REG - Avacta Group PLC - Interim Results
30/09/2024 07:00
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RNS Number : 1609G Avacta Group PLC 30 September 2024
30 September 2024
Avacta Group plc
("Avacta", the "Group" or the "Company")
Interim Results
pre|CISION™ enabled peptide drug conjugate AVA6000 continues to demonstrate
a highly encouraging tolerability profile with robust preliminary efficacy
signals in both dose escalation arms of Phase 1a trial
Continued strong clinical performance supports broader confidence in the
pre|CISION™ platform
Avacta Group plc (AIM: AVCT), a life sciences company developing innovative,
targeted oncology drugs and powerful diagnostics, announces its unaudited
interim results for the six months ending 30 June 2024 ("H1 2024") with recent
progress against the Company's 2024 stated goals.
Operational developments
· Enrollment in the AVA6000 Phase 1a dose escalation trial of
AVA6000, a peptide drug conjugate enabled by the pre|CISION™ platform, has
completed with no maximum tolerated dose ("MTD") identified. A favorable
safety profile was reported
· Multiple durable RECIST responses were observed in patients with
high-grade sarcoma and salivary gland cancers, indicating that tumor cell
expression of FAP is not required for the release of doxorubicin, with even
lower levels of stroma-only expression being sufficient
· Enrollment in the recommended dose for expansion (RDE) cohort is
ongoing, focusing on patients with high-grade sarcomas and a subset of head
and neck cancer (salivary gland cancer)
· Formation of Scientific Advisory Board ("SAB") chaired by William
D. Tap MD, Chief of the Sarcoma Oncology Service at the Memorial Sloan
Kettering Cancer Center in New York City to guide the ongoing clinical
development of AVA6000 and the pre|CISION™ platform
Financial highlights
· Financial performance of the Group in line with the Board's
expectations
· Revenues of £11.3 million (H1 2023: £11.9 million; FY 2023:
£23.3 million)
· R&D expenditure of £6.7 million (H1 2023: £6.0 million; FY
2023: £14.5 million)
· Adjusted EBITDA loss (before non-cash and non-recurring items) of
£11.1 million (H1 2023: £7.9 million; FY 2023: £20.1 million)
· Reported loss of £12.5 million (H1 2023: £11.5 million; FY
2023: £25.0 million)
· Loss per ordinary share of 3.8p (H1 2023: loss 4.3p; FY 2023:
loss 9.2p)
· Fundraise completed in March 2024 raising £31.1 million (gross)
· Cash and cash equivalents of £32.5 million (30 June 2023: £26.0
million; 31 December 2023: £16.6 million)
· Events after the reporting period:
· In July 2024, settlement in cash of the quarterly amortization
payment of £3.08 million in connection with the Group's convertible bond
· Diagnostics division revenue grew to £11.2 million (H1 2023:
£9.9 million; year ended 31 December 2023, FY 2023: £21.2 million).
Adjusted EBITDA improved to a profit of £0.1 million (H1 2023: loss of £0.4
million; FY 2023: loss of £1.2 million)
Outlook
· At the half year stage, the data from the ongoing Phase 1a
clinical study of AVA6000 continues to support Avacta's growing confidence in
AVA6000 and the wider potential of the pre|CISION™ platform
· A process to divest the Group's Diagnostics division has
commenced in order to maximize value for shareholders, ensure our focus as a
therapeutics-focused Company and support our appeal to specialist
international investors
· The Board of Directors is also exploring opportunities for a dual
listing on NASDAQ and an update on this aspect of the Group's longer-term
financing strategy will be provided in due course
Shaun Chilton, Chairman of Avacta Group plc commented:
"Over the four months since Chris Coughlin's and my appointments, we
have made significant progress on key strategic priorities. Alongside the
Board and wider team, we have carried out a detailed review of all the
Group's operations and financials with a focus on prioritizing further
investments in therapeutics, including the acceleration of the
AVA6000 clinical trial enrollment.
"We are very encouraged by the potential of the innovative medicines in the
Avacta pipeline which we plan to present at our live R&D Spotlight in
October focusing on the Next Generation of the pre|CISION™ platform.
"We have commenced a process to divest the Diagnostics Division and have
started to receive indicative offers. Our longer-term financing strategy is
being formulated and includes a potential dual listing of the Company on
NASDAQ, which the Board sees as a key strategic option for the Company."
Christina Coughlin, MD, PhD, Chief Executive Officer of Avacta Group plc,
commented:
"We are seeing notably positive progress on our drug development candidate
AVA6000 with the completion of the Phase 1a trial with no maximum tolerated
dose and opening of the RDE expansion. This novel peptide drug conjugate
continues to demonstrate a highly favorable tolerability profile and robust
preliminary signs of efficacy, with several durable responses, as it moves
through clinical development.
"The AVA6000 data in the clinic has led to a growing confidence in the
pre|CISION™platform and its potential for patients. Our next generation
programs will leverage the pre|CISION™platform as a foundation for other
tumor-specific warhead delivery systems.
