Shaping the
future of
medicine
2020 Report
& Accounts
Contents
2 Highlights
8
12
15
16
18
Affimer®, pre|CISIONTM and TMAC® Technologies
Investment Proposition
Strategic Report
Chairman and Chief Executive Officer’s Joint Statement
Chief Executive’s Q&A
20 Operational Review
20
Business Overview
22 Diagnostics Division
30 Case Study: Dx – AffiDX® SARS-CoV-2 Antigen Lateral Flow Test
34 Therapeutics Division
40 Case Study: AVA6000 Clinical Trial
42 Drug Development Collaborations
44 Animal Health Division
50
54
Financial Review
Principal Risks and Uncertainties
57 Governance
58 Board of Directors
60 Senior Leadership Team
64 Directors’ Report
67 Corporate Governance Report
72 Audit Committee Report
74 Remuneration Committee Report
79 Statement of Directors’ Responsibilities
81
Independent Auditor’s Report to the Members of Avacta Group plc
89
Financial Statements
90 Consolidated Statement of Profit or Loss
91 Consolidated Statement of Financial Position
92
93
94
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
121 Company Balance Sheet
122
Company Statement of Changes in Equity
122
Notes to the Company Balance Sheet
128 Shareholder information
128 Notice of Annual General Meeting
130 Notice of Meeting Notes
132 Advisers
1
Avacta Report and Accounts 2020 Strengthened and
expanded diagnostics
management team with
the appointment of a
Product Manager, Head of
Product Development and
Operations Director.
Announced launch of an
ELISA laboratory test for
the SARS-CoV-2 spike protein
to support global research
efforts into the coronavirus
that causes COVID-19.
Highlights 2020 to 2021
Highlights 2020 and 2021
Initiated clinical
evaluation of BAMS™
SARS-CoV-2 antigen
test at a UK NHS
hospital site.
Operating
highlights
Diagnostics
Successfully passed first audit
by the Group’s Notified Body
(BSI Group) of the Company’s
Quality Management System
as first step in establishing
ISO13485 accreditation,
a critical quality assurance
system for a developer and
legal manufacturer of diagnostic
products and medical devices.
The final audit will take place in
April 2021.
Rapid generation of a range
of Affimer® reagents that bind
to the SARS-CoV-2 coronavirus
spike antigen for diagnostic
testing applications.
Collaboration with several
partners to develop a rapid test
for the COVID-19 infection for
mass population screening.
2
Entered a collaboration with
the Liverpool School of
Tropical Medicine (‘LSTM’)
to provide analytical and
clinical validation of the rapid
coronavirus antigen test.
Collaboration with Adeptrix
(Beverly, MA, USA) to develop a
high throughput Affimer-based
SARS-CoV-2 antigen bead-
assisted mass spectrometry
test (‘BAMSTM’ test) to be used
on hospitals’ existing installed
base of mass spectrometers to
diagnose COVID-19 infection.
Major licensing agreement
with Astrea Bioseparations
Limited (‘Astrea’) for the use of
the Affimer® platform in affinity
purification applications.
Operating
highlights
Diagnostics
Appointed BBI Solutions,
part of BBI Group (‘BBI’),
and Abingdon Health to
manufacture the saliva-
based rapid SARS-CoV-2
antigen test.
Exclusive distribution agreement
announced with Medusa19 Limited
(‘Medusa19’) for direct-to-consumer
sales of a rapid antigen self-test
for Covid-19.
3
Avacta Report and Accounts 2020 Highlights 2020 to 2021
On 28 January 2021,
we entered a collaboration
agreement with Bruker
Corporation to evaluate the
clinical utility and commercial
potential of the BAMS™
SARS-CoV-2 Antigen Test.
Post-period
highlights
Diagnostics
On 9 March 2021 we
announced a royalty bearing
licence agreement with
Biokit, a Werfen Company, to
develop and commercialise
an Affimer® based in vitro
diagnostic test.
4
On 8 February 2021, we established a commercial partnership
with Mologic following several months of collaborative work to
provide Avacta with a faster route to market for the lateral flow
rapid antigen test by CE marking it for professional use under
Mologic’s existing ISO13485 quality system. The CE mark will then
be transferred to Avacta after it receives ISO13485 accreditation,
which is expected in April 2021.
The collaboration with Mologic also provides
initial manufacturing capacity with the
benefit of a short set-up time for the lateral
flow test with Global Access Diagnostics
(‘GAD’), in addition to the agreements
with BBI Group, Abingdon Health and
others, that will provide manufacturing
capabilities that can be scaled to several
millions of tests per month.
AffiDX® SARS-CoV-2 Antigen Lateral Flow Test
shows excellent analytical sensitivity of 50 pg/ml of S1
spike protein with a read time of 20 minutes. As far as the
Group is aware, and on the basis of laboratory testing to
date, this is currently the most sensitive S1 spike lateral
flow test available.
On 16 February 2021, we announced the initial clinical
evaluation of this test using anterior (front) nasal swab
samples (30 positive and 26 negative samples) which
demonstrated a sensitivity of 96.7% for samples with an
infectious viral load (PCR Ct value < 26) and a specificity
of 100%. Subsequently, on 20 April we announced the
completion of the clinical validation of the AffiDX® SARS-
CoV-2 Antigen Lateral Flow Test with excellent performance
data (clinical sensitivity of 98.0% for samples with Ct values
up to 31 and clinical specificity of 99.0%).
Increased R&D investment
across Diagnostics and
Therapeutics programmes,
leading to reported loss of
£18.9 million
(17-month period to
31 December 2019: £15.6 million)
Financial
& Corporate
Fundraisings
completed during
the period raising
£53.8 million
to expand Diagnostics
and Therapeutics
programmes.
Cash and short-term
deposit balances at 31
December 2020 of
£47.9 million
(31 December 2019: £8.8 million)
Revenues of
£3.6 million
for year ended
31 December 2020
(17-month period to
31 December 2019:
£5.5 million)
Loss per ordinary share
8.4 pence
(17-month period to
31 December 2019: 13.0p)
Operating loss of
£21.3 million for year
ended 31 December 2020
(17-month period to
31 December 2019: £18.0 million)
Paul Fry appointed as
Non-executive Director.
Paul is Chief Financial Officer
of Vectura Group plc, an
industry-leading inhaled drug
delivery specialist listed on
the FTSE Main Market.
5
Avacta Report and Accounts 2020 Highlights 2020 to 2021
Demonstrated initial
proof-of-concept for its
proprietary new class of drug
conjugate, ‘TMAC®’, in a pre-
clinical animal model of cancer.
Operating
highlights
Therapeutics
Submitted the Clinical Trial
Authorisation (CTA) to the UK
Medicines and Healthcare products
Regulatory Agency (MHRA) for
a phase I dose-escalation and
expansion study of AVA6000
pro-doxorubicin, Avacta’s first
pre|CISION™ FAP-activated prodrug.
pre|CISION™
progress
On schedule to select
the next pre|CISION™
prodrug chemotherapy
clinical development
candidate from the pipeline
by the end of 2021.
Expanded the
existing multi-
target collaboration
and development
agreement with LG
Chem Life Sciences
(‘LG Chem’) to include
new programmes
incorporating Avacta’s
Affimer XT™ serum
half-life extension
system. Deal worth up
to $98.5 million plus
royalties.
Significant progress
with in-house Affimer®
bispecific programmes
towards selection of a
clinical development
candidate by the end
of 2021. Two new
programmes initiated,
building on the AVA004
PD-L1 antagonist
programme: AVA027, a
PD-L1/TGfβ receptor trap
combination, and AVA028,
a PD-L1/IL2 bispecific.
Appointment of Neil Bell as
Chief Development Officer
responsible for the late stage
pre-clinical and early clinical
development of Avacta’s
pipeline of pre|CISION™
prodrugs and Affimer®
immunotherapies.
Established a partnered programme
(‘AffyXell Therapeutics’) in South Korea
with Daewoong Pharmaceutical Co. Ltd.,
to develop the next generation of cell and gene therapies,
incorporating Affimer® proteins to enhance the immune-
modulatory effects. Programme subsequently expanded
to provide access to the Affimer® platform for neutralising
Affimer® therapies for the treatment of seriously ill patients
with COVID-19 and to also prepare to rapidly develop similar
therapies for future global pandemics.
6
On 7 January 2021,
we announced the
licensing agreement
with Point Biopharma
Inc. to provide access
to Avacta’s pre|CISION™
technology for the
development of
tumour-activated
radiopharmaceuticals.
Post-period
highlights
Therapeutics
On 1 February 2021, AffyXell
Therapeutics (‘AffyXell’), the
partnered programme with
Daewoong Pharmaceuticals
(‘Daewoong’), closed a series
A venture capital investment of
$7.3 million to further develop
its pipeline of next generation
cell and gene therapies.
Key appointments of Head of
Chemistry, Manufacturing and
Controls (CMC), Head of Clinical
Operations and Head of Translational
Sciences will together manage an
extensive outsourced network of
drug development service providers.
On 18 February 2021, the
Medicines and Healthcare
products Regulatory Agency
(‘MHRA’) approved the
CTA for AVA6000 pro-
doxorubicin for a phase I,
first-in-human, open label,
dose-escalation and expansion
study in patients with locally
advanced or metastatic
selected solid tumours.
The Group anticipates
dosing first patients in
mid-2021 subject to
COVID-19 restrictions on
hospital resources with first
pharmacokinetics read-out
possible before the year end.
7
Avacta Report and Accounts 2020 Affimer® Technology
• many applications require the antibody to be
modified to carry a payload or signalling tag and
their large size and complex structure makes these
modifications more challenging.
In contrast, the small size and simple structure of
Affimer® molecules means that they are easy to
manufacture with simple, low-cost processes that
are reliable in their batch-to-batch consistency.
Their simplicity also means that modifying an Affimer®
molecule for a particular application is easily carried
out with simple biochemistry.
New Affimer® molecules are generated by screening
through a pre-existing large library of approximately
ten billion Affimer® molecules to identify those that
bind to the target of interest. This utilises an industry
standard in vitro process which does not use animals
and therefore it is quick, taking a matter of weeks,
and circumvents limitations arising from the need
for an immune response in an animal. This screening
process can also be finely controlled to maximise
the specificity and optimise other properties of the
Affimer® molecules that are pulled out of the library
for a particular application.
Affimer® molecules are ten times smaller than
antibodies and very stable, being resistant to extremes
of pH and temperature, which makes them better
suited to some applications where harsh conditions
are experienced or where their small size leads to
better sample penetration or a higher density of
binding sites on a surface. Their small size and the
ease with which they can be modified means that the
amount of time a therapeutic Affimer® molecule stays
in the bloodstream can be tailored to suit different
therapeutics regimes.
Despite the limitations outlined above, antibodies
have become the dominant technology in markets
worth in excess of $100 billion annually. Therefore,
the opportunity for an alternative such as Affimer®
technology is very large with the potential to
generate near-term revenue from diagnostics, as
well as potentially generating much higher rewards
from therapeutics but with associated greater
development risk.
Affimer® reagents are small proteins that
can be engineered to bind to a molecule of
interest, in the same way that an antibody
does, but with a number of competitive
advantages over antibodies.
Binding to a specific molecule so that it can be
detected enables the development of a diagnostic,
research assay, or to enrich or purify it from a
complex mixture. If the target is involved in a disease
pathway and binding by the Affimer® molecule
activates, alters or blocks its function, then there
is potential for the Affimer® molecule to provide
therapeutic benefit as a drug.
Antibodies are proteins that have evolved as part of
the immune system to bind to a target in vivo. Over
several decades this property of antibodies has been
harnessed to develop thousands of reagents for
laboratory assays and diagnostic tests, and one third
of all drugs in development are now antibodies. This
enormous success of antibodies is despite some
significant limitations. These limitations are that:
• antibodies are often not specific to the target and
cross-react with other targets causing uncertainty in
the results that are obtained or drug side-effects;
• antibodies are large proteins with complex
structures, including special internal bonds and
external chemical modifications that are required
for correct function, making many of them
challenging and costly to manufacture and resulting
in batch-to batch variability;
• antibodies are often generated by immunising
an animal and purifying the antibodies from the
animal’s blood, which means that the time required
to develop a new, high-quality antibody can be
many months and that the type of target to which
an antibody can be raised is limited to those that
are not toxic and cause an immune response; many
important and commercially valuable targets do not
fit these criteria;
• the large size of antibodies is a disadvantage in
some applications in which, for example, tissue
penetration is important or a high density on a
sensor surface is required; and
8
Platform Technologies
What is an Affimer®?
•
•
•
•
•
•
•
•
•
•
•
Based on a naturally-occurring human protein
(stefin A) and engineered to display two loops that
create an antigen binding surface.
Variable loop regions of 9 amino acids each are
randomised to create a very large (1010) libraries for
phage selections.
Technical Advantages
Smaller, simpler and more robust, soluble and
stable than antibodies.
High affinity Affimer® generated for new targets in
a matter of weeks, much quicker than antibodies.
Flexible formatting for multi-specifics, agonism,
drug conjugates.
High expression levels in a range of cells and tissues.
Fully human: lower immunogenicity risk.
Commercial Advantages
Proprietary and unencumbered IP.
Freedom to operate where there is antibody IPR.
Security of supply.
Cheaper to produce (E.coli)
Avacta Report and Accounts 2020
Variable loop regions
9
pre|CISIONTM Technology
Chemotherapies activated only in tumours
Avacta’s proprietary pre|CISION™ platform is
a targeted delivery mechanism incorporating
a substrate that is sensitive to cleavage by
fibroblast activation protein alpha (‘FAPα’),
which is highly upregulated in the tumour
microenvironment of most solid tumours
compared with healthy tissues. This means that
safety and tolerability are improved, compared
to standard chemotherapy.
The pre|CISION™ substrate can be utilised in a
drug conjugate linker or to generate chemotherapy
prodrugs that are only activated in the tumour.
When added to a chemotoxin, the pre|CISION™
substrate prevents the chemotoxin from entering
cells and therefore renders it inert until the substrate
is cleaved in the tumour microenvironment. Using
this prodrug approach, the systemic exposure to the
chemotoxin is dramatically reduced, and the safety
and therapeutic window of these powerful anti-cancer
treatments is improved.
Avacta’s long-term focus is on achieving a more durable
response for patients through synergy of the innate
immune response to pre|CISION™ chemotherapies
with the adaptive immune response to Affimer®
immunotherapies in the form of co-administered
combinations and in novel tumour microenvironment
activated drug conjugates (‘TMAC®’).
• pre|CISION™ is highly specific to cleavage by
an enzyme, fibroblast activation protein-α
(FAPα) that is highly upregulated in the tumour
microenvironment of most solid tumours
• pre|CISION™ substrate prevents chemotoxins from
entering cells rendering them inert until activated
in the tumour by FAP
• Substrate can also be incorporated into a drug
conjugate linker
• Substrate exclusively licensed from Tufts
10
Avacta’s proprietary
pre|CISIONTM technology has a
number of essential advantages.
Tumour targeting
Fibroblast activation protein alpha (‘FAPα’) is
a protease expressed at 10-100-fold above
background in many solid tumours, including
breast, pancreatic, liver, lung and ovarian tumours.
The pre|CISION™ substrate is specifically cleaved
by FAPα and not by any other enzyme, providing a
targeting mechanism that ensures localised release of
chemotherapeutic agents in the tumour.
Prodrugs
When conjugated to a chemotoxin the pre|CISION™
substrate prevents the chemotoxin from entering cells,
rendering it inactive. Thus, the pre|CISION™ platform
can be used to generate prodrug forms of many
chemotherapies that are inactive in circulation and
activated by FAPα in the tumour microenvironment.
As a result of this targeting, systemic exposure to
the active drug is limited, creating the potential for
increased and longer-duration dosing.
TMAC® Technology
Incorporating pre|CISION™ technology in the
linker of Affimer-drug conjugates ensures
localised, extracellular release of a chemotoxin
payload in the tumour microenvironment. This
mechanism overcomes the need to target an
internalising cancer marker, as with conventional
drug conjugates, allowing the Affimer® to be selected
to target an immune checkpoint. Thus, the innate
immune response to the chemotoxin is supported
by the Affimer® immune checkpoint blockade in
this novel class of checkpoint targeting tumour
microenvironment activated drug conjugates (TMAC®).
Platform Technologies
Avacta Annual Report and Accounts 2018
Addressing The Challenge for Cancer Therapies
Pre-CISIONTM
TMAC®
Bispecific Formats, Novel Drug Conjugates
Immunotherapy Combination
+
+
Immunotherapy Monotherapy
e
v
i
l
A
n
o
i
t
r
o
p
o
r
P
Control
Chemotherapy
Time from Treatment
• Therapies that alter the TME to activate the immune system locally (turning ‘cold’ tumours ‘hot’)
• Safer therapies with reduced side effects have a significant positive socioeconomic impact
I
n
c
r
e
a
s
i
n
g
s
a
f
e
t
y
a
n
d
e
ffi
c
a
c
y
?
In-house programmes
pre|CISIONTM
Only activated by FAP-α
TMAC®
Only activated by FAP-α
Affimer® Bispecifics
Inactivated prodrug that cannot enter
TME targeted prodrugs that allow:
Targeting multiple pathways which allows:
cells prior to activation that allows:
• Higher more frequent dosing
• Higher dosing with low systemic toxicity
• Direct targeting to the TME
• Greater efficacy than single combination
therapies
• Tumour targeting to reduce systemic
• Reduced systemic toxicity
• Broader patient population
AVA6000 (pro-Doxorubicin)
AVA7000 (pro-Paclitaxel)
AVA7500 (pro-Oxaliplatin)
• Additional immune modulation via the
toxicity
Affimer®
• Payload does not require
internalisation for cell killing
AVA04 TMAC
XT VbP TMAC
• Single dose administration
• Single manufacturing campaign
AVA27 (AVA04-TGFβ)
AVA28 (AVA04-IL2)
11
LT SurvivalLT SurvivalAvacta Report and Accounts 2020
Investment Proposition
Our Mission is to shape the future of medicine by
developing novel cancer therapies and powerful diagnostics
using our proprietary Affimer® and pre|CISION™ platforms.
Investment opportunity
• Avacta’s proprietary Affimer® and pre|CISION™ platforms are delivering a robust portfolio of differentiated
therapeutic and diagnostic products that address multiple multi-billion dollar markets.
• Affimer® binders are engineered alternatives to antibodies that have significant competitive advantages
including size, stability, versatility, rapid development and ease of production. Despite their shortcomings,
antibodies currently dominate markets, such as diagnostics and therapeutics, worth in excess of $100 billion.
• Avacta’s Affimer-based rapid Covid-19 antigen test due for commercial roll-out by end Q1.
• The pre|CISION™ targeted chemotherapy platform releases active chemotherapy directly in the tumour,
limiting systemic exposure and side effects associated with many commonly used cancer treatments.
Phase I trial for first candidate, AVA6000, due to start by mid-2021.
• Significant potential of Affimer® drug conjugates to be the next generation cancer treatments. Combination
of both platforms allowing immunotherapy to be fused with a chemotherapy in a single molecule.
• Platforms validated through leading industry partnerships including Moderna, LG Chem, Daewoong Pharma,
ADC Therapeutics and POINT Biopharma.
• The Company plans to generate additional Affimer® and pre|CISION™ drug development candidates in 2021
to further support its growing, innovative pipeline.
• With its strong balance sheet, the Group expects to deliver major value inflection points from its well-funded
therapeutic programmes over the next twelve months and deliver near to medium term revenues from its
diagnostic business, driving long-term shareholder value.
Our strategy
• Build a portfolio of novel, clinically differentiated cancer therapies leveraging the key benefits of the Affimer®
and pre|CISION™ platforms.
• Create a fast-paced, nimble, delivery-focused drug discovery and development organisation to transform
Avacta into a clinical stage biotech with multiple clinical programmes and an exciting pre-clinical pipeline.
• Establish partnerships with global pharmaceutical companies for our technology platforms and pipeline.
• Grow a profitable revenue stream from Affimer® diagnostics through partnerships and licensing as well as
in-house product development.
12
Investment Proposition
13
Avacta Report and Accounts 2020 1414
Avacta Report and Accounts 2020
Strategic Report
16
Chairman and Chief Executive
Officer’s Joint Statement
18
Chief Executive’s Q & A
20
Operational Review
20
Business Overview
22
Diagnostics Division
30
Case Study: Dx – AffiDX® SARS-CoV-2
Antigen Lateral Flow Test
34
Therapeutics Division
40
Case Study: AVA6000 Clinical Trial
42
Drug Development Collaborations
44
Animal Health Division
50
Financial Review
54
Principal Risks and Uncertainties
15
Chairman and Chief Executive
Officer’s Joint Statement
The significant progress achieved in both the
Diagnostics and Therapeutics divisions during
2020 has already enabled us to deliver major
value inflection points during the first four
months of 2021.
We are very excited by the commercial potential of
our scalable, rapid coronavirus test. The recently
announced excellent clinical validation data (sensitivity
of 98.0% for samples with Ct values up to 31 and
specificity of 99.0%) strongly reflects the excellent
analytical performance demonstrated in the lab and
suggests that it may be, to date, the most sensitive S1
spike protein lateral flow test.
Despite unprecedented pressures on the Diagnostics
division, we now have the infrastructure in place
to support the commercial launch of this test.
Importantly, we are close to completing the
establishment of a complex supply chain for the
scalable manufacture of the test kits and we are
making timely progress in instituting a quality
management system to support the required
ISO13485 accreditation for medical devices.
In line with commitments we made during the fund-
raise last summer, in the Therapeutics division we
expanded our in-house pre-clinical pipeline and kept
our partnered programmes moving forwards despite
the restrictions of COVID-19 safe-working. We also
appointed Neil Bell as Chief Development Officer,
who has now established a clinical development
team to drive the Company’s transition to a clinical
stage biotech.
In December, we submitted a Clinical Trial
Authorisation (‘CTA’) to the UK’s MHRA for our lead
pre|CISION™ platform drug candidate, AVA6000
pro-doxorubicin, and I am delighted that we recently
received approval from the Agency to proceed with
the phase I study, which we expect will dose first
patient around the middle of the year.
Fund-raising
During 2020, the Group completed two fund-raises,
which delivered a combined £53.8 million, transforming
the Group’s abilities to develop both its diagnostics
and therapeutics businesses. These fund-raises have
significantly strengthened the Group balance sheet,
with £47.9 million of cash and short-term deposits at
31 December 2020 and will provide funding for the
Group through 2021 to 2022 and into 2023.
16
Board changes
In February 2020, Paul Fry joined the Board as a Non-
executive Director and has become the Chairman of
the Audit Committee. Paul, who is also Chief Financial
Officer of Vectura plc, brings with him a wealth of
financial experience across several sectors including
biotech, pharmaceutical and telecommunications.
On 24 March 2021, Dr Mike Owen stepped down from
his Board role as Non-executive Director having served
as a Director since 2015. We would like to thank Mike
for his significant commercial and scientific input to
the Board. Mike will continue to chair the Scientific
Advisory Group in a non-Board role.
Our people
The commitment of our employees during the
last year has been exceptional. Despite significant
restrictions on normal working practices due to the
pandemic their efforts have transformed the Group.
Our employees are actively engaged in our strategic
plans and in delivering shareholder value, and many of
them are also shareholders in the Group. Their work
in implementing quality systems, developing Affimer®
reagents for COVID-19 development projects in very
short timescales, submitting the relevant submissions
for our first clinical trials and maintaining development
programmes with our partners across the world has
been truly inspiring.
Effects of the COVID-19 pandemic
The ability of the Group’s Diagnostics division to
react to the COVID-19 pandemic and help provide a
solution which could bring the impacts of pandemic
on daily life to an end has been transformational for
the Group. The interest generated with shareholders
created the opportunity to raise significant funds to
support the Group in developing its diagnostics and
therapeutics platforms.
The downsides of the pandemic have led to many
challenges in working practices across the Group, with
scientific staff working shifts to ensure safe laboratory
working practices and support staff working from
home where possible to reduce the number of staff at
each site. Additional premises have been taken on in
both Cambridge and Wetherby and either have been
fitted out, or are being fitted out, to provide further
laboratory space for all the scientific teams to return to
the laboratories full time and allow for the expansion
of the teams over the coming months.
Strategic Report Outlook
We are very proud of the Avacta team and how they
have overcome the substantial challenges presented
by the pandemic and continued to progress our
programmes and generate significant shareholder
value. There are several significant milestones to
deliver during 2021, with the dosing of the first
patient in the AVA6000 clinical trial, the anticipation
of initial pharmacokinetic data for AVA6000 and the
pre|CISION™ platform before year end, and the launch
of the AffiDX® SARS-CoV-2 Antigen Lateral Flow Test
with the potential to generate substantial revenues.
We look forward to updating the market on these
very exciting milestones ahead of us in due course.
Alastair Smith
Chief Executive Officer
Eliot Forster
Non-executive Chairman
22 April, 2021
22 April, 2021
There has been an impact on the therapeutic
programmes and some changes to work programmes
were necessary in the early lockdown period whilst
we managed staff numbers on site. Our contract
manufacturing and clinical operations partners also
reduced staffing levels, which caused some delays to
programmes. This also had an impact on our partnered
programme revenues recognised during 2020, with
some revenues based on FTE work slipping back into
2021. However, the teams are now focused on bringing
the programmes to fruition with our partners.
The dosing of first patients in our AVA6000 phase
I study, now that we have regulatory approval, is
due to commence in the middle of 2021. The exact
timings of this will be determined by how quickly the
pressure on clinicians and hospitals is reduced from
the COVID-19 pandemic.
Our Animal Health division’s revenues were impacted
during the first lockdown as veterinary practices were
focusing on emergency cases, with more routine
appointments in relation to allergy or therapy testing
being put on hold. The division took the opportunity
to assess its product portfolio and routes to market
during this time. Whilst some staff transferred across
to our diagnostics team there were unfortunately
two redundancies because of this process and new
routes to market. Following a non-cash impairment
charge of £1.74 million, and with the business
recovering strongly in the second half of the year to
deliver a small operating profit, it is positioned well
for trading in 2021.
The Board continues to monitor and assess the
impact of COVID-19 and the impact it has on the
Group’s businesses.
17
Avacta Report and Accounts 2020
Chief Executive’s Q & A
How do you feel Avacta has performed over the reporting period?
It has been a very strong period of performance for the Group, with it advancing its own therapeutic
programmes, securing substantial new therapeutic partnerships and expanding existing ones, and building
commercial traction in the Affimer® diagnostics business. The COVID-19 rapid antigen testing opportunity
has highlighted the significant potential of the Affimer® platform for diagnostics and dramatically increased
shareholder value in the last twelve months. The enormous hard work leading to substantial technical and
commercial progress that has been made during the past couple of years is now being reflected in the
share price and I am delighted that we are beginning to return substantial value to shareholders.
How confident are you that the phase I clinical trial for AVA6000 will be successful and will the
COVID-19 pandemic cause significant delay in starting the trial?
The pre-clinical data for AVA6000 are very compelling: we see a substantial improvement in the distribution
of the active chemotherapy to the tumour and a substantial increase in the therapeutic window compared
with doxorubicin. This gives us a high level of confidence that we will see these data reflected in a positive
phase I study in cancer patients. We anticipate dosing first patient in the middle of 2021 and, given the
progress in vaccinations in the UK and reduction in the number of COVID-19 patients in hospitals, we do
not expect there to be a significant delay because of the pandemic.
How has the strategy of the Diagnostics division changed in 2020?
The process of a partner committing their own resources to developing an Affimer-based product so that
they can evaluate its performance before committing to a commercial licence can be slow. The time taken
by Avacta to develop an Affimer® that meets their requirements is a small part of the process. It is the time
taken by the partner to develop and evaluate the Affimer® binders, when other business activities may well
take priority, that is rate determining. This is why we have taken the step of developing Affimer® diagnostic
assays ourselves, because we can prioritise the resources to do this more quickly than a partner and
reduce the time to get to a licensing deal. We will launch the first Affimer-based diagnostic in 2021 when
the AffiDX® SARS-Cov-2 rapid antigen test is on the market. In addition to developing our own products,
recently we have seen tangible progress with the licensing deals with Astrea for bioseparations and with
Biokit for a diagnostics application and, going forwards, I expect to see further such deals for Affimer®
reagents to go into third-party products alongside the development of our own pipeline of products.
What newsflow might we expect from the Group during 2021?
Clearly there is going to be a significant focus on the commercialisation of the COVID-19 diagnostic test
during 2021 and we very much look forward to keeping the market updated. Having announced the results
of the clinical validation study in April, we anticipate CE marking the test for professional-use in May. This
will be Avacta’s first in-house diagnostic product with regulatory approval and it will be a major milestone
for Avacta’s diagnostics business. Our focus is on manufacturing and supply of the product post-CE marking
and in building the commercial routes to market with partners in Europe and the UK.
The dosing of first patient with AVA6000 will mark another momentous development milestone for Avacta
as it transitions to a clinical stage biotech and we expect to see whether the pre|CISION™ chemistry works
in humans as well as it does in the preclinical models from initial pharmacokinetic data before the end
of the year. If those data are positive then we will have opened up an extensive pipeline of pre|CISION™
prodrug chemotherapies with multi-billion dollar markets and created significant, and long-term,
shareholder value in addition to the near-term revenues and shareholder value driven by COVID-19 testing.
18
Strategic Report Avacta Annual Report and Accounts 2018
19
Operational Review
Business overview
Avacta’s Therapeutics division is addressing a critical
gap in current cancer treatment - the lack of a durable
response to current immunotherapies experienced
by most patients. By combining its two proprietary
platforms, the Group is building a wholly owned
pipeline of novel cancer therapies designed to be
effective for all cancer patients. In 2021 Avacta will
commence a phase I first-in-human, open label,
dose-escalation and expansion study of AVA6000 pro-
doxorubicin, the Group’s lead pre|CISION™ prodrug,
in patients with locally advanced or metastatic
selected solid tumours.
Avacta has established drug development
partnerships with pharma and biotech, including
a research collaboration with ModernaTX,Inc.
(formerly Moderna Therapeutics Inc.), a multi-
target deal with LG Chem worth up to $400 million,
a joint venture in South Korea with Daewoong
Pharmaceutical focused on cell and gene therapies
incorporating Affimer® immune-modulators, a
partnership with ADC Therapeutics to develop
Affimer-drug conjugates and a collaboration with
Point Biopharma to develop radiopharmaceuticals
based on the pre|CISION™ platform. Avacta
continues to actively seek to license its proprietary
platforms in a range of therapeutic areas.
Avacta Group is developing novel cancer
immunotherapies through its Therapeutics
division and powerful diagnostics through
its Diagnostics division, based on its two
proprietary platforms - Affimer® biologics and
pre|CISION™ tumour-targeted chemotherapies.
The Affimer® platform is an alternative to antibodies
derived from a small human protein. Despite their
shortcomings, antibodies currently dominate markets,
such as diagnostics and therapeutics, worth in excess
of $100 billion. Affimer® technology has been designed
to address many of these negative performance issues,
principally: the time taken to generate new antibodies
and the reliance on an animal’s immune response;
poor specificity in many cases; their large size,
complexity and high cost of manufacture.
Avacta’s pre|CISION™ targeted chemotherapy
platform releases active chemotherapy in the tumour,
which limits the systemic exposure that causes
damage to healthy tissues, and thereby improves
the overall safety and therapeutic potential of these
powerful anti-cancer treatments.
The Group comprises two Life Sciences divisions
- Therapeutics and Diagnostics - and an Animal
Health division. Therapeutics development activities
are based in Cambridge, UK and the Group is
generating near-term revenues from Affimer®
reagents for diagnostics, bioprocessing and
research through a separate diagnostics business
unit based in Wetherby, UK and an Animal Health
division also based in Wetherby.
Avacta’s Diagnostics division works with partners
world-wide to develop bespoke Affimer® reagents for
third-party products. The Group is also developing an
in-house pipeline of Affimer-based diagnostic assays
including the AffiDX® SARS-CoV-2 Lateral Flow Rapid
Antigen Test and an AffiDX® BAMS™ SARS-CoV-2 Assay
in partnership with Adeptrix Inc.
20
Strategic Report 21
Avacta Report and Accounts 2020 Avacta
Diagnostics
22
Strategic Report 23
Avacta Report and Accounts 2020 Diagnostics Division
• Poised to capitalise on a substantial commercial opportunity for high quality
rapid testing for COVID-19.
• A pipeline of non-COVID-related in-house diagnostic tests for a range of
diseases and conditions being developed to be brought to market from
2022 onwards, adding to long-term COVID-19 testing revenues.
• Affimer® reagent licensing deals for diagnostic and other applications
now being delivered for a pipeline of Affimer® technology evaluations
creating the potential for long-term royalty income.
AffiDX® SARS-CoV-2 Antigen Lateral Flow
Test for potential mass deployment
During the past year Avacta, in conjunction with
its partners, has made substantial progress in
the development of its Affimer® based, SARS-
CoV-2 antigen lateral flow test.
Laboratory studies showed that it may be the most
sensitive S1 spike protein lateral flow test available to
date and recent clinical validation data has reflected
this strong analytical performance. The clinical study
tested 98 positive COVID-19 samples across a broad
range of high and low viral loads (31 with Ct<26; 65
with Ct 26-30 and 2 with Ct 30-31). The test identified
96/98 of these correctly as positive with a 20 minute
read time resulting in a clinical sensitivity of 98.0%
for samples within this broad range down to low viral
loads. Out of a total of 102 negative samples tested
with the lateral flow device, the test correctly identified
101 as negative, giving a clinical specificity of 99.0%.
The test is therefore capable of identifying individuals with
infectious viral loads using an anterior nasal swab sample.
Such a test is suitable for mass deployment to identify
those people who are likely to infect others so that they
can isolate and reduce the spread of the infection.
Lateral flow tests are a complement to, not a
replacement for, PCR testing.
How a diagnostic test is used, called the ‘Intended Use
Case’, is extremely important and it must be adhered
to in order to avoid a test being used inappropriately.
A rapid antigen test with high specificity and good
sensitivity can be used effectively to identify the
majority of people with a high viral load that makes
them infectious so that they can isolate themselves.
