Shaping the
future of
medicine
2021 Report
& Accounts
Contents
2 Highlights
6 pre|CISIONTM Technology
8 Affimer® Technology
10
Investment Proposition
13 Strategic Report
14
Chairman and Chief Executive Officer’s Joint Statement
16 Operational Review
16
Business Overview
18 Therapeutics Division
24 Case Study: AVA6000 Clinical Trial
26 Drug Development Collaborations
28 Diagnostics Division
32 Animal Health Division
36 Financial Review
40 Principal Risks and Uncertainties
43 Governance
44 Board of Directors
48 Directors’ Report
51 Corporate Governance Report
56 Audit Committee Report
58 Remuneration Committee Report
63 Statement of Directors’ Responsibilities
64 Independent Auditor’s Report to the Members of Avacta Group plc
73 Financial Statements
74 Consolidated Statement of Profit or Loss
75 Consolidated Statement of Financial Position
76
Consolidated Statement of Changes in Equity
77
Consolidated Statement of Cash Flows
78
Notes to the Consolidated Financial Statements
107 Company Balance Sheet
108
Company Statement of Changes in Equity
108
Notes to the Company Balance Sheet
114 Shareholder Information
114 Notice of Annual General Meeting
116 Notice of Meeting Notes
118 Advisers
1
Avacta Report and Accounts 2021 Highlights 2021
Highlights 2021
Avacta’s Therapeutics Division transitions to a clinical stage
oncology drug company following initiation of Phase I clinical
study for AVA6000 pro-doxorubicin in the UK and US.
UK Medicines and
Healthcare products
Regulatory Agency (‘MHRA’)
approved the Clinical
Trial Application (‘CTA’)
for AVA6000
pro-doxorubicin for a
Phase I, first-in-human,
open label, dose-escalation
and expansion study (‘ALS-
6000-101’) in patients
with locally advanced or
metastatic selected solid
tumours.
AVA6000 is the first therapeutic
product based on Avacta’s proprietary
pre|CISION™ platform.
Licensing agreement with
POINT Biopharma Inc., to
provide access to Avacta’s
pre|CISION™ technology for the
development of tumour-activated
radiopharmaceuticals.
2
Operating
highlights
Therapeutics
First patient dosed in the
ALS-6000-101 study at the
Royal Marsden Hospital in
August 2021.
US Federal Drug
Administration
(‘FDA’) approved
the Investigational
New Drug (‘IND’)
application to allow
patients in the US to
be dosed as part of
ALS-6000-101.
Series A venture capital
investment round closed for
AffyXell Therapeutics (‘AffyXell’),
the joint venture with Daewoong
Pharmaceuticals (‘Daewoong’).
Post-period – next
pre|CISION™ drug
candidate, AVA3996,
selected for pre-clinical
development with potential
for a first-in-human Phase I
clinical trial beginning in the
second half of 2023.
Dr Fiona McLaughlin
appointed as Chief Scientific
Officer of the Therapeutics
Division.
Pre-clinical milestones achieved
in LG Chem Life Sciences
partnership, triggering an
undisclosed milestone payment.
Operating
highlights
Therapeutics
Post-period - dose
increased from 80 mg/m2
to 120 mg/m2 in the
ALS-6000-101 Phase Ia
dose escalation trial of
AVA6000 pro-doxorubicin
following a positive review
of the safety data from first
cohort dosing.
Appointments to the
Therapeutics Scientific
Advisory Board, reflecting the
progress of the Therapeutics
Division and Avacta’s transition to
a clinical stage company:
Professor James Spicer MB., BA., PhD., FRCP.
Professor Krishnan Komanduri, MD.
Dr Stéphane Champiat MD, PhD.
3
Avacta Report and Accounts 2021 Highlights 2021
Highlights 2021
Transformation of Diagnostics Division to become an ISO
13485 accredited, fully integrated in vitro diagnostic (‘IVD’)
products business
Establishment of fully integrated
IVD product development
and commercial functions and
ISO13485 certification attained
to transition Avacta Diagnostics
Division from an Affimer® reagents
supplier to an IVD product
company.
Multiple
collaborations
and commercial
partnerships
entered into during
the period.
Operating
highlights
Diagnostics
Establishment of
AffiDX® brand for
all future Affimer-
powered IVD products
via launch of AffiDX®
SARS-CoV-2 antigen
lateral flow test.
4
First ever CE approval obtained
for an Affimer-based IVD product
(AffiDX® SARS-CoV-2 antigen
lateral flow test) for professional
use, and subsequently for
consumer self-testing.
Refocus of product
development resources
on pipeline of in-house
IVD products following
concentration of efforts
to bring SARS-CoV-2
antigen test to market.
Post-period - update on the
performance of the AffiDX®
SARS-CoV-2 antigen lateral
flow test (‘LFT’) against the
Omicron variant and decision
to pause sales whilst the
high performance of the test
experienced with all previous
variants is achieved for Omicron.
Increased R&D and
manufacturing investment
within the Diagnostics
Division and clinical
development costs in the
Therapeutics Division,
leading to reported loss from
continuing operations of
£26.4 million
(year ended 31 December 2020:
£16.4 million).
Cash and short-term
deposit balances at
31 December 2021 of
£26.2 million
(31 December 2020:
£47.9 million).
Financial
& Corporate
Post-period - Dr Christina
Coughlin, a medical
oncologist and immunologist
and Chief Executive Officer of
CytoImmune Therapeutics,
Inc., appointed as Non-
executive Director to the
Board of Directors of Avacta.
Post-period - Animal Health
Division sold to Vimian Group AB in
March 2022 for an upfront payment
of £0.9 million and additional
deferred contingent consideration
of up to £1.4 million dependent on
the combined performance of the
consolidated business.
Revenues of
£2.9 million
for year ended
31 December 2021
(year ended 31 December 2020:
£2.1 million).
Loss per ordinary
share from continuing
operations of 10.6p
Operating loss of £29.1
million for year ended 31
December 2021
(year ended 31 December 2020:
7.3p).
(year ended 31 December 2020:
£18.8 million).
Dr Mark Goldberg, a
medical oncologist and
haematologist at the faculty
of Brigham & Women’s
Hospital and Harvard Medical
School and a veteran biotech
executive, appointed as Non-
executive Director to the
Board of Directors of Avacta.
5
Avacta Report and Accounts 2021 pre|CISIONTM Technology
FAPα-activated chemotherapy
Avacta’s proprietary pre|CISION™ platform is
a tumour targeted drug activation mechanism.
It incorporates a substrate that is sensitive
to cleavage by an enzyme called fibroblast
activation protein alpha (‘FAPα’), which is highly
upregulated (10-100-fold above background)
in the tumour microenvironment of most solid
tumours (including breast, pancreatic, liver,
lung and ovarian tumours) compared with
healthy tissues.
Avacta’s pre|CISION™ substrate, which was invented
by Professor Bill Bachovchin at Tufts University, Boston
US, is unique in that it is specifically cleaved by FAPα
and not by any other enzyme in humans, providing an
exquisitely targeted activation mechanism that ensures
localised activation of drugs in the tumour reducing
the systemic exposure to the drug and improving
safety and therapeutic index.
When added to a chemotherapeutic the pre|CISION™
substrate prevents the chemotherapy from entering
cells and therefore renders it inert until the substrate
is cleaved, which occurs predominantly in the tumour
microenvironment, sparing healthy tissues from
exposure to these toxic drugs.
The pre|CISION™ technology can also be incorporated
into the linker of drug conjugates. A drug conjugate
combines an Affimer® or antibody that binds
specifically to certain tumour biomarkers with a
cytotoxic payload. If the linker between the Affimer®
and the cytotoxic incorporates the pre|CISION™
technology then the cytotoxic payload is released in
the tumour microenvironment when it encounters
FAPα, ensuring localised, extracellular release of
a chemotherapy payload. This new class of drug
conjugate is called a tumour microenvironment
activated drug conjugates (‘TMAC®’).
This mechanism overcomes the need to target an
internalising cancer marker, as required by conventional
drug conjugates, allowing the Affimer® to be selected
to target an immune checkpoint and cytotoxins to be
selected with novel mechanisms of action.
Avacta is exploiting the pre|CISION™ technology
both in-house and through partnerships in its
Therapeutics Division. Avacta’s lead clinical asset,
AVA6000 is a pre|CISION™ activated form of
the generic chemotherapy doxorubicin and the
company is building a pipeline of other pre|CISION™
chemotherapies designed to have improved safety and
tolerability, and therefore improved efficacy. Avacta
is also developing the TMAC® concept and through
a licensing arrangement with POINT Biopharma, the
pre|CISION™ platform is also being applied to tumour
specific activation of radiopharmaceuticals.
6
Platform Technologies Avacta Annual Report and Accounts 2018
Pipeline
Programme
Research
Pre-clinical
Phase 1
Partner
pre|CISION™ AVA-6000 - FAPα activated doxorubicin
pre|CISION™ AVA-3996 - FAPα activated proteasome inhibitor
AVA-028 - PD-L1 Affimer® / IL2 bispecific
AVA-021 - PD-L1 Affimer® / LAG-3 Affimer® bispecific
TMAC® platform
PD-L1 XT®
Undisclosed targets
Cell and gene therapies
Reducing the side-effects of chemotherapy by tumour-specific activation
AVA6000
Active doxorubicin
Tumour Microenvironment
NÄIVE T CELLS
FIBROBLAST
O
OH
O
OH
OH
O
O
OH
H
O
O
H
O
N
H
OH
NH
N
O
O
N
MACROPHAGE
B CELLS
CANCER CELLS
FAPα +ve fibroblasts and cancer cells
O
OH
O
OH
OH
O
O
OH
H
O
O
H
OH
NH2
FAPα
O
N
H
N
N
O
O
7
Avacta Report and Accounts 2021 Affimer® Technology
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 identified in the library for
a particular application.
Affimer® molecules are ten times smaller than
antibodies and are 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 tissue 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.
Avacta is exploiting the Affimer® platform in both its
Diagnostics and Therapeutics divisions, in-house and
with commercial partners, to develop powerful new
in vitro diagnostic tests for a range of diseases and
conditions, purification products for bioprocessing,
and novel immunotherapeutics for the treatment of
cancer and autoimmune diseases.
Affimer® reagents are small proteins that can
be engineered to bind to a target molecule
of interest, in the same way that an antibody
does, but with a number of competitive
advantages over antibodies.
This property enables the development of diagnostic
and research assays, or enrichment or purification
of a target 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
• 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.
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 2021
Variable loop regions
9
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|CISIONTM platforms are delivering a robust portfolio of differentiated
therapeutic and diagnostic products that address multiple multi-billion dollar markets.
• Affimer® molecules 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.
• The pre|CISIONTM targeted chemotherapy platform releases active chemotherapy directly in the tumour,
limiting systemic exposure and side effects associated with many commonly used cancer treatments. The
Phase I trial for the first candidate, AVA6000, started in August 2021 and FDA approval of its Investigational
New Drug (‘IND’) application was announced in November 2021. The Phase Ia dose escalation study is expected
to complete in the middle of 2022 and the Phase Ib dose expansion study to commence shortly afterwards.
• There is also significant longer term potential to combine the two platforms to create next generation targeted
‘drug conjugate’ cancer treatments.
• The platforms are also being developed through leading industry partnerships including LG Chem, Daewoong
Pharmaceutical and POINT Biopharma.
• The second pre|CISIONTM tumour targeted chemotherapy candidate for development was announced in
January 2022 and is a proteasome inhibitor referred to as AVA3996. The Company plans to generate additional
Affimer® and pre|CISIONTM drug development candidates in 2022, to further support its growing, innovative
therapeutic pipeline.
• The Diagnostics Division is developing a range of in vitro diagnostic products with a focus on rapid tests for
professionals and the consumer.
• 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.
• The Group also anticipates further commercial partnerships and licensing arrangements that will allow
its technology platforms to be further developed leading to long term royalty based revenue in both the
therapeutics and other markets.
10
Investment Proposition
Our Strategy
• Strongly drive shareholder value by building a portfolio of novel, clinically differentiated cancer therapies
leveraging the key benefits of the Affimer® and pre|CISIONTM platforms.
• Build a fast-paced, nimble, delivery-focused drug discovery and development organisation with multiple clinical
programmes and an innovative 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.
11
Avacta Report and Accounts 2021 1212
Avacta Report and Accounts 2021
Strategic Report
14
Chairman and Chief Executive
Officer’s Joint Statement
16
Operational Review
18
Therapeutics Division
24
Case Study: AVA6000 Clinical Trial
26
Drug Development Collaborations
28
Diagnostics Division
32
Animal Health Division
36
Financial Review
40
Principal Risks and Uncertainties
13
Chairman and Chief Executive
Officer’s Joint Statement
Significant progress has been made in both the
Diagnostics and Therapeutics divisions during
2021, transforming the Group.
of its SARS-CoV-2 antigen test in the light of the
emergence of highly mutated variants, to drive sales
revenue and profitability.
The Therapeutics Division has transitioned to a clinical
stage oncology drug business, a significant step which
is a value inflection point for a growing biotech. The
Company successfully submitted a CTA to the UK
MHRA allowing it to initiate the ALS-6000-101 Phase
I dose escalation and expansion trials in the UK and
gained approval from the US FDA for an IND so that
patients can be dosed in the US as part of this ongoing
clinical trial. The first patient ever was dosed with a
pre|CISIONTM FAPα-activated drug, AVA6000, in August
2021 and the dose has now been increased in the
Phase Ia dose escalation part of the study following
positive safety data from the first cohort of patients.
We are now looking forward to being able to report on
the full read-out of the Phase Ia trial in summer 2022 -
a potentially pivotal moment for the Group.
Mirroring the strong progress made in the
Therapeutics Division, the first ever CE marked in vitro
diagnostic product based on Affimer® technology
has been developed and brought to market, fully
validating the platform’s potential to deliver a future
pipeline of products for Avacta Diagnostics division
and its commercial partners.
The Diagnostics Division is set apart from its
UK comparators in having a powerful and
proprietary immuno-reagents platform, Affimer®
technology, which is capable of delivering in vitro
immunodiagnostics with superior performance based
solely on Affimer® reagents, and improvements to
antibody-based products by replacing one or more
reagents with Affimer® molecules. This provides a
strong engine for growth and revenue generation
through development of market leading diagnostic
tests for professional and consumer use.
Prior to the COVID pandemic, the Diagnostics
Division had a business model focused on providing
Affimer® reagents to third parties to power their
diagnostic and other products. Avacta’s Diagnostics
Division has now established a fully integrated IVD
product development capability and put in place
a Quality Management System that complies with
the diagnostics market standard of ISO13485. The
Diagnostics Division is now focused on developing its
own products and is positioned to deliver a pipeline of
in vitro diagnostic tests, including the re-development
14
Avacta Animal Health
Post-period end we sold our Animal Health Division
to Vimian Group AB’s specialty pharma segment
Nextmune, a global veterinary health group
headquartered in Sweden. The Division had been an
important part of the Avacta Group since 2009. All the
staff in the Division will be moving across to Vimian,
which was an important aspect to the structure of
the acquisition for Avacta and we wish them all well in
the future. The sale will allow the Group to focus on
growing and developing our core Therapeutics and
Diagnostics businesses.
Board changes
In August 2021, Dr Mark Goldberg joined the Board
as a Non-executive Director. Dr Goldberg is a medical
oncologist and haematologist at the faculty of Brigham
& Women’s Hospital and Harvard Medical School, a
veteran biotech executive, and long-time American
Cancer Society (ACS) and ACS Cancer Action Network
(CAN) volunteer. Dr Goldberg is the past-chair of the
Eastern New England Area Board of the American
Cancer Society and currently serves as a member of its
national board of directors.
In March 2022, Dr Christina Coughlin joined the Board
as a Non-executive Director. Dr Coughlin is the Chief
Executive Officer of CytoImmune Therapeutics, Inc.,
a clinical stage biotechnology company. Dr Coughlin
has a broad background in biotechnology and global
pharmaceuticals, with comprehensive drug development
experience spanning programs in pre-IND studies
through to late-stage trials and regulatory approval
filings, and a track record of building drug development
teams in global companies including Rubius
Therapeutics, Inc. and Tmunity Therapeutics, Inc.
