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
20 Therapeutics Division
24 AVA6000 Clinical Trial Update
26 Drug Development Collaborations
30 Diagnostics Division
32 Launch Diagnostics
36 Coris BioConcept
38 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
69 Independent Auditor’s Report to the Members of Avacta Group plc
81 Financial Statements
82 Consolidated Statement of Profit or Loss
83 Consolidated Statement of Financial Position
84 Consolidated Statement of Changes in Equity
85 Consolidated Statement of Cash Flows
86 Notes to the Consolidated Financial Statements
126 Company Balance Sheet
127 Company Statement of Changes in Equity
128 Notes to the Company Balance Sheet
135 Shareholder Information
136 Notice of Annual General Meeting
138 Notice of Meeting Notes
140 Explanation of Resolutions
144 Secretary and Advisers
1
Avacta Report and Accounts 2023
Highlights 2023
Highlights - Avacta Therapeutics
The results to date show that
AVA6000, the first peptide drug
conjugate in the Avacta pipeline,
has a favourable safety profile with
concentration of the warhead in the
TME resulting in multiple responses in
patients with high levels of Fibroblast
Activation Protein (‘FAPhigh’), thus
delivering clinical proof-of-concept for
AVA6000 and proof-of-mechanism for
the proprietary pre|CISIONTM drug
delivery platform.
The growing body of
clinical and pre-clinical data
validating the pre|CISIONTM
platform has supported an
acceleration in the Group’s
commercial activities
including the appointment
of Dr Simon Bennett as
Chief Business Officer of the
Therapeutics Division.
In the three-weekly dose
escalation study for AVA6000
the seventh dose cohort was
successfully completed and,
in light of the highly positive
safety data, patients are
now being dosed in a two-
weekly dose escalation study
with the aim of defining
the recommended Phase 2
dose ('RP2D'), allowing dose
expansion cohorts to begin in
H2 2024 followed by the Phase
2 efficacy study in a selected
orphan indication.
Data from the three-weekly
study confirm the ability of
the pre|CISIONTM platform
to concentrate a therapeutic
warhead in the tumour
microenvironment (‘TME’)
to transform the safety
profile in patients with
advanced cancers.
Encouraging
clinical data for AVA6000,
the Company’s lead
pre|CISIONTM targeted
cancer therapy
Operating
highlights
A clinical stage oncology drug company developing
innovative cancer therapies based on its two proprietary
technology platforms: pre|CISIONTM and Affimer®
AffyXell Therapeutics ('AffyXell'),
the joint venture between Avacta
and Daewoong Pharmaceutical
('Daewoong') continued to progress
well with the triggering of a second
milestone payment. This has resulted in
an increase in Avacta’s shareholding in
AffyXell to 25%.
2
Appointment of Christina
Coughlin MD, PhD as
Head of Research and
Development, to drive
the clinical development
strategy for AVA6000,
Avacta’s lead pre|CISION™
tumour targeted therapy
and the broader drug
pipeline strategy.
Data from the AVA6000
Phase 1 clinical trial
three-weekly dose
escalation study
reported at the AACR
annual meeting
in San Diego, US,
providing Clinical
Proof of Concept for
AVA6000 with multiple
patient responses and
favourable safety profile.
The Group announced that
patients are now being dosed in
a two-weekly dose escalation
study with the aim of defining
the recommended Phase 2
dose ('RP2D'), allowing dose
expansions to begin in H2
2024 followed by the Phase
2 efficacy study in a selected
orphan indication.
Patients in the two-weekly study in
each cohort can be dosed in parallel,
allowing the Company to remain on
track to begin the dose expansion
studies in the second half of 2024.
Avacta receives
approval to enrol
patients in the
UK in the ongoing
two-weekly dose
escalation study.
AVA6000
update
2
2
Events
after the
reporting
period
A Phase I trial of AVA6000, a Fibroblast Activation Protein (FAP)-released and tumor microenvironment
(TME)-targeted doxorubicin peptide drug conjugate in patients with FAP-positive solid tumors
TABLE 1. DEMOGRAPHICS AND BASELINE
CANCER HISTORY
RESULTS
SAFETY
SAFETY TABLE 2. AVA6000-RELATED TEAE BY COHORT, ALL GRADES
CLINICAL TRIAL METHODS
BACKGROUND AND PRECLINICAL DATA
MECHANISM OF ACTION OF AVA6000
Fibroblast activation protein-a (FAP) is an
extracellular post-proline protease that is
upregulated in many solid tumors in a
membrane-bound form on cancer associated
fibroblasts as well as tumor cells. FAP activity is
also observed as a soluble protease to a low
degree in plasma
AVA6000 is a peptide drug conjugate, that
leverages the tumor-specific expression of FAP
by linking a peptide moiety that is specifically
cleaved by FAP to doxorubicin
The peptide moiety linker (pre|CISION )
prevents cellular entry of doxorubicin unless
cleaved by FAP, thus enabling targeted delivery
of doxorubicin to tumors
AVA6000 was assessed in a
multi-center, ascending
dose first-in-human Phase 1
trial in patients (Data cutoff
presented is 11 March 2024).