"This platform will underpin our wider clinical strategy and our ambition of
bringing these novel cancer medicines closer to patients and delivering value
for shareholders. Along with the rest of the team, I'm excited about the
opportunity and look forward to expanding the opportunity that pre|CISION
offers."
Avacta will be hosting a live R&D Spotlight: Next Generation of
pre|CISION™ Medicines in London on 30 October 2024. This event is open to
both analysts and investors, further details are provided on the Company
website at https://avacta.com/2024-rd-spotlight-live-event/
(https://url.us.m.mimecastprotect.com/s/Oql7CzpB7LF0my7YF4f0C9pzQb?domain=avacta.com/)
.
For further information from Avacta Group plc, please contact:
Avacta Group plc Tel: +44 (0) 1904 21 7070
Christina Coughlin, CEO www.avacta.com (http://www.avacta.com/)
Michael Vinegrad, Group Communications Director
Peel Hunt (Nomad and Broker) www.peelhunt.com (http://www.peelhunt.com)
James Steel / Chris Golden / Patrick Birkholm
ICR Consilium
Mary-Jane Elliott / Jessica Hodgson / Sukaina Virji avacta@consilium-comms.com (mailto:avacta@consilium-comms.com)
About Avacta Group plc - www.avacta.com (http://www.avacta.com/)
Avacta Group is a UK-based life sciences company focused on improving
healthcare outcomes through targeted cancer treatments and diagnostics.
Avacta Therapeutics: a clinical stage oncology biotech division that is
harnessing the proprietary pre|CISION platform technology to develop novel,
highly targeted cancer drugs.
The pre|CISION™ platform is a highly specific substrate for fibroblast
activation protein (FAP) which is upregulated in most solid tumors compared
with healthy tissues. The pre|CISION™ platform harnesses this tumor specific
protease to cleave pre|CISION™ peptide drug conjugates and pre|CISION™
antibody/Affimer(®) drug conjugates in the tumor microenvironment, thus
releasing active payload in the tumor and reducing systemic exposure and
toxicity, allowing dosing to be optimized to deliver the best outcomes for
patients.
The lead pre|CISION™ program AVA6000, a peptide drug conjugate form of
doxorubicin, is in Phase 1 studies. It has shown an improvement in safety and
tolerability in clinical trials to date compared with standard doxorubicin and
preliminary signs of clinical activity in multiple patients.
Avacta Diagnostics focuses on supporting healthcare professionals and
broadening access to diagnostics.
To register for news alerts by email go
to www.avacta.com/investor-news-email-alerts
(http://www.avacta.com/investor-news-email-alerts)
Interim report
Overview
The first six months of the year saw a number of managerial and operational
changes. The Company's financial position remains in line with the Board's
expectations.
Avacta aims to leverage its proprietary pre|CISION™ platform to develop
innovative oncology therapies that make a significant difference to cancer
patients' treatment experience and outcomes.
The pre|CISION™ platform has the potential to enable patients to achieve
improved outcomes with fewer side effects by leveraging the tumor specific
enzyme Fibroblast Activation Protein (FAP) to protect normal tissues from
toxic drugs. Data recently presented at the European Society of Medical
Oncology (ESMO) conference demonstrate the observation of warhead release in
the tumor even in the setting of lower FAP activity.
The Group is poised to move into the next stage of development, implementing
these findings of this drug release mechanism across our innovative pipeline.
As previously announced the Board is in the process of selling the Diagnostics
business and sees a dual-listing on NASDAQ as a key strategic step for the
Company.
pre|CISION(TM)
The Avacta pre|CISION(TM) platform is a proprietary warhead delivery
system based on a tumor-specific protease that is designed to concentrate
highly potent warheads in the tumor microenvironment while sparing normal
tissues.
Fibroblast activation protein-α (FAP) is an extracellular post-proline
protease that is upregulated in many solid tumors in a membrane-bound form on
cancer associated fibroblasts as well as tumor cells. FAP activity is also
observed as a soluble protease to a low degree in plasma.
A pre|CISION(TM) molecule has two key properties:
1. It prevents the warhead from entering cells.
2. It is specifically cleaved by FAP to release active warhead in the
tumor.
The peptide moiety linker, pre|CISION™, prevents cellular entry of the
warhead unless it is cleaved by FAP, thus enabling targeted delivery of the
warhead to tumors.
The first of Avacta's pre|CISION™, molecules, AVA6000
(https://avacta.com/precision/pipeline/) , has achieved clinical
proof-of-concept in a Phase 1a dose escalation trial with multiple RECIST
responses observed in patients with high grade soft tissue sarcomas and
salivary gland cancers.
First Generation preCISION Peptide Drug Conjugate (PDC): AVA6000
AVA6000 is a pre|CISION(TM) peptide drug conjugate which consists of
doxorubicin conjugated directly with a peptide moiety cleaved by FAP. The
peptide is cleaved in the TME to release active doxorubicin which is then
capable of killing either FAP+ cancer associated fibroblasts (CAFs) or
FAP-negative tumor cells.
