) of an
Investigational New Drug (IND) application, two clinical trial sites in the US
are currently being prepared to join the ALS-6000-101 study. Post-period end
the FDA also granted Orphan Drug Designation (ODD) to the company's lead
pre|CISION(TM) drug candidate, AVA6000, for treatment of soft tissue sarcoma.
The FDA can grant ODD based on a review of preclinical data from
investigational treatments for rare diseases, such as soft tissue sarcoma,
which are defined as conditions affecting fewer than 200,000 people in the US.
This designation qualifies the developer of the drug for certain incentives,
including, seven years of market exclusivity upon drug approval from the FDA.
Soft-tissue sarcoma is a rare mesenchymal malignancy which accounts for less
than 1% of all adult tumours. Despite the successful advancement of localised
therapies, such as surgery and radiotherapy, these tumours can recur, often
with metastatic disease. The American Cancer Society estimates that, in 2022
approximately 13,190 new soft tissue sarcomas will be diagnosed and about
5,130 people are expected to die of the disease in the US.
Pipeline of pre|CISION(™) chemotherapies
Avacta's pre|CISION(TM) platform is a proprietary chemical modification that
renders the modified chemotherapeutic drug inactive in the circulation until
it enters the tumour micro-environment where it is activated by an enzyme
called FAPα. FAPα is in high abundance in most solid tumours but not in
healthy tissues such as the heart. This is expected to lead to a significantly
greater amount of active drug in the tumour tissue compared with healthy
tissues and a concomitant improvement in tolerability for patients and better
clinical outcomes.
If the AVA6000 Phase Ia study shows that the pre|CISION (™) chemistry is
effective in reducing systemic toxicity of doxorubicin in humans, then it can
be applied to a wide range of other established chemotherapies to potentially
improve their safety and efficacy. This would be a significant value
inflection point since it would open up a pipeline of proprietary, potentially
safer, next generation chemotherapies with significant clinical and commercial
potential in a chemotherapy market that is expected to grow to $56 billion by
2024.
The next most advanced pre|CISION(™) pro-drug candidate is AVA3996, a
FAPα-activated analogue of Velcade, Takeda's proteasome inhibitor. In
January, the Company announced that, following a review of efficacy studies in
several liquid and solid tumour models, safety studies and of
manufacturability, AVA3996 has been selected as a candidate for pre-clinical
development with the aim of a Clinical Trial Authorisation ('CTA') and/or
Investigational New Drug ('IND') filing in 2023 and dosing of the first
patient as soon thereafter as possible.
The global proteasome inhibitors' market size is expected to be worth $2.3
billion by 2026(( 1 (#_ftn1) )), and Velcade represents just over half of
that market. As with all chemotherapies, the benefit of these drugs is limited
by toxicities and tolerability for patients. In the case of Velcade, there are
significant side effects such as peripheral neuropathy which has limited its
approval, principally in treating multiple myeloma. A potentially safer
proteasome inhibitor, such as AVA3996, could win significant market share for
the treatment not only of multiple myeloma but also could be used to treat
solid tumours, such as pancreatic cancer. Pancreatic cancer exhibits the
highest level of FAP activity of any solid tumour and therefore a
FAPα-activated drug could have significant potential in this area of high
unmet need.
Affimer(®) Immunotherapy Programmes
Translation of the Affimer(®) platform into the clinic to demonstrate the
safety and tolerability of this novel therapeutic protein platform is an
important objective for the Company and represents a key value inflection
point for the Affimer technology.
In the oncology field recent studies have shown that single cancer
immunotherapies ,or 'monotherapies', have potentially limited overall response
rates. The Company's Affimer(®) immunotherapy strategy aims to harness the
benefits of the Affimer(®) platform to build bispecific drug molecules which
can address two drug targets simultaneously, and to use Affimer(®) molecules
to target toxic payloads using conventional and pre|CISION(TM) linkers.
Good progress continues to be made in the in-house Affimer(®) bispecific and
TMAC(®) pre-clinical programmes which, along with the Company's commercial
collaborations, are a key part of in-house research activities.
The Company looks forward to providing a full technical update to shareholders
on the Affimer immunotherapy and pre|CISION chemotherapy programmes as part of
a Science Day event when the data sets from the pre-clinical and clinical
programmes are in hand, so that the data can be presented and the development
path and associated risks for the programmes can be described in detail.
