REG - Avacta Group PLC - Interim Results for the Period Ending 30 June 2023
28/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230928:nRSb9119Na&default-theme=true
RNS Number : 9119N Avacta Group PLC 28 September 2023
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this
announcement via a Regulatory Information Service ('RIS'), this inside
information is now considered to be in the public domain.
28 September 2023
Avacta Group plc
("Avacta", the "Group" or the "Company")
Interim Results for the Period Ending 30 June 2023
A period of substantial clinical progress and continued growth
Avacta Group plc (AIM: AVCT), a life sciences company focused on improving
healthcare outcomes through targeted cancer treatments and diagnostics, is
pleased to announce its unaudited interim results for the six months ending 30
June 2023 ("H1 2023").
Operating highlights
Therapeutics Division - Encouraging clinical progress with AVA6000 and strong
preclinical progress with other programmes
· Avacta's lead pre|CISION™ programme, AVA6000, a tumour
microenvironment activated form of a chemotherapeutic agent, doxorubicin, made
significant progress in a Phase 1a clinical trial (ALS-6000-101) during H1
2023, with an excellent safety profile continuing to be observed through the
dose cohorts as detailed in the Company's announcements.
· Expansion of dosing into the US under the Group's Investigational
New Drug Application in Avacta's Phase 1 multi-centre trial.
· Post period, the sixth dose cohort (310 mg/m(2)) was successfully
completed and escalation to the seventh and final cohort (385 mg/m(2)) was
approved in September, with a significant reduction in tumour volume confirmed
in a patient with soft tissue sarcoma.
o In light of the highly positive Phase 1a data, the Company has adapted its
clinical development strategy with the aim of bringing forward the start of a
potentially pivotal Phase 2 study, subject to receiving the necessary
regulatory approvals.
· Preclinical data regarding AVA3996, the second pre|CISION™
programme, a tumour targeted proteasome inhibitor, were presented at the
American Association of Cancer Research Annual Meeting in April, supporting
confidence in the potential of this molecule to restrict tumour growth.
· 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 will result in an
increase in Avacta's shareholding in AffyXell to approximately 25% from its
current 19%, which will be determined when a formal valuation has been
completed as was done for the first milestone payment.
· Avacta's Board of Directors has been strengthened with the
appointment of Shaun Chilton as Non-Executive Director in June 2023.
Diagnostics Division - Second acquisition in M&A-led growth strategy
completed and integration progressing well
· The Group continues to pursue an M&A-led growth strategy for
the Diagnostics Division to support the building of an in-vitro diagnostics
product portfolio for professional use, including those against infectious
respiratory diseases.
· Avacta's Diagnostics Division completed the acquisition of
Belgium-based Coris Bioconcept SRL 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 Division:
o This acquisition supports the strategy of acquiring commercial routes into
the diagnostics market and appropriate IP-rich product portfolios,
complementing the acquisition of Launch Diagnostics in October 2022 has been
successfully integrated into the Diagnostics Division.
o Adjusted EBITDA loss (before non-cash and non-recurring items) of the
Diagnostics Division reduced to £0.4 million (H1 2022: £2.6 million; year
ended 31 December 2022: £5.1 million).
Financial highlights
· Revenues increased to £11.9 million (H1 2022: £5.5 million;
year ended 31 December 2022: £9.7 million).
· Adjusted EBITDA loss (before non-cash and non-recurring items)
of £7.9 million (H1 2022: £5.4 million; year ended 31 December 2022: £15.1
million).
· Operating loss from continuing operations of £11.9 million (H1
2022: £9.6 million; year ended 31 December 2022: £32.6 million).
· Reported loss from continuing operations of £11.5 million (H1
2022: £9.0 million; year ended 31 December 2022: £39.5 million).
· Loss per ordinary share from continuing operations of 4.3p (H1
2022: 3.6p; year ended 31 December 2022: 15.5p).
· Cash and short-term deposit balances at 30 June 2023 of £26.0
million (30 June 2022: £17.0 million; 31 December 2022: £41.8 million).
Outlook
The continuing success of AVA6000 in the Phase 1a clinical study is important
not only for the potential to improve outcomes for patients with cancers
suitable for treatment with doxorubicin, but also as a validation of the
pre|CISION(TM) platform more widely. The Company aims to complete the AVA6000
three-weekly dose escalation safety study and to provide a detailed data
read-out during Q4 2023.
In parallel, the Company will also initiate a fortnightly dosing safety study
in order to determine the dosing regimen for a Phase 2 registrational study in
soft tissue sarcoma planned to start during 2024, in advance of previous
estimates. Subject to positive data, this could potentially bring the first
pre|CISION(TM) targeted chemotherapy to market for the benefit of patients
with soft tissue sarcoma towards the end of 2026.
The Company is progressing pre-clinical programmes based on both the
pre|CISION(TM) and Affimer(®) platforms and anticipates providing detailed
updates on these programmes in the coming months.
The Group's Diagnostics Division is focused on the integration of its first
two acquisitions and finding synergies across the enlarged division. The Group
is aiming to grow the Diagnostics Division organically and through
geographical expansion into the German market, with the near-term aim of
achieving an overall EBITDA positive position.
Dr Eliot Forster, Chairman of Avacta Group plc added:
"Targeting of cancer therapies to tumour tissue has been a long sought after
goal for many oncology drug companies, clinicians and patients. There are many
potent anti-cancer drugs, the effectiveness of which is limited by the
systemic toxicities and lack of tolerability for patients.
"The clinical data emerging for our lead pre|CISION(TM) drug, AVA6000, is
ground-breaking. We are seeing a dramatic reduction in the usual toxicities
associated with anthracycline chemotherapy and we have clear indications that
doxorubicin is being released in active form in the tumour microenvironment.
"Across the board we're proud and encouraged by the momentum we're seeing in
both divisions of this business and see huge potential value both for patients
and investors in the next period."
Dr Alastair Smith, Chief Executive Officer of Avacta Group plc, commented:
"I am delighted to report substantial progress across the board as Avacta's
two divisions execute on their strategies.
