Shaping the
future of
medicine
2022 Report
& Accounts
Contents
2 Highlights
6 pre|CISIONTM Technology
8 Affimer® Technology
10 Investment Proposition
13 Strategic Report
14 Chairman's Statement
15 Chief Executive Officer’s Statement
16 Operational Review
16 Business Overview
18 Therapeutics Division
24 AVA6000 Clinical Trial Update
26 Drug Development Collaborations
28 Diagnostics Division
32 Launch Diagnostics
36 Financial Review
42 Principal Risks and Uncertainties
45 Governance
46 Board of Directors
50 Directors’ Report
53 Corporate Governance Report
60 Audit Committee Report
62 Remuneration Committee Report
67 Statement of Directors’ Responsibilities
68 Independent Auditor’s Report to the Members of Avacta Group plc
79 Financial Statements
80 Consolidated Statement of Profit or Loss
81 Statement of Financial Position
82 Consolidated Statement of Changes in Equity
83 Consolidated Statement of Cash Flows
84 Notes to the Consolidated Financial Statements
120 Company Balance Sheet
121 Company Statement of Changes in Equity
122 Notes to the Company Balance Sheet
129 Shareholder Information
130 Notice of Annual General Meeting
132 Notice of Meeting Notes
134 Explanation of Resolutions
136 Secretary and Advisers
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Avacta Report and Accounts 2022
Highlights 2022
Highlights - Avacta Therapeutics
Pre-clinical data regarding
AVA6000 was presented
at the American
Association for Cancer
Research (‘AACR’) 2022
Annual Meeting and the
Theranostics FAP Summit.
The next pre|CISION™ drug candidate,
AVA3996, a tumour-targeted proteasome
inhibitor based on bortezomib, was selected
for pre-clinical development aiming for an
Investigational New Drug Application
in late 2023 to 2024.
LG Chem Life Sciences (‘LG
Chem’), the life sciences
division of the South Korean
LG Group, exercised its
renewal option as part of the
ongoing collaboration with
Avacta, triggering a licence
renewal fee payment to
Avacta of $2 million.
The Therapeutics
Division relocated
in April 2022 to new
facilities at Scale Space,
in Imperial College’s
White City Campus
in London, bringing
together the research
and development teams
in a single site.
The US Food and Drug
Administration (‘FDA’) granted
Orphan Drug Designation (‘ODD’)
to AVA6000 for treatment of soft
tissue sarcoma.
The first-in-human Phase I
clinical trial (ALS-6000-101)
progressed through the dosing
of four cohorts (80 mg/m2
up to 200 mg/m2) following
positive reviews of safety and
tolerability data.
Avacta’s
lead pre|CISION™
programme, AVA6000 – a
tumour microenvironment
activated form of a
chemotherapeutic
agent, doxorubicin
Operating
highlights
A clinical stage oncology drug company developing
innovative cancer therapies based on its two proprietary
technology platforms: pre|CISIONTM and Affimer®
$2 million
2
Entered into collaborations with
Biocytogen, a Chinese company
specialising in developing new biological
drugs, and with the Korea Non-Clinical
Technology Solution Center (‘KNTSC’).
Successfully completed
a funding round
to advance its lead
mesenchymal stem
cell (‘MSC’) programme
towards the clinic, and
to develop its wider pre-
clinical pipeline of cell
therapies.
Avacta’s shareholding in AffyXell
increased to 19% following the triggering
of a milestone equity payment of
£3.60 million.
AffyXell Therapeutics
(‘AffyXell’), the joint
venture between Avacta
and Daewoong
Pharmaceutical
(‘Daewoong’)
Presented pre-clinical
data regarding AVA3996
at the AACR 2023
Annual Meeting.
First patient was dosed in
fifth cohort of AVA6000
Phase 1a dose escalation
study at 250mg/m2
in April 2023.
Analysis of tumour biopsy material
shows that the active chemotherapy,
doxorubicin, is being released in the
tumour microenvironment, confirming
the tumour-targeting potential of the
pre|CISIONTM technology.
Announced the completion of the
fourth dose escalation cohort of the
Company's Phase I clinical trial
(ALS-6000-101) in January 2023.
Announced
the opening
of the first two
US clinical
investigator
sites for
patient
enrolment.
The strategic partnership
with GenScript ProBio, a
leading biopharmaceutical
manufacturer was
expanded.
In February 2023, hosted a Science
Day for fund managers and analysts
providing a detailed review of the ongoing
Phase I clinical trial (ALS-6000-101) and
update on preclinical programmes.
£3.60 million
Events
after the
reporting
period
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Avacta Report and Accounts 2022
Highlights 2022
Avacta Diagnostics built an extensive
pipeline of further acquisition
opportunities to feed its
M&A-led growth strategy.
In October 2022, the Group
acquired Launch Diagnostics,
a leading independent IVD
distributor serving hospital
pathology laboratories in the
UK and France for an initial cash
consideration of £24 million
payable upon completion, in
addition to consideration for
other short-term non-operating
assets of £0.9 million.
Through its Diagnostics Division,
the Group initiated a long-term
‘buy and build’ strategy in the
fragmented European diagnostics
sector with a vision to build a
substantial in vitro diagnostics
(‘IVD’) business, with global reach,
serving centralised pathology
laboratories in hospital settings
and decentralised testing in
GP clinics, pharmacies and by
consumers themselves.
Operating
highlights
Highlights - Avacta Diagnostics
Avacta Diagnostics Division initiates an M&A-led growth
strategy to build a European IVD business serving
both healthcare professionals and consumers, and
completes its first acquisition of Launch Diagnostics.
4
Financial
& corporate
highlights
Cash and short-term
deposit balances at
31 December 2022 of
£41.8 million.
(31 December 2021:
£26.2 million).
Revenues of £9.7 million.
(2021: £2.9 million).
Reported loss from
continuing operations of
£39.5 million.
(2021: £26.4 million).
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 in
March 2022.
Adjusted EBITDA loss (before
non-cash and non-recurring
items) of £15.1 million.
(2021: £21.7 million).
£9.0 million through a
placing to new and existing
shareholders and open offer.
Loss per ordinary
share from continuing
operations of 15.5p
(2021: 10.6p).
£55.0 million senior
unsecured convertible bonds
issued at a 5% discount from a
fund advised by Heights Capital
Ireland LLC (equating to £52.25
million post-discount).
Operating loss of
£32.6 million.
(2021: £29.1 million).
In October
2022, Avacta
completed a fundraise
of £61.3 million (gross)
through a
combination of:
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Avacta Report and Accounts 2022
6
Avacta’s proprietary pre|CISION™ technology
platform is enabling first-in-class cancer therapies
that boost efficacy and minimise off-target toxicity.
The pre|CISION™ tumour microenvironment activated
chemotherapy platform releases the active drug only within
the tumour microenvironment – limiting systemic exposure
and enhancing the safety and therapeutic potential of
treatments for oncology indications. Avacta is now in the clinic
with its lead pre|CISION™ programme, AVA6000 – a tumour-
activated form of doxorubicin.
Incorporating a substrate that is sensitive to cleavage by
fibroblast activation protein (‘FAPα’), pre|CISION™ is innovating
an FAPα-activated approach to delivering cancer therapies –
preventing the drug from entering cells and rendering it inert
until the substrate is cleaved in the tumour microenvironment.
In this way, systemic exposure to the therapy is dramatically
reduced, and the safety and therapeutic window of powerful
anti-cancer treatments is improved.
The high modularity of the platform offers the potential to use
the precision substrate on a range of therapeutic agents for
the next generation of tumour microenvironment activated
drug technologies.
Avacta’s lead preCISION™ programme, AVA6000, a tumour
microenvironment activated form of chemotherapy agent
doxorubicin, is now in clinic.
pre|CISIONTM Technology
Tumour microenvironment activated cancer therapies
that transform patient outcomes
Fibroblast Activation Protein (‘FAPα’)
pre|CISION™ at a glance
Key advantages:
•
Tumour microenvironment activated –
localised release of therapeutic agents in
the tumour, including chemotherapies,
small molecules and other agents
•
FAPα-activated form of chemotherapies –
limiting systemic exposure
•
Potential to significantly increase safety and
therapeutic potential of cancer treatments
Platform Technologies
Avacta Annual Report and Accounts 2018
Programme
Research
Pre-clinical
Phase 1
Phase 2
Partner
pre|CISION™ AVA-6000 - FAPα activated doxorubicin
pre|CISION™ AVA-3996 - FAPα activated proteasome inhibitor
AVA-028 - PD-L1 Affimer® / ImmunoCytokines
TMAC® platform
AVA-021 - PD-L1 Affimer® / LAG-3 Affimer®
Undisclosed targets
LR19128 PD-L1 XT®
Undisclosed targets
AFX-001 Solid Organ Transplant
AFX-001 Graft vs Host Disease
AFX-002 Multiple Sclerosis
Pipeline
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Avacta Report and Accounts 2022
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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.
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® Technology
Platform Technologies
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.
Commercial Advantages
Proprietary and unencumbered IP.
Freedom to operate where there is antibody IPR.
Security of supply.
Cheaper to produce (E.coli).
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.
•
•
•
•
•
•
•
•
•
•
•
What is an Affimer®?
Variable
loop regions
Avacta Report and Accounts 2022
The Affimer® platform at a glance
Key advantages
• Affimer® proteins can be made to be exquisitely specific.
• Affimer® proteins can be generated to bind to targets that have proven very difficult for antibodies.
• Affimer® proteins can be linked to create multi-specific therapeutics that address more than one target
• Affimer® proteins have excellent properties for drug development:
• They can quickly be generated to bind to a target of interest.
• They have a tuneable serum half-life.
• They are relatively cheap to manufacture.
• They are robust, stable and highly soluble.
• They have no post-translational modifications.
• The core Affimer® protein is human and therefore the risk of immunogenicity is lowered.
9
10
Investment Proposition
Our Mission is to improve patients’ lives and grow
shareholder value by developing novel cancer therapies
and powerful diagnostics using our proprietary Affimer®
and pre|CISION™ platforms.
Investment opportunity
• Avacta operates through two separate divisions in both the oncology drug development market and the
diagnostics sector.
• The Diagnostics Division is growing through an M&A-led strategy with a vision to build a European in vitro
diagnostics (‘IVD’) business with global reach serving both professionals and consumers.
• The Therapeutics Division is leveraging Avacta’s proprietary technologies to develop innovative oncology drugs
that transform treatment outcomes to improve cancer patients’ lives.
Technology platforms
• Avacta has two proprietary platform technologies – the Affimer® and pre|CISION™ platforms – which are being
used to deliver a robust portfolio of differentiated therapeutic and diagnostic products that address 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|CISION™ targeted chemotherapy platform releases active chemotherapy directly in the tumour,
limiting systemic exposure and side effects associated with many commonly used cancer treatments.
Investment Proposition
Therapeutics Division
• Avacta Therapeutics’ strategy is to build an in-house pipeline of first-in-class and best-in-class targeted cancer
therapies and immunotherapies, and to accelerate the development of its platform technologies by working
with partners.
• 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 2023 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 second pre|CISION™ 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|CISION™ drug candidates to grow its innovative
therapeutic pipeline.
• Avacta has a partnership with LG Chem which is developing Avacta’s AVA004 PD-L1 antagonist with Affimer
XT® half-life extension. Avacta also has a joint venture with Daewoong Pharmaceutical called AffyXell, which
is developing next generation stem cell therapies that have been engineered to express and secrete
immunomodulatory Affimer proteins targeting CD40L and TNFR. Both partnerships’ first programmes are at
the IND-enabling stage.
• Avacta has also licensed its pre|CISION™ platform in a tightly defined agreement with POINT Biopharma to
develop tumour microenvironment targeting of radionucleotides.
Diagnostics Division
• There are many factors driving growth in the diagnostic sector, such as an aging population, the increasing
incidence of chronic and infectious diseases, the influence of tech companies through digital health devices
and the increase in awareness of self-testing in a post-pandemic world.
• The diagnostics sector is quite fragmented with a large number of small and medium-sized companies, which
provides ideal conditions for an M&A-led growth strategy to consolidate European diagnostics SMEs in a
market with strong future growth drivers.
• The Group has a platform and an experienced management team to execute an M&A-led strategy to build a
leading European IVD business.
• Integrating the unique Affimer® platform to develop new immunodiagnostic products and to help differentiate
acquired products gives a clear advantage in a competitive market.
• Initiating its M&A-led growth strategy in October 2022, Avacta completed the acquisition of UK-based IVD
distributor Launch Diagnostics (‘Launch’), which has provided Avacta with well-established sales channels in the
professional, centralised hospital laboratory testing market in the UK and France.
• Avacta Diagnostics continues to actively pursue other opportunities that add the other pieces of the jigsaw to
build a fully integrated diagnostics business. These focus on expanding our routes to market in Europe for both
professional and consumer testing products, while adding further IVD products suitable for these markets to
our portfolio.
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Avacta Report and Accounts 2022
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Avacta Report and Accounts 2022
Strategic Report
14
Chairman's Statement
15
Chief Executive Officer’s Statement
16
Operational Review
18
Business Overview
18
Therapeutics Division
24
AVA6000 Clinical Trial Update
26
Drug Development Collaborations
28
Diagnostics Division
32
Launch Diagnostics
36
Financial Review
42
Principal Risks and Uncertainties
13
13
I firmly believe that our pre|CISIONTM and Affimer®
technology platforms have the real potential to deliver
an extensive pipeline of oncology drugs that will make
a meaningful difference to cancer patients’ lives. The
AVA6000 clinical data to date is looking very promising,
and as we progress into the Phase Ib study and
demonstrate efficacy this will open up the commercial
opportunities for AVA6000 and the pre|CISIONTM
technology platform.
As a Board and company, we understand the very
different risk and return profiles of the Therapeutics
and Diagnostics Divisions and we will ensure that there
is appropriate allocation of capital between them so
that we can deliver both near-term and long-term value
inflection points across the Group.
In the Therapeutics and Diagnostics teams we have the
strength and experience that is needed to deliver full
value from our technology platforms. With these teams
and the experienced Board that we have brought
together, the future prospects for Avacta are very
positive indeed.
Dr Eliot Forster
Chairman
28 April, 2023
Chairman's Statement
14
Strategic Report
Avacta has made substantial progress during 2022 in both
its Therapeutics and Diagnostics Divisions.
The favourable safety profile emerging from the Phase Ia
dose escalation study of AVA6000, the Company’s lead
pre|CISIONTM tumour-activated chemotherapy, indicates
that tumour-specific activation of the chemotherapy by
FAPα is significantly reducing the exposure of healthy
tissues to the chemotherapy. Furthermore, analysis
of tumour biopsies has confirmed that the active
chemotherapy is being released at therapeutically
relevant levels in the tumour tissue. These data combined
are very encouraging, if early, signs for both AVA6000
as a safer form of doxorubicin and for the pre|CISION™
platform and its potential pipeline as a whole.
The safety and tolerability of AVA6000 for patients has
meant that a maximum tolerated dose has not been
reached as anticipated within the first four dose escalation
cohorts. We are now in a position to proceed beyond the
fourth cohort in the dose escalation study to even higher
doses than originally anticipated, which is an unexpected
and very positive development reflecting the very positive
safety data that are emerging from the trial.
The Diagnostics Division initiated an M&A-led growth
strategy to capitalise on the opportunity to consolidate in a
fragmented European diagnostics sector. The Company set
out a vision to build a substantial European IVD business
serving both clinicians and consumers with pathology
laboratory solutions for disease diagnostics and home
testing to improve fitness, health and well-being.
In October 2022, Avacta completed a fundraise of £61.3
million (gross) through a combination of convertible bonds
and a placing to new and existing shareholders with an
open offer, primarily to fund the Diagnostics M&A strategy.
Simultaneously the Company completed its first acquisition
– of the UK’s largest independent IVD distributor, Launch
Diagnostics – which has provided Avacta with well-
established sales channels in the professional, centralised
hospital laboratory testing market in the UK and France.
Avacta Animal Health
In March 2022, we sold our Animal Health Division to
Vimian Group AB’s specialty pharma segment Nextmune,
a global veterinary health group headquartered in
Sweden. The Animal Health Division had been a part of
the Group since 2009. All the staff in the Animal Health
Division moved across to Vimian 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 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
I am proud of our people and thank them all for their
hard work and commitment which resulted in the
strong progress made in 2022. I am also delighted to
welcome new colleagues in Launch Diagnostics to the
Avacta family. We will continue to invest in developing
our people, providing a positive work environment and
rewarding careers.
Outlook
The Board believe that the significant near-term value
driver for the Group is the clinical data from the Phase
I study of AVA6000. The pre|CISION™ FAPα-activation
approach has the potential to reduce the systemic
toxicities associated with many chemotherapies and as
such has the potential to create safer and more effective
oncology treatments that are affordable for all.
The outlook for AVA6000 and the pre|CISIONTM platform
as a whole looks very promising based on the safety,
pharmacokinetic and tumour biopsy data obtained to
date. The next significant value driver for AVA6000 will be
the initial efficacy data from the Phase Ib dose expansion
phase in patients with soft tissue sarcoma.
Avacta Diagnostics continues to actively pursue other M&A
opportunities to build a fully integrated and differentiated
European diagnostics business. These focus on expanding
our routes to market for both professional and consumer
testing products, while adding further IVD products
suitable for these markets to our portfolio.
I believe that the progress made during 2022 puts the
Group in a very strong position and we are confident and
excited about the future.
Dr Alastair Smith
Chief Executive Officer
28 April, 2023
Chief Executive Officer’s Statement
15
Avacta Report and Accounts 2022
Operational Review
Business overview
Avacta is a healthcare group developing
innovative cancer drugs and powerful in vitro
diagnostics to improve human health and
well-being. Avacta is addressing these key
challenges in healthcare through two
separate divisions:
Avacta’s Therapeutics Division, based in White City,
London in the UK, develops novel cancer therapies
using its two proprietary platforms – Affimer®
biotherapeutics and pre|CISION™ tumour-targeted
chemotherapy. With this approach, the Company aims
to address the lack of a durable response to current
immunotherapies experienced by most patients.
The Affimer® platform is a novel class of biotherapeutic
based on a naturally occurring human protein.
It is Avacta’s proprietary therapeutic platform, with
its intellectual property covered by several patent
families. Using the Affimer® platform, Avacta is focusing
on immunotherapies in the fight against cancer.
Avacta’s proprietary pre|CISION™ targeted
chemotherapy platform releases an active drug in
the tumour, thereby reducing systemic exposure
and improving the overall safety and therapeutic
potential of these powerful anti-cancer treatments.
Avacta took its first pre|CISION™ drug candidate
AVA6000, a targeted form of the standard-of-care
doxorubicin, in clinic in summer 2021. The Company
anticipates the results of this Phase I study, which
will demonstrate safety and mechanism of action,
late in 2023 . This will pave the way for further clinical
development of AVA6000 and other pre|CISION™
targeted chemotherapies.
There is potential to combine these two platforms,
with the aim creating effective treatments for all
cancer patients including those who do not respond
to existing immunotherapies.
Avacta’s Diagnostics Division, based in Wetherby
in the UK, is using the Affimer® platform to develop
market-leading diagnostic products.
Alongside this organic growth strategy, Avacta is
delivering an ambitious M&A-led growth strategy to
consolidate in the fragmented European diagnostics
sector, with the aim of building a substantial in vitro
diagnostics business with global reach and delivering
significant value to shareholders.
Avacta Diagnostics’ M&A strategy is focused on the
highest value parts of the diagnostics value chain –
innovative product development and commercial
routes to market. In this competitive market, the
Affimer® platform provides a powerful tool to
differentiate diagnostic products to gain competitive
advantage and grow market share of acquired
immunodiagnostic businesses.
Initiating its M&A-led growth strategy in October
2022, Avacta completed the acquisition of UK-based
IVD distributor Launch Diagnostics, which has
provided Avacta with well-established sales channels
in the professional, centralised hospital laboratory
testing market in the UK and France.
Avacta Diagnostics continues to actively pursue
other opportunities that add the other pieces of the
jigsaw to build a fully integrated diagnostics business.
These focus on expanding our routes to market in
Europe for both professional and consumer testing
products, while adding further IVD products suitable
for these markets to our portfolio.
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Strategic Report
17
Avacta Report and Accounts 2022
Avacta
Therapeutics
18
Strategic Report
19
Avacta Report and Accounts 2022
Therapeutics Division
Avacta Therapeutics Division aims to leverage
its two proprietary technology platforms,
pre|CISION™ and Affimer®, to develop
innovative oncology therapies that make
a significant difference to cancer patients’
treatment experience and outcomes.
The Therapeutics Division relocated its research
activities from Cambridge to White City in London in
April 2022, which has brought the research and drug
development teams together at a single site. The
relocation was completed on schedule with minimal
down-time and the Therapeutics Division has rapidly
settled into its new, world-class facilities. The team
has also been expanded to include experienced
drug development professionals, including a Head of
Chemistry, a Head of Biology, Head of IT and a Vice-
President Legal and Intellectual Property.
The team, supported by the Board and a world-
class Scientific Advisory Board chaired by Dr Mike
Owen, is committed to developing tumour-activated
drugs using the prec|CISION™ platform and novel
immunotherapies and drug conjugates using the
Affimer® platform, and will focus resources on its
clinical and most advanced pre-clinical programmes
to achieve near-term value inflection points.
AVA6000 FAPα-activated doxorubicin - the lead
pre|CISION™ programme
Anthracyclines such as doxorubicin, a generic
chemotherapy for which the broader market is
expected to grow to $1.38 billion by 2024, are
widely used as part of standard of care in several
tumour types, but their use is limited by cumulative
toxicity and, in particular, by cardiotoxicity. Avacta’s
pre|CISION™ FAPα-activated approach is designed
to reduce the systemic exposure of healthy tissue to
the active chemotherapy, leading to improved dosing
regimens, and potentially improved safety
and therapeutic profiles.
The ALS-6000-101 Phase I clinical trial involves a
dose-escalation Phase I study in patients with locally
advanced or metastatic-selected solid tumours, known
to be FAPα-positive, in which cohorts of patients
receive ascending doses of AVA6000 to determine
the maximum tolerated dose and establish a
recommended Phase Ib dose. The second part of the
study is an expansion phase where patients receive
AVA6000 to further evaluate the safety, tolerability
and clinical efficacy at this recommended Phase Ib
dose in soft tissue sarcoma. For more information visit
www.clinicaltrials.gov (NCT04969835).
Soft-tissue sarcoma is a relatively rare mesenchymal
malignancy which accounts for less than 1% of all
adult tumours. Despite the successful advancement
of localised therapies, such as surgery and
radiotherapy, these tumours can recur, often with
metastatic disease. The American Cancer Society
estimates that in 2022 approximately 13,190 new soft
tissue sarcomas were diagnosed and about 5,130
people were expected to die of the disease in the US.
The Phase Ia dose escalation study is being carried
out at several sites in the UK: The Royal Marsden
NHS Foundation Trust in London, The Christie NHS
Foundation Trust in Manchester, St James’ Hospital
in Leeds, The Beatson in Glasgow and The Freeman
in Newcastle.
The starting dose with cohort 1 was 80 mg/m2
of AVA6000, which is equivalent to 54 mg/m2 of
doxorubicin (about 90% of the normal doxorubicin
dose). The Safety Data Monitoring Committee (‘SDMC’)
reviewed the data from cohort 1 in February 2022
and recommended that the dose was escalated to
120 mg/m2, subsequently recommending that the trial
progress to the third cohort in June 2022 at a dose
of 160 mg/m2. In August 2022, the third cohort was
completed and the SDMC approved dose escalation
to 200mg/m2 in the fourth cohort. The results of the
fourth cohort were announced immediately post-
period end on 17 January 2023. In April 2023, the
SDMC recommended dose escalation to 250 mg/m2 in
the fifth cohort.