Drug Development Collaborations
The Company has several important commercial collaborations covering both the
Affimer and pre|CISION platforms, and is active in pursuing future
opportunities for licensing and partnership.
LG Chem Life Sciences: Avacta has a strategic partnership with LG Chem Life
Sciences focused on the development of a novel PD-L1 checkpoint inhibitor
utilising the Affimer(®) platform incorporating Affimer XT(®) half-life
extension. The partnership also provides LG Chem with rights to develop and
commercialise other Affimer(®) and non-Affimer biotherapeutics combined with
Affimer XT(®) half-life extension for a range of indications and Avacta could
earn up to $55 million in milestone payments for each of these new products.
In addition, under the agreement Avacta will earn royalties on all future
Affimer XT(®) product sales by LG Chem.
At the end of June 2022, LG Chem exercised its option to renew its rights
under the ongoing collaboration with Avacta, triggering a license renewal fee
payment to Avacta of $2 million. LG Chem is now focused on progressing the
PD-L1/XT oncology drug candidate towards the clinic and has commenced
pre-clinical studies which are intended to form the basis of an
Investigational New Drug (IND) submission.
AffyXell Therapeutics: AffyXell is a joint venture company with Daewoong
Pharmaceuticals in South Korea that is developing mesenchymal stem cell
therapies which have been modified to produce Affimer(®) immunotherapies
in-vivo at the site of action of the stem cells.
AffyXell has made good progress, advancing both its GMP-compliant human
mesenchymal stem cell technology and its Affimer(®) discovery programmes
against two of the three initial targets. During the reporting period the
company entered into collaboration agreements with Biocytogen, a Chinese
company specializing in developing new biological drugs, and with the Korea
Non-Clinical Technology Solution Center ("KNTSC"). The company also expanded
its strategic partnership with GenScript ProBio, a leading biopharmaceutical
manufacturer.
In April 2022, a milestone equity payment was made by AffyXell to Avacta
resulting in an increase in Avacta's shareholding in joint venture. This
payment was triggered by Avacta successfully developing and characterising
Affimer(®) proteins against the first target for AffyXell and transferring
the associated intellectual property into AffyXell. In exchange for this,
Avacta has received an increase in its equity stake in AffyXell, which was
diluted from its founding equity stake in February 2021 when AffyXell
completed a Series A financing of $7.3 million from a group of venture funds
in February 2021. Avacta's shareholding in the joint venture now stands at
21%.
Post-period end AffyXell successfully completed a funding round, raising an
undisclosed amount of capital, to advance its lead mesenchymal stem cell
programme towards the clinic, and to develop its wider pre-clinical pipeline
of cell therapies.
POINT Biopharma Inc.: Early in 2021, Avacta signed a license agreement with
POINT Biopharma Inc., 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 Diagnostics Division
Avacta Diagnostics shifted its focus to the in-house development of IVD
products at the beginning of 2020. This change of strategy coincided with the
appearance of the SARS-CoV-2 coronavirus and the beginning of the COVID-19
pandemic. During that period, Avacta Diagnostics Division was able to put in
place the infrastructure and regulatory procedures to become an ISO13485
accredited IVD product business whilst also developing, with partners, the
AffiDX (®) SARS-CoV-2 antigen lateral flow test which was the first ever CE
marked Affimer (®)-based diagnostic product to be brought to market.
The AffiDX (®) SARS-CoV-2 antigen lateral flow test, which combined the use
of an antibody and an Affimer (®) reagent in the test strip, had excellent
performance in terms of sensitivity and specificity with the emerging variants
of the virus until the Omicron variant appeared in late 2021. The AffiDX (®)
SARS CoV-2 antigen lateral flow test contained both a proprietary Affimer (®)
reagent and a commercially available antibody. Our data showed that the
Affimer (®) reagent in the AffiDX (®) test continued to detect the Omicron
variant with the same sensitivity as the Delta variant, but the antibody, with
which the Affimer (®) is paired, had been affected by the additional Omicron
mutations.
Early in 2022, the Company independently took the decision to pause sales of
the AffiDX (®) antigen test whilst it replaces the antibody in the product to
ensure that its performance with the Omicron variant matches the high
performance with previous mutations.
This re-development is ongoing, and the Company will update the market as soon
as it is able to provide a reliable timeline to product re-launch.