"In our Therapeutics Division, the pre|CISION(TM) platform is doing exactly
what it was designed to do - target the release of active chemotherapy to the
tumour tissue, minimising systemic exposure and allowing for dosing at higher
and potentially more efficacious therapeutic levels. We are all hugely excited
about its potential to deliver profound improvements in cancer care for many
patients.
"Not only are the initial safety data emerging from the AVA6000 Phase 1 study,
across all dose cohorts, remarkably good, but targeted release of doxorubicin
in the tumour has been confirmed both by analysis of tumour biopsies and now
by clear clinical responses.
"Even at this early stage and in this patient group, we have a confirmed,
significant reduction in tumour volume in a patient with soft tissue sarcoma,
as well as other positive signals across a number of patients. This excellent
progress means that we are aiming to accelerate the timetable for the start of
the pivotal Phase 2 efficacy study in soft tissue sarcoma into 2024.
"Avacta's Diagnostic Division also continues to grow and provide more
comprehensive capabilities. We have completed a second acquisition, that of
Coris Bioconcept, and I am very pleased with the progress and integration of
Coris and Launch Diagnostics as the Division moves closer towards an EBITDA
positive position."
For further information from Avacta Group plc, please contact:
Avacta Group plc Tel: +44 (0) 1904 21 7070
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 Joint Broker) Tel: +44 (0) 207 710 7600
Nicholas Moore / Nick Adams / Samira Essebiyea / Nick Harland / William www.stifel.com (http://www.stifel.com/)
Palmer-Brown
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 company focused on improving healthcare outcomes
through targeted cancer treatments and diagnostics.
Avacta has two divisions: an oncology biotech division harnessing proprietary
therapeutic platforms to develop novel, highly targeted cancer drugs, and a
diagnostics division, which is executing on an M&A led growth strategy to
create a full-spectrum diagnostics business focused on supporting healthcare
professionals and broadening access to testing. Avacta's two proprietary
platforms, Affimer(®) and pre|CISION(TM) underpin its cancer therapeutics
whilst the diagnostics division leverages the Affimer(®) platform to drive
competitive advantage in its markets.
The pre|CISION(TM) platform modifies chemotherapy to be activated only in the
tumour tissue, reducing systemic exposure and toxicity. This is achieved by
harnessing an enzyme called FAP which is highly upregulated in most solid
tumours compared with healthy tissues, turning chemotherapy into a "precision
medicine". The lead pre|CISION(TM) programme, AVA6000 a tumour activated form
of doxorubicin, is in Phase 1 studies and has shown dramatic improvement in
safety compared with standard doxorubicin, and early signs of clinical
activity.
Affimer(®) is a novel biologic platform which has significant technical and
commercial advantages compared with antibodies and is used both to develop
advanced immunotherapies and to improve the performance of immunodiagnostics.
With a balanced business and capital allocation model: a high-value oncology
pipeline supported by a revenue generating, fast-growing diagnostics business,
Avacta seeks to create long-term shareholder value alongside patient benefit.
To register for news alerts by email go
to www.avacta.com/investors/investor-news-email-alerts/
(https://avacta.com/investors/investor-news-email-alerts/)
Chairman and Chief Executive Officer's Statement
Avacta Therapeutics Division Update
Avacta's Therapeutics Division aims to leverage its two proprietary technology
platforms, pre|CISION™ and Affimer(®), to develop innovative oncology
therapies that make a significant difference to cancer patients' treatment
experience and outcomes.
AVA6000: a tumour-activated form of 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 dosing regimen
and long-term use is limited by severe systemic toxicities, in particular, by
haematological toxicities and cardiotoxicities.
Avacta's pre|CISION™ tumour-activation platform is designed to reduce the
systemic exposure of healthy tissues to the active chemotherapy, leading to
improved dosing regimens, improved safety and tolerability for patients and
better treatment outcomes.
The ALS-6000-101 Phase 1 clinical trial involves a dose-escalation Phase 1
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 initially at three-weekly intervals to determine the maximum
tolerated dose. For more information visit www.clinicaltrials.gov
(http://www.clinicaltrials.gov) (NCT04969835).
Doxorubicin is used as a monotherapy for the treatment of soft-tissue sarcoma
("STS"), a relatively rare mesenchymal malignancy which accounts for less than
1% of 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 were diagnosed and about 5,130
people were expected to die of the disease in the US.
The Phase 1a three-weekly dose escalation study is being carried out at
several sites in the UK and United States and is now dosing patients in the
seventh and final dose escalation cohort at 385 mg/m(2), which is
approximately 3.5 times the normal dose of doxorubicin.
The data emerging from the dose escalation study show an excellent safety
profile. In the first six completed dose cohorts, AVA6000 has been well
tolerated by patients, with a marked reduction in the incidence and severity
of the typical toxicities associated with the standard doxorubicin
chemotherapy administration. Typical toxicities include alopecia,
myelosuppression, nausea, vomiting, mucositis and cardiotoxicity. Importantly,
even at the highest dosing levels, equivalent to several-fold higher than the
normal dose of doxorubicin, the typical drug-related cardiotoxicity of
doxorubicin has not been observed.
Analysis of a number of tumour biopsies obtained from patients in different
cohorts has also confirmed the release of the active chemotherapy,
doxorubicin, in the tumour tissue. This analysis shows that AVA6000 targets
the release of doxorubicin to the tumour tissue at therapeutic levels which
are much higher than the levels being detected in the bloodstream at the same
timepoint.
Post-period, the Company announced that it had confirmed a significant
reduction in tumour size in a patient on the trial with a sub-type of STS in
which doxorubicin is expected to be effective. Several other patients have
also shown positive responses to the treatment.
Preliminary clinical data on AVA6000 have demonstrated that the pre|CISION(TM)
modification has resulted in targeted release of the active drug to the tumour
microenvironment, dramatically reducing the systemic toxicities being observed
in patients and resulting in clinically effective levels of the active drug in
the tumour.