Our people
Our teams across the Group have made outstanding
contributions to the Company’s progress during the
year and we would like to recognise the commitment
that this has required under often difficult
circumstances due to the pandemic.
We have invested in a third-party delivered personal
development programme for all our people, dealing
with mood, emotion and mental well-being in order
to drive even higher performance in the business and
Strategic Report foster good mental health for our staff. The programme
coaches staff on how to be resilient in the face of work
pressure, uncertainty caused by the pandemic and
the pressures of life outside of work and to ensure
that they are as productive as possible as a team. This
programme has been ongoing during Q4 2021 and will
continue through to the middle of 2022.
Outlook
The Board believes that the most significant near-term
value driver for the Group is the clinical data from the
Phase I study of AVA6000 expected in the middle of
2022. The pre|CISIONTM technology has the potential
to reduce the side effects of chemotherapy, improve
efficacy, and create affordable oncology drugs which
have the potential to significantly improve patient’s lives.
A positive readout from the AVA6000 Phase Ia trial not
only creates a significant commercial opportunity for
the Group with a potentially safer form of doxorubicin,
but also immediately opens up a large and very
valuable pipeline of pre|CISIONTM chemotherapy FAPα-
activated drugs for development and licensing.
The Diagnostics Division is focused on delivering
a pipeline of new IVD products and redeveloping
the SARS-CoV-2 antigen test, to drive revenues and
profitability of the business, which is the Division’s
primary objective, and we anticipate good progress in
that regard through 2022.
We are very confident and excited about the immediate
and long-term opportunities for the Group.
Eliot Forster
Non-executive Chairman
Alastair Smith
Chief Executive Officer
5 April, 2022
5 April, 2022
15
Avacta Report and Accounts 2021
Operational Review
Business overview
metastatic selected solid tumours. The study is a
first-in-human, open label, dose-escalation and
expansion study of the Group’s lead pre|CISION™
FAPα-activated drug, AVA6000 based on the generic
chemotherapy, doxorubicin.
Avacta has established drug development
partnerships with pharma and biotech, including 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 and a
recent licensing agreement with Point Biopharma for
them to develop radiopharmaceuticals based on the
pre|CISION™ platform.
Avacta is developing novel cancer
immunotherapies and powerful diagnostics
based on its two proprietary platforms -
Affimer® biologics and pre|CISION™ tumour-
targeted chemotherapies.
The Affimer® platform is an alternative to antibodies
and is derived from a small human protein. Affimer®
technology has been designed to address many of
the negative issues of antibodies, principally: the time
taken to generate new antibodies, the reliance on an
animal’s immune response; poor specificity in many
cases; in addition to, the complexity and high cost of
manufacture. Despite these shortcomings, antibodies
currently dominate markets, such as diagnostics and
therapeutics, which are worth in excess of $100 billion.
Avacta’s pre|CISION™ targeted chemotherapy
platform is designed to selectively activate
chemotherapy in FAP rich tumour tissue to limit the
systemic exposure that causes damage to healthy
tissues, and thereby aims to improve the overall safety
and therapeutic potential of these powerful anti-
cancer treatments.
The Avacta Group comprises two divisions: The
therapeutics development activities are based in
London and Cambridge, UK and a separate Diagnostics
business unit is based in Wetherby, UK. The Group is
generating near-term revenues from Affimer® reagents
for diagnostics, bioprocessing and research.
Avacta’s Diagnostics Division is developing an in-house
pipeline of Affimer-based diagnostic assays, including
the AffiDX® SARS-CoV-2 lateral flow rapid antigen
test, and works with partners world-wide to develop
bespoke Affimer® reagents for third party products.
Avacta’s Therapeutics Division is working to generate
more tolerable and durable treatments for oncology
patients who do not respond to existing therapies.
By combining its two proprietary platforms the
Group is building a wholly owned pipeline of
clinically differentiated cancer therapies. In 2021
Avacta transitioned to become a clinical stage
biopharmaceutical company, when it commenced
a Phase I trial in patients with locally advanced or
16
Strategic Report 17
Avacta Report and Accounts 2021 Avacta
Therapeutics
18
Strategic Report 19
Avacta Report and Accounts 2021 Therapeutics Division
Wholly-owned Therapeutic Pipeline
The past twelve months have seen significant
progress in Avacta’s Therapeutics Division with
the approval of a Clinical Trial Application in
the UK and the dosing of the first patient in
the Phase I, first-in-human, open label, dose-
escalation and expansion study of its lead
pre|CISIONTM FAPα-activated drug, AVA6000,
in patients with locally advanced or metastatic
selected solid tumours. This marks the
transformation of Avacta into a clinical stage
oncology drug company which is a major value
inflection point.
AVA6000 pro-doxorubicin
Anthracyclines such as doxorubicin, a generic
chemotherapy for which the market is expected to
grow to $1.38 billion by 2024, are widely used as
part of standard of care in several tumour types,
but their use is limited by cumulative toxicity, and,
in particular, cardiotoxicity. Avacta’s pre|CISIONTM
FAPα-activated approach is designed to reduce
the systemic exposure of healthy tissues to the
active chemotherapy, leading to improved safety
and therapeutic index, leading to improved dosing
regimens, and potentially improved safety and
therapeutic profiles.
The AVA6000 Phase I clinical trial involves a dose-
escalation Phase I study in patients with locally
advanced or metastatic selected solid tumours,
known to be fibroblast activation protein alpha
(‘FAPα‘)-positive, in which cohorts of patients
receive ascending doses of AVA6000 to determine
the maximum tolerated dose and establish a
recommended Phase II dose. The second part of the
study is an expansion phase where patients receive
AVA6000 to further evaluate the safety, tolerability
and clinical activity at this recommended Phase II dose
across selected tumour types. For more information
visit www.clinicaltrials.gov (NCT04969835).
The first patient received their first dose of AVA6000
at The Royal Marsden NHS Foundation Trust in early
August 2021. Since then clinical trial sites at the
Christie NHS Foundation Trust in Manchester and
at St James’ Hospital in Leeds have been opened
and are recruiting patients. The Phase I study will
involve up to six of the leading UK cancer centres
with an established reputation for early cancer
20
clinical research in the Phase I setting. The COVID-19
pandemic impacted patient recruitment and the
initiation of other clinical trial sites to a limited extent
causing it to take longer than planned to complete
cohort 1. Nevertheless, the dose escalation phase is
anticipated to complete in the middle of 2022 with
minimal delay and should be followed by initiation
of the dose expansion phase in 2022 which would
be expected to complete by the end of 2023.The
Company also received approval from the US Food
and Drug Administration (‘FDA’) for its Investigational
New Drug (‘IND’) application for AVA6000 on schedule
before the reporting period end. This allows Avacta to
enrol eligible patients into US clinical trial sites as part
of the ongoing Phase I ALS-6000-101 study. Two US
sites are now being initiated and may contribute to
the Phase Ia dose escalation phase.
Post-period end the Company announced that
the Phase I trial of AVA6000 pro-doxorubicin had
advanced to the next dose cohort following a positive
review of the safety data from the dosing of the first
cohort by Avacta’s Safety Data Monitoring Committee
(‘SDMC’), which comprises the clinicians currently
recruiting patients. Following this review, the SDMC
recommended that the clinical trial continued as
planned and escalates to the next dose of AVA6000 at
120mg/m2.
Pipeline of pre|CISION™ chemotherapies
The Avacta’s pre|CISIONTM platform is a proprietary
chemical modification that renders the modified
chemotherapeutic drug inactive in the circulation until
it enters the tumour micro-environment where it is
activated by an enzyme called FAPα. FAPα is in high
abundance in most solid tumours but not in healthy
tissues such as the heart. This is expected to lead to
a significantly greater amount of active drug in the
tumour tissue compared with healthy tissues and a
concomitant improvement in tolerability for patients
and better clinical outcomes.
If the AVA6000 Phase Ia study shows that the
pre|CISION™ chemistry is effective in reducing
systemic toxicity of doxorubicin in humans, then it
can be applied to a wide range of other established
chemotherapies to potentially improve their safety
and efficacy. This would be a significant value
inflection point during 2022 since it would open
up a pipeline of proprietary, potentially safer, next
generation chemotherapies with significant clinical
and commercial potential in a chemotherapy market
that is expected to grow to $56 billion by 2024.
Strategic Report TMAC® and other drug conjugates
Drug conjugates use a chemical linker to combine
a toxic payload such as a chemotherapeutic or
radioligand with a targeting system such as an
Affimer® or antibody that binds to a cancer biomarker
usually on the surface of tumour cells. Conventional
drug conjugates target a biomarker that is frequently
internalised by the tumour cells taking with it the
drug conjugate where the toxic payload is released
by enzymatic breakdown of the linker. The tumour
microenvironment activated drug conjugate (‘TMAC®’)
uses the pre|CISIONTM chemistry in the linker so
that the toxic payload can be released outside
the tumour cell in the tumour microenvironment,
allowing different, synergistic, mechanisms of
action to be envisioned between the toxin and the
targeting system that could have immunotherapeutic
properties. TMAC® is a new class of drug conjugate
for which the Company has made a patent application
with Tufts University Medical School.
Good progress is being made in the in-house
Affimer® and TMAC® programmes. These pre-
clinical programmes, along with the commercial
collaborations, are the focus of in-house research
activities and the Company plans to provide a full
technical update to shareholders during 2022 when
sufficient pre-clinical data has been gathered so
that the development path and associated risks can
described in detail.
The next most advanced pre|CISION™ pro-drug
is AVA3996, a FAP-activated analogue of Velcade,
Takeda’s proteasome inhibitor. The global proteasome
inhibitors’ market size is expected to be worth $2.3
billion by 20261, and Velcade represents just over half
of that market. As with all chemotherapies, the benefit
of these drugs is limited by toxicities and tolerability
for patients. In the case of Velcade, there are
significant side effects such as peripheral neuropathy
which has limited its approval, principally to multiple
myeloma. A potentially safer proteasome inhibitor,
such as AVA3996, could win significant market share
for the treatment not only of multiple myeloma but
also could be used to treat solid tumours, such as
pancreatic cancer. Pancreatic cancer exhibits the
highest level of FAP activity of any solid tumour and
therefore a FAPα-activated drug could have significant
potential in this area of high unmet need.
Shortly after the reporting period end, the Company
announced that, following a review of efficacy studies in
several liquid and solid tumour models, safety studies
and of manufacturability, AVA3996 has been selected
as a candidate for pre-clinical development with the
aim of a Clinical Trial Authorisation (‘CTA’) and/or
Investigational New Drug (‘IND’) filing in the first half of
2023 and dosing of the first patient later that year.
Affimer® immunotherapy programmes
Translation of the Affimer® platform into the clinic to
demonstrate the safety and tolerability of this novel
therapeutic protein platform is an important objective
for the Company.
In the oncology field it has become clear in recent
years that cancer immunotherapies used singly, so-
called ‘monotherapies’, have limited overall response
rates. The Company’s Affimer® immunotherapy
strategy is to harness the benefits of the Affimer®
platform to build bispecific drug molecules that can
address two drug targets simultaneously and to use
Affimer® molecules to target toxic payloads using
conventional and pre|CISIONTM linkers.
1 https://www.expertmarketresearch.com/reports/proteasome-inhibitors-market
21
Avacta Report and Accounts 2021 22
Strategic Report Therapeutics Division (Cont)
Chief Scientific Officer and Scientific Advisory Board
The Therapeutics Division has made a series of
new appointments in recent months, with Dr Fiona
McLaughlin joining as Chief Scientific Officer and
several appointments to its Scientific Advisory Board
(‘SAB’), reflecting Avacta’s transition to a clinical stage
oncology drug company.
Dr Fiona McLaughlin is a highly experienced
oncology drug developer, bringing over 25 years’
experience in research and translational drug
development in the pharmaceutical and biotech
sectors, having led teams from early research
through to clinical development. Fiona started her
career at GlaxoSmithKline and has subsequently held
leadership positions in multiple biotech companies,
including Vice President, Translational Research at
Antisoma plc and Director of Pre-clinical Development
at BTG plc (now part of Boston Scientific).
Other roles include Head of Biology at TopoTarget
A/S, where she was responsible for the pre-clinical
development of belinostat, which went on to gain
FDA approval to treat peripheral T-cell lymphoma.
Most recently, Fiona was Vice President of New
Opportunities at Algeta ASA (acquired by Bayer),
a Norwegian biotech developing alpha radio-
pharmaceuticals, that gained FDA approval of Xofigo
to treat castration resistant prostate cancer.
Fiona has also gained broad experience during
her career as a consultant, providing scientific
and strategic advice to biotechs, not-for-profit
organisations, and venture capitalists in the UK,
Europe, the US and Australia, including helping
drive oncology strategy at the CRUK/AstraZeneca
Alliance Laboratory. Fiona received a PhD from the
Haematology Department at Cambridge University
and has a BSc in Biochemistry from Glasgow
University.
The SAB provides the Therapeutics Division with
scientific and clinical advice to support its drug
development decision-making and pipeline strategy.
The three new members of the SAB are Professor
James Spicer MB, BA, PhD, FRCP, Professor Krishnan
Komanduri, MD, and Dr Stéphane Champiat MD, PhD.
James Spicer is Professor of Experimental Cancer
Medicine at King’s College London and Consultant in
Medical Oncology at Guy’s & St. Thomas’ Hospitals,
London. He has established and runs a world-leading
Phase I clinical trials programme in solid tumour
oncology at Guy’s Hospital, where the portfolio of
studies includes novel immunotherapies discovered
and developed at King’s as well as many externally
sponsored studies.
Krishna Komanduri is Chief of the Division of
Transplantation and Cellular Therapy, and Associate
Chief Medical Officer for Clinical Innovation, at the
Sylvester Comprehensive Cancer Center, Miami.
He is also a Professor of Medicine, Microbiology
and Immunology and a physician-scientist with a
laboratory focusing on T-cell immunology in cancer.
Krishna serves on the United Health Care Oncology
Advisory Committee and is a past Chair of the
American Society of Hematology Scientific Committee
on Host Defense, is the current Chair of the ASTCT
Cellular Therapy Committee and Chair-Elect of the
Government Relations Committee.
Stéphane Champiat MD, PhD is a physician at the
Gustave Roussy Cancer Center in Paris, where he
focuses on the development of cancer therapeutics,
in particular, new immunotherapies. He has been
principal investigator or co-investigator of more than
50 Phase I clinical trials run by many of the world’s
leading pharmaceutical and biotech companies. He
is particularly involved in the coordination of the
immunotherapy toxicity management program and
the development of the intra-tumoral immunotherapy
strategy at Gustave Roussy.
23
Avacta Report and Accounts 2021 Therapeutics Division (Cont)
Case Study: AVA6000 Clinical Trial
pre|CISION™ FAP-Targeted Technology
Avacta’s FAP-targeted technology incorporates
a substrate sensitive to cleavage by fibroblast
activation protein α (FAP), an enzyme
present in high concentrations in the tumour
microenvironment (TME) of most solid tumours
compared to healthy tissues.
FAP is expressed on the surface of specialised
fibroblastic cells which are abundant in the
supporting stroma of most epithelial cancers.
FAP expression is difficult to detect in adult non-
diseased tissues, but is greatly increased in sites
of tissue remodelling, which include liver fibrosis,
lung fibrosis, atherosclerosis, arthritis, tumours
and embryonic tissues. 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 selectively activated chemotherapy
designed to limit cell penetration and biological
activity until it is specifically released by the
presence and enzymatic activity of FAP in the TME.
Once the pre|CISION™ chemotherapy reaches
the TME the high concentration of FAP present
in the tumour cleaves the substrate from the
chemotherapy which in turn becomes activated.
The selective targeting of a chemotherapy into
the tumour microenvironment provides a means
of reducing the exposure and toxicity to non-
target sensitive tissues such as the heart and
bone marrow. By using this selective targeted
chemotherapeutic approach, the damaging
effect of the chemotherapy on sensitive tissues is
significantly reduced and therapeutic window of
these powerful anti-cancer treatments is increased.
Doxorubicin
Doxorubicin is one of the most effective and widely
used chemotherapeutic agents for the treatment of
a broad range of solid tumours and haematological
malignancies including breast, ovarian, soft-tissue
sarcoma and lymphoma. Nevertheless, the clinical
use of doxorubicin has been limited because of
a significant risk related to cardiac damage. The
risks of this life-threatening side effect depend
on cumulative doses and damage can occur both
acutely or chronically over decades after exposure.