The Diagnostics Division is now focused on developing a broader pipeline of
new IVD products outside of COVID-19 to drive future revenues and the
profitability of the Division. This pipeline is designed to deliver, over the
longer term, a full portfolio of IVD products with a focus on decentralised
testing for professionals and consumers. The Company is addressing four key
areas of respiratory, infectious and cardiovascular disease, cancer and
general health and well-being (e.g. hormones, vitamins). The Company is
exploring multiple pathways to develop this portfolio of IVD products and
revenue as rapidly as possible.
Avacta Animal Health Division
In March 2022, the Group sold its entire Animal Health division to Vimian
Group AB for an upfront payment of £0.86 million and additional deferred
contingent consideration of up to £1.43 million dependent on the combined
performance of the consolidated business. The sale of the Avacta Animal Health
business will allow the Group to focus entirely on its core businesses;
diagnostics and therapeutics.
Financial Review
Revenue for the 6 months ended 30 June 2022 increased to £5.52 million
compared to the same period in 2021 (6 months to 30 June 2021: £1.52 million;
year ended 31 December 2021: £2.94 million).
Revenue contribution from the Therapeutics Division increased to £5.44
million (6 months to 30 June 2021: £1.43 million; year ended 31 December
2021: £2.16 million) due to funded FTE reimbursement together with achieving
certain milestones in our collaborations with LG Chem (£1.48 million in cash)
and AffyXell (£3.70 million in additional equity in the joint venture).
Revenue from the Diagnostics Division was £0.07 million (6 months to 30 June
2021: £0.09 million; year ended 31 December 2021: £0.78 million) as
resources were focused on the development of future diagnostic tests combined
with a reduced number of custom projects during the period.
Research costs from the development of new diagnostic tests in the Diagnostics
Division and the clinical and pre-clinical development work of the Affimer
(®) and pre|CISION™ therapeutics programmes in the Therapeutics Division
were £6.00 million (6 months to 30 June 2021: £6.26 million; year ended 31
December 2021: £13.48 million). The share of the costs from the AffyXell
associate in the period was £0.65 million (6 months to 30 June 2021: £nil;
year ended 31 December 2021: £nil).
Selling, general and administrative costs have increased to £4.69 million (6
months to 30 June 2021: £3.58 million; year ended 31 December 2021: £8.14
million). Depreciation has also increased to £0.88 million (6 months to 30
June 2021: £0.63 million; year ended 31 December 2021: £1.46 million).
Share-based payment charges have also increased to £2.29 million (6 months to
30 June 2021: £1.42 million; year ended 31 December 2021: £5.06 million).
Amortisation of development costs has remained constant at £0.41 million (6
months to 30 June 2021: £0.41 million; year ended 31 December 2021: £0.82
million) as all the research costs incurred have been expensed during the
period with no further amounts capitalised. The value of intangible assets on
the balance sheet, which includes capitalised development costs and goodwill
has reduced from the prior year end as a result of the amortisation to £7.50
million (30 June 2021: £9.01 million; 31 December 2021: £7.93 million).
The Group's operating loss reduced to £9.65 million (6 months to 30 June
2021: £11.33 million; year ended 31 December 2021: £29.08 million) and the
reported loss from continuing operations after taxation reduced to £8.99
million (6 months to 30 June 2021: £10.18 million; year ended 31 December
2021: £26.37 million).
The resultant profit on disposal from the sale of Avacta Animal Health to
Vimian Group AB after selling costs was £1.06 million, with the results of
the division having been shown as a discontinued operation and treated as an
asset held for sale as at 31 December 2021.
The basic loss per share reduced to 3.16p (6 months to 30 June 2021: 4.09p;
year ended 31 December 2021: 10.55p) due to the reduction in reported losses.
There was a cash outflow from operations and working capital movements of
£5.50 million (6 months to 30 June 2021: £10.25 million; year ended 31
December 2021: £20.51 million) and an outflow from investing activities
(excluding movements on short-term deposits) of £4.04 million on the
increased investment in the AffyXell associate and capital expenditure (6
months to 30 June 2021: £0.80 million; year ended 31 December 2021: £1.31
million). Cash inflow from financing activities, being amounts received from
the issue of shares and exercise of share options net of lease payments
amounted to £0.37 million (6 months to 30 June 2021: £0.11 million; year
ended 31 December 2021: £0.23 million). The Group ended the period with
£17.02 million net cash and short-term deposits (30 June 2021: £36.97
million; 31 December 2021: £26.19 million).
