REG - Avacta Group PLC - Preliminary Results
06/04/2022 07:00
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RNS Number : 3982H Avacta Group PLC 06 April 2022
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6 April 2022
Avacta Group plc
("Avacta", the "Group" or the "Company")
Preliminary Results for the year ending 31 December 2021
A period of transformational progress
Avacta Group plc (AIM: AVCT), a clinical stage oncology company and developer
of powerful diagnostics based on its innovative Affimer® and pre|CISION™
platforms, is pleased to announce its preliminary results for the year ending
31 December 2021.
Operating highlights
Therapeutics - Transition into a clinical-stage business
· UK Medicines and Healthcare products Regulatory Agency ('MHRA')
approved the Clinical Trial Application ('CTA') for AVA6000 pro-doxorubicin
for a Phase I, first-in-human, open label, dose-escalation and expansion study
('ALS-6000-101') in patients with locally advanced or metastatic selected
solid tumours.
o AVA6000 is the first therapeutic product based on Avacta's proprietary
pre|CISION™ platform.
· First patient dosed in ALS-6000-101 at the Royal Marsden Hospital
in August 2021.
· US Federal Drug Administration ('FDA') approved the
Investigational New Drug ('IND') application to allow patients in the US to be
dosed as part of ALS-6000-101.
· Licensing agreement with POINT Biopharma Inc., to provide access
to Avacta's pre|CISION™ technology for the development of tumour-activated
radiopharmaceuticals.
· Series A venture capital investment round closed for AffyXell
Therapeutics ('AffyXell'), the joint venture with Daewoong Pharmaceuticals
('Daewoong').
· Pre-clinical milestones achieved in LG Chem Life Sciences
partnership, triggering an undisclosed milestone payment.
· Dr Fiona McLaughlin appointed as Chief Scientific Officer of the
Therapeutics Division.
· Appointments to the Therapeutics Scientific Advisory Board,
reflecting the progress of the Therapeutics Division and Avacta's transition
to a clinical stage company:
o Professor James Spicer MB., BA., PhD., FRCP.
o Professor Krishnan Komanduri, MD.
o Dr Stéphane Champiat MD, PhD.
· Post-period - dose increased from 80 mg/m2 to 120 mg/m2 in the
ALS-6000-101 Phase Ia dose escalation trial of AVA6000 pro-doxorubicin
following a positive review of the safety data from first cohort dosing.
· Post-period - next pre|CISION™ drug candidate, AVA3996,
selected for pre-clinical development with potential for a first-in-human
Phase I clinical trial beginning in the second half of 2023.
Diagnostics - Established a fully integrated in vitro diagnostics business
with product development and commercial functions
· Establishment of fully integrated IVD product development and
commercial functions and ISO13485 certification attained to transition Avacta
Diagnostics Division from an Affimer® reagents supplier to an IVD product
company.
· First ever CE approval obtained for an Affimer-based IVD product
(AffiDX® SARS-CoV-2 antigen lateral flow test) for professional use, and
subsequently for consumer self-testing.
· Establishment of AffiDX® brand for all future Affimer-powered
IVD products via launch of AffiDX® SARS-CoV-2 antigen lateral flow test.
· Multiple collaborations and commercial partnerships entered into
during the period.
· Refocus of product development resources on pipeline of in-house
IVD products following concentration of efforts to bring SARS-CoV-2 antigen
test to market.
· Post-period - update on the performance of the AffiDX®
SARS-CoV-2 antigen lateral flow test ('LFT') against the Omicron variant and
decision to pause sales whilst the high performance of the test experienced
with all previous variants is achieved for Omicron.
Financial and Corporate highlights
· Cash and short-term deposit balances at 31 December 2021 of
£26.2 million (31 December 2020: £47.9 million).
· Revenues of £2.9 million for year ended 31 December 2021 (year
ended 31 December 2020: £2.1 million).
· Operating loss of £29.1 million for year ended 31 December 2021
(year ended 31 December 2020: £18.8 million).
· Increased R&D and manufacturing investment within the
Diagnostics Division and clinical development costs in the Therapeutics
Division, leading to reported loss from continuing operations of £26.4
million (year ended 31 December 2020: £16.4 million).
· Loss per ordinary share from continuing operations of 10.6p (year
ended 31 December 2020: 7.3p).
· Dr Mark Goldberg, a medical oncologist and haematologist at the
faculty of Brigham & Women's Hospital and Harvard Medical School and a
veteran biotech executive, appointed as Non-executive Director to the Board of
Directors of Avacta.
· Post-period - Animal Health Division sold to Vimian Group AB in
March 2022 for an upfront payment of £0.9 million and additional deferred
contingent consideration of up to £1.4 million dependent on the combined
performance of the consolidated business.
· Post-period - Dr Christina Coughlin, a medical oncologist and
immunologist and Chief Executive Officer of CytoImmune Therapeutics, Inc.,
appointed as Non-executive Director to the Board of Directors of Avacta.
Dr Alastair Smith, Chief Executive Officer of Avacta Group, commented:
"It has been a period of transformational progress for the Group, including
many firsts for both the Therapeutics and Diagnostics divisions and despite
the many operational challenges resulting from the impact of the pandemic. I
would like to thank all our staff for the outstanding commitment shown to
deliver this progress.
"Our Therapeutics Division has transitioned to being a clinical stage business
through the dosing of the first patient in the Phase I study of AVA6000,
increasing the division's intrinsic value and attractiveness to specialist
investors and pharmaceutical partners. Success in the ongoing Phase Ia study,
which will likely read-out in the middle of 2022, will not only potentially
create a valuable chemotherapy asset but will also be a first validation of
the pre|CISION platform, highlighting a promising pipeline of chemotherapies
with the potential to significantly improve patients' lives.
"Our Diagnostic Division is now ISO13485 certified and has established all the
necessary product development functions in-house, removing the need to rely on
multiple external partners. We are now developing a pipeline of IVD products
as well as improving the performance of our antigen test for COVID-19 to
ensure it can be commercialised as soon as possible.
"We are confident and excited about the immediate and long-term future
prospects of the Group, with both potential near-term value drivers relating
to AVA6000's clinical trial progress, a pipeline of IVD products and a
redeveloped SARS-CoV-2 antigen test offering immediate and long-term
opportunities."
- Ends -
For further information from Avacta Group plc, please contact:
Avacta Group plc Tel: +44 (0) 844 414 0452
Alastair Smith, Chief Executive Officer www.avacta.com (http://www.avacta.com/)
Tony Gardiner, Chief Financial Officer
Michael Vinegrad, Group Communications Director
Stifel Nicolaus Europe Limited (Nomad and Broker) Tel: +44 (0) 207 710 7600
Nicholas Moore / Nick Adams / Fred Walsh / Nicholas Harland www.stifel.com (http://www.stifel.com/)
FTI Consulting (Financial Media and IR) Tel: +44(0) 203 727 1000
Simon Conway / Alex Shaw / George Kendrick Avacta.LS@fticonsulting.com (mailto:Avacta.LS@fticonsulting.com)
Zyme Communications (Trade and Regional Media) Tel: +44 (0)7891 477 378
Lily Jeffery lily.jeffery@zymecommunications.com
(mailto:katie.odgaard@zymecommunications.com)
About Avacta Group plc - www.avacta.com (http://www.avacta.com/)
Avacta Group is developing novel cancer immunotherapies and powerful
diagnostics based on its two proprietary platforms - Affimer(®) biologics and
pre|CISION™ tumour targeted chemotherapies.