The patient population
included the following:
IN VIVO CHARACTERIZATION
OF AVA6000
The antitumor activity of AVA6000 was
assessed in two in vivo xenograft models, one
with low and one with high tumor:plasma FAP
activity
As shown in Fig. 2 (left panel), the model with
a low activity ratio (HPAF-II) has limited activity
of AVA6000, similar to doxorubicin. However,
significant antitumor activity with a dose
response is demonstrated in the setting of
high tumor:plasma FAP activity in Fig. 2 (right
panel) suggesting that patients with tumors
with high FAP activity will be more sensitive to
the AVA6000 mechanism of action
Adverse event
80
mg/m2
Q3W
n (%)
N=4
120
mg/m2
Q3W
n (%)
N=6
160
mg/m2
Q3W
n (%)
N=8
200
mg/m2
Q3W
n (%)
N=7
250
mg/m2
Q3W
n (%)
N=9
310
mg/m2
Q3W
n (%)
N=4
385
mg/m2
Q3W
n (%)
N=4
Total
Q3W
n (%)
N=42
Doxorubicin
(75 mg/m2 Q3W)
N=251
Gr 3-4^
n (%)
Neutropenia
0
0
0
2 (29)
2 (22)
1 (25)
2 (50)
7 (16.7)
122 (49)
Leukopenia
0
0
0
0
0
1 (25)
2 (50)
3 (7.1)
59 (23.7)
Febrile neutropenia
0
0
0
0
0
0
0
0
41 (16.5)
Anemia
0
0
0
1 (14)
0
2 (50)
0
3 (7.1)
31 (12.4)
Thrombocytopenia
0
0
0
1 (14)
1 (11)
0
0
2 (4.8)
21 (8.4)
Fatigue
0
0
0
0
0
1 (25)
0
1 (2.4)
12 (4.8)
Mucositis
0
0
1 (13)
1 (14)
0
0
0
2 (4.8)
7 (2.8)
SAFETY TABLE 1. TREATMENT-EMERGENT (TE) GRADE 3-4 AVA6000-RELATED AE
BY COHORT
Data cutoff 11 March 2024)
^Tap WD, et al. 2020. Phase 3 trial of olaratumumab with doxorubicin in patients with STS. Data reported from doxorubicin mono arm Grade 3-4 events observed in at least 7 patients
Adverse event
80
mg/m2
Q3W
n (%)
N=4
120
mg/m2
Q3W
n (%)
N=6
160
mg/m2
Q3W
n (%)
N=8
200
mg/m2
Q3W
n (%)
N=7
250
mg/m2
Q3W
n (%)
N=9
310
mg/m2
Q3W
n (%)
N=4
385
mg/m2
Q3W
n (%)
N=4
Total
Q3W
n (%)
N=42
Doxorubicin
(75 mg/m2 Q3W)
N=251^
n (%)
Nausea
1 (25)
2 (33)
2 (25)
5 (71)
3 (33)
0
1 (25)
14 (33.3)
166 (67)
Neutropenia
0
1 (17)
0
2 (29)
5 (56)
2 (50)
2 (50)
12 (28.6)
144 (58)
Fatigue
1 (25)
2 (33)
5 (63)
3 (43)
7 (78)
1 (25)
2 (50)
21 (50.0)
147 (59)
Alopecia
0
2 (33)
1 (13)
6 (86)
8 (89)
2 (50)
3 (75)
22 (52.4)
124 (50)
Anemia
1 (25)
1 (17)
1 (13)
1 (14)
6 (67)
2 (50)
2 (50)
14 (33.3)
113 (45)
Mucositis
0
0
2 (25)
0
1 (11)
0
1 (25)
3 (7.1)
101 (41)
Decreased appetite
0
2 (33)
2 (25)
1 (14)
1 (11)
0
1 (25)
7 (16.7)
92 (37)
Constipation
0
0
2 (25)
0
0
0
0
2 (4.8)
87 (35)
Musculoskeletal
pain/arthralgia
0
0
1 (13)
1 (14)
0
0
0
2 (4.8)
85 (34)
Leukopenia
0
0
0
0
3 (33)
2 (50)
2 (50)
7 (16.7)
78 (31)
Diarrhea
0
1 (17)
1 (13)
3 (43)
3 (33)
0
0
8 (19.0)
75 (30)
Data cutoff 11 March 2024
^Tap WD, et al. 2020. Phase 3 trial of olaratumumab with doxorubicin in patients with STS. Data reported from doxorubicin mono arm , events reported in >30% pts (mixed 1L/2L population)
SAFETY TABLE 3. ALL CARDIAC ADVERSE EVENTS
Adverse event
80
mg/m2
Q3W
n (%)
N=4
120
mg/m2
Q3W
n (%)
N=6
160
mg/m2
Q3W
n (%)
N=8
200
mg/m2
Q3W
n (%)
N=7
250
mg/m2
Q3W
n (%)
N=9
310
mg/m2
Q3W
n (%)
N=4
385
mg/m2
Q3W
n (%)
N=4
Total
Q3W
n (%)
N=42
Doxorubicin
(75 mg/m2 Q3W)
N=251
Gr 3-4^
n (%)
Cardiac failure1
0
1 (17)
0
0
0
0
0
1 (2.4)
14 (5.6)
Troponin increase2
0
0
1 (13)
1 (14)
0
0
0
2 (4.8)
not reported
Data cutoff 11 March 2024
^Tap WD, et al. 2020 and Jones RL, et al. 2019. Phase 3 trial of olaratumab with doxorubicin in patients with STS. Data reported from doxorubicin mono arm all events/any grade
1 Cardiac failure, grade 2 (DLT) 1 Cardiac failure, grade 2 (DLT)
2 Troponin increases (n=2) reported as AE, grade 1. Additional grade 1 troponin increases were observed (160 mg/m2 – 250 mg/m2) considered not related (n=1), or not clinically significant (n=3)
SAFETY TABLE 4. DOSE-LIMITING TOXICITIES
Dose level
Event
Outcome
120 mg/m2
Grade 2 cardiac failure1
Cohort expanded and dose escalated to 160 mg/m2
200 mg/m2
Grade 4 neutropenia/ thrombocytopenia
Cohort expanded and dose escalated to 250 mg/m2
Data cutoff 11 March 2024
1 Grade 2 cardiac failure associated with LVEF reduction from 61% (baseline) to 39% (post-C1)
EFFICACY TABLE 1. BEST OVERALL RESPONSE
(FAPhigh V. FAPmid POPULATION)
FAPhigh
N=151
FAPmid
N=272
Partial response (PR), n3
2
0
Minor response (MR), n4
3
0
Stable disease (SD)<16 weeks5
4
6
SD>16 weeks5
7
10
Progressive disease (PD)
2
11
DCR (PR/MR or SD>16 weeks), n(%)
10/15 (67)
10/27 (37)
FIGURE 5.