Second Generation preCISION Peptide Drug Conjugate
Second Generation pre|CISION PDC are FAP-enabled warheads with two advances
over Generation One: (1) PK extension capabilities with an added capping group
and (2) additional linkers inserted between the warhead and preCISION peptide
allowing an adjustment to the rate of warhead cleavage (kcat/Km). These
advances in the preCISION pipeline allow tailored delivery of warheads to the
tumor microenvironment.
Third Generation pre|CISION™ Biologic Drug Conjugate
Our Third Generation pre|CISION(TM) biologic conjugate drug is a FAP-enabled
maleimide / cysteine conjugation to a biologic, in this case our proprietary
Affimer(®) molecule or a traditional antibody conjugate. The warhead is
delivered intratumorally in a sustained release mechanism.
The progress in the Second Generation and Third Generation programs will be
detailed on 30 October 2024 at our live R&D Spotlight event, being held in
London
AVA6000 Phase 1a Clinical trial data summary
Efficacy data
The Phase 1 clinical trial data have been reported at two medical congresses
(AACR, April 2024 and ESMO, September 2024). In the most recent report, 57
patients were treated in two dose escalation arms of the Phase 1 trial. Cancer
indications were categorized as FAP(high) (soft tissue sarcoma and salivary
gland cancer) or FAP(mid) (pancreatic cancer, colorectal cancer, lung cancer
and other malignancies). Patients with indications considered FAP(low) were
excluded from the trial.
· Among patients with FAP(high) cancers (n=23), three partial
responses and four minor responses were observed, including:
o A durable, confirmed partial response at 12 weeks in a 79-year-old male
patient with progressive salivary gland cancer (SGC). After an initial minor
response (22% reduction in SLD), the observed durable PR is ongoing despite
patient discontinuation due to lifetime maximum dosing (duration of response
>18 weeks, with 46.2% reduction in SLD). Tumor histology demonstrates no
expression of FAP in tumor cells with only stromal cell expression noted.
o A minor response (14.6% reduction in SLD at first 8-week scan) in a
65-year-old female patient with SGC who remains on the trial. This patient was
dosed in the 250 mg/m2 Q2W cohort of the trial and had progression on a prior
line of therapy. This patient continues on study. Similarly, the histology
shows FAP-negative tumor cells and FAP expression only in the stromal
compartment.
o A partial response (40.5% reduction in SLD) in a 55-year-old male patient
with dedifferentiated liposarcoma (DDLPS) who had progressed on two prior
lines of therapy in the metastatic setting. After an initial minor response
this patient experienced a partial response with SLD change of -40.6%. The
patient experienced new lesions at their latest follow-up scan.
o A partial response in a 60-year-old male with undifferentiated pleomorphic
sarcoma (UPS) with one prior line of therapy in the metastatic setting
(reported in April 2024 at the AACR conference). This patient remains on
study at the time of the data cutoff with a duration of response of >55
weeks.
· Eight patients remain on study in the Phase 1a cohorts with a
diagnosis of FAP(high) cancers.
· Among patients with high grade sarcomas (UPS and DDLPS), two
partial responses have been observed among the 6 patients enrolled. Similarly,
one partial response and one minor response have been observed with additional
evidence of tumor shrinkage among ten patients with salivary gland cancers
with multiple patients still ongoing in their treatment.
Among patients with FAP(mid) cancers (n=26), two minor responses were
observed.
Safety and Pharmacokinetics Data
Treatment with AVA6000 continues to be well-tolerated with the addition of the
Q2W dosing regimen (Arm 2) with a favorable safety profile and reduction in
severe and mild-to-moderate treatment-emergent toxicities as compared with
conventional dose doxorubicin. A maximum tolerated dose has not been
identified in either arm of the trial. The observed cardiac safety profile of
AVA6000 compares favorably to conventional dose doxorubicin, with low
incidence of left ventricular ejection fraction (LVEF) changes (LVEF
dysfunction 12.3% v. 48.4% with conventional doxorubicin(1,2)) and no grade 3
or 4 severe cardiac events reported. No new dose limiting toxicities were
observed and neither arm has determined an MTD.
Treatment with AVA6000 results in multiple fundamental changes in the
pharmacokinetics (PK) of released doxorubicin (compared to conventional
doxorubicin administration(3)) including extension of the plasma half-life and
reduction in both the Cmax and volume of distribution.
Tumor biopsies taken 24 hours after the first dose of AVA6000 reveal
additional insights regarding the role of FAP, in that the level of FAP
positivity in the tumor appears not to correlate with the level of released
doxorubicin in the TME (n=9). This lack of correlation indicates that lower
levels of FAP activity are sufficient for warhead release. These data
provide evidence for targeting of the FAP(mid) tumor types with novel
warheads.
The data emerging from the AVA6000 Phase 1a study have validated the
performance of the pre|CISION™ platform, opening the opportunity to apply it
to a broad range of anticancer agents.