In light of AVA6000's continued strong clinical progress, the Company has
reviewed its clinical development strategy with the aim of accelerating a
pivotal Phase 2 study in STS which could lead to the first regulatory approval
for the drug.
The excellent safety profile of AVA6000 opens up the potential to dose
patients more frequently, as well as with higher doses or more cycles of
treatment. In order to determine the recommended Phase 2 dose, the Company
will initiate a short fortnightly dosing study in place of the much longer
multi-arm Phase 1b efficacy study previously envisaged.
This fortnightly dosing study should be completed by the middle of 2024 which
the Company expects will allow the Phase 2 study to start much earlier than
planned, in 2024.
The Company expects to release detailed Phase 1a data in Q4 2023 following
completion of cohort 7.
Pipeline of pre|CISION™ chemotherapies
Avacta's pre|CISION™ platform is a proprietary chemical modification that
renders the modified chemotherapeutic drug inactive in the circulation until
it enters the tumour microenvironment, where it is activated by an enzyme
called FAPα. FAPα is in high abundance in most solid tumours but not in
healthy tissues.
The data emerging from the AVA6000 Phase 1a study have validated the
performance of the pre|CISION™ platform, opening up the opportunity to apply
it to a broad range of existing chemotherapies and new, more potent
cytotoxins.
The next most advanced pre|CISION™ pre-clinical candidate is AVA3996, a
tumour-activated proteasome inhibitor based on an analogue of Velcade. The
global proteasome inhibitors' market size is expected to be worth $2.3 billion
by 2026 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 be used to treat solid tumours.
During the period, the Company presented pre-clinical data regarding AVA3996
in a poster entitled 'AVA3996, a novel pre|CISION™ medicine, targeted to the
tumor microenvironment via Fibroblast Activation Protein-alpha (FAP-a)
mediated cleavage', at the American Association for Cancer Research ("AACR")
2023 Annual Meeting. The poster and a video explainer are available on the
Company's web site (see
https://avacta.com/avacta-presents-ava3996-pre-clinical-data-at-the-american-association-for-cancer-research-meeting/
(https://avacta.com/avacta-presents-ava3996-pre-clinical-data-at-the-american-association-for-cancer-research-meeting/)
).
The Company is continuing its pre-clinical development of AVA3996
(pre-clinical models of safety, pharmacokinetics and efficacy) with the aim of
an investigational new drug ("IND") filing in H2 2024.
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™ linkers.
Whilst the Company is prioritising its pre|CISION™ programmes as the nearest
term driver of key value inflection points for both patients and Avacta
shareholders, good progress has been made in the in-house Affimer(®)
programmes which, along with the Company's commercial collaborations, are a
key part of the in-house research activities.
Avacta will be presenting an update on its lead Affimer(®) PD-L1/cytokine
bispecific programme as a poster presentation at the
AACR-NCI-EORTC International Conference on Molecular Targets and Cancer
Therapeutics (October 11-15, 2023, Boston, USA). This information will be
made available on the Company's website following the meeting.
Ongoing Drug Development Collaborations
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 licence renewal fee
payment to Avacta of $2 million. LG Chem is 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 IND
submission.
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 is
combining 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
will result in an increase in Avacta's shareholding in AffyXell, which
currently stands at 19%. The exact shareholding will be determined, as with
the first milestone payment which was achieved in April 2022, following a
formal valuation of AffyXell and is expected to be approximately 25%.
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). See
https://www.pointbiopharma.com/our-products/pipeline
(https://www.pointbiopharma.com/our-products/pipeline) ).
Avacta Diagnostics Division Update
Avacta's Diagnostics Division is driving ambitious growth through an
M&A-led strategy with the aim of supporting healthcare professionals and
broadening access to high quality diagnostics. The strategy is founded on
acquiring both the routes into the diagnostics market and the appropriate
IP-rich product portfolios.
In October 2022, the Company completed its first acquisition, Launch
Diagnostics, a leading independent distributor in the UK in vitro diagnostics
("IVD") market. This has provided Avacta with well-established sales channels
in the professional, centralised hospital laboratory testing market in the UK
and France. Avacta's plan to grow the Launch Diagnostics business includes
expanding the company's product portfolio and investing in the sales teams in
the UK and France. The most significant opportunity for growth lies in the
geographical expansion of the business into Germany, which is Europe's largest
diagnostics market. Avacta is actively pursuing this strategy.
During the reporting period, Avacta completed its second acquisition, Coris
Bioconcept SRL ("Coris"), a developer and supplier of rapid diagnostic test
kits, for an upfront cash consideration of £7.3 million (on a
debt-free/cash-free basis and subject to customary working capital
adjustments), with an earnout based on future business performance, payable in
cash, of up to £3.0 million.
Coris, based in Gembloux, Belgium and established in 1996, develops,
manufactures and markets rapid diagnostic test kits, mainly lateral flow
tests, for use by healthcare professionals. Coris is ISO 13485 certified and
markets its products through distributors in Europe, Asia, South America,
Africa and Oceania.
Operationally, Coris employs 35 members of staff split across Production,
Sales, Marketing, Quality Control, Regulation and Administration. In March
2023, the business completed the construction of a new 10,700 ft(2)
production, offices and warehouse facility in Gembloux.
Coris' product portfolio comprises diagnostic tests for respiratory,
gastro-enteric and blood-borne pathogens (bacteria, viruses and parasites) and
for the detection of antibiotic resistance markers. Antibiotic resistance is a
major global challenge and there are good future growth prospects for the
market for antimicrobial resistance ("AMR") testing and is a key area in which
Avacta expects to grow the Coris business.
The existing Coris management team have remained with the business and are
working closely with Avacta Diagnostics' businesses to drive growth and
margins through improved distribution channels and an expanded product range.
Avacta will transfer its lateral flow product development activities to Coris
and support that activity through ongoing development of Affimer(®) reagents
for new products or to enhance existing ones.