The data emerging from the dose escalation study
show a very favourable safety profile. AVA6000 in
the four cohorts has been well tolerated by patients,
with a marked reduction in the incidence and severity
of the typical toxicities associated with the standard
doxorubicin chemotherapy administration. Typical
toxicities include alopecia, myelosuppression, nausea,
vomiting, mucositis and cardiotoxicity. Importantly,
even at the highest dosing levels in the fourth cohort,
equivalent to more than double the normal dose of
doxorubicin, the typical drug-related cardiotoxicity of
doxorubicin was not observed.
Critically, analysis of a number of tumour biopsies
obtained from patients in different cohorts has
confirmed the release of the active chemotherapy,
Wholly-owned Therapeutic Pipeline
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Strategic Report
doxorubicin, in the tumour tissue. This analysis shows
that AVA6000 targets the release of doxorubicin to
the tumour tissue at therapeutic levels which are
much higher than the levels being detected in the
bloodstream at the same timepoint.
On the basis of the very favourable safety profile
of AVA6000 in the study to date, the SDMC has
recommended continuation to higher dose cohorts
with the aim of identifying a maximum tolerated
dose (‘MTD’) necessary to inform the dosing levels
for the Phase Ib and future studies. The Medical and
Healthcare products Regulatory Agency approved a
modification to the clinical trial protocol to allow the
study to continue into additional higher dose cohorts.
The Company expects to complete these cohorts and
identify the MTD in the first half of 2023.
Following approval by the US Food and Drug
Administration (‘FDA’) of an Investigational New Drug
(‘IND’) application, two clinical trial sites in the US were
being prepared to join the ALS-6000-101 study at the
Memorial Sloane Kettering Cancer Center in New York
and the Fred Hutchinson Cancer Center in Seattle,
with both sites confirmed open to recruiting patients
post-period end in April 2023.
The FDA has also granted Orphan Drug Designation
(‘ODD’) to the Company’s lead pre|CISION™ drug
candidate, AVA6000, for treatment of soft tissue
sarcoma. The FDA can grant ODD based on a review
of preclinical data from investigational treatments for
rare diseases, such as soft tissue sarcoma, which are
defined as conditions affecting fewer than 200,000
people in the US. This designation qualifies the
developer of the drug for certain incentives, including
seven years of market exclusivity upon drug approval
from the FDA.
Pipeline of pre|CISION™ chemotherapies
Avacta’s pre|CISION™ platform is a proprietary
chemical modification that renders the modified
chemotherapeutic drug inactive in the circulation until
it enters the tumour 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.
Emerging data from the AVA6000 Phase Ia study
indicate that the pre|CISION™ chemistry is effective
in reducing systemic exposure to the chemotherapy,
creating the opportunity to apply it to a wide range
of other established chemotherapies to potentially
improve their safety and efficacy.
The next most advanced pre|CISION™ pro-drug
candidate is AVA3996, a FAPα-activated proteasome
inhibitor based on an analogue of Velcade.
>
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Avacta Report and Accounts 2022
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Strategic Report
Therapeutics Division (Cont)
In January 2022, 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 IND
filing in 2023 and dosing of the first patient as soon
thereafter as possible.
The global proteasome inhibitors’ market size is
expected to be worth $2.3 billion by 2026, and
Velcade represents just over half of that market1.
As with all chemotherapies, the benefit of these drugs
is limited by toxicities and tolerability for patients. In
the case of Velcade, there are significant side effects
such as peripheral neuropathy, which has limited its
approval, principally in treating multiple myeloma.
A potentially safer proteasome inhibitor, such as
AVA3996, could 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.
During 2022, AVA3996 was studied in several animal
efficacy models for melanoma, colorectal cancer
and sarcoma. In each of these cancer models
AVA3996 was as effective as Velcade in preventing
growth of the human tumour implanted in the mice.
However, whereas the systemic toxicities caused
by Velcade resulted in significant body weight loss
in the animals, treatment with AVA3996 showed
no such toxicities. It is this potential improvement
in therapeutic window of AVA3996 created by
the tumour targeting of the proteasome inhibitor
that holds promise for the first effective use of a
proteasome inhibitor in solid tumours.
The Company is continuing its pre-clinical
development of AVA3996 with the aim of an IND filing
late in 2023 or 2024 and anticipated first-in-human
clinical trial starting in 2024. Post period end in April
2023, pre-clinical data for AVA3996 was presented at
the 2023 American Association for Cancer Research
(AACR) Annual Meeting in Florida, USA, one of the
largest international cancer research meetings.
Affimer® immunotherapy programmes
Translation of the Affimer® platform into the clinic to
demonstrate the safety and tolerability of this novel
therapeutic protein platform is an important objective
for the Company and represents a key value inflection
point for the Affimer technology.
In the oncology field recent studies have shown that
single cancer immunotherapies, or ‘monotherapies’,
have potentially limited overall response rates. The
Company’s Affimer® immunotherapy strategy aims to
harness the benefits of the Affimer® platform to build
bispecific drug molecules which can address two drug
targets simultaneously, and to use Affimer® molecules
to target toxic payloads using conventional and
pre|CISION™ linkers.
Whilst the Company is prioritising its pre|CISION™
programmes as the nearest term driver of key value
inflection points, good progress has been made in
the in-house Affimer® bispecific and TMAC® pre-
clinical programmes which, along with the Company’s
commercial collaborations, are a key part of in-house
research activities.
1 https://www.expertmarketresearch.com/reports/proteasome-inhibitors-market
>
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Avacta Report and Accounts 2022
Therapeutics Division (Cont)
AVA6000 Clinical Trial Update
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 removes 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.
When doxorubicin is administered intravenously
into the patient it is readily distributed across almost
all tissues, resulting in indiscriminative toxic effects
on both healthy and tumour cells. One of the most
serious side effects of doxorubicin is cardiomyopathy,
whereby the heart muscle is damaged by the toxic
effects of the doxorubicin, leading to a loss of cells
in the heart muscle and ultimately irreversible
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 FAP-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’s healthy
tissues to lower concentrations of doxorubicin and
associated toxicities. AVA6000 is expected to have a
larger therapeutic window in comparison with available
doxorubicin treatments. Non-clinical studies have
shown that the toxicity of AVA6000 is significantly
reduced compared to conventional doxorubicin.
Furthermore, the anti-tumour activity of elevated doses
of AVA6000 significantly exceeded the modest effect
of doxorubicin administered at its maximum tolerated
dose, in a mouse xenograft efficacy model.
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Strategic Report
AVA6000 clinical development
A ‘first-in-human’ (‘FIH’) dose escalation study of AVA6000
is currently recruiting patients in the UK (clinicaltrials.
gov Identifier: NCT04969835). Two further clinical
investigator sites in the US have also been activated
(April 2023). This is Avacta’s first entry into the US and
the US trial sites will initially contribute patients to the
dose escalation phase, while being uniquely positioned
to lead the enrolment of soft tissue sarcoma patients in
the Phase Ib dose expansion stage of the AVA6000 study
when this begins.
The UK clinical trial is a two-part Phase I study with the
first part an AVA6000 PK-guided dose-escalation in
patients with locally advanced (unresectable) and/or
metastatic selected solid tumours. 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(s) derived in Part 1 to
assess the safety, tolerability and efficacy of AVA6000 in
tumour-specific arms.
AVA6000 is expected to have the following
attributes:
• Improved therapeutic index relative to conventional
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
The attributes of AVA6000-released doxorubicin are
anticipated to lead to higher efficacy and less toxicity
compared to conventional doxorubicin.
>
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Avacta Report and Accounts 2022
Therapeutics Division (Cont)
Drug Development Collaborations
The Company has several important commercial collaborations covering both the
Affimer® and pre|CISION™ platforms, and is active in pursuing future opportunities
for licensing and partnerships.
• AffyXell Therapeutics
AffyXell is a joint venture company with Daewoong Pharmaceuticals in South Korea
that is developing mesenchymal stem cell therapies which have been modified to
produce Affimer® immunotherapies in vivo at the site of action of the stem cells.
AffyXell 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. AFX001 is a mesenchymal stem cell (‘MSC’) therapy
which secretes anti-CD40L Affimer® for the treatment of Guest versus Host Disease
in organ transplantation. AFX002 is an MSC secreting an agonist Affimer® molecule
against an undisclosed target for use in multiple sclerosis and T1 diabetes.
In April 2022, a milestone equity payment was made by AffyXell to Avacta resulting in
an increase in Avacta’s shareholding in the joint venture. This payment was triggered
by Avacta successfully developing and characterising Affimer® proteins against CD40L
for AffyXell and transferring the associated intellectual property into AffyXell. In
exchange for this, Avacta has received an increase in its equity stake in AffyXell, which
was diluted from its founding equity stake in February 2021 when AffyXell completed
a Series A financing of $7.3 million from a group of venture funds in February 2021.
At 31 December 2022, Avacta's shareholding in the joint venture was 19%.
AffyXell also successfully completed a funding round in May 2022, raising an
undisclosed amount of capital, to advance its lead mesenchymal stem cell programme
towards the clinic, and to develop its wider pre-clinical pipeline of cell therapies.
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
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Strategic Report
• LG Chem Life Sciences
Avacta has a strategic partnership with LG Chem Life Sciences focused on the
development of a novel PD-L1 checkpoint inhibitor utilising the Affimer® platform
incorporating Affimer XT® half-life extension. The partnership also provides LG
Chem with rights to develop and commercialise other Affimer® and non-Affimer
biotherapeutics combined with Affimer XT® half-life extension for a range of
indications, and Avacta could earn up to $55 million in milestone payments for each
of these new products. In addition, under the agreement Avacta will earn royalties
on all future Affimer XT® product sales by LG Chem.
At the end of June 2022, LG Chem exercised its option to renew its rights under the
ongoing collaboration with Avacta, triggering a licence renewal fee payment to Avacta
of $2 million. LG Chem is now focused on progressing the PD-L1/XT oncology drug
candidate in clinic and has commenced pre-clinical studies which are intended to form
the basis of an Investigational New Drug ('IND') submission.
• POINT Biopharma Inc.
Early in 2021, Avacta signed a licensing agreement with POINT Biopharma Inc.
('POINT') to provide 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.
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Avacta Report and Accounts 2022
Avacta
Diagnostics
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Strategic Report
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Avacta Report and Accounts 2022
Diagnostics Division
During 2022, Avacta’s Diagnostics Division initiated an
M&A-led growth strategy to take advantage of the
fragmentation in the European in vitro diagnostics
('IVD') sector with the aim of building an integrated and
differentiated IVD business with global reach serving
professionals and consumers.
In order to achieve this vision, the Company has, since late 2021, been building a pipeline of potential acquisition
targets covering routes to market in the professional and consumer markets, as well as companies with product
portfolios suitable for use in these sectors. The Company has focused its M&A strategy on profitable businesses
engaged in developing or distributing immunodiagnostic and molecular diagnostic tests.
Avacta’s mission is to support clinicians in the diagnosis of disease and to improve health and well-being
through better access to self-testing for all.
Innovation remains a key strength of Avacta Diagnostics and in the competitive immunodiagnostics
market the Affimer® platform provides a powerful tool to differentiate diagnostic products to gain
competitive advantage and grow market share of acquired businesses.
In October 2022, Avacta completed a fundraise of £61.3 million (gross), through a combination of
convertible bonds and a placing to new and existing shareholders with an open offer, primarily to
fund the Diagnostics M&A strategy.
Simultaneously the Company completed its first acquisition, Launch Diagnostics, a leading
independent distributor in the UK IVD market. This has provided Avacta with well-established
sales channels in the professional, centralised hospital laboratory testing market in the UK
and France. Avacta’s plan to grow the Launch Diagnostics business includes expanding the
company’s product portfolio and investing in the sales teams in the UK and France. However,
the most significant opportunity for growth lies in the geographical expansion of the business
into Germany, which is Europe’s largest diagnostics market.
Avacta Diagnostics continues to pursue a careful and disciplined M&A strategy focussed
on expanding our routes to market for both professional and consumer testing products,
while adding further IVD products suitable for these markets to our portfolio.
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Strategic Report
>
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Avacta Report and Accounts 2022
Launch Diagnostics
Initiating its M&A-led growth strategy
in October 2022, Avacta completed the
acquisition of the UK’s largest independent
IVD distributor Launch Diagnostics, which
has provided Avacta with well-established
sales channels in the professional, centralised
hospital laboratory testing market in the UK
and France.
Avacta’s plan to grow Launch Diagnostics' business
includes expanding the company’s product portfolio
and investing in the sales teams in the UK and France.
However, the most significant opportunity for growth
lies in the geographical expansion of the business into
Germany, which is Europe’s largest diagnostics market.
Launch Diagnostics provides pathology solutions
encompassing high quality diagnostic reagents and
instrumentation from world-leading manufacturers to
the health services of the UK, Belgium, Luxembourg
and France (through Launch Diagnostics SAS) and to
the Republic of Ireland.
Launch Diagnostics was established in 1990 and has
been in business for more than 30 years. It is one of
the most successful companies in the UK diagnostics
industry, being recognised by its customers and
holding long-term partnerships with many respected
suppliers of diagnostic innovation.
Offering an extensive portfolio of diagnostic kits and
laboratory instrumentation, Launch’s product range has
expanded over the years to include a comprehensive
range of EIA, single test devices, serology products,
molecular assays and instrumentation.
The main customer base in the UK and Ireland are
NHS Pathology laboratories. In France there is a
split between public and private laboratories, with
approximately a 60% / 40% share respectively.
Procurement within NHS laboratories is a mix of
tenders and direct awards, with the formation of
NHS-led pathology networks / clusters leading to
much larger procurement activities, as networks are
beginning to procure for multiple trusts together.
Researchers, private laboratories and other
companies are also part of the Launch customer base.
Launch has an active field sales team cultivating long-
standing relationships built with customers over the
last 30 years that sells products for all areas within
diagnostic laboratories, including:
• Microbiology - including antimicrobial susceptibility,
serology and molecular diagnostics products.
• Biochemistry / immunology - products for faecal
calprotectin, autoimmunity and allergy.
• Haematology- mononucleosis RDT and malaria
testing utilising serological and molecular
methodologies to provide a full workflow for
diagnosis.
• Genetics - oncology qPCR’s for targeted panels in
cancer diagnostics.
• Instrumentation - a range of open and closed
systems for ELISA / immunofluorescence,
chemiluminescence, immunoturbidity, LAMP, DNA /
RNA extraction and PCR amplification.
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Strategic Report
Marketing activities
The marketing team comprises a number of product
managers with a wealth of experience in NHS labs,
private settings and commercial enterprises. This
experience is used to support sales of existing
product lines and to research and discover new
products of interest within our markets.
Liaising closely with the current portfolio of suppliers,
the team are able to support customers with
an exemplary level of customer care. The close
relationships formed with suppliers enables active
feedback of key market information, which can help
to guide product pipelines to match the current and
future requirements of end users.
Technical activities
Launch Diagnostics’ technical department comprises
managers, workshop employees and field-based
engineers, totalling 20 employees. This team is
crucial in maintaining excellent support for the 454
instruments currently supported across all territories.
Team members are highly skilled and educated.
Technical employees possess electronic engineering
diplomas or degrees, which is essential to providing
the high-quality technical support for which Launch
Diagnostics is renowned.
Product launches 2022-23
The Lotus instrument from Vircell launched as a
solution for automated chemiluminescent testing
for infectious diseases, providing customer benefits
including random access loading of patient samples
for improved workflow.
Anatolia Geneworks launched their Viral Meningitis
version 3 assay, for detection of HSV1, HSV2, VZV,
enterovirus and parechovirus. This complements
existing assays for bacterial and neonatal meningitis,
providing a comprehensive solution for testing of
typical pathogens for this syndrome.
>
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Avacta Report and Accounts 2022
HOB Biotech is a Chinese company established
in 2007. They have 30% of the diagnostic
market in mainland China. The first BioCLIA
instruments were launched in 2016, and HOB
Europe was established in 2019. HOB began
trading on the Shanghai STAR market
in January 2021.
The BioCLIA 6500 and BioCLIA 500 instruments were
launched in the UK in November 2022. These are
high throughput, continuous loading, automated
chemiluminescent (CLIA) analysers, for autoimmune
and allergy testing. The difference between the two
instruments is only in terms of size and capacity.
New and Innovative markers are being added to the
test repertoire.
These two instruments allow laboratories to move
away from the batch testing necessitated by ELISA
techniques and give Launch the capacity to respond
to tenders specifying fully automated testing.
HOB BioCLIA
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Strategic Report
BioSystems A15s
BioSystems is a Spanish company based
in Barcelona who celebrated their 40th
anniversary in 2021 and Launch Diagnostics
have been working with them for almost
30 years.
Last year BioSystems launched their assays for
faecal calprotectin and faecal haemoglobin for their
dependable A15 platform. Both of these assays are
immunoturbidimetric and provide first results in
under 30 minutes and are capable of 75 tests per
hour thereafter.
The great innovation for these faecal assays is the
very easy and fast pre-analytical extraction taking only
around 90 seconds to provide a ready-to-run sample.
This frees laboratories from the burden of a long
extraction process, and with continuous loading on the
A15 instrument removes the need for batch testing.
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Avacta Report and Accounts 2022
Revenue
Reported Group revenues for the year ended 31
December 2022 increased to £9.65 million compared
to £2.94 million for the year ended 31 December
2021 ('2021').
Revenues for the Therapeutics Division increased to £5.48
million (2021: £2.16 million), due to achieving certain milestones
in our collaborations with LG Chem (£1.65 million in cash)
and AffyXell (£3.60 million in additional equity in the joint
venture), together with further funded FTE reimbursement from
collaboration partners.
Revenues for the Diagnostics Division were £4.17 million (2021:
£0.78 million), with the increase coming from the acquisition of
Launch Diagnostics in October 2022, which contributed £3.97
million and the remainder from a smaller number of custom
Affimer® reagent projects as resources were focused on the
development of future diagnostic tests.
Acquisitions
On 21 October 2022, the Group acquired 100% of the shares
and voting interests in Launch Diagnostics Holdings Ltd (‘Launch
Diagnostics’). Launch Diagnostics is a leading independent in
vitro (‘IVD’) distributor in the UK, providing immunodiagnostic
and molecular test products, technical support and
maintenance to healthcare providers. Total consideration for
Launch Diagnostics included an initial consideration of £24
million in cash payable upon completion of the acquisition, in
addition to £0.9 million for other short-term non-operating
assets and an additional consideration of 50% of the gross
margin on sales exceeding £2 million per annum of Launch
Diagnostics' COVID-19 related products for three years capped
at £13 million (in aggregate). The additional consideration to be
paid based on future gross margin is estimated to be nil as at 31
December 2022.
The acquisition of Launch Diagnostics is the first step in a M&A-
led growth strategy for the Group’s Diagnostics Division, with the
vision of building an integrated and differentiated IVD business
with global reach servicing professionals and consumers.
For the period from acquisition to 31 December 2022, Launch
Diagnostics contributed revenue of £3,971,000 and profit
of £309,000 to the Group’s results. Further details on the
acquisition are provided in Note 26 to the Financial Statements.
Research and amortisation of development costs
During the year, the Group expensed through the income
statement £11.10 million (2021: £13.48 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.
Selling, general and administrative expenses
Administrative expenses have increased during the year
to £11.23 million (2021: £8.14 million). This has increased
because of the Launch Diagnostics acquisition (£1.43 million
of administrative expenses) and the scale-up of the operations
within both the Diagnostics Division, as it increased its product
development capabilities to become a fully integrated IVD
products business, and the Therapeutics Division as resource
was increased to support the infrastructure required and
transition into a clinical stage business.
Adjusted EBITDA
The Consolidated Statement of Profit or Loss shows an
Adjusted EBITDA loss position (before non-recurring items)
of £15.09 million for the year (2021: £21.74 million), with
the reduction in losses due to improved revenues and the
resulting gross profit increases.
Amortisation and impairment of development costs
Development costs capitalised in prior periods from the
development of the Affimer® reagents and the diagnostics
platform have been amortised, resulting in a charge of £0.82
million (2021: £0.82 million). An impairment charge of £5.23
million (2021: £nil) was recognised in the year in relation to
previously capitalised Affimer® reagents development costs.
This reflects the change in focus within the Diagnostics
Division to build on its M&A strategy; whereby the
development of diagnostic products incorporating Affimer®
reagents is now expected to occur through new development,
manufacturing, and distribution partners as the Diagnostics
Division expands in future periods. As the M&A activity was
still in progress at 31 December 2022, it was not possible to
provide certainty on the timelines of future acquisitions or,
therefore, the timeframe in which cashflows from Affimer®
reagent developed products would be received, necessitating
an impairment charge to be recognised.
Share of loss of associate
The share of loss of associate of £1.15 million arises from the
Group’s equity-accounted investment in AffyXell Therapeutics
Co., Ltd. The share of losses reflects the Group’s 19% ownership
share of the losses accumulated since its inception in 2020. The
Group investment increased from 5% to 19% at 31 December
2022 as a result of additional equity issued due to the Group
achieving certain technical milestones for the collaboration
during the year.
Financial Review
36
Strategic Report
Share-based payment charges
The non-cash charge for the year increased to £7.49
million (2021: £5.06 million) as a result of changes to the
assumptions around the likelihood of vesting of options.
There were no new options issued during the year.
Convertible bond costs
In October 2022, the Group issued senior unsecured
convertible bonds (‘the Bonds’) of £55.00 million to a fund
advised by Heights Capital Ireland LLC, a global equity and
equity-linked focussed investor. The Bonds were issued
at 95% par value with total net proceeds of £52.25 million,
and accrue interest at an annual rate of 6.5% payable
quarterly in arrears.
The Bonds contain various conversion and redemption
features. The Bonds have a maturity of five years, and
are repayable in 20 quarterly amortisation repayments,
of principal and interest over the five-year term, in either
cash or in new ordinary shares at the Group’s option. If in
shares, the repayment is at the lower of the conversion
price (118.75p) or a 10% discount to the volume weighted
average price (‘VWAP’) in the five- or ten-day trading
period prior to election date. The conversion price may
reset downwards at 18 months, depending on share price
performance, and save in limited circumstances there is a
reset price floor of £0.95.
The bond agreement contains embedded derivatives
in conjunction with an ordinary host debt liability.
As a result, the convertible bonds are shown in the
Consolidated Statement of Financial Position in two
separate components, being ‘Convertible bond – debt’
and ‘Convertible bond – derivative’. At issuance, the total
inception value was £55.00 million, being the principal
amount of the Bonds, with the initial carrying amount of
the debt liability element being the difference between
the inception value of the convertible bond and the fair
value at inception of the derivative element. Given the
option of the bondholder to convert the bond at their
discretion, the debt and derivative liability elements have
been classified as current liabilities.
The derivative element has been measured at fair
value using a Monte-Carlo option pricing model, which
estimates the fair value based on the probability-weighted
present value of expected future investment returns,
considering each of the possible outcomes available to
the bondholders. This therefore falls under Level 3 of the
fair value hierarchy. Significant assumptions used in the
fair value analysis include the volatility rate, risk-free rate
and expected dividend yield. At inception, the fair value
of the derivative component was measured at £35.00
million. The fair value at the year-end date was measured
to be £39.10 million, resulting in a charge in revaluation of
the derivative being recognised of £4.10 million.
Transaction costs of £3.41 million have been apportioned
between the derivative and debt liability components
according to the relative inception values. This has
resulted in £2.29 million of transaction costs being
recognised at acquisition, with £1.13 million adjusted for
in the carrying amount of the debt liability at acquisition.
Losses before taxation
Losses before taxation from continuing operations for the
year were £41.64 million (2021: £29.19 million).
Taxation
The Group claims each year for research and
development tax credits and, since it is currently 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
£2.23 million (2021: £2.82 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.