TUMOR DOXORUBICIN V. PLASMA DOXORUBICIN
FIGURE 4B. PATIENTS WITH FAPmid INDICATIONS2
FIGURE 4A. PATIENTS WITH FAPhigh INDICATIONS1
-100
-80
-60
-40
-20
0
20
40
60
80
100
Soft tissue sarcoma
Salivary gland cancer
Best percent change in the
sum of the longest diameters
*
*
*
*
*
*
-100
-80
-60
-40
-20
0
20
40
60
80
100
Pancreatic
Colorectal
Ovarian
Biliary tract
NSCLC
TCCU
*
*
Best percent change in the
sum of the longest diameters
Trial ALS6000-101 | Data cutoff 11 March 2024
1 FAPhigh diseases were categorized by FAP expression by IHC of archival tumor samples and literature review and include soft tissue sarcoma and salivary gland
cancer, Partial response includes 1 confirmed PR (sarcoma) and 1 unconfirmed PR (salivary gland Ca, both patients ongoing at the time of the data cutoff)
2 FAPmid diseases include colorectal carcinoma, pancreatic cancer, ovarian cancer, biliary tract cancer, transitional cell cancer of the urethra and lung cancer.
Indications categorized as FAPlow were excluded from the trial
Case Study:
60-year-old male patient with a right-side popliteal mass biopsy diagnosed with a grade 3 undifferentiated pleomorphic sarcoma (UPS). Prior cancer therapy
preoperative radiotherapy (May-Jul 2021) followed by surgery (Sept 2021, viable tumour cells in <10% of tumor volume). Stage IV diagnosis (March 2022) with
pleural metastases, enrolled in etigilimab + nivolimab (clinical trial June 2022-Jan 2023) with disease progression prior to enrolling in the AVA6000 phase 1 trial
FIGURE 3. CASE STUDY OF FIRST RESPONSE
CONCLUSIONS
REFERENCES
Ballal S, et al. Biodistribution, pharmacokinetics, dosimetry of
[68Ga]Ga-DOTA.SA.FAPi, and the head-to-head comparison with
[18F]F-FDG PET/CT in patients with various cancers. Eur J Nucl Med
Mol Imaging. 2021;48(6):1915-1931. doi: 10.1007/s00259-020-
05132-y
Kratochwil C, et al. 68Ga-FAPI PET/CT: Tracer Uptake in 28
Different Kinds of Cancer. J Nucl Med. 2019;60(6):801-805. doi:
10.2967/jnumed.119.227967
Koerber SA, et al. Novel FAP ligands enable improved imaging
contrast in sarcoma patients due to FAPI-PET/CT. Eur J Nucl Med
Mol Imaging. 2021;48(12):3918-3924. doi:10.1007/s00259-021-
05374-4
Tap WD, et al. Effect of Doxorubicin Plus Olaratumab vs
Doxorubicin Plus Placebo on Survival in Patients With Advanced
Soft Tissue Sarcomas: The ANNOUNCE Randomized Clinical Trial.
JAMA. 2020;323(13):1266-1276. doi: 10.1001/jama.2020.1707
Villalobos VM, et al. Pharmacokinetics of doxorubicin following
concomitant intravenous administration of olaratumab (IMC-3G3)
to patients with advanced soft tissue sarcoma. Cancer Med.
2020;9(3):882-893. doi: 10.1002/cam4.2728
Acknowledgements: The investigators and the team at Avacta
would like to thank the patients and their families for participating
in the trial. Scientific communication support was provided by
SlideSource and Random 42.
Presented at the American Association for Cancer Research
Annual Meeting, April 2024 San Diego, CA USA
PHARMACOKINETICS/PHARMACODYNAMICS
FIGURE 6. HIGH SERUM FAP ACTIVITY DOES NOT
TRANSLATE TO HIGH PLASMA DOXORUBICIN
Figure 6. High Serum FAP Activity does not Translate to High
Plasma Doxorubicin Exposure
FAP protease activity was quantitated with a fluorescent D-Ala-Pro
substrate to determine the level of enzyme activity in serum. FAP
activity was compared to the cleaved doxorubicin plasma exposure
[AUC (0-72)]
FIGURE 7. EFFICACY AND SEVERE NEUTROPENIA
OBSERVED AT DIFFERENT EXPOSURES
Figure 7. Efficacy with AVA6000 is Observed at Lower Exposures than Severe
Neutropenia
Logistic regression analysis of the relationship between response (PR, MR,
SD>16weeks), severe neutropenia and dose indicates high probability of
responses at a range of exposures (correlating to 250 – 310 mg/m2) compared with
observation of severe neutropenia. Exposure for individual patients with tumor
shrinkage (PR/MR) are included with black dots (1 PR with dose reduction)
Key Finding:
Responses are observed
at AVA6000 doses with
doxorubicin exposures
much lower than that
reported with standard
dose doxorubicin. This
suggests a more
frequent schedule at
these doses may
enhance efficacy while
not increasing toxicity
AVA6000
(80–385 mg/m2 Q3W)
N=42
Age, median (range)
64.5 (30-79)
Sex, m/f, n (%)
26 / 16 (61.9/38.1)
ECOG, 0/1. n (%)
14 / 28 (33.3/66.7)
Race
White, n (%)
34 (81.0)
Asian, n (%)
3 (7.1)
Black or African American, n (%)
1 (2.4)
Other/Not reported, n (%)
4 (9.5)
Ethnicity
Hispanic/Latino, n (%)
0
Non-Hispanic, non-Latino, n (%)
39 (92.9)
Not reported/unknown, n (%)
3 (7.1)
Cancer diagnosis
Soft tissue sarcoma, n (%)
14 (33.3)
Colorectal carcinoma, n (%)
11 (26.2)
Pancreatic ductal adenocarcinoma, n (%)
8 (19.0)
Cancers of the biliary tract, n (%)
3 (7.1)
Other1, n (%)
6 (14.3)1
Prior cancer therapy
No. prior regimens, median (range)
3 (0-7)
Any cytotoxic exposure, n (%)
32 (76.2)
Anthracycline exposure, n (%)
1 (2.4)
Platinum exposure, n (%)
26 (61.9)
Topoisomerase I inhibitor exposure, n (%)
20 (47.6)
Immunotherapy exposure, n (%)
14 (33.3)
RESULTS
BASELINE CHARACTERISTICS
Data cutoff 11 March 2024
1 FAPhigh indications were categorized by FAP expression in literature review and archival tumor tissue IHC. FAPhigh indications include soft
tissue sarcoma and salivary gland cancer
2 FAPmid diseases include colorectal carcinoma, pancreatic cancer, ovarian cancer, biliary tract cancer, transitional cell cancer of the urethra
and lung cancer