Avacta Diagnostics intends to continue to pursue a careful and disciplined
M&A strategy focused on expanding routes to market for professional
products, while adding further IVD products suitable for these markets to our
portfolio. Avacta Diagnostics will focus on integrating the acquired
businesses and delivering the near-term financial performance of both
companies, seeking synergies including the use of Affimers where appropriate
and driving longer term growth through:
- Expansion of the geographical sales footprint;
- Expansion of product portfolios; and
- Improved management of distribution partners.
Financial Review
Revenue
Revenue for the 6 months ended 30 June 2023 increased to £11.89 million
compared to the same period in 2022 (H1 2022: £5.52 million; year ended 31
December 2022: £9.65 million).
Revenue contribution from the Therapeutics Division was £1.99 million (H1
2022: £5.44 million; year ended 31 December 2022: £5.48 million) due to
achieving a further milestone in our collaboration with AffyXell (which leads
to additional equity in the joint venture). Revenue from the Diagnostics
Division increased to £9.90 million (H1 2022: £0.07 million; year ended 31
December 2022: £4.17 million) as the reporting period included a full six
months trading for Launch Diagnostics and one month from the recent
acquisition of Coris.
Acquisitions
On 1 June 2023, the Group acquired 100% of the shares and voting interests in
Coris. Coris develops, manufactures and markets rapid diagnostic test kits,
mainly lateral flow tests, for use by healthcare professionals. Coris is ISO
13485 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 on a debt-free / cash-free basis, in
addition to a further £2.81 million in relation to customary working capital
adjustments, payable in cash upon completion of the acquisition. There is also
additional consideration of up to £3.0 million based on revenue exceeding
certain targets over the next two financial years. The additional
consideration to be paid based on future revenues is estimated to be £1.59
million as at 30 June 2023.
The acquisition of Coris is a further step in the M&A-led growth strategy
for the Group's Diagnostics Division, designed to build an integrated and
differentiated IVD business with global reach servicing professionals and
consumers.
For the period from acquisition to 30 June 2023, Coris contributed revenue of
£0.82 million and operating profit of £0.19 million to the Group's results.
Research costs and selling, general and administrative costs
Research costs relating to 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 £6.01
million (H1 2022: £6.00 million; year ended 31 December 2022: £11.10
million).
Selling, general and administrative costs have increased to £8.65 million (H1
2022: £4.69 million; year ended 31 December 2022: £11.23 million) as the
Group expands the Diagnostics Division.
Adjusted EBITDA
The Consolidated Statement of Profit or Loss shows an Adjusted EBITDA loss
position (before non-recurring and non-cash items) of £7.91 million (H1 2022:
£5.42 million; year ended 31 December 2022: £15.09 million).
Other costs and charges
Depreciation has increased to £1.28 million (H1 2022: £0.88 million; year
ended 31 December 2022: £1.90 million). Amortisation expense has remained
almost constant at £0.44 million (H1 2022: £0.41 million; year ended 31
December 2022: £1.05 million) with amortisation of acquired intangible assets
now comprising the majority of the expense, instead of the comparative
period's amortisation of capitalised development costs.
The share of the costs from the AffyXell joint venture in the period was
£0.42 million (H1 2022: £0.65 million; year ended 31 December 2022: £1.15
million).
Acquisition related expenses during the period amounted to £0.28 million (H1
2022: £nil; year ended 31 December 2022: £0.74 million).
Share-based payment charges have reduced to £1.55 million (H1 2022: £2.29
million; year ended 31 December 2022: £7.49 million).
Operating loss
The Group's operating loss increased to £11.88 million (H1 2022: £9.65
million; year ended 31 December 2022: £32.65 million).
Convertible bond costs
During the reporting period there have been two quarterly amortisation
repayments (of £2.75 million and £2.60 million respectively in equity) and a
further early redemption (of £2.85 million in equity) which reduces the
original £55.00 million senior unsecured convertible bonds issued in October
2022 at par value to £46.80 million. Subsequent to the period end in July
2023 a third quarterly amortisation of £2.60 million in equity was settled
leaving the remaining balance of bonds at par value of £44.20 million. On 20
September 2023, 715,789 new ordinary shares were issued in settlement of
£0.85 million of the principal amount of the unsecured convertible bond,
reducing the principal remaining to £43.35 million.
The bond agreement contains embedded derivatives in conjunction with an
ordinary host debt liability. As a result, the convertible bonds are shown in
the Consolidated Statement of Financial Position in two separate components,
being 'Convertible bond - debt' and 'Convertible bond - derivative'. The
derivative element has been 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 derivative element, taking into account the amortisations and early
redemption, was revalued as at 30 June 2023 at £28.90 million (30 June 2022:
£nil; 31 December 2022: £39.10 million), which has resulted in a credit
within the period of £5.86 million.
The debt element of the bond has reduced from £18.73 million at 31 December
2022 to £15.68 million at 30 June 2023 (30 June 2022: £nil), with an
associated non-cash interest expense of £6.85 million.
Loss for the period
The reported loss from continuing operations after taxation was £11.53
million (H1 2022: £8.99 million; year ended 31 December 2022: £39.54
million).
The basic loss per share from continuing operations was 4.28p (H1 2022: 3.58p;
year ended 31 December 2022: 15.48p).
Cash flow
The Group reported cash and cash-equivalent balances of £25.97 million (30
June 2022: £17.02 million; 31 December 2022: £41.78 million).
There was a cash outflow from operations and working capital movements of
£11.19 million (H1 2022: £9.43 million; year ended 31 December 2022: £15.95
million) and an outflow from investing activities of £7.35 million from the
acquisition of Coris and capital expenditure (H1 2022: inflow of £0.09
million; year ended 31 December 2022: outflow of £25.04 million). Cash
outflow from financing activities, being principal elements of lease payments
net of amounts received from the exercise of share options amounted to £0.56
million (H1 2022: inflow of £0.37 million; year ended 31 December 2022:
inflow of £56.90 million).