Discontinued operations
In March 2022, the Animal Health Division was sold to
Vimian Group AB and the results for the current year
up to disposal and prior year have been disclosed in the
Consolidated Statement of Profit or Loss as Discontinued
Operations. Revenues were £0.41 million (2021: £1.60
million) and the Animal Health Division made a small
operating profit of £0.05 million (2021: £0.07 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, of which £0.7 million was
recognised in the current year based on the anticipated
performance of the combined business. The profit on
disposal recognised in the year was £0.31 million.
Loss for the period
The reported loss for the period was £39.19 million (2021:
£26.31 million). The loss per ordinary share increased to
15.35 pence (2021: 10.55 pence) based on a weighted
average number of shares in issue during the period of
259,007,001 (2021: 253,555,925).
>
37
Avacta Report and Accounts 2022
Cash flow
The Group reported cash and short-term deposit balances of
£41.78 million at 31 December 2022 (2021: £26.19 million).
Operating cash outflows from operations amounted to £15.95
million (2021: £22.66 million).
During the year, capital expenditure was £0.56 million (2021:
£1.16 million) as the facility move from Cambridge to London
was completed.
Net cash outflow from investing activities amounted to £25.04
million (2021: inflow of £18.70 million) arising principally from
the acquisition of Launch Diagnostics, an outflow of £24.88
million net of cash acquired. The disposal of the Animal Health
discontinued operation generated £0.55 million cash proceeds,
net of transaction costs, in the period.
In October 2022, the Group completed a fundraise of £61.27
million (gross) through a combination of £55.00 million senior
unsecured convertible bonds issued at a 5% discount from a
fund advised by Heights Capital Ireland LLC, and £9.02 million
through a placing to new and existing shareholders and open
offer (2021: £nil). There were also proceeds from the exercise of
share options by employees amounting to £0.47 million (2021:
£0.52 million).
Financial position
Net assets as at 31 December 2022 were £18.44 million (2021:
£41.22 million) of which cash and cash equivalents amounted to
£41.78 million (2021: £26.19 million).
The IFRS 16 Leases presentation results in the recognition of
a ‘right-of-use’ asset amounting to £5.42 million (2021: £1.73
million) in relation to the Group’s leasehold properties and
other leased assets, together with a corresponding lease liability
of £5.11 million (2021: £1.70 million); the increase arising due to
the longer term lease on the London facility and the acquisition
of Launch Diagnostics.
Intangible assets increased to £26.32 million (2021: £7.93
million) due to the acquisition of Launch Diagnostics and
the recognition of £12.69 million of goodwill. Further details
on the acquisition accounting are detailed in Note 26 to the
Financial Statements.
Liabilities in relation to the convertible bonds issued during the
period have been recognised, with £39.10 million relating to the
fair value of the derivative element at 31 December 2022, and
£18.73 million relating to the debt liability element.
Dividends
No dividends have been proposed for the year ended 31
December 2022 (2021: £nil).
Key performance indicators
At this stage of the Group’s development, the non-financial key
performance indicators focus around two areas:
• the progression of the Affimer® and pre|CISION™
technologies into clinical trials within the Therapeutics
Division; and
• the development of Affimer® reagents to feed into future
diagnostic products within the M&A-led growth strategy in
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, that allow an assessment of the performance of the
business as the Diagnostics Division in particular progresses
through the M&A-led growth strategy, and of the funding
available as the Therapeutics Division technologies progress
into clinical trials.
• Group revenues
• Adjusted EBITDA
• Cash and short-term deposit balances
Financial Review (cont.)
38
Strategic Report
2020
2021
4
0
2
6
10
8
12
-20
-25
-15
-5
-10
0
£26.19m
Group revenues
Adjusted EBITDA
Cash and short-term deposits
2020
2021
£2.94m
2020
2021
20
0
10
30
50
40
60
£47.91m
(£21.7m)
2022
£41.78m
2022
£9.65m
2022
(£15.1m)
(£14.1m)
£2.14m
Tony Gardiner
Chief Financial Officer
28 April, 2023
>
39
Avacta Report and Accounts 2022
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are set
out on pages 42 to 44.
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.
The Strategic Report uses Alternative Performance Measures
(‘APMs’) to assist in presenting information in this Report in an
easily analysable and comparable form. The APMs used provide
a meaningful basis on which to analyse the Group’s financial
performance, which is helpful to the reader; however, it is noted
that they are not substitutes for IFRS measures and may not be
directly comparable to similarly titled measures used by other
companies. APMs are defined in Note 1 to the accounts.
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.
Key decisions taken by the Board during the year include:
• The appointment of Dr Christina Coughlin as a Non-
executive Director to the Board, bringing with her a wealth
of drug development experience from global companies
across Europe and the US to support the Therapeutics
Division as it progresses into a clinical stage company;
• The disposal of the Animal Health Division to enable the
Group to focus solely on its Diagnostic and Therapeutic
Divisions;
• The strategic decision to develop the Diagnostics Division
into a European IVD business via an M&A strategy providing
innovative solutions for healthcare professionals and
consumers, leading to the acquisition of Launch Diagnostics
and the associated fundraise to support the M&A process.
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 Board members have had refresher training with
their Nominated Advisor (‘NOMAD’) on Director responsibilities
in the application of AIM rules.
The Directors work across all the Group’s facilities and provide
regular 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 53 to 59, including the Group’s
responsibilities to health, safety and environmental issues
in relation to its employees, suppliers, customers and the
communities in which the Group operates.
The Directors believe strongly in the maintaining the highest
levels of 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 53.
Financial Review
(Continued...)
40
Strategic Report
New 2023 image added
41
Avacta Report and Accounts 2022
The Board is responsible for risk management and
reviewing the internal controls systems. The internal
control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives
and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Group highlights potential financial and non-
financial risks that may impact on the business as
part of the risk management procedures in the form
of a Risks and Uncertainties 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 periodic 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 on a periodic basis
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:
Reliance on third parties supporting clinical and
pre-clinical programmes - Therapeutics
Change < >
Avacta relies heavily upon other parties (including clinical
research organisations) for many important stages of its
therapeutic development programmes, including execution
of some pre-clinical studies and later-stage development
for its compounds and drug candidates, and 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 now progressing Phase I trials on its first
clinical programme (AVA6000) there continues to be 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.
Manufacturing and supply risk - Diagnostics Change < >
The Group develops, with manufacturing partners, lateral
flow tests which require formal clinical validation and CE
marking. The Group has identified third-party manufacturing
partners and established an appropriate supply chain for the
manufacture of approved lateral flow tests.
The ability to produce tests within the UK to a cost price which
would make tests competitive with Chinese-manufactured
tests has been a significant challenge and the Group continues
to explore 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 price point of lateral flow tests has been under significant
pressure given the surplus production capacity from cheaper
Chinese production facilities now that the sales of COVID-19
lateral flow tests have subsided.
Establishing commercial sales channels within the UK,
Europe and other countries for the 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.
Principal Risks and Uncertainties
42
Strategic Report
The regulatory changes in relation to the IVDR/CE marking
process in 2022 have led to delays in obtaining approvals
from Notified Bodies (such as BSI) which will delay the launch
of future products not yet for sale within Europe.
The Diagnostics Division has embarked on an M&A-led
growth strategy to build additional routes to market through
established distributors (with the acquisition of Launch
Diagnostics) and will continue to look at opportunities across
Europe to expand the diagnostic product portfolio and
additional distribution channels for centralised and
de-centralised testing.
M&A risk - Diagnostics
Change ^
The Group’s Diagnostics Division has recently embarked
on an M&A-led growth strategy to build an integrated and
differentiated IVD business with global reach.
To achieve the strategy the Group needs to successfully
identify the right M&A targets with the correct attributes in
terms of products, people and geographies. The Group also
needs to ensure that businesses are acquired on favourable
terms from an acquiror’s perspective. As part of the M&A
process, adequate levels of due diligence need to be carried
out to substantiate the acquisition value and identify any risks
that exist, whether they be financial, legal, regulatory or similar.
The Group has built a strong internal team who run the M&A
process and work alongside experienced professional advisors
advisers in areas such as legal, regulatory and financial/
taxation. The established process has numerous go/no-go
points that are reviewed and discussed with the Board and
strategic advisers.
Research and development
Change < >
The Group’s research and development activities continue to
focus around the Affimer® technology within the Diagnostics
Division and the Affimer® and pre|CISIONTM technologies in
the Therapeutics Division.
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. This risk is in specific applications of the
Affimer® or pre|CISIONTM technologies rather than in the
individual technology platform as a whole.
The development teams continue to work on improving the
core Affimer® and pre|CISIONTM technology platforms and
expanding the potential areas where the technology has
significant benefits over existing antibody technologies with
oversight from the Senior Management Teams, the Board and
Scientific Advisory Board.
With the Group’s first asset (AVA6000) progressing through
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 advisers who are monitoring the
outputs of the clinical trials to ensure appropriate decisions
based on data outcomes are taken at the right time.
Funding
Change < >
The development of the Group’s Affimer® and pre|CISIONTM
technologies in the Therapeutics Division is resource and cash
intensive. The new Diagnostics Division M&A strategy also re-
quires sufficient funding to enable attractive acquisitions to be
acquired. The Group successfully raised £61.3 million (gross)
during the year to continue the Group’s plans; however, there
will be future funding requirements which will need to fund
expanded clinical development programmes.
As at 31 December 2022, the Group had cash and short-term
deposits of £41.78 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 and UK recession, which may impact the timing and
amount of funding available through capital markets.
Intellectual property
Change < >
The success of the Group’s Affimer® and pre|CISION™
technology platforms depends on its ability to obtain and
maintain patent protection for its proprietary technology.
Failure to protect the Affimer® and pre|CISION™ technology
platforms, or to obtain patent protection with a scope that is
sufficiently wide, could significantly impact the Group’s 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.
>
43
Avacta Report and Accounts 2022
Strategic Report
Key staff
Change < >
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.
During the year, the Group has successfully continued to
recruit senior specialist roles within the Therapeutics Division
covering scientific, regulatory and clinical development areas
whilst relocating its operations from Cambridge to London.
The Diagnostics Division, in the light of its recently announced
M&A strategy, has reviewed the levels of staff required to
progress its product development of diagnostic devices,
with suitable experienced staff within quality assurance and
regulatory teams.
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
Change < >
Unexpected events such as failures of IT systems or the
increasing threat of targeted cyber attacks could disrupt the
Group’s operations from any of its sites or lead to a loss of data.
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 cyber security plans are reviewed on a regular basis
and recently upgraded security access levels have been
established. It also provides training to staff on dealing with
potential cyber attacks and security risks.
Loss of facilities
Change < >
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.
The Group has purpose-built facilities in both Wetherby and
London with specialist equipment and working environments
that 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 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.
Principal Risks and Uncertanties
(Continued...)
44
Avacta Report and Accounts 2022
Governance
46
Board of Directors
50
Directors’ Report
53
Corporate Governance Report
60
Audit Committee Report
62
Remuneration Committee Report
67
Statement of Directors’
Responsibilities
68
Independent Auditor’s Report to
the Members of Avacta Group plc
45
Governance
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.
Dr Eliot Forster
Non-executive Chairman
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 and 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 Pfizer.
Eliot holds a PhD in neurophysiology
from the University of Liverpool and
an MBA from Henley Management
College. He is an Honorary Visiting
Professor at the University of Liverpool
and at the University of Pavia. He is a
Board member of OSCHR (UK Office
for Strategic Coordination of Health
Research) and the National Genomics
Board.
Eliot is a member of the Remuneration
Committee and the Audit Committee.
Dr Alastair Smith
Chief Executive Officer
Alastair was the 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 also Non-executive Chairman
of SPARTA Biodiscovery, an Imperial
College spin-out providing cutting-
edge analytical instrumentation to
biopharmaceutical developers to enable
nano-formulations of next-generation
therapeutics.
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.
46
Avacta Report and Accounts 2022
Tony Gardiner
Chief Financial Officer
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 including
extensive M&A transactional and
fundraising experience. 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.
Dr Trevor Nicholls
Non-executive Director
Trevor brings considerable experience in
the commercialisation of innovative life
science technologies from his previous
roles as Non-executive Chairman
of Oxford Nanopores Technologies,
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).
Trevor, prior to his retirement at the
end of 2020, was Chief Executive
Officer of the Centre for Agriculture and
Bioscience International, a not-for-profit
intergovernmental organisation 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 Fargro Limited a provider of products
and services for Horticulture, 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 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 Fry
Non-executive Director
Paul was appointed as a Non-
executive Director in February
2020. Paul has extensive financial
experience across several industries
including biotech, pharmaceutical and
telecommunications. Paul is currently
Chief Financial Officer of Argenta, a
global CRO and CDMO specialising
in animal health. Prior to this 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.
Paul was also 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.
>
47
Governance
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.
Dr Mark Goldberg
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 ImmunoGen,
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 currently a Lecturer
in Medicine (part-time) at Harvard
Medical School.
Mark is also a long-time 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,
currently servicing as Scientific Officer of
the board.
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).
Dr Christina Coughlin
Non-executive Director
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.
48
Avacta Report and Accounts 2022
49
Governance
The Directors present their report and the
audited financial statements for the year ended
31 December 2022.
Principal activity
The principal activities of the Group are focused on improving
patients’ lives and growing shareholder value by developing
novel cancer therapies and powerful diagnostics using its
proprietary Affimer® and pre|CISION™ platforms.
Avacta’s Therapeutics Division, based in White City, London
in the UK, develops novel cancer therapies using its two
proprietary platforms – Affimer® biotherapeutics and
pre|CISION™ tumour-targeted chemotherapy. With this
approach, the Company aims to address the lack of a
durable response to current immunotherapies experienced
by most patients.
The Affimer® platform is a novel class of biotherapeutic based
on a naturally occurring human protein. It is Avacta’s proprietary
therapeutic platform with its intellectual property covered by
several patent families. Using the Affimer® platform Avacta is
focusing on immunotherapies in the fight against cancer.
Avacta’s proprietary pre|CISION™ targeted chemotherapy
platform releases an active drug in the tumour, thereby
reducing systemic exposure and improving the overall safety
and therapeutic potential of these powerful anti-cancer
treatments. Avacta took its first pre|CISION™ drug candidate
AVA6000, a targeted form of the standard-of-care doxorubicin,
into the clinic in summer 2021. The Company anticipates the
results of this Phase I study which will demonstrate safety
and mechanism of action late in 2022. This will pave the
way for further clinical development of AVA6000 and other
pre|CISION™ targeted chemotherapies.
Avacta’s Diagnostics Division, based in Wetherby in the UK,
is using the Affimer® platform to develop market-leading
diagnostic products.
Alongside this organic growth strategy, Avacta is delivering an
M&A-led growth strategy to consolidate in the fragmented
European diagnostics sector with the aim of building a
substantial in vitro diagnostics (‘IVD’) business with global-reach
and delivering significant value to shareholders. Initiating its
M&A-led growth strategy in October 2022, Avacta completed
the acquisition of UK-based IVD distributor Launch Diagnostics
('Launch'), which has provided Avacta with well-established
sales channels in the professional, centralised hospital
laboratory testing market in the UK and France.
Avacta Diagnostics continues to pursue other opportunities
that add the other pieces of the jigsaw to build a fully
integrated diagnostics business. These focus on expanding
our routes to market in Europe for both professional and
consumer testing products, while adding further IVD products
suitable for these markets to our portfolio.
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 79 to 128.
The Directors have reviewed the results for the years ended
31 December 2022 and 31 December 2021, 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 38.
Dividends
The Directors do not recommend the payment of a dividend
(2021: £nil).
Going concern
These financial statements have been prepared on a going
concern basis, notwithstanding a loss of £39.1 million and
operating cash outflows of £16.0 million for the year ended 31
December 2022. 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 M&A opportunities, product
development projects and the Launch 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 development programmes and the Diagnostics
Division’s M&A activity.
Whilst there are inherent uncertainties regarding the cash
flows associated with the development of both the therapeutic
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
Directors’ Report
50
Avacta Report and Accounts 2022
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 2022, the Group’s cash and cash
equivalents were £41.8 million (2021: £26.2 million).
• The Group has a tax refund in relation to R&D tax credits for
the 2021 financial year of £2.8 million which was received in
January 2023.
• The Group does have external borrowings in the form of
a £55 million convertible bond with quarterly amortisation
settlements by the issue of new equity, or by cash at the
discretion of the Group.
• 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.
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
• Paul Fry
• Dr Mark Goldberg
• Dr Christina Coughlin
Appointed 18 March 2022
• Dr Alastair Smith
• Tony Gardiner
Under the Articles of Association of the Company, one third of
the Directors are required to retire at the forthcoming AGM,
notice of which accompanies this Report and Accounts. The
Directors retiring by rotation at the forthcoming AGM are Eliot
Forster, Alastair Smith and Trevor Nicholls. All three Directors,
being eligible, offer themselves for re-election. In relation to
the re-elections of each of the Directors, the Board is satisfied
that the three Directors continue to be effective and to
demonstrate commitment to the Company.
Details of the Directors offering themselves for re-election at
the forthcoming AGM can be found on pages 130 and 131.
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 28 April 2023, 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
Conifer Management, LLC
11,854,734
4.4%
Baillie Gifford & Co Limited
10,124,371
3.7%
Directors’ shareholdings
The beneficial interests of the Directors in the share capital of
the Company at 31 December 2022 and at 28 April 2023 were
as follows:
31 December
2022
number of
shares
28 April
2023
number of
shares
Non-executive Directors
Eliot Forster
169,593
169,593
Trevor Nicholls
107,455
107,455
Paul Fry
-
-
Mark Goldberg
-
-
Christina Coughlin
-
-
Executive Directors
Alastair Smith
431,100
431,100
Tony Gardiner
8,196
8,196
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 65.
>
51
Governance
The middle market price of the Company’s ordinary shares on
31 December 2022 was 115p and the range during the period
was 41p to 142p with an average price of 100p.
Information on Directors’ remuneration and share option
rights is given in the Remuneration Committee Report on
pages 62 to 66.
Research and development
During the year, the Group expensed through the income
statement £11.10 million (2021: £13.48 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 diagnostic programmes resulted in an amortisation
charge of £0.82 million (2021: £0.82 million). An impairment
charge of £5.23 million (2021: £nil) was recognised in the
year in relation to previously capitalised Affimer® reagents
development costs. This reflects the change in focus within the
Diagnostics Division to build on its M&A strategy; whereby the
development of diagnostic products incorporating Affimer®
reagents is now expected to occur through new development,
manufacturing, and distribution partners as the Diagnostics
Division expands in future periods. As the M&A activity was
still in progress at 31 December 2022, it was not possible to
provide certainty on the timelines of future acquisitions or,
therefore, the timeframe in which cashflows from Affimer®
reagent developed products would be received, necessitating
an impairment charge to be recognised.
Derivatives and financial instruments
The Group’s policy and exposure to derivatives and financial
instruments, along with the Group’s management of capital,
liquidity credit, interest rate and foreign currency risk, is set
out at Note 19.
In October 2022, the Group issued senior unsecured
convertible bonds (‘the Bonds’) of £55.00 million to a fund
advised by Heights Capital Ireland LLC, a global equity and
equity-linked focussed investor. The Bonds were issued at
95% par value with total net proceeds of £52.25 million, and
accrue interest at an annual rate of 6.5% payable quarterly
in arrears. The Bonds contain various conversion and
redemption features together with embedded derivatives in
conjunction with an ordinary host debt liability. Further details
of the Bonds are set out at Note 19.
Employment and environment
The Group’s policies on health and safety, the environment,
and employee-related matters are disclosed in the Corporate
Governance Report under the corporate social responsibility
section on pages 58 to 59.
Political and charitable donations
There were no charitable or political donations in the year
ended 31 December 2022 (2021: £nil).
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.
Re-appointment of auditor
A resolution for the re-appointment as auditor of BDO LLP and
the fixing of their remuneration will be put to the forthcoming
Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the Company will be held at the
Royal Society of Medicine, 1 Wimpole Street, London W1G 0AE
on Wednesday 28 June 2023 at 10:30 a.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
130 to 131 of this report.
This Director’s Report and the Strategic Report on pages 13 to
34, were approved by the Board on 28 April 2023 and signed
on its behalf.
By order of the Board
Dr Alastair Smith
Tony Gardiner
Chief Executive Officer
Chief Financial Officer &
Company Secretary
28 April 2023
28 April 2023
Avacta Group plc (Registered number - 04748597)
Directors’ Report
(Continued...)
52
Avacta Report and Accounts 2022
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.
Corporate Governance Report
Delivering growth
1
Establishing a strategy and business model which
promote long-term value for shareholders
See Business Overview on page 16.
2
Seek to understand and meet shareholder needs
and expectations
See this section and the ‘Corporate Governance’
section of our website www.avacta.com.
3
Consider wider stakeholder and social responsibilities
and their implications for long-term success
See this section and the ‘Corporate Governance’
section of our website.
4
Embed effective risk management, considering
both opportunities and threats, throughout the
organisation
See this section and the ‘Principal Risks and
Uncertainties’ on pages 42 to 44.
Maintain a dynamic management framework
5
Maintain the Board as a well-functioning, balanced
team led by the Chairman
See this section and the ‘Corporate Governance’
section of our website.
6
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 46 to 48.
7
Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
See this section.
8
Promote a corporate culture that is based on ethical
values and behaviours
See this section and the ‘Corporate Governance’
section of our website.
9
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.
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.
>
53
Governance
Establishing a strategy and business
model which promotes long-term value for
shareholders
Our Mission
Our Mission is to improve patients’ lives and grow shareholder
value by developing novel cancer therapies and powerful
diagnostics using our proprietary Affimer® and pre|CISION™
platforms.
Investment opportunity
• Avacta operates through two separate divisions in both the
oncology drug development market and the diagnostics sector.
• The Diagnostics Division is growing through an M&A-led
strategy with a vision to build a European IVD business with
global reach serving both professionals and consumers.
• The Therapeutics Division is leveraging Avacta’s proprietary
technologies to develop innovative oncology drugs that
transform treatment outcomes to improve cancer
patients’ lives.
Technology platforms
• Avacta’s has two proprietary platform technologies – the
Affimer® and pre|CISION™ platforms – which are being used
to deliver a robust portfolio of differentiated therapeutic and
diagnostic products that address 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|CISION™ platform provides a mechanism for
targeting the release of active chemotherapy to the
tumour, thereby reducing systemic exposure and the
side effects associated with many commonly used cancer
treatments the effectiveness of which is limited by toxicity
and tolerability for patients.
Therapeutics Division
• Avacta Therapeutics Division’s strategy is to build an
in-house pipeline of first-in-class and best-in-class targeted
cancer therapies and immunotherapies, and to accelerate
the development of its platform technologies by working
with partners.
• 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
2023 and the Phase Ib dose expansion study to commence
shortly afterwards.
• The second pre|CISION™ 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|CISION™ drug candidates to grow its innovative
therapeutic pipeline.
• There is also significant longer term potential to combine
the two platforms to create next generation targeted ‘drug
conjugate’ cancer treatments.
• Avacta has a partnership with LG Chem which is developing
Avacta’s AVA004 PD-L1 antagonist with Affimer XT® half-life
extension. Avacta also has a joint venture with Daewoong
called AffyXell Therapeutics which is developing next
generation stem cell therapies that have been engineered
to express and secrete immunomodulatory Affimer
proteins targeting CD40L and TNFR. Both partnerships’ first
programmes are at the IND-enabling stage.
• Avacta has also licensed its pre|CISIONTM platform in a tightly
defined agreement with POINT Biopharma to develop tumour
microenvironment targeting of radionucleotides.
Diagnostics Division
• There are many factors driving growth in the diagnostic
sector, such as an aging population, the increasing incidence
of chronic and infectious diseases, the influence of tech
companies through digital health and devices and the increase
in awareness of self-testing in a post-pandemic world.