3 PR in FAPhigh include 1 confirmed PR (sarcoma, duration of response 34 wk) and 1 unconfirmed PR (salivary gland Ca, both patients
ongoing at the time of the data cutoff) by RECIST v1.1
4 Minor response is defined as RECIST v1.1 SD with change in the sum of the longest diameter of -10 to -29% (2 of 3 MR ongoing)
5 Multiple patients with SD are ongoing at the time of the cutoff: 3 of 4 in FAPhigh and 2 of 9 in FAPmid
PK TABLE 1. PK PARAMETERS FOR RELEASED DOXORUBICIN
AVA6000
dose (n)
Doxorubicin
molar
equivalent
Cmax
ng/ml,
geo.mean
Tmax
(hrs)
T1/2
(hrs)
AUClast
(h*ng/ml)
AUCinf
(hr*ng/ml)
Percent
reduction1
in Cmax
Pecent
reduction1
in AUC
80 mg/m2 (n=4)
Analyte, (CV %)
54 mg/m2
190.5 (19)
0.243 (16)
35.73 (26)
488.3 (33)
592.7 (37)
92.5
77
120 mg/m2 (n=6)
Analyte, (CV %)
81 mg/m2
208.5 (44)
0.351 (35)
44.09 (20)
582.5 (42)
851.7 (55)
91.1
71.7
160 mg/m2 (n=8)
Analyte, (CV %)
108 mg/m2
216.0 (36)
0.416 (27)
41.56 (35)
615.3 (54)
711.4 (57)
91.2
70.7
200 mg/m2 (n=7)
Analyte, (CV %)
135 mg/m2
359.5 (27)
0.522 (24)
42.35 (49)
1307 (41)
1474 (28)
85.9
38.9
250 mg/m2 (n=9)
Analyte, (CV %)
169 mg/m2
456.3 (51)
0.495 (17)
38.5 (65)
1260 (34)
1457 (30)
79.9
44.9
310 mg/m2 (n=4)
Analyte, (CV %)
209 mg/m2
395.6 (60)
0.629 (20)
48.9 (49)
1748 (84)
2250 (91)
85.2
39.3
385 mg/m2 (n=4)
Analyte, (CV %)
260 mg/m2
460.8 (45)
0.798 (22)
42.8 (26)
2131 (15)
2465 (15)
77.9
4.8
1 Percent reduction in Cmax and AUC(0-72) are calculated using the published reference standard PK of doxorubicin (at 75 mg/m2)
for both Cmax and AUC (Villalobos, 2019). These PK data from the olatatumab phase 3 trial in combination with doxorubicin
published by Tap WD, et al. 2020. PK reference standards were taken from doxorubicin monotherapy arm
Probability of the Event
1.0
0.5
0
AUC(0-72)
1000
0
3000
4000
2000
Doxorubicin
75 mg/m2
310 mg/sqm
250 mg/sqm
160 mg/sqm
PR, MR SD≥ w k
Neutropenia
(grade 3/4)
PR/MR Individual
exposure
AVA6000 delivers high
concentrations of doxorubicin to
the TME relative to plasma,
resulting in significant antitumor
activity in patients whose tumors
have over-expression of FAP
AVA6000 has a distinct safety
profile, with significant
reductions in both severe and
mild to moderate toxicities
associated with standard dose
doxorubicin
Exposure-response modeling
suggests that released
doxorubicin is generated
primarily by cleavage in the TME
as opposed to soluble FAP in the
bloodstream
PK/PD modeling demonstrate
separation of the probability
curves for response v. grade 3-4
neutropenia, supporting the
further exploration of the Q2W
dosing regimen
Further development at the
recommended dose for
expansion (RDE) is planned in 2H
2024 in specific tumor types with
high FAP expression and
anthracycline sensitivity
Key Finding:
Higher serum FAP
activity is not
associated with
high plasma
exposure of
cleaved
doxorubicin,
suggesting that
AVA6000 is not
cleaved in the
periphery
3.2
4
Doxorubicin plasma exposure
AUC(0-72) (hr*ng/ml)
4000
2000
0
3000
1000
Serum FAP activity (pmol/min/mg)
0
2.4
1.6
0.8
Doxorubicin concentration
(ng/gm or ng/ml)
10000
100
0
1000
10
Free doxorubicin
in the tumor
(ng/gm, 24 hrs)
Pts with FAPhigh1
Pts with FAPmid 2
Free doxorubicin
in the plasma
(ng/ml, 24 hrs)
1 FAPhigh indications were categorized by FAP expression in literature review and archival tumor tissue IHC. FAPhigh indications include
soft tissue sarcoma and salivary gland cancer. Tumor dox range (206-4396)
2 FAPmid diseases include colorectal carcinoma, pancreatic cancer, ovarian cancer, biliary tract cancer, transitional cell cancer of the
urethra and lung cancer. Tumor dox range (76-2310)
Key Finding:
AVA6000 cleavage
occurs in the TME,
with concentration of
doxorubicin in the
TME of approximately
~ 2-log difference
between tumor and
plasma
concentrations
Near
complete
resolution of
the multiple
pleural
metastases
February 2023
January 2024
February 2023
January 2024
February 2023
January 2024
February 2023
January 2024
FIGURE 1. FAP CLEAVAGE
For analysis, literature review of FAP expression (Ballal 2021, Kratochwil 2019, Koerber 2021)
and IHC of archival tumor samples informed the classification of indications to FAPhigh and
FAPmid. Indications deemed FAPlow were excluded from the trial
On-treatment biopsies were obtained (n=11) at 24 hours after the dose was administered and
assessed for the level of free doxorubicin in the TME. Plasma samples were obtained at the
same time to assess the tumor:plasma ratio of doxorubicin
• Patients with a diagnosis of known FAPhigh cancers, including
sarcoma, pancreatic cancer, colorectal cancer, head and
neck cancers
• Acceptable performance status (ECOG 0 or 1), adequate
organ function and recovery from effects of prior therapies
• Prior therapy with any anthracycline limited to total
cumulative dose of less than 350 mg/m2 doxorubicin or
equivalent
Banerji U1, Cook N2, Anthoney A3, Plummer R4, Tap WD5, Evans J6, Cranmer LD7, Plummer C4, Loadman P8, Lahu G9, Jones H8, Kinnersley N10, Mc Laughlin F10, Twelves C3
1The Institute for Cancer Research and the Royal Marsden Hospital, 2The Christie, 3University of Leeds, 4University of Newcastle, 5Memorial Sloan Kettering Cancer Center, 6University of Glasgow, 7University of Washington, 8University of Bradford, UK, 9Thinkq2, Basel Switzerland, 10Avacta Life Sciences
1 Cancer types in Other category include (n=1 each): non-small cell lung cancer, prostate cancer, transitional cell
cancer of the urethra, ovarian carcinoma, lung cancer (not otherwise specified), esophageal cancer
FIGURE 2.