The Affimer(®) platform is an alternative to antibodies and is derived from a
small human protein. Affimer(®) technology has been designed to address many
of the negative issues of antibodies, principally: the time taken to generate
new antibodies, the reliance on an animal's immune response; poor specificity
in many cases; in addition to, the complexity and high cost of manufacture.
Despite these shortcomings, antibodies currently dominate markets, such as
diagnostics and therapeutics, which are worth in excess of $100bn.
Avacta's pre|CISION™ targeted chemotherapy platform is designed to
selectively release active chemotherapy in FAP rich tumour tissue to limit the
systemic exposure that causes damage to healthy tissues, and thereby aims to
improve the overall safety and therapeutic potential of these powerful
anti-cancer treatments.
The Avacta Group comprises two divisions: The therapeutics development
activities are based in London and Cambridge, UK and a separate diagnostics
business unit is based in Wetherby, UK. The Group is generating near-term
revenues from Affimer(®) reagents for diagnostics, bioprocessing and
research.
Avacta's Diagnostics Division is developing an in-house pipeline of
Affimer-based diagnostic assays, including the AffiDX(®) SARS-CoV-2 Lateral
Flow Rapid Antigen Test, and works with partners world-wide to develop bespoke
Affimer(®) reagents for third party products.
Avacta's Therapeutics Division is working to generate more tolerable and
durable treatments for oncology patients who do not respond to existing
therapies. By combining its two proprietary platforms the Group is building a
wholly owned pipeline of clinically differentiated cancer therapies. In 2021
Avacta transitioned to become a clinical stage biopharmaceutical company, when
it commenced a phase I trial in patients with locally advanced or metastatic
selected solid tumours. The study was a first-in-human, open label,
dose-escalation and expansion study of the Group's lead pre|CISION™ prodrug,
AVA6000 (a pro-doxorubicin).
Avacta has established drug development partnerships with pharma and biotech,
including a multi-target deal with LG Chem worth up to $400m, a joint venture
in South Korea with Daewoong Pharmaceutical focused on cell and gene therapies
incorporating Affimer(®) immune-modulators and a recent license agreement
with Point Biopharma for them to develop radiopharmaceuticals based on the
pre|CISION™ platform.
To register for news alerts by email go
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(http://www.avacta.com/investor-news-email-alerts)
Chairman and Chief Executive Officer's Statement
Significant progress has been made in both the Diagnostics and Therapeutics
divisions during 2021, transforming the Group.
The Therapeutics Division has transitioned to a clinical stage oncology drug
business, a significant step which is a value inflection point for a growing
biotech. The Company successfully submitted a CTA to the UK MHRA allowing it
to initiate the ALS-6000-101 Phase I dose escalation and expansion trials in
the UK and gained approval from the US FDA for an IND so that patients can be
dosed in the US as part of this ongoing clinical trial. The first patient ever
was dosed with a pre|CISION(TM) FAPα-activated drug, AVA6000, in August 2021
and the dose has now been increased in the Phase Ia dose escalation part of
the study following positive safety data from the first cohort of patients. We
are now looking forward to being able to report on the full read-out of the
Phase Ia trial in summer 2022 - a potentially pivotal moment for the Group.
Mirroring the strong progress made in the Therapeutics Division, the first
ever CE marked in-vitro diagnostic product based on Affimer(®) technology has
been developed and brought to market, fully validating the platform's
potential to deliver a future pipeline of products for Avacta Diagnostics
division and its commercial partners.
The Diagnostics Division is set apart from its UK comparators in having a
powerful and proprietary immuno-reagents platform, Affimer(®) technology,
which is capable of delivering in-vitro immunodiagnostics with superior
performance based solely on Affimer(®) reagents, and improvements to
antibody-based products by replacing one or more reagents with Affimer(®)
molecules. This provides a strong engine for growth and revenue generation
through development of market leading diagnostic tests for professional and
consumer use.
Prior to the COVID pandemic, the Diagnostics Division had a business model
focused on providing Affimer(®) reagents to third parties to power their
diagnostic and other products. Avacta's Diagnostics Division has now
established a fully integrated IVD product development capability and put in
place a Quality Management System that complies with the diagnostics market
standard of ISO13485. The Diagnostics Division is now focused on developing
its own products and is positioned to deliver a pipeline of in-vitro
diagnostic tests, including the re-development of its SARS-CoV-2 antigen test
in the light of the emergence of highly mutated variants, to drive sales
revenue and profitability.
Avacta Animal Health
Post-period end we sold our Animal Health Division to Vimian Group AB's
specialty pharma segment Nextmune, a global veterinary health group
headquartered in Sweden. The Division had been an important part of the Avacta
Group since 2009. All the staff in the Division will be moving across to
Vimian, which was an important aspect to the structure of the acquisition for
Avacta and we wish them all well in the future. The sale will allow the Group
to focus on growing and developing our core Therapeutics and Diagnostics
businesses.
Board changes
In August 2021, Dr Mark Goldberg joined the Board as a Non-executive Director.
Dr Goldberg is a medical oncologist and haematologist at the faculty of
Brigham & Women's Hospital and Harvard Medical School, a veteran biotech
executive, and long-time American Cancer Society (ACS) and ACS Cancer Action
Network (CAN) volunteer. Dr Goldberg is the past-chair of the Eastern New
England Area Board of the American Cancer Society and currently serves as a
member of its national board of directors.
In March 2022, Dr Christina Coughlin joined the Board as a Non-executive
Director. Dr Coughlin is the Chief Executive Officer of CytoImmune
Therapeutics, Inc., a clinical stage biotechnology company. Dr Coughlin has a
broad background in biotechnology and global pharmaceuticals, with
comprehensive drug development experience spanning programs in pre-IND studies
through to late-stage trials and regulatory approval filings, and a track
record of building drug development teams in global companies including Rubius
Therapeutics, Inc. and Tmunity Therapeutics, Inc.
Our people
Our teams across the Group have made outstanding contributions to the
Company's progress during the year and we would like to recognise the
commitment that this has required under often difficult circumstances due to
the pandemic.
We have invested in a third-party delivered personal development programme for
all our People dealing with mood, emotion and mental well-being in order to
drive even higher performance in the business and foster good mental health
for our staff. The programme coaches staff on how to be resilient in the face
of work pressure, uncertainty caused by the pandemic and the pressures of life
outside of work and to ensure that they are as productive as possible as a
team. This programme has been ongoing during Q4 2021 and will continue through
to the middle of 2022.
Outlook
The Board believes that the most significant near-term value driver for the
Group is the clinical data from the Phase I study of AVA6000 expected in the
middle of 2022. The pre|CISION(TM) technology has the potential to reduce the
side effects of chemotherapy, improve efficacy, and create affordable oncology
drugs which have the potential to significantly improve patients' lives. A
positive readout from the AVA600 Phase Ia trial not only creates a significant
commercial opportunity for the Group with a potentially safer form of
Doxorubicin, but also immediately opens up a large and very valuable pipeline
of pre|CISION(TM) chemotherapy FAPα-activated drugs for development and
licensing.
The Diagnostics Division is focused on delivering a pipeline of new IVD
products and redeveloping the SARS-CoV-2 antigen test, to drive revenues and
profitability of the business, which is the Division's primary objective, and
we anticipate good progress in that regard through 2022.
We are very confident and excited about the immediate and long-term
opportunities for the Group.