• The diagnostics sector is quite fragmented with a large
number of small and medium sized companies, which
provides ideal conditions for an M&A-led growth strategy
to consolidate European diagnostics SMEs in a market with
strong future growth drivers.
• The Group has a platform and an experienced management
team to execute an M&A-led strategy to build a leading
European IVD business.
• Integrating the unique Affimer® platform to develop new
immunodiagnostic products and to help differentiate acquired
products gives a clear advantage in a competitive market.
• Initiating its M&A-led growth strategy in October 2022, Avacta
completed the acquisition of UK-based IVD distributor Launch
Diagnostics (‘Launch’), which has provided Avacta with well-
established sales channels in the professional, centralised
hospital laboratory testing market in the UK and France.
• Avacta Diagnostics continues to actively pursue other
opportunities to build a fully integrated diagnostics business.
These focus on expanding our routes to market in Europe for
both professional and consumer testing products, while adding
further IVD products suitable for these markets to our portfolio.
The Board believes that following the significant fundraise
during 2022 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 M&A-led development
of its Diagnostics Division in the medium term to drive
significant future shareholder value.
Corporate Governance Report
(Continued...)
54
Avacta Report and Accounts 2022
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 2022,
the Board comprised five Non-executive Directors and two
Executive Directors. The profiles of the Directors are set out
on pages 46 to 48.
The division of responsibilities between the Chairman and
the Chief Executive Officer is clearly defined. The Chairman’s
primary responsibility is ensuring the effectiveness of the
Board and setting its agenda. The Chairman is not involved
in the day-to-day business of the Group. The Chief Executive
has direct charge of the Group on a day-to-day basis and is
accountable to the Board for the financial and operational
performance of the Group.
The Chairman, Dr Eliot Forster, was appointed as Chairman
to the Board in June 2018. Prior to his appointment to the
Board, he was not involved with any part of the Avacta
Group and has been considered to be independent since
his appointment. Eliot has significant experience within
US and European life science companies, in particular in
the therapeutics area where the Group’s Affimer® and
pre|CISION™ technologies have a significant focus. Eliot’s
time commitment is one to two days per month.
The Chief Executive Officer, Dr Alastair Smith, was appointed
to the Board in September 2007. Alastair has over 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.
The Board met regularly throughout the year, either in
person or by video conferencing methods, with ad hoc
meetings also being held. The role of the Board is to provide
leadership of the Company and to set strategic aims but
within a framework of prudent and effective controls which
enable risk to be managed to acceptable levels. The Board
has agreed the Schedule of Matters reserved for its decision,
which includes ensuring that the necessary financial and
human resources are in place to meet its obligations to
its shareholders and others. It also approves acquisitions
and disposals of businesses, 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.
>
55
Governance
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 more
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.
Corporate Governance Report
(Continued...)
Board meetings
Committee meetings
Audit
Remuneration
Position
Attended
Position
Attended
Position
Attended
Eliot Forster
Non-executive Chairman
13/13
Member
2/3
Member
1/1
Trevor Nicholls
Non-executive
13/13
Member
3/3
Chairman
1/1
Paul Fry
Non-executive
13/13
Chairman
3/3
Member
1/1
Mark Goldberg
Non-executive
13/13
-
-
-
-
Christina Coughlin¹
Non-executive
8/11
-
-
-
-
Alastair Smith
Executive CEO
13/13
-
3/3
-
1/1
Tony Gardiner
Executive CFO
13/13
-
3/3
-
1/1
The table below shows the number of Board meetings and Committee meetings held during the period and the attendance of each
Director.
1 Christina Coughlin was appointed as a Non-executive Director on 18 March 2022.
56
Avacta Report and Accounts 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 current role as Chief Financial Officer of Argenta
and his prior 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
• To make recommendations to the Board in relation to the
appointment of the external auditor and their remuneration,
following appointment by the shareholders in the Annual
General Meeting, and to review and be satisfied with the
auditor’s independence, objectivity and effectiveness on an
ongoing basis
• To implement the policy relating to any non-audit services
performed by the external auditor
Risk management
The Board is responsible for risk management and reviewing
the internal controls systems. The internal control systems are
designed to manage rather than eliminate the risk of failure to
achieve business objectives, and can only provide reasonable,
and not absolute assurance against material misstatement or
loss. Given the relative size of the Group, there is not currently
a separate internal audit function.
The Group highlights potential financial and non-financial
risks which may impact on the business as part of the risk
management procedures in the form of a Risk Register. The
Board receives these reports periodically 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 periodic 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 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.
The Group maintains appropriate insurance cover in respect
of actions taken against the Directors because of their roles,
as well as against material loss or claims against the Group.
The insured values and type of cover are comprehensively
reviewed on a periodic basis.
Remuneration Committee
The Remuneration Committee is chaired by Trevor Nicholls and
the other current members of the Committee are Eliot Forster
and Paul Fry, all of whom are Non-executive Directors. The
Committee meets at least once a year with the Chief Executive
and Chief Financial Officer in attendance as appropriate.
The terms of reference of the Remuneration Committee
include the following responsibilities:
• To determine the framework and policy, together with the
individual packages of the remuneration of the Executive
Directors and certain other senior executives of the Group
• To 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 Group
Communications Director together with 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 as the Investor Meet Company platform.
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 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.
>
57
Governance
Corporate Governance Report
(continued...)
The Company also holds science days, where investors and
significant private shareholders are provided with an update on
the Group’s scientific activities by members of the Board and
Senior Management Team.
Share dealing code
The Company has adopted a code on dealings in relation to the
securities of the Group. The Company requires the Directors
and other relevant employees of the Group to comply with the
Share Dealing Code and takes proper and reasonable steps to
secure their compliance.
Corporate social responsibility
The Board recognises the importance of corporate social
responsibility and seek to take account of all of the interests
of the Group stakeholders, including shareholders, partners,
employees, customers and suppliers. The Board wants to
establish and maintain an environment in which employees,
suppliers and partners act in an ethical and socially responsible
way in operating the business and the impact of its activities
relating to health, safety and environmental issues.
Employee welfare and engagement
It is the Group’s policy to involve employees in its progress,
development and performance. The Executive Directors
regularly engage with employees, most of whom are either
shareholders or holders of share options, to seek their views
and provide briefings and presentations on key developments
and strategy. 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 2022 the Group continued 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.
Training, career development and promotion
of disabled persons
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.
Equal opportunities and diversity
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.
The Group does not have formal diversity quotas but
recognises that a diverse employee profile is fundamental to
the business. The gender profile across all employees as at 31
December 2022 was 51% female and 49% male.
Health and safety
The Group has well-defined health and safety policies
and procedures, complying with current legislation and
safeguarding staff, contractors and visitors. Alastair Smith is the
Executive Director responsible for health and safety, chairing
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.
Ethics and compliance
The Group’s Diagnostics and Therapeutics Divisions operate
around product development, drug development and clinical
trials where there are highly regulated ethical frameworks
in place.
Political and charitable donations
The Group does not make political or charitable donations,
although charitable fundraising by employees is encouraged.
Modern slavery and human trafficking statement
The Group ensures that all employees are eligible to work in
their country of employment. The majority of our workforce
are employed directly; however, where agency workers are
utilised, it is ensured that these same checks are performed
by the supplier.
The Group has a Whistleblowing Policy where anyone who raise
concerns through a defined process are protected. In addition,
there are robust policies in place that ensure equality amongst
colleagues, as well as deploying a zero-tolerance approach to
harassment and bullying in all areas of the business.
Environment and greenhouse gas emissions
Due to the nature of the Group’s divisions, it has a
low environmental impact, and seeks to minimise any
environmental impact of its operations and complies with
relevant regulations and legislation.
Work started during the period to develop the processes to
measure and report on the Group’s Scope 1 and Scope 2 GHG
emissions. This will allow the Group to better identify areas of
focus in minimising the impact of its operations, as well as setting
effective targets, and these will be refined over future periods.
58
Avacta Report and Accounts 2022
In the table below:
• Scope 1 emissions cover direct emissions of greenhouse gas
from fuel combustion
• Scope 2 emissions cover emissions from purchased electricity
• Scope 3 emissions cover all other indirect emissions that
occur in a company’s value chain. They are not included in
the reporting below but the Group will continue to develop
its processes to allow measurement and reporting on these
emissions in future periods.
2022 GHG Emissions (CO2e metric tons)
Scope 1
24
Scope 2
59
Total 1
83
1 Of the amounts disclosed above, a total of 23 CO2e metric tons of Scope
1 GHG emissions and 5 CO2e metric tons of Scope 2 GHG emissions were
contributed by Launch Diagnostics in the period following its acquisition
in October 2022.
Dr Eliot Forster
Chairman
28 April 2023
59
Governance
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
• To implement any policies relating to any non-audit services
performed by the external auditor
The Committee is authorised by the Board to seek and obtain
any information it requires from any officer or employee of the
Company and to obtain external legal or other independent
professional advice as is deemed necessary by it.
Meetings of the Committee are held 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.
Due to its size and structure, the Group does not have an
internal audit function. This is a matter which the Committee
reviews annually.
External auditor
The external auditor is required to give the Committee information
about policies and processes for maintaining their independence
and compliance regarding the rotation of audit partners and staff.
The Committee considers all relationships between the external
auditor and the Company to ensure that they do not compromise
the auditor’s judgement or independence, particularly with the
provision of non-audit services.
BDO LLP were appointed auditor to the Group following a
tender process in 2021. The Audit Committee considers that
the Company’s relationship with the Group’s auditor is working
well and the Committee remains satisfied with the effectiveness
of the auditor. Piers Harrison retains the role of engagement
partner. There are no contractual obligations restricting the
Company’s choice of external auditor.
Significant issues relating to the financial
statements
The specific issues considered by the Audit Committee in the
period under review, in relation to the financial statements, are
shown below.
Use of judgements and estimates
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 together with further M&A transactions in the
Diagnostics Division.
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.
60
Avacta Report and Accounts 2022
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.
Capitalisation of development costs – Judgements arise as to
whether research and development projects meet the criteria
under IAS 38 to be capitalised. Further information on the
specific judgements made is included within Note 1I.
Investment in associates – Judgements arise as to whether
the relationship with AffyXell is an associate or an equity
investment. The rationale for the presentation as an associate
is disclosed in Note 23.
Estimates:
The Committee also considered the assumptions and
estimation uncertainties as at 31 December 2022 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
underlying these tests is disclosed in Note 10.
Acquisitions – Estimation uncertainty is inherent in the methods
used to determine the fair value of the assets acquired and
liabilities assumed, as set out in Note 26. These include the
valuation of acquired intangible assets and the estimate of
deferred contingent consideration payable.
Convertible bond – Determining the fair value of the embedded
derivative within the convertible bond, both at inception and at
the reporting date. See Note 22.
Paul Fry
Chairman of the Audit Committee
28 April 2023
61
Governance
Introduction
This report sets out the remuneration policy for the period
ended 31 December 2022. The Company is listed on AIM and
therefore is not required to prepare a remuneration report
complying with the disclosure requirements under section
420 of the Companies Act (2006) or the Companies (Directors’
Remuneration Policy and Directors’ Remuneration Report)
Regulations 2019 or to comply with the Financial Conduct
Authority Listing Rules.
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:
• Determining the framework and policy, and the individual
packages of the remuneration of the Executive Directors
and certain other senior executives, including pension rights
and any compensation payments
• Determining targets for performance-related pay and share
incentive schemes
• Reviewing employee benefit structures
• Appointing and using remuneration consultants
• Producing an annual report of the Committee’s
remuneration policy
Remuneration policy of Executive Directors
Avacta’s remuneration policy for Executive Directors is
designed to attract, retain and motivate executives of
the highest calibre to ensure that the Group is managed
successfully for the benefit of shareholders. The policy is
to pay base salary at median quartile levels with attractive
short-term and longer-term performance incentives. Share
ownership is encouraged and all the Executive Directors are
directly interested in the share capital of the Company or hold
share options over the share capital.
In setting remuneration levels, the Committee 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 has grown significantly in size, scope and value over the
last few years. Positions are benchmarked from time-to-time
against comparable roles in biotech and AIM companies,
with the first full exercise for a number of years carried out in
January 2023 with the support of an external adviser, Mercer.
Mercer does not provide any other services to the Group and
is a signatory to the UK Remuneration Consultants Group
Code of Conduct.
Executive Directors – Short-term incentives
Basic salary
Basic salary is determined by several factors including market
rates, together with the individual Director’s experience,
responsibilities and performance. Individual salaries of
Directors were reviewed by the Remuneration Committee on
1 February 2023, following the completion of the independent
Mercer review. The review highlighted that the Executive
Directors salaries had fallen below the lower quartile of the
comparator group of companies and were not representative
of the status of the Company, now a clinical stage biotech
within the AIM100 index. The Committee considered the
output of the Mercer review and the difference that existed
between current basic salaries and the median salaries that
had been obtained from the review. The gap to bring salaries
back in line with median salaries was considered too large
to adjust in one change and it was agreed that the salaries
would be increased with effect from 1 February 2023 and
that a further similar increase would be considered by the
Committee in February 2024. It was agreed that, with effect
from 1 February 2023, the salary of the Chief Executive Officer
would be increased from £286,000 to £343,000 per annum
and the salary of the Chief Financial Officer be increased from
£197,600 to £237,000 per annum.
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 for the
2022 financial year was 50% of basic salary. Following the
Mercer review, which showed that the bonus potential of the
Executive Directors was again below the lower quartile of the
comparator group of companies, it was agreed for the 2023
financial year to increase the maximum bonus that could be
earned to 100% 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.
For the year ending 31 December 2021, the Chief Executive
Officer was paid a bonus equivalent to 35% of his current
basic salary and the Chief Financial Officer was paid a bonus
equivalent to 26% of his current basic salary. The bonuses
were paid in March 2022.
Remuneration Committee Report
62
Avacta Report and Accounts 2022
For the year ending 31 December 2022, 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 48% of his basic salary and the Chief
Financial Officer should be paid a bonus equivalent to 36% of
his basic salary. The bonuses were paid in March 2023.
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.
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 51 and their interests in options held over shares
in the Company are set out on page 65.
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 most
recent awards being granted in June 2020. No awards were
made during 2021 or 2022.
The June 2020 LTIP award was granted with vesting conditions
based on the share price performance of the Group being
maintained at an average share price in excess of 110p per
share over a three-year period ending on 31 December 2022
and to the extent that they had vested could not be exercised
before 31 December 2022, subject to Board having discretion
to review the exercise conditions in exceptional circumstances.
The Committee reviewed the vesting conditions and the
supporting share price data and it was agreed that the LTIP
award would vest in full for the Executive Directors that had
received the award. Details of the options that vested are set
out on page 65.
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
Nil
6 months
Tony Gardiner
4 January 2016
Nil
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. 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
Nil
1 month
Trevor Nicholls
2 August 2013
Nil
1 month
Paul Fry
9 January 2020
Nil
1 month
Mark Goldberg
17 August 2021
Nil
1 month
Christina Coughlin
18 March 2022
Nil
1 month
The Non-executive Directors are encouraged to maintain a
shareholding within the Company and their current holdings
are set out on page 51. 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 65). 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.
63
>
Governance
Remuneration Committee Report
(continued...)
2022
Basic salary
and fees
2022
Bonus
2022
Benefits
in kind
2022
Total
2022
4Pension
contributions
2021
Total
2021
Pension
contributions
£000
£000
£000
£000
£000
£000
£000
Non-executive Directors
Eliot Forster
100
-
-
100
-
94
-
Trevor Nicholls
40
-
-
40
-
36
-
Paul Fry
40
-
-
40
-
36
-
¹Mark Goldberg
45
-
-
45
-
15
-
²Christina Coughlin
37
-
-
37
-
-
-
³Mike Owen
-
-
-
-
-
8
-
Executive Directors
Alastair Smith
286
136
5
427
17
376
17
Tony Gardiner
190
70
2
262
11
228
11
738
206
7
951
28
793
28
The above emoluments include all payments paid to the Directors whilst Directors of the Group.
1.
Mark Goldberg was appointed as a Director on 17 August 2021.
2.
Christina Coughlin was appointed as a Director on 18 March 2022. The above emoluments include basic salary payable in respect of
the year ended 31 December 2022.
3.
Mike Owen resigned as a Director on 24 March 2021.
4.
Pension contributions consist of employer defined contribution benefits, excluding salary sacrifice contributions made by the employees,
plus cash payments in lieu of pension.
The number of Directors accruing benefits under money purchase pension schemes was two (2021: two).
The share-based payments charge to the Consolidated Income Statement in respect of Directors’ share options was £3,248,000
(2021: £1,049,000). The aggregate gain made by Directors on the exercise of share options was £nil (2021: £nil).
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
The remuneration of each of the Directors of the Company for the year ended 31 December 2022 is set out below. These values are
included within the audited accounts.
64
Avacta Report and Accounts 2022
Details of Directors’ interests in share options in the Executive Share Option Schemes
At 1
Jan 2022
Granted
Waived /
Lapsed
Exercised
At 31
Dec 2022
Exercise
price
pence
Date
from which
exercisable
Date
of grant
Expiry
date
Eliot Forster
340,000
-
-
-
340,000
25.0p
11 June 2021
7 Jan 2019
7 Jan 2029
340,000
-
-
-
340,000
Alastair Smith
141,176
-
(141,176)
-
-
50.0p
9 Jan 2016
9 Jan 2012
9 Jan 2022
Alastair Smith
128,764
-
-
-
128,764
118.5p
15 Feb 2020
15 Feb 2016
15 Feb 2026
Alastair Smith
74,325
-
-
-
74,325
74.0p
16 Dec 2016
16 Dec 2016
16 Dec 2026
Alastair Smith
96,900
-
-
-
96,900
25.0p
7 Jan 2019
7 Jan 2019
7 Jan 2029
Alastair Smith
224,663
-
-
-
224,663
25.0p
Note 1
7 Jan 2019
7 Jan 2029
Alastair Smith
466,774
-
-
-
466,774
17.25p
Note 1
14 May 2020
14 May 2030
Alastair Smith
4,000,000
-
-
-
4,000,000
10.0p
31 Dec 2022
14 May 2020
14 May 2030
5,132,602
-
(141,176)
-
4,991,426
-
Tony Gardiner
210,968
-
-
-
210,968
118.5p
15 Feb 2020
15 Feb 2016
15 Feb 2026
Tony Gardiner
22,973
-
-
-
22,973
74.0p
16 Dec 2016
16 Dec 2016
16 Dec 2026
Tony Gardiner
56,960
-
-
-
56,960
25.0p
7 Jan 2019
7 Jan 2019
7 Jan 2029
Tony Gardiner
117,375
-
-
-
117,375
25.0p
Note 1
7 Jan 2019
7 Jan 2029
Tony Gardiner
170,108
-
-
-
170,108
17.25p
Note 1
14 May 2020
14 May 2030
Tony Gardiner
1,000,000
-
-
-
1,000,000
10.0p
31 Dec 2022
14 May 2020
14 May 2030
1,578,384
-
-
-
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.
Details of Directors’ joint interests in the Joint Share Ownership Plan (‘JSOP’)
At 1 Jan 2022
Granted
Waived
Exercised
At 31 Dec 2022
Date of agreement
Alastair Smith
1,144,149
-
-
-
1,144,149
9 Jan 2012
Alastair Smith
495,851
-
-
-
495,851
15 Feb 2016
1,640,000
-
-
-
1,640,000
-
Tony Gardiner
150,000
-
-
-
150,000
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.
>
65
Governance
1 The share prices above have been rebased to a common starting
point of 1.0, with performance over time then measured relative to
this starting point, to allow a better comparison of performance
over time.
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 28 April 2023 and was signed on its
behalf by:
Dr Trevor Nicholls
Chairman of the Remuneration Committee
28 April 2023
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 (rebased1) and the FTSE All-
Share Healthcare Index (rebased) for the period ended 31
December 2022.
66
Avacta Report and Accounts 2022
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 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.
Statement of Directors’ Responsibilities
in Respect of the Annual Report and the
Financial Statements
67
Governance
Governance
68
Avacta Report and Accounts 2022
Independent auditor’s report to the members of Avacta Group plc
Opinion on the financial statements
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2022 and of the Group’s loss for the year then ended;
•
the Group financial statements have been properly prepared in accordance with UK adopted
international accounting standards;
•
the Parent Company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
•
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of Avacta Group plc (the ‘Parent Company’) and its subsidiaries
(the ‘Group’) for the year ended 31 December 2022 which comprise the Consolidated Statement of Profit
or Loss and Other Comprehensive Income, the Consolidated Statement of Financial Position, the
Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company
Balance Sheet, the Company Statement of Changes in Equity and the notes to the financial statements,
including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial
statements is applicable law and UK adopted international accounting standards. The financial reporting
framework that has been applied in the preparation of the Parent Company financial statements is
applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102
The Financial Reporting Standard in the United Kingdom (United Kingdom Generally Accepted
Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’
assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of
accounting included:
- evaluating the appropriateness of the going concern assessment performed by the Directors with regard
to the requirements of the applicable financial reporting framework, including the period covered;
- testing the mathematical accuracy of the going concern model prepared by the Directors and the
underlying calculations used within it;
- agreeing the level of cash held by the Group as at 31 March 2023 and cash movements post year end;
- Discussing and challenging the Directors’ financial forecasts and the underlying key assumptions, by
recalculating operating cash burn rates and challenging the plausibility of the Directors’ going concern
Independent Auditor’s Report to
the Members of Avacta Group plc
69
Governance
Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
scenario analysis by recalculating the impact potential cost reduction measures which would have the
effect of extending the cash runway; and
- Checking the adequacy of disclosures made in the annual report in respect of going concern, against
the knowledge obtained during the course of audit.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent
Company’s ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in
the relevant sections of this report.
Overview
Coverage
95.8% (2021: 97%) of Group loss
100% (2021: 100%) of Group revenue
99.6% (2021: 99.9%) of Group total assets
Key audit matters
2022
2021
1 Revenue recognition
X
X
2 Acquisition accounting
X
3 Convertible bond valuation
X
Materiality
Group financial statements as a whole
£1.55m (2021:£1.28m) based on 5.8% (2021: 4.4%) of Loss
before tax, impairment, bond charges and acquisition related
expenses.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including
the Group’s system of internal control and assessing the risks of material misstatement in the financial
statements. We also addressed the risk of management override of internal controls, including assessing
whether there was evidence of bias by the Directors that may have represented a risk of material
misstatement.
We assessed the Parent entity and three of the Group subsidiaries to be significant components. The
Group audit team completed full scope audits on significant components. For non-significant components
we have performed either Group level analytical procedures with specifiied audit procedures over large
or higher risk balances or Group level analytical procedures without additional substantive audit
procedures.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified, including those which had the
greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial
70
Avacta Report and Accounts 2022
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matter
How the scope of our audit addressed
the key audit matter
Revenue
Recognition
The
Group’s
accounting
policy
for
revenue
recognition is
disclosed
in
note 1C on
page 73 and
note
3
on
page 83
The
Group’s
revenue
of
£9,653,000 (2021: £2,941,000) is
generated from a number of
different revenue streams which
principally arise from the provision
of services and reagent sales in
the diagnostics and therapeutics
operating segments.
We assessed the audit risk for
each
revenue
stream
and
identified that the significant risk
existed in areas stated below:
-
Milestone achievement may
not be accurately identified or
may
be
fraudulently
misrepresented, leading to
inaccurate
reporting
of
revenues for therapeutics and
diagnostics services licencing
revenue streams.
-
An inappropriate policy of
recognising revenue under
IFRS
15
Revenue
From
Contracts With
Customers
may be applied to R&D
licences either fraudulently to
misstate revenues or in error.