24
When doxorubicin is administered intravenously
into the patient it is readily distributed across almost
all tissues, resulting in indiscriminative toxic effects
on all cells exposed. The most serious side effect
of doxorubicin is cardiomyopathy, a disease of the
heart muscle, leading to congestive heart failure. The
rate of cardiomyopathy is dependent on doxorubicin
cumulative dose and there are several ways in which
doxorubicin is believed to cause damage to the heart.
How does AVA6000 address the drawbacks
of doxorubicin?
AVA6000 is a selectively activated doxorubicin designed
to limit cell penetration and biological activity until it is
specifically released by the presence and enzymatic
activity of FAP in the TME.
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
greater 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.
AVA6000 Clinical Development
AVA6000 transitioned into early clinical development
in mid-2021 with a ‘first into human’ (‘FIH’) clinical
study (Protocol Number: ALS-6000-101) which is
currently recruiting patients across a small number
of investigator sites in the UK. The study is a two-part
Phase I study where the first part is an AVA6000
PK-guided dose-escalation in approximately 15 - 20
patients with locally advanced (unresectable) and/or
metastatic selected solid tumours. Patients include
pancreatic, colorectal, breast, ovarian, non-small cell
lung cancer (‘NSCLC’), head & neck squamous cell
carcinoma (‘HNSCC’), soft-tissue sarcoma, and bladder
cancer. The starting dose is 80 mg/m2 AVA6000 with
dose-escalation in subsequent cohorts being based on
the decision of the Safety Data Monitoring Committee
following review of safety, tolerability, and PK data for
AVA6000 in the preceding dose levels. The dose-
escalation phase (Part 1) will be followed by a second
dose-expansion phase (Part 2) using the maximum
tolerated dose or recommended safe dose derived in
Part 1 to assess the safety, tolerability and initial efficacy
of AVA6000 in tumour-specific arms.
Strategic Report In conclusion, AVA6000 is expected to have the
following attributes:
• Improved therapeutic index relative to conventional
The attributes of AVA6000-released doxorubicin are
anticipated to lead to higher efficacy and less toxicity
compared to conventional doxorubicin.
doxorubicin
• Increased intra-tumoural doxorubicin exposure
made possible through patients being able to
tolerate higher doses and/or increased number
of cycles of AVA6000 relative to conventional
doxorubicin
• Decreased systemic exposure of released
doxorubicin and its metabolites, resulting in
decreased exposure to tissues including heart and
bone marrow
AVA6000 Phase I Design and Timeline
25
Avacta Report and Accounts 2021 Therapeutics Division (Cont)
Drug Development Collaborations
• LG Chem Life Sciences: Very good progress has been made in our
strategic partnership with LG Chem Life Sciences towards the clinical
development of a novel checkpoint inhibitor utilising the Affimer®
platform.
• LG Chem successfully completed certain pre-clinical in vivo models in the
PD-L1/XT programme leading to the selection of a pre-clinical candidate
for further development towards the clinic and triggering an undisclosed
milestone payment.
• The partnership also provides LG Chem with rights to develop and
commercialise other Affimer® and non-Affimer biotherapeutics combined
with Affimer XT® half-life extension for a range of indications and Avacta
could earn up to $55 million in milestone payments for each of these new
products. In addition, under the agreement Avacta will earn royalties on
all future Affimer XT® product sales by LG Chem.
• AffyXell: AffyXell is an Affimer-engineered cell therapy joint venture with
Daewoong Pharmaceuticals in South Korea. During the reporting period
AffyXell closed a Series A round of $7.3 million with a syndicate of venture
capital firms including Samsung Venture Investment Corporation. The
Company has made good progress, advancing both its GMP-compliant
human mesenchymal stem cell technology and its Affimer® discovery
programmes against two of the three initial targets. Proof-of-concept
studies are planned for 2022 to form the basis for a Series B fund-raise to
move candidate cell therapies into the clinic.
• POINT Biopharma: During the reporting period Avacta signed a licensing
agreement with POINT Biopharma Inc., to provide access to Avacta’s
pre|CISION™ technology for the development of tumour-activated
radiopharmaceuticals. Under the terms of the agreement, Avacta
received an upfront fee and will receive development milestone payments
for the first radiopharmaceutical FAPα-activated drug totalling $9.5
million. Avacta will also receive milestone payments for subsequent
radiopharmaceutical FAPα-activated drugs of up to $8 million each, a
royalty on sales of FAP-activated radiopharmaceuticals by POINT and a
percentage of any sublicensing income received by POINT.
26
Strategic Report 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 licence to the
pre|CISIONTM platform for
the development of
tumour-targeting
radiopharmaceuticals
27
Avacta Report and Accounts 2021 Avacta
Diagnostics
28
Strategic Report 29
Avacta Report and Accounts 2021 Diagnostics Division
During the past year the Avacta Diagnostics Division has been
transformed into an ISO13485 accredited in vitro -
diagnostics (‘IVD’) product business, and has achieved CE
marking and subsequent commercial launch of the first
ever Affimer-based diagnostic product, a SARS-CoV-2
antigen lateral flow test.
The AffiDX® SARS-CoV-2 antigen lateral flow test was developed with several partners in response to the need for
a high quality rapid COVID-19 test for infectiousness. The resulting test, which combined the use of an antibody
and an Affimer® reagent in the test strip, had excellent performance in terms of sensitivity and specificity with
the emerging variants of the virus until the Omicron variant appeared in late 2021. The AffiDX® SARS CoV-2
antigen lateral flow test contained both a proprietary Affimer® reagent and a commercially available antibody.
Our data showed that the Affimer® reagent in the AffiDX® test continued to detect the Omicron variant
with the same sensitivity as the Delta variant, but the antibody, with which the Affimer® is paired, had
been affected by the additional Omicron mutations. The Company independently took the decision to
pause sales of the AffiDX® antigen test whilst it replaces the antibody in the product to ensure that its
performance with the Omicron variant matches the high performance with previous mutations. To note,
the Company’s partner Medusa19 had just received the CE mark for consumer self-testing when sales
were paused.
Prior to the COVID pandemic the Company had a business model focused on providing Affimer®
reagents to third parties to power their diagnostic and other products. Avacta’s Diagnostics Division
has used the opportunity offered by a response to the pandemic to establish a fully integrated IVD
product development capability and put in place a Quality Management System that complies
with the essential diagnostics market standard of ISO13485.
This has transformed the opportunity for the Diagnostics Division which is now focused on
developing a pipeline of new IVD products outside of COVID-19 to drive future revenues and
the profitability of the Division. This pipeline is designed to deliver, over the longer term,
a full portfolio of IVD products with a focus on decentralised testing for professionals
and consumers. The Company is addressing four key areas of respiratory infectious and
cardiovascular disease, cancer and general health and well-being (e.g. hormones, vitamins).
The Company is exploring multiple pathways to develop this portfolio of IVD product and
revenue as rapidly as possible.
During the year the Company also entered into a licencing agreement with Biokit, a
Werfen Company, to incorporate Affimer® reagents into a Biokit IVD product. Biokit
is recognised and renowned as a Centre of Excellence with consolidated experience
worldwide in research, development and manufacturing of assays and biomaterial
solutions for IVD use.
The licencing agreement follows an extensive evaluation by Biokit of certain
Affimer® reagents to detect a key analyte. Under the terms of the agreement,
Biokit has the right to develop, manufacture and commercialise through original
equipment manufacturer (OEM) partners a diagnostic immunoassay for this
analyte. Avacta will receive royalties on future sales of any products brought
to market following completion of product development and regulatory
approvals. Financial details of the agreement were not disclosed.
30
Strategic Report 31
Avacta Report and Accounts 2021 Avacta
Animal Health
32
Strategic Report 33
Avacta Report and Accounts 2021 Animal Health Division
Avacta’s Animal Health division is a
UK-based laboratory, research and
development business focused on
delivering evidence-based animal health
solutions, centred on the work-up and
management of allergic disease.
The business works in partnership with
veterinary professionals and allergy experts to
offer unrivalled service and technical support
to its customers, with a tailored and personal
approach. Its customers include veterinary
professionals, laboratories, large commercial
organisations, SMEs and academic groups.
Avacta Animal Health remains the only UK laboratory
with end-to-end test control, with years of dedication
to research and development that underpins its
constant drive to make a real-life difference to
animal health.
As the change within the veterinary industry continues
at a rapid pace in practice, for suppliers and for
pet owners, Avacta Animal Health’s commitment to
innovation within the field of allergy remains its core
focus and its key to success. The new Avacta Allergy+
portfolio was launched in March 2021 and now
offers veterinary practices a range of testing options
with enhanced performance. Avacta Animal Health
continues to support vets in their interpretation
of results and supply tailor-made allergen-specific
immunotherapy (‘ASIT’) to aid with the long-term
management of allergic skin disease for veterinary
practices in the UK.
Avacta Animal Health’s export reach and international
customer base continues to grow, alongside
dedicated provision of tailored and trusted support
to veterinary professionals across the UK. This is in
addition to providing UK-specific testing services and
therapy options via our own authorised laboratories.
The Division’s in-house team of development scientists
are highly regarded in the field of dermatology and
work alongside world-leading dermatologists to
develop, manufacture and run our own tests, allowing
them the aforementioned end-to-end control. The
Division also has a number of qualified vets and vet
nurses, who maintain regular communication to gain
insight from veterinary professionals and experts in
the field, allowing them to analyse and review what is
clinically relevant on a regular basis.
Sale to Vimian Group AB
Post-period end in March 2022, the Group announced
the sale of the Animal Health Division to Nextmune
Holdings BV, which is part of Vimian Group AB’s
Specialty Pharma division.
The Avacta Animal Health team, which has been part
of the Avacta family since 2009, will be transferring
across to become part of the larger Nextmune
UK team. They will provide a UK-based laboratory
for veterinary allergy diagnostics and a full-service
offering covering all veterinary dermatology needs,
enabling the larger group to accelerate sales and
improve customer experience in the UK.
34
Strategic Report
35
Avacta Report and Accounts 2021 Financial Review
Revenue
Reported Group revenues for the year ended 31
December 2021 increased to £2.94 million compared to
the year ended 31 December 2020 (‘2020’): £2.14 million.
Revenues for the Diagnostics Division were £0.78 million
(2020: £0.52 million), with the increase coming from a
licensing agreement with Astrea Bioseparations together
with a smaller number of custom Affimer® reagent
projects and a small amount of revenue from the sale of
the AffiDX® SARS-CoV-2 antigen lateral flow tests.
Revenues for the Therapeutics Division were £2.16
million (2020: £1.63 million), which reflects additional
milestone payments from the LG Chem collaboration
and a licensing agreement with POINT Biopharma,
together with further revenues from funded FTE
development projects with LG Chem and AffyXell.
Discontinued operations
Post-period end the Animal Health Division was sold to Vimian
Group AB and the results for the current and prior year have
been disclosed in the Consolidated Statement of Profit or Loss
as Discontinued Operations. Revenues were £1.60 million (2020:
£1.49 million), with the revenues increasing from growth in
export sales and contracted clinical research work. The Division
made a small operating profit of £0.06 million compared to an
operating loss of £2.49 million in the prior year. The Division has
been presented separately within the Consolidated Statement
of Financial Position as assets held for sale of £1.28 million and
liabilities of £0.35 million. An up-front payment of £0.9 million
was received with deferred contingent consideration of up to
£1.4 million dependent on the combined performance of the
consolidated business. There were associated costs to sell
of £0.2 million. The fair value less costs to sell of the disposal
therefore exceed the carrying amount of £0.93 million.
Research and amortisation of development costs
During the year, the Group expensed through the income
statement £13.48 million (2020: £8.89 million) research costs
relating to the in-house Affimer® and pre|CISION™ therapeutic
programmes, which are expensed given their pre-clinical stage
of development, in addition to research costs on Affimer®
diagnostics products that have not yet completed product
development and obtained regulatory approval to become
commercial products.
36
In addition, development costs capitalised in prior periods
from the development of the Affimer® reagents and
diagnostics platform have been amortised, resulting in a
charge of £0.82 million (2020: £0.82 million).
Manufacturing costs of £2.14 million (2020: £nil) in relation to
the manufacture of pre-production and production AffiDx®
SARS-CoV-2 antigen lateral flow tests have been expensed in
the period given the decision that was made to pause sales
of the AffiDx® SARS-CoV-2 antigen lateral flow tests given the
reduced sensitivity of the tests against the Omicron variant
compared to previous SARS-CoV-2 variants.
Selling, general and administrative expenses
Administrative expenses have increased during the year to
£8.14 million (2020: £5.93 million) as the business scaled up the
operations within both the Diagnostics Division as it increased
its product development capabilities and became an ISO 13485
accredited, fully integrated in vitro diagnostic (‘IVD’) products
business. The Therapeutics Division’s costs also increased as
additional resource was increased to support the infrastructure
required and transition into a clinical stage business.
Share-based payment charges
The non-cash charge for the year increased to £5.06 million
(2020: £3.07 million) as additional share option awards were
granted to key-hires within the Therapeutics Division.
Net finance costs
The net finance costs in the Group arise from the IFRS 16
accounting for leases, which resulted in an interest charge of
£0.12 million (2020: £0.05 million) being recognised.
Losses before taxation
Losses before taxation from continuing operations for the year
were £29.19 million (2020: £18.86 million).
Taxation
The Group claims each year for research and development tax
credits and, since it is loss-making, elects to surrender these
tax credits for a cash rebate. The amount is included within the
taxation line of the consolidated statement of profit and loss in
respect of amounts received and receivable for the surrender
of research and development expenditure amounting to £2.82
million (2020: £2.46 million). The Group has not recognised
any tax assets in respect of trading losses arising in the current
financial year or accumulated losses in previous financial years.
Loss for the period
The reported loss for the period was £26.31 million (2020:
£18.89 million). The loss per ordinary share increased to
10.55 pence (2020: 8.37 pence) based on an average number
of shares in issue during the period of 253,555,925 (2020:
229,673,873).
Strategic Report Cash flow
The Group reported cash and short-term deposit
balances of £26.19 million at 31 December 2021 (2020:
£47.91 million).
Operating cash outflows from operations amounted
to £22.66 million (2020: £13.35 million). Within the
net operating cash outflows there were cash receipts
in respect of research and development tax credits
amounting to £2.29 million (2020: £2.75 million), which
represented the tax refund for the prior year ended
31 December 2020 compared to the tax refund for the
17-month financial period ended 31 December 2019.
£1.73 million (2020: £2.10 million) in relation to the
Group’s three leasehold properties together with a
corresponding lease liability of £1.70 million (2020: £2.04
million).
Dividends
No dividends have been proposed for the year ended 31
December 2021 (2020: £nil).
Key performance indicators
At this stage of the Group’s development, the non-
financial key performance indicators focus around two
areas:
During the year, capital expenditure was £1.16 million
(2020: £1.28 million) as facility expansions at both
Wetherby and Cambridge sites were completed.
• the progression of the Affimer® and pre|CISION™
technologies into clinical trials within the Therapeutics
Division; and
The Group did not complete any fund-raises during
the year (2020: £53.75 million before costs) but there
were proceeds from the exercise of share options by
employees amounting to £0.52 million (2020: £1.11
million).
Financial position
Net assets as at 31 December 2021 were £41.22 million
(2020: £61.93 million) of which short-term deposits, cash
and cash equivalents amounted to £26.19 million (2020:
£47.91 million).
Intangible assets reduced to £7.92 million (2020: £9.42
million) due to the amortisation charge of £0.82 million.
The IFRS 16 Leases presentation results in the
recognition of a ‘right-of-use’ asset amounting to
• the development of Affimer® diagnostic products
and commercial licensing agreements for Affimer®
reagents within the Diagnostics Division.
These are discussed in more detail within the
Operational Review on pages 16 to 35:
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
6
5
4
3
2
1
0
£3.33m
£2.94m
£2.14m
Research and
development expenditure
£13.48m
£9.74m
£9.06m
14
12
10
8
6
4
2
0
Cash and short-term deposits
60
50
40
30
20
10
0
£8.79m
£47.91m
£26.19m
2019
2020
2021
2019
2020
2021
2019
2020
2021
Please note: 2019 is the 17 months ended 31 December 2019, 2020 is the 12 months ended 31 December 2020 and
2021 is the 12 months ended 31 December 2021.