Dr Eliot Forster Dr Alastair Smith
Chairman Chief Executive Officer
6 April 2022 6 April 2022
Therapeutics Division
The past twelve months have seen significant progress in Avacta's Therapeutics
Division with the approval of a Clinical Trial Application in the UK and the
dosing of the first patient in the Phase I, first-in-human, open label,
dose-escalation and expansion study of its lead pre|CISION(TM) FAPα-activated
drug, AVA6000, in patients with locally advanced or metastatic selected solid
tumours. This marks the transformation of Avacta into a clinical stage
oncology drug company which is a major value inflection point.
AVA6000 pro-doxorubicin
Anthracyclines such as doxorubicin, a generic chemotherapy for which the
market is expected to grow to $1.38 billion by 2024, are widely used as part
of standard of care in several tumour types, but their use is limited by
cumulative toxicity, and, in particular, cardiotoxicity. Avacta's
pre|CISION(TM) FAPα-activated approach is designed to reduce the systemic
exposure of healthy tissues to the active chemotherapy, leading to improved
dosing regimens, and potentially improved safety and therapeutic profiles.
The AVA6000 Phase I clinical trial involves a dose-escalation Phase I study in
patients with locally advanced or metastatic selected solid tumours, known to
be fibroblast activation protein alpha ('FAPα')-positive, in which cohorts of
patients receive ascending doses of AVA6000 to determine the maximum tolerated
dose and establish a recommended Phase II dose. The second part of the study
is an expansion phase where patients receive AVA6000 to further evaluate the
safety, tolerability and clinical activity at this recommended Phase II dose
across selected tumour types. For more information visit
www.clinicaltrials.gov (https://clinicaltrials.gov/ct2/show/NCT04969835)
(NCT04969835).
The first patient received their first dose of AVA6000 at The Royal Marsden
NHS Foundation Trust in early August 2021. Since then clinical trial sites at
the Christie NHS Foundation Trust in Manchester and at St James' Hospital in
Leeds have been opened and are recruiting patients. The Phase I study will
involve up to six of the leading UK cancer centres with an established
reputation for early cancer clinical research in the Phase I setting. The
COVID-19 pandemic impacted patient recruitment and the initiation of other
clinical trial sites to a limited extent causing it to take longer than
planned to complete cohort 1. Nevertheless, the dose escalation phase is
anticipated to complete in the middle of 2022 with minimal delay and should be
followed by initiation of the dose expansion phase in 2022 which would be
expected to complete by the end of 2023.The Company also received approval
from the US Food and Drug Administration ('FDA') for its Investigational New
Drug ('IND') application for AVA6000 on schedule before the reporting period
end. This allows Avacta to enrol eligible patients into US clinical trial
sites as part of the ongoing Phase I ALS-6000-101 study. Two US sites are now
being initiated and may contribute to the Phase Ia dose escalation phase.
Post-period end the Company announced that the Phase I trial of AVA6000
pro-doxorubicin had advanced to the next dose cohort following a positive
review of the safety data from the dosing of the first cohort by Avacta's
Safety Data Monitoring Committee ('SDMC'), which comprises the clinicians
currently recruiting patients. Following this review, the SDMC recommended
that the clinical trial continued as planned and escalates to the next dose of
AVA6000 at 120mg/m(2).
Pipeline of pre|CISION(™) chemotherapies
Avacta's pre|CISION(TM) platform is a proprietary chemical modification that
renders the modified chemotherapeutic drug inactive in the circulation until
it enters the tumour micro-environment where it is activated by an enzyme
called FAPα. FAPα is in high abundance in most solid tumours but not in
healthy tissues such as the heart. This is expected to lead to a significantly
greater amount of active drug in the tumour tissue compared with healthy
tissues and a concomitant improvement in tolerability for patients and better
clinical outcomes.
If the AVA6000 Phase Ia study shows that the pre|CISION (™) chemistry is
effective in reducing systemic toxicity of doxorubicin in humans, then it can
be applied to a wide range of other established chemotherapies to potentially
improve their safety and efficacy. This would be a significant value
inflection point during 2022 since it would open up a pipeline of proprietary,
potentially safer, next generation chemotherapies with significant clinical
and commercial potential in a chemotherapy market that is expected to grow to
$56 billion by 2024.
The next most advanced pre|CISION(™) pro-drug is AVA3996, a FAP-activated
analogue of Velcade, Takeda's proteasome inhibitor. The global proteasome
inhibitors' market size is expected to be worth $2.3 billion by 2026(( 1 )),
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 to multiple myeloma. A potentially safer proteasome inhibitor,
such as AVA3996, could win significant market share for the treatment not only
of multiple myeloma but also could be used to treat solid tumours, such as
pancreatic cancer. Pancreatic cancer exhibits the highest level of FAP
activity of any solid tumour and therefore a FAPα-activated drug could have
significant potential in this area of high unmet need.
Shortly after the reporting period end, the Company announced that, following
a review of efficacy studies in several liquid and solid tumour models, safety
studies and of manufacturability, AVA3996 has been selected as a candidate for
pre-clinical development with the aim of a Clinical Trial Authorisation
('CTA') and/or Investigational New Drug ('IND') filing in the first half of
2023 and dosing of the first patient later that year.
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.
In the oncology field it has become clear in recent years that cancer
immunotherapies used singly, so-called 'monotherapies', have limited overall
response rates. The Company's Affimer(®) immunotherapy strategy is to harness
the benefits of the Affimer(®) platform to build bispecific drug molecules
that can address two drug targets simultaneously and to use Affimer(®)
molecules to target toxic payloads using conventional and pre|CISION(TM)
linkers.
TMAC(®) and other drug conjugates
Drug conjugates use a chemical linker to combine a toxic payload such as a
chemotherapeutic or radioligand with a targeting system such as an Affimer(®)
or antibody that binds to a cancer biomarker usually on the surface of tumour
cells. Conventional drug conjugates target a biomarker that is frequently
internalised by the tumour cells taking with it the drug conjugate where the
toxic payload is released by enzymatic breakdown of the linker. The tumour
microenvironment activated drug conjugate ('TMAC(®)') uses the pre|CISION(TM)
chemistry in the linker so that the toxic payload can be released outside the
tumour cell in the tumour microenvironment, allowing different, synergistic,
mechanisms of action to be envisioned between the toxin and the targeting
system that could have immunotherapeutic properties. TMAC(®) is a new class
of drug conjugate for which the Company has made a patent application with
Tufts University Medical School.
Good progress is being made in the in-house Affimer(®) and TMAC(®)
programmes. These pre-clinical programmes, along with the commercial
collaborations, are the focus of in-house research activities and the Company
plans to provide a full technical update to shareholders during 2022 when
sufficient pre-clinical data has been gathered so that the development path
and associated risks can described in detail.
Chief Scientific Officer and Scientific Advisory Board
The Therapeutics Division has made a series of new appointments in recent
months, with Dr Fiona McLaughlin joining as Chief Scientific Officer and
several appointments to its Scientific Advisory Board ('SAB'), reflecting
Avacta's transition to a clinical stage oncology drug company.
Dr McLaughlin is a highly experienced oncology drug developer, bringing over
25 years' experience in research and translational drug development in the
pharmaceutical and biotech sectors, having led teams from early research
through to clinical development. Fiona started her career at GlaxoSmithKline
and has subsequently held leadership positions in multiple biotech companies,
including Vice President, Translational Research at Antisoma plc and Director
of Pre-clinical Development at BTG plc (now part of Boston Scientific).