This may arise either due to
an
incorrect
assessment
being
made
of
whether
revenue should be recognised
at a point in time or over time,
or
because
an
incorrect
assessment is made of the
distinction
between
the
Group’s
performance
obligations. This is primarily
the case in contracts where
R&D licences are granted and
other services are supplied
under the same agreement.
The result in either case could
be that revenues are not
recorded in the correct period
or accurately according to the
requirements of IFRS 15.
-
Revenue in any stream may
not be appropriately deferred
when the provision of goods
or services has not taken
place in the financial year,
leading
to
early
revenue
Our audit procedures in response to the
assessed risks were substantive in
nature. On a sample basis we:
-
Agreed
a
sample
of
revenue
recorded to supporting documents
such as invoice, contract and proof of
delivery / performance.
-
Obtained supporting evidence as to
whether the milestones that were
claimed to have been achieved were
actually met.
-
Assessed for each sample in our
selection
whether
the
revenue
recognition
policy
applied
was
appropriate under IFRS 15 and
consistent with the nature of the
contract
entered
into
with
the
customer.
Key observations
Based on the procedures performed we
consider that that the delivery of
intellectual property under licence, or
services, had occurred and revenue had
been recognised in the appropriate
amount and in the correct period
according
to
the
contractual
documentation in place.
86
95
71
Governance
Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
recognition
and
understatement of deferred
income, whether due to fraud
or error.
Taking these factors together, the
audit of revenue recognition had a
significant effect on the direction,
supervision and review of the
Group audit and hence we treated
revenuerecognition as a key audit
matter.
Acquisition
accounting
Note
26
Acquisition
accounting
Avacta Group plc acquired all of
the issued share capital of
Launch Diagnostics Holdings
Limited (“Launch”) on 21 October
2022 for total consideration
of £40.8m. We identified a
significant risk in relation to the
acquisition accounting and
treated this as a key audit
matter..
The risk of material misstatement
arose due to the following
factors:
-
The valuation of the
separable intangibles
may not be accurate and
the customer
relationships, brand and
goodwill may
be misstated as a result,
together with the
deferred tax to be
recognised on the
separable intangible
assets acquired.
-
The fair value of the
purchase consideration,
and therefore the value
of the goodwill arising on
acquisition, may be
incorrectly calculated.
-
Accounting policy
differences may not all
have been identified, or
accurately quantified, in
recording the Launch
assets and liabilities in
the Group’s financial
statements.
We used internal valuations specialists
iin order to assist with our interrogation of
the model used to calculate the value of
the acquired intangible assets. Our
scrutiny of the calculations included
consideration of the types of intangible
asset acquired in the light of our
knowledge and understanding of Launch,
the suitability of the discount rate used in
the valuation, the application of additional
risk premia and the profile of future cash
flows.
We considered the work performed by
management on the accounting policies
of Launch, which were based on UK
GAAP and required conversion to IFRS,
and challenged management on areas
where the acquired business’ accounting
policies may differ from the Group’s
policies. We further recalculated the
associated deferred tax liability arising on
the acquired intangibles.
We tested the accuracy of the deferred
contingent
consideration
(which
is
measured
at
£nil)
payable
by
reperforming the calculation by reference
to
the
underlying
share
purchase
agreement and management forecasts of
sales of the relevant product groups.
Key observations
Based on the procedures performed we
consider that the valuation of separable
intangible assets acquired and the
associated deferred tax, the valuation of
the purchase consideration and the
alignment of Launch accounting policies
with those of the Group are appropriate.
.
Convertible
bond Note 22
In October 2022, the Group’s
newly-incorporated financing
vehicle, Avacta Finance Jersey
Limited, issued a £52.5m
convertible bond.
We used internal quantitative valuations
specialists in order to assist with our
evaluation of management’s approach.
This involved assessment of the choice
of modelling approach applied as well as
interrogation of the operation of the
72
Avacta Report and Accounts 2022
This is a technically complex
transaction because the bond is
required to be accounted for in
part as a derivative, which relies
on modelling techniques based
on a combination of observable
and unobservable inputs being
calculated using an appropriate
valuations model.
There is a risk the calculation is
not accurately prepared and
therefore that the value of the
derivative element of the bond,
together with the associated fair
value movement on the
respective elements is materially
misstated.
The risk of material misstatement
also arises in the choice of
accounting policy, which required
careful assessment of the
provisions of IAS 32 and IFRS 9.
We therefore treated the
accounting for the bond as a key
audit matter.
model itself and verification of the
observable inputs to their respective
sources (for example, the historic Avacta
Group plc share price volatility) and
sensitivity testing of unobservable inputs
(for example, credit spread assumptions
and certain beta factor inputs).
We performed technical analysis of the
required accounting treatment under the
applicable accounting standards in order
to determine whether the accounting
policy adopted by management was
appropriate both in the Group as well as
in
the
Parent
Company
financial
statements.
Key observations
Based on the procedures performed we
consider that the accounting for the
convertible bond and the valuation of the
derivative are appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect
of misstatements. We consider materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality,
we use a lower materiality level, performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also
take account of the nature of identified misstatements, and the particular circumstances of their occurrence,
when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole
and performance materiality as follows:
Group financial statements
Parent company financial
statements
2022
£m
2021
£m
2022
£m
2021
£m
Materiality
£1.55m
£1.28m
£0.96m
£1.00m
Basis
for
determining
materiality
5.8% of loss
before
tax,
impairment,
bond charges
and acquisition
related
expenses
4.4% of loss
before tax
62% of Group
Materiality.
78%
of
Group
Materiality
Rationale for the
benchmark
applied
We considered adjusted loss
before tax to be the most
appropriate
performance
We allocated a share of Group
materiality based on the size and
our assessment of the risk of
73
Governance
Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
measure at this stage in the
Group’s life cycle.
material misstatement of the Parent
company component
Performance
materiality
£0.83m
£0.75m
0.64m
£0.60m
Basis
for
determining
performance
materiality
Set based on
66.7%
of
materiality. We
have set this
higher this year
as
management
is
open
to
considering
adjustments
and
usually
corrects
all
known
misstatements.
Set based on
60%
of
materiality.
Set based on
66.7%
of
materiality. We
have set this
higher this year
as
management
is
open
to
considering
adjustments
and
usually
corrects
all
known
misstatements.
Set based on 60%
of materiality.
Rationale for the
percentage
applied
for
performance
materiality
Following evaluation, inter alia, of the expected total value of known and
likely misstatements and the nature of our planned testing.
Component materiality
We set materiality for each component of the Group based on a percentage of between 25% and 75%
(2021: 75%-90%) of Group materiality dependent on the size and our assessment of the risk of material
misstatement of that component. Component materiality ranged from £0.3m to £0.95m (2021: £0.45m to
£1.16m). In the audit of each component, we further applied performance materiality levels of 66.7%
(2021:60%) of the component materiality to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess
of £29,000 (2021:£32,000). We also agreed to report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the Report and Accounts other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit,
or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
74
Avacta Report and Accounts 2022
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we
are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as
described below.
Strategic
report
and
Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic report and the Directors’ report for
the financial year for which the financial statements are prepared is
consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent
Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the Directors’ report.
Matters
on
which we are
required
to
report
by
exception
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
the Parent Company financial statements are not in agreement with
the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not
made; or
we have not received all the information and explanations we require
for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities , the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and
for such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the
Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
Non-compliance with laws and regulations
75
Governance
Independent Auditor’s Report to
the Members of Avacta Group plc (continued…)
Based on:
Our understanding of the legal and regulatory frameworks that are applicable to Avacta Group plc
and the industry in which it operates;
Discussion with management and those charged with governance, the Audit Committee and in-
house legal counsel;
and
Obtaining and understanding of the Group’s policies and procedures regarding compliance with
laws and regulations;
we considered that the most significant laws and regulations which are directly relevant to specific
assertions in the financial statements are those related to the reporting framework (UK adopted
International Accounting Standards and the Companies Act 2006), labour regulations and taxation
in the United Kingdom.
Our procedures in respect of the legal and regulatory compliance included:
Review of minutes of meetings of those charged with governance for any instances of non-
compliance with laws and regulations;
Review of correspondence with regulatory and tax authorities for any instances of non-
compliance with laws and regulations;
Review of financial statement disclosures and agreeing to supporting documentation;
Involvement of tax specialists in the audit; and
Review of legal expenditure accounts to understand the nature of expenditure incurred.
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our
risk assessment procedures included:
Enquiry with management and those charged with governance, and the Audit Committee
regarding any known or suspected instances of fraud;
Obtaining an understanding of the Group’s policies and procedures relating to:
o
Detecting and responding to the risks of fraud; and
o
Internal controls established to mitigate risks related to fraud.
Obtaining an understanding how senior management monitors those procedures and controls;
Considering potential fraud drivers including financial or other pressures, opportunity, and
personal or corporate motivations;
Review of minutes of meeting of those charged with governance for any known or suspected
instances of fraud;
Discussion amongst the engagement team as to how and where fraud might occur in the financial
statements; and
Performing analytical procedures to identify any unusual or unexpected relationships that may
indicate risks of material misstatement due to fraud.
Based on our risk assessment, we considered the areas most susceptible to fraud to be the processing of
non-routine journal entries, revenue recognition, acquisition accounting, impairment of intangibles and
capitalisation of expenditure.
Our procedures in respect of the above included:
Testing a sample of journal entries throughout the year, which met a defined risk criteria, by
agreeing to supporting documentation;
Performing audit procedures in relation to the occurrence of revenue and the timing and accuracy
of revenue recognition
Assessing significant estimates and judgments made by management in relation to key areas
such as valuation and impairment of intangibles, convertible bond accounting and acquisition
accounting. In the audit of both we used internal specialists to assist the audit team as indicated
in the KAM section of this report.
Assessing capitalisation of expenditure by testing a sample of capitalised items, performing a
review of income statement accounts which may include capital items and testing a sample of
capitalisation journals.
76
Avacta Report and Accounts 2022
We also communicated relevant identified laws and regulations and potential fraud risks to all
engagement team who were all deemed to have appropriate competence and capabilities and remained
alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
Parent Company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Piers Harrison (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Cambridge, UK
28 April 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
77
Avacta Report and Accounts 2022
Financial
Statements
80
Consolidated Statement of
Profit or Loss
81
Statement of Financial Position
82
Consolidated Statement of
Changes in Equity
83
Consolidated Statement of
Cash Flows
84
Notes to the Consolidated
Financial Statements
120
Company Balance Sheet
121
Company Statement of
Changes in Equity
122
Notes to the Company Balance
Sheet
8
5
2
79
Financial Statements
Consolidated Statement of Profit or Loss
and Other Comprehensive Income for the
Year Ended 31 December 2022
The notes on pages 84 to 119 form an integral part of these financial statements.
Note
2022
£000
2021
£000
Continuing operations
Revenue
3
9,653
2,941
Cost of sales
(2,410)
(924)
Gross profit
7,243
2,017
Research costs
(11,100)
(13,480)
Manufacturing costs
-
(2,143)
Selling, general and administrative expenses
(11,232)
(8,136)
Adjusted EBITDA
(15,089)
(21,742)
Impairment charge
10
(5,225)
-
Depreciation expense
11,21
(1,904)
(1,462)
Amortisation expense
10
(1,050)
(821)
Share of loss of associate
23
(1,152)
-
Acquisition-related expenses
26
(735)
-
Share-based payment expense
5
(7,490)
(5,058)
Operating loss
6
(32,645)
(29,083)
Convertible bond – professional fees
22
(2,287)
-
Convertible bond – interest expense
22
(2,606)
-
Convertible bond – revaluation of derivative
22
(4,100)
-
Finance income
91
17
Other finance costs
(95)
(128)
Loss before tax
(41,642)
(29,194)
Taxation
8
2,102
2,820
Loss from continuing operations
(39,540)
(26,374)
Discontinued operation
Profit from discontinued operation
27
351
58
Loss for the period
(39,189)
(26,316)
Foreign operations – foreign currency translation differences
46
4
Other comprehensive income
46
4
Total comprehensive loss for the period
(39,143)
(26,312)
Loss per share:
Basic and diluted
9
(15.35p)
(10.55p)
Loss per share – continuing operations
Basic and diluted
9
(15.48p)
(10.57p)
80
Avacta Report and Accounts 2022
The notes on pages 84 to 119 form an integral part of these financial statements.
The financial statements on pages 80 to 119 were approved by the Board of Directors on 28 April 2023 and signed on its behalf by:
Dr Alastair Smith
Tony Gardiner
Chief Executive Officer
Chief Financial Officer
Consolidated Statement of Financial
Position as at 31 December 2022
Note
2022
£000
2021
£000
Assets
Property, plant and equipment
11
2,380
2,612
Right-of-use assets
21
5,418
1,729
Intangible assets
10
26,324
7,925
Investment in associate
23
2,976
-
Non-current assets
37,098
12,266
Inventories
12
1,681
189
Trade and other receivables
13
5,579
4,327
Income tax receivable
6,510
2,750
Cash and cash equivalents
14
41,781
26,191
55,551
33,457
Assets held for sale
27
-
1,279
Current assets
55,551
34,736
Total assets
92,649
47,002
Liabilities
Lease liabilities
21
(3,753)
(1,412)
Deferred tax
16
(2,845)
-
Non-current liabilities
(6,598)
(1,412)
Trade and other payables
15
(8,423)
(3,731)
Lease liabilities
21
(1,361)
(291)
Convertible bond - debt
22
(18,729)
-
Convertible bond - derivatives
22
(39,100)
-
(67,613)
(4,022)
Liabilities directly associated with the assets held for sale
27
-
(346)
Current liabilities
(67,613)
(4,368)
Total liabilities
(74,211)
(5,780)
Net assets
18,438
41,222
Equity
Share capital
17
26,685
25,472
Share premium
18
62,184
54,530
Reserves
18
(4,434)
(4,687)
Retained earnings
18
(65,997)
(34,093)
Total equity
18,438
41,222
81
Financial Statements
Consolidated Statement of Changes in Equity for the
Year Ended 31 December 2022
Share
capital
£000
Share
premium
£000
Other
reserve
£000
Translation
reserve
£000
Reserve
for own
shares
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 January 2021
25,343
54,137
(1,729)
-
(2,961)
(12,861)
61,929
Loss for the period
-
-
-
-
-
(26,316)
(26,316)
Other comprehensive income for the period
-
-
-
4
-
-
4
Total comprehensive loss for the period
-
-
-
4
-
(26,316)
(26,312)
Transactions with owners of the Company:
Exercise of share options
129
393
-
-
-
-
522
Equity-settled share-based payment
-
-
-
-
-
5,083
5,083
129
393
-
-
-
5,083
5,605
Balance at 31 December 2021
25,472
54,530
(1,729)
4
(2,961)
(34,093)
41,222
Loss for the period
-
-
-
-
-
(39,189)
(39,189)
Other comprehensive income for the period
-
-
-
46
-
-
46
Total comprehensive loss for the period
-
-
-
46
-
(39,189)
(39,143)
Transactions with owners of the Company:
Issue of shares
949
7,448
8,397
Exercise of share options
264
206
-
-
-
-
470
Transfer of own shares
-
-
-
-
206
(206)
-
Equity-settled share-based payment
-
-
-
-
-
7,490
7,490
1,213
7,654
-
-
-
7,284
16,357
Balance at 31 December 2022
26,685
62,184
(1,729)
50
(2,755)
(65,997)
18,438
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
82
Avacta Report and Accounts 2022
Consolidated Statement of Cash Flows for the Year
Ended 31 December 2022
Note
2022
£000
2021
£000
Cash flows from operating activities
25
(15,953)
(22,656)
Interest received
75
17
Interest elements of lease payments
20
(202)
(139)
Income tax (paid) / received
(168)
2,291
Withholding tax paid
(184)
(19)
Net cash used in operating activities
16,432
(20,506)
Cash flows from investing activities
Purchase of plant and equipment
10
(558)
(1,162)
Proceeds from sale of plant and equipment
50
-
Acquisition of subsidiary, net of cash acquired
26
(24,878)
-
Disposal of discontinued operation, net of cash disposed of
27
705
-
Transaction costs related to disposal of discontinued operation
27
(160)
-
Acquisition of right-of-use assets
(165)
-
Purchase of intangible assets
11
(36)
(152)
Decrease in balances on short-term deposit
-
20,017
Net cash (used in) / generated from investing activities
(25,042)
18,703
Cash flows from financing activities
Proceeds from issue of share capital
9,016
-
Transaction costs related to issue of share capital
(618)
-
Proceeds from exercise of share options
470
522
Principal elements of lease payments
20
(800)
(290)
Proceeds from issue of convertible bonds
22
52,250
-
Transaction costs related to issue of convertible bonds
22
(3,414)
-
Net cash from financing activities
56,904
232
Net increase / (decrease) in cash and cash equivalents
15,430
(1,571)
Cash and cash equivalents at 1 January 2022
26,191
27,894
Effects of movements in exchange rates on cash held
160
4
41,781
26,327
Cash and cash equivalents forming part of assets held for sale
-
(136)
Cash and cash equivalents at 31 December 2022
41,781
26,191
The accompanying notes form an integral part of the financial statements.
83
Financial Statements
1
Accounting policies
Avacta Group plc (the ‘Company’) is a company incorporated and
domiciled in the UK. These consolidated financial statements for
the year ended 31 December 2022 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 £39.1 million and
operating cash outflows of £16.0 million for the year ended 31
December 2022. 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 M&A opportunities, product development
projects and the Launch 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 development
programmes and the Diagnostics Division’s M&A activity.
Whilst there are inherent uncertainties regarding the cash
flows associated with the development of both the therapeutic
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:
• As at 31 December 2022, the Group’s short-term deposits
and cash and cash equivalents were £41.8 million (2021:
£26.2 million)
• The Group has a tax refund in relation to R&D tax credits for
the 2021 financial year of £2.8 million which was received in
January 2023.
• The Group does have external borrowings in the form of
a £55 million convertible bond with quarterly amortisation
settlements by the issue of new equity, or by cash at the
discretion of the Group.
• 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 2024. The sources of income could come through
the licensing of assets/targets from the proprietary Affimer®
and pre|CISION™ platforms or 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 - arise from the application of IFRS 15 to
the Group’s revenue streams, as disclosed in Note 1C, as to
the timing and nature of revenue recognised in relation to the
achievement of milestones.
Notes to the Consolidated
Financial Statements
84
Avacta Report and Accounts 2022
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.
Capitalisation of development costs – Judgements arise as to
whether research and development projects meet the criteria
under IAS 38 to be capitalised. Further information on the
specific judgements made is included within Note 1I.
The Directors consider that the assumptions and estimation
uncertainties at 31 December 2022 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. Further
information on the key assumptions underlying these tests is
disclosed in Note 10.
Acquisitions - Estimation uncertainty is inherent in the methods
used to determine the fair value of the assets acquired and
liabilities assumed, as set out in Note 26.
Convertible bond - Determining the fair value of the embedded
derivative within the convertible bond, both at inception and at
the reporting date. See Note 22.
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 2022, 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 IAS 1 Presentation of Financial Statements:
•
Classification of Liabilities as Current or Non-current
•
Non-current Liabilities with Covenants
• Amendments to IFRS 16 Leases: Lease Liability in a Sale and
Leaseback
• IFRS 17 Insurance Contracts and Amendments to IFRS 17
Insurance contracts: Initial Application of IFRS 17 and IFRS 9 –
Comparative Information
• Amendments to IAS 12 Income Taxes: Deferred Tax related
to Assets and Liabilities arising from a Single Transaction
• Amendments to IAS 1 Presentation of Financial Statements:
Disclosure of Accounting Policies
• Amendments to IAS 8 Accounting policies, Changes in
Accounting Estimates and Errors: Definition of Accounting
Estimates
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 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.
85
>
Financial Statements
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.
Notes to the Consolidated
Financial Statements (continued…)
Type of product/
service
Segment
Nature and timing of satisfaction of performance
obligations
Revenue recognition policies
Custom Affimer®
development
projects
Diagnostics
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.
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.
Research and
development
licences
Diagnostics /
Therapeutics
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 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.
Reagent sales
Diagnostics
Customers obtain control of diagnostic reagent sales when
the goods are delivered to and have been accepted at
their premises. Invoices are generated at that point in time
and are usually 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.
Service contracts
Diagnostics
The performance obligation, of maintaining equipment to
a sufficient standard, is satisfied over the life of the service
contract.
Revenue is recognised over
time on a straight-line basis as
the service is provided.
86
Avacta Report and Accounts 2022
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.
E – Finance income and finance costs
The Group’s finance income and finance costs include:
• interest income;
• interest expense on lease liabilities (see note 1L); and
• interest expense and gains/losses on revaluation of
derivative in respect of convertible bond (see Note 1J).
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, net of current tax payable. 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.
The estimated useful lives of property, plant and equipment
for current and comparative periods are as follows:
Laboratory equipment
3 to 10 years
Fixtures and fittings
3 to 10 years
Leasehold improvements
5 to 10 years
Motor vehicles
3 to 5 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
87
>
Financial Statements
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.
Research 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, 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.
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.
• Brand: amortised over the useful life of the asset, being
ten years.
• Customer relationships: amortised over the useful life of
the asset, being 15 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 103). 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.
Notes to the Consolidated
Financial Statements (continued…)
88
Avacta Report and Accounts 2022
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
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.
Cash and cash equivalents comprise cash balances and
short-term deposits. Cash and bank overdrafts are offset and
the net amount reported in the balance sheet when there is
a legally enforceable right to offset the recognised amounts,
there is an intention to settle on a net basis and interest is
charged on a net basis.
Financial liabilities are classified as measured at amortised
cost or FVPL. A financial liability is classified as at FVPL if
it is classified as held-for-trading, it is a derivative or it is
designated as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in profit or
loss. Other financial liabilities are subsequently measured
at amortised cost using the effective interest method.
Interest expense and foreign exchange gains and losses
are recognised in profit or loss. Other financial liabilities are
subsequently measured at amortised cost using the effective
interest method. Interest expense and foreign exchange gains
and losses are recognised in profit or loss.
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.
89
>
Financial Statements
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 – Discontinued 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.
Notes to the Consolidated
Financial Statements (continued…)
90
Avacta Report and Accounts 2022
N – Fair value measurement
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal,
or in its absence, the most advantageous market to which
the Group has access at that date. The fair value of a liability
reflects its non-performance risk.
A number of the Group’s accounting policies and disclosures
require the measurement of fair values, for both financial and
non-financial assets and liabilities.
If there is no quoted price in an active market, then the
Group uses valuation techniques that maximise the use of
observable inputs and minimise the use of unobservable
inputs. The chosen valuation technique incorporates all of the
factors that market participants would take into account in
pricing a transaction.
The best evidence of the fair value of a financial instrument
on initial recognition is normally the transaction price – i.e. the
fair value of the consideration given or received.
O - Alternative performance measures
This Group presents an alternative performance measure
(‘APM’), adjusted EBITDA, in the Consolidated Statement of
Profit or Loss. Adjusted EBITDA is presented to enhance
an investor’s evaluation of ongoing operating results, by
facilitating both a meaningful comparison of results between
periods and identification of the underlying cash used by
operations within the business. Items of expenditure included
from the adjusted EBITDA measure are those where the
relative magnitudes year-on-year are not directly reflective
of year-on-year performance, or are not closely linked to
the underlying cashflows from operations. There is a clear
reconciliation between adjusted EBITDA and operating loss in
the Consolidated Statement of Profit or Loss. It is noted that
the above APM is not a substitute for IFRS measures, and may
not be directly comparable to similarly titled measures used
by other companies.