24
Frequent testing, at least once every few days and
ideally daily, is important so that as soon as the viral
load of an infected person becomes high enough to
be infectious that person is identified.
The first challenge in developing a clinically useful
rapid coronavirus test for mass population
screening is to understand what viral load should
be considered infectious.
Patient samples can be characterised in a number of
ways, but the most common are as follows:
• Genome copies per millilitre (i.e., how many copies
of the virus RNA are present in a millilitre of sample)
• Plaque forming units (‘pfu’) per millilitre (i.e., how
many viable viruses that can infect cells and multiply
are present in a millilitre of sample). The number of
pfu/ml and genomes/ml are different because there
is RNA present in samples that is not assembled
into viable virus particles (i.e., the genomes per ml is
higher than the pfu per ml). These two measures of
infection vary in a way which has not yet been fully
characterised, but there is probably between 10 -
10,000 more genomes/ml than pfu/ml in a sample
• Cycle time (‘Ct’), which is the number of amplification
cycles of PCR required to detect the virus (i.e., a
low Ct value means that the person has higher
viral load because it took fewer amplification cycles
to become detectable). Ct values vary between
different PCR tests, and even between different
laboratories running the same test, so this should
also be taken into account
A reasonable assumption, based upon the growing
combined understanding of SARS-CoV-2 and
COVID-19, is that a person is infectious and likely to
infect others if their viral load is > 10,000 genomes/
ml (i.e., approximately > 100 pfu/ml and Ct < 25).
Strategic Report According to recently published data from the
Liverpool Covid Smart Pilot, a viral load of < 10,000
genome/ml leads to a likelihood of infecting others
of around 10%. Therefore, at this low end of the
infectious range the risk of infecting others appears
to be quite low. Whereas the risk of a person with a
viral load ~1,000,000 genome copies/ml is around
50%. Highly infectious people can have viral loads >
100,000,000 genome copies/ml.
With all this in mind, for a rapid antigen test to have
clinical utility (and therefore sustainable commercial
value) it should be able to detect SARS-CoV-2 viral
load of a few hundred pfu/ml, or Ct of 25 or below,
or > 10,000 genomes/ml. Clearly, the lower the
detection limit the better, and a test must be able to
achieve this limit of detection in real patient samples
and not just in contrived ‘clean’ laboratory samples
Laboratory testing suggests that the AffiDX®
SARS-CoV-2 Antigen Lateral Flow Test could
be the most sensitive spike antigen test so
far available.
The AffiDX® SARS-CoV-2 Antigen Lateral Flow Test
detects the SARS-CoV-2 S1 spike protein and has
an analytical limit of detection (‘LOD’) in nasal swab
samples of 50 pg/ml. This can be achieved with a visual
read time of 10 minutes. The test line is clearer if a
longer read time is used, therefore a read time of 20
minutes has been adopted as the standard for this test.
How does this analytical sensitivity translate into
pfu/ml of virus, which is the clinically relevant
measure? Avacta has established this relationship
using Avacta’s research ELISA for S1 protein and
inactivated virus provided by Public Health England
(Porton Down, UK). Using this safe form of the virus,
we have shown that an analytical LOD of 50pg/ml
corresponds to the amount of S1 spike protein in a
virus sample containing 500 pfu/ml.
A significant proportion of the development time
of the AffiDX® SARS-CoV-2 Antigen Lateral Flow
Test has been focused on achieving this level of
sensitivity in human saliva and nasal swab clinical
samples. The development work has been carried out
in-house and with our development partners using
saliva and anterior nasal swab samples taken from
healthy volunteers to which the S1 spike protein has
subsequently been added to known concentrations to
generate a contrived clinical sample. The key challenge
in developing the test has been to get these complex
human fluids to flow properly in the device and to
eliminate false positive results arising from unknown
material in nasal samples and saliva. This has been
achieved through detailed studies evaluating a range
of different additives to the lateral flow test and sample
extraction buffer for both nasal and saliva samples.
The Group announced in Q4 2020 that it would focus
on anterior nasal sampling because of the variability
of saliva samples, although the test works with both
sample types. The UK Department of Health and Social
Care has also recently focused on nasal and other swab
samples rather than saliva.
In summary, the AffiDX® SARS-CoV-2 Antigen Lateral
Flow Test has excellent analytical sensitivity (LOD) of 50
pg/ml S1 spike protein, which appears sensitive enough
to detect the lowest viral loads of relevance to the
Intended Use Case, with a read time of 20 minutes.
As far as the Group is aware, this is the most sensitive
S1 spike lateral flow test available.
The analytical specificity of the Affimer® reagents
has been reported previously with no cross-
reactivity with the S1 spike proteins from closely
related coronaviruses: MERS-CoV S1, SARS-CoV-1
S1, HC0V-229E S1, HCoV-HKU1 S1, HCoV-NL63 S1
or HCoV-OC43 S1.
The test detects the D641G mutant of the original
coronavirus, and the Group expects that the test will
also detect the newer coronavirus variants. Work is
ongoing with Public Health England to confirm this.
25
Avacta Report and Accounts 2020
Diagnostics Division (Cont)
Clinical evaluation of AffiDX® SARS-CoV-2 Antigen
Lateral Flow Test
Avacta Diagnostics division expects ISO13485
accreditation early in Q2 2021.
Avacta’s Diagnostics division has completed the two
audits of the Group’s Quality Management System
that are required by its external auditor in order
to award ISO13485 accreditation and is awaiting
confirmation of the outcome.
Medical device manufacturing is a highly regulated
sector in which stringent quality systems and product
performance requirements must be satisfied. These
regulatory requirements are intended to ensure that
manufacturers consistently design, produce and place
onto the market medical devices that are safe and
fit for their intended purpose. ISO13485 certification
provides a practical foundation for diagnostics and
medical device manufacturers to address these
regulatory requirements and obligations of the
industry, as well as demonstrating a commitment to
device safety and quality.
The Diagnostics division has established a Quality
Management System and the first external audit by
the Group’s Notified Body (BSI Group) was passed in
December successfully. The second and final audit
was scheduled in March 2021, but due to a COVID-19
case at Avacta’s Wetherby site, the second audit has
been split into two with the final site visit now occurring
in early April. The Group is awaiting confirmation of a
positive outcome to this second audit. This certification
sets the organisational and operational framework for
all current and future diagnostic product developments
and it is an essential accreditation that underpins
future commercial success.
The clinical performance of a diagnostic test cannot
simply be inferred from the analytical performance
because of the complex pathology of diseases which
control the amount of a biomarker that is available
in a sample when added to the test. In the case of
COVID-19, there is a complex series of biological
processes that determine how much of the virus
spike protein is actually present in the anterior (front)
part of the nose to be picked up on a swab and then
released into a buffer to be added to the lateral flow
test strip. A clinical evaluation of the test is the only
way to determine whether it is capable of identifying
infectious individuals.
The initial evaluation of Avacta’s lateral flow rapid
antigen test with clinical samples was carried out
at two sites, one in the EU and one in the UK using
patient samples with viral loads confirmed by PCR.
30 positive samples were tested with Ct values of 26
and below, with half of those in the range 22-26, and
the lateral flow test identified 29/30 of these correctly
as positive. This indicates a clinical sensitivity of 96.7%
for samples with a Ct value below 26. Importantly,
out of a total of 26 negative samples tested with the
lateral flow device, the test correctly identified all 26
as negative, giving a clinical specificity of 100%.
High specificity is critical for a lateral flow test for mass
screening so that large numbers of false positives are
not generated, which would create a major burden on
follow-on testing resources, and result in a significant
socio-economic cost of unnecessarily isolating people.
The second clinical validation for CE marking purposes
was carried out at a single site in Europe and reported
on recently. The study tested 98 positive samples (31
with Ct<26; 65 with Ct 26-30 and 2 with Ct 30-31).
Avacta’s rapid antigen test identified 96/98 of these
correctly as positive with a 20 minute read time resulting
in a clinical sensitivity of 98.0% for samples within this
broad range down to low viral loads. Out of a total
of 102 negative samples tested with the lateral flow
device, the test correctly identified 101 as negative,
giving a clinical specificity of 99.0%.
On the basis of these excellent clinical data, the
Group will now complete the technical file, including
accelerated stability data, for CE marking the test for
professional use early in May followed immediately
by commercial roll-out.
26
Strategic Report Mologic partnership enables near-term AffiDX® CE
mark for professional use
Whilst the Group establishes its own ISO13485
accreditation, in order to achieve the fastest possible
and lowest risk route to CE marking, Avacta has
established a partnership with Mologic Ltd. so that the
AffiDX® SARS-CoV-2 Antigen Lateral Flow Test can be
CE marked for professional use quickly under Mologic’s
established ISO13485 Quality System. The CE mark
will then be transferred to Avacta when it achieves
ISO13485 accreditation, which is expected early in May
2021. As part of the collaboration between the two
companies, Avacta and Mologic are also exploring the
possibility of combining Avacta’s spike antigen test with
Mologic’s nucleocapsid antigen test in a single device
which would be a world first and has the potential to
deliver the most sensitive rapid antigen test possible.
The two companies will evaluate whether the two tests
can be combined in a single device and then make a
commercial decision on whether to pursue this second
generation COVID-19 diagnostic.
Avacta will immediately be able access initial
manufacturing capacity through Mologic’s close
partner Global Access Diagnostics (GAD), in addition
to scale-up manufacturing capacity with BBI and
Abingdon Health. Combined, these manufacturing
partnerships can scale up to several million tests
per month and potentially much higher with further
investment. Avacta is also continuing its discussions
with other manufacturers in the UK and overseas
in order to be able to access additional capacity to
ensure that it can meet the expected demand.
The Group continues its commercial discussions
with potential customers for the AffiDX® SARS-CoV-2
Antigen Lateral Flow Test and expects demand to be
present for rapid testing for at least two years and
probably for longer. Only by having a high-quality test
that identifies the majority of infectious individuals
can this clinical need be translated into commercial
success and the Group believes that the recent initial
clinical data are extremely encouraging in that regard.
Healthcare services providers and governments
are likely to be the largest volume customers of
a professional use rapid antigen test and with an
estimated price point in the mid-single digit GBP
range. A higher price point is anticipated for sales
to corporates for workforce testing.
BAMS™ SARS-CoV-2 assay
In collaboration with Adeptrix Inc, Avacta has
developed a mass spectrometry assay on Adeptrix’s
BAMS™ platform which combines enrichment of
the sample using Avacta’s SARS-CoV-2 spike protein
Affimer® binders to improve sensitivity with the
power of mass-spectrometry for analysis. Up to one
thousand samples per day can be analysed by a
single technician using BAMS, exceeding the capacity
of a single PCR machine.
In January, Avacta established a collaboration with
Bruker Corporation (Billerica, MA) (NASDAQ: BRKR,
‘Bruker’) to evaluate the Affimer-based SARS-CoV-2
BAMSTM assay and assess the suitability of the test as
a professional-use in-vitro diagnostic (‘IVD’) product
for SARS-CoV-2 infection to run on Bruker’s MALDI-
TOF instruments.
Bruker is one of the world’s leading analytical
instrumentation companies, providing high-performance
scientific instruments and high-value analytical and
diagnostic solutions to scientists globally. It is also one
of the foremost suppliers of mass spectrometers with
a significant installed based in clinical microbiology
laboratories in hospitals world-wide.
Having successfully developed a prototype test with
Adeptrix, Avacta, has been working with its clinical
partners in the UK to refine the assay to fit into the
typical workflows in a clinical microbiology laboratory
and to work well on the type of simplified mass
spectrometer that is found in this setting. Avacta is
working closely with Bruker and Adeptrix on this process.
There is now a well-established PCR-testing capacity
in most countries that is capable of dealing with
current demand, making the commercial case for
mass spectrometer based additional capacity less
compelling than anticipated by the two companies.
In light of this rapidly changing COVID-19 hospital
testing market Avacta is working closely with Bruker
and Adeptrix to review the commercial strategy for
the SARS-CoV-2 assay and for a wider range of BAMS
proteomics tests in general.
27
Avacta Report and Accounts 2020 performance requirements for new tests to feed
the product development pipeline in the future.
This appointment is part of a wider expansion of
the Diagnostics division’s management team which
also includes a Head of Product Development and
Operations Director.
During the pandemic, in order to maintain a COVID
safe working environment the Group has not been
able to have all laboratory staff on site at the same
time and has worked in two teams. New CAT 2
laboratory facilities in Wetherby have been completed
and equipment that has been installed and validated
to satisfy the requirements of ISO13485. The new
facilities can house about 20 staff and all scientific
staff are now able to work full time in the laboratories.
Diagnostics Division (Cont)
Non-COVID diagnostics update
Post-period end, the Group entered into a licence
agreement with Astrea for the use of the Affimer®
platform in affinity purification applications.
Astrea is a leading provider of affinity separation
solutions to the pharmaceutical and biomanufacturing
industries. It is a division of Gamma Biosciences, the
life sciences tools platform created by KKR, to build a
leading position in next generation bioprocessing for
advanced therapies.
This is an important validation of one part of the
Group’s business model for non-therapeutic
Affimer® applications – that of third-party technical
evaluations of bespoke Affimer® reagents generated
for a specific application leading to licensing of those
Affimer® reagents and long-term royalty-based
revenue streams. Astrea has evaluated certain
Affimer® reagents for affinity separation, resulting
in the agreement between the two companies for
a non-exclusive licence for the use of the Affimer®
technology in this field.
The agreement includes a £0.5 million upfront payment
to Avacta which gives Astrea the rights to generate
and develop Affimer® reagents in-house for affinity
separation using an Affimer® library to be provided by
Avacta. It also provides Astrea with an option to convert
the agreement into an exclusive licence if certain
commercial performance criteria are met over the next
three years and subject to the payment of an additional
undisclosed option exercise fee.
Avacta will receive royalties on future sales of Astrea’s
purification products that contain Affimer® reagents.
Although the pandemic has affected the Group’s
business development activities, it continues to
generate new projects and to work on established
Affimer® evaluations with partners to generate further
licensing agreements.
The Group is also developing an in-house pipeline of
Affimer-based diagnostic tests. Resources have been
focused during 2020 primarily on the immediate
COVID testing opportunities, and since the lateral
flow test is now in clinical evaluation the Group is
in a position to begin to refocus its research and
development resources onto non-COVID diagnostic
tests, which include assays for D-dimer, cortisol,
vitamins D and B12 and C-reactive protein, a test with
regard to liver function. Avacta has recently appointed
a Product Manager who joined the Group in March
whose role is to define the market opportunity and
28
Strategic Report Complete 2021
29
Avacta Report and Accounts 2020 Diagnostics Division (Cont)
Case Study: Dx – AffiDX® SARS-CoV-2 Antigen
Lateral Flow Test
Avacta has developed the AffiDX® SARS-
CoV-2 Lateral Flow Antigen Test, an Affimer-
based in vitro diagnostic (‘IVD’) test to detect
SARS-CoV-2 antigen in human anterior
nasal swab samples.
The test is to be used to identify individuals
with higher viral loads of SARS-CoV-2 that
increase the likelihood of transmitting the
infection to others.
Avacta began screening for the Affimer® molecules
against the SARS-CoV-2 spike antigen in April
2020, generating a number of binders in just four
weeks. Over the course of 2020 and early 2021
the test architecture was developed whilst the
Diagnostics division also scaled up internal resources,
manufacturing and logistics. The test was brought
to market around one year after initial development
began. This is a very fast development time for an
IVD, particularly given it is the first product brought to
market by the Company.
The case for lateral flow tests
One key benefit of the lateral flow antigen (‘LFA’)
tests are their effectiveness to detect a high viral
load, therefore enabling infectious people to isolate
quickly whilst helping to reduce the number of
people who are not infectious having to isolate.
Studies have shown that the more virus present in
the nose and throat, the more infectious a person
is1. Consequently, assessing this viral load will enable
faster identification and isolation of these highly
infectious individuals, to ultimately minimise further
transmission and reduce the R rate.
Another benefit is that LFA tests are mobile and rapid,
suitable for use at the point-of-care without the need
for specialist equipment. In this format, the tests can
be rapidly deployed across multiple locations without
stringent infrastructure or training requirements.
In addition, LFA tests can provide much faster results
than PCR tests, with most displaying a result within 30
minutes. PCR test results can take several days from
testing to results, leaving a window in which infection
can spread. Rapid testing means a faster start to
quarantine for infectious individuals, and so greater
control over disease spread.
Viral load
Low analytic sensitivity (lateral flow test)
High analytic sensitivity (PCR)
Negative test
Positive Test
Incubation
Infectious
Post infectious
Symptoms
Exposure
PCR test continues to be positive in throat swabs
Average 17 days (maximum 83 days)
0
5
10
15
20
25
Time
Early infection detectable by PCR
only (potentially pre-infectious)
Infectious
Late phase detectable by PCR
only (potentially post-infectious)
High frequency testing with low analytic sensitivity versus low frequency testing with high analytic sensitivity. A person’s infection trajectory (solid grey line) is shown in
the context of two surveilance regimens (circles) with different analytic sensitivity. Higher frequency testing is more likely to test in the infectious window. Therefore,
although both testing regimens detect the infection (orange circles), the high frequency lateral flow test is more likely to detect it during the transmission window
(shading),despite its lower analytic sensitivity. The figure is not an accurate representation of exactly when a positive test is likely to signify that a case is infectious.
Crozier et al, BMJ 2021; 372:n208
d
a
o
l
l
a
r
i
v
2
-
V
o
C
-
S
R
A
S
30
Strategic Report
31
Avacta Report and Accounts 2020 3.
Remove the
swab from
the peel
pouch with-
out touching
or allowing
the tip to
come in to
contact with
any surfaces.
4.
Insert the swab tip in to one
nostril to a depth of around
1-2cm and hold against
the inner wall of the nostril.
Move the swab around the
nostril wall, whilst rotating
the swab between the
process for a minimum
of 10 seconds.
7.
Mix by rapid
inversion
of the
tube 10
times.
x10
8.
This sample
can be
stored for
up to X
hours (TBD)
at X°C prior
to running
the lateral
procedure.
4.
Put the
cap back
on the
nozzle and
discard the
tube safely
as biohaz-
ardous
waste.
5.
Using a timer, leave
surface for 20 minutes.
the device.
20
12345678
x4
Diagnostics Division (Cont)
TEST PROCEDURE
Swab Sample Collection & Processing
1.
Peel
back the
the
capsule
to expose
the outlet
only.
5.
Repeat
with the
other
nostril
using
the
same
swab.
2.
Empty the entire
contents into the
swab extraction
tube.
Place the
tube in an
upright
position during
the swabbing
process.
6.
Place the swab
(tip end first) in
the swab extraction
tube and snap the tip
breakpoint, leaving the
tip in the tube. Close the
lid of the tube and put
the cap on the nozzle.
Lateral Flow Test Procedure
2.
Tear open the
foil pouch at
the nick pro-
vided, remove
the lateral
device from
the foil pouch
and lay it on a
3.
Remove the
nozzle cap of the
swab extraction
tube and holding
the tube vertically
carefully dispense
4 drops into the
sample well of the
device.
INTERPRETATION OF RESULTS
1.
Allow the
test device to
equilibrate
to within the
operational
temperature
range (15-
30°C) before
opening the
foil pouch.
6.
Read test
results after
20 minutes.
Test results
MUST NOT
be interpreted
after 30
minutes.
32
POSITIVE
SARS-CoV-2 antigen was
detected in patient sample.
positive result. Higher risk of
the patient being infectious.
Local guidelines for suspected
SARS-CoV-2 infection should
be followed immediately.
NEGATIVE
SARS-CoV-2 antigen was
NOT detected in patient
sample. Lower risk of the
patient being infectious
but a negative result does
not mean that the patient
does not have SARS-CoV-2
infection. Local COVID-19
transmission prevention
guidance should still be
followed.
INVALID
No control line observed.
Test failed. Repeat test
with a new test device.
INVALID
Partial or incomplete bands on the test or
control lines should be considered invalid
results. Repeat test with a new test device.
If persistent invalid results are observed please check that the
Instructions For Use are being carefully followed. If this does not
resolve the issue, please contact technical support.
Strategic Report
Test principle
New variants
The sample buffer provided in the buffer capsule is
dispensed into the swab extraction tube. An anterior
nasal swab sample is collected from the patient using
the swab provided, which is then placed into the swab
extraction tube and the tip of the swab is snapped off,
leaving the swab tip in the swab extraction tube.
This is then mixed, lysing the virus and releasing
the SARS-CoV-2 antigen into the sample buffer.
The sample buffer is added to the sample well on
the lateral flow device, using the nozzle on the swab
extraction tube. If SARS-CoV-2 antigen is present
in the patient sample, this will bind to biotinylated
Affimer® highly specific to SARS-CoV-2 antigen.
This antigen-Affimer® complex is then in turn
specifically bound to conjugated microparticles, with
the antigen-Affimer-microparticle complex migrating
along the lateral flow strip by capillary action until it
reaches the test line. Immobilised poly-streptavidin is
present on the test line, which binds the complex via
the available biotin label on the Affimer®. Remaining
unbound microparticles continue to migrate along
the lateral flow strip until they reach the control
line, where they are captured by an immobilised
antibody specific to the conjugated microparticles.
The test result is then read after 20 minutes by visual
determination of the presence or absence of a band
at the test line in conjunction with the presence of a
band at the control line.
Avacta has demonstrated that the AffiDX® SARS-
CoV-2 test detects the dominant new variants of the
coronavirus, known as the B117, or ‘Kent’, variant,
and the D614G variant, as well as the original strain.
The SARS-CoV-2 virus, like most viruses, mutates
over time into slightly different variants. Some of
these variants are more infectious, and therefore
more rapidly transmissible, and have the potential
to become dominant strains.
Early on in the pandemic a variant referred to as
D614G appeared, which rapidly became the dominant
strain globally. The B117 variant, which was first
observed in Kent, is prevalent in the UK, has been
found in more than 50 countries and, according to
Professor Sharon Peacock (Professor of Public Health
and Microbiology at Cambridge University), is likely
to become the next dominant strain globally.
Avacta has carried out analytical tests with the spike
proteins isolated from both the B117 and D614G
variants, and has confirmed that its AffiDX® SARS-
CoV-2 Rapid Antigen Lateral Flow Test detects both
of these variants as well as the original strain.
The Company will continue to monitor the
performance of the Affimer® reagents with future
dominant variants as they become available to us.
Since the Affimer® reagents we use in Avacta’s range
of SARS-CoV-2 tests do not bind in the region of the
spike protein where the dominant mutations appear,
we do not anticipate that the performance of the tests
will be affected. Now that we have developed a robust
lateral flow test architecture, we can easily insert
Affimer® reagents that can be very rapidly developed
for new variants if necessary, and indeed in response
to any other future pandemic virus.
1. ‘Lateral flow devices detect most infectious COVID-19 cases and could
allow a safer relaxation of the current lockdown’
https://www.ox.ac.uk/news/2021-01-21-lateral-flow-devices-detect-most-
infectious-covid-19-cases-and-could-allow-safer
33
Avacta Report and Accounts 2020 Avacta
Therapeutics
34
Strategic Report 35
Avacta Report and Accounts 2020 Therapeutics Division
Wholly-owned Therapeutic Pipeline
• Poised to transition into a clinical stage biotech with the dosing of first
patient in mid-2021 with the first pre|CISION™ prodrug, AVA6000 pro-
doxorubicin, in a phase I study in patients with locally advanced or
metastatic selected solid tumours.
• Pipeline of multiple Affimer® and pre|CISION™ clinical candidates to be
generated in 2021 and 2022 for pre-clinical and clinical development.
Approval of CTA for AVA6000, the Group’s lead
pre|CISION™ prodrug, is a key milestone.
The Group achieved a significant milestone
with the submission in Q4 2020 and
subsequent approval on 19 February 2021
from the MHRA (Medicines and Healthcare
products Regulatory Agency) of the Clinical
Trial Authorisation (CTA) for AVA6000 pro-
doxorubicin, the Group’s lead pre|CISION™
prodrug, for a phase I, first-in-human, open
label, dose-escalation and expansion study
in patients with locally advanced or metastatic
selected solid tumours.
The Group anticipates dosing first patients in mid-
2021, subject to COVID-19 restrictions on hospital
resources, with first pharmacokinetics read-out
possible before the year-end.
Instrumental in achieving the CTA submission
milestone was the appointment of Chief Development
Officer, Neil Bell, who has rapidly established a highly
experienced clinical development team including
a Head of Chemistry, Manufacturing and Controls
(CMC), Head of Clinical Operations and Head of
Translational Medicine appointed in-house to manage
an extensive outsourced network of service providers.
In AVA6000, Doxorubicin has been modified with
Avacta’s pre|CISION™ chemistry, which renders the
modified drug inactive in the circulation until it enters
the tumour micro-environment. Here it is activated by
an enzyme called FAP (fibroblast activation protein),
which is in high abundance in most solid tumours but
36
not in healthy tissue such as the heart. AVA6000 has
been shown in animal models to significantly increase
the amount of active drug in a tumour compared with
the heart and should thereby improve tolerability and
achieve better clinical outcomes for patients
Phase I study will be clinical proof-of-concept of
the pre|CISION™ platform
The phase I study is a first-in-human, open-label,
multi-centre study to be carried out in the UK in
patients with locally advanced or metastatic solid
tumours which are known to be FAP positive, including
pancreatic, colorectal, breast, ovarian, bladder and
non-small cell lung cancers, squamous cell carcinoma
of the head and neck and soft-tissue sarcoma.
The dose-escalation phase of the study, which will
be carried out in 15 to 20 patients, is designed to
evaluate the safety of AVA6000 in humans and
establish the appropriate dosing levels for the dose
expansion phase of the study.
The dose expansion phase will consist of up to three
studies in specific tumour types to further evaluate
safety and tolerability and to explore the anti-
tumour activity of AVA6000 when administered asa
monotherapy. This phase of study will comprise 45
to 60 patients in total.
If the AVA6000 study shows that the pre|CISION™
chemistry is effective in reducing systemic toxicity
of Doxorubicin in humans, then it can be applied
to a range of other established chemotherapies to
improve their safety and efficacy. This would open up
a pipeline of next generation chemotherapies for the
Group, with significant clinical and commercial value
in a chemotherapy market that is expected to grow
to $56 billion by 2024.
The Group is on schedule to select the next clinical
development candidate by the end of 2021 from the
Strategic Report pre|CISION™ prodrug pipeline. Lead programmes
include: AVA3996, a FAPα activated proteasome
inhibitor; AVA7500, a FAPα activated platin; and
AVA7000, a FAPα activated taxane. These are being
developed in close collaboration with Professor William
Bachovchin at Tuft’s University School of Medicine.
Building a pre-clinical pipeline of valuable
chemotherapy/immunotherapy drug assets
In the oncology field it has become clear in recent
years that cancer immunotherapies used singly,
so-called ‘monotherapies’ have limited overall
response rates and that combining immune
checkpoint modulators such as PD-1, or PD-L1,
with chemotherapy improves patients’ outcomes.
Avacta is in a unique position, with two proprietary
platforms, to address this urgent clinical need.
The Company’s strategy is to harness the benefits
of the Affimer® platform to build single Affimer®
drug molecules that can hit two drug targets
simultaneously, called ‘bispecifics’, and to bring
together Affimer® immunotherapies with the
pre|CISION™ targeted chemotherapies, in order
to develop superior cancer treatments with better
patient outcomes.
Figure: Addressing the gap in immunotherapy: bispecifics and novel tumour microenvironment activated drug conjugates
PDL1/TGFb ‘Trap’ Bispecific
1. TGF-β ‘trap’ - extracellular domain of TGF-β
receptor II - binds all 3 TGF-β isoforms.
2. FC Fusion for serum half-life extension.
3. PD-L1 inhibitory Affimers promote tumour
localisation and block PD1/PDL1 axis.
2
1
3
Half-life
extension
IL2
PDL1/IL2 Bispecific
Affimer®
XT
• Blocking PD1/PDL1 axis.
• Targeting T-effector cells to tumour.
• Expanding activated T-cells.
• Activation of NK cells.
Tumour cell
PD-L1
T cell
Dendritic Cell
T Cell
Natural
Killer Cell
Macrophage
AVA004 PD-L1
TGF-β:
• Suppresses immune response.
• Promotes tumour vascularisation.
• Promotes epithelial/mesenchymal transition.
• Promotes over-production of tumour
extracellular matrix.
Tumour Microenvironment
Activated Drug Conjugate
NK cell
• Cytotoxin linked to immunotherapy by pre|CISIONTM linker.
• Cytoxin released in the tumour by FAP.
• Synergistic action of pro-inflammatory cytotoxin
and immunotherapy.
• Pipeline potential: immunoactive warheads such as
STING and TLR agonists combined with bispecific
Affimer® immunotherapies.
37
Avacta Report and Accounts 2020
Company has made a patent application with Tufts
University Medical School.
The first of Avacta’s TMACs combines an Affimer®
PD-L1 inhibitor with a powerful chemotherapy
called AVA100 I-DASH (also known as Val-boro-
Pro (VbP)) that kills macrophage in the tumour
microenvironment leading to a significant
inflammatory event that attracts the immune system
to the tumour. The postulated mechanism of action
is that the immune response to the pro-inflammatory
cell killing in the tumour is then supported by the
presence of the Affimer® PD-L1 blockade.
In vivo studies of the lead TMAC® programmes
are ongoing to support the selection of a clinical
development candidate from the pipeline. The first of
these programmes is AVA04-VbP, a TMAC® combining
a PD-L1 Affimer® antagonist with VbP. The second
TMAC® programme combines an Affimer® against an
undisclosed target with VbP.
These in vivo studies will continue through 2021and are
expected to support the selection of the first TMAC®
drug candidate during 2022 for pre-clinical and clinical
development.
Therapeutics Division (Cont)
Bispecifics Affimer® immunotherapies
Good progress has also been made with the in-house
Affimer® bispecific programmes towards selection of
a clinical development candidate by the end of 2021.
Two new programmes have been initiated that build
upon the AVA004 PD-L1 antagonist programme:
AVA027, a PD-L1/TGF-β receptor trap combination,
and AVA028, a PD-L1/IL2 bispecific.
TGF-β largely plays a pro-tumour signalling role by
suppressing the immune response and helping
to build the blood supply to the tumour, as well
as promoting the growth of the tumour in other
ways. Reducing the amount of TGF-β in the tumour
microenvironment is therefore expected to have
an anti-cancer effect which can be combined with
PD-L1 checkpoint inhibition to support the immune
response to the tumour. In AVA027 this is being
achieved by combining a TGF-β trap that helps to mop
up the TGF-β in the tumour along with an Affimer®
PD-L1 blockade in a single drug molecule.
IL-2 is a cytokine that plays a signalling role in
expanding the number of activated immune cells
(T and NK cells). It has been developed as a cancer
therapy, but it suffers from challenging systemic
toxicity and therefore the concept in AVA028 is to
combine IL-2 with an Affimer® PD-L1 inhibitor in a
bispecific drug molecule to not only support the
immune response in the tumour through blocking of
the PD-L1 / PD-1 interaction but also to help target
the IL-2 to tumours which have an increased level
of PD-L1 compared with healthy tissue.
The Group has set the objective of selecting a
bispecific clinical candidate from either the AVA027 or
AVA028 programmes by the end of 2021 to be taken
into pre-clinical development.
TMAC® drug conjugates
The pre|CISION™ substrate can also be
incorporated into a chemical linker joining an Affimer®
immunotherapy with a chemotoxin to create a single
drug conjugate molecule that can be delivered to the
patient in a single infusion. The linker is cut by the FAP
enzyme in the tumour microenvironment releasing
and activating the chemotherapy in the tumour
alongside the Affimer® immunotherapy. By selecting
the chemotherapy to have a mechanism of action that
stimulates and recruits the immune system to the
tumour, the Affimer® checkpoint blockade provides
synergistic support for this immune response.
This tumour microenvironment activated drug conjugate
(TMAC®) is a new class of drug conjugate for which the
38
Strategic Report Complete 2021
39
Avacta Report and Accounts 2020 Therapeutics Division (Cont)
Case Study: AVA6000 Clinical Trial
depend on cumulative dosage and can occur both
acutely or decades after exposure. Doxorubicin is
readily distributed into almost all tissues, resulting in
indiscriminative toxic effects on all cells exposed to
it. The most dangerous side effect of doxorubicin is
cardiomyopathy, leading to congestive heart failure.
The rate of cardiomyopathy is dependent on its
cumulative dose and there are several ways in which
doxorubicin is believed to cause cardiomyopathy.
How does AVA6000 address the drawbacks
of doxorubicin?
Prodrugs are derivatives of drugs which are designed
to remain inactive when they are first administered to
the body allowing the prodrug to bypass key tissues
or systems to reach the relevant target tissue where
they are eventually metabolized to generate the active
drug at the intended site of action. They are particularly
useful in the development of novel antitumour
chemotherapeutics leading to reduced toxicity,
improved specificity or precision targeting and the
avoidance of multi-drug resistance. Several doxorubicin
prodrug candidates are in clinical development, but
none have been commercialised to date.
AVA6000 is a prodrug of doxorubicin designed to
limit cell penetration and biological activity of the
chemotherapeutic agent until it is specifically released
by the enzymatic activity of fibroblast activation
protein α (FAP) in the tumour microenvironment.
The FAP-activated doxorubicin prodrug, AVA6000,
has the potential to deliver doxorubicin directly to the
tumour microenvironment while exposing the patient
to a lesser degree of doxorubicin-associated toxicities.
AVA6000 is expected to have a significantly larger
therapeutic window in comparison with available
doxorubicin treatments. Non-clinical studies have
shown that the toxicity of AVA6000 is significantly
reduced compared to conventional doxorubicin.
Furthermore, the anti-tumour activity of elevated
doses of AVA6000 significantly exceeded the modest
effect of doxorubicin administered at its maximum
tolerated dose, in a mouse xenograft efficacy model.
Avacta’s proprietary pre|CISION™
technology incorporates a substrate
sensitive to cleavage by fibroblast
activation protein (FAP), an enzyme which
is highly upregulated in the tumour
microenvironment (TME) of most solid
tumours compared with healthy tissues.