37
Avacta Report and Accounts 2021 The Board looks to promote the long-term success of the
Group whilst considering the interests of all stakeholders. The
Board reviews matters relating to financial and operational
performance; business strategy; key risks; stakeholder-related
matters; legal and regulatory compliance matters over the
course of the financial year and through future financial periods.
The Directors work across all the Group’s facilities and provide
regular monthly updates to employees, most of whom are
either shareholders or holders of share options, on the
progress of the Group. The updates provide details of the
business objectives, strategy and business model, together
with sharing of technical progress across the various teams
within the Group. The Directors actively seek regular feedback
from employees to ensure their interests are reflected.
Engaging with the Group’s stakeholders is key to the way the
Group is operated and is an important consideration for the
Directors when making relevant decisions. Details of how the
Directors engage with stakeholders is set out in the Corporate
Governance report on pages 51 to 55, including the Group’s
responsibilities to health, safety and environmental issues to
its employees, suppliers, customers and communities in which
the Group operates.
The Directors believe strongly in the maintaining the highest
levels business conduct, accountability and good corporate
governance to all the Group’s stakeholders. In maintaining
this approach the Group has adopted the Quoted Companies
Alliance Corporate Governance Code with further details on
how it complies with the Code set out on page 51.
Financial Review
(Continued...)
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are set
out on pages 40 to 42.
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.
Section 172(1) statement
Section 172(1) of the Companies Act 2006 requires a Director
of a company to act in the way he or she considers, in good
faith, would be most likely to promote the success of the
company for the benefit of its members as a whole. In doing
so, s172(1) requires the Directors to have regard, amongst
other matters, to the:
• likely consequences of any decision in the long term;
• interests of the Group’s employees;
• need to foster the Group’s business relationships with
suppliers, customers and others;
• impact of the Group’s operations on the community and the
environment;
• desirability of the Group in maintaining a reputation for high
standards of business conduct; and
• need to act fairly between members of the Group.
In discharging its Section 172(1) duties, the Board has regard
to the factors set out above and ensures that decision-
making processes are made on a consistent basis and meet
the above factors.
38
Strategic Report 39
Avacta Report and Accounts 2021 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.
Manufacturing & supply risk - Diagnostics Change ^
The Group had developed with manufacturing partners
a rapid COVID-19 lateral flow test which had completed
formal clinical validation and CE marking. The Group was
in the process of scaling up production with third party
manufacturing partners and establishing an appropriate
supply chain for the approved lateral flow test during 2021.
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 reviews these reports and monitors the position at
Audit Committee and 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 launch a COVID-19 lateral flow test
was transformational and then impacted by the Omicron
variant which reduced the sensitivity of the test, leading to a
pause in sales and re-work of the test.
Working practices across the Group are now back to normal
levels with all lab-based staff working as normal. Non-scientific
staff are now working on a combination of in-office and home-
based schedules as a result of changed working methods.
The commencement of dosing of first patients in our AVA6000
phase I study, once regulatory approval was received,
commenced in the middle of 2021. The speed at which clinical
sites and patients were signed up was determined by the
individual sites and availability of staff to complete the site set
up procedures.
40
Product manufacture had to be paused as the sensitivity of
the test which had been excellent up to and including the
Delta variant, was reduced with the Omicron variant. This
has led to a re-development of the product and constituent
components.
The ability to produce the test within the UK to a cost price
which would have made the test competitive with Chinese
manufactured tests has been a significant challenge and the
Group is actively exploring alternative production routes for
the manufacture of future tests.
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/manufacturer.
Commercial risk - Diagnostics
Change ^
The transition of the Diagnostics business has been significant
because of the COVID-19 lateral flow test opportunity. In
2020 the business had progressed to developing its own
diagnostic products, such as the COVID-19 lateral flow test
and working on customer collaboration projects. In 2021 the
development of the COVID-19 lateral flow test continued and
was commercially launched but then sales were paused due to
a lower detection rate with the Omicron variant and the need
to re-work the test. The price point of COVID-19 lateral flow
tests has been under significant pressure given the volume of
tests flooding the market from cheaper Chinese production
and the limited sales market within the UK due to government
procurement policies.
Establishing commercial sales channels within the UK, Europe
and other countries for the COVID-19 lateral flow test and
future diagnostic tests in development 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.
The regulatory changes in relation to the IVDR/CE marking
process in FY22 could lead to delays in obtaining approvals
from Notified Bodies (such as BSI) which could delay the
launch of future products not yet for sale within Europe.
Building collaborative partnerships with large pharma/biotech
companies can be a lengthy process and normal business
development channels, such as conferences, have changed
Strategic Report
because of the pandemic. However, the Astrea licence and
collaboration deal for affinity separation completed in 2020
shows the potential for significant commercial partnerships.
significant benefits over existing antibody technologies with
oversight from the Senior Management Teams, the Board and
Scientific Advisory Board.
Change < >
Reliance on third parties supporting clinical and pre-
clinical programmes - Therapeutics
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.
With the Group having commenced Phase I trials on its first
clinical programme (AVA6000) there has been significant
recruitment within the 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 regulatory approval processes of the MHRA and FDA and
other comparable regulatory authorities can be lengthy and
time consuming. 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 and timely approval of the CTA and IND
submissions 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®, pre|CISIONTM and TMAC®
technologies in the Therapeutics Division.
Change < >
There is a risk, consistent with similar biotechnology
companies developing new and innovative technology
platforms, that the scientific results required for specific
internal development programmes, product development
projects, customer-related evaluations or third-party
collaborations will not be produced. This risk is in specific
applications of the Affimer®, pre|CISIONTM or TMAC®
technologies rather than in the individual technology platform
as a whole.
The development teams continue to work on improving the
core Affimer®, pre|CISIONTM and TMAC® technology platforms
and expanding the potential areas where the technology has
With the Group’s first asset (AVA6000) having entered clinical
trials there is a risk that the trials might not be successful and
that the Group is unable to develop marketable products.
There is a risk that the clinical trials could lead to unanticipated
results, which require further development leading to time
delays. The Group has built an experienced and reputable
team of clinical advisors who are monitoring the outputs of the
clinical trials to ensure appropriate decisions based on data
outcomes are taken at the right time.
Funding
The development of the Group’s Affimer® and pre|CISIONTM
technologies in the Therapeutics Division, is resource and cash
intensive. Given its successful fundraising in 2020, the Group
has not needed to raise additional funding during 2021.
Change ^
As at 31 December 2021, the Group had cash and short-term
deposits of £26.19 million, which leaves it in a good position to
deliver on its short to medium term objectives.
As with all fundraising activities in the biotech sector, there are
external market and economic factors, such as the Ukraine
conflict, which may impact the timing and amount of funding
available through capital markets.
Intellectual property
The success of the Group’s Affimer® and pre|CISIONTM
technology platforms depends on its ability to obtain and
maintain patent protection for its proprietary technology.
Change < >
Failure to protect the Affimer® and pre|CISIONTM technology
platforms, or to obtain patent protection with a scope that
is sufficiently wide, could significantly impact the ability to
commercialise 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 The Group has in place experienced and motivated Senior
Leadership Teams across the Diagnostics and Therapeutics
Divisions together with a significant number of highly skilled
senior scientists and technical specialists.
Loss of key staff could lead to a delay in the Group’s plans and
operations.
41
Avacta Report and Accounts 2021
Strategic Report
Principal Risks and Uncertanties
(Continued...)
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 5 April 2022 and signed on its behalf.
Alastair Smith
Chief Executive Officer
Tony Gardiner
Chief Financial Officer
5 April 2022
5 April 2022
During the year, the Group has successfully continued to
recruit senior specialist roles within the Therapeutics Division
covering scientific, regulatory and clinical development areas.
The Diagnostics Division has continued to recruit senior staff
skilled in product development of diagnostic devices and build
a quality assurance and regulatory team to support its ISO
13485 quality management 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.
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
cybersecurity 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 are in the process of being re-located to
White City, London) 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.
42
Governance
44
Board of Directors
48
Directors’ Report
51
Corporate Governance Report
56
Audit Committee Report
58
Remuneration Committee Report
63
64
Statement of Directors’
Responsibilities
Independent Auditor’s Report to
the Members of Avacta Group plc
5
43
Avacta Report and Accounts 2021 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.
44
Dr Eliot Forster
Non-executive Chairman
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 the US.
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 US, 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.
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 Chairman
of Liverpool Health Partners, 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.
Governance Tony Gardiner
Chief Financial Officer
Dr Trevor Nicholls
Non-executive Director
Paul Fry
Non-executive Director
Tony joined Avacta in 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.
Prior to joining Avacta, Tony worked for
AHR (formerly Aedas), 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.
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.
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, 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
and a Non-executive Director of Wobble
Genomics Ltd, a spin-out of the Roslin
Institute, specialising in DNA analytics
and diagnostics. 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.
Trevor is Chair of the Remuneration Committee
and a member of the Audit Committee.
Paul 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 was Chief Financial Officer of Vectura
Group Ltd, an industry-leading inhaled
drug delivery specialist which up until
2021 was listed on the FTSE Main Market.
Prior to his position at Vectura Group
Ltd, 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.
45
Avacta Report and Accounts 2021 Board of
Directors (cont.)
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.
46
Dr Mark Goldberg
Non-executive Director
Dr Christina Coughlin
Non-executive Director
Mark was appointed as a Non-executive
Director in August 2021 and is a
medical oncologist, haematologist and a
biotechnology executive. Mark currently
serves on the boards of directors of
ImmunoGen, Idera Pharmaceuticals,
GlycoMimetics, Blueprint Medicines, and
Walden Biosciences.
Mark was part of the executive
management team of Synageva
Biopharma from 2011 until 2014. Prior
to that, he served in various management
capacities of increasing responsibility at
Genzyme Corporation from 1996 until
2011, including as Senior Vice President
of Clinical Development. Prior to joining
Genzyme, he was a full-time staff physician
at Dana-Farber Cancer Institute and
Brigham and Women’s Hospital, where
he still holds an appointment. He is an
Associate Professor of Medicine (part-
time) at Harvard Medical School.
Mark is also a longtime American Cancer
Society (‘ACS’) and ACS Cancer Action
Network volunteer. He was a member of
the American Cancer Society New England
Division Board from 2010 to 2017 and has
been a member of the national Board of
Directors of the American Cancer Society
since 2019.
Mark received his AB from Harvard
College (magna cum laude) and his MD
(cum laude) from Harvard Medical School
(Harvard MIT Program in Health Sciences
and Technology).
Christina was appointed as a Non-executive
Director in March 2022. Christina is the
Chief Executive Officer of Cytolmmune
Therapeutics LLC, which is a clinical stage
biotechnology company focused on
development and commercialisation of
novel cancer immunotherapy products
designed to use the patient’s own
immune system to eliminate cancer cells.
Christina has a broad background in
biotechnology and global pharmaceuticals,
with a comprehensive drug development
background from pre-IND to filing
experience and has a track record of
building drug development teams in global
companies.
Christina previously served as Chief
Medical Officer to Rubius Therapeutics. Inc,
where she led the clinical development,
translational medicine and regulatory
efforts in the allogeneic red cell therapy
platform. Prior to Rubius, Christina was
with Tmunity Therapeutics, Inc., where
she served as Chief Medical Officer and
was responsible for the development
of autologous CAR-T and TCR-T cellular
therapies.
Christina has held other leadership roles
in the pharmaceutical and biotechnology
fields in her career including Chief Medical
Officer at Immunocore, where she led
the development of Kimmtrak™, recently
approved for the treatment of metastatic
uveal melanoma. Christina was also an
Oncology Asset Team Leader at Pfizer and
Clinical Program Team Lead at Novartis.
She received her MD and PhD from the
University of Pennsylvania and completed
fellowships in Haematology and Oncology
at the Children’s Hospital of Philadelphia
and in the Translational Research Group
under the direction of Carl June, MD at the
University of Pennsylvania.
Governance 47
Avacta Report and Accounts 2021 Directors’ Report
The Directors present their report and the audited
financial statements for the period ended 31
December 2021.
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 therapies using 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
in vitro diagnostics and works with partners world-wide to
develop Affimer® reagents with the objective of establishing
royalty-bearing licensing deals.
The Group also provided veterinary laboratory services and
developed market-leading veterinary diagnostic tests through
its Animal Health division up to March 2022, at which point
it was sold to Vimian Group A.B, a Swedish based global
veterinary group.
Business review and future developments
A review of the Group’s operations and future developments is
covered in the Strategic Report on pages 13 to 42. 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 74 to 113.
The Directors have reviewed the results for the years ended
31 December 2021 and 31 December 2020, 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 page 37.
Dividends
The Directors do not recommend the payment of a dividend
(2020: £nil).
48
Going concern
These financial statements have been prepared on a going
concern basis, notwithstanding a loss of £26.3 million and
operating cash outflows of £22.7 million for the period ended 31
December 2021. The Directors consider this to be appropriate
for the following reasons.
The Directors have prepared detailed cash flow forecasts that
extend to at least twelve months from the date of approval of
the financial statements. The forecasts take into account the
Directors’ views of current and future economic conditions that
are expected to prevail over the period. These forecasts include
assumptions regarding the status of therapeutic development
collaborations, the AVA6000 pro-doxorubicin Phase I clinical trials,
diagnostic product development projects and sales pipeline,
future revenues and costs, together with various scenarios which
reflect growth plans, opportunities, risks and mitigating actions.
The forecasts also include assumptions regarding the timing
and quantum of investment in the therapeutic and diagnostic
research and development programmes.
Whilst there are inherent uncertainties regarding the cash
flows associated with the development of both the therapeutic
and diagnostic platforms, together with the timing and delivery
of diagnostic product development projects and future
therapeutic collaboration transactions, the Directors are
satisfied that there is sufficient discretion and control as to
the timing and quantum of cash outflows to ensure that the
Company and Group are able to meet their liabilities as they
fall due for at least twelve months from the date of approval
of the financial statements. The key factors considered in
reaching this conclusion are summarised below:
• As at 31 December 2021, the Group’s short-term deposits
and cash and cash equivalents were £26.2 million (2020:
£47.9 million).
• The Group has a tax refund in relation to R&D tax credits
due in the second half of 2022 amounting to £2.8 million
(a comparable tax refund of £2.3 million was received in
October 2021).
• Post period end the Group disposed of the Animal Health
Division which generated an up-front payment of £0.9 million
and a future earnout which could reach £1.43 million.
• The Group does not have external borrowings or any
covenants based on financial performance.
• The Directors have considered the position of the individual
trading companies in the Group to ensure that these
companies are also in a position to continue to meet their
obligations as they fall due.
The Directors continue to explore additional sources of
income and finance available to the Group to continue the
development of the therapeutic and diagnostic platforms
beyond 2023. The sources of income could come through
additional therapeutic collaborations, similar to the LG
Chem and Daewoong collaborations, which may include
up-front technology access fees and significant early-stage
development income, or through additional equity fundraises.
Based on these indications, the Directors are confident that
Governance the Company will have sufficient funds to continue to meet its
liabilities as they fall due for at least twelve months from the
date of approval of the financial statements and therefore have
prepared the financial statements on a going concern basis.
Directors’ shareholdings
The beneficial interests of the Directors in the share capital of
the Company at 31 December 2021 and at 5 April 2022 were
as follows:
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
• Dr Mark Goldberg
Appointed 17 August 2021
• Dr Christina Coughlin
Appointed 18 March 2022
• Dr Alastair Smith
• Tony Gardiner
Under the Articles of Association of the Company, Directors
are subject to re-election at the Annual General Meeting
(‘AGM’) following their appointment. In addition, one third of
the Directors are required to retire at the forthcoming AGM,
notice of which accompanies this Report and Accounts. Mark
Goldberg and Christina Coughlin, having been appointed as
Directors since the last AGM, will be due for re-election at the
next AGM. The Directors retiring by rotation at the forthcoming
AGM are Paul Fry and Tony Gardiner. Both Paul Fry and Tony
Gardiner, 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 AGM can be found on pages
44 to 46.