>
91
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
2022
2021
£’000
£’000
UK
2,532
540
France
1,296
86
Rest of Europe
158
25
North America
179
815
South Korea
5,481
1,400
Rest of Asia
7
74
9,653
2,940
During the year, transactions with two external customers, both in the Therapeutics segment, amounted individually to 10% or
more of the Group’s revenues from continuing operations, being £3,798,000 and £1,682,000 respectively. In the year ended 31
December 2021 transactions with three external customers, two in the Therapeutics segment and one in the Diagnostic segment,
amounted to 10% or more of the Group’s revenues from continuing operations, being £966,000, £736,000 and £523,000
respectively.
2
Segment Reporting
Operating segments
In the view of the Board of Directors, the Group has two (2021:
three) distinct reportable segments, which are Diagnostics
and Therapeutics (2021: 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 in the current
and prior year are as follows:
Diagnostics: development and sale of innovative, next generation
diagnostic solutions and disruptive immunodiagnostic products,
including Affimer® reagents.
Therapeutics: development of novel cancer therapies harnessing
proprietary technology.
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 74% (2021: 82%) of total revenue.
The revenue analysis below, for continuing operations, is based
on the country of registration of the customer:
92
Avacta Report and Accounts 2022
>
Operating segment analysis 2022
Diagnostics
£000
Therapeutics
£000
Central
overheads1
£000
Total
(continuing)
£000
Animal Health
(discontinued)
£000
Revenue
4,172
5,481
-
9,653
412
Cost of goods sold
(2,282)
(128)
-
(2,410)
(118)
Gross profit
1,890
5,353
-
7,243
294
Research costs
(2,309)
(8,791)
-
(11,100)
-
Selling, general and administrative expenses
(4,706)
(2,403)
(4,122)
(11,231)
(240)
Adjusted EBITDA
(5,125)
(5,841)
(4,122)
(15,088)
54
Impairment charge
(5,225)
-
-
(5,225)
-
Depreciation expense
(627)
(1,269)
(9)
(1,905)
(11)
Amortisation expense
(1,033)
(8)
(9)
(1,050)
-
Share of loss of associate
-
(1,152)
-
(1,152)
-
Acquisition-related expenses
-
-
(735)
(735)
-
Share-based payment expense
(1,438)
(2,713)
(3,339)
(7,490)
-
Segment operating loss
(13,448)
(10,983)
(8,214)
(32,645)
43
1Central overheads, which relate to operations of the Group functions, are not allocated to the operating segments.
Operating profit/loss is the measure of profit or loss regularly reviewed by the Board. Other items comprising the Group’s loss
before tax are not monitored on a segmental basis.
The information reported to the Board does not include balance sheet information at the segment level. 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, except for £2,281,000 located in France (2021: all material
segmental non-current assets located in the UK).
93
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
1Central overheads, which relate to operations of the Group functions, are not allocated to the operating segments
Operating segment analysis 2021
Diagnostics
£000
Therapeutics
£000
Central
overheads1
£000
Total
(continuing)
£000
Animal Health
(discontinued)
£000
Revenue
779
2,162
-
2,941
1,604
Cost of goods sold
(223)
(700)
-
(923)
(506)
Gross profit
555
1,462
-
2,017
1,098
Research costs
(3,665)
(9,815)
-
(13,480)
(39)
Manufacturing
(2,143)
-
-
(2,143)
-
Selling, general and administrative expenses
(2,893)
(1,899)
(3,344)
(8,136)
(915)
Adjusted EBITDA
(8,146)
(10,252)
(3,344)
(21,742)
144
Amortisation expense
(821)
-
-
(821)
-
Depreciation expense
(505)
(950)
(7)
(1,462)
(50)
Share-based payment expense
(984)
(2,981)
(1,093)
(5,058)
(25)
Segment operating loss
(10,456)
(14,183)
(4,444)
(29,083)
69
94
Avacta Report and Accounts 2022
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
Year ended 31 December 2022
Diagnostics
£000
Therapeutics
£000
Continuing
operations
£000
Animal Health
£000
Total
£000
Nature of revenue
Sale of goods
19
-
19
864
883
Provision of services
260
1,058
1,318
740
2,058
Licence-related income
500
1,104
1,604
-
1,604
779
2,162
2,941
1,604
4,545
Timing of revenue recognition
Products or services transferred at a point in time
520
1,105
1,625
1,540
3,165
Products or services transferred over time
259
1,057
1,316
64
1,380
779
2,162
2,941
1,604
4,545
Diagnostics
£000
Therapeutics
£000
Continuing
operations
£000
Animal Health
£000
Total
£000
Nature of revenue
Sale of goods
3,779
-
3,779
259
4,038
Provision of services
393
229
622
153
775
Licence-related income
-
5,252
5,252
-
5,252
4,172
5,481
9,653
412
10,065
Timing of revenue recognition
Products or services transferred at a point in time
3,780
5,251
9,031
391
9,422
Products or services transferred over time
393
229
622
21
643
4,173
5,480
9,653
412
10,065
>
95
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
31 December
2022
£000
31 December
2021
£000
Receivables, which are included in “Trade and other receivables”
2,442
1,278
Receivables, which are included in “Assets held for sale”
-
124
Contract assets
28
19
Contract liabilities
(273)
(51)
2022
£000
2021
£000
Staff costs:
Wages and salaries
8,089
7,147
Social security costs
993
819
Contributions to defined contribution plans
397
373
Share-based payment charges
7,490
5,058
16,969
13,397
Average number of employees (including Directors) during the year:
Commercial and operational
91
106
Administrative
29
27
120
133
b) Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
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 £51,000 (2021: £579,000) in contract liabilities at the beginning of the period, £31,000 (2021: £579,000) has been
recognised as revenue for the period ended 31 December 2022.
The amount of revenue recognised in 2022 from performance obligations satisfied (or partially satisfied) in previous periods was
£1,650,000 (2021 from those performance obligations satisfied in 2020: £369,000). 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
The remuneration of the Directors (including the details of the highest paid Director) is set out on page 64 of the Remuneration
Committee Report.
96
Avacta Report and Accounts 2022
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 £7,490,000 (2021: £5,083,000).
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.
Note 1 – 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 2 – This option provides that they can, if they have not lapsed, be exercised in full on or after 30 June 2023.
Note 3 - This option provides that they can, if they have not lapsed, be exercised in full on or after 30 September 2024.
Note 4 - This option provides that they can, if they have not lapsed, be exercised in full on or after 31 March 2024.
Note 5 - This option provides that they can, if they have not lapsed, be exercised in full on or after 30 June 2024.
Note 6 – 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.
Options granted in relation to collaboration agreements
Grant date
Employees
entitled
Number of
options
Vesting
conditions
Exercise
price (p)
Earliest exercise
date/Vested
Expiry date
Options granted as employee benefits
15 February 2016
3
550,700
Time served
118.5
Vested
15 February 2026
16 December 2016
2
97,298
Unconditional
74.0
Vested
16 December 2026
24 August 2018
9
186,783
Time served
25.0
Vested
23 August 2028
7 January 2019
2
153,860
Unconditional
25.0
Vested
6 January 2029
7 January 2019
1
340,000
Time served
25.0
Vested
6 January 2029
7 January 2019
3
453,151
Technical, commercial and
share price performance
25.0
Vested
6 January 2029
1 July 2019
3
215,666
Time served
30.0
Vested
30 June 2029
25 March 2020
17
1,462,507
Time served
25.0
Vested
24 March 2030
14 May 2020
3
797,915
Technical, commercial and
share price performance
17.25
Vested
14 May 2030
14 May 2020
3
6,500,000
Share based
10.0
Vested
14 May 2030
14 May 2020
1
1,000,000
Time served and commercial
performance
25.0
Note 1
14 May 2030
28 July 2021
5
3,250,000
Time served
10.0
Vested
28 July 2031
28 July 2021
1
450,000
Time served and commercial
performance
10.0
Vested
28 July 2031
28 July 2021
2
100,000
Time served
10.0
Note 2
28 July 2031
8 October 2021
1
3,000,000
Time served
10.0
Note 3
8 October 2031
8 October 2021
4
475,000
Time served
10.0
Note 4
8 October 2031
2 December 2021
1
250,000
Time served
10.0
Note 5
2 December 2031
31 May 2019
1
1,161,582
Technical/regulatory
milestones
29.2
Note 6
31 May 2026
97
>
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
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 option pricing model. 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 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.
No new options were granted during the year. The inputs into the Black-Scholes models for the options granted during the prior
year were as follows:
2022
£000
2021
£000
Weighted average share price at date of grant
-
120.84p
Weighted average exercise price
-
10.00p
Weighted average fair value at date of grant
-
111.79p
Expected volatility
-
83.1%
Expected life
-
5.0 years
Risk-free rate
-
1.0%
Expected dividends
-
Nil
98
Avacta Report and Accounts 2022
The options outstanding at 31 December 2022 had a range of exercise prices from 10p to 118.5p (2021: 10p to 118.5p), a
weighted average exercise price of 17.45p (2021: 17.99p), and a weighted average remaining contractual life of 6 years and 31
weeks (2021: 8 years).
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 2022, five employees (2021: five) had joint interests in
2,782,306 (2021: 2,932,306) 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 24 February 2022 245,246 ordinary shares of 10p each were
issued in relation to the Free Share award based on the closing middle market price of 53.0p on 24 February 2022.
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 2022, 24 eligible
employees had made binding commitments to subscribe for partnership shares during the period ending 31 December 2022.
Free share awards are met through a combination of reallocating ordinary shares which have been forfeited by leavers from within
the SIP and through the issue of new ordinary shares when required. 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.
As at 31 December 2022, the Trustee held 1,010,042 (2021: 1,361,886) ordinary shares of 10p on behalf of the SIP.
Options
Weighted average
exercise price (p)
Options
Weighted average
exercise price (p)
At start of period
25,545,539
17.99
22,904,846
22.23
Granted during the year
-
-
8,125,000
10.00
Exercised during the year
(2,640,682)
18.08
(1,298,072)
39.61
Forfeited or lapsed during the year
(2,460,395)
22.33
(4,186,235)
19.03
Outstanding at end of period
20,444,462
17.45
25,545,539
17.99
Exercisable at end of period
14,491,213
17.94
3,786,653
38.76
2022
2021
The number and weighted average exercise price of share options are as follows:
99
>
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
6
Operating loss
Operating loss is stated after charging/(crediting):
Note
2022
£000
2021
£000
Lease expense relating to lease of low-value assets
21
9
2
Lease expense relating to short-term leases
21
33
27
Depreciation of property, plant and equipment1
11
1,029
1,195
Depreciation of right-of-use assets2
21
932
316
Net loss on disposal of property, plant and equipment
40
29
Inventories recognised as an expense during the period
2,179
82
Employee benefit expense, including share-based payment charges
4
16,970
13,397
Auditor’s remuneration:
• Audit services in respect of the Company’s financial statements
197
120
• Audit services in respect of the Company’s subsidiaries’ financial statements
35
30
1 Of which, £19,000 (2021: £nil) relates to depreciation of laboratory equipment forming part of the supply of goods or provision of
services to customers and is presented within ‘Cost of sales’ in the ‘Consolidated Statement of Profit or Loss’
2 Of which, £37,000 (2021: £nil) relates to depreciation of laboratory equipment right-of-use assets forming part of the supply of
goods or provision of services to customers and is presented within ‘Cost of sales’ in the ‘Consolidated Statement of Profit or Loss’
7
Net finance costs
2022
£000
2021
£000
Convertible bond – professional fees
(2,287)
-
Convertible bond – interest expense
(2,606)
-
Convertible bond – revaluation of derivative
(4,100)
-
Finance income
91
17
Other finance costs
(90)
(128)
(8,992)
(111)
8
Taxation on loss on ordinary activities
2022
£000
2021
£000
Current tax:
Current period
(2,010)
(2,729)
Changes in estimates related to prior years
(29)
(91)
Deferred taxation:
Origination and reversal of temporary differences
(63)
-
Tax on loss on ordinary activities
(2,102)
(2,820)
The tax on loss in the year relates solely to continuing operations.
100
Avacta Report and Accounts 2022
Factors affecting the tax credit for the current period
The current tax credit for the year is lower (2021: lower) than the standard rate of corporation tax in the UK of 19.0% (2021: 19.0%).
The differences are explained below.
2022
£000
2021
£000
Loss on ordinary activities before taxation
(38,211)
(29,137)
Loss on ordinary activities before taxation multiplied by the
standard rate of corporation tax in the UK of 19.0% (2021: 19.0%)
(7,260)
(5,536)
Effect of tax rates in foreign jurisdictions
2
-
Effects of:
• Expenses not deductible for tax purposes
3,774
1,086
• Tax-exempt income
(684)
-
• Deferred tax losses not recognised
4,112
4,451
• Government tax incentives
(2,230)
(2,840)
• Withholding tax expense
184
19
(2,102)
(2,820)
9
Earnings per ordinary share
The calculation of earnings per ordinary share is based on the profit or loss for the period and the weighted average number of
equity voting shares in issue excluding own shares held jointly by the Avacta Employees’ Share Trust and certain employees and
the shares held within the Avacta Share Incentive Plan (‘SIP’).
At 31 December 2022, 20,444,462 options (2021: 25,545,539) 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.
At 31 December 2022, 5,314,010 potentially dilutive shares relating to the convertible bond (2021: nil) 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 the convertible bond are set out in Note 22.
In January 2023, 3,068,421 new ordinary shares of 10 pence each were issued in settlement of the quarterly principal of £2.75
million and interest repayment of £0.89 million in respect of the unsecured convertible bond.
In February 2023, 2,400,000 new ordinary shares of 10 pence each were issued and allotted in relation to a Notice of Conversion
in respect of £2.85 million of the £55.00 million unsecured convertible bonds.
In April 2023 2,906,097 new ordinary shares of 10 pence each were issued in settlement of the quarterly principal of £2.6 million
and interest repayment of £0.80 million in respect of the unsecured convertible bond.
Continuing
operations
2022
Discontinued
operation
Total
Continuing
operations
2021
Discontinued
operation
Total
Loss (£000)
(39,540)
351
(39,189)
(26,374)
58
(26,315)
Weighted average number
of shares (number)
255,369,066
249,478,070
Basic and diluted loss per
ordinary share (pence)
(15.48p)
0.13p
(15.35p)
(10.57p)
0.02p
(10.55p)
101
>
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
10
Intangible fixed assets
Goodwill
£000
Development
costs
£000
Brands
£000
Customer
relationships
£000
Software
£000
Patents
£000
Total
£000
Cost
At 1 January 2021
4,655
10,200
-
-
215
206
15,276
Internally developed/additions
-
-
-
-
79
73
152
Disposals
-
-
-
-
-
-
-
Reclassification to assets held for sale
(3,116)
-
-
-
(30)
-
(3,146)
At 31 December 2021
1,539
10,200
-
-
264
279
12,282
Acquisitions – business combinations
12,694
-
1,216
10,746
3
-
24,658
Acquisitions – purchases
-
-
-
-
5
31
36
Disposals
-
-
-
-
(38)
(46)
(84)
Effect of movements in exchange rates
-
-
4
23
-
-
27
At 31 December 2022
14,233
10,200
1,220
10,769
231
264
36,917
Amortisation and impairment
At 1 January 2021
2,340
3,332
-
-
183
4
5,859
Amortisation
-
822
-
-
35
10
867
Disposals
-
-
-
-
(29)
-
(29)
Reclassification to assets held for sale
(2,340)
-
-
-
-
-
(2,340)
At 31 December 2021
-
4,154
-
-
189
14
4,357
Amortisation
-
821
24
138
58
8
1,049
Disposals
-
-
-
-
(38)
-
(38)
Impairment loss
-
5,225
-
-
-
-
5,225
Effect of movements in exchange rates
-
-
-
-
-
-
-
At 31 December 2022
-
10,200
24
138
209
22
10,593
Net book value
At 31 December 2022
14,233
-
1,196
10,631
22
242
26,324
At 31 December 2021
1,539
6,046
-
-
75
265
7,925
At 31 December 2020
2,315
6,868
-
-
32
202
9,417
Development costs
The specific judgements applied by management when
capitalising development costs are discussed in Note 1I.
Development costs related to the internally generated
intangible assets associated with the development of the
Affimer® diagnostics technology. At 31 December 2022, the
Group was part way through an M&A-led growth strategy
for the Diagnostics Division and so the composition of the
Diagnostics Division at the balance sheet date resulted in
uncertainty in the timing and value of future cash flows to be
generated from these intangible assets.
As such, an impairment of the remaining carrying amount of
£5,225,000 has been recognised.
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.
102
Avacta Report and Accounts 2022
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. Goodwill is not amortised, but is tested annually for
impairment at this CGU level. 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, goodwill can be allocated to the following CGUs /
group of CGUs as follows:
2022
£000
2021
£000
Therapeutics
1,539
1,539
Diagnostics
26
12,694
-
Goodwill
14,233
1,539
Impairment review
An impairment review of the Group’s intangible and tangible non-current assets was conducted at 31 December 2022. Impairment
tests are mandatory for CGUs containing goodwill acquired in a business combination. Impairment tests for other CGUs are
carried out when an indication of impairment is considered to exist, such as operating losses.
Therapeutics
The recoverable amount of this CGU was based on a value-in-use calculation, using discounted cash-flow projections.
The key assumptions used in the estimation of the recoverable amount are considered to be as follows:
• Modelled growth over a ten-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 the development pipeline and ongoing contracts, and the length of time expected to be taken to generate
ongoing commercial revenues from such work.
• Revenue growth is forecasted to increase to circa £25 million over a five-year timeframe. Growth rates then decline 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 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 3.5% (2021: 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 19.0% (2021: 17%), derived from a weighted-average cost-of-capital of 15% (2021: 15%)
Using the assumptions listed above, the value in use of the Therapeutics CGU exceeds its carrying amount by £43.2 million.
The quantum of some longer-term commercial licence revenues and milestones included in management’s expectations presents
a risk that reasonably possible changes in the assumption that these longer-term revenues and/or milestones are achieved may
result in an impairment to the CGU.
With an assumption that long-term growth rates remain unchanged, the pre-tax discount rate would need to increase to 26.0% to
result in an impairment.
103
>
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
Diagnostics
The composition of the Diagnostics segment changed during the year due to the acquisition of Launch Diagnostics Holdings Ltd
(see Note 26). As at 31 December 2022, goodwill has been allocated to the group of CGUs comprising the Diagnostics segment.
The recoverable amount of this group of CGUs was based on a value-in-use calculation, using discounted cash-flow projections.
The key assumptions used in the estimation of the recoverable amount are considered to be as follows:
• Modelled growth over a five-year forecast period, reflecting management’s best estimate of revenue growth and gross margins.
Revenue growth is forecasted to increase from £19.4 million in the Year 1 to £39.3 million by the end of the forecast period,
representing a compound annual growth rate of 19.3%
• Terminal growth rate after the modelled growth phase of 3.5%, approximating the annual long-term inflation rate
• Pre-tax discount rate of 16.5%, derived from a weighted-average cost-of-capital of 12.4%
Using the assumptions listed above, the value in use of the Diagnostics CGU exceeds its carrying amount by £2.6 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 17.5% or the revenue CAGR would need to reduce
to 18.6% for the recoverable amount to be equal to the carrying amount.
The non-current assets belonging to the group of Diagnostics and Therapeutics CGUs at 31 December 2022 can be allocated as follows:
Category
Diagnostics
Therapeutics
Diagnostics
Therapeutics
Tangible assets
1,522
845
1,597
1,001
Right-of-use assets
1,608
3,809
725
1,004
Investment in associate
-
2,976
-
1,538
Goodwill
12,694
1,539
-
-
Brands
1,196
-
-
-
Customer relationships
10,631
-
-
-
Development costs
-
-
6,046
-
Patents
242
-
267
-
Software
2
2
40
20
Total
27,895
9,170
8,675
3,563
2022
2021
104
Avacta Report and Accounts 2022
11
Property, plant and equipment
Assets in the
course of
construction
£000
Leasehold
improvements
£000
Laboratory
equipment
£000
Office fixtures
and fittings
£000
Motor
vehicles
£000
Total
£000
Cost
At 1 January 2021
301
1,913
5,089
402
-
7,705
Additions
99
549
431
83
-
1,162
Transfers
(229)
97
91
41
-
-
Disposals
(28)
-
(4)
(51)
-
(83)
Reclassification to
assets held for sale
-
(125)
(175)
(42)
-
(342)
At 31 December 2021
143
2,434
5,432
433
-
8,442
Acquisitions - purchases
-
17
310
225
6
558
Acquisitions – business
combinations
-
-
123
43
127
293
Transfers
(143)
7
138
(2)
-
-
Effect of movements in
exchange rates
-
-
1
-
2
3
Disposals
-
(1,064)
(292)
(89)
-
(1,445)
At 31 December 2022
-
1,394
5,712
610
135
7,851
Depreciation
At 1 January 2021
-
1,066
3,624
319
-
5,009
Charge for the period
-
550
572
73
-
1,195
Disposals
-
-
(2)
(51)
-
(53)
Reclassification to
assets held for sale
-
(117)
(166)
(38)
-
(321)
At 31 December 2021
-
1,499
4,028
303
-
5,830
Charge for the period
-
382
543
101
3
1,029
Disposals
-
(1,019)
(283)
(88)
-
(1,389)
Effect of movements in
exchange rates
-
-
-
-
-
-
At 31 December 2022
-
862
4,289
317
3
5,471
Net book value
At 31 December 2022
-
532
1,423
293
132
2,380
At 31 December 2021
143
935
1,404
130
-
2,612
At 31 December 2020
301
847
1,465
83
-
2,696
105
>
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
13
Trade and other receivables
2022
£000
2021
£000
Trade receivables
2,442
1,278
Prepayments
1,760
2,468
Other receivables
535
442
Contract assets
28
19
Contingent consideration receivable
27 717
-
Other taxes and social security
97
120
5,579
4,327
2022
£000
2021
£000
Under 30 days overdue
726
-
Between 30 and 60 days overdue
197
-
Between 60 and 90 days overdue
88
191
Over 90 days overdue
79
525
1,090
716
14
Cash and cash equivalents
2022
£000
2021
£000
Cash and cash equivalents
41,781
26,191
41,781
26,191
Trade and other receivables denominated in currencies other than sterling comprise £7,000 (2021: £1,271,000) of trade
receivables denominated in US dollars and £1,153,000 (2021: £nil) denominated in euros. The fair values of trade receivables are
the same as their book values.
Trade receivables includes £nil due from related parties (2021: £1,023,000), see Note 23.
The ageing analysis of trade receivables past due is as follows:
No material provision against trade receivables has been made, the overdue receivables relate to a number of customers for
whom there is no recent history of default, nor any other indication that settlement will not be forthcoming. The other classes
within trade and other receivables do not contain impaired assets and are considered to be fully recoverable.
12
Inventories
2022
£000
2021
£000
Raw materials and components
198
189
Finished goods and goods for resale
1,483
-
1,681
189
106
Avacta Report and Accounts 2022
15
Trade and other payables
2022
£000
2021
£000
Trade payables
2,487
561
Other taxes and social security
876
210
Accruals
3,767
2,836
Other payables
152
73
Deferred consideration
868
-
Contract liabilities
273
51
8,423
3,731
16
Deferred tax liabilities
At 31 December 2022
2022
At 1 January
2022
Recognised
in profit or
loss
Acquisitions
– business
combinations
Effect of
movements in
exchange rates
Net
Deferred tax
assets
Deferred tax
liabilities
Development costs
(1,512)
1,512
-
-
-
-
-
Interest in associate
-
(744)
-
-
(744)
(744)
-
Trading losses
760
555
275
-
1,590
1,316
274
Intangible assets
-
41
(2,991)
(7)
(2,957)
-
(2,957)
Property, plant and
equipment
752
(729)
(185)
-
(162)
-
(162)
Convertible bond
-
(572)
-
-
(572)
(572)
-
-
63
(2,901)
(7)
(2,845)
-
(2,845)
At 31 December 2021
2021
At 1 January
2021
Recognised
in profit or
loss
Acquisitions
– business
combinations
Effect of
movements in
exchange rates
Net
Deferred tax
assets
Deferred tax
liabilities
Development costs
(1,305)
(207)
-
-
(1,512)
(1,512)
-
Trading losses
1,006
(246)
-
-
760
760
-
Property, plant and
equipment
299
453
-
-
752
752
-
-
-
-
-
-
-
-
>
107
Trade and other payables denominated in currencies other than sterling comprise £92,000 (2021: £163,000) of trade payables
denominated in US dollars, £951,000 (2021: £47,000) denominated in euros, and £13,000 (2021: £7,000) denominated in CHF. The
fair values of trade payables are the same as their book values.