FAP expression is difficult to detect in
non-diseased adult organs, but is greatly
upregulated in sites of tissue remodelling,
which include liver fibrosis, lung fibrosis,
atherosclerosis, arthritis, tumours and
embryonic tissues.
Due to its restricted expression pattern and dual
enzymatic activities, FAP is emerging as a unique
therapeutic target. FAP expression is seen on
activated stromal fibroblasts of more than 90% of
all human carcinomas.
The pre|CISION™ substrate can be chemically attached
to a chemotherapy to generate a chemotherapy
prodrug which renders the chemotherapy inactive
when it is infused into the bloodstream. Once the
prodrug reaches the tumour microenvironment the
high concentration of FAP present in the tumour
cleaves the substrate from the chemotherapy which
then becomes activated. This precision targeting of
a chemotherapy into the TME provides a means of
concentrating the chemotherapy into the tumour
where it most needed and reduces the toxicity to
healthy tissues such as the heart and bone marrow.
By using this prodrug targeted approach, the systemic
exposure in the human body to the damaging effects
of the chemotherapy is dramatically reduced in
healthy tissues and the safety and therapeutic window
of these powerful anti-cancer treatments is improved.
Doxorubicin
Doxorubicin is one of the most effective anticancer
chemotherapy drugs used for the treatment of a
broad range of solid tumours and haematological
malignancies including breast, ovarian, soft-tissue
sarcoma and lymphoma. However, despite this,
the clinical use of doxorubicin has been limited
because of a significant risk for cardiac damage.
The chances of this life-threatening side effect
40
Strategic Report Moving into the Clinic with AVA6000
We are now planning to move AVA6000 into the clinic
and we have designed a first into human clinical
study (Protocol Number: ALS-6000-101) which
will be run at a small number of UK investigator
sites. The aim of this clinical study is to determine
the maximum tolerated dose (MTD) and/or the
recommended phase 2 dose (RP2D) of AVA6000
when administered as monotherapy with the aim
to deliver an active dose of AVA6000 with fewer
toxicities than those observed with standard
doxorubicin (or other anthracycline) administration.
ALS-6000-101 is a first into human study designed
as a dose escalation and dose expansion in patients
with locally advanced and/or metastatic selected
solid tumours who have progressed on standard of
care treatment. Patients with solid tumours with a
stroma shown in the scientific literature to express
FAP will be enrolled in the dose escalation. These
include patients with pancreatic, colorectal, breast,
ovarian, NSCLC, SCCHN, bladder and soft-tissue
sarcoma. The proposed starting dose is 80 mg/m2
AVA6000 given by iv infusion, with dose escalation
in subsequent cohorts being based on safety,
tolerability and PK data for AVA6000 in the preceding
dose level(s).
In conclusion, AVA6000 is expected to have an
improved therapeutic index relative to conventional
doxorubicin as a consequence of increased intra-
tumoural doxorubicin levels. This should translate
into patients being able to tolerate higher doses
and/or increased number of treatment cycles
of AVA6000 relative to conventional doxorubicin.
AVA6000 will also enable a decreased systemic
exposure of released doxorubicin, resulting in
decreased levels of doxorubicin to tissues including
heart and bone marrow. The attributes of AVA6000-
released doxorubicin are anticipated to lead to
increased efficacy and reduced toxicity compared to
conventional doxorubicin.
AVA6000 Phase I Design and Timeline
2020
Q4
2021
2022
2023
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
CTA
subm
CTA
approved
First Pt
Dosed
pK Data
Cohort 1
First Pt Dosed
(Exp)
Last Pt Out
(Exp)
Phase 1 Safety & pK Study
Approval & Study Set Up
Phase 1a - Dose Escalation
Phase 1b - Dose Expansion
Phase 1a
Phase 1b
• Objective: Assess safety and tolerability of
AVA6000; determine MTD and/or
recommended dose for further development.
• Approximatley 4 Cohorts to Achieve MTD.
• 15 to 20 patients.
• Patient Population: Locally advanced and/or
metastatic pancreatic, colorectal, non-small
cell lung, breast, head and neck (SCCHN), soft
tissue sarcoma, ovarian and bladder cancer.
• Objective: Confirm safety and tolerability of
AVA6000 at the MTD (or recommended dose)
determined in Part 1: explore preliminary
anti-tumour activity.
• Up to 3 cohorts & 15-20 patients/cohort.
• Patient Population: selected on the basis
of Part 1 data.
MTD - Maximum Tolerated Dose
41
Avacta Report and Accounts 2020 Therapeutics Division (Cont)
Drug Development Collaborations
• Good progress in existing partnered programmes during 2020 despite the
restrictions imposed by COVID safe working.
• Expansion of the partnership with LG to include Affimer XT™ half-life
extension platform.
• AffyXell, a partnered programme with Daewoong Pharmaceutical,
established in South Korea to develop next-generation cell and gene
therapies incorporating Affimer® immuno-therapies; successful series A
funding for AffyXell of $7.3 million post-period end.
• Establishment of new collaboration with POINT Biopharma for
pre|CISION™ radiopharmaceuticals.
The Group has established several significant
therapeutic partnerships with biotech
and pharma partners including Moderna
Therapeutics Inc., LG Chem Life Sciences,
Daewoong Pharmaceuticals, ADC Therapeutics
and recently with POINT Biopharma. Despite
the effects of the pandemic, the Group has
continued to make solid progress on those
programmes in which Avacta plays an active
research and development role (LG Chem,
Daewoong and ADC Therapeutics).
In August 2020 Avacta agreed to expand the
existing multi-target collaboration and development
agreement with LG Chem to include new programmes
incorporating Avacta’s Affimer XT™ serum half-life
extension system. The expansion of the partnership
includes an undisclosed additional upfront payment,
plus near-term pre-clinical milestones and longer-
term clinical development milestones totalling up to
$98.5 million for two therapeutics to be developed
using the Affimer XT™ technology. Under the terms of
the extended agreement, LG Chem has the exclusive
rights to develop and commercialise, on a world-wide
basis, Avacta’s Affimer® PD-L1 inhibitor with Affimer
XT™ serum half-life extension.
The expanded partnership also provides LG Chem
with rights to develop and commercialise other
42
Affimer® and non-Affimer® biotherapeutics combined
with Affimer XT™ half-life extension for a range of
indications and Avacta could earn up to an additional
$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.
The Group is working with ADC Therapeutics SA
(Lausanne, CH) to develop conventional Affimer-drug
conjugates combining Avacta’s Affimer® technology
with ADC Therapeutics’ pyrrolobenzodiazepine (PBD)-
based warhead and linker technologies.
As part of the multi-target collaboration, Avacta is in
the process of generating and optimising Affimer®
binders against three undisclosed cancer targets
so that ADC Therapeutics can use these to target
its cytotoxic PBDs to the site of the tumour. ADC
Therapeutics will carry out pre-clinical research and
development programmes to evaluate each of the
Affimer-drug conjugates with a view to generating
clinical candidates.
The Group continues to make excellent progress in its
collaboration with Daewoong Pharmaceutical through
the joint venturepartnered programme, AffyXell.
AffyXell was established in January 2020 by Avacta and
Daewoong as a joint venturepartnered programme
to develop novel stem cell therapies. AffyXell is
combining Avacta’s Affimer® platform with Daewoong’s
mesenchymal stem cell (MSC) platform such that
the stem cells are primed to produce and secrete
therapeutic Affimer® proteins in situ in the patient.
Strategic Report The Affimer® proteins are designed to enhance the
therapeutic effects of the stem cells, creating a novel,
next -generation cell therapy platform.
The Group recently announced, post-period end, that
the joint venture with Daewoong Pharmaceuticals
calledAffyXell has closed a Series A venture capital
investment of $7.3 million to further develop its
pipeline of next-generation cell and gene therapies.
The Series A funding has been raised from a group of
venture funds including Samsung Venture Investment
Corporation, Shinhan Venture Investment, Smilegate
Investment, Shinhan Investment Corporation, Kolon
Investment, Stonebridge Ventures, and Gyeongnam
Venture Investment.
The capital raised will be used by AffyXell to continue
the development of MSCs engineered to produce
Affimer® molecules generated by Avacta that inhibit
inflammatory and autoimmune pathways and
promote tissue regeneration.
While initially focusing on inflammatory and
autoimmune diseases and prevention of organ
transplant rejection, longer term goals could also
include applications in regenerative medicine,
infectious diseases and oncology.
Post-period end the Group entered into a new
licensing agreement with POINT Biopharma
Inc. to provide access to Avacta’s pre|CISION™
technology for the development of tumour-activated
radiopharmaceuticals.
The radiopharmaceutical market is expected to grow
to $15 billion by 20251 and there is a substantial
opportunity to grow much faster if safety and
tolerability of these effective treatments can be
improved. POINT Biopharma is a clinical-stage
pharmaceutical company focused on developing
radioligands2 as precision medicines for the
treatment of cancer.
Avacta’s proprietary pre|CISION™ chemistry can
be used to modify a radioligand drug to form a
tumour-activated prodrug. The prodrug form is
inactive in circulation until it enters the tumour
micro-environment, where it is activated by an
enzyme called fibroblast activation protein (or
FAP) that is present in high abundance in most
solid tumours but not in healthy tissue. Avacta’s
pre|CISION™ technology therefore has the potential
to improve the tolerability and achieve better clinical
outcomes for patients compared with standard
radiopharmaceuticals by targeting the radioligand
treatment more specifically to cancer cells.
The agreement provides POINT with an exclusive
licence to the pre|CISION™ technology for use
in the first radiopharmaceutical prodrug the
company intends to develop, and a non-exclusive
licence to the pre|CISION™ platform for the
development of a broader pipeline of FAP-activated
radiopharmaceuticals.
Under the terms of the agreement, Avacta will receive
an upfront fee and development milestones for
the first radiopharmaceutical prodrug totalling $9.5
million. Avacta will also receive milestone payments
for subsequent radiopharmaceutical prodrugs 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.
1. https://www.marketresearchfuture.com/reports/radio-pharmaceutical-market-1650
2. For more information about radioligands visit https://www.radioligands.org
Our Drug Development Partnerships
AffyXell
A joint venture in South Korea to
develop engineered mesenchymal stem
cells that express and secrete
immuno-modulatory Affimer® molecules
to treat autoimmune diseases
A multi-target development
partnership and licensing
deal worth up to $310 million with
a focus on oncology and
inflammatory diseases
A research partnership and option
agreement to develop tumour
targeting Affimer® Fc fusions to
deliver cytotoxic payloads to
cancerous cells for oncology
A research collaboration and option
agreement to develop Affimer®
molecules against oncology targets
that can be encoded as mRNA and
expressed directly from human tissue
A licence to the
pre|CISIONTM platform for
the development of
tumour-targeting
radiopharmaceuticals
43
Avacta Report and Accounts 2020 Avacta
Animal Health
44
Strategic Report 45
Avacta Report and Accounts 2020 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.
The division’s revenues were impacted during the
first UK lockdown as veterinary practices were forced
to focus only on emergency cases, meaning more
routine consultations, including allergy or therapy
testing, were put on hold. Face-to-face contact with
customers also ceased but the launch of Avacta
Animal Health’s new website in April 2020 allowed
them to continue providing veterinary practices with
a wealth of valuable digital resources throughout, via
the dedicated Practice Portal. This was supported by
a strengthening of the social media campaign.
During this time, the division took the opportunity
to assess its product portfolio and routes to market.
Following a non-cash impairment charge of £1.74
million, and with the business recovering strongly in
the second half of the year to deliver a small operating
profit, it is now positioned well for trading in 2021.
Products and market focus
As the change within the veterinary industry continues
at a rapid pace both 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 development of
the new Avacta Allergy+ portfolio (launched in March
2021) was a key focus throughout 2020 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 is growing, alongside dedicated
provision of tailored and trusted support to veterinary
professionals across the UK. In addition to providing
UK-specific testing services and therapy options via its
own authorised laboratories. it continues to expand
in Europe, as well as in parts of the Asian and Latin
American markets.
Competitive strengths
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.
• Experts in the work-up and management of allergic disease
• Strong veterinary focused team including a number of qualified vets and vet nurses
• Experienced and innovative research and development team
• Evidence-based test and therapy solutions
• Dedicated technical team including dermatology consultants
• Renowned for exceptional level of service and support
• Practice Portal providing a wealth of comprehensive and practical veterinary literature
• Informative pet owner resources
• Educational and training resources for veterinary professionals
46
Strategic Report 47
Avacta Report and Accounts 2020 Animal Health Division (Cont)
Research and development
The dedicated 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. Development of the new Avacta
Allergy+ tests were a key focus of the research and
development team in 2020, with enhancements to
both the canine and feline environmental tests, as
part of the focused new portfolio.
Avacta Animal Health have a strong team, including
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.
Avacta Animal Health will attend and support a
number of UK conferences and events throughout
2021, providing visibility within the industry and
ensuring it remains informed of developments.
These events also provide the opportunity to
convene and converse in person with new and
existing customers, as well as with industry experts
and academics.
Via Avacta’s Diagnostics business there is an
opportunity to scope out new projects using
the Affimer® technology and, with experience in
reproducible research and statistical analysis, all future
work will continue to see a strong steer towards data-
driven projects involving machine learning and data
visualisation. Such analytical techniques will benefit
both internal projects and contracted project work.
48
Strategic Report 49
Avacta Report and Accounts 2020 Financial Review
Revenue
Reported Group revenues for the year ended 31
December 2020 decreased to £3.64 million compared
to the longer 17-month period ended 31 December
2019 (‘2019’): £5.51 million.
Revenues for the Diagnostics division were £0.52 million
(2019: £0.81 million), with the reduction due to a decrease
in the number of custom Affimer® reagent projects given the
working restrictions with some customers and a re-focus of
the business on developing the COVID-19 lateral flow tests
and other related COVID-19 projects.
Revenues for the Therapeutics division were £1.63 million
(2019: £2.52 million), with the 2019 revenue including an
upfront technology access fee arising from the LG Chem
collaboration, whilst 2020 revenues reflected a much smaller
milestone payment in the LG Chem collaboration and reduced
revenues from funded FTE development projects due to
restricted working practices at the Cambridge site.
Revenues for the Animal Health division were £1.49 million
(2019: £2.18 million), with the revenues in the second quarter
of 2020 severely restricted due to the closure of most
veterinary practices during the first lockdown. Revenues for the
second half of 2020 recovered and were only slightly behind
the corresponding period for 2019.
Research and amortisation of development costs
During the year, the Group expensed through the income
statement £8.96 million (2019: £7.86 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 which 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 together with new Animal Health allergy
tests have been amortised, resulting in a charge of £1.01
million (2019: £2.20 million).
Furthermore, development costs amounting to £0.17 million
(2019: £1.88 million) were capitalised within intangible assets
during the period and will be amortised over future periods.
The share of losses from the research costs of the
therapeutics partnered programme with Daewoong
Pharmaceutical, AffyXell Therapeutics, accounted for as an
investment in associate, amounting to £0.22 million (2019:
£nil) have been expensed using the equity method.
50
Following completion of the annual impairment reviews, an
impairment charge of £1.74 million (2019: £nil) has been
recognised against the intangible assets associated with the
Animal Health division comprising goodwill and capitalised
development costs. The charge arose as the business
restructured, in the light of the COVID-19 pandemic and how
the business intends to operate in the veterinary industry,
with short-term revenue estimates being revised downwards.
Selling, general and administrative expenses
Administrative expenses have fallen during the year to £7.32
million (2019: £10.06 million) alongside depreciation at £1.13
million (2019: £1.64 million) due to the 12-month versus
17-month reporting comparative reporting period.
Net finance costs
The Group adopted the new accounting standard IFRS16
Leases during the previous reporting period, which resulted
in an interest charge of £0.1 million (2019: £0.1 million)
being recognised.
Losses before taxation
Losses before taxation from continuing operations for the year
were £21.34 million (2019: £18.05 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 £2.45
million (2019: £2.44 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 £18.89 million (2019: £15.62
million). The loss per ordinary share reduced to 8.37 pence (2019:
12.98 pence) based on an average number of shares in issue
during the period of 229,673,873 (2019: 120,336,858).
Cash flow
The Group reported cash and short-term deposit balances of
£47.91 million at 31 December 2020 (2019: £8.79 million).
Operating cash outflows from operations amounted to £13.35
million (2019: £14.44 million). Within the net operating cash
outflows there were cash receipts in respect of research and
development tax credits amounting to £2.75 million (2019:
£1.63 million) which represented the tax refund for the
previous 17-month financial period.
During the year, capital expenditure increased to £1.28 million
(2019: £0.62 million) as facility expansion at both Wetherby
Strategic Report and Cambridge sites were underway. Capitalised
development costs fell during the year to £0.17 million
(2019: £1.88 million) as the majority of diagnostic
development work was not at the stage of gaining
regulatory approval for commercial launch of products.
The Group completed two fund-raises via a combination
of placings and subscriptions during the reporting
period. The first fund-raise, which was announced in
April 2020, raised £5.75 million gross (£5.36 million net).
The second fund-raise was announced in June 2020 and
raised £48.00 million gross (£45.43 million net).
Financial position
Net assets as at 31 December 2020 were £61.93 million
(2019: £25.81 million) of which short-term deposits, cash
and cash equivalents amounted to £47.91 million (2019:
£8.79 million).
Intangible assets reduced to £9.42 million (2019:
£11.80 million) following the impairment of the Animal
Health goodwill and the amortisation charge of £1.01
million (2019: £2.20 million) exceeding the capitalised
development costs in the period of £0.17 million (2019:
£1.88 million).
The adoption of IFRS16 Leases and the expansion of
leasehold premises in both Wetherby and Cambridge
results in the recognition of a ‘right-of-use’ asset
amounting to £2.10 million (2019: £0.78 million) in
relation to the Group’s three leasehold properties
together with a corresponding lease liability of £2.04
million (2019: £0.82 million).
Dividends
No dividends have been proposed for the year ended 31
December 2020 (2019: £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 the number of customers evaluating Affimer®
reagents which might lead to commercial licensing
agreements within the Diagnostics division.
These are discussed in more detail within the Operational
Review on pages 20 to 47:
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
Page 30
Group revenues
Research and
development expenditure
6
5
4
3
2
1
0
£5.51m
£3.64m
£2.76m
10
8
6
4
2
0
£4.58m
£9.74m
£9.13m
Cash and short-term deposits
60
50
40
30
20
10
0
£47.91m
£5.22m
£8.79m
2018
2019
2020
2018
2019
2020
2018
2019
2020
*2018 is the 12 months ended 31 July 2018; 2019 is the 17 months ended 31 December 2019, 2020 is the 12 months
ended 31 December 2020.
51
Avacta Report and Accounts 2020 Financial Review
(Continued...)
Going concern
These financial statements have been prepared on a going
concern basis, notwithstanding a loss of £18.89 million
and operating cash outflows of £13.35 million for the year
ended 31 December 2020. The Directors consider this to be
appropriate for the following reasons.
The Directors have prepared detailed cash flow forecasts
that extend at least 12 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 12 months from the date of approval of the
financial statements. The key factors considered in reaching
this conclusion are summarised below:
• The Group continues to develop its therapeutic and
diagnostic platform technologies. The development of the
AffiDX® SARS-CoV-2 Antigen Lateral Flow Test, which is in
the late stages of clinical validation and CE marking, could
generate significant revenue and profits for the Group in
the near term, which have not been included in the base
case assessment.
• As at 31 December 2020, the Group’s short-term deposits
and cash and cash equivalents were £47.91 million (2019:
£8.79 million).
• The Group has a tax refund in relation to R&D tax credits
due in the second half of 2021 amounting to £2.20 million
(a comparable tax refund of £2.75 million was received
in October 2020 relating to the 17-month period to 31
December 2019).
52
• 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 have also reviewed these cash flow forecasts in
the light of potential impacts from the COVID-19 pandemic.
The short-term impact centres around the commencement
of clinical trials for the AVA6000 pro-doxorubicin phase
I clinical trials which are due to commence in mid-2021,
the ability to recruit patients to the trial given potential
COVID-19 follow-on issues and any delay this may have on
the initial phase I study readouts. This could potentially delay
expenditures and reduce cash burn during the forecast
period. The Directors are confident that the current level of
funding will be sufficient for the Group and Company to meet
their liabilities for the forecast period.
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 12 months from the date
of approval of the financial statements and therefore have
prepared the financial statements on a going concern basis.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are set
out on pages 54 to 56.
Cautionary statement
The Strategic Report, containing the Operational and
Financial reviews of the Group, contains 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.
Strategic Report
Complete 2021
53
Avacta Report and Accounts 2020 Principal Risks and Uncertainties
The Board is responsible for risk management and
reviewing the internal controls systems. The internal
control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives
and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Group highlights potential financial and non-financial
risks that may impact on the business as part of the risk
management procedures in the form of a Risk Register.
The Board receives these regular reports and monitors the
position at Board meetings. There are ongoing processes
for identifying, evaluating and mitigating the significant risks
faced by the Group, which are reviewed on a regular basis. The
review process involves a review of each area of the business to
identify material risks and the controls in place to manage these
risks. The process is undertaken by the Chief Financial Officer
and senior managers with responsibility for specific controls.
Commercial, Operational, Development and Quality Teams, in
addition to project teams, meet at least once a month to review
progress of all key projects and identify key issues for discussion
with the Senior Management Team. Where any significant
weakness or failing is identified, implementation of appropriate
remedial action is completed following approval by the Board.
The principal risks and uncertainties that could have a
significant impact on the Group are set out below.
COVID-19 pandemic
Change v
The Board continues to monitor and assess the impact of
COVID-19 and the impact it has on the Group’s businesses.
The ability of the Group’s Diagnostics division to react to the
COVID-19 pandemic and help provide a solution which could
bring the impacts of pandemic on daily life to an end has
been transformational for the Group. The interest generated
with shareholders created the opportunity to raise significant
funds to support the Group in developing its diagnostics and
therapeutics platforms.
The downsides of the pandemic have led to many challenges in
working practices across the Group, with scientific staff working
shifts to ensure safe laboratory working practices, and support
staff working from home where possible to reduce the number
of staff on each site. Additional premises have been taken on
in both Cambridge and Wetherby and have been fitted out to
provide further laboratory space for all the scientific teams to
return to the laboratories full time and allow for the expansion
of the teams over the coming months.
54
There has been an impact on the therapeutic programmes
and some changes to work programmes were necessary in
the early lockdown period whilst we managed staff numbers
on site. Our contract manufacturing and clinical operations
partners also reduced staffing levels, which caused some
delays to programmes. This also had an impact on our
partnered programme revenues recognised during 2020,
with some revenues based on FTE work slipping back into
2021. However, COVID-safe working systems are now in place
and the teams are focused on bringing the programmes to
fruition with our partners.
The dosing of first patients in our AVA6000 phase I study, now
that we have regulatory approval, is due to commence in the
middle of 2021. The exact timings of this will be determined by
how quickly the pressure on clinicians and hospitals is reduced
from the COVID-19 pandemic.
Our Animal Health division’s revenues were impacted during
the first lockdown as veterinary practices were focusing on
emergency cases, with more routine appointments in relation
to allergy or therapy testing being put on hold. The division
took the opportunity to assess its product portfolio and routes
to market during this time and whilst some staff transferred
across to the Diagnostics division there were unfortunately
two redundancies as a result of this process. The business has
recovered strongly in the second half of the year and delivered
a small operating profit, positioning it well for trading in 2021.
Manufacturing and supply risk - Diagnostics Change ^
With its partners, the Group has developed a SARS-CoV-2 antigen
lateral flow test, which is in the process of completing formal clinical
validation and CE marking.
The Group’s ability to successfully scale up production with third-
party manufacturing partners and establish an appropriate supply
chain for the approved AffiDX® SARS-CoV-2 Antigen Lateral Flow
Test will be vital to the commercial success of the product.
Product manufacture requires successful clinical validation
and verification of production scale batches which is subject to
continual regulatory control in order to achieve and maintain CE
marking and similar regulatory approvals. Any changes to the
approved process may require further regulatory approval which
could delay the commercial launch of the product.
Substantial cost increases of kit components and delays in
production / sourcing could adversely impact the ability to produce
tests in sufficient quantities to meet market demands.
The Group has established contractual relationships with several
key manufacturers and suppliers of kit components in order to
ensure availability of supply and not place over-reliance on any one
supplier or manufacturer. Regulatory and supply chain specialists
have been engaged to support the Group with risk mitigation plans
in place where supply or production challenges are identified.
Strategic Report
Commercial risk - Diagnostics
Change ^
The transition of the Diagnostics business has been signif-
icant because of the SARS-CoV-2 antigen lateral flow test
opportunity. In 2019 the division was focused on providing
custom Affimer® development projects for commercial
partners which could lead to commercial royalty-based deals.
In 2020 the business has progressed to developing its own
diagnostic products, such as the COVID-19 lateral flow test,
and working on collaborative projects with partners.
In order to participate in tender contracts offered by the
UK Government, the AffiDX® SARS-CoV-2 Antigen Lateral
Flow Test has to pass an evaluation process at the UK
Government’s Porton Down facility. The first stage of the
evaluation process does not use the lateral flow test in
the manner that it was designed for and there is therefore
uncertainty as to whether the test can pass the Porton Down
evaluation process which could delay the ability to tender
for government contracts. The Group is progressing the
clinical validation and CE marking of the product so that sales
channels (other than the UK Government) can be exploited
regardless of any delays in obtaining UK Government
approval or tenders.
Establishing commercial sales channels within the UK,
Europe and other countries for the AffiDX® SARS-CoV-2
Antigen Lateral Flow Test will involve substantial business
development and management/legal time to ensure the
partnerships established are as commercially rewarding
as possible and sustainable without creating any significant
commercial risk in terms of working capital.
Building collaboration partnerships with large pharma/
biotech companies can be a lengthy process and normal
business development channels, such as conferences, have
changed because of the pandemic. However, the Astrea
licence and collaboration deal for affinity separation signed
in December 2020 shows the potential for significant
diagnostic partnerships.
Reliance on third parties supporting clinical and
pre-clinical programmes - Therapeutics
Change ^
Avacta relies heavily upon other parties (including clinical
research organisations) for many important stages of its
therapeutic development programmes, including execution
of some pre-clinical studies and later-stage development
for its compounds and drug candidates, management of
its clinical trials, including medical monitoring and data
management. Underperformance by any of these other
parties could adversely impact the Group’s ability to operate
effectively. There is also a risk that changes in the wider
regulatory environment as a result of clinical trial outcomes
from other biotech companies could stop or slow down Avacta’s
clinical trial programmes whilst regulatory guidance is clarified.
With the Group about to commence phase I trials on its first
clinical programme (AVA6000) there has been significant
recruitment to build a clinical development team, led by Neil
Bell, and they are working to ensure the performance of the
third parties that are contracted to ensure that the quality and
timeliness of these services provided are acceptable.
The Group consults, where appropriate, with regulatory advisers
and regulatory approved bodies to ensure that all regulatory
requirements are met, as demonstrated by the submission,
timely approval and positive feedback of the CTA submission
to the MHRA for the AVA6000 programme.
The Group uses experienced and reputable clinical research
organisations and requires its clinical and manufacturing
partners to comply with Good Clinical Practice and Good
Manufacturing Practice.
Research and development
The Group’s research and development activities continue to
focus around the Affimer® technology within the Diagnostic
division and the Affimer® and pre|CISION™ technologies in
the Therapeutics division.
Change < >
There is a risk, consistent with similar biotechnology companies
developing new and innovative technology platforms, that the
scientists involved are unable to produce the results required
for specific internal development programmes, product
development projects, customer-related evaluations or third-
party collaborations. This risk is in specific applications of
the Affimer® or pre|CISION™ technologies rather than in the
individual technology platform as a whole. There is a risk that
poor clinical data from the AVA6000 clinical trial highlights a
problem, not only with the AVA6000 programme but also with
the wider pre|CISION™ platform, which may delay or limit the
ability to progress the programme or the wider platform.
The development teams continue to work both internally and
with CROs on improving the core Affimer®, pre|CISION™ and
TMAC® technology platforms and expanding the potential
areas where the technology has significant benefits over
existing antibody technologies with oversight from the Senior
Management Team, the Board and the Scientific Advisory Board.
Funding
The development of the Group’s Affimer® and pre|CISION™
technologies in the Therapeutics division, is resource and cash
intensive. The Group successfully raised two separate tranches
of funding in April and June 2020 totalling £53.75 million to
continue to develop its technology.
Change v
As at 31 December 2020, the Group had cash and short-term
deposits of £47.91 million, which leaves it in a strong position to
deliver on its short- to medium -term objectives, including the
potential significant cash generation that the AffiDX® SARS-CoV-2
Antigen Lateral Flow Test could contribute to Group funding.
55
Avacta Report and Accounts 2020
Strategic Report
Principal Risks and Uncertanties
(Continued...)
The Group has in place disaster recovery plans which are
periodically tested and third-party specialists are used to assess
any potential vulnerabilities in the Group’s systems.
The Group ensures that all software and systems are
regularly updated to latest software versions and firmware
updates. Its cyber security plans are reviewed on a regular
basis and has recently upgraded its security access levels
working with a UK government backed organisation given the
number of staff now working remotely from Avacta sites. It also
provides training to staff on dealing with potential cyber attacks
and security risk.
Loss of facilities
Should the Group’s facilities become inaccessible through
damage caused by fire, flooding or theft, the ability to carry on
development programmes and meet customer deadlines may
be affected depending on the severity of the incident.
Change < >
The Group has purpose-built facilities in both Wetherby
and Cambridge which have specialist equipment and
working environments which potentially may not be easily
repaired or replaced.
The Group has established business continuity plans in place
for each location which are regularly reviewed and tested.
Resilience exists between sites so that certain operations
could be quickly transferred from one facility to another where
appropriate. Health and Safety procedures and policies exist
for each site with routine checks on facilities, equipment and
infrastructure. The Group also maintains adequate insurance to
cover any business damage or interruption.
This Strategic Report, which outlines our performance against
our strategic objectives, performance and financial position, as
well as our outlook for the future, was approved by the Board
on 22 April 2021 and signed on its behalf.
Alastair Smith
Chief Executive Officer
Tony Gardiner
Chief Financial Officer
22 April 2021
22 April 2021
Should the Group decide to accelerate the Affimer® and
pre|CISION™ therapeutic development programmes
and take more programmes into clinical trials to increase
shareholder value then further funding would need to be
raised. As with all fundraising activities, there are external
market and economic factors which may impact the timing
and amount of funding available.
Intellectual property
The success of the Group’s Affimer® and pre|CISION™ tech-
nology platforms depends on its ability to obtain and maintain
patent protection for its proprietary technology.
Change < >
Failure to protect the Affimer® and pre|CISION™ technology
platforms, or to obtain patent protection with a scope that is
sufficiently wide, could significantly impact the ability to com-
mercialise the technology.
Should the patents be challenged, there could be a considerable
cost in defending the patent rights, with an uncertain outcome.
The Board regularly reviews the patent portfolio and its
protection. Specialist patent attorneys are engaged to apply for
and defend intellectual property rights in appropriate territories.
Key staff
Change < >
The Group has in place an experienced and motivated Senior
Leadership Team together with a significant number of highly
skilled senior scientists. Loss of key staff could lead to a delay
in the Group’s plans and operations.
During the year, the Group has successfully recruited senior
specialist roles within the Therapeutics division covering clinical
development areas and further senior staff have joined during
2021. The Diagnostics division has recruited senior staff skilled
in product development of diagnostic devices and built a
quality assurance and regulatory team to support the division
in its introduction of an ISO 13485 quality system.
The Group aims to provide remuneration packages,
including share incentive plans, and working conditions that
will attract and retain staff of the required level, informally
benchmarking the level of benefits provided to its staff
against comparator companies.
Cybersecurity
Unexpected events such as IT systems failures or targeted cyber
attacks could disrupt the Group’s operations from any of its
sites or lead to a loss of data.
Change < >
The Group continues to place reliance on third-party
cloud-hosted applications, which provide cost-effective services
with significant redundancies and disaster prevention and
recovery strategies.
56
Governance
58
Board of Directors
60
Senior Leadership Team
64
Directors’ Report
67
Corporate Governance Report
72
Audit Committee Report
74
Remuneration Committee Report
79
81
Statement of Directors’
Responsibilities
Independent Auditor’s Report to
the Members of Avacta Group plc
5
57
Avacta Report and Accounts 2020 Board of Directors
The Avacta Group Board of
Directors provide experienced
strategic and practical guidance to
the Company to help ensure that
the interests of all shareholders
are met and that corporate good
practice is followed.
Top row:
Dr Eliot Forster
Dr Alastair Smith
Middle row:
Tony Gardiner
Dr Trevor Nicholls
Bottom row:
Paul Fry
Dr Mike Owen
58
Governance
Dr Eliot Forster
Non-executive Chairman
Tony Gardiner
Chief Financial Officer
Paul Fry
Non-executive Director
Eliot was appointed as Chairman to
the Board in June 2018, bringing with
him three decades of experience in the
pharmaceutical and biotechnology industry.
He is currently the Chief Executive Officer
of F-star (NASDAQ FSTX), a clinical stage
biopharmaceutical company developing
immuno-oncology bispecific antibody
treatments. He is also Non-executive
Director of Immatics NV, a clinical stage
biopharmaceutical company developing
TCR-based therapeutics for the treatment
of cancer (NASDAQ IMTX).
Prior to joining F-star, Eliot was Chief
Executive Officer at Immunocore, Creabilis
Therapeutics and Solace Pharmaceuticals
Inc. The early part of Eliot’s career was
at GSK and then at Pfizer, where he was
involved in bringing several drugs to
market, including Celebrex® (celecoxib) and
Relpax® (eletriptan).
Eliot holds a PhD in neurophysiology from
Liverpool University and an MBA from
Henley Management College. He is an
Honorary Visiting Professor at the University
of Liverpool and at the University of Pavia. He
is a Board member of OSCHR (UK Office for
Strategic Coordination of Health Research)
and the National Genomics Board.
Eliot is a member of the Remuneration
Committee and the Audit Committee.