Other roles include Head of Biology at TopoTarget A/S, where she was
responsible for the pre-clinical development of belinostat, which went on to
gain FDA approval to treat peripheral T-cell lymphoma. Most recently, Fiona
was Vice President of New Opportunities at Algeta ASA (acquired by Bayer), a
Norwegian biotech developing alpha radio-pharmaceuticals, that gained FDA
approval of Xofigo to treat castration resistant prostate cancer.
Fiona has also gained broad experience during her career as a consultant,
providing scientific and strategic advice to biotechs, not-for-profit
organisations, and venture capitalists in the UK, Europe, the US and
Australia, including helping drive oncology strategy at the CRUK/AstraZeneca
Alliance Laboratory. Fiona received a PhD from the Haematology Department at
Cambridge University and has a BSc in Biochemistry from Glasgow University.
The SAB provides the Therapeutics Division with scientific and clinical advice
to support its drug development decision-making and pipeline strategy. The
three new members of the SAB are Professor James Spicer MB, BA, PhD, FRCP,
Professor Krishnan Komanduri, MD, and Dr Stéphane Champiat MD, PhD.
James Spicer is Professor of Experimental Cancer Medicine at King's College
London and Consultant in Medical Oncology at Guy's & St. Thomas'
Hospitals, London. He has established and runs a world-leading Phase I
clinical trials programme in solid tumour oncology at Guy's Hospital, where
the portfolio of studies includes novel immunotherapies discovered and
developed at King's as well as many externally sponsored studies.
Krishna Komanduri is Chief of the Division of Transplantation and Cellular
Therapy, and Associate Chief Medical Officer for Clinical Innovation, at the
Sylvester Comprehensive Cancer Center, Miami. He is also a Professor of
Medicine, Microbiology and Immunology and a physician-scientist with a
laboratory focusing on T-cell immunology in cancer. Krishna serves on the
United Health Care Oncology Advisory Committee and is a past Chair of the
American Society of Hematology Scientific Committee on Host Defense, is the
current Chair of the ASTCT Cellular Therapy Committee and Chair-Elect of the
Government Relations Committee.
Stéphane Champiat MD, PhD is a physician at the Gustave Roussy Cancer Center
in Paris, where he focuses on the development of cancer therapeutics, in
particular, new immunotherapies. He has been principal investigator or
co-investigator of more than 50 Phase I clinical trials run by many of the
world's leading pharmaceutical and biotech companies. He is particularly
involved in the coordination of the immunotherapy toxicity management program
and the development of the intra-tumoral immunotherapy strategy at Gustave
Roussy.
Drug Development Collaborations
LG Chem Life Sciences: Very good progress has been made in our strategic
partnership with LG Chem Life Sciences towards the clinical development of a
novel checkpoint inhibitor utilising the Affimer(®) platform. LG Chem
successfully completed certain pre-clinical in-vivo models in the PD-L1/XT
programme leading to the selection of a pre-clinical candidate for further
development towards the clinic and triggering an undisclosed milestone
payment.
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.
AffyXell: AffyXell is an Affimer-engineered cell therapy joint venture with
Daewoong Pharmaceuticals in South Korea. During the reporting period AffyXell
closed a Series A round of $7.3 million with a syndicate of venture capital
firms including Samsung Venture Investment Corporation. The Company has made
good progress, advancing both its GMP-compliant human mesenchymal stem cell
technology and its Affimer(®) discovery programmes against two of the three
initial targets. Proof-of-concept studies are planned for 2022 to form the
basis for a Series B fund-raise to move candidate cell therapies into the
clinic.
POINT Biopharma: During the reporting period Avacta signed a licensing
agreement with POINT Biopharma Inc., to provide access to Avacta's
pre|CISION(™) technology for the development of tumour-activated
radiopharmaceuticals. Under the terms of the agreement, Avacta received an
upfront fee and will receive development milestone payments for the first
radiopharmaceutical FAPα-activated drug totalling $9.5 million. Avacta will
also receive milestone payments for subsequent radiopharmaceutical
FAPα-activated drugs of up to $8 million each, a royalty on sales of
FAP-activated radiopharmaceuticals by POINT and a percentage of any
sublicensing income received by POINT.
Diagnostics Division
During the past year the Avacta Diagnostics Division has been transformed into
an ISO13485 accredited in vitro -diagnostics ('IVD') product business, and has
achieved CE marking and subsequent commercial launch of the first ever
Affimer-based diagnostic product, a SARS-CoV-2 antigen lateral flow test.
The AffiDX(®) SARS-CoV-2 antigen lateral flow test was developed with several
partners in response to the need for a high quality rapid COVID-19 test for
infectiousness. The resulting test, which combined the use of an antibody and
an Affimer(®) reagent in the test strip had excellent performance in terms of
sensitivity and specificity with the emerging variants of the virus until the
Omicron variant appeared in late 2021. The AffiDX(®) SARS CoV-2 antigen
lateral flow test contained both a proprietary Affimer(®) reagent and a
commercially available antibody. Our data showed that the Affimer(®) reagent
in the AffiDX(®) test continued to detect the Omicron variant with the same
sensitivity as the Delta variant, but the antibody, with which the Affimer(®)
is paired, had been affected by the additional Omicron mutations. The Company
independently took the decision to pause sales of the AffiDX(®) antigen test
whilst it replaces the antibody in the product to ensure that its performance
with the Omicron variant matches the high performance with previous mutations.
To note, the Company's partner Medusa19 had just received the CE mark for
consumer self-testing when sales were paused.
This re-development is ongoing and making good progress. The precise timeline
of bringing a CE marked product back to market is difficult to predict at this
stage of re-development because of the nature of scientific research and the
lack of clarity on the regulatory pathway until the final product format has
been confirmed, and the effects of rapidly changing regulatory frameworks in
Europe and the UK. The Company will update the market as soon as it is able to
provide a reliable timeline to product launch.
Prior to the COVID pandemic the Company had a business model focused on
providing Affimer(®) reagents to third parties to power their diagnostic and
other products. Avacta's Diagnostics Division has used the opportunity offered
by a response to the pandemic to establish a fully integrated IVD product
development capability and put in place a Quality Management System that
complies with the essential diagnostics market standard of ISO13485.
This has transformed the opportunity for the Diagnostics Division which is now
focused on developing a pipeline of new IVD products outside of COVID-19 to
drive future revenues and the profitability of the Division. This pipeline is
designed to deliver, over the longer term, a full portfolio of IVD products
with a focus on decentralised testing for professionals and consumers. The
Company is addressing four key areas of respiratory infectious and
cardiovascular disease, cancer and general health and well-being (e.g.
hormones, vitamins). The Company is exploring multiple pathways to develop
this portfolio of IVD product and revenue as rapidly as possible.
During the year the Company also entered into a licence agreement with Biokit,
a Werfen Company, to incorporate Affimer(®) reagents into a Biokit IVD
product. Biokit is recognised and renowned as a Centre of Excellence with
consolidated experience worldwide in research, development and manufacturing
of assays and biomaterial solutions for IVD use.
The licence agreement follows an extensive evaluation by Biokit of certain
Affimer(®) reagents to detect a key analyte. Under the terms of the
agreement, Biokit has the right to develop, manufacture and commercialise
through original equipment manufacturer (OEM) partners a diagnostic
immunoassay for this analyte. Avacta will receive royalties on future sales of
any products brought to market following completion of product development and
regulatory approvals. Financial details of the agreement were not disclosed.