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
17
Share capital
2022
£000
2021
£000
Allotted, called up and fully paid:
- 266,081,715 (2021: 253,950,626) ordinary shares of 10p each
26,608
25,395
- 19,327,344 deferred shares of 0.4p each
77
77
26,685
25,472
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items, because it is not probable that future taxable
profits will be available against which the Group can use the benefits:
Deferred tax has been measured using the substantively enacted rate due to prevail in the year of reversal.
During the year, a total of 2,640,682 ordinary 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 18.08p.
On 18 October 2022, 7,368,427 ordinary shares of 10p each were allotted and issued at 95p further to a placing of shares, with
a further 15,000 ordinary shares of 10p each being allotted and issued in relation to a management subscription of shares. On 7
November 2022, 2,106,990 ordinary shares of 10p each were allotted and issued at 95p further to an open offer of shares. Placing
costs of £618,000 were incurred and offset against the share premium reserve.
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 are 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.
£000
Gross amount
Tax effect
Gross amount
Tax effect
Deductible temporary differences
20,168
5,042
11,640
2,910
Tax losses
42,832
10,708
39,724
9,931
Total
63,000
15,750
51,364
12,841
2022
2021
108
Avacta Report and Accounts 2022
18
Capital reserves
Share premium
The share premium account of £62,184,000 (2021: £54,530,000) 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 (2021: 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 £2,754,000 (2021: 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 5) in previous periods. In addition,
2,782,306 (2021: 2,932,306) ordinary shares of 10p each are held jointly by certain employees, each individually with Avacta Group
Trustee Limited. This reserve is not distributable. Where ordinary shares have been transferred from Link Market Services Trust
Limited into the beneficial ownership of employees during the period, these amounts have been transferred to retained earnings,
this amounted to £206,000 in the period (2021: £nil).
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.
In October 2022, the Group issued senior unsecured convertible bonds (‘the Bonds’) of £55.00 million to a fund advised by Heights
Capital Ireland LLC, a global equity and equity-linked focussed investor. The Bonds were issued at 95% par value with total net
proceeds of £52.25 million, and accrue interest at an annual rate of 6.5% payable quarterly in arrears. The Bonds contain various
conversion and redemption features together with embedded derivatives in conjunction with an ordinary host debt liability,
further details of which can be found in Note 22.
The Group also has 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.
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.
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.
The convertible bond has a fixed interest coupon rate payable of 6.5% per annum. However, due to the embedded derivative
component, there is an effective interest rate on the debt liability of 113.7% contributing to the ‘Convertible bond – interest
expense’ charged in the period.
109
>
Financial Statements
Interest rate and currency profile
At 31 December 2022 and throughout the year, the Group maintained cash at bank in the following currencies: The current book
value of interest-bearing assets and liabilities is as follows:
Cash at bank attracted interest at floating rates, which were between nil% and 2.85% at 31 December 2022 (2021: nil% and
0.05%).
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 held with any one financial institution. The Group does not require collateral in respect of
financial assets. At the balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit
risk is represented by the carrying amount of each financial asset in the balance sheet.
Fair value of financial instruments
At 31 December 2022, the fair value of the Group’s financial assets and liabilities approximates to their carrying amounts as
disclosed in the Consolidated Statement of Financial Position, with exception of the convertible bond debt element which has an
effective interest rate of 113.7% due to the embedded derivative component.
Sensitivity analysis
The Group is not materially exposed to changes in interest or exchange rates at 31 December 2022.
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.
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 unless stated, is set out below.
2022
'000
2021
'000
Cash at bank (floating interest rate) - £
39,445
26,191
Cash at bank (floating interest rate) - $
2,217
-
Cash at bank (floating interest rate) - €
561
-
Notes to the Consolidated
Financial Statements (continued…)
110
Avacta Report and Accounts 2022
Financial assets
2022
£000
2021
£000
Trade receivables
2,442
833
Other receivables
535
442
Contingent consideration receivable (measured at fair value, Level 3)
27
717
-
Cash
41,781
26,191
45,475
27,466
All financial assets are receivable or expected to be receivable within one year.
Financial liabilities
Trade payables
2,487
561
Deferred consideration
868
-
Accruals
3,767
2,836
Other payables
152
73
Lease liabilities
21
5,114
1,703
Convertible bond – debt component
22
18,729
-
Convertible bond – derivative component (measured at fair value, Level 3)
22
39,100
-
70,217
5,173
Maturity profile of
financial liabilities
£000
In one year or
on demand
2022
In more than
one year
Total
In one year or
on demand
2021
In more than
one year
Total
Lease liabilities
1,361
3,753
5,114
291
1,412
1,703
Convertible bond – debt
component
18,729
-
18,729
-
-
-
Convertible bond – derivative
component
39,100
-
39,100
-
-
-
Other financial liabilities
7,274
-
7,274
3,470
-
3,760
66,464
3,753
70,217
3,761
1,412
5,173
20
Pensions
The Group operates defined contribution pension schemes for its employees. The pension cost charge for the year represents
contributions payable by the Group to the schemes and other personal pension plans and amounted to £397,000 (2021:
£379,000). There were outstanding contributions at 31 December 2022 of £79,000 (2021: £61,000).
111
>
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
Right-of-use assets
Property
£000
Laboratory
equipment
£000
Total
£000
Total
£000
As at 1 January 2021
1,926
170
-
2,096
Remeasurement of lease liability
80
-
-
80
Depreciation charge
(298)
(18)
-
(316)
Reclassification to assets held for sale
(129)
-
-
(129)
As at 31 December 2021
1,577
152
-
1,729
Additions
4,496
-
26
4,522
Acquisitions through business combinations
160
585
376
1,121
Remeasurement of lease liability
(85)
-
-
(85)
Disposals
(938)
-
-
(938)
Depreciation charge
(850)
(55)
(27)
(932)
Effect of movements in exchange rates
1
-
-
1
As at 31 December 2022
4,361
682
375
5,418
21
Leases
See accounting policy in Note 1L.
The Group leases a small number of properties for office and laboratory use, as well as laboratory equipment for both internal research
and development use and provision to customers. Information about leases for which the Group is a lessee is presented below.
a) Amounts recognised in the balance sheet
Property
2022
Laboratory
equipment
Motor
vehicles
Total
Property
2021
Laboratory
equipment
Total
Lease liabilities
Current
941
279
141
1,361
230
61
291
Non-current
3,469
48
236
3,753
1,380
32
1,412
4,410
327
377
5,114
1,610
93
1,703
112
Avacta Report and Accounts 2022
2022
£000
2021
£000
Depreciation charge on right-of-use assets
Property
845
298
Laboratory equipment
55
18
900
316
Interest on lease liabilities
228
138
Expenses relating to leases of low-value assets
9
2
Expense relating to short-term leases
33
27
b) Amounts recognised in profit or loss
The total cash outflow for leases in the period was £1,003,000 (2021: £428,000).
c) Capital commitments
At 31 December 2022, the Group had £nil of capital commitments (2021: £55,000).
Reconciliation of change in lease liability
£000
As at 1 January 2021
2,042
Remeasurement of lease liability
80
Payment of lease liability – principal element
(290)
Payment of lease liability – interest element
(138)
Interest expense
138
Reclassification to assets held for sale
(129)
As at 31 December 2021
1,703
Acquisitions through business combinations
893
Additions
4,356
Disposals
(969)
Remeasurement of lease liability
(85)
Payment of lease liability – principal element
(800)
Payment of lease liability – interest element
(202)
Interest expense
218
As at 31 December 2022
5,114
>
113
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
£000
As at 1 January 2021 and 31 December 2021
-
Additions
4,128
Share of loss of associate
(1,152)
As at 31 December 2022
2,976
Convertible bond - derivative
£000
Convertible bond - debt
£000
At inception
35,000
16,123
Interest expense
-
2,606
Revaluation of derivative
4,100
-
At 31 December 2022
39,100
18,729
22
Convertible bond
In October 2022, the Group issued senior unsecured convertible bonds (‘the Bonds’) of £55 million to a fund advised by Heights
Capital Ireland LLC, a global equity and equity-linked focussed investor.
The Bonds were issued at 95% par value with total net proceeds of £52.25 million, and accrue interest at an annual rate of 6.5%
payable quarterly in arrears.
The Bonds contain various conversion and redemption features. The Bonds have a maturity of five years, and are repayable in 20
quarterly amortisation repayments, of principal and interest over the five-year term, in either cash or in new ordinary shares at the
Group’s option. If in shares, the repayment is at the lower of the conversion price (118.75p) or a 10% discount to the volume weighted
average price (‘VWAP’) in the five- or ten-day trading period prior to election date. The conversion price may reset downwards at 18
months, depending on share price performance, and save in limited circumstances there is a reset price floor of 95p.
Additionally, the bondholder has the option to partially convert the convertible bond at their discretion, though did not do so
during the period. Such a partial conversion did occur after the reporting period, see Note 28.
The bond agreement contains embedded derivatives in conjunction an ordinary host debt liability. As a result, the convertible
bonds are shown in the Consolidated Statement of Financial Position in two separate components, being ‘Convertible bond –
debt’ and ‘Convertible bond – derivative’. At issuance, the total inception value was £52,500,000, being the 5% issue discount to
the principal amount of the Bonds, with the initial carrying amount of the debt liability element being the difference between
this inception value of the convertible bond and the fair value at inception of the derivative element. Given the option of the
bondholder to convert the bond at their discretion, the debt and derivative liability elements have been classified as current
liabilities.
The derivative element has been measured at fair value using a Monte-Carlo option pricing model, which estimates the fair
value based on the probability-weighted present value of expected future investment returns, considering each of the possible
outcomes available to the bondholders. This therefore falls under Level 3 of the fair value hierarchy. At inception, the fair value
of the derivative component was measured at £35,000,000, resulting in an initial carrying amount of the debt liability element
of £16,123,000. The fair value at the year-end date was measured to be £39,100,000 resulting in a loss on revaluation of the
derivative being recognised of £4,100,000.
Significant assumptions used in the fair value analysis include the volatility rate and recovery amount. A volatility of 67.4% was
used in the determination of the fair value of the derivative element, a reduction of 10% would have resulted in a reduction in the
fair value at inception by £4,401,000 with an increase of 10% resulting in an increase in the fair value at inception of £4,561,000.
An estimated recovery amount of 75% was also used in the determination of fair value, with an increase of 10% resulting in an
increase in fair value by £1,351,000 and a decrease by 20% resulting in a decrease in the fair value by £3,390,000.
Transaction costs of £3,413,000 have been apportioned between the derivative and debt liability components according to the
relative inception values. This has resulted in £2,287,000 of transaction costs being recognised as an expense at acquisition, with
£1,127,000 adjusted for in the carrying amount of the debt liability at acquisition.
23
Equity-accounted investees
114
Avacta Report and Accounts 2022
2022
£000
2021
£000
Percentage ownership interest
19%
5%
Non-current assets
9,373
5,014
Current assets
8,668
3,494
Non-current liabilities
(303)
(154)
Current liabilities
(632)
(701)
Net assets (100%)
17,106
7,653
Group’s share of net assets
3,167
413
Revenue
26
13
Total comprehensive loss for the year (100%)
(4,781)
(2,077)
Group’s share of total comprehensive loss for the year
(899)
(145)
2022
£000
2021
£000
Short-term employee benefits
1,056
895
Post-employment benefits
28
27
Share-based payment
3,248
1,049
4,332
1,971
Short-term employee benefits include employers’ NI of £105,000 (2021: £106,000). The aggregate remuneration of the highest
paid director was £427,000, with £17,000 of post-employment contributions.
2022
£000
2021
£000
Provision of services*
Associate - AffyXell Therapeutics Co., Ltd
3,798
1,126
Trade receivables
Associate – AffyXell Therapeutics Co., Ltd
-
1,023
* £3,798,000 (2021: £966,000) of which relates to revenue recognised during the year.
24
Related party transactions
Transactions between the parent company of the Group and its subsidiaries, which are related parties, have been eliminated on
consolidation. See Note 37 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 23. These transactions were made on terms equivalent to those that
prevail in arm’s length transactions.
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:
AffyXell Therapeutics Co., Ltd is an associate in which the Group has a 19% ownership (2021: 5%). The investment in associate is
measured using the equity method. The Group has significant influence as a result of material transactions with the entity and the
provision of essential technical information, AffyXell Therapeutics Co., Ltd was established in 2020 to develop Affimer® proteins
which will be used for the generation of new cell and gene therapies.
The carrying amount at 31 December 2021 was £nil due to recognition of share of losses exceeding the initial investment,
resulting in an unrecognised share of losses of £253,000. The share of losses exceeding the initial contribution were unrecognised
due to the Group having no legal or constructive liability to make further payments to the associate.
During the year, the investment in associate has increased with the achievement of certain milestones within the collaboration
resulting in additional issue of equity to the Group. The share of loss of associate in the year includes the previously unrecognised
share of losses at 31 December 2021.
>
115
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
2022
£000
2021
£000
Loss for the period
(39,189)
(26,316)
Adjustments for:
Amortisation expense
1,051
865
Impairment losses
5,225
-
Depreciation
1,961
1,511
Net loss on disposal of property, plant and equipment
52
30
Share of loss of associate
1,152
-
Equity-settled share-based payment transactions
7,490
5,083
Profit on lease modification
(31)
-
Gain on sale of discontinued operation
(308)
-
Net finance costs
9,000
121
Increase in investment in associate
(4,127)
-
Taxation
(2,102)
(2,820)
Operating cash outflow before changes in working capital
(19,826)
(21,526)
Decrease in inventories
52
13
Decrease/(increase) in trade and other receivables
2,225
(1,599)
Increase in trade and other payables
1,596
456
Operating cash outflow from operations
(15,953)
(22,656)
25
Operating cash outflow from operations
26
Aquisition of subsidiary
On 21 October 2022, the Group acquired 100% of the shares and voting interests in Launch Diagnostics Holdings Ltd (‘Launch
Diagnostics’). Launch Diagnostics is a leading independent IVD distributor in the UK, providing immunodiagnostic and molecular
test products, technical support and maintenance to healthcare providers.
The acquisition of Launch Diagnostics is the first step in an M&A-led growth strategy for the Group’s Diagnostics Division, with the
vision of building an integrated and differentiated IVD business with global reach servicing professionals and consumers.
For the period from acquisition to 31 December 2022, Launch Diagnostics contributed revenue of £3,971,000 and profit of
£309,000 to the Group’s results. If the acquisition had occurred on 1 January 2022, management estimates that consolidated
revenue would have been £27,845,000 and consolidated loss for the year would have been £34,601,000. In determining these
amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the
same if the acquisition had occurred on 1 January 2022.
116
Avacta Report and Accounts 2022
In addition, the Group has agreed to pay the selling shareholders additional consideration of 50% of the gross margin on sales
exceeding £2 million per annum of Launch Diagnostics’ COVID-19 related products for three years capped at £13 million. Based
on an assessment of forecast future sales, the fair value of this contingent consideration at the acquisition date is £nil. At 31
December 2022, the contingent consideration estimated has remained at £nil.
B. Acquisition-related costs
The Group incurred acquisition-related costs of £712,000 on legal fees and due diligence costs. These costs have been included in
‘Acquisition-related expenses’.
C. Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
Trade receivables comprises gross contractual amounts of £2,493,000 with £nil expected to be uncollectable at the date of
acquisition. Amounts receivable from selling shareholders were settled at acquisition at their gross contractual amount.
D. Goodwill
Goodwill arising from the acquisition has been recognised as follows:
The goodwill is attributable mainly to the skills and technical talent of Launch Diagnostics’ work-force and the synergies expected
to be achieved from integrating the company into the Group’s Diagnostics business. None of the goodwill recognised is expected
to be deductible for tax purposes.
£000
Consideration transferred
A
29,201
Fair value of identifiable net assets
C
(16,507)
Goodwill
12,694
117
A. Consideration transferred
£000
Cash
28,350
Deferred consideration
851
Total consideration transferred
29,201
£000
Property, plant and equipment
293
Right-of-use assets
1,121
Intangible assets – brand
1,216
Intangible assets – customer relationships
10,746
Intangible assets – other
2
Inventories
1,545
Trade and other receivables
3,233
Income tax receivable
1,369
Cash and cash equivalents
3,472
Trade and other payables
(2,696)
Deferred taxation
(2,901)
Lease liabilities
(893)
Total identifiable net assets acquired
16,507
>
Financial Statements
Notes to the Consolidated
Financial Statements (continued…)
27
Discontinued operation
On 15 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 (‘earn-out payment’) of up to £1,433,000. There were associated costs to sell of £181,000.
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.
Contingent consideration of £717,000 has been estimated as at 31 December 2022. The earn out payment is tiered based
on revenues achieved by the combined performance of the Animal Health segment and its acquirer. Based on the maximum
revenues achieved in any twelve-month period of the three years to 31 December 2024 (the ‘earn-out period’), the earn-out
payment will be nil, £717,000 or £1,433,000. Management’s estimate has been derived from the information on performance for
the period to 31 December 2022 and growth rates expected over the remaining earn-out period.
The Animal Health segment was classified as held for sale in the consolidated financial statements for the year ended 31
December 2021.
118
A. Effect of the disposal on the financial position of the Group
The carrying amounts of assets and liabilities in the disposal group are summarized as follows:
£000
Property, plant and equipment
(20)
Right of use asset
(122)
Intangible asset
(778)
Inventories
(81)
Trade and other receivables
(192)
Cash and cash equivalents
(194)
Trade and other payables
175
Lease liabilities
124
Net assets and liabilities
(1,088)
Consideration received in cash
860
Contingent consideration
717
Transactions costs directly relating to disposal
(181)
Gain on disposal
308
Avacta Report and Accounts 2022
B. Results of discontinued operation
2022
£000
2021
£000
Revenue
411
1,604
Cost of sales
(117)
(506)
Gross profit
294
1,098
Research costs
(6)
(39)
Selling, general and administrative expenses
(233)
(915)
Depreciation expense
(10)
(50)
Share-based payment charge
-
(25)
Operating profit
45
69
Finance costs
(2)
(11)
Profit before tax
43
58
Taxation
-
-
Profit from operating activities
43
58
Gain on sale of discontinued operation
308
-
Profit for the period
351
58
C. Cash flows from (used in) discontinued operations
Cash flows generated by the Animal Health segment for the reporting periods under review until its disposal are as follows:
2022
£000
2021
£000
Net cash (used in) / from operating activities
(47)
225
Net cash from / (used in) investing activities
505
(19)
Net cash (used in) / from financing activities
(6)
30
Net cash flows for the period
452
236
28
Events after the reporting period
On 23 January 2023, 3,068,421 new ordinary shares were issued in settlement of the quarterly principal of £2.75 million and
interest repayment of £0.89 million in respect of the convertible bond, reducing the principal remaining to £52.25 million.
On 10 February 2023, 2,400,000 new ordinary shares were issued in settlement of a received Notice of Conversion in respect of
£2.85 million of the convertible bond, reducing the principal remaining to £49.40 million.
On 21 April 2023, 2,906,097 new ordinary shares were issued in settlement of the quarterly principal of £2.6 million and interest
repayment of £0.80 million in respect of the convertible bond, reducing the principal remaining to £46.80 million.
119
>
Financial Statements
Note
2022
£000
2021
£000
Fixed assets
Tangible assets
30
14
13
Intangible assets
30
5
13
Investments
31
75,029
7,892
75,048
7,918
Current assets
Debtors*
32
103,204
86,586
Cash and cash equivalents
36,249
25,549
139,453
112,135
Current liabilities
33
(90,832)
(518)
Net current assets
48,621
111,617
Net assets
123,669
119,535
Capital and reserves
Called-up share capital
35
26,685
25,472
Share premium account
36
62,184
54,530
Reserve for own shares
36
(2,755)
(2,961)
Retained earnings
36
37,555
42,494
Shareholders’ funds
123,669
119,535
Company Balance Sheet as at 31 December 2022
– Registered number 04748597
*Of which £102,237,000 (2021: £84,052,000) is expected to be recovered in more than twelve months
The loss of the Company for the year ended 31 December 2022 was £12,222,000 (2021: profit of £225,000)
The notes on pages 121 to 127 form an integral part of these financial statements.
The balance sheet above was approved by the Board of Directors and authorised for issue on 28 April 2023 and signed on its
behalf by:
Dr Alastair Smith
Tony Gardiner
Chief Executive Officer
Chief Financial Officer
120
Avacta Report and Accounts 2022
Share
capital
£000
Share
premium
£000
Reserve for
own shares
£000
Retained
earnings
£000
Total
equity
£000
At 1 January 2021
25,343
54,137
(2,961)
37,186
113,705
Exercise of share options
130
392
-
-
522
Total comprehensive loss for the period
-
-
-
225
225
Share-based payment charges
-
-
-
5,083
5,083
At 31 December 2021
25,473
54,530
(2,961)
42,493
119,535
Issue of shares
948
7,448
-
-
8,396
Exercise of share options
264
206
-
-
470
Total comprehensive profitloss for the period
-
-
-
(12,222)
(12,222)
Share-based payment charges
-
-
-
7,490
7,490
Transfer1
-
-
206
(206)
-
At 31 December 2022
26,685
62,184
(2,755)
37,555
123,669
Company Statement of Changes in Equity
for the Year Ended 31 December 2022
The accompanying notes form an integral part of the financial statements.
1Where ordinary shares have been transferred from Link Market Services Trust Limited into the beneficial ownership of employees
during the period, these amounts have been transferred from ‘Reserve for own shares’ to ‘Retained earnings’.
121
>
Financial Statements
29
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 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
• 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.
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 2022 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 cash flows 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
and that the carrying amount of the investment in Launch
Diagnostics has been impaired to its recoverable amount such
that an adverse change in assumptions would increase the
quantum of impairment. A 1% increase in the discount rate
would result in an increase in the provision against investment
in subsidiary undertakings by £2,617,000, and a 1% decrease
in the compound annual revenue growth rate within the
forecast period of the model would result in an increase in
provision of £4,296,000.
Note 10 sets out a number of other 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
other scenarios the recoverable amount would still exceed
the carrying amount of investments in subsidiaries, and the
present value of estimated cash flows discounted at the asset’s
original effective interest rate would still exceed the carrying
amount of amounts owed by subsidiary undertakings.
Notes to the Company Balance Sheet
122
Avacta Report and Accounts 2022
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
Intangible 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 to 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.
Convertible bond – derivative liability
The Company is party to the derivative element of the
convertible bond only. The derivative is initially measured at
fair value, creating a corresponding investment in subsidiary
reflecting the element of the convertible bond liability borne
on behalf of the Company’s subsidiary, Avacta Finance (Jersey)
Ltd. This arises from the future settlement of the bond
being through the issue of ordinary shares in the Company.
Subsequent changes in this fair value are recognised through
profit or loss.
Notes to the Company Balance Sheet
(Continued...)
>
123
Financial Statements
Notes to the Company Balance Sheet
(Continued...)