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 5 April 2022, individual
registered shareholdings of more than 3% of the Company’s
issued share capital were as follows:
Number of
shares
% of issued
ordinary
share capital
Baillie Gifford & Co Limited
11,619,480
Premier Miton Group
Conifer Management, LLC
8,017,913
7,597,195
4.6%
3.2%
3.0%
31 December
2021
number of
shares
5 April
2022
number of
shares
153,333
107,455
153,333
107,455
-
-
-
-
-
-
431,100
8,196
431,100
8,196
Non-executive Directors
Eliot Forster
Trevor Nicholls
Paul Fry
Mark Goldberg
Christina Coughlin
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
page 61.
The middle market price of the Company’s ordinary shares on
31 December 2021 was 126p and the range during the period
was 105p to 275p with an average price of 165p.
Information on Directors’ remuneration and share option rights is
given in the Remuneration Committee Report on pages 58 to 62.
Research and development
During the year, the Group expensed through the income
statement £13.48 million (2020: £8.89 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 resulted in an amortisation charge of £0.82 million
(2020: £0.82 million).
Derivatives and financial instruments
The Group’s policy and exposure to derivatives and financial
instruments is set out at Note 19.
49
Avacta Report and Accounts 2021
Annual General Meeting
The Annual General Meeting of the Company will be held at the
offices of FTI Consulting at 200 Aldersgate, Aldersgate Street,
London EC1A 4HD on Thursday 23 June 2022 at 3.30 p.m. Full
details of the business to be transacted at the Annual General
Meeting can be found in the Notice of Annual General Meeting
on pages 114 to 115 of this report.
By order of the Board
Tony Gardiner
Company Secretary
Avacta Group plc (Registered number - 4748597)
5 April 2022
Directors’ Report
(Continued...)
Employees
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. During 2021 the Group embarked on a
development programme for all its staff called CHX (Culture
Humanity Excellence) Performance, which focused on reframing
the organisation’s mental health, humanising leadership and
creating a higher performing, more engaged organisation.
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.
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.
Appointment of auditor
During the year the Group went through a detailed audit
tender process and BDO LLP were selected, subject to
approval at the forthcoming AGM, to become the new auditor
for the Group. KPMG LLP, the Group’s previous auditor,
resigned following the audit tender process and in accordance
with Section 519 of the Companies Act 2006, confirmed
that there were no circumstances in connection with their
resignation which needed to be brought to the attention of the
Company’s shareholders or creditors.
50
Governance Corporate Governance Report
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. In the statement
below, we explain our approach to governance, and how the
Board and its committees operate.
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.
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 16.
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 40 to 42.
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 44 to 46.
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.
51
Avacta Report and Accounts 2021 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 driven primarily by its well-funded therapeutic
programmes, and also from the development of new
products for its diagnostic business in the medium term to
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 2021, the Board comprised four (five following
the appointment of Dr Christina Coughlin in March 2022)
Non-executive Directors and two Executive Directors.
The profiles of the Directors are set out on pages 44 to 46.
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.
52
The Chief Executive Officer, Dr Alastair Smith, was
appointed to the Board in September 2007. Alastair has
15 years’ experience as Chief Executive Officer of an AIM-
listed business, having 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 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.
Dr Mark Goldberg was appointed as a Non-executive
Director in August 2021. 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. Mark has an extensive background as
an Executive and Non-executive Director within the US
biotechnology sector and is also a medical oncologist.
Mark’s time commitment is one to two days per month.
Dr Christina Coughlin was appointed as a Non-executive
Director in March 2022. Prior to her appointment to the
Board, she was not involved with any part of the Avacta
Group and has been considered independent since her
appointment. Christina has an extensive background
in the pharmaceutical and biotechnology fields, with a
broad background of drug development from pre-IND
to filing experience in global companies. Christina’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.
Governance The Board met regularly throughout the year, largely via
video conferencing methods given the COVID-19 pandemic,
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, 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 or she
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. 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 which are now fully
vested do not carry any performance obligations (further details
are provided within the Remuneration Report). The Board and
Company’s advisers 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 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.
53
Avacta Report and Accounts 2021 Corporate Governance Report
(continued...)
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 Owen¹
Paul Fry
Non-executive
Non-executive
Non-executive
Mark Goldberg²
Non-executive
Christina Coughlin³
Non-executive
Alastair Smith
Tony Gardiner
Executive CEO
Executive CFO
12/12
12/12
3/3
11/12
3/4
-
12/12
12/12
Member
Member
Member
Chairman
-
-
-
-
4/4
4/4
1/1
4/4
-
-
4/4
4/4
Member
Chairman
Member
Member
-
-
-
-
1/1
1/1
1/1
1/1
-
-
1/1
1/1
1 – Mike Owen resigned as a Non-executive Director on 24 March 2021.
2 – Mark Goldberg was appointed as a Non-executive Director on 17 August 2021.
3 – Christina Coughlin was appointed as a Non-executive Director on 18 March 2022.
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 role as Chief Financial Officer of Vectura Group
Ltd, which was listed on the Main Market of the London Stock
Exchange until it was acquired by Philip Morris International
Inc. and subsequently de-listed in October 2021. The current
members of the Committee - Eliot Forster and Trevor Nicholls,
both 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
• To monitor and review the effectiveness of the Company’s
system of internal control
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 commencement of the 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
weakness or failing is identified, implementation of appropriate
remedial action is completed following approval by the Board.
• 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
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.
• To implement the policy relating to any non-audit services
performed by the external auditor
54
Governance Remuneration Committee
The Remuneration Committee is chaired by Trevor Nicholls and
the other current members of the Committee are Eliot Forster
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.
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.
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 determine targets for performance-related pay schemes
• 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 Investor Meet Company and Vox
Markets 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 Non-executive Directors are also
available to discuss governance and other matters directly with
major shareholders.
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.
Corporate culture, social and environmental
responsibility
The Executive Directors provide regular monthly updates to
staff, most of whom are either shareholders or holders of share
options, on the progress of the Group. The updates also 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.
During 2021 the Group embarked on a development
programme for all its staff called CHX (Culture Humanity
Excellence) Performance which focused on reframing the
organisation’s mental health, humanising leadership and
creating a higher performing, more engaged organisation.
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. During the development of the SARS-
CoV-2 antigen lateral flow test the product development team
worked to incorporate, where possible, recycled material within
the plastic components and cardboard packaging.
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
5 April 2022
55
Avacta Report and Accounts 2021
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 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
between the external auditor and the Company to ensure
that they do not compromise the auditor’s judgement or
independence, particularly with the provision of non-audit
services.
KPMG LLP were originally appointed auditor to the Group
following a tender process in 2010. Following the completion
of the 2020 external audit, they indicated that they would
not be seeking re-election for the 2021 external audit, having
served as auditor for in excess of ten years and, given the
increase in market capitalisation of the Group on the FTSE
Alternative Investment Market (‘AIM’), they would not be able
to carry out the dual roles of external auditor and continue to
provide certain taxation and non-audit services.
The Audit Committee commenced an audit tender process
in April 2021, having reviewed the current auditors of
comparable companies which at that time were listed on the
FTSE AIM 100 Index. The review identified eight auditors and
initial informal pre-tender discussions were undertaken to
identify which auditors would be suitable/able to participate
in a formal audit tender process. This process led to a short
list of three auditors who were then contacted under a formal
Request for Proposal (‘RFP’) process.
The RFP process undertaken sought to request information on
the auditors covering a number of areas:
• To implement any policies relating to any non-audit services
performed by the external auditor
• Credentials of the firm to support the two expanding
Diagnostics and Therapeutics Divisions within the Group
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 as required during the
year. The regular meetings 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 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.
During 2021 additional Committee meetings were held in
relation to the appointment of a new external auditor as set
out below.
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
56
• Resource capacity to complete the year ended 31 December
2021 audit
• Indicative fee proposals
• Composition of the audit team and lead partner
• Experiences of auditing similar sized healthcare and AIM-
listed entities
• Observations on existing accounting policies/treatments
used by the Group
• Recent FRC feedback on the auditors recent audits of AIM-
listed entities.
The three shortlisted auditors all presented to the Audit
Committee and the Committee subsequently reviewed the
quality of the tender documents and presentations.
The Committee decided to appoint BDO LLP, with Piers
Harrison taking on the role of engagement partner. BDO
have completed the audit for the year ended 31 December
2021 and their appointment will be formally put before
shareholders at the upcoming AGM.
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.
Governance Use of judgements and estimates
Estimates:
The Committee also considered the assumptions and estimation
uncertainties as at 31 December 2021 that have a significant risk
of resulting in a material adjustment to the carrying amounts
and liabilities in the next financial year are:
Impairment – Impairment tests have been performed on the
carrying amounts of the Group’s cash generating units. Key
assumptions such as the amount and timing of future cash
flow growth, and the achievement of future development
milestones, underlie the recoverable amounts used in these
impairment tests. Further information on the key assumptions
used is disclosed in Note 10.
Paul Fry
Chairman of the Audit Committee
5 April 2022
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 twelve
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
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 twelve 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 1C.
Share based payments – Judgements arise from the choice
of inputs to the share option valuation models underlying the
share-based payment charge, as disclosed in Note 5.
The Directors consider that the assumptions and estimation
uncertainties at 31 December 2021 that have a significant risk
of resulting in a material adjustment to the carrying amounts
and liabilities in the next financial year are:
57
Avacta Report and Accounts 2021
Remuneration Committee Report
This report sets out the remuneration policy for the
year ended 31 December 2021.
Introduction
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 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:
levels, the Committee 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 a full exercise
carried out in July 2020.
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 reviewed on 1 January 2022, with a 4% increase
applied based on a RPI measure on a consistent basis with
other staff across the Group. The Committee recommended
that the salary of the Chief Executive Officer be increased from
£275,000 to £286,000 per annum and the salary of the Chief
Financial Officer be increased from £190,000 to £197,600 per
annum. Base salaries will next be reviewed on 1 January 2023
along with other staff across the Group.
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 is 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.
• 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
For the year ending 31 December 2020, the Chief Executive
Officer was paid a bonus equivalent to 44% of his basic salary
and the Chief Financial Officer was paid a bonus equivalent to
33% of his basic salary.
• 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
For the year ending 31 December 2021, 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 35% of his current basic salary and the
Chief Financial Officer should be paid a bonus equivalent to
26% of his current basic salary. The bonuses were paid in
March 2022.
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.
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.
58
Governance 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 49 and their interests in options held over shares
in the Company are set out on page 61.
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 with
awards being granted in January 2019 and June 2020. No
awards were made during 2021.
The LTIP option vesting for the 2019 and part of the 2020
award was 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 were 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. The Remuneration Committee reviewed
the vesting of the awards as at 31 December 2021 and, whilst
the share price performance targets were not met for the
period from 1 January 2019 to 31 December 2021, certain of
the commercial and technical strategic objectives were met
and the details of the options which vested or lapsed is set out
on page 61.
The second part of the June 2020 LTIP award was granted to
bring the long-term equity incentives of the Executive Directors
in line with a group of comparable AIM-listed companies. The
vesting conditions were 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
Paul Fry
9 January 2020
Mark Goldberg
17 August 2021
Christina Coughlin
18 March 2022
Nil
Nil
Nil
Nil
Nil
1 month
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 49. 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 vested equally over a three-year period and did
not carry any performance obligations (further details are
provided within the table on page 61). The Committee and
Company’s advisers 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.
59
Avacta Report and Accounts 2021 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 2021 is set out below. These values are
included within the audited accounts.
2021
Basic salary
and fees
£000
2021
Bonus
£000
2021
Benefits
in kind
£000
2021
Total
£000
2021
4Pension
contributions
£000
2020
Total
£000
2020
Pension
contributions
£000
Year ended
31 December 2021
Year ended
31 December 2020
Non-executive Directors
Eliot Forster
Trevor Nicholls
Paul Fry
¹Mike Owen
²Mark Goldberg
Executive Directors
Alastair Smith
Tony Gardiner
94
36
36
8
15
275
183
647
-
-
-
-
-
121
63
184
-
-
-
-
-
5
1
6
94
36
36
8
15
401
247
837
-
-
-
-
-
17
11
28
85
31
28
31
-
261
181
617
-
-
-
-
-
14
10
24
The above emoluments include all payments paid to the Directors whilst Directors of the Group.
1 – Mike Owen resigned as a Director on 24 March 2021.
2 – Mark Goldberg was appointed as a Director on 17 August 2021.
3 – 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 (2020: two).
The share-based payments charge to the Consolidated Income Statement in respect of Directors’ share options was £1,049,000
(2020: £1,076,000). The aggregate gain made by Directors on the exercise of share options was £nil (2020: £nil).
60
Governance
Details of Directors’ joint interests in the Joint Share Ownership Plan (‘JSOP’) – audited
At 1 Jan 2021
Granted
Waived
Exercised
At 31 Dec 2021
Date of agreement
Alastair Smith
Alastair Smith
Tony Gardiner
1,144,149
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
Waived /
Jan 2021 Granted
Lapsed Exercised
At 31
Dec 2021
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
96,900
Alastair Smith
599,100
Alastair Smith
868,260
Alastair Smith
4,000,000
5,908,525
-
Tony Gardiner
210,968
Tony Gardiner
22,973
Tony Gardiner
56,960
Tony Gardiner
313,000
Tony Gardiner
453,620
Tony Gardiner 1,000,000
2,057,521
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(374,437)
(401,486)
-
(775,923)
-
-
-
(195,625)
(283,512)
-
(479,137)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
340,000
25.0p
11 June 2021
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
96,900
224,663
74.0p
16 Dec 2016
16 Dec 2016
16 Dec 2026
25.0p
25.0p
7 Jan 2019
7 Jan 2019
7 Jan 2029
Note 1
7 Jan 2019
7 Jan 2029
466,774
17.25p
Note 1
14 May 2020
14 May 2030
4,000,000
10.0p
Note 2
14 May 2020
14 May 2030
5,132,602
210,968
118.5p
15 Feb 2020
15 Feb 2016
15 Feb 2026
22,973
56,960
117,375
74.0p
16 Dec 2016
16 Dec 2016
16 Dec 2026
25.0p
25.0p
7 Jan 2019
7 Jan 2019
7 Jan 2029
Note 1
7 Jan 2019
7 Jan 2029
170,108
17.25p
Note 1
14 May 2020
14 May 2030
1,000,000
10.0p
Note 2
14 May 2020
14 May 2030
1,578,384
Note 1 – The vested options can be exercised from 31 December 2021; however,
the option holder cannot sell the shares prior to 31 December 2023.
Note 2 – 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.
61
Avacta Report and Accounts 2021 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 2021.
Page 57
2.500
2.000
1.500
1.000
0.000
0
2
-
c
e
D
-
1
3
1
2
-
n
a
J
-
1
3
1
2
-
b
e
F
-
9
2
1
2
-
r
a
M
-
1
3
1
2
-
r
p
A
-
0
3
1
2
-
y
a
M
-
1
3
1
2
-
n
u
J
-
0
3
1
2
-
l
u
J
-
1
3
1
2
-
g
u
A
-
1
3
1
2
-
p
e
S
-
1
3
1
2
-
t
c
O
-
1
3
1
2
-
v
o
N
-
0
3
1
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 5 April 2022 and was signed on its
behalf by:
Dr Trevor Nicholls
Chairman of the Remuneration Committee
5 April 2022
62
Governance
Statement of Directors’ Responsibilities
in Respect of the Annual Report and the
Financial Statements
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 UK adopted international accounting
standards 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 UK adopted international
accounting standards
• 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
fraud or error, and have general responsibility for taking such
63
Avacta Report and Accounts 2021 Governance
Independent Auditor’s Report to
the Members of Avacta Group plc
64
Governance 65
Avacta Report and Accounts 2021 Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
66
Governance 67
Avacta Report and Accounts 2021 Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
68
Governance 69
Avacta Report and Accounts 2021 Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
70
Governance 71
Avacta Report and Accounts 2021 Governance
Financial
Statements
74
Consolidated Statement of
Profit or Loss
75 Consolidated Statement of
Financial Position
76
Consolidated Statement of
Changes in Equity
77
Consolidated Statement of
Cash Flows
78
Notes to the Consolidated
Financial Statements
107 Company Balance Sheet
108
Company Statement of
Changes in Equity
108
Notes to the Company
Balance Sheet
8 52
73
Avacta Report and Accounts 2021
Consolidated Statement of Profit or Loss
and Other Comprehensive Income for the
Year Ended 31 December 2021
Continuing operations
Revenue
Cost of sales
Gross profit
Research costs
Manufacturing costs
Share of loss of associate
Amortisation of development costs
Selling, general and administrative expenses
Depreciation expense
Share-based payment charge
Operating loss
Finance income
Finance costs
Net finance costs
Loss before tax
Taxation
Note
3
22
10
11, 21
5
6
7
21
2021
£000
2,941
(924)
2,017
(13,480)
(2,143)
-
(821)
(8,136)
(1,462)
(5,058)
(29,083)
17
(128)
(111)
2020
£000
2,144
(962)
1,182
(8,891)
-
(217)
(824)
(5,933)
(1,063)
(3,070)
(18,814)
43
(89)
(46)
(29,194)
(18,861)
8
2,820
2,464
Loss from continuing operations
(26,374)
(16,397)
Disontinued operation
Profit / (loss) from discontinued operation
24
Loss for the period
Foreign operations – foreign currency translation differences
Other comprehensive income
58
(26,316)
(2,494)
(18,891)
4
4
-
-
Total comprehensive loss for the period
(26,312)
(18,891)
Loss per share
Basic and diluted
Loss per share - continuing operations
Basic and diluted
9
9
(10.55p)
(8.37p)
(10.57p)
(7.27p)
The notes on pages 78 to 106 form an integral part of these financial statements.