Diagnostics Division Update
The Diagnostics Division has continued to grow revenues, with the sale of
Coris products through the Launch Diagnostics ('Launch') distribution channels
and the expansion of Launch into the German market. The Company streamlined
its operations during the period by closing its Wetherby facility, having
transferred product development activities to the Coris operations in Belgium.
Revenues have grown to £11.2 million in the six-month period ended 30 June
2024, from £9.9 million in the same period to 30 June 2023. This has led to
an improvement in adjusted EBITDA to £0.1 million in the six-month period
ended 30 June 2024, from an EBITDA loss of £0.4 million in the comparative
period in 2023. The Company expects the Diagnostics Division to remain
adjusted EBITDA positive in H2 2024 and be cash flow positive in 2025.
As previously announced, the Company has been reviewing strategic options in
relation to its Diagnostics Division to ensure it maximizes value for
shareholders. A process to divest the division is ongoing and indicative
offers have started to be received.
Funding
The equity fundraise in March 2024 significantly extended the Group's cash
runway and cash resources are being managed prudently. The Group continues to
explore all available pathways to provide optionality for financing its
clinical therapeutics programs over the longer term, including divestment of
the Diagnostics Division, partnering, attracting global specialist biotech
investors and potentially a NASDAQ dual-listing, on which further updates will
be provided in the coming months.
Financial Review
Revenue
Revenue for the six months ended 30 June 2024 reduced to £11.26 million
compared to the same period in 2023 (H1 2023: £11.89 million; FY 2023:
£23.25 million).
Revenue contribution from the Therapeutics Division reduced to £0.06 million
(H1 2023: £1.99 million; FY 2023: £2.06 million) due to the milestone
achieved in H1 2023 in the collaboration with AffyXell (which lead to
additional equity in the joint venture). Revenue from the Diagnostics Division
increased to £11.20 million (H1 2023: £9.90 million; FY 2023: £21.19
million) as the reporting period included a full six months trading for both
Launch Diagnostics ("Launch") and Coris BioConcept ("Coris").
Research costs and selling, general and administrative costs
Research costs relate predominantly to the clinical and pre-clinical
development work of the pre|CISION™ therapeutics programs in the
Therapeutics Division and amounted to £6.75 million (H1 2023: £6.01 million;
FY 2023: £14.53 million).
Selling, general and administrative costs have increased to £9.37 million (H1
2023: £8.65 million; FY 2023: £16.86 million), reflecting a full period of
ownership of Coris relative to the one month contribution in H1 2023.
Adjusted EBITDA
The Consolidated Statement of Profit or Loss shows an Adjusted EBITDA loss
position (before non-recurring and non-cash items) of £11.10 million (H1
2023: £7.91 million; FY 2023: £20.14 million).
Other costs and charges
Exceptional expenses of £1.52 million were incurred (H1 2023: £nil; FY 2023:
£nil) relating to both the closure of the Wetherby laboratory within the
Avacta Diagnostics division, and the replacement of the Group's prior Chief
Executive Officer.
Depreciation has increased to £1.39 million (H1 2023: £1.28 million; FY
2023: £2.64 million). Amortization expense has increased to £0.58 million
(H1 2023: £0.44 million; FY 2023: £1.03 million).
The share of the costs from the AffyXell joint venture in the period was
£0.40 million (H1 2023: £0.42 million; FY 2023: £0.85 million). Avacta's
shareholding in AffyXell remained at 25% at the current and comparative
period-ends, reducing to 21% post period-end following completion of a funding
round by AffyXell which the Group did not participate in.
No further acquisition-related expenses were incurred during the period (H1
2023: £0.28 million; FY 2023: £0.28 million).
Share-based payment charges have increased to £2.26 million (H1 2023: £1.55
million; FY 2023: £2.91 million).
Operating loss
The Group's operating loss increased to £17.25 million (H1 2023: £11.88
million; FY 2023: £28.36 million).
Convertible bond costs
During the reporting period there have been two quarterly amortization
repayments (of £2.55 million each in equity) which reduces the original
£55.00 million senior unsecured convertible bonds issued in October 2022 at
par value to £35.70 million.
Subsequent to the period end in July 2024 a third quarterly amortization of
£2.55 million (in addition to £0.58 million of interest) was settled in cash
leaving the remaining balance of bonds at par value of £33.15 million. The
Board carefully considers each payment separately as it arises, taking into
account a range of factors including the Company's cash runway, shareholder
dilution and broader business prospects.
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 amortizations in the period,
was revalued as at 30 June 2024 at £8.37 million (30 June 2023: £28.90
million; 31 December 2023: £18.33 million), which has resulted in a credit to
the statement of profit or loss on revaluation of derivative within the period
of £9.96 million (H1 2023: £5.86 million; FY 2023: £15.68 million).
The debt element of the bond has reduced to £15.33 million (H1 2023: £15.68
million; 31 December 2023: £16.10 million), with an associated non-cash
interest expense of £6.35 million (H1 2023: £6.85 million; FY 2023: £14.73
million).