Outlook
The Board believe that a significant near-term value driver for the Group is
the clinical data from the phase I study of AVA6000. The pre|CISION(™)
FAPα-activation approach has the potential to reduce the systemic toxicities
associated with many chemotherapies and as such has the potential to create
safer and more effective oncology treatments that are affordable for all.
If the pre|CISION(™) platform is shown to improve the safety of Doxorubicin
in the AVA6000 phase I study then it not only creates a significant commercial
opportunity for the Group with a proprietary safer form of Doxorubicin, but
also potentially opens up a large, and valuable, pipeline of future
pre|CISION(™) chemotherapy prodrugs.
The Diagnostics Division continues to be focused on building a portfolio of
IVD products, addressing infectious respiratory diseases and a broader range
of tests for use by professionals and consumers to build a profitable
diagnostics business.
Dr Eliot Forster Dr Alastair Smith
Chairman Chief Executive Officer
29 September 2022 29 September 2022
Condensed Consolidated Statement of Profit or Loss for the 6 months ended 30
June 2022
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 2022 30 June 2021 31 December 2021
£000 £000 £000
Revenue 5,517 1,516 2,941
Cost of sales (244) (547) (924)
Gross profit 5,273 969 2,017
Research costs (5,999) (6,259) (13,480)
Manufacturing costs - - (2,143)
Share of loss of associate (646) - -
Amortisation of development costs (410) (410) (821)
Selling, general and administrative expenses (4,692) (3,579) (8,136)
Depreciation expense (879) (626) (1,462)
Share-based payment charge (2,292) (1,421) (5,058)
Operating loss (9,645) (11,326) (29,083)
Finance income 120 13 17
Finance costs (125) (66) (128)
Net finance costs (5) (53) (111)
Loss before tax (9,650) (11,379) (29,194)
Taxation 660 1,199 2,820
Loss from continuing operations (8,990) (10,180) (26,374)
Discontinued operation
Profit / (loss) from discontinued operation 1,055 (17) 58
Loss for the period (7,935) (10,197) (26,316)
Foreign operations - foreign currency translation differences (2) - 4
Other comprehensive income (2) - 4
Total comprehensive loss for the period (7,937) (10,197) (26,312)
Loss per share:
Basic and diluted (3.16p) (4.09p) (10.55p)
Loss per share - continuing operations
Basic and diluted (3.58p) (4.09p) (10.57p)
Condensed Consolidated Statement of Financial Position as at 30 June 2022
Unaudited Unaudited Audited
As at As at As at
30 June 2022 30 June 2021 31 December 2021
£000 £000 £000
Assets
Property, plant and equipment 2,306 2,920 2,612
Right-of-use assets 4,650 1,937 1,729
Investment in associate 3,481 - -
Intangible assets 7,504 9,069 7,925
Non-current assets 17,941 13,926 12,266
Inventories 193 222 189
Trade and other receivables 6,715 5,786 4,327
Income tax receivable 3,595 3,400 2,750
Short-term deposits - 5,023 -
Cash and cash equivalents 17,017 31,951 26,191
27,520 46,382 33,457
Assets held for sale - - 1,279
Current assets 27,520 46,382 34,736
Total assets 45,461 60,308 47,002
Liabilities
Lease liabilities (3,973) (1,599) (1,412)
Non-current liabilities (3,973) (1,599) (1,412)
Trade and other payables (4,648) (4,979) (3,731)
Lease liabilities (857) (300) (291)
(5,505) (5,279) (4,022)
Liabilities directly associated with assets held for sale - - (346)
Current liabilities (5,505) (5,279) (4,368)
Total liabilities (9,478) (6,878) (5,780)
Net assets 35,983 53,430 41,222
Equity attributable to equity holders of the Company
Share capital 25,710 25,443 25,472
Share premium 54,699 54,297 54,530
Reserves (4,689) 4,690 (4,687)
Retained earnings (39,737) (21,620) (34,093)
Total equity 35,983 53,430 41,222
Total equity is wholly attributable to equity holders of the parent Company.
Approved by the Board and authorised for issue on 29 September 2022.