74
Financial Statements
Consolidated Statement of Financial
Position as at 31 December 2021
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
Assets held for sale
Current assets
Total assets
Liabilities
Lease liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Liabilities directly associated with the assets held for sale
Current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Reserves
Retained earnings
Total equity
Note
11
21
10
12
13
14
14
24
21
15
21
24
17
18
18
18
2021
£000
2,612
1,729
7,925
12,266
189
4,327
2,750
-
26,191
33,457
1,279
2020
£000
2,696
2,095
9,417
14,208
248
2,895
2,200
20,017
27,894
53,254
-
34,736
53,254
47,002
67,462
(1,412)
(1,412)
(3,731)
(291)
(4,022)
(346)
(4,368)
(1,752)
(1,752)
(3,491)
(290)
(3,781)
-
(3,781)
(5,780)
(5,533)
41,222
61,929
25,472
25,343
54,530
(4,687)
(34,093)
41,222
54,137
(4,690)
(12,861)
61,929
The notes on pages 78 to 106 form an integral part of these financial statements.
The financial statements on pages 74 to 106 were approved by the Board of Directors on 5 April 2022 and signed on its behalf by:
Alastair Smith
Chief Executive Officer
Tony Gardiner
Chief Financial Officer
75
Avacta Report and Accounts 2021
Consolidated Statement of Changes in Equity for the
Year Ended 31 December 2021
Share
capital
£000
Share
premium
£000
Other
reserve
£000
Translation
reserve
£000
Balance at 1 January 2020
17,671
9,877
(1,729)
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
7,195
43,596
467
10
-
645
19
-
7,672
44,260
-
-
-
-
-
-
Balance at 31 December 2020
25,343
54,137
(1,729)
Loss for the period
Other comprehensive income for the period
Total comprehensive loss for the period
Transactions with owners of the Company:
Exercise of share options
Equity-settled share-based payment
-
-
-
129
-
130
-
-
-
393
-
392
-
-
-
-
-
-
Balance at 31 December 2021
25,472
54,530
(1,729)
-
-
-
-
-
-
-
-
-
4
4
-
-
-
4
Reserve
for own
shares
£000
Retained
earnings
£000
Total
equity
£000
(2,932)
2,922
25,809
-
-
-
(29)
-
(29)
(18,891)
(18,891)
-
-
-
3,108
3,108
50,791
1,112
-
3,108
55,011
(2,961)
(12,861)
61,929
-
-
-
-
-
-
(26,316)
(26,316)
-
4
(26,316)
(26,312)
-
5,083
5,083
522
5,083
5,605
(2,961)
(34,094)
(41,222)
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
76
Financial Statements Consolidated Statement of Cash Flows for the Year
Ended 31 December 2021
2021
£000
2020
£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
Operating cash outflow before changes in working capital
Decrease/(increase) in inventories
Increase in trade and other receivables
Increase in trade and other payables
(26,316)
(18,891)
865
-
1,511
30
-
5,083
121
(2,820)
(21,526)
13
(1,599)
456
1,029
1,741
1,125
6
217
3,108
50
(2,452)
(14,067)
(91)
(814)
1,627
Operating cash outflow from operations
(22,656)
(13,345)
Interest received
Interest elements of lease payments
Tax credit received
Withholding tax paid
17
(139)
2,291
(19)
42
(93)
2,754
-
Net cash used in operating activities
(20,506)
(10,642)
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 generated from / (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 2021
Effects of movements in exchange rates on cash held
Cash and cash equivalents forming part of assets held for sale
Cash and cash equivalents at 31 December 2021
The accompanying notes form an integral part of the financial statements.
(1,162)
(152)
-
-
20,017
18,703
-
-
522
(290)
232
(1,571)
27,894
4
26,327
(136)
26,191
(1,279)
(221)
(217)
(165)
(20,017)
(21,899)
53,750
(2,960)
1,112
(255)
51,647
19,106
8,788
-
27,894
-
27,894
77
Avacta Report and Accounts 2021
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 2021 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 UK adopted international
accounting standards. 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.
Functional and presentation currency
These consolidated financial statements are presented in
pound sterling, which is the Company’s functional currency.
All amounts have been rounded to the nearest thousand,
unless otherwise indicated.
Going concern
These financial statements have been prepared on a going
concern basis, notwithstanding a loss of £26.31 million and
operating cash outflows of £22.66 million for the year ended 31
December 2021. The Directors consider this to be appropriate
for the following reasons.
The Directors have prepared detailed cash flow forecasts that
extend at least twelve months from the date of approval of
the financial statements. The forecasts take into account the
Directors’ views of current and future economic conditions
that are expected to prevail over the period. These forecasts
include assumptions regarding the status of therapeutic
development collaborations, the AVA6000 pro-doxorubicin
Phase I clinical trials, diagnostic product development projects
and sales pipeline, future revenues and costs together with
various scenarios which reflect growth plans, opportunities,
risks and mitigating actions. The forecasts also include
assumptions regarding the timing and quantum of investment
in the therapeutic and diagnostic research and development
programmes.
Whilst there are inherent uncertainties regarding the cash
flows associated with the development of both the therapeutic
and diagnostic platforms, together with the timing and delivery
of diagnostic product development projects and future
therapeutic collaboration transactions, the Directors are
satisfied that there is sufficient discretion and control as to
the timing and quantum of cash outflows to ensure that the
Company and Group are able to meet their liabilities as they
fall due for at least twelve months from the date of approval
of the financial statements. The key factors considered in
reaching this conclusion are summarised as follows:
78
• As at 31 December 2021, the Group held cash and cash
equivalents of £26.19 million (2020: £47.91 million, including
short-term deposits).
• The Group has a tax refund in relation to R&D tax credits
due in the second half of 2022 amounting to £2.75 million
(a comparable tax refund of £2.3 million was received in
October 2021 relating to the year to 31 December 2020).
• Post period end the Group disposed of the Animal Health
Division which generated an up-front payment of £0.86
million and a future earnout which could reach £1.43 million.
• The Group does not have external borrowings or any
covenants based on financial performance.
• The Directors have considered the position of the individual
trading companies in the Group to ensure that these
companies are also in a position to continue to meet their
obligations as they fall due.
The Directors continue to explore additional sources of
income and finance available to the Group to continue the
development of the therapeutic and diagnostic platforms
beyond 2023. The sources of income could come through
additional therapeutic collaborations, similar to the LG Chem
and Daewoong collaborations, which may include up-front
technology access fees and significant early-stage development
income, or through additional equity-fundraises.
Based on these indications, the Directors are confident that
the Company will have sufficient funds to continue to meet its
liabilities as they fall due for at least twelve months from the
date of approval of the financial statements and therefore have
prepared the financial statements on a going concern basis.
Use of judgements and estimates
In preparing these consolidated financial statements,
management has made judgements and estimates that affect
the application of the Group’s accounting policies and the
reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to estimates are recognised
prospectively.
Information about judgements and estimates made by
management that have the most significant effects on the
amounts recognised in the financial statements is given below.
The Directors consider that the key judgements made in
preparation of the financial statements are:
Going concern - The judgement of whether or not the accounts
should be prepared on a going concern basis has been
disclosed above.
Revenue recognition - Judgements arise from the application of
IFRS 15 to the Group’s revenue streams, as disclosed in Note
1C.
Share-based payments - Judgements arise from the choice of
inputs to the share option valuation models underlying the
share-based payment charge, as disclosed in Note 5.
Financial Statements The Directors consider that the assumptions and estimation
uncertainties at 31 December 2021 that have a significant risk of
resulting in a material adjustment to the carrying amounts and
liabilities in the next financial year are:
Impairment - Impairment tests have been performed on the
carrying amounts of the Group’s cash generating units. Key
assumptions such as the amount and timing of future cash flow
growth, and the achievement of future development milestones,
underlie the recoverable amounts used in these impairment
tests. Further information on the key assumptions used is
disclosed in Note 10.
The estimates and judgements relevant to the Company
financial statements have been disclosed in Note 25.
New standards and interpretations not applied
A number of new or amended standards are effective for future
annual periods, beginning after 1 January 2021, and earlier
application is permitted; however, the Group has not early
adopted the new or amended standards in preparing these
consolidated financial statements.
These standards and interpretations, summarised below,
are not expected to have a significant impact on the Group’s
consolidated financial statements:
• Amendments to IFRS 3 Business Combinations; IAS 16 Property,
Plant and Equipment; IAS 37 Provisions, Contingent Liabilities
and Contingent Assets; and Annual Improvements 2018-2020
• Amendments to IFRS 16 Leases: Covid-19- Related Rent
Concessions beyond 30 June 2021
• IFRS 17 Insurance Contracts
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.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts
are generally recognised in profit or loss.
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 other comprehensive income (‘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, or in OCI
where they relate to the net investment in a foreign operation.
The assets and liabilities of foreign operations are translated
into pound sterling at the exchange rates at the reporting date.
The income and expenses of foreign operations are translated
into pound sterling at the average exchange rates relevant to
the reporting period.
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.
79
Avacta Report and Accounts 2021 Notes to the Consolidated
Financial Statements (continued…)
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 intellectual property (‘IP’),
primarily as a result of the Group not undertaking activities
that significantly affect the IP 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.
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. Where contracts
include variable consideration
relating to previously satisfied
performance obligations, the
transaction price is deemed to
be the most likely amount at
the reporting date.
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 market or non-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.
Obligations for contributions to defined contribution plans are
expensed as the related service is provided.
Termination benefits are expensed at the earlier of when the
Group can no longer withdraw the offer of those benefits and
when the Group recognises costs for a restructuring.
.
80
Financial Statements E – Finance income and finance costs
The Group’s finance income and finance costs include:
The estimated useful lives of property, plant and equipment
for current and comparative periods are as follows:
• 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 – Taxation
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 where the
cost exceeds the net realisable value.
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 these 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.
81
Avacta Report and Accounts 2021 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 the expected
useful life of the technology, being five to 15 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 95). Goodwill arising from a
business combination is allocated to 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
82
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’):
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 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.
M - Discounted operations
A discontinued operation is a component of the Group’s
business, the operations and cash flows of which can be
clearly distinguished from the rest of the Group and which
represents a separate major line of business and is part of a
single co-ordinated plan of disposal.
Classification as a discontinued operation occurs at the earlier
of disposal or when the operation meets the criteria to be
classified as held-for-sale.
When an operation is classified as a discontinued operation,
the comparative statement of profit or loss and OCI is re-
presented as if the operation had been discontinued from the
start of the comparative year.
83
Avacta Report and Accounts 2021
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 (2020: Diagnostics, Therapeutics
and Animal Health), and segment reporting has been presented
on this basis. The Directors recognise that the operations of the
Group are dynamic and therefore this position will be monitored
as the Group develops.
The principal activities of each reportable segment are as follows:
Diagnostics: development of custom Affimer® proteins for
incorporation into customer products and in-house diagnostic
assays.
Therapeutics: development of novel cancer immunotherapies
combining proprietary platforms.
Animal Health: provision of tools and contract services to assist
diagnosis of conditions in animals to enable faster treatment for
veterinarians. The Animal Health operating segment was sold in
March 2022, and has been classified as a discontinued operation
from the start of the prior year.
Segment revenue represents revenue from external customers
arising from sale of goods and services, plus inter-segment
revenues. Inter-segment transactions are priced on an arm’s
length basis. Segment results, assets and liabilities include items
directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
The Group’s revenue from continuing operations to destinations
outside the UK amounted to 82% (2020: 97%) of total revenue.
The revenue analysis below, for continuing operations, is based
on the country of registration of the customer:
UK
Rest of Europe
North America
South Korea
Rest of Asia
2021
£’000
540
111
815
1,400
74
2,941
2020
£’000
75
205
402
1,462
1
2,143
During the year, transactions with three external customers, two in the Therapeutics segment and one in the Diagnostics segment,
amounted individually to 10% or more of the Group’s revenues from continuing operations, being £966,000, £736,000 and
£523,000 respectively. In the year 31 December 2020, transactions with two external customers in the Therapeutics segment
amounted to 10% or more of the Group’s revenues from continuing operations, being £768,000 and £694,000 respectively.
84
Financial Statements
Operating segment analysis 2021
Revenue
Cost of goods sold
Gross profit
Research costs
Manufacturing
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
Diagnostics
Therapeutics
Animal Health
(discontinued)
£000
2,162
(700)
1,462
£000
1,605
(506)
1,098
Total
£000
4,546
(1,429)
3,115
(9,815)
(39)
(13,519)
£000
779
(223)
555
(3,665)
(2,143)
(821)
(2,893)
(505)
(984)
-
-
(1,899)
(950)
(2,981)
(10,456)
(14,183)
-
-
(916)
(50)
(25)
68
(2,143)
(821)
(5,708)
(1,505)
(3,990)
(24,571)
(4,443)
(29,014)
17
(139)
(29,136)
2,820
(26,316)
Operating profit/loss is the measure of profit or loss regularly reviewed by the Board. Central overheads, which relate to
operations of the Group functions, are not allocated to the segments.
The information reported to the Board does not include balance sheet information at the segment level. The key segmental
balance sheet information is considered to be the segment’s non-current assets which are disclosed in Note 10.
All material segmental non-current assets are located in the UK.
85
Avacta Report and Accounts 2021
Notes to the Consolidated
Financial Statements (continued…)
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
(discontinued)
£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)
Total
£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)
86
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 2021
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
Year ended 31 December 2020
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
Diagnostics
Therapeutics
Continuing
operations
Animal Health
Total
£000
£000
£000
£000
£000
19
260
500
779
520
259
779
-
1,058
1,104
2,162
1,105
1,057
2,162
19
1,318
1,604
2,941
1,625
1,316
2,941
864
740
-
1,605
1,540
64
1,605
883
2,058
1,604
4,545
3,165
1,380
4,545
Diagnostics
Therapeutics
Continuing
operations
Animal Health
Total
£000
£000
£000
£000
£000
-
519
-
519
8
511
519
-
1,436
189
1,625
189
1,436
1,625
-
1,955
189
2,144
197
1,947
2,144
846
646
-
1,492
1,459
33
1,492
846
2,601
189
3,636
1,656
1,980
3,636
87
Avacta Report and Accounts 2021
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, which are included in “Trade and other receivables”
Receivables, which are included in “Assets held for sale”
Contract assets
Contract liabilities
31 December
2021
£000
31 December
2020
£000
1,278
124
19
(51)
1,415
-
158
(579)
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 £579,000 (2020: £40,000) in contract liabilities at the beginning of the period, £579,000 (2020: £30,000) has been
recognised as revenue for the period ended 31 December 2021.
The amount of revenue recognised in 2021 from performance obligations satisfied (or partially satisfied) in previous periods
was £369,000 (2020 from those performance obligations satisfied in 2019: £nil). This is mainly due to changes in the amount of
variable consideration recognised in relation to the grants of IP under R&D licences, see Note 1C.