ENHANCED ANTITUMOR ACTIVITY OF AVA6000 IS OBSERVED IN FAPhigh TUMOR MODELS
Days after tumor inoculation
Mean tumor volume + SEM (mm3)
1000
800
600
400
200
0
40
20
60
0
Model with naturally low FAP expression
(HPAF-IIP model)
(tumor: normal of 4:1)
p < 0.05
v. vehicle
Mean Tumor volume ± SEM (mm3)
0
500
1000
1500
2000
Days after tumor inoculation
0
10
20
30
40
50
60
12mg/kg
9mg/kg
6mg/kg
Model with engineered high FAP expression
(HEK-FAP model)
(tumor:normal of 200:1)
Doxorubicin
2 mg/kg
Vehicle i.v. QW x 4
AVA6000 12 mg/kg i.v. QW x 4
Doxorubicin 2 mg/kg i.v. QW x 4
PRELIMINARY EFFICACY
3
Avacta Report and Accounts 2023
Highlights 2023
Avacta’s Diagnostics Division
completed the acquisition of Belgium-
based Coris BioConcept SRL, (‘Coris’),
a developer and manufacturer of rapid
tests focused on infectious diseases,
on 31 May 2023 for an upfront
consideration of £7.3 million with an
earn-out based on future business
performance of up to £3.0 million
payable in cash, adding a broad range
of marketed professional-use rapid
tests to the Diagnostics Division.
The Diagnostics Division, which includes
Launch Diagnostics, (‘Launch’), a leading UK
IVD distributor that was acquired in October
2022, reports revenue of £21.2 million (2022:
£4.2 million) and an adjusted EBITDA loss of
£1.18 million (2022: £5.13 million).
The Group continues its focus on
consolidating the Diagnostics Division
post the Launch and Coris acquisitions.
After the period end Avacta announced
that it is exploring strategic options
for the Division in a manner which
maximises shareholder value and
benefit for the Group in creating a
pure-play oncology biopharmaceutical
company that the Board expects
will be more attractive to specialist
international biotech investors.
Operating
highlights
Highlights - Avacta Diagnostics
Second acquisition completed and integration
progressing to build a profitable Diagnostics Division.
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Cash and short-term
deposit balances at 31
December 2023 of
£16.6 million
(31 December 2022: £41.8 million)
Reported loss from
continuing operations of
£24.95 million
(2022, restated: £36.98 million)
Revenues increase to
£23.25 million
(2022: £9.65 million)
Adjusted EBITDA loss
(before non-cash and
non-recurring items)
of £20.14 million
(2022: £15.09 million)
Loss per ordinary
share from continuing
operations of 9.15p
(2022, restated: 14.48p)
Operating loss reduces to
£28.36 million
(2022: £32.6 million)
Shaun Chilton joined
Avacta's Board of
Directors as Non-
executive Director
in June 2023.
Financial
& corporate
highlights
Highlights - Financial & Corporate
Fundraise completed in
March 2024 raising £31.1
million (gross proceeds)
from quality institutions,
including a European
healthcare specialist investor,
and private shareholders
to significantly extend the
Group’s cash runway.
Events
after the
reporting
period
£
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Avacta Report and Accounts 2023
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The Avacta pre|CISIONTM platform is a proprietary warhead
delivery system, based on the activity of a cancer-specific
protease, that is designed to concentrate highly potent
warheads in the tumour microenvironment while sparing
normal tissues.
Fibroblast activation protein-α ('FAP') is an extracellular post-
proline protease that is upregulated in many solid tumours in
a membrane-bound form on cancer associated fibroblasts as
well as tumour cells. FAP activity is also observed as a soluble
protease to a low degree in plasma.
AVA6000 is the first clinical-stage pre|CISIONTM molecule. It is
a peptide drug conjugate that leverages the tumour-specific
expression of FAP by linking a peptide moiety which has two
key properties:
• It prevents the warhead from entering cells.
• It is specifically cleaved by FAP to release active
doxorubicin.
The peptide moiety linker, pre|CISION™, prevents cellular
entry of the warhead unless it is cleaved by FAP, thus enabling
targeted delivery of doxorubicin to tumours.
pre|CISIONTM Technology
Concentrating highly potent warheads in the tumour microenvironment
Fibroblast activation protein (FAP α)
Platform Technologies
Avacta Annual Report and Accounts 2018
Avacta’s lead prelCISION™ programme, AVA6000, a tumour microenvironment activated form of chemotherapy agent doxorubicin, is now in clinic.