Loss for the period
The reported loss after taxation was £12.47 million (H1 2023: £11.53
million; FY 2023: £24.95 million).
The basic loss per share was 3.82p (H1 2023: 4.28p; FY 2023: 9.15p).
Cash flow
The Group reported cash and cash-equivalent balances of £32.53 million (30
June 2023: £25.97 million; 31 December 2023: £16.63 million).
There was a cash outflow from operations and working capital movements of
£12.84 million (H1 2023: £11.19 million; FY 2023: £21.85 million) and an
outflow from investing activities of £0.80 million from capital expenditure
(H1 2023: outflow of £7.35 million; FY 2023: outflow of £9.00 million). The
significant decrease in the outflow is due to the acquisition of tangible and
intangible assets acquired through the Coris acquisition in May 2023.
Cash inflow from financing activities, being net proceeds from the issue of
share capital and share options, net of the principal elements of lease
payments amounted to £29.09 million (H1 2023: outflow of £0.56 million; FY
2023: outflow of £1.30 million). The cash inflow in the period related to the
equity fundraise in March 2024 which generated a net inflow of £29.40
million.
Financial position
Net assets as at 30 June 2024 were £48.16 million (30 June 2023: £22.74
million; 31 December 2023: £21.81 million) of which cash and cash equivalents
amounted to £32.53 million (30 June 2023: £25.97 million; 31 December 2023:
£16.63 million).
Right-of-use assets amounting to £6.27 million (30 June 2023: £6.18 million;
31 December 2023: £7.07 million) are recognized in relation to the Group's
leasehold properties and other leased assets, together with a corresponding
lease liability of £6.60 million (30 June 2023: £6.10 million; 31 December
2023: £7.03 million).
Intangible assets decreased to £30.18 million (30 June 2023: £33.46 million;
31 December 2023: £30.84 million) due to amortization of intangible assets
acquired through the Launch and Coris acquisitions.
Liabilities in relation to the unsecured senior convertible bonds issued in
October 2022 result in a fair value of the derivative element of £8.37
million (30 June 2023: £28.90; 31 December 2023: £18.33 million). The
convertible bond debt element at 30 June 2023 was £15.33 million (30 June
2023: £15.68; 31 December 2023: £16.10 million).
Events after the reporting period
In July 2024, settlement in cash of the quarterly amortization payment in
respect of the unsecured convertible bonds, comprising principal of £2.55
million and interest of £0.58 million.
In September 2024, AffyXell Therapeutics Co., Ltd ('AffyXell'), an associate
of the Group, successfully completed a funding round, thereby reducing the
Group's shareholding to 21%. Avacta did not participate in the funding round.
The Group has announced its intention to divest the Diagnostics Division, at
this stage of the divestment process an estimate of the effect on the
financial statements cannot be made.
Shaun Chilton Christina Coughlin
Chairman Chief Executive Officer
30 September 2024 30 September 2024
Condensed Consolidated Statement of Profit or Loss
for the 6 months ended 30 June 2024
Unaudited Unaudited Audited
6 months ended 6 months ended 30 June 2023 Year ended
Notes 30 June 2024 31 December 2023
£000 £000 £000
Revenue 4 11,261 11,889 23,247
Cost of sales (6,240) (5,141) (12,003)
Gross profit 5,021 6,748 11,244
Research costs (6,746) (6,009) (14,529)
Selling, general and administrative expenses (9,373) (8,646) (16,855)
Adjusted EBITDA (11,098) (7,907) (20,140)
Exceptional expenses (1,521) - -
Amortization expense (575) (437) (1,033)
Impairment charge - - (512)
Share of loss of associate (404) (424) (847)
Acquisition related expenses - (282) (282)
Depreciation expense (1,393) (1,276) (2,638)
Share-based payment charge (2,262) (1,553) (2,906)
Operating loss (17,253) (11,879) (28,358)
Convertible bond - interest expense 6 (6,345) (6,847) (14,730)
Convertible bond - revaluation of derivative 6 9,955 5,862 15,684
Finance income 420 331 655
Finance costs (213) (268) (568)
Loss before tax (13,436) (12,801) (27,317)
Taxation 964 1,269 2,370
Loss for the period (12,472) (11,532) (24,947)
Foreign operations - foreign currency translation differences (349) (179) 1
Other comprehensive income (12,821) (11,711) (24,946)
Total comprehensive loss for the period (12,821) (11,711) (24,946)
Loss per share:
Basic and diluted (3.82p) (4.28p) (9.15p)
Condensed Consolidated Statement of Financial Position
as at 30 June 2024
Unaudited as at Unaudited as at Audited as at
30 June 2024 30 June 2023 31 December 2023
£000 £000 £000
Assets
Property, plant and equipment 3,415 2,814 2,921
Right-of-use assets 6,270 6,175 7,065
Investment in associate 3,731 4,539 4,079
Intangible assets 30,181 33,455 30,837
Deferred tax asset 247 - 253
Non-current assets 43,844 46,983 45,155
Inventories 2,612 3,052 2,585
Trade and other receivables 7,589 6,770 6,585
Income tax receivable 2,717 4,975 2,239
Cash and cash equivalents 32,532 25,968 16,627
Current assets 45,450 40,765 28,036
Total assets 89,294 87,748 73,191
Liabilities
Lease liabilities (5,299) (4,703) (5,735)
Financing liabilities (166) (238) (219)
Provisions (272) - -
Deferred tax (128) (2,952) (323)
Non-current liabilities (5,865) (7,893) (6,277)
Trade and other payables (10,132) (10,805) (9,225)
Lease liabilities (1,300) (1,394) (1,295)
Financing liabilities (134) (339) (166)
Convertible bond - debt 6 (15,331) (15,679) (16,098)
Convertible bond - derivative 6 (8,370) (28,900) (18,325)
Current liabilities (35,267) (57,117) (45,109)
Total liabilities (41,132) (65,010) (51,386)
Net assets 48,162 22,738 21,805
Equity attributable to equity holders of the Company
Share capital 7 36,185 27,629 28,501
Share premium 112,462 75,698 83,220
Reserves (4,322) (4,371) (4,163)
Retained earnings (96,163) (76,218) (85,753)
Total equity 48,162 22,738 21,805
Total equity is wholly attributable to equity holders of the parent Company.