Animal Health Division
Avacta's Animal Health division is a UK-based laboratory, research and
development business focused on delivering evidence-based animal health
solutions, centred on the work-up and management of allergic disease. The
business works in partnership with veterinary professionals and allergy
experts to offer unrivalled service and technical support to its customers,
with a tailored and personal approach. Its customers include veterinary
professionals, laboratories, large commercial organisations, SMEs and academic
groups.
Avacta Animal Health remains the only UK laboratory with end-to-end test
control, with years of dedication to research and development that underpins
its constant drive to make a real-life difference to animal health.
As the change within the veterinary industry continues at a rapid pace in
practice, for suppliers and for pet owners, Avacta Animal Health's commitment
to innovation within the field of allergy remains its core focus and its key
to success. The new Avacta Allergy+ portfolio was launched in March 2021 and
now offers veterinary practices a range of testing options with enhanced
performance. Avacta Animal Health continues to support vets in their
interpretation of results and supply tailor-made allergen-specific
immunotherapy ('ASIT') to aid with the long-term management of allergic skin
disease for veterinary practices in the UK.
Avacta Animal Health's export reach and international customer base continues
to grow, alongside dedicated provision of tailored and trusted support to
veterinary professionals across the UK. This is in addition to providing
UK-specific testing services and therapy options via our own authorised
laboratories.
The Division's in-house team of development scientists are highly regarded in
the field of dermatology and work alongside world-leading dermatologists to
develop, manufacture and run our own tests, allowing them the aforementioned
end-to-end control. The Division also has a number of qualified vets and vet
nurses, who maintain regular communication to gain insight from veterinary
professionals and experts in the field, allowing them to analyse and review
what is clinically relevant on a regular basis.
Sale to Vimian Group AB
Post-period end in March 2022, the Group announced the sale of the Animal
Health Division to Nextmune Holdings BV, which is part of Vimian Group AB's
Specialty Pharma division.
The Avacta Animal Health team, which has been part of the Avacta family since
2009, will be transferring across to become part of the larger Nextmune UK
team. They will provide a UK-based laboratory for veterinary allergy
diagnostics and a full-service offering covering all veterinary dermatology
needs, enabling the larger group to accelerate sales and improve customer
experience in the UK.
Financial Review
Revenue
Reported Group revenues for the year ended 31 December 2021 increased to
£2.94 million compared to the year ended 31 December 2020 ('2020'): £2.14
million.
Revenues for the Diagnostics Division were £0.78 million (2020: £0.52
million), with the increase coming from a licensing agreement with Astrea
Bioseparations together with a smaller number of custom Affimer(®) reagent
projects and a small amount of revenue from the sale of the AffiDx(®)
SARS-CoV-2 antigen lateral flow tests.
Revenues for the Therapeutics Division were £2.16 million (2020: £1.63
million), which reflects additional milestone payments from the LG Chem
collaboration and a licensing agreement with POINT Biopharma, together with
further revenues from funded FTE development projects with LG Chem and
AffyXell.
Discontinued operations
Post-period end the Animal Health Division was sold to Vimian Group AB and the
results for the current and prior year have been disclosed in the Consolidated
Statement of Profit or Loss as Discontinued Operations. Revenues were £1.60
million (2020: £1.49 million), with the revenues increasing from growth in
export sales and contracted clinical research work. The Division made a small
operating profit of £0.06 million compared to an operating loss of £2.49
million in the prior year. The Division has been presented separately within
the Consolidated Statement of Financial Position as assets held for sale of
£1.28 million and liabilities of £0.35 million. An up-front payment of £0.9
million was received with deferred contingent consideration of up to £1.4
million dependent on the combined performance of the consolidated business.
There were associated costs to sell of £0.2 million. The fair value less
costs to sell of the disposal therefore exceed the carrying amount of £0.93
million.
Research and amortisation of development costs
During the year, the Group expensed through the income statement £13.48
million (2020: £8.89 million) research costs relating to the in-house
Affimer(®) and pre|CISION(™) therapeutic programmes, which are expensed
given their pre-clinical stage of development, in addition to research costs
on Affimer(®) diagnostics products that have not yet completed product
development and obtained regulatory approval to become commercial products.
In addition, development costs capitalised in prior periods from the
development of the Affimer(®) reagents and diagnostics platform have been
amortised, resulting in a charge of £0.82 million (2020: £0.82 million).
Manufacturing costs of £2.14 million (2020: £nil) in relation to the
manufacture of pre-production and production AffiDx(®) SARS-CoV-2 antigen
lateral flow tests have been expensed in the period given the decision that
was made to pause sales of the AffiDx(®) SARS-CoV-2 antigen lateral flow
tests, given the reduced sensitivity of the tests against the Omicron variant
compared to previous SARS-CoV-2 variants.
Selling, general and administrative expenses
Administrative expenses have increased during the year to £8.14 million
(2020: £5.93 million) as the business scaled up the operations within both
the Diagnostics Division as it increased its product development capabilities
and became an ISO 13485 accredited, fully integrated in vitro diagnostic
('IVD') products business. The Therapeutics Division's costs also increased as
additional resource was increased to support the infrastructure required and
transition into a clinical stage business.
Share-based payment charges
The non-cash charge for the year increased to £5.06 million (2020: £3.07
million) as additional share option awards were granted to key-hires within
the Therapeutics Division.
Net finance costs
The net finance costs in the Group arise from the IFRS 16 accounting for
leases, which resulted in an interest charge of £0.12 million (2020: £0.05
million) being recognised.
Losses before taxation
Losses before taxation from continuing operations for the year were £29.19
million (2020: £18.86 million).
Taxation
The Group claims each year for research and development tax credits and, since
it is loss-making, elects to surrender these tax credits for a cash rebate.
The amount is included within the taxation line of the consolidated statement
of profit and loss in respect of amounts received and receivable for the
surrender of research and development expenditure amounting to £2.82 million
(2020: £2.46 million). The Group has not recognised any tax assets in respect
of trading losses arising in the current financial year or accumulated losses
in previous financial years.
Loss for the period
The reported loss for the period was £26.31 million (2020: £18.89 million).
The loss per ordinary share increased to 10.55 pence (2020: 8.37 pence) based
on an average number of shares in issue during the period of 253,555,925
(2020: 229,673,873).
Cash flow
The Group reported cash and short-term deposit balances of £26.19 million at
31 December 2021 (2020: £47.91 million).
Operating cash outflows from operations amounted to £22.66 million (2020:
£13.35 million). Within the net operating cash outflows there were cash
receipts in respect of research and development tax credits amounting to
£2.29 million (2020: £2.75 million), which represented the tax refund for
the prior year ended 31 December 2020 compared to the tax refund for the
17-month financial period ended 31 December 2019.
During the year, capital expenditure was £1.16 million (2020: £1.28 million)
as facility expansions at both Wetherby and Cambridge sites were completed.
The Group did not complete any fund-raises during the year (2020: £53.75
million before costs) but there were proceeds from the exercise of share
options by employees amounting to £0.52 million (2020: £1.11 million).
Financial position
Net assets as at 31 December 2021 were £41.22 million (2020: £61.93 million)
of which short-term deposits, cash and cash equivalents amounted to £26.19
million (2020: £47.91 million).
Intangible assets reduced to £7.92 million (2020: £9.42 million) due to the
amortisation charge of £0.82 million.