AVA6000 is proving to be distinct from standard doxorubicin and shows a reduction in side effects
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Avacta Report and Accounts 2023
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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.
Affimer® regents can be used to develop diagnostic
and research assays, or products to enrich or purify 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 entirely 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.
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.
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What is an Affimer®?
Variable
loop regions
Avacta Report and Accounts 2023
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.
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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 has two divisions: a clinical stage oncology biotech division harnessing proprietary therapeutic
platforms to develop novel, highly targeted cancer drugs, and its Diagnostics Division focused on supporting
healthcare professionals
• The Therapeutics Division is leveraging Avacta’s proprietary technologies to develop innovative oncology drugs
that transform treatment outcomes to improve cancer patients’ lives.
• The Diagnostics Division is focused on supporting healthcare professionals and broadening access to testing.
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.
• The pre|CISION™ platform is a highly specific substrate for fibroblast activation protein ('FAP') which is
highly upregulated in most solid tumours compared with healthy tissues. The pre|CISION™ platform
harnesses this tumour-specific protease to activate pre|CISION™ peptide drug conjugates and
pre|CISION™ antibody drug conjugates in the tumour microenvironment, reducing systemic exposure
and toxicity, allowing dosing to be optimised to deliver the best outcomes for patients.
• Affimer® molecules are engineered alternatives to antibodies that have significant competitive
advantages including size, stability, versatility, rapid development and ease of production.
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 to accelerate the development of its platform technologies by working with partners.
• AVA6000, a peptide drug conjugate form of doxorubicin, is in Phase 1 studies. It has shown a dramatic
improvement in safety and tolerability compared with standard doxorubicin and preliminary signs of clinical
activity in patients with high FAP tumours that are sensitive to anthracyclines.
• Data from the Phase 1 trial for the first candidate, AVA6000, confirms the pre|CISIONTM platform’s ability to target
a toxin to the tumour microenvironment ('TME') and transform the safety profile of such cancer therapies.
• The second pre|CISION™ tumour-targeted chemotherapy candidate for development was announced in
January 2022 and is a proteasome inhibitor referred to as AVA3996.
• Preclinical data regarding AVA3996, the second pre|CISION™ programme, a tumour targeted proteasome
inhibitor, were presented at the American Association of Cancer Research Annual Meeting in April, and at
AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics in October along
with data from other research programmes.
• Additional pre|CISIONTM targeted cancer therapies are being developed in the pre-clinical pipeline and have
not yet been publicly disclosed.
• There is also significant longer-term potential to combine Avacta’s two platforms to create next generation
targeted ‘drug conjugate’ cancer treatments.
• AffyXell Therapeutics ('AffyXell'), the joint venture between Avacta and Daewoong Pharmaceutical ('Daewoong')
continued to progress well with the triggering of a second milestone payment. This resulted in an increase in
Avacta’s shareholding in AffyXell to 25%.
• The growing body of clinical and pre-clinical data validating the pre|CISIONTM platform has supported an
acceleration in the Group’s commercial activities including the appointment of Dr Simon Bennett as Chief
Business Officer of the Therapeutics Division.
Diagnostics Division
• Avacta’s Diagnostics Division completed the acquisition of Belgium-based Coris BioConcept SRL, a developer
and manufacturer of rapid tests focused on infectious diseases, on 31 May for an upfront consideration of
£7.3 million with an earn-out based on future business performance of up to £3.0 million payable in cash,
adding a broad range of marketed professional-use rapid tests to the Division.
• The Diagnostics Division, which also includes Launch Diagnostics, a leading UK in vitro diagnostics (‘IVD’)
distributor that was acquired in October 2022, reports revenue of £21.2 million and an adjusted EBITDA
loss of £1.2 million.
• The Group’s strategy is to focus its cash resources on growing the Therapeutics Division which the Board
believes is now the main value driver of the Group. Whilst the Diagnostics Division is expected to be cash
generative in the near future, it is strategically important for the Group to simplify its structure in order to
attract specialist healthcare investors with the ability to support the growing pre-clinical and clinical pipeline
of pre|CISIONTM and Affimer® therapeutics and it will do so in a manner which maximises value and strategic
benefits for its shareholders.
With a balanced business and capital allocation model, and a high-value oncology pipeline supported by a
revenue-generating, fast-growing diagnostics business, Avacta seeks to create long-term shareholder value
alongside patient benefit.
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Avacta Report and Accounts 2023
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Avacta Report and Accounts 2023
Strategic Report
14
Chairman's Statement
15
Chief Executive Officer’s Statement
16
Operational Review
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Business Overview
20
Therapeutics Division
24
AVA6000 Clinical Trial Update
26
Drug Development Collaborations
30
Diagnostics Division
32
Launch Diagnostics
36
Coris BioConcept
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Financial Review
42
Principal Risks and Uncertainties
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I believe that Avacta has reached a pivotal point in its
history. The clinical progress of the pre|CISION™ platform
and of AVA6000 enable the Company to bring singular
focus to the Therapeutics Division, though clinical
development and partnering.
We are also aware of the need to continue to evolve the
Board of Directors to best suit the needs of an AIM-listed
clinical stage cancer treatments company, to strategically
manage the Diagnostics Division for the best outcome for
our staff, customers and shareholders alike, and to create
financial optionality with respect to the company bond.
The Board of Directors and I are excited about what is to
come for Avacta.
The AVA6000 clinical data continue to impress. As we
begin to progress into the expansion cohorts and Phase
2 study and hopefully continue to demonstrate clear
patient benefits, I am confident this will further open up
the commercial partnering opportunities for AVA6000
and the pre|CISION™ technology platform.