Dr Alastair Smith
Chief Executive Officer
Alastair was Founder of Avacta and has
been Chief Executive Officer since its
inception in 2005. Alastair has extensive
management, strategic planning and
transactional experience, having led the
public and private M&A activities of the
Group including the IPO of the Group
in 2006 via a reverse merger. He is
well known in the UK public markets; a
respected and trusted executive with many
years’ experience of investor relations
in the UK, Europe and USA. He has
successfully delivered multiple follow-on
fundraisings for the Group.
Alastair is a scientist by training with
a degree and PhD in Physics from
Manchester University. Following a period
of working in the USA, he returned in 1995
to take up an academic position at Leeds
University, becoming Professor of Molecular
Biophysics at the age of 38. Over a ten-year
period, through close collaboration with
life scientists, he built one of the leading
biophysics research groups in Europe
before leaving his academic career in 2007
to focus full time on delivering value to
Avacta shareholders.
Tony joined Avacta in January 2016 as
Chief Financial Officer and is a member
of the Institute of Chartered Accountants
of England and Wales. He has over 25
years’ experience of senior financial and
operational management roles across
several different sectors. Between 2007
and 2011, Tony was the Chief Financial
Officer of AIM-listed Fusion IP plc, an IP
commercialisation company, which was
subsequently acquired by IP Group plc in
2014. He played a key role in supporting
the growth of the business and oversaw
all finance activities as well as directly
supporting life sciences and health
technology companies in Fusion’s portfolio.
Tony joined Avacta from AHR, an international
architecture and building consultancy practice
where he had been Finance Director since
2011. Tony has also held senior finance roles
within Eversheds LLP, KCOM Group plc and
Hickson International plc.
Dr Trevor Nicholls
Non-executive Director
Trevor brings considerable experience in
the commercialisation of innovative life
science technologies from his previous roles
as Chief Commercial Officer at Affymetrix,
founder and Chief Executive Officer of
UK biotech company Oxagen Ltd and
Commercial Director of the Life Sciences
business at Amersham International (now
part of Danaher Corporation).
At the end of 2020, after 15 years in the
role, Trevor retired as Chief Executive
Officer of the Centre for Agriculture and
Bioscience International, a not-for-profit
intergovernmental organisation owned
by 47 member countries whose mission
is to improve lives worldwide by providing
information and applying scientific
expertise to solve problems in agriculture
and the environment.
In addition to Avacta, Trevor is also Non-
executive Chairman of Iota Sciences Limited,
a spin-out company from the University of
Oxford which is commercialising innovative
microfluidic technology for the life sciences
sector, and a Non-executive Director of
Conidia Bioscience Limited, which develops
and sells patented lateral flow tests for the
detection of microbial contamination of
aviation and diesel fuels. Previously Trevor
has been Non-executive Chairman of DNA
sequencing company Oxford Nanopore
Technologies Limited and of Activiomics
Limited, a biomarker discovery specialist, as
well as a Non-executive Director of hVivo plc,
a clinical research organisation.
Paul was appointed as a Non-executive
Director in February 2020. Paul has
extensive financial experience across
several industries including biotech,
pharmaceutical and telecommunications.
He is currently Chief Financial Officer of
Vectura Group plc, an industry-leading
inhaled drug delivery specialist listed on
the FTSE Main Market.
Prior to his current position, he was
Chief Financial Officer of Immunocore
Limited, a leading biotech company
focused on the development of a new
class of immunotherapeutic drugs
based on proprietary T-cell receptor
technology. Paul has also served as
Director of Global Finance Operations at
Vodafone plc and spent more than 25
years at GlaxoSmithKline (‘GSK’), where
he held several senior roles including
Head of Global Finance Services and
Chief Financial Officer for GSK’s Italian
pharmaceutical business.
Paul holds a degree from Oxford University
and is a member of the Chartered Institute
of Management Accounts.
Paul is Chair of the Audit Committee and a
member of the Remuneration Committee.
Dr Mike Owen
Senior Independent Director1
Mike was Senior Vice-President
and global Head of Research of the
Biopharmaceuticals R&D Unit at
GlaxoSmithKline and was responsible
for initiating and rapidly growing GSK’s
robust pre-clinical and clinical therapeutic
antibody pipeline during the last decade
through in-house development as well as
through acquisitions such as Domantis.
He left GSK in 2010 to establish Kymab,
which is developing biotherapeutics using
its novel transgenic mouse platform.
Mike is an immunologist by training who
had a highly successful scientific career
at Imperial Cancer Research, during
which he was elected a member of the
European Molecular Biology Organisation
and a fellow of the Academy of Medical
Sciences. Mike is also an independent
Board member at Sareum plc, Zealand
Pharma, Chairman and Non-executive
Director of Ossianix Inc., and a Non-
executive Director of ReNeuron plc,
GammaDelta Therapeutics and Glythera.
He also advises the private equity CRT
Pioneer Fund. Mike is Chairman of the
Scientific Advisory Board and a member
of the Remuneration Committee and the
Audit Committee.
Trevor is Chair of the Remuneration
Committee and a member of the Audit
Committee.
1 Mike Owen resigned from the Board on 24
March 2021 and took on the non-Board role
of Chair of the Scientific Advisory Board.
59
Avacta Report and Accounts 2020 Senior Leadership Team
The Senior Leadership Team
bring a wealth of commercial,
technical, scientific and operational
experience to the Group.
Working with the Board of Directors,
the team helps define the Group’s
strategy and provides experienced
management of the Group’s
activities to deliver that strategy.
Top row:
Dr Matt Johnson
David Wilson
Middle row:
Mary Bronserud
Emma Wright
Dr Neil Bell
Bottom row:
Dr Amrik Basran
Dr Matt Vincent
60
Governance
Dr Matt Johnson
Chief Scientific Officer - Diagnostics
Matt studied Genetics and Microbiology
at the University of Sheffield and
completed a PhD in Molecular Biology
with Dr Anne Moir investigating novel
surface proteins of the B. cereus
endospore. As part of his PhD, he
completed an EMBO short-term
fellowship at the Pasteur Institute in
Paris with Dr Michele Mock, looking
at the same proteins in B. anthracis,
the causative agent of anthrax. After
completing his PhD, Matt took a
Postdoctoral position in the Department
of Biochemistry at Cambridge University
with Professor George Salmond. The
focus of the project was characterising
a novel toxin-antitoxin phage resistance
mechanism discovered on a cryptic
plasmid in E. carotovora. Matt joined
Abcam in 2005 as a development
scientist and his career developed as the
company grew to become the leading
provider of research-grade antibodies in
the life sciences market. He held several
roles over his eight years in the company,
culminating in the post of Head of
R&D. His experience at Abcam includes
building an imaging team for ICC and
IHC, being responsible for managing
the antibody characterisation group,
running a team responsible for process
improvements and QA, project managing
a team of developers implementing a
new LIMS system and management
team of the Product Development
and Manufacturing facility. As Head
of R&D, he built and ran a research
group with interests in recombinant
antibody/binder technologies,
alternative detection methodologies,
immunoassay development and
antibody characterisation. His other
responsibilities included contributing
to M&A strategy, licensing deals and
technology scouting. To support this,
he completed a Postgraduate Certificate
in Intellectual Property Law at the
University of Bournemouth in 2012
David Wilson
Commercial Director - Diagnostics
David brings to Avacta over 25 years’
international experience in business
development, marketing and sales
management in the in vitro diagnostic
medical devices industry, having held
senior commercial and Board-level
positions in global corporations, angel
and venture capital funded start-ups
and a sector-specific trade association.
Following a twelve-year period at
Genzyme Corporation, where David
led the international sales, marketing
and business development functions
for the Diagnostics Products division,
he joined US/Israeli start-up Molecular
Detection as Vice-President Commercial
Operations to lead the commercial
development of a molecular diagnostics
technology platform applied to the
rapid, accurate detection of antibiotic-
resistant bacteria.
Building on his experience supporting
the development of early-stage
businesses and technologies in the
in vitro diagnostics sector, David joined
London / Boston-based specialist life
sciences consulting firm Alacrita and led
the development of their diagnostics
consulting practice, providing both
strategic and operational support to
early-stage diagnostics companies
entering new markets. More recently,
as Head of International Sales for
USA-based Asuragen Inc., David led
a team developing and delivering the
international commercial strategy for
a specialised genetic and oncology
molecular diagnostic product portfolio.
He is currently a Board member for
two early-stage diagnostic businesses
developing novel point-of-care
diagnostic testing platforms and has
served on the Executive Committee
of the British In Vitro Diagnostics
Association (BIVDA). David has a BSc
(Hons) in Biochemistry and Microbiology
from the University of St. Andrews
and an MBA from the Open University
Business School.
Mary Bronserud
Operations Director - Diagnostics &
Animal Health
With 20 years’ experience in senior
leadership positions in FMCG and Animal
Health, Mary joined the Animal Health
division of Avacta in 2018. She came
directly from a global management
consultancy that specialised in
organisation design, enabling companies
to realise their potential. Mary has a
wealth of experience in sales, marketing
and supply chain/logistics, which provide
a strong commercial perspective,
alongside strategic leadership.
Mary took on the role of Operations
Director for the Diagnostics division
during 2020, in addition to her role of
managing the Animal Health division.
Mary’s role oversees the Regulatory and
Quality teams within the Diagnostics
division, including the implementation
of the ISO13485 Quality systems. The
operations team includes laboratory
operations, production and building the
supply chain/logistics infrastructure for
the future.
As General Manager of the Animal
Health division, Mary successfully leads
the business, working closely with
team members across Research and
Development, Laboratory Services,
Technical Support, Sales and Marketing,
driving the business forward and
developing the teams. Mary has a
passion for creating an authentic working
environment and strongly encourages
cross-functional collaboration and
teamwork to innovate and succeed.
Emma Wright
Group In-house Counsel
Emma Wright has 20 years’ experience
in advising on, drafting and negotiating
commercial and intellectual property
contracts. She joined Avacta Group plc
in 2014 from Walker Morris Solicitors,
where she headed the Life Sciences and
Pharmaceuticals Group for the practice.
Emma has previous in-house experience,
working at the global FTSE 100 medical
devices company, Smith & Nephew plc.
She was also a member of the Legal and
Regulatory Committee and Adjudication
Panel of the Association of British
Healthcare Industries (ABHI). Emma has
a wealth of experience in commercial
contracts relating to research,
development and commercialisation in
the life sciences sector, including cross-
jurisdictional research and collaboration
agreements; supply agreements;
manufacturing and outsourcing
agreements; and multi-jurisdictional
intellectual property licensing.
61
Avacta Report and Accounts 2020 development, and with Avacta as Vice
President, Business Development and
Therapeutic Innovation Strategy he
brings his overall background to bear
through coordinating the company’s
business, intellectual property, drug
pricing and regulatory strategies.
His experience has provided him
with shrewd analytical skills and
market research capabilities founded
on a broad science-based business
background, as well as the ability to
collaborate cross-functionally with
scientific and legal teams. Areas of
deep technical expertise include drug
development relating to oncology
(with strengths in immuno-oncology),
inflammatory, autoimmune, metabolic
and cardiovascular diseases,
ophthalmology (both front-of-the-eye
and back-of-the-eye diseases) and
cell therapies. At Ocata Therapeutics,
he led the business development
efforts, contract negotiations and due
diligence team through the acquisition
of Ocata by Astellas Pharmaceuticals
for an almost 100% premium over
market capitalisation.
Matt holds a BS in Chemistry from
Worcester Polytechnic Institute, a PhD
in Biochemistry from Tufts University
School of Medicine, and a J.D. from
Suffolk University School of Law. He is
also a co-inventor on several patents
and a co-author on recent papers
in such high impact journals as The
Lancet, Nature and Cell.
Senior Leadership Team
(Continued...)
Dr Neil Bell
Chief Development Officer -
Therapeutics
Dr Amrik Basran
Chief Scientific Officer -
Therapeutics
Neil is responsible for late stage
pre-clinical and early clinical
development of Avacta’s pipeline of
pre|CISION™ prodrugs and Affimer®
immunotherapies. Neil has over
30 years’ experience in the drug
development industry, having held
senior positions in global pharmaceutical
companies and innovative biotechs.
The early part of his career was spent in
clinical development at Eisai and Pfizer
before becoming Therapeutic Area Head
for Gastroenterology and Neurology
at Ipsen. In each of these roles he led
numerous phase I to III clinical studies,
gaining significant experience across
all facets of drug development: from
strategy to pre-clinical development,
manufacturing and regulatory, to clinical
study design and implementation.
In his role as Head of Global Clinical
Operations for Teva Pharmaceuticals,
Neil led an international team
responsible for the delivery of clinical
programmes in neurology, autoimmune
and oncology therapeutic areas. During
this period, he contributed to the
development of Copaxone, achieving
leadership in the treatment for multiple
sclerosis globally, as well as successfully
introducing Azilect to global markets.
Following this period at Teva, Neil
joined Daichi-Sankyo as Head of Clinical
Operations, where he led the clinical
operations team through early and
late-stage development activities across
cardiovascular, pain and oncology,
and was responsible for building an
effective drug development organisation
in Europe serving the global clinical
programmes and leading to the
successful global approval of Edoxaban.
Most recently, Neil held the role of Senior
Vice President, Head of Global Clinical
Operations at Autolus, a UK cell and gene
therapy company backed by Syncona,
which listed in the USA in 2018 (NASDAQ:
AUTL); a process in which Neil played a
key role. At Autolus Neil was responsible
for building a global clinical operations
team delivering phase I/II clinical studies
across the UK, Europe and USA in acute
lymphoblastic leukemia, multiple myeloma,
B-cell lymphoma, and T-cell lymphoma,
and implemented the first commercially
sponsored CAR-T study in the UK.
62
Amrik has over 15 years’ experience of
both the biotech and pharma industries.
He completed his degree and PhD at
the University of Leicester and has a
background in protein biochemistry /
engineering. He then spent six years
as a post-doctoral researcher at the
Institute of Biotechnology, Cambridge
University isolating novel bacterial
pathways involved with the metabolism
of illicit drugs and high explosives.
In 2002, Amrik then joined Domantis,
a start-up biotech company based
in Cambridge developing domain
antibodies (dAbs), a novel antibody
fragment technology. As Director of
Protein Sciences, he was responsible
for characterising the lead dAbs from
early discovery for their suitability for
drug development, supporting pre-
clinical evaluations and tech transfer to
CMOs. Domantis was acquired by GSK
in 2006, after which Amrik became Head
of Topical Delivery (Biopharm Discovery
Unit), supporting the development of
biotherapeutics across the GSK portfolio.
The group focused on discovering and
developing a wide range of therapeutic
antibodies, dAbs and proteins for
delivery into the eye, skin and lung. This
included developing formulation and
delivery strategies for biotherapeutics for
phase I clinical studies.
Amrik left GSK in 2012 and joined
Avacta in 2013 as Chief Scientific Officer
to develop the Affimer® platform for
therapeutic use, focusing on immuno-
oncology where there is a high unmet
medical need for new novel drugs to
improve the long-term clinical outcome
for cancer patients.
Dr Matt Vincent
Senior Vice President, Business
Development and Innovation
Strategy - Therapeutics
Matt joined the company in 2017 with
over 30 years of experience in the
life science industry in both law firm
settings and in business development
roles that provided him with a robust
deal sheet developed through extensive
transaction/negotiation lead experience.
In each of his various previous roles,
he has specialised in collaboration
management and therapeutic
Governance 63
Avacta Report and Accounts 2020 Directors’ Report
The Directors present their report and the audited
financial statements for the period ended 31
December 2020.
Principal activity
The principal activities of the Group are based on developing
safe and efficacious drugs, and high-performing diagnostics,
based on its proprietary Affimer® and pre|CISION™ platforms.
The Therapeutics division, based in Cambridge, UK, develops
novel cancer immunotherapies combining its two proprietary
platforms – Affimer® biotherapeutics and pre|CISION™
tumour-targeted chemotherapy – aiming to address the lack of
a durable response to current immunotherapies experienced
by most patients.
The Diagnostics division, based in Wetherby, UK, utilises its
proprietary Affimer® platform to develop high-performing
diagnostics and works with partners world-wide to develop
Affimer® reagents with the objective of establishing royalty-
bearing licensing deals.
The Group also provides veterinary laboratory services and
develops market-leading veterinary diagnostic tests through its
Animal Health division.
Business review and future developments
A review of the Group’s operations and future developments
is covered in the Strategic Report on pages 16 - 56. This report
includes sections on strategy and markets and considers key
risks and key performance indicators.
Financial results
Details of the Group’s financial results are set out in the
Consolidated Income Statement and other components on
pages 90 to 127.
The Directors have reviewed the results for the year ended
31 December 2020 and the 17-month period ended 31
December 2019, including the Annual Report & Accounts,
preliminary results statement and the report from the external
auditor. In reviewing the statements and determining whether
they were fair, balanced and understandable, the Directors
considered the work and recommendations of management
as well as the report from the external auditor.
Financial key performance indicators (‘KPIs’)
A review of the Group’s KPIs are included within the Financial
Review on pages 50 to 52.
Dividends
The Directors do not recommend the payment of a dividend
(2019: £nil).
Going concern
These financial statements have been prepared on a going
concern basis, notwithstanding a loss of £18.9 million and
64
operating cash outflows of £13.3 million for the period
ended 31 December 2020. The Directors consider this to be
appropriate for the following reasons.
The Directors have prepared detailed cash flow forecasts that
extend to at least 12 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 12 months from the date of approval of the
financial statements. The key factors considered in reaching
this conclusion are summarised below:
• The Group continues to develop its therapeutic and
diagnostic platform technologies. The development of the
AffiDX® SARS-CoV-2 Antigen Lateral Flow Test, which is in
the late stages of clinical validation and CE marking, could
generate significant revenue and profits for the Group in
the near term, which have not been included in the base
case assessment.
• As at 31 December 2020, the Group’s short-term deposits
and cash and cash equivalents were £47.9 million (2019:
£8.8 million).
• The Group has a tax refund in relation to R&D tax credits
due in the second half of 2021 amounting to £2.2 million
(a comparable tax refund of £2.5 million was received in
October 2020).
• 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 have also reviewed these cash flow forecasts in
the light of potential impacts from the COVID-19 pandemic.
The short-term impact centres around the commencement of
clinical trials for the AVA6000 pro-doxorubicin phase I clinical
trials, which are due to commence in mid-2021, the ability to
recruit patients to the trial given potential COVID-19 follow-
on issues and any delay this may have on the initial phase I
Governance study readouts. This could potentially delay expenditures and
reduce cash burn during the forecast period. The Directors
are confident that the current level of funding will be sufficient
for the Group and Company to meet their liabilities for the
forecast period.
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 12 months from the date
of approval of the financial statements and therefore have
prepared the financial statements on a going concern basis.
Directors
The Directors who were in office during the year and up to
the date of signing the Report and Accounts, unless otherwise
stated were:
• Dr Eliot Forster
• Dr Trevor Nicholls
• Dr Mike Owen - Resigned 24 March 2021
• Paul Fry - Appointed 3 February 2020
• Dr Alastair Smith
• Tony Gardiner
Under the Articles of Association of the Company, Directors
are subject to re-election at the Annual General Meeting
following their appointment. In addition, one third of the
Directors are required to retire at the forthcoming Annual
General Meeting, notice of which accompanies this Report and
Accounts. The Directors retiring by rotation at the forthcoming
Annual General Meeting are Eliot Forster and Trevor Nicholls.
Both Eliot Forster and Trevor Nicholls, being eligible, offer
themselves for re-election. In relation to the re-elections of
each of the Directors, the Board is satisfied that both Directors
continue to be effective and to demonstrate commitment to
the Company. Details of the Directors offering themselves
for re-election or re-appointment at the forthcoming Annual
General Meeting can be found on pages 58 and 59.
The Directors benefited from qualifying third-party indemnity
provisions in place during the financial year and at the date of
this report.
Substantial shareholders
The Company is informed that, at 22 April 2021, individual
registered shareholdings of more than 3% of the Company’s
issued share capital were as follows:
Premier Miton Group
Number of
shares
11,609,794
Baillie Gifford & Co Limited
11,515,758
Conifer Management, LLC
8,333,333
% of issued
ordinary
share capital
4.7%
4.6%
3.5%
Directors’ shareholdings
The beneficial interests of the Directors in the share capital of
the Company at 31 December 2020 and at 22 April 2021 were
as follows:
31 December
2020
number of
shares
22 April
2021
number of
shares
153,333
107,455
7,763
-
431,100
8,196
153,333
107,455
7,763
-
431,100
8,196
Non-executive Directors
Eliot Forster
Trevor Nicholls
Mike Owen
Paul Fry
Executive Directors
Alastair Smith
Tony Gardiner
In addition, Alastair Smith has a joint interest in 1,640,000
shares and Tony Gardiner has a joint interest in 150,000
shares in the share capital of the Company. Such shares
are jointly held by themselves individually and Avacta Group
Trustee Limited in its capacity as trustee of The Avacta
Employees’ Share Trust. The precise nature of the joint
interest is described within Joint Share Ownership Agreements
between Alastair Smith (dated 9 January 2012 and 15 February
2016) or Tony Gardiner (dated 15 February 2016) and Avacta
Group Trustee Limited and Avacta Group plc in both cases.
None of the Directors have any interest in the share capital of
any subsidiary company. Further details of options held by the
Directors are set out in the Remuneration Committee Report
on pages 74 to 78.
The middle market price of the Company’s ordinary shares on
31 December 2020 was 114p and the range during the period
was 14p to 202p with an average price of 107p.
Information on Directors’ remuneration and share option
rights is given in the Remuneration Committee Report on
pages 74 to 78.
Research and development
During the year, the Group expensed through the income
statement £8.96 million (2019: £7.86 million) in relation to
research costs which relate to the costs associated with
the pre-clinical Affimer® and pre|CISION™ therapeutic
programmes and the early-stage development costs of the
diagnostic programmes. In addition, development costs
capitalised in prior periods from the custom Affimer® reagents
and diagnostics programmes, and new Animal Health allergy
tests are amortised, resulting in a charge of £1.01 million
(2019: £2.20 million).
Furthermore, development costs amounting to £0.17 million
(2019: £1.88 million) were capitalised within intangible assets
during the period and will be amortised over future periods.
65
Avacta Report and Accounts 2020
Directors’ Report
(Continued...)
Derivatives and financial instruments
The Group’s policy and exposure to derivatives and financial
instruments is set out at Note 19.
business to be transacted at the Annual General Meeting can
be found in the Notice of Annual General Meeting on pages
128 to 129 of this report.
By order of the Board
Tony Gardiner
Company Secretary
Avacta Group plc (Registered number - 4748597)
22 April 2021
Employee involvement
It is the Group’s policy to involve employees in its progress,
development and performance. The Executive Directors
regularly engage with employees to seek their views and
provide briefings and presentations on key developments
and strategy. Employees are encouraged to offer suggestions
and views, and to raise queries with the Directors and senior
leadership teams.
The Group is a committed equal opportunities employer, and
its employees and job applicants will receive equal treatment
regardless of age, disability, gender reassignment, marital
or civil partner status, pregnancy or maternity, race, colour,
nationality, ethnic or national origin, religion or belief, sex or
sexual orientation.
Applications for employment by disabled persons are
fully considered, bearing in mind the respective aptitudes
and abilities of the applicants concerned. It is the policy
of the Group that the training, career development and
promotion of a disabled person should, as far as possible,
be identical to that of a person who is fortunate enough not
to suffer from a disability. In the event of members of staff
becoming disabled, every effort is made to ensure that their
employment with the Group continues.
Supplier payment policy and practice
The Group does not operate a standard code in respect of
payments to suppliers. The Group agrees terms of payment with
suppliers at the start of business and then makes payments in
accordance with contractual and other legal obligations.
The ratio, expressed in days, between the amount invoiced to
the Company by its suppliers during the period to 31 December
2020 and the amount owed to its trade creditors at 31 December
2020, was 14 days (2019: 13 days).
Disclosure of information to auditor
The Directors who held office at the date of approval of this
Directors’ Report confirm that, so far as they are aware, there
is no relevant audit information of which the Company’s
auditor is unaware and each Director has taken all the steps
that he or she ought to have taken to make himself or herself
aware of any relevant audit information and to establish that
the Company’s auditor is aware of that information.
Re-appointment of auditor
A resolution for the re-appointment as auditor of KPMG
LLP and the fixing of their remuneration will be put to the
forthcoming Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the Company will be held at
the offices of Walker Morris LLP, 33 Wellington Street, Leeds
LS1 4DL, on Monday 28 June 2021 at 10.00. Full details of the
66
Governance Corporate Governance Report
Our approach to corporate governance, and how
the Board and its committees operate, is explained
in the statement below.
Chairman’s Statement on Corporate Governance
All members of the Board believe strongly in the value
and importance of good corporate governance and in our
accountability to all the Company’s stakeholders, including
shareholders, staff, customers and suppliers.
The corporate governance framework which the Company
operates, including Board leadership and effectiveness, Board
remuneration, and internal control, is based upon practices
which the Board believes are proportional to the size, risks,
complexity and operations of the business and is reflective of
the Group’s values. The Board adopts the Quoted Companies
Alliance’s (QCA) Corporate Governance Code for small and
mid-size quoted companies (revised in April 2018 to meet the
new requirements of AIM Rule 26).
The QCA Code is constructed around ten broad principles
and a set of disclosures. The QCA has stated what it considers
to be appropriate arrangements for growing companies and
asks companies to provide an explanation about how they are
meeting the principles through the prescribed disclosures.
Delivering growth
Establishing a strategy and business model which
promote long-term value for shareholders
See Business Overview on page 20.
Seek to understand and meet shareholder needs
and expectations
See this section and the ‘Corporate Governance’
section of our website www.avacta.com.
Consider wider stakeholder and social responsibilities
and their implications for long-term success
See this section and the ‘Corporate Governance’
section of our website.
Embed effective risk management, considering
both opportunities and threats, throughout the
organisation
Maintain a dynamic management framework
See this section and the ‘Principal Risks and
Uncertainties’ on pages 54 to 56.
Maintain the Board as a well-functioning, balanced
team led by the Chairman
See this section and the ‘Corporate Governance’
section of our website.
Ensure that between them the Directors have
the necessary up-to-date experience, skills and
capabilities
See this section and the ‘Board of Directors’ section on
pages 58 and 59.
Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
See this section.
Promote a corporate culture that is based on ethical
values and behaviours
See this section and the ‘Corporate Governance’
section of our website.
Maintain governance structures and processes that
are fit for purpose and support good decision-making
by the Board
See this section and the ‘Corporate Governance’
section of our website.
1
2
3
4
5
6
7
8
9
Build trust
10
Communicate how the Company is governed
and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
See this section and the ‘Corporate Governance’
section of our website
The Board considers that it does not depart from any of the principles of the QCA Code.
67
Avacta Report and Accounts 2020 Corporate Governance Report
(Continued...)
Establishing a strategy and business model which
promotes long-term value for shareholders
The mission statement of the Group is to shape the future
of medicine by developing novel cancer therapies and
powerful diagnostics using our proprietary Affimer® and
pre|CISION™ platforms.
Our strategy is to:
• build a portfolio of novel, clinically differentiated cancer
therapies leveraging the key benefits of the Affimer® and
pre|CISION™ platforms;
• create a fast-paced, nimble, delivery-focused drug discovery
and development organisation to transform Avacta into a
clinical stage biotech with multiple clinical programmes and
an exciting pre-clinical pipeline;
• establish partnerships with global pharmaceutical companies
for our technology platforms and pipeline;
• grow a profitable revenue stream from Affimer® diagnostics
through partnerships and licensing as well as in-house
product development.
The Board believes that following the significant fund-raise
during 2020 and its strong balance sheet, it has the right strategy
in place to be able to deliver major value inflection points from
its well-funded therapeutic programmes and from its diagnostic
business’ revenue generation in the near to medium term that
should drive significant future shareholder value.
Board structure, skills and compliance
The Board has a collective responsibility and legal obligation
to promote the interests of the Company and to define the
corporate governance arrangements. At 31 December 2020,
the Board comprised four Non-executive Directors and two
Executive Directors. The profiles of the Directors are set out
on pages 58 to 59.
The division of responsibilities between the Chairman and the
Chief Executive Officer is clearly defined. The Chairman’s primary
responsibility is ensuring the effectiveness of the Board and
setting its agenda. The Chairman is not involved in the day-to-day
business of the Group. The Chief Executive has direct charge of
the Group on a day-to-day basis and is accountable to the Board
for the financial and operational performance of the Group.
The Chairman, Dr Eliot Forster, was appointed as Chairman to
the Board in June 2018. Prior to his appointment to the Board,
he was not involved with any part of the Avacta Group and has
been considered to be independent since his appointment.
Eliot has significant experience within US and European life
science companies, in particular in the therapeutics area
where the Group’s Affimer® and pre|CISION™ technologies
have a significant focus. Eliot’s time commitment is one to
two days per month.
The Chief Executive Officer, Dr Alastair Smith, was appointed to
the Board in September 2007. Alastair has 14 years’ experience
as Chief Executive Officer of an AIM-listed business, having
68
founded the business and has been responsible for the strategic
development of the Group, leading fund-raising and M&A
activities during this time. Alastair’s time commitment is full time.
Dr Mike Owen was appointed as a Non-executive Director
in September 2015 and has undertaken the role of Senior
Independent Director since September 2017. The Board
determines him to be independent of the executive
management and free from any relationship that could
materially affect the exercise of his independent judgement.
Mike also chairs the Therapeutics Scientific Advisory Board,
which is currently being updated with independent key opinion
leaders who provide a challenging review of the ongoing pre-
clinical and clinical programmes covering areas such as immuno-
oncology target selection. Mike has significant experience
within large pharmaceutical companies and a broad range of
experience as a Non-executive within life science companies.
Mike’s time commitment is one to two days per month.
Dr Trevor Nicholls was appointed as Non-executive Director in
August 2013 and was Chairman from August 2013 to June 2018.
Prior to his appointment to the Board, he was not involved with
any part of the Avacta Group and has been considered to be
independent since his appointment. Trevor has vast experience
with life science and reagents companies and has provided
significant oversight into the development of the Affimer®
reagents and diagnostics proposition. During the period Trevor
has been Chairman of the Remuneration Committee. Trevor’s
time commitment is one to two days per month.
Paul Fry was appointed as a Non-executive Director in
February 2020. Prior to his appointment to the Board, he was
not involved with any part of the Avacta Group and has been
considered independent since his appointment. Paul has an
extensive financial background within the life sciences sector
and has been Chairman of the Audit Committee since his
appointment to the Board. Paul’s time commitment is one to
two days per month.
Tony Gardiner was appointed as an Executive Director in
January 2016 and fulfils the role of Chief Financial Officer for the
Group. Tony has over 25 years’ experience in senior financial
and operational roles across small and large organisations
and has previously served as CFO in an AIM-listed business.
In addition to this role, Tony is also Company Secretary and
provides advice and guidance to the Board and Non-executive
Directors. The Board acknowledges that best corporate
governance practice would not combine the role of an
Executive Director and Company Secretary; however, given the
relative size of the Group at this stage, the Board is comfortable
with Tony performing both roles but will review the position as
the Group grows. Tony’s time commitment is full time.
The Board met regularly throughout the year, largely via video
conferencing methods, with ad hoc meetings also being held.
The role of the Board is to provide leadership of the Company
and to set strategic aims but within a framework of prudent
and effective controls which enable risk to be managed to
acceptable levels. The Board has agreed the Schedule of
Matters reserved for its decision, which includes ensuring
that the necessary financial and human resources are in
place to meet its obligations to its shareholders and others.
It also approves acquisitions and disposals of businesses,
Governance major capital expenditure, annual financial budgets and
recommends interim and final dividends. It receives
recommendations from the Audit Committee in relation to
the appointment of an auditor, their remuneration and the
policy relating to non-audit services. The Board agrees the
framework for Executive Directors’ remuneration with the
Remuneration Committee and determines fees paid to Non-
executive Directors. Given the relative size of the Company,
there is currently no separate Nomination Committee and
the Board, with advice from the Remuneration Committee,
takes responsibility for any recruitment of Executive and Non-
executive Directors, together with succession planning. Board
papers are circulated before Board meetings in sufficient time to
allow meaningful review and preparation by all Board members.
Conflicts of interest
Each Director has a duty to avoid situations in which he has or
can have a direct or indirect interest that conflicts, or possibly
may conflict, with the interests of the Group. The Board requires
each Director to declare to the Board the nature and extent
of any direct or indirect interest in a proposed transaction
or arrangement with the Group and the Company Secretary
maintains a register of Directors’ other interests. The Board has
power to authorise any potentially conflicting interests that are
disclosed by a Director.
Board evaluation and performance
The performance of the Board is evaluated on an ongoing
basis informally with reference to all aspects of its operation
including, but not limited to: the appropriateness of its skill
level; the way its meetings are conducted and administered
(including the content of those meetings); the effectiveness of
the various Committees; whether corporate governance issues
are handled in a satisfactory manner; and, whether there is a
clear strategy and objectives.
A new Director, on appointment, is briefed on the activities of
the Company. Professional induction training is also given as
appropriate. The Chairman briefs Non-executive Directors on
issues arising at Board meetings if required and Non-executive
Directors have access to the Chairman at any time. Ongoing
training is provided as needed. Directors are continually updated
on the Group’s business by means of Board presentations on
risk and compliance matters as well as issues covering pensions,
social, ethical, environmental and health and safety.
In the furtherance of their duties or in relation to acts carried
out by the Board or the Company, each Director has been
informed that they are entitled to seek independent professional
advice at the expense of the Company. The Company maintains
appropriate cover under a Directors and Officers insurance policy
in the event of legal action being taken against any Director.
Each Director is appraised through the normal appraisal
process. The Chief Executive is appraised by the Chairman,
the executive Board members by the Chief Executive and the
non-executive Board members by the Chairman. The Senior
Independent Director seeks the views of all the Directors on
the performance of the Chairman and discusses their combined
views with him. Each Director has access to the services of the
Company Secretary if required.