The IFRS 16 Leases presentation results in the recognition of a 'right-of-use'
asset amounting to £1.73 million (2020: £2.10 million) in relation to the
Group's three leasehold properties together with a corresponding lease
liability of £1.70 million (2020: £2.04 million).
Dividends
No dividends have been proposed for the year ended 31 December 2021 (2020:
£nil).
Key performance indicators
At this stage of the Group's development, the non-financial key performance
indicators focus around two areas:
· the progression of the Affimer(®) and pre|CISION(™)
technologies into clinical trials within the Therapeutics Division; and
· the development of Affimer(®) diagnostic products and commercial
licensing agreements for Affimer(®) reagents within the Diagnostics Division.
The financial key performance indicators focus around three areas:
· Group revenues
· Research and development expenditure, which is either expensed
through the Income Statement or capitalised
· Cash and short-term deposit balances
Cautionary statement
The preliminary statements contain forward-looking statements that are subject
to risk factors associated with, amongst other things, economic and business
circumstances occurring from time to time within the markets in which the
Group operates. The expectations expressed within these statements are
believed to be reasonable but could be affected by a wide variety of variables
outside of the Group's control. These variables could cause the results to
differ materially from current expectations. The forward-looking statements
reflect the knowledge and information available at the time of preparation.
Alastair Smith Tony Gardiner
Chief Executive Officer Chief Financial Officer
6 April 2022 6 April 2022
Consolidated Statement of Profit or Loss and Other Comprehensive Income for
the year ended 31 December 2021
2021 2020
£000 Note
Continuing operations
Revenue 4 2,941 2,144
Cost of sales (924) (962)
------------- -------------
Gross profit 2,017 1,182
Research costs (13,480) (8,891)
Manufacturing costs (2,143) -
Share of loss of associate - (217)
Amortisation of development costs (821) (824)
Selling, general and administrative expenses (8,136) (5,933)
Depreciation expense (1,462) (1,063)
Share-based payment charge (5,058) (3,070)
------------- -------------
Operating loss (29,083) (18,814)
Finance income 17 43
Finance costs (128) (89)
------------- -------------
Net finance costs (111) (46)
------------- -------------
Loss before tax (29,194) (18,861)
Taxation 2,820 2,464
------------- -------------
Loss from continuing operations (26,374) (16,397)
------------- -------------
Discontinued operation
Profit / (loss) from discontinued operation 6 58 (2,494)
------------ ------------
Loss for the period (26,316) (18,891)
Foreign operations - foreign currency translation differences 4 -
----------- --------------
Other comprehensive income 4 -
------------ ---------------
Total comprehensive loss for the period (26,312) (18,891)
----------- ----------
Loss per share:
Basic and diluted 5 (10.55p) (8.37p)
------------- -------------
Loss per share - continuing operations:
Basic and diluted 5 (10.57p) (7.27p)
------------- -------------
Consolidated Statement of Financial Position as at 31 December 2021
2021 2020
Note £000 £000
Assets
Property, plant and equipment 2,612 2,696
Right-of-use assets 1,729 2,095
Intangible assets 7,925 9,417
------------- -------------
Non-current assets 12,266 14,208
------------- -------------
Inventories 189 248
Trade and other receivables 4,327 2,895
Income tax receivable 2,750 2,200
Short-term deposits - 20,017
Cash and cash equivalents 26,191 27,894
------------- -------------
33,457 53,254
Assets held for sale 6 1,279 -
------------- -------------
Current assets 34,736 53,254
------------- -------------
Total assets 47,002 67,462
------------- -------------
Liabilities
Lease liabilities (1,412) (1,752)
------------- -------------
Non-current liabilities (1,412) (1,752)
------------- -------------
Trade and other payables (3,731) (3,491)
Lease liabilities (291) (290)
------------- -------------
(4,022) (3,781)
Liabilities directly associated with the assets held for sale 6 (346) -
--------- -------------
Current liabilities (4,368) (3,781)
------------- -------------
Total liabilities (5,780) (5,533)
------------- -------------
Net assets 41,222 61,929
------------- -------------
Equity
Share capital 25,472 25,343
Share premium 54,530 54,137
Reserves (4,687) (4,690)
Retained earnings (34,093) (12,861)
------------- -------------
Total equity 41,222 61,929
------------- -------------
Consolidated Statement of Changes in Equity for the year ended 31 December
2021
Share capital Share premium Other reserve Translation reserve Reserve for own shares Retained earnings Total equity
£000 £000 £000 £000 £000 £000 £000
--------- ------------ ---------- ------------- ------------ ------------- -----------
Balance at 1 January 2020 17,671 9,877 (1,729) - (2,932) 2,922 25,809
Total comprehensive loss for the period - - - - - (18,891) (18,891)
Transactions with owners of the Company:
Issue of shares 7,195 43,596 - - - - 50,791
Exercise of share options 467 645 - - - - 1,112
Own shares acquired 10 19 - - (29) - -
Equity-settled share-based payment - - - - - 3,108 3,108
--------- ------------ ---------- ------------- ------------ ------------- -----------
7,672 44,260 - - (29) 3,108 55,011
--------- ------------ ---------- ------------- ------------ ------------- -----------
Balance at 31 December 2020 25,343 54,137 (1,729) - (2,961) (12,861) 61,929
--------- ------------ ---------- ------------- ------------ ------------- -----------
Loss for the period - - - - - (26,316) (26,316)
Other comprehensive loss for the period - - - 4 - - 4
--------- ------------ ---------- ------------ ------------ ------------ -----------
Total comprehensive loss for the period - - - 4 - (26,316) (26,312)
Transactions with owners of the Company:
Exercise of share options 129 393 - - - - 522
Equity-settled share-based payment - - - - - 5,083 5,083
--------- ------------ ---------- ------------- ------------ ------------- -----------
130 392 - - - 5,083 5,605
--------- ------------ ---------- ------------- ------------ ------------- -----------
Balance at 31 December 2021 25,472 54,530 (1,729) 4 (2,961) (34,094) (41,222)
--------- ------------ ---------- ------------- ------------ ------------- -----------
Consolidated Statement of Cash Flows for the Year Ended 31 December 2021
2021 2020
Cash flows from operating activities £000 £000
Loss for the period (26,316) (18,891)
Adjustments for:
Amortisation 865 1,029
Impairment losses - 1,741
Depreciation 1,511 1,125
Net loss on disposal of property, plant and equipment 30 6
Share of loss of associate - 217
Equity-settled share-based payment transactions 5,083 3,108
Net finance costs 121 50
Taxation (2,820) (2,452)
------------- -------------
Operating cash outflow before changes in working capital (21,526) (14,067)
Decrease/(increase) in inventories 13 (91)
Increase in trade and other receivables (1,599) (814)
Increase in trade and other payables 456 1,627
------------- -------------
Operating cash outflow from operations (22,656) (13,345)
Interest received 17 42
Interest elements of lease payments (139) (93)
Tax credit received 2,291 2,754
Withholding tax paid (19) -
------------- -------------
Net cash used in operating activities (20,506) (10,642)
------------- -------------
Cash flows from investing activities
Purchase of plant and equipment (1,162) (1,279)
Purchase of intangible assets (152) (221)
Investment in associate - (217)
Development expenditure capitalised - (165)
Decrease/(increase) in balances on short-term deposit 20,017 (20,017)
------------- -------------
Net cash generated from / (used in) investing activities 18,703 (21,899)
------------- -------------
Cash flows from financing activities
Proceeds from issue of share capital - 53,750
Transaction costs related to issue of share capital - (2,960)
Proceeds from exercise of share options 522 1,112
Principal elements of lease payments (290) (255)
------------- -------------
Net cash from financing activities 232 51,647
------------- -------------
Net increase/(decrease) in cash and cash equivalents (1,571) 19,106
Cash and cash equivalents at 1 January 2021 27,894 8,788
Effects of movements in exchange rates on cash held 4 -
------------- -------------
26,327 27,894
Cash and cash equivalents forming part of assets held for sale (136) -
------------- -------------
Cash and cash equivalents at 31 December 2021 26,191 27,894
------------- ------------
Notes to the Preliminary Results to 31 December 2021
1 General Information
These preliminary results have been prepared on the basis of the accounting
policies which are set out in Avacta Group plc's annual report and financial
statements for the year ended 31 December 2021.