Dr Alastair Smith Tony Gardiner
Chief Executive Officer Chief Financial Officer
Condensed Consolidated Statement of Changes in Equity for the 6 months ended
30 June 2022
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Share Share premium Other reserve Translation reserve Reserve for own shares Retained earnings Total Equity
Capital
£000 £000 £000 £000 £000 £000 £000
At 1 January 2021 25,343 54,137 (1,729) - (2,961) (12,861) 61,929
Total comprehensive loss for the period - - - - (10,197) (10,197)
Total transactions with owners of the company:
Exercise of options 100 160 - - - 260
Equity-settled share based payment - - - - 1,438 1,438
At 30 June 2021 25,443 54,297 (1,729) - (2,961) (21,620) 53,430
Loss for the period - - - - - (16,119) (16,119)
Other comprehensive income for the period 4 4
Total comprehensive loss for the period 4 (16,119) (16,115)
Transactions with owners of the company:
Exercise of options 29 233 - - - 262
Equity-settled share based payment - - - - 3,645 3,645
At 31 December 2021 25,472 54,530 (1,729) 4 (2,961) (34,094) 41,222
Loss for the period - - - - - (7,935) (7,935)
Other comprehensive income for the period (2) - - (2)
Total comprehensive loss for the period (2) (7,935) (7,937)
Total transactions with owners of the company:
Exercise of options 237 169 - - - 406
Equity-settled share based payment - - - - 2,291 2,291
At 30 June 2022 25,710 54,699 (1,729) 2 (2,961) (38,737) 35,983
Condensed Consolidated Statement of Cash Flows for the 6 months ended 30 June
2022
Unaudited Unaudited Audited
6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021
£000 £000 £000
Cash flow from operating activities
Loss for the period (7,935) (10,197) (26,316)
Adjustments for:
Amortisation 435 428 865
Depreciation 888 652 1,511
Net (gain) / loss on disposal (41) - 30
of property, plant and equipment
Share of loss of associate 646 - -
Equity-settled share-based payment charges 2,292 1,438 5,083
Gain on sale of discontinued operation (1,004) - -
Net finance costs 119 58 121
Taxation (660) (1,199) (2,820)
Operating cash outflow before changes in working capital (5,260) (8,820) (21,526)
Decrease / (increase) in inventories (4) 26 13
Increase in trade and other receivables (953) (2,888) (1,599)
Increase in trade and other payables 916 1,486 456
Operating cash outflow from operations (5,303) (10,196) (22,656)
Interest received 5 13 17
Interest elements of lease payments (17) (66) (139)
Tax credit received - - 2,291
Withholding tax paid (187) - (19)
Net cash used in operating activities (5,502) (10,249) (20,506)
Cash flows from investing activities
Purchase of plant and equipment (287) (718) (1,162)
Proceeds from sale of plant and equipment 49 - -
Acquisition of right of use asset (165) - -
Purchase of intangible assets (14) (81) (152)
Disposal of discontinued operation, net of cash disposed of 666 - -
Transaction costs paid, relating to disposal of discontinued operation (160) - -
Investment in associate (4,127) - -
Decrease/(Increase) in balances on short-term deposit - 14,994 20,017
Net cash used in investing activities (4,038) 14,195 18,703
Cash flows from financing activities
Proceeds from exercise of share options 406 259 522
Principal elements of lease payments (38) (148) (290)
Net cash flow from financing activities 368 111 232
Net increase/(decrease) in cash and cash equivalents 9,171 4,057 (1,571)
Cash and cash equivalents at the beginning of the period 26,191 27,894 27,894
Effect of movements in exchange rates on cash held 2 4
17,017 31,951 26,327
Cash and cash equivalents within assets held for sale - - (136)
Cash and cash equivalents at the end of the period 17,017 31,951 26,191
1) Basis of preparation
Avacta Group plc ('the Company') is a company incorporated in England and
Wales under the Companies Act 2006. These condensed consolidated interim
financial statements ('interim financial statements') as at and for the 6
months ended 30 June 2022 comprise the Company and its subsidiaries (together
referred to as 'the Group').
The interim financial statements for the 6 months ended 30 June 2022 are
unaudited. This information does not constitute statutory accounts as defined
in Section 435 of the Companies Act 2006. The financial figures for the year
ended 31 December 2021, as set out in this report, do not constitute statutory
accounts but are derived from the statutory accounts for that financial year.