The Non-executive Directors are considered by the Board
to be independent of management and are free to exercise
independence of judgement. The Non-executive Directors
have never been employees of the Company nor do they
participate in any of the Company’s pension schemes or
bonus arrangements. They receive no remuneration from the
Company other than the Directors’ fees. Dr Eliot Forster, shortly
after his appointment to the Board in 2018, received an award
of share options, which were equivalent to one year’s fee for
his services as Chairman. The share options vest equally over a
three-year period and do not carry any performance obligations
(further details are provided within the Remuneration Report).
The Board and Company’s advisors do not consider the share
options, given their relatively low value in relation to Dr Forster’s
fee for his services and his income from other roles outside of
the Avacta Group, to impact his independence.
Directors are subject to re-election at the Annual General
Meeting following their appointment. In addition, at each Annual
General Meeting one third (or whole number less than one
third) of the Directors will retire by rotation.
As the Group evolves and develops the composition of the
Board will change to reflect the priorities of the Group. There are
currently no female or ethnic minority Board members, however
the Group is satisfied that as further Directors are added to the
Board that there will be no limitation of opportunities due to
diversity (including gender).
The table below shows the number of Board meetings
and Committee meetings held during the period and the
attendance of each Director.
Board meetings
Committee meetings
Audit
Remuneration
Position
Attended
Position
Attended
Position
Attended
Eliot Forster
Non-executive Chairman
Trevor Nicholls
Mike Owen
Paul Fry¹
Alastair Smith
Tony Gardiner
Non-executive
Non-executive
Non-executive
Executive CEO
Executive CFO
10/10
10/10
10/10
8/9
10/10
10/10
Member
Member
Member
Chairman
-
-
1/1
1/1
1/1
1/1
1/1
1/1
Member
Chairman
Member
Member
-
-
3/3
3/3
3/3
3/3
2/3
2/3
1
Paul Fry was appointed as Non-executive Director on 3 February 2020.
69
Avacta Report and Accounts 2020 Corporate Governance Report
(continued...)
Audit Committee
The Audit Committee (‘the Committee’) is established by and is
responsible to the Board.
Paul Fry is the Chair of the Committee and is considered to
be an independent Non-executive Director. Paul is a member
of the Chartered Institute of Management Accountants and
brings significant breadth of recent and relevant financial
experience including his current role as Chief Financial
Officer of Vectura plc, which is listed on the Main Market of
the London Stock Exchange. The current members of the
Committee - Eliot Forster, Trevor Nicholls and Mike Owen,
all of whom are Non-executive Directors - have gained wide
experience in regulatory, commercial and risk issues.
The terms of reference of the Audit Committee include the
following responsibilities:
• To monitor and be satisfied with the truth and fairness of
the Company’s financial statements before submission to
the Board for approval, ensuring their compliance with the
appropriate accounting standards, the law and the Listing
Rules of the Financial Services Authority
weakness or failing is identified, implementation of appropriate
remedial action is completed following approval by the Board.
The Group maintains appropriate insurance cover in respect
of actions taken against the Directors because of their roles,
as well as against material loss or claims against the Group.
The insured values and type of cover are comprehensively
reviewed on a periodic basis.
Remuneration Committee
The Remuneration Committee is chaired by Trevor Nicholls
and the other current members of the Committee are Eliot
Forster, Mike Owen and Paul Fry, all of whom are Non-
executive Directors. The Committee meets at least once a
year with the Chief Executive and Chief Financial Officer in
attendance as appropriate.
The terms of reference of the Remuneration Committee
include the following responsibilities:
• To determine the framework and policy, together with the
individual packages of the remuneration of the Executive
Directors and certain other senior executives of the Group
• To monitor and review the effectiveness of the Company’s
• To determine targets for performance-related pay schemes
system of internal control
• To make recommendations to the Board in relation to the
appointment of the external auditor and their remuneration,
following appointment by the shareholders in the Annual
General Meeting, and to review and be satisfied with the
auditor’s independence, objectivity and effectiveness on
an ongoing basis
• To implement the policy relating to any non-audit services
performed by the external auditor
Risk management
The Board is responsible for risk management and reviewing
the internal controls systems. The internal control systems are
designed to manage rather than eliminate the risk of failure to
achieve business objectives, and can only provide reasonable,
and not absolute assurance against material misstatement or
loss. Given the relative size of the Group, there is not currently
a separate internal audit function.
The Group highlights potential financial and non-financial
risks which may impact on the business as part of the risk
management procedures in the form of a Risk Register.
The Board receives these regular reports and monitors the
position at Board meetings. There are ongoing processes
for identifying, evaluating and mitigating the significant
risks faced by the Group, which are reviewed on a regular
basis. The review process involves a review of each area of
the business to identify material risks and the controls in
place to manage these risks given the rapid acceleration of
production, regulatory and supply chain considerations within
the Diagnostics division and the preparations for Avacta’s
first clinical trials in the Therapeutics division. The process is
undertaken by the Chief Financial Officer and senior managers
with responsibility for specific controls. Where any significant
70
• To review employee benefit structures
• To produce an annual report of the Committee’s
remuneration policy
Shareholder communications and engagement
Responsibility for investor relations sits with the Chief Executive
Officer, supported by the Chief Financial Officer and input from
other members of the Senior Management Team as required.
The Company is committed to communicating openly with
its shareholders to ensure that its strategy and performance
are clearly understood. We communicate with shareholders
through the Annual Report & Accounts, full-year and half-year
announcements, trading updates and the Annual General
Meeting, and we encourage shareholders’ participation using
technology platforms such the Investor Meet Company.
A range of corporate information (including the Annual Report
& Accounts) is also available to shareholders, investors and
the public on our website, www.avacta.com. The Company
uses intermediaries such as Vox Markets and Directors Talk
to ensure that key updates provided via RNS releases are
relayed to as many shareholders as possible. The Directors
encourage the participation of all shareholders, including
private investors, at the Annual General Meeting and, as a
matter of policy, the level of proxy votes (for, against and vote
withheld) lodged on each resolution is declared at the meeting
and published on the Company’s website.
The Chief Executive Officer and Chief Financial Officer meet
regularly with institutional shareholders to foster a mutual
understanding of objectives and communicate back to the
Board. The Chairman and Senior Independent Director are
also available to discuss governance and other matters
directly with major shareholders.
Governance The Company also holds science days, where investors and
significant private shareholders are provided with an update
on the Group’s scientific activities by members of the Board
and Senior Management Team.
Share dealing code
The Company has adopted a code on dealings in relation
to the securities of the Group. The Company requires the
Directors and other relevant employees of the Group to
comply with the Share Dealing Code and takes proper and
reasonable steps to secure their compliance.
Corporate culture, social and environmental
responsibility
The Executive Directors provide regular updates to staff, most
of whom are either shareholders or holders of share options,
on the progress of the Group. These updates follow key events
within the financial reporting calendar and aim to give staff the
same level of insight provided to institutional shareholders and
analysts, providing details of the business objectives, strategy
and business model, together with sharing of technical
progress across the various teams within the Group. Senior
management work across all the Group’s facilities and actively
seek regular feedback from staff to ensure that the strategy
and aims of the Group are readily understood.
The Board recognises the importance of considering corporate
social responsibility in operating the business and the impact
of its activities relating to health, safety and environmental
issues. Due to the nature of the Group’s divisions, it has
a low environmental impact, and it seeks to minimise any
environmental impact of its operations and complies with
relevant regulations and legislation.
The Group has well-defined health and safety policies
and procedures, complying with current legislation and
safeguarding staff, contractors and visitors. All Group sites
have been regularly assessed as we have worked through
the COVID-19 pandemic to ensure that facilities are COVID-
safe, with the levels of staff on site carefully managed to
ensure a safe and secure working environment for those
staff who have been unable to work from home. Alastair
Smith is the Executive Director responsible for health and
safety, chairing quarterly Group meetings and reporting on
health and safety matters to the Board. The Group’s policies
and procedures form a part of staff induction and training
programmes. Regular internal safety audits are carried out
and no significant issues have been identified by these audits.
Dr Eliot Forster
Chairman
22 April 2021
71
Avacta Report and Accounts 2020 Audit Committee Report
Introduction
The Audit Committee is a sub-committee of the Board and is
responsible for reviewing all aspects of the financial reporting
of the business and all aspects of internal control. The
Committee represents the interests of our shareholders in
relation to the integrity of information and the effectiveness
of the audit processes in place.
The terms of reference of the Audit Committee include the
following responsibilities:
• To monitor and be satisfied with the truth and fairness of
the Company’s financial statements before submission to
the Board for approval, ensuring their compliance with the
appropriate accounting standards, the law and the Listing
Rules of the Financial Services Authority
• To monitor and review the effectiveness of the Company’s
system of internal control
to ensure that they do not compromise the auditor’s
judgement or independence, particularly with the provision
of non-audit services.
KPMG LLP were appointed auditor to the Group following
a tender process in 2010. The Audit Committee considers
that the Company’s relationship with the Group’s auditor is
working well and the Committee remains satisfied with the
effectiveness of the auditor. During the year, the engagement
partner, John Pass, has rotated off the audit, having worked
with the Group for seven years, and Stuart Burdass has
taken over the role of engagement partner. There are no
contractual obligations restricting the Company’s choice of
external auditor.
Significant issues relating to the financial
statements
The specific issues considered by the Audit Committee in the
period under review, in relation to the financial statements,
are shown below.
• To make recommendations to the Board in relation to the
Use of judgements and estimates
appointment of the external auditor and their remuneration,
following appointment by the shareholders in the Annual
General Meeting, and to review and be satisfied with the
auditor’s independence, objectivity and effectiveness on an
ongoing basis
• To implement the policy relating to any non-audit services
performed by the external auditor
The Committee is authorised by the Board to seek and obtain
any information it requires from any officer or employee of the
Company and to obtain external legal or other independent
professional advice as is deemed necessary by it.
Meetings of the Committee are held once or twice per year
to coincide with the review of the scope of the external
audit and observations arising from their work in relation to
internal control and to review the financial statements. The
external auditor is invited to these meetings and meets with
the Audit Committee at least once a year. At its meeting, the
Committee carries out a full review of the year-end financial
statements and of the audit, using as a basis the Report to
the Audit Committee prepared by the external auditor and
considering any significant accounting policies, any changes
to them and any significant estimates or judgements.
Questions are asked of management of any significant or
unusual transactions where the accounting treatment could
be open to different interpretations.
Due to its size and structure, the Group does not have an
internal audit function. This is a matter which the Committee
reviews annually.
External auditor
The external auditor is required to give the Committee
information about policies and processes for maintaining
their independence and compliance regarding the rotation
of audit partners and staff. The Committee considers all
relationships between the external auditor and the Company
72
In preparing the consolidated financial statements, the
Group 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 the
Group that have the most significant effects on the amounts
recognised in the financial statements are given below.
Judgements:
During the year, the Committee considered the following key
judgements made in preparation of the financial statements:
Going concern - The judgement of whether or not the accounts
should be prepared on a going concern basis, as detailed in
the Financial Review. The Committee has reviewed detailed
cash flow forecasts that extend to at least 12 months from
the date of approval of the financial statements. The forecasts
consider 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
Governance the Company and Group are able to meet their liabilities as
they fall due throughout the forecast period. 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 12 months from the date of approval of the
financial statements and therefore have prepared the financial
statements on a going concern basis.
Revenue recognition – Judgements arise from the application
of IFRS 15 to the Group’s revenue streams, as disclosed in
Note 1(C) to the financial statements. In particular, the key
judgement arising from this application was whether revenue
from licence-related income in the period was recognised over
time or at a point in time.
Estimates:
The Committee also considered the assumptions and estimation
uncertainties as at 31 December 2020 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 underlie the recoverable amounts used in these
impairment tests, including the recoverability of development
costs. Management have prepared detailed value-in-use
models to assess the recoverable amount of the three cash
generating units (‘CGUs’). These models use the approved
budget as the basis for short-term forecast revenues and
costs, extending these forecasts over a longer-term period
using assumptions on shorter and longer-term revenue
and cost growth to capture the longer-term value in the
Diagnostics and Therapeutics business units in particular.
The Animal Health division restructured during the period
and focused on core revenue streams. As a result of this
restructure and the assumptions made in the value-in-
use models, an impairment charge of £1.74 million was
identified in relation to previously capitalised development
costs and goodwill arising from historic acquisitions into the
division. Further information on the key assumptions used
in arriving at the impairment charge are disclosed in Note
10 to the financial statements.
Paul Fry
Chairman of the Audit Committee
22 April 2021
73
Avacta Report and Accounts 2020
Remuneration Committee Report
This report sets out the remuneration policy for the
year ended 31 December 2020.
Introduction
This report sets out the remuneration policy for the period
ended 31 December 2020. The Company is listed on AIM and
therefore is not required to prepare a remuneration report
complying with the disclosure requirements of Directors’
Remuneration Report Regulations 2002 or to comply with the
UKLA Listing Rules and disclosure provisions under Schedule 8
of the Companies Act 2006.
The Company aims to adhere to a high level of compliance with
corporate governance guidelines and therefore the Company has
prepared this unaudited report voluntarily so that shareholders
can clearly understand remuneration paid to the Directors.
At the Company’s Annual General Meeting, a resolution to
approve the Remuneration Report will be proposed, with details
provided within the Notice of Meeting. The vote will be advisory.
Remuneration Committee
The Remuneration Committee consists of Trevor Nicholls
(Chairman), Eliot Forster, Mike Owen and Paul Fry. All members
of the Committee are Non-executive Directors of the Company
and are considered by the Board to be independent. Non-
executive Directors have no personal financial interest in the
Company, except the holding of shares, no potential conflict
of interest arising from cross directorships and no day-to-day
involvement in the running of the Company.
The Remuneration Committee has responsibility for the following:
• Determining the framework and policy, and the individual
packages of the remuneration of the Executive Directors
and certain other senior executives, including pension rights
and any compensation payments
• Determining targets for performance-related pay and share
incentive schemes
• Reviewing employee benefit structures
• The use of remuneration consultants
• To produce an annual report of the Committee’s
remuneration policy
Remuneration policy of Executive Directors
Avacta’s remuneration policy for Executive Directors is designed
to attract, retain and motivate executives of the highest calibre
to ensure that the Group is managed successfully for the
benefit of shareholders. The policy is to pay base salary at
median quartile levels with attractive short-term and longer-
term performance incentives. Share ownership is encouraged
and all the Executive Directors are directly interested in the
share capital of the Company or hold share options over the
share capital. In setting remuneration levels, the Committee
74
takes into consideration remuneration within the Group and the
remuneration practices in other companies of a similar size in
the markets and locations in which Avacta operates. Avacta is a
dynamic, growing company operating in a specialised field and
positions are benchmarked against comparable roles in AIM
companies, with the most recent exercise carried out in July
2020. The next planned review will take place in 2022.
Executive Directors – Short-term incentives
Basic salary
Basic salary is based on several factors including market rates,
together with the individual Director’s experience, responsibilities
and performance. Individual salaries of Directors were
subject to review in June 2020 when the Committee carried
out a review of the Executive Director salaries in relation to a
group of comparable AIM-listed companies. The Committee
recommended that the salary of the Chief Executive Officer be
increased to £275,000 per annum and the salary of the Chief
Financial Officer be increased to £190,000 per annum. The
increases brought both positions in line with the median salary of
the comparator companies. No further changes to base salaries
will take place until 1 January 2022. During the review process,
the salaries of the Senior Leadership Team were also reviewed
to ensure that their remuneration levels were also consistent with
those of similar professionals within the biotech sector.
Performance-related bonus
The Company operates an annual performance-related bonus
scheme for Executive Directors. Payments under the bonus
scheme are at the discretion of the Board (as recommended
by the Remuneration Committee) and are based around
significant value creation milestones, covering financial,
commercial, technical and operational parameters, which are
set at the start of the financial year. The maximum bonus that
can be earned by an Executive Director following the review
which took place in June 2020 has been reduced to 50% of
basic salary. The Committee determines on an annual basis
the composition of the award, which can be split between
cash, deferred share awards and share options.
There was no bonus award for the period ended 31 December
2019. The Committee agreed a one-off exceptional cash bonus
of 10% of base salary for the two Executive Directors in July
2020 following the significant successful fund-raise.
For the year ending 31 December 2020, the Remuneration
Committee reviewed the performance of the Executive
Directors against the agreed targets for the year and
concluded that the Chief Executive Officer should be paid a
bonus equivalent to 44% of his current basic salary and the
Chief Financial Officer should be paid a bonus equivalent to
33% of his current basic salary. The bonuses will be paid in
two equal instalments in March and September 2021.
Benefits in kind
The Company provides private medical, critical illness and
income protection insurance for the Executive Directors.
Pensions
The Company makes payments into defined contribution
Personal Pension Plans on behalf of the Executive Directors.
Governance These payments are at a rate up to 6% of basic salary
consistent with terms offered to other staff across the
Group. Executive Directors can elect to take these pension
contributions as additional salary payments if they so choose.
Executive Directors – Long-term incentives
Share interests
The Committee considers that the long-term motivation of
the Executive Directors is secured by their interests in the
share capital of the Company, operating an EMI-approved
share option scheme, an unapproved Executive Share Option
Scheme and a Long-Term Incentive Plan (‘LTIP’).
The individual interests and joint interests (where applicable)
of the Directors in the share capital of the Company are set
out on page 65 and their interests in options held over shares
in the Company are set out on page 77.
Executive Directors are expected to build a direct stake in the
Company’s shares over time, either through the purchase of
shares in the market from time to time and/or through the
future exercise of share options.
The Committee has an established framework of LTIP awards
for Executive Directors and certain senior executives. The
first LTIP award was originally granted in January 2019 and
the second award, having been deferred by the Committee,
was granted in June 2020 following the release of the Group
preliminary results.
The LTIP option vesting is based on a combination of
achievement of commercial and technical strategic objectives
together with the performance of the Company’s share price.
The share price performance targets are calculated based on
the average share price in the preceding 30-day period, with
lower and upper share price targets set to trigger the vesting
on the third anniversary. Vested options can be exercised at
any time but may not be disposed of until at least the fifth
anniversary of the award grant.
Having reviewed the overall remuneration package for
Executive Directors and certain senior executives, the
Committee granted a further one-off LTIP award to Executive
Directors and certain senior executives in June 2020 to
bring the long-term equity incentives in line with the group of
comparable AIM-listed companies. The additional award had
vesting conditions based on the share price performance of
the Group being maintained over a three-year period ending
on 31 December 2022. The options once vested cannot be
exercised until at least the 31 December 2022, subject to
Board having discretion to review the exercise conditions in
exceptional circumstances.
The Company can grant share options under its share option
schemes subject to a cap, agreed with shareholders, to be
up to 15% of total issued share capital in any ten-year period.
Executive Directors’ service agreements
The Board’s policy on setting notice periods for Directors is
that these should not exceed one year. All Executive Directors
have service agreements terminable on six months’ notice.
The details of the service contracts of the Executive Directors
are shown below
Date of
service
contract
Initial
term of
contract
Notice period
following
initial term
Alastair Smith
9 January 2012
Tony Gardiner
4 January 2016
Nil
Nil
6 months
6 months
Non-executive Directors
The Board determines the fees paid to Non-executive Directors,
the aggregate limit for which is laid down in the Articles of
Association. The fees, which are reviewed annually, are set
in line with prevailing market conditions and at a level which
will attract individuals with the necessary experience and
ability to make a significant contribution to the Group’s affairs.
Non-executive Directors are not involved in any discussion or
decision about their own remuneration. The same applies to
the Chairman of the Board, whose remuneration is determined
by the Board on the recommendation of the Committee.
The Non-executive Directors do not participate in any of the
Company’s pension schemes or bonus arrangements nor do
they have service agreements.
The details of the service contracts of the Non-executive
Directors are shown below.
Date of
service
contract
Initial term
of contract
Notice period
following
initial term
Eliot Forster
11 June 2018
Trevor Nicholls
2 August 2013
Mike Owen
17 September 2015
Paul Fry
9 January 2020
Nil
Nil
Nil
Nil
1 month
1 month
1 month
1 month
The Non-executive Directors are encouraged to maintain a
shareholding within the Company and their current holdings
are set out on page 65. None of the Non-executive directors
(except for Eliot Forster) hold any interest in share options
or the joint share ownership plan of the Company. Eliot
Forster, shortly after his appointment to the Board in 2018,
received an award of share options, which were equivalent
to one year’s fee for his services as Chairman. The share
options vest equally over a three-year period and do not
carry any performance obligations (further details are
provided within the table on page 77). The Committee and
Company’s advisors do not consider the share options, given
their relatively low value in relation to Dr Forster’s fee for
his services and his income from other roles outside of the
Avacta Group, to impact his independence.
75
Avacta Report and Accounts 2020
Remuneration Committee Report
(continued...)
External appointments
The Committee recognises that its Directors may be invited to become Executive or Non-executive Directors of other companies or
to become involved in charitable or public service organisations. As the Committee believes that this can broaden the knowledge and
experience of the Company’s Directors to the benefit of the Group, it is the Company’s policy to approve such appointments provided
there is no conflict of interest and the commitment required is not excessive. The Director concerned can retain the fees relating to
any such appointment.
Directors’ remuneration – audited
The remuneration of each of the Directors of the Company for the year ended 31 December 2020 is set out below. These values
are included within the audited accounts.
2020
Basic salary
and fees
£000
2020
Bonus
£000
2020
Benefits
in kind
£000
2020
Total
£000
2020
4Pension
contributions
£000
2019
Total
£000
2019
Pension
contributions
£000
12 months to
31 December 2020
17 months to
31 December 2019
Non-executive Directors
Eliot Forster
Trevor Nicholls
Mike Owen
1Paul Fry
2Alan Aubrey
3Sam Williams
Executive Directors
Alastair Smith
Tony Gardiner
85
31
31
28
-
-
237
165
577
-
-
-
-
-
-
20
15
35
-
-
-
-
-
-
4
1
5
85
31
31
28
-
-
261
181
617
-
-
-
-
-
-
14
10
24
120
46
44
-
12
24
311
232
789
-
-
-
-
-
-
17
13
30
The above emoluments include all payments paid to the Directors whilst Directors of the Group.
1. Paul Fry was appointed as a Director on 3 February 2020.
2. Alan Aubrey resigned as a Director on 21 January 2019.
3. Sam Williams resigned as a Director on 4 November 2019. Sam’s services as Director were provided by IP2IPO Limited.
4. Pension contributions consist of employer defined contribution benefits, excluding salary sacrifice contributions made by the employees,
plus cash payments in lieu of pension.
The number of Directors accruing benefits under money purchase pension schemes was two (2019: two).
The share-based payments charge to the Consolidated Income Statement in respect of Directors’ share options was £1,076,000
(2019: £120,000). The aggregate gain made by Directors on the exercise of share options was £nil (2019: £nil).
76
Governance
Details of Directors’ joint interests in the Joint Share Ownership Plan (‘JSOP’) – audited
At 1 Jan 2020
Granted
Waived
Exercised
At 31 Dec 2020
Date of agreement
Alastair Smith
Alastair Smith
Tony Gardiner
1,144,1491
495,851
1,640,000
150,000
-
-
-
-
-
-
-
-
-
-
-
-
1,144,149
495,851
1,640,000
150,000
9 Jan 2012
15 Feb 2016
-
15 Feb 2016
Alastair Smith and Tony Gardiner hold an interest in the shares of the Company, which are jointly held by themselves individually and
Avacta Group Trustee Limited in its capacity as trustee of The Avacta Employees’ Share Trust. The precise nature of the Joint Share
Ownership Agreements between the individual, Avacta Group Trustee Limited and Avacta Group plc are described within Note 5.
Details of Directors’ interests in share options in the Executive Share Option Schemes – audited
At 1
Jan 2020 Granted
Waived /
Lapsed
Exercised
At 31
Dec 2020
Exercise
price
pence
Date
from which
exercisable
Date
of grant
Expiry
date
Eliot Forster
340,000
340,000
Alastair Smith
141,176
Alastair Smith
128,764
Alastair Smith
74,325
Alastair Smith
520,550
Alastair Smith
96,900
Alastair Smith
599,100
-
-
-
-
-
-
-
-
Alastair Smith
Alastair Smith
-
868,260
- 4,000,000
-
-
-
-
-
(520,550)
-
-
-
-
1,560,815 4,868,260 (520,550)
-
Tony Gardiner
210,968
Tony Gardiner
22,973
Tony Gardiner
306,000
Tony Gardiner
56,960
Tony Gardiner
313,000
-
-
-
-
-
Tony Gardiner
-
453,620
Tony Gardiner
- 1,000,000
-
-
(306,000)
-
-
-
-
909,901 1,453,620 (306,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
340,000
25.0p
Note 1
7 Jan 2019
7 Jan 2029
340,000
141,176
50.0p
9 Jan 2016
9 Jan 2012
9 Jan 2022
128,764
118.5p
15 Feb 2020
15 Feb 2016
15 Feb 2026
74,325
74.0p
16 Dec 2016
16 Dec 2016
16 Dec 2026
-
72.5p
Note 2
27 Jan 2017
27 Jan 2027
96,900
25.0p
7 Jan 2019
7 Jan 2019
7 Jan 2029
599,100
25.0p
Note 3
7 Jan 2019
7 Jan 2029
868,260
17.25p
Note 3 14 May 2020
14 May 2030
4,000,000
10.0p
Note 4 14 May 2020
14 May 2030
5,908,525
210,968
118.5p
15 Feb 2020
15 Feb 2016
15 Feb 2026
22,973
74.0p
16 Dec 2016
16 Dec 2016
16 Dec 2026
-
72.5p
Note 2
27 Jan 2017
27 Jan 2027
56,960
25.0p
7 Jan 2019
7 Jan 2019
7 Jan 2029
313,000
25.0p
Note 3
7 Jan 2019
7 Jan 2029
453,620
17.25p
Note 3 14 May 2020
14 May 2030
1,000,000
10.0p
Note 4 14 May 2020
14 May 2030
2,057,521
Note 1 – This option provides that, unless waived at the discretion of the
Remuneration Committee of the Board, it can, if it has not lapsed, be exercised
as to one third on or after 11 June 2019, one third on or after 11 June 2020 and
the remaining third on or after 11 June 2021.
Note 2 – This option lapsed as the share price targets which had to be met at 31
December 2020 were not met.
Note 3 – This option provides that, unless waived at the discretion of the
Remuneration Committee of the Board and it has not lapsed, it will vest as
to one quarter of the award if the share price on 31 December 2021 is at or
above 150p per share. If the share price on 31 December 2021 is at or above
300p per share, then one half of the award will vest. A linear sliding scale will
operate should the share price fall in the range between 150p and 300p on 31
December 2021. The remaining one half of the award is based on achieving
certain technical and commercial milestones subject to a minimum share
price floor of 37.5p per share on 31 December 2021. On the assumption that
the vesting conditions are met, and the options are exercised then the option
holder cannot sell the shares prior to 31 December 2023.
Note 4 – This option provides that, unless waived at the discretion of the
Remuneration Committee of the Board and it has not lapsed, it will vest as
to one quarter of the award if the share price exceeds an average of 44p per
share between 1 January 2020 and 31 December 2022. If the share price
between 1 January 2020 and 31 December 2020 exceeds an average of 110p
per share, then one quarter of the award will vest. If the share price between
1 January 2021 and 31 December 2021 exceeds an average of 110p per
share, then one quarter of the award will vest. If the share price between 1
January 2022 and 31 December 2022 exceeds an average of 110p per share,
then one quarter of the award will vest. A linear sliding scale will operate
should the share price fall in the range between 44p and 110p for any of
the three calendar periods 2020, 2021 and 2022. On the assumption that
the vesting conditions are met, the option holder cannot exercise or sell the
shares prior to 31 December 2022.
77
Avacta Report and Accounts 2020 Remuneration Committee Report
(continued...)
Performance graph
The following graph shows the Company’s performance,
measured by total shareholder return, compared with the
performance of the FTSE AIM (rebased) and a comparator
group of FTSE AIM Biotech companies (rebased) for the
period ended 31 December 2020.
Page 57
12.000
10.000
8.000
6.000
4.000
2.000
0.000
9
1
-
c
e
D
-
1
3
0
2
-
n
a
J
-
1
3
0
2
-
b
e
F
-
9
2
0
2
-
r
a
M
-
1
3
0
2
-
r
p
A
-
0
3
0
2
-
y
a
M
-
1
3
0
2
-
n
u
J
-
0
3
0
2
-
l
u
J
-
1
3
0
2
-
g
u
A
-
1
3
0
2
-
p
e
S
-
1
3
0
2
-
t
c
O
-
1
3
0
2
-
v
o
N
-
0
3
0
2
-
c
e
D
-
1
3
Avacta (rebased)
AIM All Share (rebased)
AIM Biotech Index (rebased)
The Remuneration Committee has selected the above
comparators because they are most relevant for the
Company’s size and sector.
This report was approved by the Board of Directors and
authorised for issue on 22 April 2021 and was signed on
its behalf by:
Dr Trevor Nicholls
Chairman of the Remuneration Committee
22 April 2021
78
Governance
Statement of Directors’ Responsibilities
in Respect of the Annual Report and the
Financial Statements
fraud or error, and have general responsibility for taking
such steps as are reasonably open to them to safeguard
the assets of the Group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report and a Directors’
Report that complies with that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors are responsible for preparing the
Annual Report and the Group and parent company
financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare Group and
parent company financial statements for each financial year.
As required by the AIM Rules of the London Stock Exchange,
they are required to prepare the Group financial statements
in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs as adopted by
the EU) and applicable law and have elected to prepare the
parent company financial statements in accordance with
UK accounting standards and applicable law (UK Generally
Accepted Accounting Practice), including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland.
Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
parent company and of their profit or loss for that period. In
preparing each of the Group and parent company financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable,
relevant, reliable, and prudent;
• for the Group financial statements, state whether they have
been prepared in accordance with IFRSs as adopted by the EU;
• for the parent company financial statements, state whether
applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained
in the financial statements;
• assess the Group and parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern; and
• use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent company or to
cease operations or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the parent company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
parent company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
79
Avacta Report and Accounts 2020 Governance
80
Governance Independent Auditor’s Report to
the Members of Avacta Group plc
Independent
auditor’s report
to the members of Avacta Group plc
Overview
Materiality:
group financial
statements as a
whole
Coverage
£600k (2019:£800k)
2.8% (2019: 4.4%) of loss
before tax
99.9% (2019:99.9%) of group
loss before tax
Key audit matters vs 2019
Recurring risks
◄►
◄►
Recoverability of
intangible assets
(goodwill and
development costs)
Recoverability of
investments in
subsidiaries and
intercompany
receivables
Going concern
▼
1. Our opinion is unmodified
We have audited the financial statements of Avacta
Group Plc (“the Company”) for the year ended 31
December 2020 which comprise the Consolidated
Income Statement, Consolidated Balance Sheet,
Consolidated Statement of Changes in Equity,
Consolidated Statement of Cash Flows, Company
Balance Sheet, Company Statement of Changes in
Equity, and the related notes, including the
accounting policies in note 1.
In our opinion:
— the financial statements give a true and fair
view of the state of the Group’s and of the
parent Company’s affairs as at 31 December
2020 and of the Group’s loss for the year then
ended;
— the Group financial statements have been
properly prepared in accordance with
international accounting standards in conformity
with the requirements of the Companies Act
2006;
— the parent Company financial statements have
been properly prepared in accordance with UK
accounting standards, including FRS 102 The
Financial Reporting Standard applicable in the
UK and Republic of Ireland; and
— the financial statements have been prepared in
accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities are
described below. We have fulfilled our ethical
responsibilities under, and are independent of the
Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to
listed entities. We believe that the audit evidence
we have obtained is a sufficient and appropriate
basis for our opinion.
81
Avacta Report and Accounts 2020 Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows.
The risk
Our response
Forecast-based assessment:
Our procedures included:
Goodwill and development costs are
significant and the estimated
recoverable amounts are subjective due
to the inherent uncertainty involved in
forecasting and discounting future cash
flows. Auditor judgement is required to
assess whether the directors’ overall
estimate, taking into account key
discount rate and growth rate
assumptions, falls within an acceptable
range.
The effect of these matters is that, as
part of our risk assessment, we
determined that the carrying amount of
goodwill and other intangible assets has
a high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality
for the financial statements as a whole.
The financial statements (note 10)
disclose the sensitivity estimated by the
Group.
— Our sector experience: We evaluated the
assumptions used, in particular those
relating to projected revenues and the
discount rate applied to cash flows;
— Benchmarking assumptions: We
compared the group’s assumptions to
externally derived data in relation to key
inputs such as growth, where available, and
discount rates;
— Sensitivity analysis: We performed
breakeven analysis on the assumptions
noted above;
— Comparing valuations: We compared the
sum of the discounted cash flows to the
group’s market capitalisation to assess the
reasonableness of those cash flows and
considered the reasons for the current
variance, including reference to analyst
forecasts;
— Assessing transparency: We assessed
whether the group’s disclosures about the
sensitivity of the outcome of the impairment
assessment to changes in key assumptions
reflected the risks inherent in the valuation
of goodwill and development costs.
Forecast-based assessment:
Our procedures included:
The carrying amount of the parent
company’s investments in subsidiaries
and intra-group debtor balances are
significant. The risk of irrecoverability
arises as the estimated recoverable
amount of these balances is subjective
due to the inherent uncertainty involved
in forecasting and discounting future
cash flows.
The effect of these matters is that, as
part of our risk assessment, we
determined that the carrying amount of
the cost of investment in subsidiaries
has a high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than our
materiality for the financial statements
as a whole. The financial statements
(note 24) disclose the sensitivity
estimated by the Company.
— Test of detail: With reference to our audit
of the valuation of intangible assets (see
above) we compared the carrying value of
the parent company’s investments in each
of the subsidiaries and intra-group debtor
balances against the estimated recoverable
amount of the relevant cash generating
units assessed above;
— Assessing transparency: We assessed
whether the disclosures about the
sensitivity of the outcome of the impairment
assessment to changes in key assumptions
reflected the risks inherent in the valuation
of investments and intercompany
receivables.