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
2021
£000
7,147
819
373
5,058
13,397
106
27
133
2020
£000
6,011
673
328
3,108
10,120
104
19
123
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 60 to 61 which form part of these audited financial statements.
88
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’)
The Group recognised a total share-based payment charge to the income statement of £5,083,000 (2020: £3,108,000).
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 benefits
9 January 2012
15 February 2016
16 December 2016
1
3
2
141,176
550,700
97,298
24 August 2018
16
326,733
Time served
Time served
Unconditional
Time served
24 August 2018
7 January 2019
7 January 2019
7 January 2019
1 July 2019
1 July 2019
5
2
1
5
3
1
254,531
153,860
340,000
712,822
261,332
113,629
Time served and technical
milestones
Unconditional
Time served
Technical, commercial and
share price performance
Time served
Time served and technical
milestones
25 March 2020
34
3,482,627
Time served
50.0
118.5
74.0
25.0
25.0
25.0
25.0
25.0
30.0
30.0
25.0
Vested
9 January 2022
Vested
15 February 2026
Vested
16 December 2026
Vested
23 August 2028
Note 1
23 August 2028
Vested
Vested
6 January 2029
6 January 2029
Vested
6 January 2029
Vested
30 June 2029
Note 2
30 June 2029
Note 3
24 March 2030
14 May 2020
14 May 2020
14 May 2020
28 July 2021
28 July 2021
28 July 2021
8 October 2021
8 October 2021
2 December 2021
5
4
1
5
1
3
1
5
1
1,174,249
7,650,000
1,000,000
3,250,000
750,000
150,000
3,000,000
725,000
250,000
Technical, commercial and
share price performance
Share based
Time served and
commercial performance
Time served
Time served and
commercial performance
Time served
Time served
Time served
Time served
17.25
Vested
14 May 2030
10.0
25.0
10.0
10.0
10.0
10.0
10.0
10.0
Note 4
Note 5
Note 6
Note 7
Note 8
Note 9
14 May 2030
14 May 2030
28 July 2031
28 July 2031
28 July 2031
8 October 2031
Note 10
8 October 2031
Note 11
2 December 2031
Options granted in relation to collaboration agreements
31 May 2019
1
1,161,582
Technical/regulatory
milestones
29.2
Note 12
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 2021, 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 31,407 as at 31 December 2021, as to 46,111 once the first
technical milestone is achieved and as to 46,111 once the second technical milestone is achieved.
Note 3 – This option provides that they can, if they have not lapsed, be exercised in full on or after 31 December 2022.
Note 4 – This option provides that they can, if they have not lapsed, be exercised as to 6,025,000 on or after 31 December 2022 and as to 1,625,000 on
or after 31 December 2022, if the average share price is over 110p for more than 20 business days during 2022.
89
Avacta Report and Accounts 2021
Notes to the Consolidated
Financial Statements (continued…)
Note 5 – 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 6 - This option provides that they can, if they have not lapsed, be exercised in full on or after 31 December 2022.
Note 7 - This option provides that they can, if they have not lapsed, be exercised as to 150,000 once the first commercial milestone is achieved, as to
150,000 once the second commercial milestone is achieved, as to 150,000 once the third commercial milestone is achieved, as to 150,000 once the
fourth commercial milestone is achieved and as to 150,000 on or after 31 December 2022.
Note 8 – This option provides that they can, if they have not lapsed, be exercised in full on or after 30 June 2023.
Note 9 - This option provides that they can, if they have not lapsed, be exercised in full on or after 30 September 2024.
Note 10 - This option provides that they can, if they have not lapsed, be exercised in full on or after 31 March 2024.
Note 11 - This option provides that they can, if they have not lapsed, be exercised in full on or after 30 June 2024.
Note 12 – This option provides that they can, if they have not lapsed, be exercised 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.
The inputs into the Black-Scholes models for the options granted during the year are as follows:
2021
£000
120.84p
10.00p
111.79p
83.1%
2020
£000
75.08p
15.04p
9.51p
63.3%
5.0 years
5.0 years
1.0%
Nil
1.0%
Nil
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
90
Financial Statements The number and weighted average exercise price of share options are as follows:
2021
2020
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
22,904,846
8,125,000
(1,298,072)
(4,186,235)
25,545,539
3,786,653
22.23
10.00
39.61
19.03
17.99
38.76
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
The options outstanding at 31 December 2021 had a range of exercise prices from 10p to 118.5p (2020: 10p to 118.5p), a
weighted average exercise price of 17.99p (2020: 22.23p), and a weighted average remaining contractual life of 8 years (2020: 8
years and 1 week).
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 2021, five employees (2020: five) had joint interests in
2,932,306 (2020: 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 21 February 2021 69,902 ordinary shares of 10p each were
issued in relation to the Free Share award based on the closing middle market price of 183.0p on 19 February 2021.
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 2021, 41 eligible
employees, had made binding commitments to subscribe for partnership shares during the period ending 31 December 2021.
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 2021, the Trustee held 1,361,886 (2020: 1,404,230) ordinary shares of 10p on behalf of the SIP.
91
Avacta Report and Accounts 2021 Notes to the Consolidated
Financial Statements (continued…)
6
Operating loss
Operating loss is stated after charging/(crediting):
Note
Lease expense relating to lease of low-value assets
Lease expense relating to short-term leases
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
21
11
21
10
10
22
4
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
2021
£000
Continuing
2020
Discontinued
(2,729)
(91)
-
(2,820)
(2,199)
(265)
-
(2,464)
-
12
-
12
The tax on loss in the year relates solely to continuing operations.
92
2021
£000
2
27
1,195
316
29
865
-
-
2020
£000
2
-
882
244
6
1,029
1,741
217
13,397
10,120
120
30
2021
£000
17
(128)
(111)
80
25
2020
£000
43
(93)
(50)
Total
(2,199)
(253)
-
(2,452)
Financial Statements
Factors affecting the tax charge for the current period
The current tax credit for the year is lower (2020: lower) than the standard rate of corporation tax in the UK of 19.0% (2020: 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% (2020: 19.0%)
Effects of:
• Expenses not deductible for tax purposes
• Deferred tax losses not recognised
• Government tax incentives
• Withholding tax expense
2021
£000
(29,137)
(5,536)
1,086
4,451
(2,840)
19
(2,820)
2020
£000
(21,343)
(4,055)
674
3,381
(2,452)
-
(2,452)
Earnings per ordinary share
9
The calculation of earnings per ordinary share is based on the profit or loss for the period and the weighted average number of
equity voting shares in issue excluding own shares held jointly by the Avacta Employees’ Share Trust and certain employees and
the shares held within the Avacta Share Incentive Plan (‘SIP’).
At 31 December 2021, 25,545,539 options (2020: 22,904,846) have been excluded from the diluted weighted-average number of
ordinary shares calculation because, due to the loss for the period, their effect would have been anti-dilutive. Further details on
share options are set out in Note 5.
2021
2020
Continuing
operations
Discontinued
operation
Total
Continuing
operations
Discontinued
operation
Total
Loss (£000)
(26,374)
58
(26,315)
(16,397)
(2,494)
(18,891)
Weighted average number
of shares (number)
Basic and diluted loss per
ordinary share (pence)
249,478,070
225,578,759
(10.57p)
0.02p
(10.55p)
(7.27p)
(1.11p)
(8.37p)
93
Avacta Report and Accounts 2021
Notes to the Consolidated
Financial Statements (continued…)
10
Intangible fixed assets
Goodwill
£000
Development
costs
£000
Software
£000
Patents
£000
Total
£000
Cost
At 1 January 2020
Internally developed/additions
Disposals
4,655
-
-
11,084
165
(1,049)
At 31 December 2020
4,655
10,200
Internally developed/additions
Disposals
Reclassification to assets held for sale
At 31 December 2021
Amortisation and impairment
At 1 January 2020
Amortisation
Impairment
Disposals
At 31 December 2020
Amortisation
Disposals
Reclassification to assets held for sale
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
At 31 December 2019
-
-
(3,116)
1,539
822
-
1,518
-
2,340
-
-
(2,340)
-
1,539
2,315
3,833
-
-
-
10,200
3,152
1,007
223
(1,050)
3,332
822
-
-
4,154
6,046
6,868
7,932
200
15
-
215
79
-
(30)
264
165
18
-
-
183
35
(29)
-
189
75
32
35
-
206
-
206
73
-
-
279
-
4
-
-
4
10
-
-
14
265
202
-
15,939
386
(1,049)
15,276
152
-
(3,146)
12,282
4,139
1,029
1,741
(1,050)
5,859
867
(29)
(2,340)
4,357
7,925
9,417
11,800
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.
94
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 (2020: 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
2021
£000
1,539
-
-
1,539
2020
£000
1,539
-
776
2,315
* The goodwill allocated to the Animal Health CGU has been reclassified to assets held for sale, see Note 24
Impairment review
An impairment review of the Group’s intangible and tangible non-current assets was conducted at 31 December 2021. 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 an eleven-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 £15 million over a five-year timeframe, equivalent to a 55% 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% (2020: 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% (2020: 17%), derived from a weighted-average cost-of-capital of 15% (2020: 15%)
Using the assumptions listed above, the value in use of the Therapeutics CGU exceeds its carrying amount by £35.8 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 £9.3 million, equivalent to a CAGR of 41.1%, 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.
95
Avacta Report and Accounts 2021 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 eight-year period, the timeframe reflecting the expected remaining useful life of the Affimer® scaffold
development work, and therefore the time period over which revenue growth would be expected to exceed the long-term
growth rate. This is therefore management’s best estimate of the period over which the CGU’s revenue growth rate would
exceed the long-term growth rate
• Revenue growth is forecasted to increase to £30.4 million over this eight-year timeframe, equivalent to a CAGR of 53%. Revenue
growth rates and gross margins have been based on management’s best estimate of future growth in product development
revenue streams
• Terminal growth rate after the modelled growth phase of 2.5% (2020: 2.5%), approximating the annual long-term inflation rate
• Pre-tax discount rate of 17.5% (2020: 16%), derived from a weighted-average cost-of-capital of 15% (2020: 14%)
Using the assumptions listed above, the value in use of the Diagnostics CGU exceeds its carrying amount by £2.5 million.
Management has identified that a reasonably possible change in two key assumptions could cause the carrying amount to exceed
the recoverable amount. The pre-tax discount rate would need to increase to 18.5% (an increase of 4%) and the revenue CAGR
would need to reduce to 50% (a decrease of 5.5%) for the recoverable amount to be equal to the carrying amount.
The non-current assets belonging to the Diagnostics and Therapeutics CGUs at 31 December 2021 can be allocated as follows:
Tangible
£000
ROU Assets
£000
Goodwill
£000
Development costs
£000
Patents
£000
Software
£000
Therapeutics
Diagnostics
1,001
1,597
2,598
1,004
725
1,729
1,538
-
1,538
-
6,046
6,046
-
267
267
20
40
60
Total
£000
3,563
8,675
12,238
The non-current assets belonging to the Diagnostics and Therapeutics CGUs at 31 December 2020 were allocated as follows:
Tangible
£000
ROU Assets
£000
Goodwill
£000
Development costs
£000
Patents
£000
Software
£000
Therapeutics
Diagnostics
1,175
1,491
2,666
1,184
747
1,931
1,538
-
1,538
-
6,868
6,868
-
202
202
8
6
14
Total
£000
3,905
9,314
13,219
96
Financial Statements 11
Property, plant and equipment
Assets in the course
of construction
£000
Leasehold
improvements
£000
Laboratory
equipment
£000
Office fixtures
and fittings
£000
10
318
(27)
-
301
99
(229)
(28)
-
143
-
-
-
-
-
-
-
-
143
301
10
1,863
50
-
-
1,913
549
97
-
(125)
2,434
834
232
-
1,066
550
-
(117)
1,499
935
847
1,029
Cost
At 1 January 2020
Additions
Transfers
Disposals
At 31 December 2020
Additions
Transfers
Disposals
Reclassification to
assets held for sale
At 31 December 2021
Depreciation
At 1 January 2020
Charge for the period
Disposals
At 31 December 2020
Charge for the period
Disposals
Reclassification to
assets held for sale
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
At 31 December 2019
12
Inventories
Raw materials and components
Finished goods
4,461
854
23
(249)
5,089
431
91
(4)
(175)
5,432
3,269
598
(243)
3,624
572
(2)
(166)
4,028
1,404
1,465
1,192
344
57
4
(3)
402
83
41
(51)
(42)
433
271
52
(4)
319
73
(51)
(38)
303
130
83
73
2021
£000
189
-
189
Total
£000
6,678
1,279
-
(253)
7,705
1,162
-
(83)
(342)
8,442
4,374
882
(247)
5,009
1,195
(53)
(321)
5,830
2,612
2,696
2,304
2020
£000
207
41
248
97
Avacta Report and Accounts 2021 Notes to the Consolidated
Financial Statements (continued…)
13
Trade and other receivables
Trade receivables
Prepayments
Other receivables
Contract assets
Other taxes and social security
2021
£000
1,278
2,468
442
19
120
4,327
2020
£000
1,415
1,039
187
158
96
2,895
Trade and other receivables denominated in currencies other than sterling comprise £1,271,000 (2020: £639,000) of trade
receivables denominated in US dollars and £nil (2020: £14,000) denominated in euros. The fair values of trade receivables are the
same as their book values.
Trade receivables includes £1,023,000 due from related parties (2020: £473,000), see Note 23.The ageing analysis of trade
receivables past due is as follows:
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
15
Trade and other payables
Trade payables
Other taxes and social security
Accruals
Other payables
Contract liabilities
2021
£000
-
-
191
525
716
2021
£000
-
26,191
26,191
2021
£000
561
210
2,836
73
51
3,731
2020
£000
80
4
9
76
169
2020
£000
20,017
27,894
47,911
2020
£000
856
232
1,819
5
579
3,491
Trade and other payables denominated in currencies other than sterling comprise £163,000 (2020: £47,000) of trade payables
denominated in US dollars, £47,000 (2020: £38,000) denominated in euros, and £7,000 (2020: £nil) denominated in CHF. The fair
values of trade payables are the same as their book values.
98
Financial Statements 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
2021
£000
(1,512)
760
752
-
2020
£000
(1,305)
1,006
299
-
Movement in deferred tax for period ended 31 December 2021
Development costs
Trading losses
Property, plant and equipment
At 1 January
2021
£000
Income
statement
£000
At 31 December
2021
£000
(1,305)
1,006
299
-
(207)
(246)
453
-
(1,512)
760
752
-
There is no liability to corporation tax in the year. There are unprovided deferred tax assets of approximately £9,931,000 due
to trading losses in the current and prior financial years (2020: £5,414,000) and of £2,910,000 (2020: £1,271,000) relating to
deductible temporary differences (future taxable deductions on exercise of share options) of where it is not probable that future
taxable profit will be available against which the Group can use the benefits therefrom.
17
Share capital
Allotted, called up and fully paid:
- 253,950,626 (2020: 252,655,554) ordinary shares of 10p each
- 19,327,344 deferred shares of 0.4p each
2021
£000
25,395
77
25,472
2020
£000
25,266
77
25,343
During the year, a total of 1,298,072 shares of 10p each were allotted and issued following the exercise of vested EMI and
unapproved options. Options were exercised at an average price of 39.61p
99
Avacta Report and Accounts 2021
Notes to the Consolidated
Financial Statements (continued…)
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 £54,530,000 (2020: £54,137,000) arose from the issue of shares at a premium to their nominal
value less certain allowable costs of issue. This reserve is not distributable.
Other reserve
The other reserve of negative £1,729,000 (2020: 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.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign
operations. The transactions recognised within other comprehensive income during the year, from which the translation reserve
arises, are all items that are or may be reclassified subsequently to profit or loss. This reserve is not distributable.
Reserve for own shares
The reserve for own shares of negative £2,961,000 (2020: negative £2,961,000) arose following the issue of ordinary shares of 10p
each to Link Market Services Trust Limited as Trustee to the Avacta Group plc SIP (see Note 4) in previous periods. In addition,
2,932,306 (2020: 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.
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.
100
Financial Statements
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 2021 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)
2021
£000
26,191
-
2020
£000
27,894
20,017
Cash at bank attracted interest at floating rates, which were between nil% and 0.05% at 31 December 2021 (2020: nil% and
0.15%).