The consolidated financial statements of the Group for the year ended 31
December 2021 were prepared in accordance with UK adopted international
accounting standards.
The financial information set out above for the year ended 31 December 2021
and the year ended 31 December 2020 does not constitute the Company's
statutory accounts for those years.
Statutory accounts for the year ended 31 December 2020 have been delivered to
the Registrar of Companies and distributed to shareholders. The statutory
accounts for the year ended 31 December 2021 will be delivered to the
Registrar of Companies on or before 30 June 2022.
The auditors' reports on the accounts for the year ended 31 December 2021 and
the year ended 31 December 2020 were unqualified, did not draw attention to
any matters by way of emphasis, and did not contain a statement under 498(2)
or 498(3) of the Companies Act 2006.
2 Basis of preparation
The Group's consolidated financial statements have been prepared in accordance
with UK adopted international accounting standards.
The financial statements have been prepared on the historical cost basis.
Functional and presentation currency
These consolidated financial statements are presented in pound sterling, which
is the Company's functional currency. All amounts have been rounded to the
nearest thousand, unless otherwise indicated.
Going concern
These financial statements have been prepared on a going concern basis,
notwithstanding a loss of £26.31 million and operating cash outflows of
£22.66 million for the year ended 31 December 2021. The Directors consider
this to be appropriate for the following reasons.
The Directors have prepared detailed cash flow forecasts that extend at least
twelve months from the date of approval of the financial statements. The
forecasts take into account the Directors' views of current and future
economic conditions that are expected to prevail over the period. These
forecasts include assumptions regarding the status of therapeutic development
collaborations, the AVA6000 pro-doxorubicin Phase I clinical trials,
diagnostic product development projects and sales pipeline, future revenues
and costs together with various scenarios which reflect growth plans,
opportunities, risks and mitigating actions. The forecasts also include
assumptions regarding the timing and quantum of investment in the therapeutic
and diagnostic research and development programmes.
Whilst there are inherent uncertainties regarding the cash flows associated
with the development of both the therapeutic and diagnostic platforms,
together with the timing and delivery of diagnostic product development
projects and future therapeutic collaboration transactions, the Directors are
satisfied that there is sufficient discretion and control as to the timing and
quantum of cash outflows to ensure that the Company and Group are able to meet
their liabilities as they fall due for at least twelve months from the date of
approval of the financial statements. The key factors considered in reaching
this conclusion are summarised below:
· As at 31 December 2021, the Group held cash and cash equivalents
of £26.19 million (2020: £47.91 million, including short-term deposits).
· The Group has a tax refund in relation to R&D tax credits due
in the second half of 2022 amounting to £2.75 million (a comparable tax
refund of £2.3 million was received in October 2021 relating to the year to
31 December 2020).
· Post period end the Group disposed of the Animal Health Division
which generated an up-front payment of £0.86 million and a future earnout
which could reach £1.43 million.
· The Group does not have external borrowings or any covenants
based on financial performance.
· The Directors have considered the position of the individual
trading companies in the Group to ensure that these companies are also in a
position to continue to meet their obligations as they fall due.
The Directors continue to explore additional sources of income and finance
available to the Group to continue the development of the therapeutic and
diagnostic platforms beyond 2023. The sources of income could come through
additional therapeutic collaborations, similar to the LG Chem and Daewoong
collaborations, which may include up-front technology access fees and
significant early-stage development income, or through additional
equity-fundraises.
Based on these indications, the Directors are confident that the Company will
have sufficient funds to continue to meet its liabilities as they fall due for
at least twelve months from the date of approval of the financial statements
and therefore have prepared the financial statements on a going concern basis.
Use of judgements and estimates
In preparing these consolidated financial statements, management has made
judgements and estimates that affect the application of the Group's accounting
policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to estimates are recognised prospectively.
Information about judgements and estimates made by management that have the
most significant effects on the amounts recognised in the financial statements
is given below.
The Directors consider that the key judgements made in preparation of the
financial statements are:
Going concern - The judgement of whether or not the accounts should be
prepared on a going concern basis has been disclosed above.
Revenue recognition - Judgements arise from the application of IFRS 15 to the
Group's revenue streams, as disclosed in Note 1C of the financial statements
for the year ended 31 December 2020.
Share-based payments - Judgements arise from the choice of inputs to the share
option valuation models underlying the share-based payment charge, as
disclosed in Note 5 of the financial statements for the year ended 31 December
2020.
The Directors consider that the assumptions and estimation uncertainties at 31
December 2021 that have a significant risk of resulting in a material
adjustment to the carrying amounts and liabilities in the next financial year
are:
Impairment - Impairment tests have been performed on the carrying amounts of
the Group's cash generating units. Key assumptions such as the amount and
timing of future cash flow growth, and the achievement of future development
milestones, underlie the recoverable amounts used in these impairment tests.
Further information on the key assumptions used is disclosed in Note 10 of the
financial statements for the year ended 31 December 2020.
Significant accounting policies
The Group has consistently applied the accounting policies to all periods
presented in these preliminary statements. Whilst there are a number of new
standards effective from periods beginning after 1 January 2021, the Group has
not early adopted the new or amended standards and does not expect them to
have a significant impact on the Group's consolidated financial statements.
3 Segment reporting
Operating segments
In the view of the Board of Directors, the Group has three (2020: three)
distinct reportable segments, which are Diagnostics, Therapeutics and Animal
Health (2020: Diagnostics, Therapeutics and Animal Health), and segment
reporting has been presented on this basis. The Directors recognise that the
operations of the Group are dynamic and therefore this position will be
monitored as the Group develops.
The principal activities of each reportable segment are as follows:
Diagnostics: development of custom Affimer(®) proteins for incorporation into
customer products and in-house diagnostic assays.
Therapeutics: development of novel cancer immunotherapies combining
proprietary platforms.
Animal Health: provision of tools and contract services to assist diagnosis of
conditions in animals to enable faster treatment for veterinarians. The Animal
Health operating segment was sold in March 2022, and has been classified as a
discontinued operation from the start of the prior year.
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 82% (2020: 97%) of total revenue. The revenue analysis below, for
continuing operations, is based on the country of registration of the
customer:
2021 2020
£'000 £'000
UK 540 75
Rest of Europe 111 205
North America 815 402
South Korea 1,401 1,460
Rest of Asia 74 1
2,941 2,143
During the year, transactions with three external customers, two in the
Therapeutics segment and one in the Diagnostics segment, amounted individually
to 10% or more of the Group's revenues from continuing operations, being
£966,000, £736,000 and £523,000 respectively. In the year 31 December 2020,
transactions with two external customers in the Therapeutics segment amounted
to 10% or more of the Group's revenues from continuing operations, being
£768,000 and £694,000 respectively.