The statutory accounts for the year ended 31 December 2021 were prepared under
IFRS and have been delivered to the Registrar of Companies. The auditors
reported on those accounts. Their report was unqualified, did not draw
attention to any matters by way of emphasis and did not include a statement
under Section 498 of the Companies Act 2006.
The Board confirms that, to the best of its knowledge, these condensed
financial statements have been prepared in accordance with IAS34 Interim
Financial Reporting and should be read in conjunction with the Group's last
annual consolidated financial statements as at and for the year ended 31
December 2021 ('last annual financial statements'). They do not include all of
the financial information required for a complete set of IFRS financial
statements. However, selected explanatory notes are included to explain events
and transactions that are significant to an understanding of the changes in
the Group's financial position and performance since the last annual financial
statements.
The Board approved these interim financial statements for issue on 29
September 2022.
2) Use of judgements and estimates and significant accounting policies
The preparation of the interim financial statements requires management to
make judgements and estimates that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expense. Although these estimates are based on management's best knowledge of
the amount, events or actions, actual events ultimately may differ from those
estimates.
The significant judgements made by management in applying the Group's
accounting policies, and the key sources of estimation uncertainty were the
same as those described in the last annual financial statements.
The accounting policies applied in these interim financial statements are the
same as those applied in the Group's consolidated financial statements as at
and for the year ended 31 December 2021. A number of new standards are
effective from 1 January 2022, but they do not have a material effect on the
Group's financial statements.
3) Segmental reporting
The Group has three distinct operating segments: Diagnostics, Therapeutics and
Animal Health. These are the reportable operating segments in accordance with
IFRS 8 Operating Segments. The Directors recognize that the operations of the
Group are dynamic and therefore this position will be monitored as the Group
develops.
The Animal Health operating segment was sold in March 2022, and has been
classified as a discontinued operation in the current period, comparative
financial periods have also been restated to reflect the results of the Animal
Health segment as a discontinued operation. Further information on the results
of the discontinued operation in the current and comparative periods can be
found in note 8.
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 from continuing operations to destinations outside the UK
amounted to 100% (6 months to 30 June 2021: 100%; year to 31 December 2021:
82%). The revenue analysis below is based on the country of registration of
the customer:
£000 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021
UK 14 1 540
Rest of Europe 1 35 111
North America 50 804 815
South Korea 5,444 664 1,400
Rest of Asia 7 12 74
5,516 1,516 2,941
During the six month period ended 30 June 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 £3,788,000 and
£1,656,000 respectively.
During the six month period ended 30 June 2021, 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 £736,000 and
£629,000 respectively.
During the year 31 December 2020, transactions with three external customers,
two in the Therapeutics segment and one in the Diagnostics segment, amounted
individually to 10% or more of the Group's revenues from continuing
operations, being £966,000, £736,000 and £523,000 respectively.
Operating segment analysis for the six months ended 30 June 2022
Diagnostics Therapeutics Total
£000 £000 £000
Revenue 73 5,444 5,517
Cost of goods sold (38) (206) (244)
------------- ------------- -------------
Gross profit 35 5,238 5,273
Research costs (1,136) (4,863) (5,999)
Amortisation of development costs (410) - (410)
Share of loss of associate - (646) (646)
Selling, general and administrative expenses (1,466) (1,354) (2,820)
Depreciation expense (260) (614) (874)
Share-based payment expense (492) (1,250) (1,742)