Financial position
Net assets as at 30 June 2023 were £22.74 million (30 June 2022: £35.98
million; 31 December 2022: £18.44 million) of which cash and cash equivalents
amounted to £25.97 million (30 June 2022: £17.02 million; 31 December 2022:
£41.78 million).
The IFRS 16 Leases presentation results in the recognition of a 'right-of-use'
asset amounting to £6.18 million (30 June 2022: £4.65 million; 31 December
2022: £5.42 million) in relation to the Group's leasehold properties and
other leased assets, together with a corresponding lease liability of £6.10
million (30 June 2022: £4.83 million; 31 December 2022: £5.11 million).
Intangible assets increased to £33.46 million (30 June 2022: £7.50 million;
31 December 2022: £26.32 million) due to the acquisition of Coris and the
recognition of a further £7.61 million in goodwill, which is expected to be
allocated in part to other intangible assets as a result of the purchase price
allocation exercise currently being undertaken.
Liabilities in relation to the unsecured senior convertible bonds issued in
October 2022 and subsequent amortisations and redemptions during the period,
result in a fair value of the derivative element of £28.90 million (30 June
2022: £nil; 31 December 2022: £39.10 million). The convertible bond debt
element at 30 June 2023 was £15.68 million (30 June 2022: £nil; 31 December
2022: £18.73 million).
Dr Eliot Forster Dr Alastair Smith
Chairman Chief Executive Officer
28 September 2023 28 September 2023
Condensed Consolidated Statement of Profit or Loss
for the 6 months ended 30 June 2023
Unaudited Unaudited Audited
6 months ended 6 months ended 30 June 2022 Year ended
Notes 30 June 2023 31 December 2022
£000 £000 £000
Revenue 4 11,889 5,517 9,653
Cost of sales (5,141) (244) (2,410)
Gross profit 6,748 5,273 7,243
Research costs (6,009) (5,999) (11,100)
Selling, general and administrative expenses (8,646) (4,692) (11,232)
Adjusted EBITDA (7,907) (5,418) (15,089)
Amortisation expense (437) (410) (1,050)
Impairment charge - - (5,225)
Share of loss of associate 7 (424) (646) (1,152)
Acquisition related expenses 8 (282) - (735)
Depreciation expense (1,276) (879) (1,904)
Share-based payment charge (1,553) (2,292) (7,490)
Operating loss (11,879) (9,645) (32,645)
Convertible bond - professional fees 9 - - (2,287)
Convertible bond - interest expense 9 (6,847) - (2,606)
Convertible bond - revaluation of derivative 9 5,862 - (4,100)
Finance income 331 120 91
Finance costs (268) (125) (95)
Loss before tax (12,801) (9,650) (41,642)
Taxation 1,269 660 2,102
Loss from continuing operations (11,532) (8,990) (39,540)
Discontinued operation
Profit from discontinued operation 1 - 1,055 351
Loss for the period (11,532) (7,935) (39,189)
Foreign operations - foreign currency translation differences (179) (2) 46
Other comprehensive income (11,711) (2) 46
Total comprehensive loss for the period (11,711) (7,937) (39,143)
Loss per share:
Basic and diluted 5 (4.28p) (3.16p) (15.35p)
Loss per share - continuing operations
Basic and diluted 5 (4.28p) (3.58p) (15.48p)
Condensed Consolidated Statement of Financial Position
as at 30 June 2023
Unaudited as at Unaudited as at Audited as at
30 June 2023 30 June 2022 31 December 2022
£000 £000 £000
Assets
Property, plant and equipment 2,814 2,306 2,380
Right-of-use assets 6 6,175 4,650 5,418
Investment in associate 7 4,539 3,481 2,976
Intangible assets 33,455 7,504 26,324
Non-current assets 46,983 17,941 37,098
Inventories 3,052 193 1,681
Trade and other receivables 6,770 6,715 5,579
Income tax receivable 4,975 3,595 6,510
Cash and cash equivalents 25,968 17,017 41,781
Current assets 40,765 27,520 55,551
Total assets 87,748 45,461 92,649
Liabilities
Lease liabilities 6 (4,703) (3,973) (3,753)
Financing liabilities (238) - -
Deferred tax (2,952) - (2,845)
Non-current liabilities (7,893) (3,973) (6,598)
Trade and other payables (10,805) (4,648) (8,423)
Lease liabilities 6 (1,394) (857) (1,361)
Financing liabilities (339) - -
Convertible bond - debt 9 (15,679) - (18,729)
Convertible bond - derivative 9 (28,900) - (39,100)
Current liabilities (57,117) (5,505) (67,613)
Total liabilities (65,010) (9,478) (74,211)
Net assets 22,738 35,983 18,438
Equity attributable to equity holders of the Company
Share capital 27,629 25,709 26,685
Share premium 75,698 54,699 62,184
Reserves (4,371) (4,688) (4,434)
Retained earnings (76,218) (39,737) (65,997)
Total equity 22,738 35,983 18,438
Total equity is wholly attributable to equity holders of the parent Company.
Approved by the Board and authorised for issue on 28 September 2023.