Tangible
£000
Intangible
£000
Total
£000
Cost at 31 December 2021
62
108
170
Additions
15
-
15
Transfers from / (to) wholly-owned subsidiaries
(10)
-
(10)
Disposals
(10)
-
(10)
At 31 December 2022
57
108
165
Depreciation at 31 December 2021
49
95
144
Charge for the year
8
8
16
Transfers from / (to) wholly-owned subsidiaries
(5)
-
(5)
Disposals
(9)
-
(9)
At 31 December 2022
43
103
146
Net book value
At 31 December 2022
14
5
19
At 31 December 2021
13
13
26
£000
Cost at 1 January 2022
9,666
Additions *
4,151
Acquisition of subsidiary
29,929
Issue of convertible bond notes by subsidiary
35,000
Disposals
(124)
At 31 December 2022
78,622
Provision at 1 January 2022
1,774
Impairment charge for the year
1,918
Disposals
(99)
At 31 December 2022
3,593
Net book value
At 31 December 2022
75,029
At 31 December 2021
7,892
30
Tangible and intangible fixed assets
31
Investments
* Additions in the year are capital contributions relating to share-based payments to employees of subsidiary undertakings.
During the current year, an impairment assessment of the investment in subsidiaries was undertaken. This assessment involved
comparing the future discounted cashflows of the subsidiary to the carrying value of the relevant investment balance. Where the
carrying value exceeded the future discounted cashflows, an impairment was taken.
124
Avacta Report and Accounts 2022
Principal
activity
Country of
Incorporation
Class and percentage
of voting shares held
Holding
Subsidiary undertakings
Affimer Limited (formerly Promexus Limited)
4Dormant
¹England
Ordinary 100%
Indirect
Avacta Limited
Non-trading
¹England
Ordinary 100%
Direct
Avacta Analytical Limited
4Dormant
¹England
Ordinary 100%
Indirect
Avacta Animal Health Inc.
4Dormant
¹US
Ordinary 100%
Direct
Avacta Finance (Jersey) Limited
7Trading
3Jersey
Ordinary 100%
Direct
Avacta Group Trustee Limited
4Dormant
¹England
Ordinary 100%
Direct
Avacta Life Sciences Limited
Technology development
¹England
Ordinary 100%
Direct
Avacta Life Sciences Inc.
Technology development
¹US
Ordinary 100%
Indirect
Crossco (1127) Limited
5Intermediate holding
company
¹England
Ordinary 100%
Direct
Launch Diagnostics Holdings Limited
Intermediate holding
company
¹England
Ordinary 100%
Direct
Launch Diagnostics Limited
6Trading
¹England
Ordinary 100%
Indirect
Launch Diagnostics France SAS
6Trading
2France
Ordinary 100%
Indirect
The companies in which Avacta Group plc has an interest at 31 December 2022 and form part of the consolidated Group financial
statements are as follows:
Avacta Analytical Limited is a subsidiary of Avacta Limited. Avacta Life Sciences Inc and Affimer Limited (formerly Promexus
Limited) are subsidiaries of Avacta Life Sciences Limited. Launch Diagnostics Limited and Launch Diagnostics France SAS are
subsidiaries of Launch Diagnostics Holdings Limited.
1 Registered address: Unit 20, Ash Way, Thorp Arch Estate, Wetherby, West Yorkshire.
2 Registered address: 6 avenue Franklin D. Roosevelt, Paris, France
3 Registered address: 47 Esplanade, St Helier, Jersey, JE1 0BD
4 Dormant status accounts will be filed for the year ended 31 December 2022.
5 Crossco (1127) Limited was the intermediate holding company of Avacta Animal Health Limited which was sold during the period.
6 The main trade being the provision of diagnostic reagents and hospital laboratory instrumentation
7 Avacta Finance (Jersey) Limited being the issuer of the convertible bond during the period.
32
Debtors
2022
£000
2021
£000
Other taxes and social security
13
6
Prepayments and other debtors
345
461
Amounts owed by subsidiary undertakings*
118,443
100,236
Less: provision against amounts owed by subsidiary undertakings
(15,597)
(14,117)
103,204
86,586
* Of which, £102,237,000 (2021: £84,052,000) are expected to be recovered in more than twelve months. The terms of the
intercompany loans are disclosed in Note 37.
>
125
Financial Statements
Notes to the Company Balance Sheet
(Continued...)
Share issues
During the year, a total of 2,640,682 ordinary 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 18.08p
On 18 October 2022, 7,368,427 ordinary shares of 10p each
were allotted and issued at 95p further to a placing of shares,
with a further 15,000 ordinary shares of 10p each being
allotted and issued in relation to a management subscription
of shares. On 7 November 2022, 2,106,990 ordinary shares of
10p each were allotted and issued at 95p further to an open
offer of shares. Placing costs of £618,000 were incurred and
offset against the share premium reserve.
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 are 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.
35
Reserves
Share premium
The share premium account of £62,184,000 (2021:
£54,530,000) 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 £2,755,000 (2021:
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, 2,782,306 (2021: 2,932,306) ordinary
shares of 10p each are held jointly by certain employees, each
individually with Avacta Group Trustee Limited.
This reserve is not distributable. Where ordinary shares have
been transferred from Link Market Services Trust Limited
into the beneficial ownership of employees during the period,
these amounts have been transferred to retained earnings,
this amounted to £206,000 in the period (2021: £nil).
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.
34
Share capital
2021
£000
2020
£000
Allotted, called up and fully paid:
- 266,081,715 (2021: 253,950,626) ordinary shares of 10p each
26,608
25,395
- 19,327,344 deferred shares of 0.4p each
77
77
26,685
25,472
Further details on the convertible bond, and the sensitivity of the fair value to key assumptions, can be found in Note 22.
The Company has recognised a loss on change in fair value of the derivative of £4,100,000 in the year to 31 December 2022.
33
Current liabilities
2022
£000
2021
£000
Trade creditors
75
31
Other taxes and social security
63
57
Accruals and other creditors
766
430
Deferred consideration
868
-
Amounts owed to subsidiary undertakings
49,960
-
Convertible bond – derivative liability
39,100
-
90,832
518
126
Avacta Report and Accounts 2022
2022
£000
2021
£000
Non-cancellable operating lease rentals are payable as follows:
• Less than one year
1,091
388
• Between one and five years
526
1,254
• Over five years
-
162
1,617
1,804
Management charges made to subsidiaries
2022
£000
2021
£000
Avacta Life Sciences Limited
3,240
3,275
Avacta Animal Health Limited
-
543
Launch Diagnostics Limited
480
-
Launch Diagnostics France SAS
130
-
36
Commitments
(a) Capital commitments
At 31 December 2022, the Company had £nil capital commitments (2021: £nil).
(b) Contingent liabilities
The Company has guaranteed the overdrafts of some of its subsidiaries. The amount outstanding at 31 December 2022 was £nil (2021: £nil).
(c) Operating lease commitments
The Company maintains non-cancellable operating lease commitments on three properties.
37
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.
The Company received the principal amount in relation to the issue of convertible bonds on behalf of its wholly owned subsidiary
Avacta Finance (Jersey) Limited. This intercompany loan is repayable on demand but is expected to be settled over the life of the
bond as the Company settles the quarterly amortisation repayments on behalf of Avacta Finance (Jersey) Limited.
2022
2021
Avacta Limited
5,875
5,873
Avacta Analytical Limited
3,833
3,833
Avacta Animal Health Limited
-
6,477
Avacta Life Sciences Limited
102,237
84,052
Crossco (1127) Limited
5,889
-
Avacta Finance (Jersey) Limited
(49,960)
-
Launch Diagnostics Limited
480
-
Launch Diagnostics France SAS
130
-
68,484
100,235
Remuneration of key management personnel
The disclosures relating to remuneration of key management personnel for the Company are equivalent to those for the Group
disclosed in Note 24.
Intercompany loans during and at the end of the period (before provisions against amounts owed) were as follows:
127
Governance
Avacta Report and Accounts 2022
Shareholder
information
130
Notice of Annual General Meeting
132
Notice of Meeting Notes
134
Explanation of Resolutions
136
Secretary and Advisers
129
130
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 Royal Society of Medicine, 1
Wimpole Street, London W1G 0AE on Wednesday 28 June 2023 at 10:30 a.m. for the following purposes:
To consider and, if thought fit, pass the following resolutions as ordinary resolutions:
1.
To adopt and receive the audited accounts, the strategic report, the Directors’ report and the auditor’s report of the Company for the year ended 31
December 2022.
2.
To approve the remuneration report contained within the report and accounts for the year ended 31 December 2022.
3.
To re-appoint Eliot Forster as a Director of the Company in accordance with article 35 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 Alastair Smith as a Director of the Company in accordance with article 35 of the Articles who offers himself for re-appointment as a
Director of the Company.
5.
To re-appoint Trevor Nicholls as a Director of the Company in accordance with article 35 of the Articles who offers himself for re-appointment as a
Director of the Company.
6.
To increase the maximum number of Directors of the Company from eight to 10 Directors in accordance with article 29.1 of the Articles.
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’) (if resolution
10 below is passed, in substitution for all existing authorities (other than, for the avoidance of doubt, resolution 10 below) or, if resolution 10 below
is not passed, in addition to resolution 9 passed at the annual general meeting of the Company held on 23 June 2022 but otherwise 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’):
9.1 up to an aggregate nominal amount of £9,178,000 (being approximately one third of the issued ordinary share capital of the Company as at the
date of this notice); and
9.2. up to an aggregate nominal amount of £18,356,000 (such amount to be reduced by the aggregate nominal amount of shares allotted and Rights
granted under the authority conferred by virtue of resolution 9.1) in connection with or pursuant to a fully pre-emptive offer (as defined below in
resolution 11),
provided that such authorities 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 authorities 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 authorities conferred by this resolution had not expired.
10.
To authorise the Directors of the Company generally and unconditionally pursuant to section 551 of the Act (in addition to 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 up to an aggregate nominal amount of £6,500,000 in connection with or pursuant to the bond agreement
between the Company, Addition Finance (Jersey) Limited and CVI Investments, Inc. dated 18 October 2022, as amended or restated from time to time,
provided that this authority shall expire on the date falling five years after the date on which this resolution is passed unless varied, revoked or renewed
by the Company in general meeting.
To consider and, if thought fit, pass the following resolutions as special resolutions:
11.
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 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:
1.
in connection with or pursuant to an offer of such securities by way of a fully pre-emptive offer (as defined below);
1.
(otherwise than pursuant to resolution 11.1 above) up to an aggregate nominal amount of £2,753,000 (being approximately 10% of the issued
ordinary share capital of the Company as at the date of this notice); and
1.
(otherwise than pursuant to resolutions 11.1 or 11.2 above) up to an aggregate nominal amount equal to 20% of any allotment of equity
securities or sale of treasury shares from time to time under resolution 11.2 above, such authority to be used only for the purposes of making
a follow-on offer which the Directors of the Company determine to be of a kind contemplated by paragraph 3 of Section 2B of the Statement of
Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this notice,
Notice of Annual General Meeting
11.1
11.2
11.3
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 resolutions 9.2 and 11: fully pre-emptive offer means a rights issue, open offer or other pre-emptive issue or offer to: (i) holders
of ordinary shares in proportion (as nearly as may be practicable) to the respective numbers of ordinary shares held by them on the record date(s)
for such allotment; and (ii) persons who are holders of other classes of equity securities if this is required by the rights of such securities (if any) or, if
the Directors of the Company consider necessary, as permitted by the rights of those securities, but subject in both cases to such exclusions or other
arrangements as the Directors of the Company may deem necessary or expedient in relation to fractional entitlements, treasury shares, record dates
or legal, regulatory or practical difficulties which may arise under the laws of any jurisdiction, the requirements of any recognised regulatory body or any
stock exchange in any territory or any other matter whatsoever.
12.
To empower the Directors of the Company (subject to the passing of resolution 9 and in substitution for all existing like powers (other than resolution
11 above) 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
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:
1.
up to an aggregate nominal amount of £2,753,000 (being approximately 10% of the issued ordinary share capital of the Company as at the date
of this notice), such authority to be used only for the purposes of financing (or refinancing, if the authority is to be used within 12 months after the
original transaction) a transaction which the Directors of the Company determine to be either an acquisition or a specified capital investment of a
kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to
the date of this notice; and
1.
(otherwise than pursuant to resolution 12.1 above) up to an aggregate nominal amount equal to 20% of any allotment of equity securities or sale
of treasury shares from time to time under resolution 12.1 above, such authority to be used only for the purposes of making a follow-on offer
which the Directors of the Company determine to be of a kind contemplated by paragraph 3 of Section 2B of the Statement of Principles on
Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to 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.
13.
To authorise the Directors of the Company generally and unconditionally for the purpose of section 701 of the Act and in accordance with article 22 of
Articles, to make market purchases (within the meaning of section 693 of the Act) of ordinary shares of 10p each in the capital of the Company on such
terms and in such manner as the Directors of the Company may determine provided that:
1.
the maximum number of ordinary shares that may be purchased under this authority is restricted to 27,534,000 (being approximately 10% of the
issued ordinary share capital of the Company as at the date of this notice);
1.
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
1.
the minimum price which may be paid for any and each ordinary share purchased under this authority 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
28 April 2023
Registered Office:
Unit 20, Ash Way, Thorp Arch Estate, Wetherby LS23 7FA
Avacta Report and Accounts 2022
131
13.1
13.2
13.3
12.1
12.2
132
Notice of Meeting Notes
The following notes explain your general rights as a registered 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 26 June 2023.
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 their discretion. Your proxy will vote (or
abstain from voting) as they think 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;
• Link Group, the Company's registrar ('the Registrar'), has launched a shareholder app: LinkVote+. It’s free to download and
use and gives shareholders the ability to access their shareholding record at any time and allows users to submit a proxy
appointment quickly and easily online rather than through the post. The app is available to download on both the Apple App
Store and Google Play;
• if you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process
which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please
go to www.proxymity.io. Your proxy must be lodged by 10:30am on 26 June 2023 in order to be considered valid or, if the
meeting is adjourned, by the time which is 48 hours before the time of the adjourned meeting. Before you can appoint a proxy
via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read
these carefully as you will be bound by them and they will govern the electronic appointment of your proxy. An electronic proxy
appointment via the Proxymity platform may be revoked completely by sending an authenticated message via the platform
instructing the removal of your proxy vote;
• by requesting a hard copy form of proxy directly from the Registrar by email at shareholderenquiries@linkgroup.co.uk or by
phone on 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the UK will
be charged at the applicable international rate. Lines are open between 9.00 a.m. to 5.30 p.m., Monday to Friday (excluding
public holidays in England and Wales); or
• in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures
set out below.
6. In order for a proxy appointment to be a valid, a proxy form, electronic filing or any CREST Proxy Instructions (as described in note
10 below) must be completed. In each case so as to be received by Link Group by 10.30 a.m. on 26 June 2023 in accordance with
these notes and the notes to the form of proxy.
7. If you return more than one proxy appointment, either by paper or electronic communication, the appointment received last by
Link Group 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 they wish 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). 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.
Notice of Annual General Meeting
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 & International Limited's specifications, and
must contain the information required for such instructions, as described in the CREST manual. The message must be transmitted
so as to be received by the issuer's agent (ID RA10) by 10.30 a.m. on 26 June 2023. 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.
11. CREST members and, where applicable, their CREST sponsors or voting service provider(s) should note that Euroclear UK &
International 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 their 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 registered shareholder can appoint one or more corporate representatives who may exercise on its
behalf all of its powers as a registered shareholder, provided that no more than one corporate representative exercises powers in
relation to the same share.
13. As at 28 April 2023 (being the latest practicable business day prior to the publication of this Notice), the Company’s ordinary issued
share capital consisted of 275,348,077 ordinary shares, carrying one vote each, and 19,327,344 deferred shares, carrying no voting
rights. Therefore, the total voting rights in the Company as at 28 April 2023 were 275,348,077.
14. You may not use any electronic address (within the meaning of section 333(4) of the Act) 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 12 set out in this Notice are ordinary business, and resolution 13 is special business.
Avacta Report and Accounts 2022
133
134
Explanation of Resolutions
Ordinary resolutions
Resolutions 1 to 10 are proposed as ordinary resolutions. Each of these resolutions will be passed if more than 50% of the votes
cast (in person or by proxy) are cast in favour of it.
a. Resolution 1: The Directors of the Company (“Directors”) are required to present to shareholders at the AGM the audited
accounts of the Company, the strategic report, and the reports of the Directors and auditor, for the year ended 31
December 2022.
b. Resolution 2: The Directors’ remuneration report is set out in the Company’s Annual Report and Accounts for the year
ended 31 December 2022. The vote is advisory and the Directors’ entitlement to remuneration is not conditional on it.
c. Resolutions 3, 4 and 5: The Company’s Articles of Association require one third of the Directors to retire from office each
year (or, if their number is not a multiple of three, the number nearest to but not less than one-third). Eliot Forster, Alastair
Smith and Trevor Nicholls are each retiring by rotation and seeking re-election at the AGM.
Biographical information for all the Directors standing for re-election is included on page 46 of the Directors’ report in the
Company’s Annual Report and Accounts. Having considered the performance of and contribution made by each of the
Directors standing for re-election, the board of Directors (the “Board”) remains satisfied that, and the Chair confirms that,
the performance of each Director continues to be effective and to demonstrate commitment to the role and as such the
Board recommends their re-election.
d. Resolution 6: The Company’s Articles of Association limit the maximum number of Directors to eight. Resolution 6, if
passed, would increase the maximum number of Directors to 10. The intention of this resolution is to give the Company
flexibility to appoint additional Directors.
e. Resolution 7: Resolution 7 relates to the appointment of BDO LLP as the Company’s Auditor to hold office until the next
General Meeting of the Company at which accounts are laid before the Company.
f. Resolution 8: It is normal practice for shareholders to resolve at the AGM that the Audit and Risk Committee decides on
the level of remuneration of the auditor for the audit work to be carried out by it in the next financial year. The amount of the
remuneration paid to the auditor for the next financial year will be disclosed in the next audited annual accounts of the Company.
g. Resolution 9: The Directors may only allot shares or grant rights over shares if authorised to do so by shareholders. The
Investment Association (“IA”) guidelines on authority to allot shares state that IA members will permit, and treat as routine,
resolutions seeking authority to allot shares representing up to two-thirds of a company’s issued share capital provided
that any amount in excess of one-third of the company’s issued share capital is applied to fully pre-emptive offers only
(including open offers and rights issues). Accordingly, resolution 9, if passed, would authorise the Directors under section
551 of the Companies Act 2006 (the “Act”) to allot new shares or grant rights to subscribe for, or convert any security into,
new shares (subject to shareholders’ pre-emption rights (unless and to the extent disapplied)): (i) up to a maximum nominal
amount of £9,178,000; and (ii) up to a maximum nominal amount of £18,356,000 (less the aggregate nominal amount of
shares or rights granted under (i)) in connection with a fully pre-emptive offer, together representing the IA guideline limit
of approximately two-thirds of the Company’s issued ordinary share capital (excluding shares held in treasury) as at 28
April 2023, being the latest practicable date prior to the publication of this document. Passing this resolution will ensure
that the Directors continue to have the flexibility to act in the best interests of shareholders, when opportunities arise, by
issuing new shares or granting rights over shares. There are no current plans to issue new shares except in connection with
employee share schemes and under the Bond Agreement (detailed below).
h. Resolution 10: The Company has an option to allot new ordinary shares to CVI Investments, Inc. pursuant to the bond
agreement between the Company, Addition Finance (Jersey) Limited and CVI Investments, Inc. dated 18 October 2022, as
amended or restated from time to time (the “Bond Agreement”). As detailed above in relation to resolution 9, the Directors
may only allot shares if authorised to do so by shareholders. Resolution 10, if passed, would, in addition to the authority
granted by resolution 9, authorise the Directors under section 551 of the Act to allot new shares in the Company up to an
aggregate nominal amount £6,500,000 pursuant to the Bond Agreement at any time during the five year period from the
date on which the resolution is passed (this will therefore cover the remaining term of the bonds). Passing this resolution
will ensure that the Directors have a dedicated authority to allot new ordinary shares pursuant to the terms of the Bond
Agreement and avoid breaching the provisions of the Act or otherwise having to settle interest and/or amortisation
payments in cash.
Explanation of Resolutions
i. Special resolutions
Resolutions 11 to 13 are special resolutions. Each of these resolutions will be passed if 75% or more of the votes cast (in
person or by proxy) are cast in favour of it.
j. Resolutions 11 and 12: The Statement of Principles on Disapplying Pre-Emption Rights most recently published by
the Pre-Emption Group prior to the publication of this document (the “Pre-Emption Principles”) states that a general
disapplication of pre-emption rights will likely be supported where a company seeks authority to issue non-pre-emptively
for cash shares representing: (i) no more than 10% of its issued share capital on an unrestricted basis (being for any
purpose); and (ii) no more than an additional 10% of its issued share capital to be used for an acquisition or a specified
capital investment of a kind contemplated by the Pre-Emption Principles. In addition, the Pre-Emption Principles state
that, in each case, a company may seek further authority to disapply pre-emption rights for up to 2% of its issued share
capital to be used only for the purposes of a follow-on offer of a kind contemplated by paragraph 3 of Section 2B of the
Pre-Emption Principles.
Resolution 11 contains a three-part disapplication of statutory pre-emption rights. Other than in connection with a fully
pre-emptive offer, the power contained in resolution 11 would be limited to a maximum nominal amount of £3,303,600,
which would equate to 33,036,000 ordinary shares in the capital of the Company, representing approximately 12% of
the Company’s issued share capital as at 28 April 2023, being the latest practicable date prior to the publication of this
document. Of the £3,303,600, £550,600 can only be used for the purposes of making a follow-on offer.
Resolution 12 is a further disapplication of pre-emption rights limited to an additional 10% of issued ordinary share
capital to be used for transactions which the Directors determine to be an acquisition or specified capital investment
and a further 2% of issued ordinary share capital to be used for making a follow-on offer. This power would be limited
to a maximum nominal amount of £3,303,600, which would equate to 33,036,000 ordinary shares in the capital of the
Company, representing approximately 12% of the Company’s issued share capital as at 28 April 2023, being the latest
practicable date prior to the publication of this AGM notice. Again, of the £3,303,600, £550,600 can only be used for the
purposes of making a follow-on offer.
If passed, these authorities will expire at the same time as the authority to allot shares given pursuant to resolution 9.
k. Resolution 13: A company may only purchase its own shares if authorised to do so by shareholders. The IA guidelines
state that IA members will permit, and treat as routine, resolutions seeking authority to purchase up to 10% of a
company’s issued ordinary shares. Accordingly, resolution 13, if passed, would authorise the Company under section
701 of the Act to purchase up 27,534,000 ordinary shares in its share capital, representing the IA guideline limit of 10%
of the Company’s issued ordinary shares as at 28 April 2023, being the latest practicable date prior to the publication of
this document.
In accordance with the IA guidelines, the minimum price payable for the purchase of any ordinary share under this
authority shall be the nominal value of that ordinary share, and the maximum price payable for each ordinary share
under this authority shall be 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).
l.
Avacta Group plc
Registered Office:
Unit 20, Ash Way, Thorp Arch Estate, Wetherby LS23 7FA
www.avacta.com
Avacta Report and Accounts 2022
135
Advisers
Secretary and Registered Office
Tony Gardiner
Avacta Group plc
Unit 20
Ash Way
Thorp Arch Estate
Wetherby
LS23 7FA
Nominated Adviser and Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Legal Adviser
Walker Morris LLP
33 Wellington Street
Leeds
LS1 4DL
Independent Auditor
BDO LLP
Newton House
Cambridge Business Park
Cambridge
CB4 0WZ
Banker
National Westminster Bank plc
4th Floor
2 Whitehall Quay
Leeds
LS1 4HR
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
Advisers
136
Avacta Report and Accounts 2022
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