------------- ------------- -------------
Segment operating loss (3,729) (3,489) (7,218)
Central overheads (2,427)
------------- ------------- -------------
Operating loss (9,645)
Finance income 120
Finance expense (125)
-------------
Loss before taxation (9,650)
Taxation 660
-------------
Loss for the period from continuing operations (8,990)
Profit from discontinued operations 1,055
-------------
Loss for the period (7,935)
-------------
Operating segment analysis for the six months ended 30 June 2021
Diagnostics Therapeutics Total
£000 £000 £000
Revenue 91 1,425 1,516
Cost of goods sold (50) (497) (547)
------------- ------------- -------------
Gross profit 41 928 969
Research costs (2,068) (4,190) (6,258)
Amortisation of development costs (410) - (410)
Selling, general and administrative expenses (1,232) (869) (2,101)
Depreciation expense (248) (376) (624)
Share-based payment expense (371) (390) (761)
------------- ------------- -------------
Segment operating loss (4,288) (4,897) (9,185)
Central overheads (2,141)
------------- ------------- -------------
Operating loss (11,326)
Finance income 13
Finance expense (66)
-------------
Loss before taxation (11,379)
Taxation 1,199
-------------
Loss for the period from continuing operations (10,180)
Loss from discontinued operations (17)
---------
Loss for the period (10,197)
---------
Operating segment analysis for the year ended 31 December 2021
Diagnostics Therapeutics Total
£000 £000 £000
Revenue 779 2,162 2,941
Cost of goods sold (223) (700) (923)
------------- ------------- -------------
Gross profit 556 1,462 2,017
Research costs (3,665) (9,815) (13,480)
Manufacturing costs (2,143) - (2,143)
Amortisation of development costs (821) - (821)
Selling, general and administrative expenses (2,893) (1,899) (4,792)
Depreciation expense (505) (950) (1,455)
Share-based payment expense (984) (2,981) (3,965)
------------- ------------- -------------
Segment operating loss (10,456) (14,183) (24,639)
Central overheads (4,443)
------------- ------------- -------------
Operating loss (29,082)
Finance income 17
Finance expense (129)
-------------
Loss before taxation (29,194)
Taxation 2,820
-------------
Loss for the period from continuing operations (26,374)
Profit from discontinued operation 58
---------
Loss for the year (26,316)
---------
4) Revenue
The Group's operations and main revenue streams are those described in the
last annual financial statements. The Group's revenue is all derived from
contracts with customers.
Disaggregation of revenue
In the following table, revenue is disaggregated by its nature. The table also
includes a reconciliation of the disaggregated revenue with the Group's
reportable segments (see Note 3).
Six months ended 30 June 2022
£'000 Diagnostics Therapeutics Continuing operations Animal Health (discontinued)
Nature of revenue
Sale of goods (2) - (2) 258
Provision of services 75 192 267 153
Licence-related income - 5,252 5,252 -
73 5,444 5,517 411
Six months ended 30 June 2021
£'000 Diagnostics Therapeutics Continuing operations Animal Health (discontinued)
Nature of revenue
Sale of goods - - - 392
Provision of services 337 795 1,132 285
Licence-related income - - - -
337 795 1,132 677
Year ended 31 December 2021
£'000 Diagnostics Therapeutics Continuing operations Animal Health (discontinued)
Nature of revenue
Sale of goods 19 - 19 864
Provision of services 260 1,058 1,318 740
Licence-related income 500 1,104 1,604 -
779 2,162 2,941 1,604
5) Earnings per share
Unaudited Unaudited Audited
£'000 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021
Loss from continuing operations (8,990) (10,180) (26,374)
Profit/(loss) from discontinued operations 1,055 (17) 58
Loss for the period (7,935) (10,197) (26,316)
Weighted average number of shares (number) 251,096,503 249,127,610 249,478,070
- Basic and diluted loss per ordinary share from continuing (3.58) (4.09) (10.57)
operations (p)
-
-
- Basic and diluted earnings / (loss) per ordinary share from 0.42 - 0.02
discontinued operations (p)
-
-
- Basic and diluted loss per ordinary share for the period (p) (3.16) (4.09) (10.55)
6) Leases
The Group leases a small number of properties for office and laboratory use,
as well as some laboratory equipment. Information about leases for which the
Group is a lessee is presented below.