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 2023
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Share Share premium Other Translation reserve Reserve for own shares Retained earnings Total Equity
reserve
Capital
£000 £000 £000 £000 £000 £000 £000
At 1 January 2022 25,472 54,530 (1,729) 4 (2,961) (34,093) 41,223
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)
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 25,709 54,699 (1,729) 2 (2,961) (39,737) 35,983
Loss for the period - - - - (31,253) (31,253)
-
Other comprehensive income for the period - - - - - 48
48
Total comprehensive loss for the period - - - 48 - (31,253) (31,205)
Transactions with owners of the company:
Issue of shares 949 7,448 - - - - 8,397
Exercise of options 27 37 - - - - 64
Transfer of own shares - - - - 206 (206) -
Equity-settled share based payment - - - - - 5,199 5,199
At 31 December 2022 26,685 62,184 (1,729) (2,755) (65,997) 18,438
50
Loss for the period - - - - (11,532) (11,532)
-
Other comprehensive income for the period - - - - - (179)
(179)
Total comprehensive loss for the period - - - (179) - (11,532) (11,711)
Transactions with owners of the company:
Exercise of options 107 117 - - - - 224
Transfer of own shares - - - - 242 (242) -
Convertible bond - issue of shares 837 13,397 - - - - 14,234
Equity-settled share based payment - - - - - 1,553 1,553
At 30 June 2023 27,629 75,698 (1,729) (129) (2,513) (76,218) 22,738
Condensed Consolidated Statement of Cash Flows
for the 6 months ended 30 June 2023
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December
Note
2022
£000 £000 £000
Operating cash outflow from operations 10 (11,194) (9,428) (15,953)
Interest received 331 5 75
Interest elements of lease payments (128) (17) (202)
Income tax received/(paid) 2,942 - (168)
Withholding tax paid - (187) (184)
Net cash used in operating activities (8,049) (9,627) (16,432)
Cash flows from investing activities
Purchase of plant and equipment (406) (287) (558)
Proceeds from sale of plant and equipment - 49 50
Acquisition of right of use asset - (165) (165)
Acquisition of subsidiary, net of cash acquired (6,896) - (24,878)
Purchase of intangible assets (49) (14) (36)
Disposal of discontinued operation, net of cash disposed of - 666 705
Transaction costs paid, relating to disposal of discontinued operation - (160) (160)
Net cash (used in) / generated from investing activities (7,351) 89 (25,042)
Cash flows from financing activities
Proceeds from exercise of share options 224 406 470
Repayment of financing liabilities (49) - -
Principal elements of lease payments (736) (38) (800)
Proceeds from issue of share capital - - 9,016
Transaction costs relate to issue of share capital - - (618)
Proceeds from issue of convertible bonds - - 52,250
Transaction costs related to issue of convertible bonds - - (3,414)
Net cash flow (used in) / generated from financing activities (561) 368 56,904
Net (decrease) / increase in cash and cash equivalents (15,961) (9,170) 15,430
Cash and cash equivalents at the beginning of the period 41,781 26,191 26,191
Effect of movements in exchange rates on cash held 148 (4) 160
Cash and cash equivalents at the end of the period 25,968 17,017 41,781
Notes to the unaudited condensed consolidated financial statements
for the 6 months ended 30 June 2023
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 2023 comprise the Company and its subsidiaries (together
referred to as 'the Group').
The interim financial statements for the 6 months ended 30 June 2023 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 2022, 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 2022 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 2022 ('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 comparative results for the 6 month period ended 30 June
2022 and the year ended 31 December 2022 include those of a discontinued
operation. This relates to the Animal Health segment, which the Group sold in
its entirety on 15 March 2022. Further details of this discontinued operation
can be found in the financial statements for the year ending 31 December 2022.
The Board approved these interim financial statements for issue on 28
September 2023.
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 2022. A number of new standards were
effective from 1 January 2023 but they do not have a material effect on the
Group's financial statements.
3) Segmental reporting
The Group has two distinct operating segments: Diagnostics and Therapeutics.
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.
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 47% (6 months to 30 June 2022: 100%; year to 31 December 2022:
74%). The revenue analysis below is based on the country of registration of
the customer:
6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended 31 December 2022
£000
UK 6,323 14 2,532
France 2,248 - 1,296
Rest of Europe 1,285 1 158
North America 21 50 179
South Korea 1,991 5,444 5,481
Rest of World 21 7 7
11,889 5,516 9,653
During the six month period ended 30 June 2023, transaction with one external
customer in the Therapeutics segment, amounted individually to 10% or more of
the Group's revenue, being £1,991,000.
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 year 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 for the six months ended 30 June 2023
Diagnostics Therapeutics Central overheads(1) Total
£000 £000 £000 £000
Revenue 9,898 1,991 - 11,889
Cost of goods sold (5,133) (8) - (5,141)
------------- ------------- ------------- -------------
Gross profit 4,765 1,983 - 6,748
Research costs (663) (5,346) - (6,009)
Selling, general and administrative expenses (4,529) (1,185) (2,932) (8,646)
------------- ------------- ------------- -------------
Adjusted EBITDA (427) (4,548) (2,932) (7,907)
Depreciation expense (640) (632) (4) (1,276)
Amortisation expense (431) (4) (2) (437)
Share of loss of associate - (424) - (424)
Acquisition related expenses - - (282) (282)
Share-based payment expense (403) (600) (550) (1,553)
------------- ------------- ------------- -------------
Segment operating loss (1,901) (6,208) (3,770) (11,879)
------------- ------------- ------------- -------------
(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.
Operating segment analysis for the six months ended 30 June 2022
Diagnostics Therapeutics Central overheads(1) Total Animal health
(continuing) (discontinued)
£000 £000 £000 £000 £000
Revenue 73 5,444 - 5,517 411
Cost of goods sold (38) (206) - (244) (117)
------------- ------------- ------------- ------------- -------------
Gross profit 35 5,238 - 5,273 294
Research costs (1,136) (4,863) - (5,999) (6)
Selling, general and administrative expenses (1,466) (1,354) (1,872) (4,692) (233)
------------- ------------- ------------- ------------- -------------
Adjusted EBITDA (2,567) (979) (1,872) (5,418) 55
Depreciation expense (260) (614) (5) (879) (10)
Amortisation expense (410) - - (410) -
Share of loss of associate - (646) - (646) -
Share-based payment expense (492) (1,250) (550) (2,292) -
------------- ------------- ------------- ------------- -------------
Segment operating (loss)/profit (3,729) (3,489) (2,427) (9,645) 45
------------- ------------- ------------- ------------- -------------
(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.
Operating segment analysis for the year ended 31 December 2022
Diagnostics Therapeutics Central overheads(1) Total Animal health (discontinued)
(continuing)
£000 £000 £000 £000 £000
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) (4,123) (11,232) (240)
------------- ------------- ------------- ------------- -------------
Adjusted EBITDA (5,125) (5,481) (4,123) (15,089) 54
Impairment charge (5,225) - - (5,225) -
Depreciation expense (627) (1,269) (8) (1,904) (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)/profit (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.