Group: Recoverability of
intangible assets (goodwill and
development costs)
(£9.2 million; 2019: £11.8 million)
Refer to:
page 72 (Audit Committee Report)
page 97 (Accounting Policy)
page 110 (Financial Disclosures)
Refer to:
page 72 (Audit Committee Report)
page 123 (Accounting Policy)
page 124 (Financial Disclosures)
82
Parent company: Recoverability
of investments in subsidiaries
and intercompany receivables
[We continue to perform procedures over [identify key audit matter]. However, following [explain why risk is less significant
this year], we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not
separately identified in our report this year.]
66.4 million; 2019: £54.3 million)
(£
Governance 2. Key audit matters: our assessment of risks of material misstatement (continued)
The risk
Our response
Going concern
Disclosure quality
Our procedures included:
Refer to:
page 72 (Audit Committee Report)
page 94 (Accounting Policy)
The financial statements explain how
the Board has formed a judgement that
it is appropriate to adopt the going
concern basis of preparation for the
Group and parent company.
Funding assessment: We assessed the level
of funding available to the Group taking into
account cash resources at the balance sheet
date and the impact of post balance sheet
events such as performance to date;
Historical
analysed
comparisons: We
management’s previous projections against
actual outcomes to form a view of historical
forecasting accuracy and guide our challenge of
the
by
forecasts
management;
prepared
2021/22
Key dependency assessment: We identified
the critical factors in determining whether there
is a risk of business failure based on our
knowledge of the business and specific risk
assessments for the impact of COVID-19;
Sensitivity
considered
analysis: We
sensitivities over the level of available financial
resources indicated by the Group’s financial
forecasts taking account of reasonably plausible
(but not unrealistic) adverse effects that could
arise
and
collectively;
from these
individually
risks
Assessing transparency: We assessed the
completeness and accuracy of the matters
covered in the going concern disclosure in light
of the conclusions reached in the above
procedures.
That judgement is based on an
evaluation of the inherent risks to the
Group’s and Company’s business model
and how those risks might affect the
Group’s and Company’s financial
resources or ability to continue
operations over a period of at least 12
months from the date of approval of the
financial statements.
The risks most likely to adversely affect
the Group’s and Company’s available
financial resources over this period
were:
• The impact of additional government
lock-downs resulting in temporary
closure of laboratories or staff illness
prompted by COVID-19;
• The impact of disruption to the supply
chain or the distribution network
bringing operations to a halt as a result
of COVID-19.
There are also less predictable but
realistic second order impacts, such as
the impact of Brexit and the erosion of
customer or supplier confidence, which
could result in a rapid reduction of
available financial resources.
The risk for our audit was whether or
not those risks were such that they
amounted to a material uncertainty that
may have cast significant doubt about
the ability to continue as a going
concern. Had they been such, then that
fact would have been required to have
been disclosed.
We continue to perform procedures over the completeness and existence of capitalised development costs. However, given
the amount capitalised in the year is well below materiality, we have not assessed this as one of the most significant risks in
our current year audit and, therefore, it is not separately identified in our report this year.
We continue to perform procedures over revenue recognition. However given that no new material contracts have been
entered into in the current year the level of subjective judgement involved has decreased, we have not assessed this as one of
the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year.
We continue to perform procedures over the UK’s departure from the European Union. However, given the foreseen impact of
the UK’s departure from the European Union on the Group is expected to be low, we have not assessed this as one of the
most significant risks in our current year audit and, therefore, it is not separately identified in our report this year.
83
Avacta Report and Accounts 2020 Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
3. Our application of materiality and an
overview of the scope of our audit
Group loss before tax
£21.3m (2019: £18.1m)
Group materiality
£600k (2019: £800k)
Materiality for the group financial statements as a
whole was set at £600k (2019: £800k),
determined with reference to a benchmark of
group loss before tax, of which it represents
2.8% (2019: 4.4%).
Materiality for the parent company financial
statements as a whole was set at £210k (2019:
£275k), determined with reference to a
benchmark of company net assets, of which it
represents 0.2% (2019: 0.4%).
In line with our audit methodology, our
procedures on individual account balances and
disclosures were performed to a lower
threshold, performance materiality, so as to
reduce to an acceptable level the risk that
individually immaterial misstatements in
individual account balances add up to a material
amount across the financial statements as a
whole.
Performance materiality was set at 75% (2019:
75%) of materiality for the financial statements
as a whole, which equates to £450k (2019:
£600k) for the group and £158k (2019: £206k)
for the parent company. We applied this
percentage in our determination of performance
materiality because we did not identify any
factors indicating an elevated level of risk.
We agreed to report to the Audit Committee any
corrected or uncorrected identified
misstatements exceeding £30k (2019: £40k), in
addition to other identified misstatements that
warranted reporting on qualitative grounds.
Of the group’s 7 (2019: 7) reporting
components, we subjected 4 (2019: 4) to full
scope audits for group purposes and none
(2019: none) to specified risk-focused audit
procedures.
The components within the scope of our work
accounted for the percentages illustrated
opposite.
£600k
Whole financial
statements materiality (2019:
£800k)
£510k
Range of materiality at 4
components (£45k - £510k)
(2019: £100k to £675k)
Loss before tax
Group materiality
£30k
Misstatements reported to the
audit committee (2019: £40k)
Group revenue
Group loss before tax
99.9%
(2019: 99.9%)
99.9
99.9
100%
(2019: 100%)
100
100
Group total assets
99.9%
(2019 99.9%)
99.9
99.9
Key:
Full scope for group audit purposes 2020
Full scope for group audit purposes 2019
Residual components
84
Governance 4. Going concern
5. Fraud and breaches of laws and regulations – ability to
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Group or the Company or to cease their operations, and as
they have concluded that the Group and the Company’s
financial position means that this is realistic. They have also
concluded that there are no material uncertainties that
could have cast significant doubt over their ability to
continue as a going concern for at least a year from the
date of approval of the financial statements (“the going
concern period”).
An explanation of how we evaluated management’s
assessment of going concern is set out in the related key
audit matter in section 2 of this report.
Our conclusions based on this work:
— we consider that the directors’ use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate;
— we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s or
Company's ability to continue as a going concern for the
going concern period; and
— we found the going concern disclosure in note 1 to be
acceptable
However, as we cannot predict all future events or
conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the above
conclusions are not a guarantee that the Group and the
Company will continue in operation.
detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud
(“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide
an opportunity to commit fraud. Our risk assessment
procedures included :
• Enquiring of directors and in-house Group legal counsel as
to the Group’s high-level policies and procedures to prevent
and detect fraud, as well as whether they have knowledge
of any actual, suspected or alleged fraud.
• Reading Board minutes.
• Considering remuneration incentive schemes and
performance targets for management and directors.
We communicated identified fraud risks throughout the
audit team and remained alert to any indications of fraud
throughout the audit.
As required by auditing standards, we perform procedures
to address the risk of management override of controls and
the risk of fraudulent revenue recognition, in particular the
risk that revenue is recorded in the wrong period, the risk
that Group management may be in a position to make
inappropriate accounting entries, and the risk of bias in
accounting estimates and judgements such as impairment
assumptions. We did not identify any additional fraud risks.
We performed procedures including:
• Identifying journal entries to test for all full scope
components based on risk criteria and comparing the
identified entries to supporting documentation. These
included those posted to unusual account pairings.
• Evaluated the business purpose of significant unusual
transactions.
• Assessing significant accounting estimates for bias.
Identifying and responding to risks of material
misstatement due to non-compliance with laws and
regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our general commercial and
sector experience, and discussed with the directors and
other management the policies and procedures regarding
compliance with laws and regulations.
We communicated identified laws and regulations
throughout our team and remained alert to any indications
of non-compliance throughout the audit.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies
legislation), distributable profits legislation, and taxation
legislation and we assessed the extent of compliance with
these laws and regulations as part of our procedures on the
related financial statement items.
85
Avacta Report and Accounts 2020 Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
5. Fraud and breaches of laws and regulations – ability to
detect (cont.)
Identifying and responding to risks of material
misstatement due to non-compliance with laws and
regulations (cont).
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in
the financial statements, for instance through the
imposition of fines or litigation. We identified the following
areas as those most likely to have such an effect: health
and safety and employment law, recognising the nature of
the Group’s activities. Auditing standards limit the required
audit procedures to identify non-compliance with these
laws and regulations to enquiry of the directors and other
management and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements, even
though we have properly planned and performed our audit
in accordance with auditing standards. For example, the
further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures
required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk
of non-detection of fraud, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not
responsible for preventing non-compliance or fraud and
cannot be expected to detect non-compliance with all laws
and regulations.
86
Governance 6. We have nothing to report on the other information in
Auditor’s responsibilities
the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have
not identified material misstatements in the other
information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
strategic report and the directors’ report;
— in our opinion the information given in those reports for
the financial year is consistent with the financial
statements; and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
7. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report
to you if, in our opinion:
— adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
— the parent Company financial statements are not in
agreement with the accounting records and
returns; or
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
9. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Stuart Burdass (Senior Statutory Auditor)
— certain disclosures of directors’ remuneration specified
for and on behalf of KPMG LLP, Statutory Auditor
by law are not made; or
— we have not received all the information and
explanations we require for our audit.
We have nothing to report in these respects
8. Respective responsibilities
Directors’ responsibilities
Chartered Accountants
One Sovereign Square
Leeds
LS1 4DA
22 April 2021
As explained more fully in their statement set out on page
79, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error; assessing the Group and, parent Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the
going concern basis of accounting unless they either intend
to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
87
Avacta Report and Accounts 2020 Financial
Statements
90
Consolidated Statement of
Profit or Loss
91
Consolidated Balance Sheet
92
93
94
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Notes to the Consolidated
Financial Statements
121 Company Balance Sheet
122
Company Statement of
Changes in Equity
122
Notes to the Company
Balance Sheet
8 52
89
Avacta Report and Accounts 2020 Consolidated Statement of Profit or Loss
and Other Comprehensive Income for the
Year Ended 31 December 2020
Revenue
Cost of sales
Gross profit
Research costs
Share of loss of associate
Amortisation of development costs
Impairment of intangible fixed assets
Selling, general and administrative expenses
Depreciation expense
Share-based payment charge
Operating loss
Finance income
Finance costs
Net finance costs
Loss before tax
Taxation
Loss and total comprehensive loss for period
Loss per ordinary share
Basic and diluted
Note
3
22
10
10
11, 21
5
6
7
21
8
9
2020
£000
3,636
(1,455)
2,181
(8,961)
(217)
(1,007)
(1,741)
(7,315)
(1,125)
(3,108)
(21,293)
43
(93)
(50)
2019*
£000
5,511
(1,440)
4,071
(7,860)
-
(2,202)
-
(10,064)
(1,636)
(338)
(18,029)
73
(98)
(25)
(21,343)
(18,054)
2,452
2,439
(18,891)
(15,615)
(8.37p)
(12.98p)
* These results relate to the 17-month period ended 31 December 2019
All activities relate to the continuing operations of the Group.
The notes on pages 94 to 127 form an integral part of these financial statements.
90
Financial Statements
Consolidated Statement
of Financial Position as at
31 December 2020
Assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Non-current assets
Inventories
Trade and other receivables
Income tax receivable
Short-term deposits
Cash and cash equivalents
Current assets
Total assets
Liabilities
Lease liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserve
Reserve for own shares
Retained earnings
Total equity
Note
11
21
10
12
13
14
21
15
21
17
18
18
18
18
2020
£000
2,696
2,095
9,417
14,208
248
2,895
2,200
20,017
27,894
53,254
2019
£000
2,304
780
11,800
14,884
156
2,082
2,500
-
8,788
13,526
67,462
28,410
(1,752)
(1,752)
(3,491)
(290)
(3,781)
(646)
(646)
(1,778)
(177)
(1,955)
(5,533)
(2,601)
61,929
25,809
25,343
54,137
(1,729)
(2,961)
(12,861)
61,929
17,671
9,877
(1,729)
(2,932)
2,922
25,809
The notes on pages 92 to 125 form an integral part of these financial statements.
The financial statements on pages 88 to 125 were approved by the Board of Directors on 22 April 2021and signed on its behalf by:
Alastair Smith
Chief Executive Officer
Tony Gardiner
Chief Financial Officer
91
Avacta Report and Accounts 2020
Consolidated Statement of Changes in Equity for the
Year Ended 31 December 2020
Balance at 1 August 2018
Share
capital
£000
6,976
Share
premium
£000
Other
reserve
£000
Capital
reserve
£000
Reserve
for own
shares
£000
Retained
earnings
£000
Total
equity
£000
770
(1,729)
1,899
(2,802)
16,299
21,413
Total comprehensive loss for the period
-
-
Transactions with owners of the Company:
Issue of shares
Exercise of share options
Own shares acquired
Equity-settled share-based payment
Transfer1
Balance at 31 December 2019
Total comprehensive loss for the period
Transactions with owners of the Company:
Issue of shares
Exercise of share options
Own shares acquired
Equity-settled share-based payment
10,625
8,674
32
38
-
-
10,695
17,671
-
341
92
-
-
9,107
9,877
-
7,195
43,596
467
10
-
645
19
-
7,672
44,260
-
-
-
-
-
-
-
-
-
-
-
-
(1,899)
(1,899)
-
-
-
(130)
-
-
(130)
(2,932)
-
-
-
(29)
-
(29)
(15,615)
(15,615)
-
-
-
338
1,899
2,237
2,922
19,299
373
-
338
-
20,011
25,809
(18,891)
(18,891)
-
-
-
3,108
3,108
50,791
1,112
-
3,108
55,011
(2,961)
(12,861)
61,929
-
-
-
-
-
-
-
-
(1,729)
-
-
-
-
-
-
Balance at 31 December 2020
25,343
54,137
(1,729)
1 The transfer from the capital reserve to retained earnings relates to the elimination of the original acquisition accounting of Avacta Health
Limited, which was dissolved during the comparative period.
Details of the nature of each component of equity are given at Note 18.
The accompanying notes form an integral part of the financial statements
92
Financial Statements Consolidated Statement of Cash Flows for the Year
Ended 31 December 2020
2020
£000
2019*
£000
Cash flows from operating activities
Loss for the period
Adjustments for:
- Amortisation
- Impairment losses
- Depreciation
- Net loss on disposal of property, plant and equipment
- Share of loss of associate
- Equity-settled share-based payment transactions
- Net finance costs
- Taxation
(18,891)
(15,615)
1,029
1,741
1,125
6
217
3,108
50
(2,452)
2,313
-
1,636
19
-
338
25
(2,439)
Operating cash outflow before changes in working capital
(14,067)
(13,723)
Decrease/(increase) in inventories
Increase in trade and other receivables
Increase in trade and other payables
(91)
(814)
1,627
30
(825)
78
Operating cash outflow from operations
(13,345)
(14,440)
Interest received
Interest elements of lease payments
Tax credit received
Withholding tax paid
42
(93)
2,754
-
72
(86)
1,631
(192)
Net cash used in operating activities
(10,642)
(13,015)
Cash flows from investing activities
Purchase of plant and equipment
Purchase of intangible assets
Investment in associate
Development expenditure capitalised
Increase in balances on short-term deposit
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Transaction costs related to issue of share capital**
Proceeds from exercise of share options
Principal elements of lease payments
Net cash from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January 2020
Cash and cash equivalents at 31 December 2020
*These results relate to the 17-month period ended 31 December 2019
** Please see Note 18 for further information
The accompanying notes form an integral part of the financial statements.
(1,279)
(221)
(217)
(165)
(20,017)
(21,899)
53,750
(2,960)
1,112
(255)
51,647
19,106
8,788
27,894
(618)
(34)
-
(1,875)
-
(2,527)
19,331
-
-
(221)
19,110
3,568
5,220
8,788
93
Avacta Report and Accounts 2020
Notes to the Consolidated
Financial Statements
Accounting policies
1
Avacta Group plc (the ‘Company’) is a company incorporated and
domiciled in the UK. These consolidated financial statements for
the year ended 31 December 2020 comprise the Company and
its subsidiaries (together referred to as the ‘Group’).
Basis of preparation
The Group’s consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standards (’IFRSs’) as adopted by the European Union. The
Company has elected to prepare its parent company financial
statements in accordance with applicable UK accounting
standards, including Financial Reporting Standard 102 – The
Financial Reporting Standard applicable in the United Kingdom and
Republic of Ireland (‘FRS 102’), and with the Companies Act 2006.
These parent company financial statements and notes appear
after the notes to the consolidated financial statements.
The financial statements have been prepared on the historical
cost basis.
During the prior period, the Group changed its accounting period
to 31 December to bring it in line with the calendar year and
therefore the accounts are showing a 12-month financial year
to the comparative 17-month financial period. As such, amounts
presented in the financial statements are not readily comparable.
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 £18.9 million and
operating cash outflows of £13.3 million for the year ended 31
December 2020. The Directors consider this to be appropriate
for the following reasons.
The Directors have prepared detailed cash flow forecasts that
extend to at least 12 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 12 months from
94
the date of approval of the financial statements. The key factors
considered in reaching this conclusion are summarised below:
• The Group continues to develop its therapeutic and
diagnostic platform technologies. The development of the
AffiDX® SARS-CoV-2 Antigen Lateral Flow Test, which is in
the late stages of clinical validation and CE marking, could
generate significant revenue and profits for the Group in
the near term, which have not been included in the base
case assessment.
• As at 31 December 2020, the Group’s short-term deposits
and cash and cash equivalents were £47.9 million (2019:
£8.8 million).
• The Group has a tax refund in relation to R&D tax credits
due in the second half of 2021 amounting to £2.2 million
(a comparable tax refund of £2.8 million was received
in October 2020 relating to the 17-month period to 31
December 2019).
• 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 have also reviewed these cash flow forecasts in the
light of potential impacts from the COVID-19 pandemic. The short-
term impact centres around the commencement of clinical trials
for the AVA6000 pro-doxorubicin phase I clinical trials, which are
due to commence in mid-2021, the ability to recruit patients to
the trial given potential COVID-19 follow-on issues and any delay
this may have on the initial phase I study readouts. This could
potentially delay expenditures and reduce cash burn during the
forecast period. The Directors are confident that the current level
of funding will be sufficient for the Group and Company to meet
their liabilities for the forecast period.
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 12 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:
Financial Statements Going concern – The judgement of whether or not the
accounts should be prepared on a going concern basis has
been disclosed above.
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships.
Such amounts are generally recognised in profit or loss.
Revenue recognition – Judgements arise from the application of
IFRS 15 to the Group’s revenue streams, as disclosed in Note
1 C.
The Directors consider that the assumptions and
estimation uncertainties at 31 December 2020 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 underlie the recoverable amounts used
in these impairment tests, including the recoverability of
development costs. Information on the key assumptions
used is disclosed in Note 10.
The estimates and judgements relevant to the Company
financial statements have been disclosed in Note 24.
New standards and interpretations not applied
A number of new standards are effective for annual periods
beginning after 1 January 2020 and earlier application is
permitted; however, the Group has not early adopted the
new or amended standards in preparing these consolidated
financial statements.
The following amended standards and interpretations are
not expected to have a significant impact on the Group’s
consolidated financial statements:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform – Phase 2
• Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9
• Amendments to IFRS 16 Leases Covid 19-Related Rent
Concessions
• Amendments to IFRS 3 Business Combinations
No new standards becoming effective and applied in the
current year have had a material impact on the financial
statements.
Significant accounting policies
The Group has consistently applied the following accounting
policies to all periods presented in these consolidated financial
statements, except if mentioned otherwise.
A - Basis of consolidation
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is generally
measured at fair value, as are the identifiable net assets
acquired. Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase is recognised in
profit or loss immediately. Transaction costs are expensed
as incurred, except if related to the issue of debt or equity
securities.
Any contingent consideration is measured at fair value to
the date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instrument
is classified as equity, then it is not remeasured and settlement
is accounted for within equity. Otherwise, other contingent
consideration is remeasured at fair value at each reporting
date and subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity. The financial statements of subsidiaries are included in
the consolidated financial statements from the date on which
control commences until the date on which control ceases.
Control exists when the Company has the power, directly or
indirectly, to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing
control, potential voting rights that presently are exercisable
or convertible are considered. The financial statements
of subsidiaries are included in the consolidated financial
statements from the date that control commences until the
date that control ceases.
The Group’s interests in equity-accounted investees comprises
an interest in an associate. Associates are those entities in
which the Group has significant influence, but not control or
joint control, over the financial and operating policies. Interests
in associates are accounted for using the equity method.
They are initially recognised at cost, which includes transaction
costs. Subsequent to initial recognition, the consolidated
financial statements include the Group’s share of the profit or
loss and OCI of equity-accounted investees, until the date on
which significant influence ceases.
Intra-group balances and transactions, and any unrealised
income and expenses arising from intra-group transactions,
are eliminated.
B – Foreign currency
Transactions in foreign currencies are translated into the
respective functional currencies of Group companies at
the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at
the exchange rate at the reporting date. Non-monetary
items that are measured based on historical cost in a
foreign currency are translated at the exchange rate at the
date of the transaction. Foreign currency differences are
generally recognised in profit or loss and presented within
administrative expenses.
95
Avacta Report and Accounts 2020 Notes to the Consolidated
Financial Statements (continued…)
C – Revenue from contracts with customers
Revenue is measured based on the consideration specified
in a contract with a customer. The Group recognises revenue
when it transfers control over a good or service to a customer.
The following table provides information about the nature
and timing of the satisfaction of performance obligations in
contracts with customers, including significant payment terms,
and the related revenue recognition policies.
Type of product/
service
Segment
Nature and timing of satisfaction of performance
obligations
Custom Affimer®
development
projects
Diagnostics
Research and
development
licences
Diagnostics /
Therapeutics
The Group has determined that for custom Affimer®
development projects, the customer controls the output of
the contract as the service is being provided. This is because
under these contracts, the service provided is bespoke to a
customer’s specification and the Group is entitled to certain
value earned to date on cancellation of a project. Invoices
are issued at set milestones as defined within the contract
and are payable within standard commercial credit terms.
The Group consider that up-front payments received during
the period in relation to R&D licences are as consideration
for a right-to-use the relevant IP, primarily as a result of
the Group not undertaking activities that significantly affect
the intellectual property to which customers have rights
during the respective contracts. Therefore, the associated
performance obligation is satisfied at the point in time the
IP is granted, or at the point in time the work associated
with the customer using the IP is completed where the
licence and associated service are judged to form part of
the same performance obligation. For work performed
under R&D licences (presented as provision of services in
Note 3), performance obligations are satisfied over time
as the relevant work is performed. For future milestone
payments specified under licence agreements, performance
obligations are satisfied at the point in time that the
milestone is achieved.
Revenue recognition policies
Revenue is recognised over
time, with progress being
determined based on costs
incurred to date relative
to the total expected costs
incurred in satisfaction of the
performance obligation.
Revenue is recognised at
the point in time that the
performance obligations under
R&D licences are satisfied for
milestone payments. For work
performed under R&D licences,
the practical expedient to
recognise revenue at an
amount that corresponds
directly to that invoiced to the
customer for performance to
date is taken.
Allergy diagnostic
tests
Animal Health Customers obtain control of the service once test results
have been sent. Invoices are generated at this point in time
and are payable within standard commercial credit terms.
Revenue is recognised at the
point in time that the test
results are sent.
Immunotherapy
vaccine / export
sales
Animal Health Customers obtain control of the goods once the goods are
delivered to and have been accepted at the customer’s
premises. Invoices are generated at this point in time and
are payable within standard commercial credit terms.
Revenue is recognised at the
point in time that the goods
are delivered and have been
accepted by customers at their
premises.
D – Employee benefits
Short-term employee benefits are expensed as the related
service is provided. A liability is recognised for the amount
expected to be paid if the Group has a present legal or
constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be
estimated reliably.
The grant-date fair value of equity-settled share-based
payment arrangements granted to employees is generally
recognised as an expense, with a corresponding increase in
equity, over the vesting period of the awards. The amount
recognised as an expense is adjusted to reflect the number
of awards for which the related service and non-market
performance conditions are expected be met, such that
the amount ultimately recognised is based on the number
of awards that meet the related service and non-market
performance conditions at the vesting date. For share-based
payment awards with non-market vesting conditions, the
grant-date fair value of the share-based payment is measured
to reflect such conditions and there is no true-up for
differences between expected and actual outcomes.
96
Financial Statements Obligations for contributions to defined contribution plans
are expensed as the related service is provided.
The estimated useful lives of property, plant and equipment
for current and comparative periods are as follows:
E – Finance income and finance costs
The Group’s finance income and finance costs include:
• interest income;
• interest expense on lease liabilities (see note 1L)
Interest income on cash deposits is recognised in the profit or
loss as it is earned.
F – Income tax
The income tax credit comprises current and deferred tax. It
is recognised in the statement of profit or loss except to the
extent that it relates to items recognised directly in equity, in
which case it is recognised in equity.
The current tax credit relates to the expected Small and
Medium Sized Enterprise R&D relief receivable for the year,
and any adjustment to the amount receivable in respect of
previous years. The amount of current tax receivable is the
best estimate of the tax amount expected to be received
that reflects the related uncertainty. It is measured using
the applicable rates enacted or substantively enacted at the
reporting date.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for
taxation purposes except for when they arise on the initial
recognition of goodwill. Deferred tax assets are recognised
for unused tax losses, unused tax credits and deductible
temporary differences to the extent that it is probable that
future taxable profits will be available against which they can
be used. Unrecognised deferred tax assets are reassessed at
each reporting date and recognised to the extent that it has
become probable that future taxable profits will be available
against which they can be used.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using
tax rates enacted or substantively enacted at the reporting
date.
G – Inventories
Inventories are measured at the lower of cost and net
realisable value. Cost is determined using the first in, first out
principle. Appropriate provisions for estimated irrecoverable
amounts are recognised in the income statement when there
is objective evidence that the assets are impaired.
H – Property, plant and equipment
Property, plant and equipment are held at cost less
accumulated depreciation and any accumulated impairment
losses.
Any gain or loss on disposal of an item of property, plant and
equipment is recognised in profit or loss.
Depreciation is calculated to write off the cost of items of
property, plant and equipment less their estimated residual
values using the straight-line method over their estimated
useful lives, and is recognised in profit or loss.
Laboratory equipment
– 3 to 10 years
Fixtures and fittings
– 3 to 10 years
Leasehold improvements
– 5 to 10 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
I – Intangible assets and goodwill
Goodwill arising on the acquisition of subsidiaries is measured
at cost less accumulated impairment losses.
Research and development – Expenditure on research
activities is recognised in profit or loss as incurred.
Development expenditure is capitalised on a research and
development project only if the expenditure can be measured
reliably, the product or process is technically and commercially
feasible, future economic benefits are probable and the
Group intends to and has sufficient resources to complete
development and to use or sell the asset. Otherwise, it is
recognised in profit or loss as incurred.
Development expenditure relating to Therapeutics work
is expensed in the period it is incurred, consistent with
pharmaceutical industry practice. Given the stage of
development of the technology and the significant risk through
the product development stages up to regulatory approval
that a commercial product may not materialise, there is not
sufficient certainty that the relevant expenditure satisfies the
commercial or technical feasibility criteria.
For Diagnostics and Animal Health, an assessment is made
of the research and development expenditure on a project-
by-project basis to identify which expenditure satisfies the
above capitalisation criteria. The key judgement involved is
considered to be the assessment of the stage of development
of the project, and whether it can be demonstrated that a
project has commercial or technical feasibility. For projects
which are judged to meet this criteria, there is an associated
judgement in ensuring that those direct people costs and
bought-in materials relating to these development projects
are properly segregated from research and customer projects.
For direct people costs, this requires a judgement of the
proportion of each relevant staff member’s time that is spent
on development projects. A broader judgement is also made
around the availability of sufficient financial resources to
complete the development projects, which is fundamentally
linked to the going concern assessment discussed earlier in
Note 1.
Subsequent to initial recognition, development expenditure
is measured at cost less accumulated amortisation and any
accumulated impairment losses. A periodic review of existing
capitalised development costs is performed to identify costs
relating to projects which are no longer considered to satisfy
the capitalisation criteria. For such costs, an impairment
charge is recognised in profit or loss.
Other intangible assets, including software and patents that
are acquired by the Group and have finite useful lives are
measured at cost less accumulated amortisation and any
accumulated impairment losses.
97
Avacta Report and Accounts 2020 Notes to the Consolidated
Financial Statements (continued…)
Amortisation is calculated to write off the cost of intangible
assets less their estimated residual values using the straight-
line method over their estimated useful lives, and is recognised
in profit or loss. Goodwill is not amortised.
The estimated useful lives for current and comparative periods
are as follows:
• Development expenditure relating to Diagnostics products
are amortised on a straight-line basis over a period reducing
from 15 years down to 5 years.
• Software: amortised over the useful life of the software,
being three to five years
• Patents: amortised over the same period as the length of
the life of the patent, being up to 20 years
At each reporting date, the Group reviews the carrying
amounts of its non-financial assets to determine whether
there is any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated.
Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash
inflows of other assets or cash generating units (‘CGUs’ –
defined under ‘Goodwill’ on page 111). Goodwill arising from
a business combination is allocated to CGUs or groups of
CGUs that are expected to benefit from the synergies of the
combination.
The recoverable amount of an asset or CGU is the greater of
its value in use and its fair value less costs to sell. Value in use
is based on the estimated future cash flows, discounted to
their present value using a discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an
asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are
allocated first to reduce the carrying amount of any goodwill
allocated to the CGU, and then to reduce the carrying
amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For
other assets, an impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation
or amortisation if no impairment loss had been recognised.
J – Financial instruments.
The Group classifies its financial assets in the following
measurement categories:
• Those to be measured subsequently at fair value (either
through other comprehensive income (‘OCI’) or through
profit or loss)
• Those to be measured at amortised cost
The classification depends on the entity’s business model for
98
managing the financial assets and the contractual terms of the
cash flows.
At initial recognition, the Group measures a financial asset
at its fair value plus, in the case of a financial asset not at fair
value through profit or loss (‘FVPL’), transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are
expensed in profit or loss.
Subsequent measurement of debt instruments depends
on the Group’s business model for managing the asset and
the cash flow characteristics of the asset. There are three
measurement categories into which the Group classifies its
debt instruments:
• Amortised cost: Assets that are held for collection of
contractual cash flows, where those cash flows represent
solely payments of principal and interest, are measured at
amortised cost. Interest income from these financial assets
is included in finance income using the effective interest
rate method. Any gain or loss arising on derecognition is
recognised directly in profit or loss and presented in other
gains / (losses) together with foreign exchange gains and
losses. Impairment losses are presented as a separate line
item in the statement of profit or loss.
• Fair value through other comprehensive income (‘FVOCI’):
FVOCI: Assets that are held for collection of contractual cash
flows and for selling the financial assets, where the assets’
cash flows represent solely payments of principal and
interest, are measured at FVOCI. Movements in the carrying
amount are taken through OCI, except for the recognition
of impairment gains or losses, interest income and foreign
exchange gains and losses, which are recognised in profit
or loss. When the financial asset is derecognised, the
cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss and recognised in
other gains/(losses). Interest income from these financial
assets is included in finance income using the effective
interest rate method. Foreign exchange gains and losses are
presented in other gains/(losses), and impairment expenses
are presented as a separate line item in the statement of
profit or loss.
• FVPL: Assets that do not meet the criteria for amortised
cost or FVOCI are measured at FVPL. A gain or loss on a
debt investment that is subsequently measured at FVPL is
recognised in profit or loss and presented net within other
gains/ (losses) in the period in which it arises.
The Group assesses, on a forward-looking basis, the expected
credit losses associated with its debt instruments carried
at amortised cost and FVOCI. The impairment methodology
applied depends on whether there has been a significant
increase in credit risk. For trade receivables, the Group
applies the simplified approach permitted by IFRS 9, which
requires expected lifetime losses to be recognised from initial
recognition of the receivables. In the current financial period,
this expected credit loss did not have a material impact on the
financial statements.
Financial Statements K – Operating segments
An operating segment is a component of the Group that
engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses
that relate to transactions with any of the Group’s other
components. An operating segment’s operating results are
reviewed regularly by the CODM Group’s chief operating
decision-maker (‘CODM’) to make decisions about resources to
be allocated to the segment and assess its performance, and
for which discrete financial information is available.
In accordance with IFRS 8 Operating Segments, the Group
determines and presents operating segments based on
the information that internally is provided to the Board of
Directors. Accordingly, the Board of Directors, which reviews
internal monthly management reports, budget and forecast
information is deemed to be the Group’s CODM.
L - Leases
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right
to control the use of an identified asset, the Group uses the
definition of a lease in IFRS 16.
At commencement or on modification of a contract that
contains a lease component, the Group allocates the
consideration in the contract to each lease component on
the basis of its relative stand-alone prices. However, for the
leases of property the Group has elected not to separate non-
lease components and account for the lease and non-lease
components as a single lease component.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount
of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove
the underlying asset or to restore the underlying asset or the
site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end
of the lease term, unless the lease transfers ownership of the
underlying asset to the Group by the end of the lease term
or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use
asset will be depreciated over the useful life of the underlying
asset, which is determined on the same basis as those of
property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted
for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses its
incremental borrowing rate as the discount rate.
The Group’s incremental borrowing rate is the rate of interest
that the Group would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain
an asset of a similar value to the right-of-use asset in a similar
economic environment.
Lease payments included in the measurement of the lease
liability comprise the following:
• Fixed payments, including in-substance fixed payments
• Variable lease payments that depend on an index or a
rate, initially measured using the index or rate as at the
commencement date
• Amounts expected to be payable under a residual
value guarantee
• The exercise price under a purchase option that the Group
is reasonably certain to exercise, lease payments in an
optional renewal period if the Group is reasonably certain
to exercise an extension option, and penalties for early
termination of a lease unless the Group is reasonably
certain not to terminate early
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in an
index or rate, if there is a change in the Group’s estimate of
the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it
will exercise a purchase, extension or termination option or
if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced
to zero.
The Group has elected not to recognise right-of-use assets
and lease liabilities for leases of low-value assets and short-
term leases, including IT equipment. The Group recognises the
lease payments associated with these leases as an expense on
a straight-line basis over the lease term.