During the year there have been some changes to the
Board, including the appointment of Shaun Chilton as
Non-executive Director in June 2023. Shaun has held a
number of senior and executive commercial positions,
with more than 30 years’ experience in the pharmaceutical
and pharmaceutical services industries, most recently as
Chief Executive Officer of Clinigen. We believe he will bring
invaluable experience to the Company.
Christina Coughlin MD, who joined the Board as a Non-
executive Director in March 2022 and acted as Medical
Advisor in the latter half of the year, has now joined
the Board on a full-time basis as Head of Research
and Development in February 2024. Chris, a talented
oncologist and immunologist, has been pivotal in driving
the clinical development strategy for AVA6000 and will
be responsible for all pre-clinical research and clinical
development activities.
The Board will need to continue to evolve to meet the
demands of being a clinical stage oncology Company
and to more clearly communicate with shareholders and
other stakeholders.
Dr Eliot Forster
Chairman
29 April, 2024
Chairman's Statement
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Strategic Report
The clinical data emerging from the AVA6000 Phase 1 study
during 2023 clearly validate the pre|CISIONTM platform as
a leading tumour-targeting mechanism. Targeting tumour
tissue and reducing systemic exposure are key objectives in
oncology drug development allowing more potent therapies
to be utilised. The potential of a successful tumour-targeting
platform is huge.
AVA6000, Avacta’s first pre|CISIONTM peptide drug conjugate,
has been shown to target doxorubicin to FAP-rich tumour
tissue, dramatically improving the safety and tolerability
of this well-established chemotherapy. Early signs of anti-
tumour activity have been seen in a number of patients on
the trial meaning that clinically effective levels of the drug are
being released in the tumour microenvironment. This also
reflects the tumour biopsy data which show doxorubicin
being present in the tumour tissue at many times the level
measured in the blood stream at the same timepoint showing
effectiveness in the tumour whilst minimising the debilitating
side effects characteristically experienced with chemotherapy.
Avacta has been able to leverage this excellent progress in
the clinic to progress conversations with potential commercial
partners. The commercial strategy is to continue to develop
AVA6000 through the Phase 2 efficacy study to maximise
value. However, there are significant partnering opportunities
for the broader pre|CISIONTM platform. The body of positive
clinical data we have seen will support our commercial activities.
The Group’s focus is on growing shareholder value through
its oncology drug programmes. The Diagnostics Division has
been executing the plan that was set out to shareholders in
October 2022 to build a valuable in vitro diagnostics business
serving the needs of healthcare professionals. It has grown
through two acquisitions, resulting in a combined revenue of
£21.2 million, and is on a trajectory to become EBITDA positive
in the near future with the acquired businesses showing 10%
growth during 2023.
The fundraise completed post-period end in March 2024
amounting to £31.1 million (gross proceeds) from new and
existing institutional and private shareholders has enabled
us to significantly extend the Group’s cash runway, creating a
strong negotiating position in future commercial discussions
and providing the funds to progress AVA6000 into Phase 2
clinical trials, subject to FDA approval.
Dr Alastair Smith
Chief Executive Officer
29 April, 2024
Chief Executive Officer’s Statement
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Avacta Report and Accounts 2023
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: an
oncology biotech division harnessing proprietary
therapeutic platforms to develop novel, highly
targeted cancer drugs, and its Diagnostics Division
focused on supporting healthcare professionals and
broadening access to testing.
Avacta's two proprietary platforms, pre|CISION™
and Affimer®, underpin its cancer therapeutics whilst
the Diagnostics Division is focused on innovative
product development, the commercial routes to
market and leveraging the Affimer® platform to drive
competitive advantage.
The pre|CISION™ platform modifies chemotherapy
to be activated only in the tumour tissue, reducing
systemic exposure and toxicity. This is achieved by
harnessing an enzyme called FAP which is highly
upregulated in most solid tumours compared
with healthy tissues, turning chemotherapy into a
peptide drug conjugate ‘precision medicine’. The lead
pre|CISION™ programme, AVA6000 a peptide drug
conjugate tumour-activated form of doxorubicin,
is in Phase 1 studies and has shown dramatic
improvement in safety compared with standard
doxorubicin, and preliminary signs of clinical efficacy.
Affimer® is a novel biologic platform which has
significant technical and commercial advantages
compared with antibodies and is used both to
develop advanced immunotherapies and to improve
the performance of immunodiagnostics.
Avacta’s Diagnostics Division comprises two business
units – Launch Diagnostics and Coris BioConcept.
Avacta acquired 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. Coris, based in Gembloux,
Belgium, develops, manufactures and markets
rapid diagnostic test kits, mainly lateral flow tests,
for use by healthcare professionals. Coris is ISO
13485 certified and markets its products through
distributors in Europe, Asia, South America, Africa
and Oceania.
In the highly competitive diagnostics market, Avacta’s
proprietary Affimer® platform is able to differentiate
our immunodiagnostic products to gain competitive
advantage and grow market share.
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Strategic Report
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Avacta Report and Accounts 2023
Avacta
Therapeutics
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Strategic Report
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Avacta Report and Accounts 2023
Therapeutics Division
The Avacta pre|CISIONTM platform is a proprietary
warhead delivery system based on a tumour-specific
protease that is designed to concentrate highly potent
warheads in the tumour microenvironment while
sparing normal tissues. Fibroblast activation protein-α
('FAP') is an extracellular post-proline protease that is
upregulated in many solid tumours in a membrane-
bound form on cancer associated fibroblasts as well
as tumour cells. FAP activity is also observed as a
soluble protease to a low degree in plasma.
A pre|CISIONTM molecule has two key properties:
1. It prevents the warhead from entering cells.
2. It is specifically cleaved by FAP to release active
warhead in the tumour.
The peptide moiety linker, pre|CISION™, prevents
cellular entry of the warhead unless it is cleaved by
FAP, thus enabling targeted delivery of the warhead to
tumours.
The lead pre|CISIONTM programme, AVA6000 a tumour
activated form of doxorubicin, is in Phase 1 studies
and has achieved clinical proof-of-concept, showing
dramatic improvement in safety compared with
standard doxorubicin, and early signs of clinical activity.