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 2023
£'000 Diagnostics Therapeutics Total
Nature of revenue
Sale of goods 9,379 - 9,379
Provision of services 519 3 522
Licence-related income - 1,988 1,988
9,898 1,991 11,889
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
Year ended 31 December 2022
£'000 Diagnostics Therapeutics Continuing operations Animal Health (discontinued)
Nature of revenue
Sale of goods 3,779 - 3,779 259
Provision of services 393 229 622 153
Licence-related income - 5,252 5,252 -
4,172 5,481 9,653 412
5) Earnings per share
Unaudited Unaudited Audited
£'000 6 months ended 30 June 2023 6 months ended 30 June 2022 Year ended 31 December 2022
Loss from continuing operations (11,532) (8,990) (39,540)
Profit/(loss) from discontinued operations - 1,055 351
Loss for the period (11,532) (7,935) (39,189)
Weighted average number of shares (number) 269,159,631 251,096,503 255,369,066
- Basic and diluted loss per ordinary share from continuing (4.28) (3.58) (15.48)
operations (p)
-
-
- Basic and diluted earnings / (loss) per ordinary share from - 0.42 0.13
discontinued operations (p)
-
-
- Basic and diluted loss per ordinary share for the period (p) (4.28) (3.16) (15.35)
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 Motor Vehicles Total
£'000
As at 1 January 2022 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
Additions 301 - 26 327
Acquisitions through business combinations 160 585 376 1,121
Depreciation charge (523) (46) (27) (596)
Remeasurement of lease liability (85) - - (85)
Effect of movement in exchange rates 1 - - 1
As at 31 December 2022 4,361 682 375 5,418
Additions - - 275 275
Acquisitions through business combinations 1,446 - 17 1,463
Depreciation charge (549) (87) (97) (733)
Transfers to property, plant & equipment - (241) - (241)
Effect of movement in exchange rates (7) - - (7)
As at 30 June 2023 5,251 354 570 6,175
Presentation of lease liability
30 June 2023 30 June 2022
£000 Property Laboratory equipment Motor vehicles Total Property Laboratory equipment Motor vehicles Total
Lease liabilities
Current 1,070 135 189 1,394 795 62 - 857
Non-current 4,294 28 381 4,703 3,973 - - 3,973
5,364 163 570 6,097 4,768 62 - 4,830
31 December 2022
£000 Property Laboratory equipment Motor vehicles Total
Lease liabilities
Current 941 279 141 1,361
Non-current 3,469 48 236 13,753
4,410 327 377 5,114
Reconciliation of change in lease liability £000
As at 1 January 2022 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
Payment of lease liability - principal (584)
Payment of lease liability - interest (101)
Interest expense 93
Additions 328
Acquisitions through business combinations 893
Remeasurement of lease liability (85)
As at 31 December 2022 5,114
Payment of lease liability - principal (738)
Payment of lease liability - interest (128)
Interest expense 128
Additions 275
Acquisitions through business combinations 1,453
Effect of movement in exchange rates (7)
As at 30 June 2023 6,097
7) Equity-accounted investees
The Group currently holds a 19% equity interest (6 months to 30 June 2022:
21%; year to 31 December 2022: 19%) 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 investment in associate is measured using the equity method. The Group has
significant influence as a result of material transactions with the entity and
the provision of essential technical information, AffyXell Therapeutics Co.,
Ltd was established in 2020 to develop Affimer® proteins which will be used
for the generation of new cell and gene therapies.
During the period, the investment in associate has increased with the
achievement of a milestone within the collaboration which will result in the
issue of equity to the Group. The exact shareholding will be determined, as
with the first milestone payment which was achieved in April 2022, following a
formal valuation of AffyXell and is expected to be circa 25%.
Reconciliation of change in value of associate £000
As at 1 January 2022 -
Additions 4,128
Share of loss of associate (646)
As at 30 June 2022 3,482
Additions -
Share of loss of associate (506)
As at 31 December 2022 2,976
Additions 1,987
Share of loss of associate (424)
As at 30 June 2023 4,539
8) Acquisition of subsidiary
On 31 May 2023, the Group acquired 100% of the shares and voting interests in
Coris Bioconcept. Coris Bioconcept are a Belgium based company specialising in
developing, manufacturing and marketing rapid diagnostic tests, for use by
healthcare professionals, through distributors in Europe, Asia, South America,
Africa and Oceania.
The acquisition of Coris Bioconcept was a further step forward in an
M&A-led growth strategy for the Group's Diagnostics Division, with the
vision of building an integrated and differentiated IVD business with global
reach servicing professionals and consumers.
For the period from acquisition to 30 June 2023, Coris Bioconcept contributed
revenue of £815,000 and operating profit of £189,000 to the Group's results.
A. Consideration transferred
£000
Cash 10,116
Deferred consideration 1,587
-----------
Total consideration transferred 11,703
In addition, the Group has agreed to pay the selling shareholders additional
consideration based on sales for the year ended 31 December 2023 and 31
December 2024. For 2023, additional consideration will be calculated at 100%
of sales exceeding €5.5 million and for 2024 at 90% of sales exceeding
€6.5 million. The additional consideration is capped at €3.5 million.
Based on an assessment of forecast future sales, the fair value of this
deferred contingent consideration at the acquisition date was £1,587,000 and
at 30 June 2023 is £1,583,000.
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' in the Condensed Consolidated Statement of Profit or Loss for the 6
months ended 30 June 2023.
C. Identifiable assets acquired and liabilities assumed
The following table summarises the provisionally recognised amounts of assets
acquired and liabilities assumed at the date of acquisition. A purchase price
allocation (PPA) exercise is in progress to assess the valuation of intangible
assets recognised on acquisition and the associated deferred tax liabilities.
At this stage, the Group expects these intangible assets to relate to the
brand, development project work and customer relationships acquired. At this
stage, these amounts are included within the Goodwill figure disclosed in D.