99
Avacta Report and Accounts 2020 Notes to the Consolidated
Financial Statements (continued…)
2
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 (2019: 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.
Segment revenue represents revenue from external
customers arising from sale of goods and services, plus inter-
segment revenues. Inter-segment transactions are priced on
an arm’s length basis. Segment results, assets and liabilities
include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
The Group’s revenue to destinations outside the UK amounted
to 70% (2019: 69%) of total revenue. The revenue analysis
below is based on the country of registration of the customer:
UK
Rest of Europe
North America
Asia
Year ended
31 December 2020
17 months ended
31 December 2019
£’000
1,076
685
402
1,473
3,636
£’000
1,691
851
496
2,473
5,511
During the year, transactions with three external customers, two in the Therapeutics segment and one in the Animal Health
segment, amounted individually to 10% or more of the Group’s revenues, being £768,000, £694,000 and £440,000 respectively.
In the 17-month period ended 31 December 2019, transactions with one individual customer amounted to 10% or more of the
Group’s revenues. These revenues were £2,442,000 for a customer in the Therapeutics segment.
100
Financial Statements
Operating segment analysis 2020
Revenue
Cost of goods sold
Gross profit
Research costs
Share of loss of associate
Amortisation of development costs
Selling, general and administrative expenses
Impairment charge
Depreciation expense
Share-based payment expense
Segment operating loss
Central overheads
Operating loss
Finance income
Finance expense
Loss before taxation
Taxation
Amount attributable to equity
holders of the Company
Diagnostics
Therapeutics
Animal Health
Total
£000
519
(321)
198
(2,458)
-
(824)
(2,525)
-
(357)
(636)
£000
1,625
(641)
984
(6,432)
(217)
-
(1,702)
-
(701)
(893)
£000
1,492
(493)
999
(71)
-
(183)
(966)
(1,741)
(62)
(38)
£000
3,636
(1,455)
2,181
(8,961)
(217)
(1,007)
(5,193)
(1,741)
(1,120)
(1,567)
(6,602)
(8,961)
(2,062)
(17,625)
(3,668)
(21,293)
43
(93)
(21,343)
2,452
(18,891)
Operating profit/loss is the measure of profit or loss regularly reviewed by the Board. Central overheads, which relate to
operations of the Group function, 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 which are disclosed in Note 10.
All material segmental non-current assets are located in the UK.
101
Avacta Report and Accounts 2020
Notes to the Consolidated
Financial Statements (continued…)
Operating segment analysis 2019
Diagnostics
Therapeutics
Animal Health
Total
Revenue
Cost of goods sold
Gross profit
Research costs
Amortisation of development costs
Selling, general and administrative expenses
Depreciation expense
Share-based payment expense
Segment operating loss
Central overheads
Operating loss
Finance income
Finance expense
Loss before taxation
Taxation
Amount attributable to equity
holders of the Company
£000
812
(454)
358
(620)
(1,600)
(3,605)
(612)
(55)
(6,134)
£000
2,515
(284)
2,231
(7,240)
-
(2,269)
(678)
(101)
(8,057)
£000
2,184
(702)
1,482
-
(602)
(1,776)
(52)
(34)
(982)
£000
5,511
(1,440)
4,071
(7,860)
(2,202)
(7,650)
(1,342)
(190)
(15,173)
(2,856)
(18,029)
73
(98)
(18,054)
2,439
(15,615)
102
Financial Statements
3
Revenue
See accounting policy and discussion of main revenue streams in Note 1C. The Group’s revenue is all derived from contracts
with customers.
a) Disaggregation of revenue
In the following table, revenue is disaggregated by both its nature and the timing of revenue recognition. The table also includes a
reconciliation of the disaggregated revenue with the Group’s reportable segments (see Note 2).
Year ended 31 December 2020
Diagnostics
Therapeutics
Animal Health
Nature of revenue
Sale of goods
Provision of services
Licence-related income
Timing of revenue recognition
Products or services transferred at a point in time
Products or services transferred over time
£000
-
519
-
519
8
511
519
£000
-
1,436
189
1,625
189
1,436
1,625
£000
846
646
-
1,492
1,459
33
1,492
17 months ended 31 December 2019
Diagnostics
Therapeutics
Animal Health
Nature of revenue
Sale of goods
Provision of services
Licence-related income
Timing of revenue recognition
Products or services transferred at a point in time
Products or services transferred over time
£000
-
812
-
812
13
799
812
£000
-
556
1,959
2,515
1,959
556
2,515
£000
1,101
1,083
-
2,184
2,031
153
2,184
Total
£000
846
2,601
189
3,636
1,656
1,980
3,636
Total
£000
1,101
2,451
1,959
5,511
4,003
1,508
5,511
103
Avacta Report and Accounts 2020
Notes to the Consolidated
Financial Statements (continued…)
b) Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
Receivables
Contract assets
Contract liabilities
31 December
2020
£000
31 December
2019
£000
1,415
158
(579)
650
40
(40)
The contract assets primarily relate to the Group’s rights to consideration for work completed but not invoiced at the
reporting date. The contract assets are transferred to receivables when the rights become unconditional, this usually occurs
when the Group issues an invoice to the customer. The contract liabilities primarily relate to advance consideration received
from customers.
Of the £40,000 (2019: £66,000) in contract liabilities at the beginning of the period, £30,000 (2019: £66,000) has been recognised
as revenue for the period ended 31 December 2020.
The amount of revenue recognised in 2020 from performance obligations satisfied (or partially satisfied) in previous periods was
£nil (2019 from those performance obligations satisfied in 2018: £nil).
4
Employees
Staff costs:
Wages and salaries
Social security costs
Contributions to defined contribution plans
Share-based payment charges
Average number of employees (including Directors) during the year:
Commercial and operational
Administrative
2020
£000
6,011
673
328
3,108
10,120
104
19
123
2019
£000
8,044
799
396
338
9,577
102
17
119
The remuneration of the Directors (including the details of the highest paid Director) is set out within the audited sections of the
Remuneration Committee Report on pages 74 to 78 which form part of these audited financial statements.
104
Financial Statements
5
Share-based payments
The Group operates the following schemes:
• An HM Revenue and Customs (‘HMRC’) approved enterprise management incentive plan (‘EMI scheme’)
• An unapproved share option plan (‘Unapproved scheme’)
• An HMRC approved employee share incentive plan (‘SIP’)
• A Joint Share Ownership Plan (‘JSOP’)
Options have also been granted during the period to Evolution 2020 Limited in relation to a capital markets advice with options vesting
based on the achievement of certain share-based milestones.
The Group recognised a total share-based payment charge to the income statement of £3,108,000 (2019: £338,000).
EMI, unapproved and collaboration options
Details of the EMI, unapproved and collaboration options currently granted and unexercised, which are all equity settled, are given below.
Grant date
Employees
entitled
Number of
options
Vesting
conditions
Exercise
price (p)
Earliest exercise
date/Vested
Expiry
date
Options granted as employee (or consultant) benefits
6 September 2011
9 January 2012
16 June 2014
15 May 2015
15 February 2016
16 December 2016
1
1
1
1
3
2
20,689
Contractual performance
141,176
111,607
126,666
550,700
97,298
Time served
Time served and
commercial performance
Time served
Time served
Unconditional
Time served
24 August 2018
19
417,778
24 August 2018
24 August 2018
7 January 2019
7 January 2019
7 January 2019
1 July 2019
1 July 2019
6
1
2
1
5
3
1
296,527
54,000
153,860
340,000
Time served and
technical milestones
Time served and
commercial performance
Unconditional
Time served
1,900,854
Technical, commercial and
share price performance
261,332
123,629
Time served
Time served and
technical milestones
25 March 2020
35
3,982,627
Time served
14 May 2020
14 May 2020
14 May 2020
14 May 2020
5
5
1
1
2,754,856
8,500,000
1,000,000
Technical, commercial and
share price performance
Share based
Time served and
commercial performance
328,874
Unconditional
Options granted in relation to collaboration agreements
31 May 2019
1
1,742,373
Technical/regulatory
milestones
72.5
50.0
118.0
85.5
118.5
74.0
25.0
25.0
25.0
25.0
25.0
25.0
30.0
30.0
25.0
17.25
10.0
25.0
25.0
Vested
6 September 2021
Vested
9 January 2022
Vested
Vested
16 June 2024
15 May 2025
Vested
15 February 2026
Vested
16 December 2026
Vested
23 August 2028
Note 1
23 August 2028
Note 2
23 August 2028
Vested
Note 3
6 January 2029
6 January 2029
Note 4
6 January 2029
Note 5
30 June 2029
Note 6
30 June 2029
Note 7
24 March 2030
Note 8
14 May 2030
Note 9
14 May 2030
Note 10
14 May 2030
Vested
14 May 2030
29.2
Note 11
31 May 2026
Note 1 – This option provides that they can, if they have not lapsed, be exercised as to 7,076 as at 31 December 2020, as to
144,725 once the first technical milestone is achieved, 144,726 once the second technical milestone is achieved.
Note 2 – This option provides that they can, if they have not lapsed, be exercised as to 28,400 as at 31 December 2020 and as to
25,600 on or after 18 September 2022.
105
Avacta Report and Accounts 2020
Notes to the Consolidated
Financial Statements (continued…)
Note 3 – This option provides that they can, if they have not lapsed, be exercised as to 226,666 at 31 December 2020 and as to
113,334 on or after 11 June 2021.
Note 4 – This option provides that they can, if they have not lapsed, be exercised as to 950,427 on or after 31 December 2021
based on achieving certain technical and commercial milestones provided that the share price on 31 December 2021 is a
minimum of 37.5p. The second batch of 950,427 options can be exercised on or after 31 December 2021 on a sliding scale if the
share price range as at 31 December 2021 falls between 150p and 300p.
Note 5 – This option provides that they can, if they have not lapsed, be exercised as to 60,833 as at 31 December 2020 and as to
200,499 on or after 1 June 2021.
Note 6 – This option provides that they can, if they have not lapsed, be exercised as to 31,407 as at 31 December 2020, as to
46,111 once the first technical milestone is achieved and as to 46,111 once the second technical milestone is achieved.
Note 7 – This option provides that they can, if they have not lapsed, be exercised in full on or after 31 December 2022.
Note 8 - This option provides that they can, if they have not lapsed, be exercised as to 1,377,428 on or after 31 December
2021 based on achieving certain technical and commercial milestones provided that the share price on 31 December 2021 is a
minimum of 37.5p. The second batch of 1,377,428 options can be exercised on or after 31 December 2021 on a sliding scale if the
share price range as at 31 December 2021 falls between 150p and 300p.
Note 9 – This option provides that they can, if they have not lapsed, be exercised as to 4,250,000 as at 31 December 2020, as to
2,125,000 on or after 31 December 2021, if the average share price is over 110p for more than 20 business days during 2021, and
as to 2,125,000 on or after 31 December 2022, if the average share price is over 110p for more than 20 business days during 2022.
Note 10 – This option provides that they can, if they have not lapsed, be exercised as to 250,000 once the first commercial
milestone is achieved, as to 250,000 once the second commercial milestone is achieved, as to 250,000 once the third commercial
milestone is achieved and as to 250,000 on or after 5 August 2023.
Note 11 – This option provides that they can, if they have not lapsed, be exercised as to 580,791 as at 31 December 2020, as
to 580,791 once the second technical/regulatory milestone is achieved and as to 580,791 once the third technical/regulatory
milestone is achieved.
These options are share-based payments and are measured at fair value at the date of grant. The fair value determined at the
grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of shares that will eventually vest. If options remain unexercised after a period of 10 years from the date of grant,
the options expire. Furthermore, options are forfeited if the employee leaves the Group before the options vest.
Fair value is measured by use of the Black-Scholes or Monte Carlo option pricing model depending on which is most appropriate
to the conditions attached to the share-based payment. Expected volatility was determined by calculating the historical volatility
of the Group’s share price over a period commensurate with the expected life of the option. The expected life used in the model
has been adjusted, based on management’s best estimate at the date of grant, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
The fair value of the options granted in relation to collaboration agreement during the period has also been measured using the
above method, on the basis that the fair value of the services provided cannot be measured reliably.
106
Financial Statements The inputs into the Black-Scholes models for the options granted during the year are as follows:
Weighted average share price at date of grant
Weighted average exercise price
Weighted average fair value at date of grant
Expected volatility
Expected life
Risk-free rate
Expected dividends
The number and weighted average exercise price of share options are as follows:
2020
2020
75.08p
15.04p
9.51p
63.3%
2019
26.16p
26.16p
10.97p
50.0%
5.0 years
5.0 years
1.0%
Nil
1.0%
Nil
2019
Options
Weighted average
exercise price (p)
Options
Weighted average
exercise price (p)
At start of period
Granted during the year
Exercised during the year
Forfeited or lapsed during the year
Outstanding at end of period
Exercisable at end of period
10,588,313
19,726,357
(4,671,274)
(2,738,550)
22,904,846
8,461,364
40.74
15.04
23.80
39.34
22.23
26.82
4,709,820
8,667,005
(323,086)
(2,465,426)
10,588,313
2,965,364
81.80
26.16
10.00
71.92
40.74
61.62
The options outstanding at 31 December 2020 had a range of exercise prices from 10p to 118.5p (2019: 25p to 118.5p) and a
weighted average exercise price of 22.23p (2019: 40.74p), and a weighted average remaining contractual life of 8 years and 1 week
(2019: 6 years and 33 weeks).
Joint Share Ownership Plan
The Joint Share Ownership Plan (‘JSOP’) covers certain employees who have a joint interest in shares with Avacta Group Trustee
Limited as trustee of The Avacta Employees’ Share Trust. At 31 December 2020, five employees (2019: six) had joint interests in
2,932,306 (2019: 3,232,306) ordinary shares in the Company. The Joint Share Ownership Agreements are dated 15 February 2016,
or 21 February 2014, or 9 January 2012 between each employee individually, Avacta Group Trustee Limited and Avacta Group plc.
Each employee has purchased 1% of the ordinary shares and the Avacta Group Trustee Limited owns 99% of the ordinary shares.
The agreements operate when a Capital event occurs, being the sale or partial sale of the Company’s ordinary shares. If the
proceeds per ordinary share are more than the original market price on the date the agreement was entered into then a formula
sets out the sharing of the gain between the employee and Avacta Group Trustee Limited.
These joint interests have been treated as employee benefits and the fair value at the date of issue of the shares based on the
Group’s estimate of the number of shares that will eventually be sold and the price at which they will be sold on a straight-line
basis from the date that a sale becomes probable to the date at which they are anticipated to be sold.
Share Incentive Plan
The Group operates an HMRC-approved Share Incentive Plan (‘SIP’). The SIP is operated on behalf of the Group by Link Market
Services Trust Limited as Trustee for the SIP. Certain employees based on eligibility criteria are issued free shares up to a
maximum £3,000 as part of their annual performance review. On 11 February 2020 101,701 ordinary shares of 10p each were
issued in relation to the Free Share award based on the closing middle market price of 28.5p on 8 February 2020.
In addition to the free share awards, the Group also operates a matching and partnership share arrangement whereby for
each one share purchased by the employee via salary deduction a matching share was awarded by the Group. The maximum
amount that can be subscribed for by employees via salary deduction is £1,800 per annum. As at 31 December 2020, 41 eligible
employees, had made binding commitments to subscribe for partnership shares during the period ending 31 December 2020.
Free share and matching share awards to date have generally been met from continued on-market purchases by Link Market
Services Trustees Limited as trustee of the SIP. To the extent that ordinary shares are not available in the volume required through
the market, the Company will issue new ordinary shares to meet these awards.
As at 31 December 2020, the Trustee held 1,404,230 (2019: 970,213) ordinary shares of 10p on behalf of the SIP.
107
Avacta Report and Accounts 2020 Notes to the Consolidated
Financial Statements (continued…)
6
Operating loss
Operating loss is stated after charging/(crediting):
Note
Lease expense on low-value assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Net loss on disposal of property, plant and equipment
Amortisation of intangible fixed assets
Impairment of intangible fixed assets
Share of loss of associate
Employee benefit expense, including share-based payment charges
Auditor’s remuneration:
• Audit services in respect of the Company’s financial statements
• Audit services in respect of the Company’s subsidiaries’ financial statements
21
11
21
10
10
22
4
• Tax compliance services
• Tax advisory services
7
Net finance costs
Interest income
Interest expense on lease liabilities
8
Taxation on loss on ordinary activities
Current tax:
Current period
Changes in estimates related to prior years
Deferred taxation:
Current period
Tax on loss on ordinary activities
108
2020
£000
2
882
244
6
1,029
1,741
217
9,506
80
25
11
3
2020
£000
43
(93)
(50)
2019
£000
2
1,350
288
18
2,313
-
-
9,577
58
25
18
20
2019
£000
73
(98)
(25)
2020
£000
(2,199)
(253)
2019
£000
(2,305)
(134)
-
-
(2,452)
(2,439)
Financial Statements
Factors affecting the tax charge for the current period
The current tax credit for the year is lower (2019: lower) than the standard rate of corporation tax in the UK of 19.0% (2019: 19.0%).
The differences are explained below.
Loss on ordinary activities before taxation
Loss on ordinary activities before taxation multiplied by the
standard rate of corporation tax in the UK of 19.0% (2019: 19.0%)
Effects of:
• Expenses not deductible for tax purposes
• Deferred tax losses not recognised
• Government tax incentives
• Withholding tax expense
2020
£000
(21,343)
(4,055)
674
3,381
(2,452)
-
(2,452)
2019
£000
(18,054)
(3,430)
95
3,335
(2,631)
192
(2,439)
9
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 2020, 22,904,846 options (2019: 10,588,313)
have been excluded from the diluted weighted-average
number of ordinary shares calculation because their effect
would have been anti-dilutive, further details are set out in
Note 5.
Loss (£000)
Weighted average number of shares (number)
Basic and diluted loss per ordinary share (pence)
2020
(18,891)
2019
(15,615)
225,578,759
120,336,858
(8.37p)
(12.98p)
109
Avacta Report and Accounts 2020
Notes to the Consolidated
Financial Statements (continued…)
10
Intangible fixed assets
Goodwill
£000
Customer-related
intangible assets
£000
Development
costs
£000
Software
£000
Patents
£000
Total
£000
Cost
At 1 August 2018
Internally developed/additions
Disposals
4,655
-
-
At 31 December 2019
4,655
Internally developed/additions
Disposals
-
-
At 31 December 2020
4,655
Amortisation and impairment
At 1 August 2018
Amortisation
Disposals
At 31 December 2019
Amortisation
Impairment
Disposals
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
At 31 July 2018
822
-
-
822
-
1,518
-
2,340
2,315
3,833
3,833
150
-
(150)
-
-
-
-
150
-
(150)
-
-
-
-
-
-
-
-
10,338
1,875
(1,129)
11,084
165
(1,049)
10,200
2,079
2,202
(1,129)
3,152
1,007
223
(1,050)
3,332
6,868
7,932
8,259
249
34
(83)
200
15
-
215
224
24
(83)
165
18
-
-
183
32
35
25
115
-
(115)
-
206
-
206
28
87
15,507
1,909
(1,477)
15,939
386
(1,049)
15,276
3,303
2,313
(115)
(1,477)
-
4
-
-
4
202
-
87
4,139
1,029
1,741
(1,050)
5,859
9,417
11,800
12,204
Development costs
Development costs relate to the internally generated
intangible assets associated with the development of the
Affimer® diagnostics-based technologies.
The specific judgements applied by management when
capitalising development costs are discussed in Note 1I.
Research and development expenditure relating to
Therapeutics work is expensed in the period it is incurred,
consistent with pharmaceutical industry practice. Given the
stage of development of the technology and the significant
risk through the product development stages up to regulatory
approval that a commercial product may not materialise, there
is not sufficient certainty that the relevant expenditure satisfies
the commercial or technical feasibility criteria.
110
Financial Statements Goodwill
Goodwill arising on business combinations is allocated to the Group’s separate Cash Generating Units (‘CGUs’) based on an
assessment of which CGUs will derive benefit from each acquisition. A CGU is the smallest group of assets which generate cash
inflows independently from other assets. A CGU can be smaller than an operating segment. In the view of the Directors, the Group
currently has three (2019: three) CGUs reflecting the core areas of technological focus. Goodwill is not amortised, but is tested
annually for impairment. The goodwill can be allocated, on an operating segment (see Note 2) basis, as follows:
Therapeutics
Diagnostics
Animal Health
Goodwill
2020
£000
1,538
-
777
2,315
2019
£000
1,538
-
2,295
3,833
Impairment review
An impairment review of the Group’s intangible and tangible non-current assets was conducted at 31 December 2020.
Impairment tests are mandatory for CGUs containing goodwill acquired in a business combination. Impairment tests for
other CGUs are carried out when an indication of impairment is considered to exist, such as operating losses
Therapeutics
The recoverable amount of this CGU was based on a value-in-use calculation, using discounted cash-flow projections.
The key assumptions used in the estimation of the recoverable amount are considered to be as follows:
• Modelled growth over a twelve-year period, this timeframe reflecting management’s best estimate of the period at which
revenue growth of the CGU would be above the long-term background growth rate. This timeframe exceeds the usual five-year
period due to the stage of ongoing contracts, and wider pipeline, and the length of time between entering into such contracts
and the generation of ongoing commercial revenues
• Revenue growth is forecasted to increase to circa £16 million over a five-year timeframe, equivalent to a 44.4% compound
annual growth rate (CAGR), with growth rates declining from 30% in Year 6 to a long-term growth rate over the remainder of
the modelled growth period. Short-term growth rates are based on management’s expectations of achievement of near-term
milestones, and service revenue in existing research and development licence contracts. Longer-term revenue growth is based
on longer-term milestones in these contracts, management’s best estimate of growth from current pipeline deals, future licence
deals and longer-term commercial licence revenue
• Terminal growth rate after the modelled growth phase of 2.5% (2019: 2.5%), approximating the annual average inflation rate
• Gross margins projected based on those achieved historically, and management’s best estimate of the future margins arising
from the growth in licensing revenue
• Pre-tax discount rate of 17% (2019: 16.5%), derived from a weighted-average cost-of-capital of 15% (2019: 15%)
Using the assumptions listed above, the value in use of the Therapeutics CGU exceeds its carrying amount by £50.3 million.
Sensitivity analysis has been performed, where a reasonably possible delay in commercial licence revenue has been modelled,
with the effect of halving the growth rates after the initial five-year period. Sensitivity analysis has also been performed in relation
to the discount rate by increasing the pre-tax discount rate by 3%. In neither scenario was an impairment charge identified. With
an assumption that long-term growth rates remain unchanged, the revenue growth over the initial five-year timeframe would
have to reduce to the extent that Year 5 revenue was £8.3 million, equivalent to a CAGR of 26.9%, for an impairment to
occur. The quantum of some longer-term milestones included in management’s expectations also presents a risk that reasonably
possible changes in the assumption that these longer-term milestones are achieved may result in an impairment to the CGU.
111
Avacta Report and Accounts 2020 Notes to the Consolidated
Financial Statements (continued…)
Diagnostics
No goodwill is allocated to the Diagnostics cash-generating unit; however, an impairment test has been performed in response to
identified indicators of impairment, being an operating loss in the period. The recoverable amount of this CGU was based on a value-
in-use calculation, using discounted cash-flow projections. The key assumptions used in the estimation of the recoverable amount
are considered to be as follows:
• Modelled growth over an eleven-year period, the timeframe reflecting the company being part-way through the circa 20-year
timeframe for the development cycle of customers incorporating patented Affimer® technology into their own products. This is
therefore management’s best estimate of the period over which the CGU’s revenue growth rate will be in excess of the long-
term growth rate
• Revenue growth is forecasted to increase to £9.7 million over a five-year timeframe, equivalent to a CAGR of 42%, with growth
rates decreasing from 30% in Year 5 to a long-term growth rate over the remainder of the modelled growth period. Growth
rates have been based on historic performance, the current order book and management’s best estimate of future growth in
existing revenue streams, with the longer-term growth rates being driven primarily by the development of licensing revenue
from existing and future customer relationships
• Terminal growth rate after the modelled growth phase of 2.5% (2019: 2.5%), approximating the annual average inflation rate
• Gross margins projected based on those achieved historically
• Pre-tax discount rate of 16% (2019: 16%), derived from a weighted-average cost-of-capital of 14% (2019: 14%)
Using the assumptions listed above, the value in use of the Diagnostics CGU exceeds its carrying amount by £29.9 million.
Sensitivity analysis has been performed with respect to the key assumptions underlying the impairment models. which did not
result in an impairment charge. For the recoverable amount of the Diagnostics CGU to reduce to the level of the carrying amount,
the pre-tax discount rate would need to increase to 27.5% or CAGR over the initial six-year period would need to reduce to 30%,
equivalent to a drop in revenue in year 5 to £6.3 million.
Animal Health
The recoverable amount of this CGU was based on a value-in-use calculation, using discounted cash-flow projections. The key
assumptions used in the estimation of the recoverable amount are considered to be as follows:
• Most recent budgets/forecasts for a five-year period
• Average revenue growth of 5% per annum over this forecast period, increasing forecast revenue from £1.5 million to £1.9
million over this period, based on historic performance and management’s best estimate of future growth
• Terminal growth rate after the modelled growth phase of 2.5% (2019: 2.5%), approximating the annual average inflation rate
• Gross margins projected based on those achieved historically and management’s best estimate of the future margins arising in
the forecast period
• Pre-tax discount rate of 15% (2019: 14%), derived from a weighted-average cost-of-capital of 12.5% (2019: 12.5%)
Using the assumptions listed above, the recoverable amount of the Animal Health CGU is determined to be £962,000 resulting
in an impairment charge of £1,518,000 (2019: £nil) recognised against goodwill. The impairment charge within the Animal
Health CGU arose as the business restructured, in light of the impact of the COVID-19 pandemic on the Company and the wider
veterinary industry, and revised its estimates of short-term revenue growth. This impairment charge is in addition to the specific
impairment charge of £223,000 identified of development costs prior to the CGU-level impairment review, and arising from the
restructure of the business and the re-focussing on core revenue streams. After impairment of the remaining carrying amount,
these development costs were disposed of, resulting in the £1.05 million disposal of cost and accumulated amortisation.
Sensitivity analysis with respect to this impairment has been performed, where a reasonably possible change in average revenue
growth rate has been modelled. Reducing the average growth rate by 1% per annum would result in the impairment charge increasing
by £406,000. Conversely, increasing the average growth rate by 1% per annum would reduce the impairment charge by £421,000.
Sensitivity analysis has also been performed in relation to the discount rate. An increase in the pre-tax discount rate by 1%
increases the impairment charge by £84,000 whilst a decrease in the pre-tax discount rate by 1% would reduce the impairment
charge by £98,000.
112
Financial Statements The tangible and intangible non-current assets at 31 December 2020 can be allocated as follows:
Tangible
£000
ROU Assets
£000
Goodwill
£000
Development costs
£000
Patents
£000
Software
£000
Therapeutics
Diagnostics
Animal Health
1,175
1,491
19
2,685
1,184
1,538
747
164
-
777
2,095
2,315
-
6,868
-
6,868
-
202
-
202
11
Property, plant and equipment
Assets in the course
of constructions
£000
Leasehold
improvements
£000
Laboratory
equipment
£000
Office fixtures
and fittings
£000
Cost
At 1 August 2018
Additions
Transfers
Disposals
At 31 December 2019
Additions
Transfers
Disposals
At 31 December 2020
Depreciation
At 1 August 2018
Charge for the period
Transfers
Disposals
At 31 December 2019
Charge for the period
Transfers
Disposals
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
At 1 August 2018
3
7
-
-
10
318
(27)
-
301
-
-
-
-
-
-
-
-
-
301
10
-
1,834
29
-
-
1,863
50
-
-
1,913
511
323
-
-
834
232
-
-
1,066
847
1,029
1,323
4,116
527
6
(188)
4,461
854
23
(249)
5,089
2,498
935
6
(170)
3,269
598
-
(243)
3,624
1,465
1,192
1,618
311
55
(6)
(16)
344
57
4
(3)
402
201
92
(6)
(16)
271
52
-
(4)
319
83
73
110
Total
£000
3,905
9,314
963
8
6
3
17
14,182
Total
£000
6,264
618
-
(204)
6,678
1,279
-
(253)
7,705
3,210
1,350
-
(186)
4,374
882
-
(247)
5,009
2,696
2,304
3,054
113
Avacta Report and Accounts 2020 Notes to the Consolidated
Financial Statements (continued…)
12
Inventories
Raw materials and components
Finished goods
13
Trade and other receivables
Trade receivables
Prepayments
Other receivables
Contract assets
Other taxes and social security
2020
£000
207
41
248
2020
£000
1,415
1,039
187
158
96
2,895
2019
£000
142
14
156
2019
£000
650
889
423
40
80
2,082
Trade and other receivables denominated in currencies other than sterling comprise £639,000 (2019: £353,000) of trade
receivables denominated in US dollars and £14,000 (2019: £20,000) denominated in euros. The fair values of trade receivables are
the same as their book values.
The ageing analysis of trade receivables past due is as follows:
2020
£000
80
4
9
76
169
2020
£000
20,017
27,894
47,911
2019
£000
114
40
23
10
187
2019
£000
-
8,788
8,788
Under 30 days overdue
Between 30 and 60 days overdue
Between 60 and 90 days overdue
Over 90 days overdue
14 Cash and cash equivalents
Short-term deposits
Cash and cash equivalents
114
Financial Statements
15
Trade and other payables
Trade payables
Other taxes and social security
Accruals
Other payables
Contract liabilities
2020
£000
856
232
1,819
5
579
3,491
2019
£000
698
160
823
57
40
1,778
Trade and other payables denominated in currencies other than sterling comprise £47,000 (2019: £145,000) of trade payables
denominated in US dollars, £38,000 (2019: £26,000) denominated in euros, and £nil (2019: £11,000) denominated in CHF. The fair
values of trade payables are the same as their book values.
16 Deferred tax liabilities
Deferred tax liabilities are attributable as set out below and are disclosed as non-current liabilities in the balance sheet:
Deferred tax asset/(liability)
Development costs
Trading losses
Property, plant and equipment
2020
£000
(1,305)
1,006
299
-
2019
£000
(1,348)
571
777
-
Movement in deferred tax for period ended 31 December 2020
Development costs
Trading losses
Property, plant and equipment
At 1 January
2020
£000
Income
statement
£000
At 31 December
2020
£000
(1,348)
571
777
-
43
435
(478)
-
(1,305)
1,006
299
-
There is no liability to corporation tax in the year. There are unprovided deferred tax assets of approximately £5,414,000 due
to trading losses in the current and prior financial years (2019: £5,013,000) and of £1,271,000 (£nil) relating to deductible
temporary differences where it is not probable that future taxable profit will be available against which the Group can use the
benefits therefrom.
115
Avacta Report and Accounts 2020
Notes to the Consolidated
Financial Statements (continued…)
17
Share capital
Allotted, called up and fully paid:
- 252,652,554 (2019: 175,935,136) ordinary shares of 10p each
- 19,327,344 deferred shares of 0.4p each
2020
£000
25,266
77
25,343
2019
£000
17,594
77
17,671
Share issues
On 10 February 2020, 101,701 ordinary shares of 10p each were allotted and issued at 28.5p per share to Link Market Services
Trust Limited as Trustee of the Avacta Group plc SIP (see Note 5).
On 24 April 2020, 31,944,443 ordinary shares of 10p each were allotted and issued at 18p further to a placing of shares. Placing
costs of £391,000 were incurred and offset against the share premium reserve.
On 15 and 26 May 2020, a total of 816,535 ordinary shares of 10p each were allotted and issued following the exercise of vested
EMI options.
On 10 and 25 June, a total of 40,000,000 ordinary shares of 10p each were allotted and issued at £1.20 further to a placing of
shares. Placing costs of £2,567,843 were incurred and offset against the share premium reserve.
On 7 July, 18 August, 20 August, 7 October and 13 November, a total of 3,854,739 ordinary shares of 10p each were allotted and
issued following the exercise of vested EMI and unapproved options.
Respective rights of ordinary and deferred shares
The rights of the ordinary shareholders are dealt with in the Articles of Association of the Company, which is available from the
Company’s registered office at Unit 20, Ash Way, Thorp Arch Estate, Wetherby, LS23 7FA or from its website, www.avacta.com.
The holders of the deferred shares shall not, by virtue or in respect of their holdings of deferred shares, have the right to receive
notice of any General Meeting, nor the right to attend, speak or vote at any such General Meeting. Save as required by law, the
Company need not issue share certificates to the holders of the deferred shares in respect of their holding thereof. The deferred
shares shall not entitle their holders to receive any dividend or other distribution. The deferred shares shall on a return of assets
in a winding up entitle the holders only to the repayment of the amounts so paid up on such deferred shares after repayment
of the capital paid up on the ordinary shares plus the payment of £10,000,000 per ordinary share. The Company shall have
irrevocable authority at any time to appoint any person to execute on behalf of the holders of the deferred shares a transfer
thereof and/or an agreement to transfer the same to such person as the Company determines as custodian thereof, without
making any payment to the holders thereof, and/or to cancel the same (in accordance with the provisions of the Companies Acts)
without making any payment to or obtaining the sanction of the holders thereof, and pending such transfer and/or cancellation,
to retain the certificate for such shares. The Company may, at its option at any time purchase all or any of the deferred shares
then in issue, at a price not exceeding 1p for each holding of deferred shares so purchased.
18
Capital reserves
Share premium
The share premium account of £54,137,000 (2019: £9,877,000) arose from the issue of shares at a premium to their nominal value
less certain allowable costs of issue. This reserve is not distributable.
Capital reserve
The capital reserve of £nil (2019: £nil) arose from the application of acquisition accounting principles to the financial statements
at the time of the acquisition of Avacta Health Limited (formerly Oxford Medical Diagnostics Limited). The reserve represented
the value of ordinary shares of 10p to be issued as part of the contingent considerations subject to the achievement of certain
milestone objectives in the case of Avacta Health Limited. This reserve was transferred to retained earnings during the prior
period following the dissolution of Avacta Health Limited.