Approved by the Board and authorized for issue on 30 September 2024.
Shaun Chilton Dr Christina Coughlin
Chairman Chief Executive Officer
Condensed Consolidated Statement of Changes in Equity
for the 6 months ended 30 June 2024
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 2023 26,685 62,184 (1,729) 50 (2,755) (63,440) 20,995
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) (73,661) 25,295
Loss for the period - - - - (13,415) (13,415)
-
Other comprehensive income for the period - - - - - 180
180
Total comprehensive loss for the period - - - 180 - (13,415) (13,235)
Transactions with owners of the company:
Convertible bond - issue of shares 726 7,493 - - - - 8,219
Exercise of options 146 29 - - - - 175
Transfer of own shares - - - - 28 (28) -
Equity-settled share based payment - - - - - 1,351 1,351
At 31 December 2023 28,501 83,220 (1,729) 51 (2,485) (85,753) 21,805
Loss for the period - - - - (12,472) (12,472)
-
Other comprehensive income for the period - - - - - (349)
(349)
Total comprehensive loss for the period - - - (349) - (12,472) (12,821)
Transactions with owners of the company:
Issue of shares 6,230 23,174 - - - - 29,404
Exercise of options 357 43 - - - - 400
Transfer of own shares - - - - 200 (200) -
Convertible bond - issue of shares 1,096 6,016 - - - - 7,112
Own shares acquired 1 9 - - (10) - -
Equity-settled share based payment - - - - - 2,262 2,262
At 30 June 2024 36,185 112,462 (1,729) (298) (2,295) (96,163) 48,162
Condensed Consolidated Statement of Cash Flows
for the 6 months ended 30 June 2024
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 2024 30 June 2023 31 December
Note
2023
£000 £000 £000
Operating cash outflow from operations 8 (12,839) (11,194) (21,845)
Interest received 420 331 655
Interest elements of lease payments (193) (128) (304)
Interest elements of financing liabilities (6) - (11)
Income tax received 296 2,942 6,633
Net cash used in operating activities (12,322) (8,049) (14,872)
Cash flows from investing activities
Purchase of plant and equipment (702) (406) (1,124)
Proceeds from sale of plant and equipment 86 - 60
Acquisition of right of use asset (6) - (42)
Acquisition of subsidiary, net of cash disposed of - (6,896) (6,931)
Purchase of intangible assets (173) (49) (96)
Payment of deferred consideration on past acquisition - - (868)
Net cash used in investing activities (795) (7,351) (9,001)
Cash flows from financing activities
Proceeds from exercise of share options 401 224 398
Repayment of financing liabilities (77) (49) (246)
Principal elements of lease payments (636) (736) (1,450)
Proceeds from issue of share capital 31,148 - -
Transaction costs relating to the issue of share capital (1,744) - -
Net cash flow from financing activities 29,092 (561) (1,298)
Net increase/(decrease) in cash and cash equivalents 15,975 (15,961) (25,171)
Cash and cash equivalents at the beginning of the period 16,627 41,781 41,781
Effect of movements in exchange rates on cash held (70) 148 17
Cash and cash equivalents at the end of the period 32,532 25,968 16,627
Notes to the unaudited condensed consolidated financial statements
for the 6 months ended 30 June 2024
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 2024 comprise the Company and its subsidiaries (together
referred to as 'the Group').
The interim financial statements for the 6 months ended 30 June 2024 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 2023, 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 2023 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 2023 ('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 Group's operations and results are not impacted by seasonal fluctuations.
The Board approved these interim financial statements for issue on 30
September 2024.