£000
Property, plant and equipment 366
Right-of-use assets 1,463
Intangible assets 61
Other non-current receivables 12
Inventories 1,287
Trade and other receivables 1,335
Cash and cash equivalents 3,208
Other Trade and other payables (1,576)
Financing liabilities (628)
Lease liabilities (1,454)
----------
Total identifiable net assets acquired 4,074
D. Goodwill
Goodwill arising from the acquisition has been recognised as follows:
£000
Consideration transferred A 11,703
Fair value of identifiable net assets C (4,074)
-----------
Goodwill 7,629
As set out in C, a PPA exercise is underway to value the intangible assets
acquired and therefore allocate, in part, this goodwill to other intangible
assets. The residual goodwill would be expected to be attributable to the
skills and technical talent of Coris Bioconcept's workforce, and the synergies
expected to be achieved from integrating the company into the Group's
Diagnostics business. None of the goodwill recognised is expected to be
deductible for tax purposes.
9) 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 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. If in shares, the repayment
is at 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 election date. The conversion price may reset downwards at 18 months,
depending on share price performance, and save in limited circumstances there
is a reset price floor of 95p.
Additionally, the bondholder has the option to partially convert the
convertible bond at their discretion, such as occurred on 10 February 2023.
The bond agreement contains embedded derivatives in conjunction with an
ordinary host debt liability. As a result, the convertible bonds are shown in
the Consolidated Statement of Financial Position in two separate components,
being 'Convertible bond - debt' and 'Convertible bond - derivative'. At
issuance, the total inception value was £52,500,000, being the 5% issue
discount to the principal amount of the Bonds, with the initial carrying
amount of the debt liability element being the difference between this
inception value of the convertible bond and the fair value at inception of the
derivative element. Given the option of the bondholder to convert the bond at
their discretion, the debt and derivative liability elements are classified as
current liabilities.
The derivative element has been 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
therefore falls under Level 3 of the fair value hierarchy. At inception, the
fair value of the derivative component was measured at £35,000,000, resulting
in an initial carrying amount of the debt liability element of £16,123,000
(net of transaction costs apportioned to the debt liability element of
£1,127,000).
During the 6 month period ended 30 June 2023, the following conversion events
occurred:
- On 23 January 2023, 3,068,421 new ordinary shares were issued in
settlement of the quarterly principal of £2.75 million and interest repayment
of £0.89 million in respect of the convertible bond, reducing the principal
remaining to £52.25 million.
- On 10 February 2023, 2,400,000 new ordinary shares were issued
in settlement of a received Notice of Conversion in respect of £2.85 million
of the convertible bond, reducing the principal remaining to £49.40 million.
- On 21 April 2023, 2,906,097 new ordinary shares were issued in
settlement of the quarterly principal of £2.6 million and interest repayment
of £0.80 million in respect of the convertible bond, reducing the principal
remaining to £46.80 million.
At each conversion event, the reduction in the host debt and derivative
liabilities is recognised as an addition to equity. The fair value as at 30
June 2023 was measured to be £28,900,000 resulting in a gain on revaluation
of the derivative being recognised of £5,862,000.
The debt liability incurred finance costs of £6,847,000 during the period,
though reduced to £15,679,000 as a result of the conversion events set out
above.
Significant assumptions used in the fair value analysis include the volatility
rate and recovery amount. A volatility of 68.1% (2022: 67.4%) was used in the
determination of the fair value of the derivative element, a change by 10% in
the volatility rate would result in a change in the fair value of the
derivative element by £3,300,000. An estimated recovery amount of 75% (2022:
75%) was also used in the determination of fair value, with a change by 10%
resulting in change in fair value of the derivative element by £1,400,000.
Convertible bond - derivative Convertible bond - debt
£000 £000
At inception 35,000 16,123
Interest expense - 2,606
Revaluation of derivative 4,100 -
----------- -----------------
At 31 December 2022 39,100 18,729
Settlement of liability through issue of shares (4,338) (9,897)
Interest expense - 6,847
Revaluation of derivative (5,862) -
----------- -----------------
At 30 June 2023 28,900 15,679
----------- -----------------
10) Operating cash outflow from operations
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 31 December
2022
£000 £000 £000
Cash flow from operating activities
Loss for the period (11,532) (7,935) (39,189)
Adjustments for:
Amortisation 437 435 1,051
Impairment losses - - 5,225
Depreciation 1,276 888 1,961
Net (gain) / loss on disposal 23 (41) 52
of property, plant and equipment
Share of loss of associate 424 646 1,152
Profit on lease modification - - (31)
Equity-settled share-based payment charges 1,553 2,292 7,490
Gain on sale of discontinued operation - (1,004) (308)
Increase in investment in associate (1,988) (4,127) (4,127)
Net finance costs 653 119 9,000
Taxation (1,270) (660) (2,102)
Operating cash outflow before changes in working capital (10,424) (9,387) (19,826)
Decrease / (increase) in inventories (85) (4) 52
Increase in trade and other receivables 144 (953) 2,225
Increase in trade and other payables (829) 916 1,596
Operating cash outflow from operations (11,194) (9,428) (15,953)
11) Events after the reporting period
On 21 July 2023, 3,752,652 new ordinary shares were issued in settlement of
the quarterly principal of £2.60 million and interest repayment of £0.76
million in respect of the convertible bond, reducing the principal remaining
to £44.20 million.
On 20 September 2023, 715,789 new ordinary shares were issued in settlement of
£0.85 million of the principal amount of the unsecured convertible bond,
reducing the principal remaining to £43.35 million.
- Ends -
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR DGGDCBGDDGXRRecent news on Avacta
See all newsREG - Avacta Group PLC - Board change
AnnouncementREG - Avacta Group PLC - Block Listing Six Monthly Return
AnnouncementREG - Avacta Group PLC - Avacta presents preclinical data at AACR
AnnouncementREG - Avacta Group PLC - Avacta presents data from lead candidate at AACR
AnnouncementREG - AIM - AIM Notice - 24/04/2025
Announcement