Other reserve
The other reserve of negative £1,729,000 (2019: negative £1,729,000) arose from the application of reverse acquisition
accounting principles to the financial statements at the time of the reverse takeover of Avacta Group plc by Avacta Limited.
This reserve is not distributable.
116
Financial Statements
Reserve for own shares
The reserve for own shares of negative £2,961,000 (2019: negative £2,932,000) increased during the year following the issue
of 101,701 (2019: 372,826) ordinary shares of 10p each being issued to Link Market Services Trust Limited as Trustee to the
Avacta Group plc SIP (see Note 4). In addition, 3,232,306 (2019: 3,232,306) ordinary shares of 10p each are held jointly by certain
employees, each individually with Avacta Group Trustee Limited. This reserve is not distributable.
Retained earnings
Retained earnings arise from the cumulative profits or losses of the Group. The charge and associated credits in respect of
cumulative share-based payment charges (where appropriate) are also included.
Transaction costs related to the issue of share capital
In the prior period, the Consolidated Statement of Cash Flows presented proceeds from the issue of share capital, £20,617,000, net
of transactions related to the issue of share capital, £1,286,000. The Directors have reviewed this prior year presentation and have
not restated the prior year figures as they have concluded that the net presentation was not material to the financial statements.
19
Financial instruments and risk management
Capital management
The Group’s main objective when managing capital is to protect returns to shareholders by ensuring the Group develops such
that it trades profitably in the foreseeable future. The Group recognises that because it is an early stage development Group with
limited current revenues, and significant continued investment that does not support debt within its capital structure, its capital
structure is largely limited to equity-based capital which the Group uses to finance most of its strategy.
The Group has only one form of debt: credit card debt. Credit card debt is used to finance incidental expenditure, is short term and
settled in the month following the incurring of the related expenditure. The Group does not have long-term gearing ratio targets.
Whilst the Group uses debt in the forms described above, this debt is immaterial to the Group’s capital structure and its capital
management strategy. The Group manages its capital with regard to the risks inherent in the business and the sector within which
it operates. It does not impact the dividend policy of the Group as the current strategy is to invest capital in the business. The
Group has not made any changes to its capital management during the year.
Financial risk management
The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including foreign currency risk).
Interest rate risk
The Group continues to manage the cash position in a manner designed to maximise interest income, while at the same time
minimising any risk to these funds. Surplus cash funds are deposited with commercial banks that meet credit criteria approved by
the Board, for periods between one and twelve months.
Interest rate and currency profile
At 31 December 2020 and throughout the year, the Group maintained sterling cash at bank and short-term deposits. The current
book value of interest-bearing assets and liabilities is as follows:
Cash at bank (floating interest rate)
Short-term deposits (floating interest rate)
2020
£000
27,894
20,017
2019
£000
8,788
-
Cash at bank attracted interest at floating rates, which were between nil% and 0.15% at 31 December 2020 (2019: nil% and 0.9%).
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. This policy includes
restricting the maximum value of cash and short-term deposits held with any one financial institution. Credit evaluations are
performed on all customers requiring credit over a certain amount. The Group does not require collateral in respect of financial
assets. At the balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is
represented by the carrying amount of each financial asset in the balance sheet.
Fair value of financial instruments
At 31 December 2020, the difference between the book value and the fair value of the Group’s financial assets and liabilities was
£nil (2019: £nil).
117
Avacta Report and Accounts 2020 Notes to the Consolidated
Financial Statements (continued…)
Sensitivity analysis
The Group is not materially exposed to changes in interest or exchange rates at 31 December 2020.
Financial instruments policy
Treasury and financial risk policies are approved by the Board. All instruments utilised by the Group are for financing purposes.
Short-term deposits are placed for a period of no longer than twelve months with institutions with a ‘superior or strong’ ability to
repay short-term debt obligations. In order to manage financial exposure between different financial institutions no more than
£30 million is placed on short-term deposit with any one financial institution. The day-to-day financial management and treasury
function is controlled centrally for all operations. During the year, the Group had no derivative transactions.
Financial assets and liabilities
The Group’s financial instruments comprise cash and liquid resources, and various items such as trade receivables and trade
payables that arise directly from its operations. An analysis of the financial assets and liabilities recognised on the balance sheet,
each of which is at amortised cost is set out below.
Financial assets
Trade receivables
Short-term deposits
Cash
Financial liabilities
Trade payables
Maturity profile of financial liabilities
In one year or on demand
2020
£000
1,415
27,894
20,017
49,326
856
856
2019
£000
650
-
8,788
9,438
697
697
The financial liabilities due for repayment within one year relate to trade payables and other short-term liabilities.
20
Pensions
The Group operates a defined contribution pension scheme for its employees. The pension cost charge for the year represents
contributions payable by the Group to the scheme and other personal pension plans and amounted to £316,000 (2019:
£396,000). There were outstanding contributions at 31 December 2020 of £49,000 (2019: £44,000).
21
Leases
See accounting policy in Note 1L.
The Group leases a small number of properties for office and laboratory use, as well as some laboratory equipment. Information
about leases for which the Group is a lessee is presented below.
a)
Amounts recognised in the balance sheet
Right-of-use assets
As at 1 August 2018
Depreciation charge
As at 31 December 2019
Additions
Depreciation charge
As at 31 December 2020
118
Property
£000
Laboratory
equipment
£000
1,067
(288)
779
1,382
(235)
1,926
-
-
-
179
(9)
170
Total
£000
1,067
(288)
779
1,561
(244)
2,096
Financial Statements 31 December 2020
31 December 2019
Property
Laboratory
equipment
£000
232
1,659
1,891
£000
58
93
151
Total
£000
290
1,752
2,042
Property
£000
177
646
823
Lease liabilities
Current
Non-current
Reconciliation of change in lease liability
As at 1 August 2018
Payment of lease liability – principal element
Payment of lease liability – interest element
Interest expense
As at 31 December 2019
Additions to lease liability
Payment of lease liability – principal element
Payment of lease liability – interest element
Interest expense
As at 31 December 2020
b)
Amounts recognised in profit or loss
Depreciation charge on right-of-use assets
Property
Equipment
Interest on lease liabilities
Expenses relating to leases of low-value assets
The total cash outflow for leases in the period was £348,000.
c)
Capital commitments
At 31 December 2020, the Group had £84,000 of capital commitments (2019: £nil).
£000
1,033
(222)
(86)
98
823
1,474
(255)
(93)
93
2,042
2019
£000
286
-
286
98
2
119
2020
£000
235
9
244
93
2
Avacta Report and Accounts 2020
Notes to the Consolidated
Financial Statements (continued…)
22
Equity-accounted investees
During the year ended 31 December 2020, the Group formed an entity with Daewoong Pharmaceutical, AffyXell Therapeutics Co.,
Ltd based in South Korea, through an initial contribution of £217,000. The Group has significant influence and, at 31 December
2020, a 12% ownership interest. The entity, accounted for as an investment in associate, has been established to develop Affimer®
proteins which will be used for the generation of new cell and gene therapies.
The associate is measured using the equity method and the Group has recognised an investment in associate of £nil at 31
December 2020 due to recognition of a share of losses of the associate of £217,000 during the year. At 31 December 2020, the
Group has an unrecognised share of losses of £108,000 in excess of the initial contribution.
23
Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. See
Note 32 for details of these transactions.
Provision of services to related parties in the period relate to research and development services provided to an associate of
the Group, AffyXell Therapeutics Co., Ltd, as set out in Note 22. Purchase of services from related parties during the prior period
comprises provision of Non-executive Director services and related expenses. These transactions were made on terms equivalent
to those that prevail in arm’s length transactions.
Provision of services
Associate - AffyXell Therapeutics Co., Ltd
Purchase of services
IP Group plc and subsidiaries
Amounts receivable
Associate – AffyXell Therapeutics Co., Ltd
Year ended
31 December 2020
£000
17 months ended
31 December 2019
£000
694
-
473
-
29
-
Remuneration of key management personnel
The Group considers its key management personnel to comprise only of the Directors of the Group. Key management personnel
compensation from the Group is set out below:
Short-term employee benefits*
Post-employment benefits
Share-based payment
Year ended
31 December 2020
£000
17 months ended
31 December 2019
£000
897
24
1,076
884
30
120
*Short-term employee benefits include employers’ NI of £101,000 (2020: £95,000).
Full details of compensation of key management personnel are set out in the audited sections of the Remuneration Committee
Report on pages 74 to 78 which form part of these audited financial statements.
120
Financial Statements
Company Balance Sheet as at 31 December 2020
– Registered number 4748597
Note
25
25
26
27
28
29
30
30
30
2020
£000
11
15
3,902
3,928
62,697
20,017
27,547
110,261
(484)
109,777
113,705
25,343
54,137
(2,961)
37,186
113,705
Fixed assets
Tangible assets
Intangible assets
Investments
Current assets
Debtors*
Short-term deposits
Cash and cash equivalents
Current liabilities
Net current assets
Net assets
Capital and reserves
Called-up share capital
Share premium account
Reserve for own shares
Retained earnings
Shareholders’ funds
*Of which £62,516,000 (2019: £51,923,000) is expected to be
recovered in more than 12 months
The notes on pages 122 to 127 form an integral part of these
financial statements.
The balance sheet above was approved by the Board of
Directors and authorised for issue on 22 April 2021 and signed
on its behalf by:
Alastair Smith
Chief Executive Officer
Tony Gardiner
Chief Financial Officer
2019
£000
8
12
2,374
2,394
52,069
-
8,308
60,377
(212)
60,165
62,559
17,671
9,877
(2,932)
37,943
62,559
121
Avacta Report and Accounts 2020
Company Statement of Changes in Equity
for the Period Ended 31 December 2020
At 31 July 2018
Issue of shares
Exercise of share options
Own shares acquired
Total comprehensive loss for the period
Share-based payment charges
Transfer1
Share
capital
£000
6,976
10,625
32
38
-
-
-
770
8,674
341
92
-
-
At 31 December 2019
17,671
9,877
Issue of shares
Exercise of share options
Own shares acquired
Total comprehensive loss for the period
Share-based payment charges
7,194
43,597
468
10
-
-
644
19
-
-
At 31 December 2020
25,343
54,137
Share
premium
£000
Capital
reserve
£000
Reserve for
own shares
£000
Retained
earnings
£000
1,899
(2,802)
36,425
Total
equity
£000
43,268
19,299
373
-
(719)
338
-
-
-
(130)
-
-
-
-
-
-
(719)
338
1,899
(2,932)
37,943
62,559
-
-
(29)
-
-
-
-
-
(3,865)
3,108
50,791
1,112
-
(3,865)
3,108
(2,961)
37,186
113,705
-
-
-
-
-
(1,899)
-
-
-
-
-
-
-
1
The transfer from the capital reserve to retained earnings relates to the elimination of the original acquisition accounting of Avacta Health Limited, which was
dissolved during the period.
The accompanying notes form an integral part of the financial statements.
Notes to the Company Balance Sheet
24
Accounting policies
Basis of preparation
As used in the financial statements and related notes, the term
‘Company’ refers to Avacta Group plc.
These financial statements have been prepared in accordance
with applicable UK accounting standards, including Financial
Reporting Standard 102 – The Financial Reporting Standard
applicable in the United Kingdom and Republic of Ireland
(‘FRS 102’), and with the Companies Act 2006. The financial
statements have been prepared on the historical cost basis
except for the modification to a fair value basis for certain
financial instruments as specified in the accounting policies
below.
The Company has taken advantage of section 408 of the
Companies Act 2006 and has not included its own profit and
loss account in these financial statements. The individual
accounts of the Company have also adopted the following
disclosure exemptions:
• The requirement to present a statement of cash flows and
related notes.
• The reconciliation of number of shares outstanding from the
beginning to the end of the period has not been included a
second time.
• Key Management Personnel compensation has not been
included a second time.
• Certain disclosures required by FRS 102.11 Basic Financial
Instruments and FRS 102.12 Other Financial Instrument Issues
in respect of financial instruments not falling within the fair
value accounting rules of Paragraph 36(4) of Schedule 1; and
• Certain disclosures required by FRS 102.26 Share Based
Payments.
These financial statements have been prepared on a going
concern basis, the rationale for this assessment is given in
Note 1.
122
Financial Statements
Notes to the Company Balance Sheet
(Continued...)
Use of judgements and estimates
In preparing the Company 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 in Note 1.
The Directors consider that the assumptions and estimation
uncertainties at 31 December 2020 that have a significant risk
of resulting in a material adjustment to the carrying amounts
and liabilities in the next financial year are:
Carrying amount of investments in subsidiaries and amounts
owed by subsidiary undertakings – Management perform
an impairment assessment by comparing the aggregate
balance of investment in subsidiaries and amounts owed to
subsidiary undertakings relevant to each subsidiary with the
corresponding recoverable amount. The recoverable amount
is considered to be the value in use of the corresponding
cash-generating unit forming the basis of the Group impairment
testing. Where the aggregate carrying amount of investment
in subsidiary and amount owed by subsidiary exceeds the
recoverable amount, an impairment charge is recognised.
The impairment is first allocated against the investment, with
any residual impairment recognised against the amount
owed by subsidiary. Management measure the impairment
recognised against the amount owed by the subsidiary by
discounting the future cash flows by the original effective
interest rate of the intercompany loans. Management
recognise that there is inherent uncertainty in the recoverable
amount and that the aggregate carrying amount relevant to
Avacta Animal Health Ltd has been impaired to its recoverable
amount such that an adverse change in assumptions would
increase the quantum of impairment. A 1% increase in
the discount rate used in the Animal Health value-in-use
calculation would result in an increase in the provision against
amounts owed by subsidiary undertakings by £84,000, and
a 1% decrease in the average revenue growth rate would
increase the provision by £406,000. More broadly, were the
values in use in the Group’s impairment models all to reduce
to the carrying amount of the CGUs disclosed in Note 10,
there would be an associated increase in the provision against
investments in subsidiary and amounts owed by subsidiary
undertakings of £25.8 million.
Tangible fixed assets
Tangible fixed assets are held at cost less accumulated
depreciation and impairment charges.
Depreciation is provided at the following annual rates in order
to write off the cost less estimated residual value, which is
based on up-to-date prices, of property, plant and equipment
over their estimated useful lives as follows:
Fixtures and fittings
3 to 10 years
Intangible fixed assets
ntangible fixed assets are held at cost less accumulated
amortisation and impairment charges. Amortisation is
provided for to write off the cost less estimated residual value
of intangible assets over the estimated useful lives as follows:
Software 3 to 5 years
Investments
Fixed asset investments are stated at cost less accumulated
provision for impairment where appropriate. The Directors
consider annually whether a provision against the value of
investments on an individual basis is required. Such provisions
are charged to the profit and loss account in the year.
Taxation
The charge for taxation is based on the result for the year
and takes into account taxation deferred because of timing
differences between the treatment of certain items for
taxation and accounting purposes.
Deferred tax is provided for any timing differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes except when they arise on the initial recognition of
assets and liabilities that is not a business combination and
that affects neither accounting nor taxable profits. A deferred
tax asset is recognised only to the extent that it is probable
that future taxable income will be available against which an
asset can be utilised.
Share-based payments
The fair value of awards to employees or other parties that
take the form of shares or rights to shares is recognised as an
employee expense with a corresponding increase in equity.
The fair value is measured at grant date and spread over the
period during which the employees become unconditionally
entitled to the options. The fair value of the options granted
is measured using an option valuation model, considering
the terms and conditions upon which the options were
granted. The amount recognised as an expense is adjusted
to reflect the actual number of share options that vest except
where forfeiture is due only to share prices not achieving the
threshold for vesting.
Share-based payments made to employees of subsidiary
undertakings are treated as capital contributions to subsidiary
undertakings from the parent company, increasing the cost of
investment in subsidiary.
123
Avacta Report and Accounts 2020 Notes to the Company Balance Sheet
(Continued...)
25
Tangible and intangible fixed assets
Tangible
£000
Intangible
£000
Total
£000
Cost at 31 December 2019
Additions
Disposals
At 31 December 2020
Depreciation at 31 December 2019
Charge for the year
Disposal
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
26
Investments
Cost at 1 January 2020
Additions
At 31 December 2020
Provision at 1 January 2020
Charge for the year
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
52
8
-
60
44
5
-
49
11
8
78
8
-
86
66
5
-
71
15
12
130
16
-
146
110
10
-
120
26
20
£000
4,109
1,567
5,676
1,735
39
1,774
3,902
2,374
Additions in the year are capital contributions relating
to share-based payments to employees of subsidiary
undertakings.
During the current year, an impairment assessment of the
investment in and loan to subsidiaries was undertaken.
This assessment involved comparing the future discounted
cashflows of the subsidiary to the aggregated carrying value
of the relevant investments and intercompany balance.
Where the aggregated carrying value exceeded the future
discounted cashflows, an impairment was taken first against
the investment in subsidiary and secondly against the
intercompany receivable balance.
124
Financial Statements The companies in which Avacta Group plc has an interest at
31 December 2020 and form part of the consolidated Group
financial statements are as follows:
Subsidiary undertakings
Avacta Limited
Avacta Analytical Limited
Crossco (1127) Limited
Principal
activity
Country of
Incorporation
Class and percentage
of voting shares held
Non-trading
2Dormant
2Intermediate holding
company
¹England
¹England
¹England
Ordinary 100%
Ordinary 100%
Ordinary 100%
Avacta Animal Health Limited
Contract services
¹England
Ordinary 100%
Avacta Animal Health Inc.
2Dormant
¹USA
Ordinary 100%
Avacta Life Sciences Limited
Technology development
¹England
Ordinary 100%
Avacta Life Sciences Inc.
Technology development
¹USA
Ordinary 100%
Affimer Limited (formerly Promexus Limited)
Avacta Group Trustee Limited
2Dormant
2Dormant
¹England
¹England
Ordinary 100%
Ordinary 100%
Holding
Direct
Indirect
Direct
Indirect
Indirect
Direct
Indirect
Indirect
Direct
Avacta Analytical Limited is a subsidiary of Avacta Limited. Avacta Animal
Health Limited is a subsidiary of Crossco (1127) Limited. Affimer Limited
(formerly Promexus Limited) is a subsidiary of Avacta Life Sciences Limited.
1 Registered address: Unit 20, Ash Way, Thorp Arch Estate, Wetherby,
West Yorkshire.
2 Dormant status accounts will be filed for the year ended 31 December 2020.
27
Debtors
Other taxes and social security
Prepayments and other debtors
Amounts owed by subsidiary undertakings* (which are expected
to be recovered in more than 12 months)
Less: provision against amounts owed by subsidiary undertakings
* The terms of the intercompany loans are disclosed in Note 32
28
Current liabilities
Trade creditors
Other taxes and social security
Accruals and other creditors
2020
£000
8
172
77,468
(14,951)
62,697
2020
£000
41
50
393
484
2019
£000
10
136
64,242
(12,319)
52,069
2019
£000
50
28
134
212
125
Avacta Report and Accounts 2020
Notes to the Company Balance Sheet
(Continued...)
29
Share capital
Allotted, called up and fully paid:
- 252,652,554 (2019: 175,935,136) ordinary shares of 10p each
- 19,327,344 deferred shares of 0.4p each
Share issues
In 10 February 2020, 101,701 ordinary shares of 10p each
were allotted and issued at 28.5p per share to Link Market
Services Trust Limited as trustee of the Avacta Group plc SIP
(see Note 5).
On 24 April 2020, 31,944,443 ordinary shares of 10p each
were allotted and issued at 18p further to a placing of shares.
Placing costs of £391,000 were incurred and offset against the
share premium reserve.
On 15 and 26 May 2020, a total of 816,535 ordinary shares
of 10p each were allotted and issued following the exercise of
vested EMI options.
On 10 and 25 June 2020, a total of 40,000,000 ordinary shares
of 10p each were allotted and issued at £1.20 further to a
placing of shares. Placing costs of £2,567,843 were incurred
and offset against the share premium reserve.
On 7 July, 18 August, 20 August, 7 October and 13 November
2020, a total of 3,854,739 ordinary shares of 10p each were
allotted and issued following the exercise of vested EMI and
unapproved options.
Respective rights of ordinary and deferred shares
The rights of the ordinary shareholders are dealt with in
the Articles of Association of the Company which is available
from the Company’s registered office at Unit 20, Ash Way,
Thorp Arch Estate, Wetherby, LS23 7FA or from its website,
www.avacta.com. The rights of the holders of the deferred
shares are set out at Note 17.
2020
£000
25,266
77
25,343
2019
£000
17,594
77
17,671
30
Reserves
Share premium
The share premium account of £54,137,000 (2019: £9,877,000)
arose from the issue of shares at a premium to their nominal
value less certain allowable costs of issue. This reserve is
not distributable.
Capital reserve
The capital reserve of £nil (2019: £nil) arose from the
application of acquisition accounting principles to the financial
statements at the time of the acquisition of Avacta Health
Limited (formerly Oxford Medical Diagnostics Limited). The
reserve represented the value of ordinary shares of 10p to
be issued as part of the contingent considerations subject to
the achievement of certain milestone objectives in the case of
Avacta Health Limited. This reserve was transferred to retained
earnings during the prior period following the dissolution of
Avacta Health Limited.
Reserve for own shares
The reserve for own shares of negative £2,961,000 (2019:
negative £2,932,000) increased during the year following the
issue of 101,701 (2019: 372,826) ordinary shares of 10p each
being issued to Link Market Services Trust Limited as Trustee
to the Avacta Group plc SIP (see Note 4). In addition, 3,232,306
(2019: 3,232,306) ordinary shares of 10p each are held jointly
by certain employees, each individually with Avacta Group
Trustee Limited. This reserve is not distributable.
Retained earnings
Retained earnings arise from the cumulative profits or losses
of the Group. The charge and associated credits in respect of
cumulative share-based payment charges (where appropriate)
are also included.
126
Financial Statements 31
Commitments
(a) Capital commitments
At 31 December 2020, the Company had £nil capital commitments (2019: £nil).
(b) Contingent liabilities
The Company has guaranteed the overdrafts of its subsidiaries, the amount outstanding at 31 December 2020 was £nil (2019: £nil).
(c) Operating lease commitments
The Company maintains non-cancellable operating lease commitments on three properties.
Non-cancellable operating lease rentals are payable as follows:
• Less than one year
• Between one and five years
• Over five years
2020
£000
362
1,250
432
2,044
2019
£000
232
430
172
834
32
Related party transactions
The Company holds the Group’s treasury balances and provides funds to the Group’s subsidiaries in order to fund their operating
activities. Amounts owed from these entities are interest free and repayable on demand. The Company makes management
charges to its subsidiaries each year, which are disclosed in the table below.
Purchase of services from related parties during the prior period comprises provision of Non-executive Director services and
related expenses. These transactions were made on terms equivalent to those that prevail in arm’s length transactions.
Purchase of services
IP Group plc and subsidiaries
Management charges made to subsidiaries
Avacta Life Sciences Limited
Avacta Animal Health Limited
Year ended
31 December 2020
£000
17 months ended
31 December 2019
£000
-
29
2,016
416
2,562
594
Intercompany loans during and at the end of the period (before provisions against amounts owed) were as follows:
At 31 December
2019
£000
(Repayment)/Advance
in the period
£000
At 31 December
2020
£000
Avacta Limited
Avacta Analytical Limited
Avacta Animal Health Limited
Avacta Life Sciences Limited
12,756
3,833
4,324
43,329
64,242
(6,887)
-
1,886
18,225
13,224
Remuneration of key management personnel
The disclosures relating to remuneration of key management
personnel for the Company or equivalent to those for the
Group disclosed in Note 23.
5,869
3,833
6,210
61,554
77,466
127
Avacta Report and Accounts 2020
Notice of Annual General Meeting
Avacta Group PLC
(Incorporated in England and Wales with registered number 04748597)
NOTICE IS GIVEN that the Annual General Meeting of Avacta Group plc (‘the Company’) will be held at the offices of Walker Morris
LLP at 33 Wellington Street, Leeds LS1 4DL on Monday 28 June 2021 at 10:00 a.m. for the following purposes:
To consider and, if thought fit, pass the following resolutions as ordinary resolutions:
1. To adopt and receive the audited accounts, the strategic report, the Directors’ report and the auditor’s report of the
Company for the year ended 31 December 2020.
2. To approve the remuneration report contained within the report and accounts for the year ended 31 December 2020.
3. To re-appoint Dr Eliot Forster as a Director of the Company in accordance with article 35 of the Articles who offers himself
for re-appointment as a Director of the Company.
4. To re-appoint Dr Trevor Nicholls as a Director of the Company in accordance with article 35 of the Articles who offers
himself for re-appointment as a Director of the Company.
5. To appoint KPMG LLP as auditor of the Company to hold office from the conclusion of this meeting until the conclusion of
the next general meeting at which accounts are laid before the Company.
6. To authorise the audit committee of the board of Directors of the Company to determine the auditor’s remuneration.
7. To authorise the Directors of the Company generally and unconditionally pursuant to section 551 of the Companies Act
2006 (the ‘Act’) (in substitution for all existing authorities granted to the Directors of the Company under section 551 of
the Act (to the extent that they remain in force and unutilised)) to exercise all powers of the Company to allot shares in
the Company and to grant rights to subscribe for or to convert any security into such shares (‘Rights’) up to an aggregate
nominal amount of £8,440,000 (being approximately one third of the issued ordinary share capital of the Company as at
the date of this notice), provided that this authority shall expire on the earlier of the date falling six months from the end of
the current financial year of the Company and the conclusion of the next Annual General Meeting of the Company after the
passing of this resolution unless varied, revoked or renewed by the Company in general meeting, save that the Company
may, before the expiry of the authority granted by this resolution, make a further offer or agreement which would or might
require shares to be allotted or Rights to be granted after such expiry and the Directors of the Company may allot shares
and grant Rights in pursuance of such an offer or agreement as if the authority conferred by this resolution had not expired.
To consider and, if thought fit, pass the following resolutions as special resolutions:
8. To empower the Directors of the Company (subject to the passing of resolution 7 and in substitution for all existing like
powers granted to the Directors of the Company (to the extent that they remain in force and unexercised)) pursuant to
sections 570 and 573 of the Companies Act 2006 (the ‘Act’) to allot equity securities (within the meaning of section 560
of the Act) for cash pursuant to the authority conferred upon them by resolution 7 or where the allotment constitutes an
allotment of equity securities by virtue of section 560(3) of the Act as if section 561(1) of the Act and sections (1) - (6) of
sections 562 of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of
equity securities:
8.1 in connection with or pursuant to an offer of such securities by way of a pre-emptive offer (as defined below); and
8.2 (otherwise than pursuant to sub-paragraph 8.1 above) up to an aggregate nominal amount of £1,266,000 (being
approximately 5% of the issued ordinary share capital of the Company as at the date of this notice),
and shall expire on the earlier of the date falling six months from the end of the current financial year of the Company
and the conclusion of the next Annual General Meeting of the Company after the passing of this resolution, save that
the Company may, before the expiry of any power contained in this resolution, make a further offer or agreement which
would or might require equity securities to be allotted after such expiry and the Directors of the Company may allot equity
securities in pursuance of such offer or agreement as if the power conferred by this resolution had not expired.
For the purpose of this resolution 8:
Pre-emptive offer means a rights issue, open offer or other pre-emptive issue or offer to: (i) holders of ordinary shares
in proportion (as nearly as may be practicable) to the respective numbers of ordinary shares held by them on the record
date(s) for such allotment; and (ii) persons who are holders of other classes of equity securities if this is required by the
rights of such securities (if any) or, if the Directors of the Company consider necessary, as permitted by the rights of those
securities, but subject in both cases to such exclusions or other arrangements as the Directors of the Company may deem
necessary or expedient in relation to fractional entitlements, treasury shares, record dates or legal, regulatory or practical
difficulties which may arise under the laws of any jurisdiction, the requirements of any recognised regulatory body or any
stock exchange in any territory or any other matter whatsoever.
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Notice of Annual General Meeting 9. To authorise the Directors of the Company generally and unconditionally for the purpose of section 701 of the Companies
Act 2006 (the ‘Act’) and in accordance with article 22 of the Articles, to make market purchases (within the meaning of
section 693 of the Act) of ordinary shares of 10p each in the capital of the Company on such terms and in such manner as
the Directors of the Company may determine provided that:
9.1 the maximum number of ordinary shares that may be purchased under this authority is restricted to 12,662,000 (being
approximately 5% of the issued ordinary share capital of the Company as at the date of this notice);
9.2 the maximum price which may be paid for any and each ordinary share purchased under this authority shall not be
more than the higher of: (i) an amount equal to 105% of the average of the middle market prices (as derived from the
London Stock Exchange Daily Official List) for the five business days immediately preceding the day on which that ordinary
share is contracted to be purchased; and (ii) an amount equal to the higher of the price of the last independent trade and
the highest current independent bid on the London Stock Exchange at the time the purchase is carried out (in each case
exclusive of expenses); and
9.3 the minimum price which may be paid shall be the nominal value of that ordinary share (exclusive of expenses payable
by the Company in connection with the purchase),
and shall expire on the earlier of the date falling six months from the end of the current financial year of the Company
and the conclusion of the next Annual General Meeting of the Company after the passing of this resolution, save that
the Company may make a contract or contracts to purchase ordinary shares under this authority before its expiry which
will or may be executed wholly or partly after the expiry of this authority and may make a purchase of ordinary shares in
pursuance of any such contract.
By order of the Board
Tony Gardiner
Company Secretary
22 April 2021
Registered Office:
Unit 20, Ash Way, Thorp Arch Estate, Wetherby LS23 7FA
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Avacta Report and Accounts 2020
Notice of Meeting Notes
The following notes explain your general rights as a shareholder and your right to attend and vote at this Annual General Meeting
(the ‘Meeting’) or to appoint someone else to vote on your behalf:
1. To be entitled to attend and vote at the Meeting (and for the purpose of the determination by the Company of the number
of votes they may cast), shareholders must be registered in the Register of Members of the Company at 8.00 p.m. on 24
June 2021. Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of
any person to attend and vote at the Meeting.
2. Registered shareholders are entitled to appoint another person as a proxy to exercise all or part of their rights to attend,
speak and vote on their behalf at the Meeting. A shareholder may appoint more than one proxy in relation to the Meeting,
provided that each proxy is appointed to exercise the rights attached to a different ordinary share or ordinary shares
held by that shareholder. A proxy need not be a shareholder of the Company. Given the uncertainty, in light of the
COVID-19 pandemic, around whether Shareholders will be able to attend the Meeting it is recommended that all
Shareholders appoint the Chairman of the Meeting as their proxy to vote in accordance with their instructions.
This will ensure that their vote will be counted even if attendance is restricted or they are unable to attend in person.
3. The Company is actively following developments and will issue further information through an RIS and/or on
its website at https;//avacta.com/investors/ if it becomes necessary or appropriate to make any alternative
arrangements for the Meeting.
4.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint
holders appear in the Company’s Register of Members in respect of the joint holding (the first named being the most senior).
5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against
the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy
will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.
6. You can vote/appoint a proxy:
• by logging on to www.signalshares.com and following the instructions;
• by requesting a hard copy form of proxy directly from the registrar, Link Group, on Tel: 0371 664 0300. Calls are
charged at the standard geographic rate and will vary by provider. Calls outside the UK will be charged at the applicable
international rate. Lines are open between 9:00 a.m. to 5.30 p.m., Monday to Friday (excluding public holidays in England
and Wales); or
• in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the
procedures set out below.
7.
8.
In order for a proxy appointment to be a valid, the form of proxy must be completed. In each case the form of proxy must
be received by Link Group at 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL, by 10.00 a.m. on 24 June 2021.
If you return more than one proxy appointment, either by paper or electronic communication, the appointment received
last by the registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms
and conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them will
not be disadvantaged.
9. The return of a completed proxy form, electronic filing or any CREST Proxy Instructions (as described in note 11 below) will
not prevent a shareholder from attending the Meeting and voting in person (should this be permitted under applicable
COVID-19 restrictions) if he or she wishes to do so.
10. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do
so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST manual (available
from www.euroclear.com/site/public/EUI). CREST personal members or other CREST sponsored members, and those
CREST members who have appointed (a) voting service provider(s), should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf.
11.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a
‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications,
and must contain the information required for such instructions, as described in the CREST manual. The message must be
transmitted so as to be received by the issuer’s agent (ID RA10) by 10.00 a.m. on 24 June 2021. For this purpose, the time of
receipt will be taken to mean the time (as determined by the timestamp applied to the message by the CREST Application
Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee
through other means.
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Notice of Meeting Notes 12. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK
& Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings
and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed
(a) voting service provider(s), to procure that his or her CREST sponsor or voting service provider(s) take(s)) such action
as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In
this connection, CREST members and, where applicable, their CREST sponsors or voting system provider(s) are referred,
in particular, to those sections of the CREST manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.
13. Any corporation which is a shareholder can appoint one or more corporate representatives who may exercise on its behalf
all of its powers as a shareholder provided that no more than one corporate representative exercises powers in relation to
the same shares.
14. As at 22 April 2021 (being the latest practicable business day prior to the publication of this Notice), the Company’s ordinary
issued share capital consists of 253,395,434 ordinary shares, carrying one vote each, and 19,327,344 deferred shares, which
carry no voting rights. Therefore, the total voting rights in the Company as at 22 April 2021 were 253,395,434.
15. You may not use any electronic address (within the meaning of section 333(4) of the Companies Act 2006) provided in either
this Notice or any related documents (including the form of proxy) to communicate with the Company for any purposes
other than those expressly stated.
16. Under the articles of association of the Company, resolutions 1 to 8 set out in this Notice are ordinary business, and
resolution 9 is special business.
Avacta Report and Accounts 2020 Advisers
Secretary and Registered Office
Tony Gardiner
Avacta Group plc
Unit 20
Ash Way
Thorp Arch Estate
Wetherby
LS23 7FA
Independent Auditor
KPMG LLP
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
Nominated Adviser and Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Banker
National Westminster Bank plc
4th Floor
2 Whitehall Quay
Leeds
LS1 4HR
Legal Adviser
Walker Morris LLP
33 Wellington Street
Leeds
LS1 4DL
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
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Avacta Report and Accounts 2020