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 with the
exception of those discussed below:
- Presentation of discontinued operations - a judgement exists in
relation to whether the Diagnostics division should be presented as a
discontinued operation and a held for sale asset, given the announced
divestment process. A sale must be deemed highly probable for an operation to
be disclosed as such. Given the early stage of the divestment process this was
not judged to be the case at 30 June 2024, but had been judged to have become
so by 30 September 2024 and as such has been disclosed as a subsequent event.
A similar judgement must also be made in relation to whether the Wetherby
diagnostics laboratory, closed during the period, represented a separate major
line of business or geographical area of operations and as such should be
presented as a discontinued operation rather than as an exceptional expense.
Due to the close interactions between the laboratory and other product
development operations within the wider Diagnostics division, it has been
judged that the Wetherby laboratory is not significantly distinct enough to
warrant presentation as a discontinued operation.
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 2023. A number of new standards were
effective from 1 January 2024 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 39% (6 months to 30 June 2023: 47%; year to 31 December 2023:
45%). The revenue analysis below is based on the country of registration of
the customer:
6 months ended 30 June 2024 6 months ended 30 June 2023 Year ended 31 December 2023
£000
UK 6,885 6,323 12,750
France 2,846 2,248 4,120
Rest of Europe 960 1,285 3,688
North America - 21 21
South Korea 56 1,991 2,055
Rest of World 514 21 613
11,261 11,889 23,247
During the six month period ended 30 June 2024, there were no transactions
with a single external customer that exceeded 10% of the Group's revenue,
being £1,126,000.
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 year 31 December 2023, transactions with one external customer in
the Therapeutics segment amounted individually to 10% or more of the Group's
revenues from continuing operations, being £2,054,000.
Operating segment analysis for the six months ended 30 June 2024
Diagnostics Therapeutics Central overheads(1) Total
£000 £000 £000 £000
Revenue 11,205 56 - 11,261
Cost of goods sold (6,240) - - (6,240)
------------- ------------- ------------- -------------
Gross profit 4,965 56 - 5,021
Research costs (197) (6,549) - (6,746)
Selling, general and administrative expenses (4,689) (1,330) (3,354) (9,373)
------------- ------------- ------------- -------------
Adjusted EBITDA 79 (7,823) (3,354) (11,098)
Exceptional expenses (1,028) - (493) (1,521)
Depreciation expense (763) (617) (13) (1,393)
Amortization expense (569) (5) (1) (575)
Share of loss of associate - (404) - (404)
Share-based payment expense (120) (577) (1,565) (2,262)
------------- ------------- ------------- -------------
Segment operating loss (2,401) (9,426) (5,426) (17,253)
------------- ------------- ------------- -------------
(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 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)
Amortization 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 year ended 31 December 2023
Diagnostics Therapeutics Central overheads(1) Total
£000 £000 £000 £000
Revenue 21,192 2,055 - 23,247
Cost of goods sold (11,988) (15) - (12,003)
------------- ------------- ------------- -------------
Gross profit 9,204 2,040 - 11,244
Research costs (1,421) (13,108) - (14,529)
Selling, general and administrative expenses (8,963) (2,489) (5,403) (16,855)
------------- ------------- ------------- -------------
Adjusted EBITDA (1,180) (13,557) (5,403) (20,140)
Impairment charge (512) - - (512)
Depreciation expense (1,359) (1,271) (8) (2,638)
Amortization expense (1,020) (10) (3) (1,033)
Share of loss of associate - (847) - (847)
Acquisition related expenses - - (282) (282)
Share-based payment expense (359) (1,739) (808) (2,906)
------------- ------------- ------------- -------------
Segment operating loss (4,430) (17,424) (6,504) (28,358)
------------- ------------- ------------- -------------
(1)Central overheads, which relate to operations of the Group functions, are
not allocated to the operating segments.
Operating profit/loss is the measure of profit or loss regularly reviewed by
the Board. Other items comprising the Group's loss before tax are not
monitored on a segmental basis.
The information reported to the Board does not include balance sheet
information at the segment level.
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 2024
£'000 Diagnostics Therapeutics Total
Nature of revenue
Sale of goods 10,506 - 10,506
Provision of services 652 - 652
Licence-related income 47 56 103
11,205 56 11,261
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
Year ended 31 December 2023
£'000 Diagnostics Therapeutics Continuing operations
Nature of revenue
Sale of goods 20,019 - 20,019
Provision of services 1,173 3 1,176
Licence-related income - 2,052 2,052
21,192 2,055 23,247
5) Earnings per share
Unaudited Unaudited Audited
£'000 6 months ended 30 June 2024 6 months ended 30 June 2023 Year ended 31 December 2023
Loss for the period (12,472) (11,532) (24,947)
Weighted average number of shares (number) 326,900,635 269,159,631 272,683,485
- Basic and diluted loss per ordinary share (3.82) (4.28) (9.15)
-
6) 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 amortization
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 (88.72p) 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 reset downwards from the original
118.75p at the Reset Date on 20 April 2024. There is a Reset Clawback Period
in place until 20 January 2025 during which, if the VWAP of the Company's
Ordinary Shares on each of at least 20 dealing days in any period of 30
consecutive dealing days is greater than 130% of the pre-reset conversion
price, then the conversion price will be restored, thereby reversing the
effect of the reset made on 20 April 2024. Additionally, the bondholder has
the option to partially convert the convertible bonds at their discretion
which has occurred twice to date, on 10 February 2023 and 20 September 2023
where £2.85 million and £0.85 million of principal was settled respectively.