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 other than those with related parties
as set out in Note 23. 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 2021, the difference between the book value and the fair value of the Group’s financial assets and liabilities was
£nil (2020: £nil).
Sensitivity analysis
The Group is not materially exposed to changes in interest or exchange rates at 31 December 2021.
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.
101
Avacta Report and Accounts 2021 Notes to the Consolidated
Financial Statements (continued…)
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
Other receivables
Short-term deposits
Cash
Financial liabilities
Trade payables
Accruals
Other payables
Lease liabilities
Maturity profile of financial liabilities
In one year or on demand
In more than one year
2021
£000
833
442
-
26,191
27,466
561
2,836
73
1,703
5,173
3,760
1,412
2020
£000
1,415
187
27,894
20,017
49,513
856
1,819
5
2,042
4,722
2,970
1,752
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 £379,000 (2020:
£316,000). There were outstanding contributions at 31 December 2021 of £61,000 (2020: £49,000).
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 January 2020
Additions
Depreciation charge
As at 31 December 2020
Remeasurement of lease liability
Depreciation charge
Reclassification to assets held for sale
As at 31 December 2021
102
Property
£000
779
1,382
(235)
1,926
80
(298)
(129)
1,577
Laboratory
equipment
£000
-
179
(9)
170
-
(18)
-
152
Total
£000
779
1,561
(244)
2,096
80
(316)
(129)
1,729
Financial Statements
Lease liabilities
Current
Non-current
2021
Property
Laboratory
equipment
Total
Property
2020
Laboratory
equipment
230
1,380
1,610
61
32
93
291
1,412
1,703
232
1,659
1,891
58
93
151
Reconciliation of change in lease liability
As at 1 January 2020
Additions to lease liability
Payment of lease liability – principal element
Payment of lease liability – interest element
Interest expense
As at 31 December 2020
Remeasurement of lease liability
Payment of lease liability – principal element
Payment of lease liability – interest element
Interest expense
Reclassification to assets held for sale
As at 31 December 2021
b)
Amounts recognised in profit or loss
Depreciation charge on right-of-use assets
Property
Laboratory equipment
Interest on lease liabilities
Expenses relating to leases of low-value assets
Expense relating to short-term leases
The total cash outflow for leases in the period was £428,000 (2020: £348,000).
c)
Capital commitments
At 31 December 2021, the Group had £55,000 of capital commitments (2020: £84,000).
2021
£000
298
18
316
138
2
27
Total
290
1,752
2,042
£000
823
1,474
(255)
(93)
93
2,042
80
(290)
(138)
138
(129)
1,703
2020
£000
235
9
244
93
2
-
103
Avacta Report and Accounts 2021
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
2021, a 5% ownership interest (2020: 12%). The entity, accounted for as an investment in associate due to material transactions
and the provision of essential technical information, 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 2021 (31 December 2020: £nil) due to recognition of a share of losses of the associate of £217,000 during the prior
year. At 31 December 2021, the Group has an unrecognised share of losses of £253,000 in excess of the initial contribution (31
December 2020: £108,000). The share of losses exceeding the initial contribution are unrecognised due to the Group having no
legal or constructive liability to make further payments to the associate.
23
Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. See
Note 33 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. These transactions were made on terms equivalent to those that
prevail in arm’s length transactions.
Provision of services*
Associate - AffyXell Therapeutics Co., Ltd
Trade receivables
Associate – AffyXell Therapeutics Co., Ltd
2021
£000
1,126
1,023
2020
£000
694
473
*£966,000 (2020: £694,000) of which relates to revenue recognised during the year.
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
2021
£000
895
27
1,049
1,971
2020
£000
897
24
1,076
1,997
*Short-term employee benefits include employers’ NI of £106,000 (2020: £101,000).
Full details of compensation of key management personnel are set out in the audited sections of the Remuneration Committee
Report on pages 60 to 61, which form part of these audited financial statements
104
Financial Statements
24
Discontinued operation
In March 2022, the Group sold its entire Animal Health segment (see Note 2). An up-front payment of £860,000 was received with
deferred contingent consideration of up to £1,430,000 dependent on the combined performance of the consolidated business.
There were associated costs to sell of £190,000. Management committed to a plan to sell the segment in late 2021 following a
strategic decision to place focus on the Group’s key competencies – the development of diagnostic products and cancer therapies.
At the reporting date, an active programme to locate a buyer had been initiated, the segment was being actively marketed for sale
at a price that was reasonable to its fair value and a sale was expected to qualify for recognition as a completed sale within one
year from the date of classification. As a result, the Animal Health segment has been presented as a disposal group held for sale.
No impairment loss has been recognised on presentation of the Animal Health segment as held for sale as the fair value less costs
to sell exceed the carrying amount of the disposal group of £805,000. The non-recurring fair value measurement for the disposal
group has been based on the post year-end selling price of the segment.
The Animal Health segment was not previously classified as held for sale or as a discontinued operation. The comparative
consolidated statement of profit or loss and OCI has been re-presented to show the discontinued operation separately from
continuing operations. Note 9 discloses the amount per share for the discontinued operation.
a) Results of discontinued operation
Revenue
Cost of sales
Gross profit
Research costs
Amortisation of development costs
Impairment of intangible fixed assets
Selling, general and administrative expenses
Depreciation expense
Share-based payment charge
Operating loss
Financial cost
Loss before tax
Taxation
Loss for the period
2021
£000
1,604
(506)
1,098
(39)
-
-
(915)
(50)
(25)
69
(11)
58
-
58
2020
£000
1,492
(493)
999
(70)
(183)
(1,741)
(1,382)
(62)
(38)
(2,478)
(4)
(2,482)
(12)
(2,494)
105
Avacta Report and Accounts 2021 Notes to the Consolidated
Financial Statements (continued…)
b) Effect of the disposal on the financial position of the Group
Intangible assets
Right-of-use assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Lease liabilities
Net assets and liabilities
c) Cash flows from discontinued operation
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
2021
£000
(779)
(129)
(22)
(46)
(168)
(136)
217
129
(933)
2020
£000
134
(9)
(39)
86
2021
£000
225
(19)
(30)
176
106
Financial Statements Company Balance Sheet as at 31 December 2021
– Registered number 4748597
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
Note
26
26
27
28
29
30
31
31
31
2021
£000
13
13
7,892
7,918
86,586
-
25,549
112,135
(518)
111,617
119,535
25,472
54,530
(2,961)
42,494
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
119,535
113,705
*Of which £84,052,000 (2020: £62,516,000) is expected to be recovered in more than 12 months
The profit of the Company for the year ended 31 December 2021 was £225,000 (2020: loss of £3,865,000)
The notes on pages 108 to 113 form an integral part of these financial statements.
The balance sheet above was approved by the Board of Directors and authorised for issue on 5 April 2022 and signed on its
behalf by:
Alastair Smith
Chief Executive Officer
Tony Gardiner
Chief Financial Officer
107
Avacta Report and Accounts 2021
Company Statement of Changes in Equity
for the Period Ended 31 December 2021
Reserve for
own shares
£000
Retained
earnings
£000
(2,932)
37,943
At 1 January 2020
Issue of shares
Exercise of share options
Own shares acquired
Total comprehensive loss for the period
Share-based payment charges
Share
capital
£000
17,671
7,194
468
10
-
-
Share
premium
£000
9,877
43,597
644
19
-
-
-
-
(29)
-
-
At 31 December 2020
25,343
54,137
(2,961)
Exercise of share options
Total comprehensive loss for the period
Share-based payment charges
130
-
-
392
-
-
-
-
-
At 31 December 2021
25,473
54,530
(2,961)
Total
equity
£000
62,559
50,791
1,112
-
(3,865)
3,108
113,705
522
225
5,083
119,535
-
-
-
(3,865)
3,108
37,186
-
225
5,083
42,494
The accompanying notes form an integral part of the financial statements.
Notes to the Company Balance Sheet
25
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.
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.
108
Financial Statements Notes to the Company Balance Sheet
(Continued...)
Share-based payments - Judgements arise from the choice of
inputs to the share option valuation models underlying the
share-based payment charge, as disclosed in Note 5.
The Directors consider that the assumptions and estimation
uncertainties at 31 December 2021 that have a significant risk
of resulting in a material adjustment to the carrying amounts
and liabilities in the next financial year are:
Carrying amount of investments in subsidiaries and amounts
owed by subsidiary undertakings – Management perform an
impairment assessment of investments in subsidiaries by
comparing the carrying amount relevant to each subsidiary
with the corresponding recoverable amount. In the absence
of a determinable fair value, 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.
Management measure impairment of amounts owed by
subsidiary undertakings by comparing the carrying amount
with the present value of estimated cashflows discounted at
the asset’s original effective interest rate.
Where fair value less costs to sell is measurable, for example
where there is an agreement for sale in place, the aggregate
carrying amount of investment in subsidiary and intercompany
receivable is compared to this recoverable amount. Where the
aggregate carrying amount exceeds the fair value less costs
to sell, an impairment is first allocated against the investment,
with any residual impairment recognised against the amount
owed by the subsidiary. Where the fair value less costs to sell
exceed the carrying amount, previous impairment losses are
reversed to increase the carrying amount to the recoverable
amount.
Management recognise that there is inherent uncertainty in
the recoverable amounts based on the value in use models.
Note 10 sets out a number of sensitivities in which the
values in use of the impairment models were to reduce to
the carrying amount of the corresponding CGU;, however, in
these scenarios the recoverable amount would still exceed
the carrying amount of investments in subsidiaries, and the
present value of estimated cashflows discounted at the asset’s
original effective interest rate would still exceed the carrying
amount of amounts owed by subsidiary undertakings.
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 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 market or non-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.
Employees of subsidiary undertakings are treated as capital
contributions to subsidiary undertakings from the parent
company, increasing the cost of investment in subsidiary.
109
Avacta Report and Accounts 2021 Notes to the Company Balance Sheet
(Continued...)
26
Tangible and intangible fixed assets
Tangible
£000
Intangible
£000
60
8
2
(8)
62
49
7
(7)
49
13
11
86
22
-
-
108
71
24
-
95
13
15
Cost at 31 December 2020
Additions
Transfers from wholly-owned subsidiaries
Disposals
At 31 December 2021
Depreciation at 31 December 2020
Charge for the year
Disposal
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
27
Investments
Cost at 1 January 2021
Additions
At 31 December 2021
Provision at 1 January 2021
Charge for the year
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
Additions in the year are capital contributions relating
to share-based payments to employees of subsidiary
undertakings.
110
Total
£000
146
30
2
(8)
170
120
31
(7)
144
26
26
£000
5,676
3,990
9,666
1,774
-
1,774
7,892
3,902
Financial Statements The companies in which Avacta Group plc has an interest at
31 December 2021 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
¹US
Ordinary 100%
Avacta Life Sciences Limited
Technology development
¹England
Ordinary 100%
Avacta Life Sciences Inc.
Technology development
¹US
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 2021.
28
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 33
29
Current liabilities
Trade creditors
Other taxes and social security
Accruals and other creditors
2021
£000
6
461
100,236
(14,117)
86,586
2021
£000
31
57
430
518
2020
£000
8
172
77,468
(14,951)
62,697
2020
£000
41
50
393
484
111
Avacta Report and Accounts 2021
2021
£000
25,395
77
25,472
2020
£000
25,266
77
25,343
Notes to the Company Balance Sheet
(Continued...)
30
Share capital
Allotted, called up and fully paid:
- 253,950,626 (2020: 252,655,554) ordinary shares of 10p each
- 19,327,344 deferred shares of 0.4p each
Share issues
During the year, a total of 1,298,072 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.
31
Reserves
Share premium
The share premium account of £54,530,000 (2020:
£54,137,000) arose from the issue of shares at a premium to
their nominal value less certain allowable costs of issue. This
reserve is not distributable.
Reserve for own shares
The reserve for own shares of negative £2,961,000 (2020:
negative £2,961,000) arose following the issue of ordinary
shares of 10p each to Link Market Services Trust Limited as
Trustee to the Avacta Group plc SIP (see Note 4) in previous
periods. In addition, 2,932,306 (2020: 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.
112
Financial Statements 32
Commitments
(a) Capital commitments
At 31 December 2021, the Company had £nil capital commitments (2020: £nil).
(b) Contingent liabilities
The Company has guaranteed the overdrafts of its subsidiaries, the amount outstanding at 31 December 2021 was £nil (2020: £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
2021
£000
388
1,254
162
1,804
2020
£000
362
1,250
432
2,044
33
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. These transactions were made on terms equivalent to
those that prevail in arm’s length transactions.
Management charges made to subsidiaries
Avacta Life Sciences Limited
Avacta Animal Health Limited
Year ended
31 December 2021
£000
Year ended 31
December 2020
£000
3,275
543
2,562
594
Intercompany loans during and at the end of the period (before provisions against amounts owed) were as follows:
At 31 December
2020
£000
(Repayment)/Advance
in the period
£000
At 31 December
2021
£000
Avacta Limited
Avacta Analytical Limited
Avacta Animal Health Limited
Avacta Life Sciences Limited
5,869
3,833
6,210
61,554
77,466
4
-
267
22,498
22,769
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.
5,873
3,833
6,477
84,052
100,235
113
Avacta Report and Accounts 2021
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 FTI Consulting
at 200 Aldersgate, Aldersgate Street, London EC1A 4HD on Thursday 23 June 2022 at 3.30 p.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 2021.
2. To approve the remuneration report contained within the report and accounts for the year ended 31 December 2021.
3. To re-appoint Dr Mark Goldberg as a Director of the Company in accordance with article 30.2 of the Company’s articles of
association (‘the Articles’) who offers himself for re-appointment as a Director of the Company.
4. To re-appoint Dr Christina Coughlin as a Director of the Company in accordance with article 30.2 of the Articles who offers
herself for re-appointment as a Director of the Company.
5. To re-appoint Paul Fry 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.
6. To re-appoint Tony Gardiner 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.
7. To appoint BDO 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.
8. To authorise the Audit Committee of the Board of Directors of the Company to determine the auditor’s remuneration.
9. 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 £8,480,000 (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:
10. To empower the Directors of the Company (subject to the passing of resolution 9 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 9 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:
10.1 in connection with or pursuant to an offer of such securities by way of a pre-emptive offer (as defined below); and
10.2 (otherwise than pursuant to sub-paragraph 10.1) up to an aggregate nominal amount of £1,271,900 (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 10:
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
114
Notice of Annual General Meeting
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.
11. 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, 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:
11.1 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);
11.2 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
11.3 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
5 April 2022
Registered Office:
Unit 20, Ash Way, Thorp Arch Estate, Wetherby LS23 7FA
115
Avacta Report and Accounts 2021
Notice of Meeting Notes
The following notes explain your general rights as a shareholder and your right to attend, speak and vote at this Annual General
Meeting (the ‘Meeting’) or to appoint someone else to do so on your behalf:
1. To be entitled to attend, speak 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 21 June 2022. Changes to the Register of Members after the relevant deadline shall be disregarded in determining the
rights of any person to attend, speak 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.
3.
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).
4. 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.
5. 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. and 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.
6.
7.
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 3.30 p.m. on 21 June 2022.
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.
8. The return of a completed proxy form, electronic filing or any CREST Proxy Instructions (as described in note 10 below) will
not prevent a shareholder from attending the Meeting and speaking and/or voting in person if he or she wishes to do so.
9. 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.
10.
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 3.30 p.m. on 21 June 2022. 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.
116
Notice of Annual Meeting Notes 11. CREST members and, where applicable, their CREST sponsors, or voting service provider(s) 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.
12. 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 share.
13. As at 30 May 2022 (being the latest practicable business day prior to the publication of this Notice), the Company’s ordinary
issued share capital consisted of 254,381,086 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 5 April 2022 were 254,381,086.
14. 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.
15. Under the Articles, resolutions 1 to 8 set out in this Notice are ordinary business, and resolutions 9 to 11 are special
business.
Avacta Report and Accounts 2021 Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Secretary and Registered Office
Tony Gardiner
Avacta Group plc
Unit 20
Ash Way
Thorp Arch Estate
Wetherby
LS23 7FA
Independent Auditor
BDO LLP
Newton House
Cambridge Business Park
Cambridge
CB4 0WZ
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
118
Notice of Annual Meeting Notes Notes
Avacta Report and Accounts 2021 120
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Avacta Report and Accounts 2021