Operating segment analysis 2021
Diagnostics Therapeutics Animal Health (discontinued) Total
£000 £000 £000 £000
Revenue 779 2,162 1,605 4,546
Cost of goods sold (223) (700) (506) (1,429)
------------- ------------- ------------- -------------
Gross profit 555 1,462 1,098 3,115
Research costs (3,665) (9,815) (39) (13,519)
Manufacturing (2,143) - - (2,143)
Amortisation of development costs (821) - - (821)
Selling, general and administrative expenses (2,893) (1,899) (916) (5,708)
Depreciation expense (505) (950) (50) (1,505)
Share-based payment expense (984) (2,981) (25) (3,990)
------------- ------------- ------------- -------------
Segment operating loss (10,456) (14,183) 68 (24,571)
Central overheads (4,443)
------------- ------------- ------------- -------------
Operating loss (29,014)
Finance income 17
Finance expense (139)
-------------
Loss before taxation (29,136)
Taxation 2,820
-------------
Amount attributable to equity (26,316)
holders of the Company
-------------
Operating profit/loss is the measure of profit or loss regularly reviewed by
the Board. Central overheads, which relate to operations of the Group
functions, are not allocated to the segments.
The information reported to the Board does not include balance sheet
information at the segment level. The key segmental balance sheet information
is considered to be the segment's non-current assets.
All material segmental non-current assets are located in the UK.
Operating segment analysis 2020
Diagnostics Therapeutics Animal Health (discontinued) Total
£000 £000 £000 £000
Revenue 519 1,625 1,492 3,636
Cost of goods sold (321) (641) (493) (1,455)
------------- ------------- ------------- -----------
Gross profit 198 984 999 2,181
Research costs (2,458) (6,432) (71) (8,961)
Share of loss of associate - (217) - (217)
Amortisation of development costs (824) - (183) (1,007)
Selling, general and administrative expenses (2,525) (1,702) (966) (5,193)
Impairment charge - - (1,741) (1,741)
Depreciation expense (357) (701) (62) (1,120)
Share-based payment expense (636) (893) (38) (1,567)
------------- ------------- ------------- -----------
Segment operating loss (6,602) (8,961) (2,062) (17,625)
Central overheads (3,668)
------------- ------------- ------------- -----------
Operating loss (21,293)
Finance income 43
Finance expense (93)
-----------
Loss before taxation (21,343)
Taxation 2,452
-----------
Amount attributable to equity (18,891)
holders of the Company
-----------
4. Revenue
The Group's revenue is all derived from contracts with customers.
In the following table, revenue is disaggregated by both its nature and the
timing of revenue recognition. The table also includes a reconciliation of the
disaggregated revenue with the Group's reportable segments (see Note 3).
Year ended 31 December 2021
Diagnostics Therapeutics Continuing operations Animal Health (discontinued) Total
£000 £000 £000 £000
Nature of revenue
Sale of goods 19 - 19 864 883
Provision of services 260 1,058 1,318 740 2,058
Licence-related income 500 1,104 1,604 - 1,604
779 2,162 2,941 1,604 4,545
Timing of revenue recognition
Products or services transferred at a point in time 520 1,105 1,625 1,540 3,165
Products or services transferred over time 259 1,057 1,316 64 1,380
779 2,162 2,941 1,604 4,545
Year ended 31 December 2020
Diagnostics Therapeutics Continuing operations Animal Health (discontinued) Total
£000 £000 £000
Nature of revenue
Sale of goods - - - 846 846
Provision of services 519 1,436 1,955 646 2,601
Licence-related income - 189 189 - 189
519 1,625 2,144 1,492 3,636
Timing of revenue recognition
Products or services transferred at a point in time 8 189 197 1,459 1,656
Products or services transferred over time 511 1,436 1,947 33 1,980
519 1,625 2,144 1,492 3,636
5. Earnings per ordinary share
The calculation of earnings per ordinary share is based on the profit or loss
for the period and the weighted average number of equity voting shares in
issue excluding own shares held jointly by the Avacta Employees' Share Trust
and certain employees and the shares held within the Avacta Share Incentive
Plan ('SIP').
At 31 December 2021, 25,545,539 options (2020: 22,904,846) have been excluded
from the diluted weighted-average number of ordinary shares calculation
because, due to the loss for the period, their effect would have been
anti-dilutive.
2021 2020
Continuing operations Discontinued operation Total Continuing operations Discontinued operation Total
Loss (£000) (26,374) 58 (26,315) (16,397) (2,494) (18,891)
--------------- --------------- ------------ -------------- -------------- ---------------
Weighted average number of shares (number) 249,478,070 225,578,759
--------------- -------------- ------------ -------------- -------------- ---------------
Basic and diluted loss per ordinary share (pence) (10.57p) 0.02p (10.55p) (7.27p) (1.11p) (8.37p)
--------------- -------------- ------------ -------------- -------------- ----------------
6 Discontinued operation
In March 2022, the Group sold its entire Animal Health segment (see Note 2).
An up-front payment of £860,000 was received with deferred contingent
consideration of up to £1,430,000 dependent on the combined performance of
the consolidated business. There were associated costs to sell of £190,000.
Management committed to a plan to sell the segment in late 2021 following a
strategic decision to place focus on the Group's key competencies - the
development of diagnostic products and cancer therapies. At the reporting
date, an active programme to locate a buyer had been initiated, the segment
was being actively marketed for sale at a price that was reasonable to its
fair value and a sale was expected to qualify for recognition as a completed
sale within one year from the date of classification. As a result, the Animal
Health segment has been presented as a disposal group held for sale.
No impairment loss has been recognised on presentation of the Animal Health
segment as held for sale as the fair value less costs to sell exceed the
carrying amount of the disposal group of £805,000. The non-recurring fair
value measurement for the disposal group has been based on the post year-end
selling price of the segment.
The Animal Health segment was not previously classified as held for sale or as
a discontinued operation. The comparative consolidated statement of profit or
loss and OCI has been re-presented to show the discontinued operation
separately from continuing operations. Note 5 discloses the amount per share
for the discontinued operation.
a) Results of discontinued operation
2021 2020
£000
Revenue 1,604 1,492
Cost of sales (506) (493)
-------------- -----------
Gross profit 1,098 999
Research costs (39) (70)
Amortisation of development costs - (183)
Impairment of intangible fixed assets - (1,741)
Selling, general and administrative expenses (915) (1,382)
Depreciation expense (50) (62)
Share-based payment charge (25) (38)
------------- -----------
Operating loss 69 (2,478)
Finance costs (11) (4)
--------------- -------------
Loss before tax 58 (2,482)
Taxation - (12)
--------------- -------------
Loss for the period 58 (2,494)
--------------- --------------
b) Effect of the disposal on the financial position of the Group
2021
£000
Intangible assets (779)
Right-of-use assets (129)
Property, plant and equipment (22)
Inventories (46)
Trade and other receivables (168)
Cash and cash equivalents (136)
Trade and other payables 217
Lease liabilities 129
----------------
Net assets and liabilities (933)
c) Cash flows from discontinued operation
2021 2020
£000 £000
Net cash from operating activities 225 134
Net cash used in investing activities (19) (9)
Net cash used in financing activities (30) (39)
---------------- ----------------
176 86
- Ends -
1 https://www.expertmarketresearch.com/reports/proteasome-inhibitors-market
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