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. Significant
assumptions used in the fair value measurement include the volatility rate.
The table below documents the impact on changes in volatility by 25% on the
fair value measurement.
Volatility (%) 83 108 58
Convertible bond - derivative liability (£'000) 8,370 9,410 7,400
The host debt liability is measured at amortized cost, being adjusted to
reflect revisions in estimated cashflows arising from early conversion events
or settlements of quarterly amortization events in shares.
During the 6 month period ended 30 June 2024, the following conversion events
occurred:
- On 22 January 2024, 3,425,373 new ordinary shares were issued in
settlement of the quarterly principal of £2.55 million and interest repayment
of £0.66 million.
- On 20 April 2024, 7,529,825 new ordinary shares were issued in
settlement of the quarterly principal of £2.55 million and interest repayment
of £0.62 million, reducing the principal remaining to £35.70 million.
Convertible bond - derivative Convertible bond -
debt
£000 £000
At 1 January 2023 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
Settlement of liability through issue of shares (753) (7,464)
Interest expense - 7,883
Revaluation of derivative (9,822) -
----------- -----------------
At 31 December 2023 18,325 16,098
Settlement of liability through issue of shares - (7,112)
Interest expense - 6,345
Revaluation of derivative (9,955) -
----------- -----------------
At 30 June 2024 8,370 15,331
----------- -----------------
7) Share capital
Unaudited Unaudited Audited
Six months ended 30 June 2024
Six months ended 30 June 2023
Year ended 31 December 2023
£000 £000 £000
Allotted, called up and fully paid: 36,108 27,552 28,424
- 361,078,622 (H1 2023: 275,520,666; 2023: 284,240,834 ordinary shares of 10p
each
77
77
77
- 19,327,344 deferred shares of 0.4p each
----------- ----------- -----------
36,185 27,629 28,501
----------- ----------- -----------
During the period, the following ordinary share issues occurred:
- On 22 January 2024, 3,425,373 new ordinary shares were issued in
settlement of the quarterly principal of £2,550,000 and interest repayment of
£663,000 of the convertible bond.
- On 15 February 2024, 9,515 ordinary shares of 10p each were
allotted and issued at 105p per share to Link Market Services Trustees Limited
as Trustee of the Avacta Group plc SIP.
- On 4 March 2024, 27,390,485 ordinary shares of 10p each were
allotted and issued at 50p further to a placing of shares, with a further
130,000 ordinary shares of 10p each being allotted and issued in relation to a
management subscription of shares. On 19 March 2024, a further 23,879,124
conditional placing shares and 10,896,948 REX offer shares of 10p each were
allotted and issued at 50p. Placing costs of £1,744,000 were incurred and
offset against the share premium reserve.
- On 20 April 2024, 7,529,825 new ordinary shares were issued in
settlement of the quarterly principal of £2,550,000 and interest repayment of
£622,000, reducing the principal remaining to £35,700,000 of the convertible
bond.
Additionally, during the year a total of 3,576,518 ordinary shares of 10p each
were allotted and issued following the exercise of vested EMI and unapproved
options.
8) Operating cash outflow from operations
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 2024 30 June 2023 31 December
2023
£000 £000 £000
Cash flow from operating activities
Loss for the period (12,472) (11,532) (24,947)
Adjustments for:
Amortization 575 437 1,033
Impairment losses - - 512
Depreciation 1,393 1,276 2,638
Net (gain) / loss on disposal (9) 23 (2)
of property, plant and equipment
Deferred income movement 630 - 28
Share of loss of associate 404 424 847
Profit on lease modification - - 1
Equity-settled share-based payment charges 2,262 1,553 2,906
Increase in investment in associate (56) (1,988) (1,950)
Net finance costs (3,830) 653 (1,277)
Taxation (964) (1,270) (2,370)
Operating cash outflow before changes in working capital (12,067) (10,424) (22,581)
(Increase) / decrease in inventories (58) (85) 196
(Increase) / decrease in trade and other receivables (1,035) 144 841
Increase / (decrease) in trade and other payables 321 (829) (301)
Operating cash outflow from operations (12,839) (11,194) (21,845)
9) Events after the reporting period
In July 2024, there was a settlement in cash of the quarterly amortization
payment in respect of the unsecured convertible bonds, comprising principal of
£2.55 million and interest of £0.58 million.
In September 2024, AffyXell Therapeutics Co., Ltd ('AffyXell'), an associate
of the Group, successfully completed a funding round, which Avacta did not
participate in, thereby reducing the Group's shareholding from 25% to 21%.
The Group has announced its intention to divest the Diagnostics Division, at
this stage of the divestment process an estimate of the effect on the
financial statements cannot be made.
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