a) Amounts recognised in the balance sheet
Right-of-use assets Property Laboratory equipment Total
£'000
As at 1 January 2021 1,926 170 2,096
Additions - - -
Depreciation charge (150) (9) (159)
As at 30 June 2021 1,406 161 1,937
Remeasurement of lease liability 80 - 80
Depreciation charge (148) (9) (157)
Reclassification to assets held for sale (129) - (129)
As at 31 December 2021 1,577 152 1,729
Additions 4,195 - 4,195
Depreciation charge (327) (9) (336)
Disposals (938) - (938)
As at 30 June 2022 4,507 143 4,650
Presentation of lease liability
30 June 2022 30 June 2021 31 December 2021
£000 Property Laboratory equipment Total Property Laboratory equipment Total Property Laboratory equipment Total
Lease liabilities
Current 795 62 857 241 59 300 230 61 291
Non-current 3,973 - 3,973 1,537 62 1,599 1,380 32 1,412
4,768 62 4,830 1,778 121 1,899 1,610 93 1,703
Reconciliation of change in lease liability £000
As at 1 January 2021 2,042
Payment of lease liability - principal (144)
Payment of lease liability - interest (66)
Interest expense 68
As at 30 June 2021 1,900
Remeasurement of lease liability 80
Payment of lease liability - principal (146)
Payment of lease liability - interest (72)
Interest expense 70
Reclassification to assets held for sale (129)
As at 31 December 2021 1,703
Payment of lease liability - principal (216)
Payment of lease liability - interest (101)
Interest expense 125
Additions 4,028
Disposals (969)
As at 30 June 2022 4,570
7) Equity-accounted investees
The Group holds a 21% equity interest in its associate AffyXell Therapeutics
Co., Ltd ('AffyXell') based in South Korea. AffyXell has been established to
develop Affimer(®) proteins which will be used for the generation of new cell
and gene therapies.
The associate is measured using the equity method and the Group has recognised
an investment in associate of £3,482,000 as at 30 June 2022 (30 June 2021:
£nil; 31 December 2021: £nil). The increase in investment in associate arose
due to the achievement of a milestone under the collaboration agreement
between the two entities, resulting in a £3,666,000 increase in investment.
A share of loss of the associate has been recognized in the period of
£646,000 (6 months ended 30 June 2021: £nil; Year ended 31 December 2021:
£nil). Due to the increase in carrying amount of the investment during the
period, previously unrecognised share of losses have been recognized, such
that the unrecognised share of losses as at 30 June 2021 is £nil (30 June
2021: £186,000; 31 December 2021: £253,000). At previous reporting dates,
the share of losses exceeding the initial contribution were unrecognised due
to the Group having no legal or constructive liability to make further
payments to the associate.
8) Discontinued operation
On 15 March 2022, the Group sold its entire Animal Health segment. An up-front
payment of £860,000 was received with deferred contingent consideration of up
to £1,430,000 dependent on the combined performance of the consolidated
business. There were associated costs to sell of £202,000. Management
committed to a plan to sell the segment in late 2021 following a strategic
decision to place focus on the Group's key competencies - the development of
diagnostic products and cancer therapies.
The Animal Health segment was classified for held for sale in the consolidated
financial statements for the year ended 31 December 2021. The comparative
results for the 6 month period ended 30 June 2021 have been re-presented to
show the discontinued operation separately from continuing operations.
Effect of the disposal on the financial position of the Group
The carrying amounts of assets and liabilities in the disposal group are
summarized as follows:
£000
Property, plant and equipment (20)
Right of use asset (122)
Intangible asset (778)
Inventories (81)
Trade and other receivables (192)
Cash and cash equivalents (194)
Trade and other payables 175
Lease liabilities 124
Net assets and liabilities (1,087)
Consideration received in cash 860
Contingent consideration 1,433
Transactions costs directly relating to disposal (202)
Gain on disposal 1,004
A. Results of discontinued operation
Unaudited Unaudited Audited
6 months ended 6 months ended 30 June 2021 Year ended
30 June 2022 31 December 2021
£000 £000 £000
Revenue 411 805 1,604
Cost of sales (117) (264) (506)
Gross profit 294 541 1,098
Research costs (6) (27) (39)
Selling, general and administrative expenses (233) (483) (915)
Depreciation expense (10) (25) (50)
Share-based payment charge - (17) (25)
Operating loss (45) (11) 69
Finance costs (2) (6) (11)
Profit / (loss) before tax 43 (17) 58
Taxation - - -
Profit / (loss) from operating activities 43 (17) 58
Gain on sale of discontinued operation 1,004 - -
Profit / (loss) for the period 1,055 (17) 58
Cash flows from (used in) discontinued operations
Cash flows generated by the Animal Health segment for the reporting periods
under review until its disposal are as follows:
Unaudited Unaudited Audited
6 months ended 6 months ended 30 June 2021 Year ended
30 June 2022 31 December 2021
£000 £000 £000
Net cash (used in) / from operating activities (47) 109 225
Net cash from / (used in) investing activities 699 (28) (19)
Net cash used in financing activities (6) (14) 30
Net cash flows for the period 646 66 176
- Ends -
1 (#_ftnref1)
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