Affimer® is a novel biologic platform which has
significant technical and commercial advantages
compared with antibodies and is used both to
develop advanced immunotherapies and to improve
the performance of immunodiagnostics.
AVA6000 FAPα-activated doxorubicin - the lead
pre|CISION™ programme
Avacta’s lead programme, AVA6000, is a pre|CISIONTM
targeted form of doxorubicin, an anthracycline that
is used as part of standard of care in several tumour
types including soft tissue sarcoma. Its dosing
schedule and long-term use is limited by severe
systemic toxicities, in particular, by haematological
toxicities and cardiotoxicities.
The ALS-6000-101 Phase 1 clinical trial involves a
dose-escalation Phase 1 study in patients with locally
advanced or metastatic solid tumour, known to be
Fibroblast Activation Protein α ('FAP') positive, in
which cohorts of patients receive ascending doses
of AVA6000 initially at three-weekly intervals to
determine the maximum tolerated dose. For more
information visit www.clinicaltrials.gov (NCT04969835).
The Phase 1a three-weekly dose escalation study has
been carried out at several sites in the UK and US
and completed the seventh and final dose escalation
cohort at 385 mg/m2, which is approximately 3.5 times
the normal dose of doxorubicin. A number of patients
in several different cohorts remain on the trial.
The data emerging from the three-weekly dose
escalation study show an excellent safety profile and
that the pre|CISIONTM platform is functioning as
expected. The key findings of the study are:
• The pre|CISIONTM platform targets the release of
a chemotherapy to the tumour as intended. The
data show that the pre|CISIONTM modification is
cleaved specifically by FAP, an enzyme present
in high concentrations in many solid tumour
compared with healthy tissue. In the case of
AVA6000, this targets the release of doxorubicin
to the tumour microenvironment, concentrating
the active cytotoxic drug within the tumour
microenvironment and limiting systemic exposure
to the chemotherapy.
• AVA6000 has significantly improved the safety and
tolerability of doxorubicin. A significant reduction
in the frequency and severity of the known
doxorubicin toxicities has been observed across the
dosing range. A maximum tolerated dose has not
been reached in the three-weekly dose escalation
study despite dosing approximately 3.5x the normal
level of doxorubicin in the highest and final dose
cohort in this part of the Phase 1a study.
• AVA6000 has shown encouraging preliminary
clinical signs of anti-tumour activity. Preliminary
results in the Phase 1a trial demonstrate activity
of AVA6000 in patients with tumour with high FAP
activity and anthracycline sensitivity, validating the
mechanism of action of AVA6000.
Post-period end the Company announced that
patients are now being dosed in a two-weekly
dose escalation study with the aim of defining the
recommended Phase 2 dose (RP2D), allowing dose
expansions to begin in H2 2024 followed by the Phase
2 efficacy study, subject to FDA approval, in a selected
orphan indication.
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.
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Strategic Report
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Avacta Report and Accounts 2023
Pipeline of pre|CISION™ chemotherapies
The next most advanced pre|CISION™ pre-clinical
candidate is AVA3996, a tumour-activated proteasome
inhibitor based on an analogue of Velcade.
Avacta is developing other pre|CISION™ drugs
incorporating more potent toxins, the details of which
have not yet been made public, but which the Group
intends to disclose during 2024.
Affimer® immunotherapy programmes
Avacta has also developed Affimer® immunotherapies,
the most advanced of which (AVA032) is in pre-
clinical research phase and is a bispecific molecule
comprising an anti-PD-L1 Affimer® fused to IL-
15, a cytokine that regulates the activation and
proliferation of immune cells (T-cells and natural killer
(NK) cells). Data presented at the AACR-NCI-EORTC
International Conference on Molecular Targets and
Cancer Therapeutics in October 2023 demonstrate
encouraging in vitro and in vivo efficacy.
Translation of the Affimer® platform into the clinic
to demonstrate the safety and tolerability of this
novel therapeutic protein platform represents a key
value inflection point for the Affimer® technology.
Limited resources for internal Affimer® programmes
are complemented by external partnerships for the
Affimer® platform with Daewoong Pharmaceutical
and LG Chem Life Sciences.
Therapeutics Division (continued)
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>
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Avacta Report and Accounts 2023
Therapeutics Division (continued)
AVA6000 Clinical Trial Update
The pre|CISION™ platform - a proprietary
warhead delivery system
The Avacta pre|CISIONTM platform is a proprietary
warhead delivery system based on the activity
of a cancer-specific protease that is designed to
concentrate highly potent warheads in the tumour
microenvironment ('TME') while sparing normal tissues.
Fibroblast activation protein-α ('FAP') is an extracellular
post-proline protease that is upregulated in many
solid tumours in a membrane-bound form of cancer
associated fibroblasts as well as tumour cells. FAP
activity is also observed as a soluble protease to a low
degree in plasma.
AVA6000 is the first clinical-stage pre|CISIONTM
molecule. It is a peptide drug conjugate that
leverages the tumour-specific expression of FAP
by linking a peptide moiety which has two key
properties:
• It prevents the warhead from entering cells.
• It is specifically cleaved in the tumour
microenvironment by FAP to release active
doxorubicin which can then enter cells.
pre|CISIONTM drug conjugate ('PDC')
The warhead is linked to a peptide specifically cleaved
by fibroblast activation protein-α ('FAP'), thus releasing
the warhead in the extracellular space of the TME.
The Avacta pre|CISIONTM platform is a proprietary
warhead delivery system that is designed to
concentrate highly potent warheads in the tumour
microenvironment while sparing normal tissues that is
based on a cancer-specific protease
Fibroblast activation protein-α ('FAP') is an extracellular
post-proline protease that is upregulated in many
solid tumours in a membrane-bound form on cancer
associated fibroblasts as well as tumour cells, FAP
activity is also observed as a soluble protease to a low
degree in plasma.
pre|CISION+ Immuno-peptide drug conjugate
The Avacta pre|CISION+ platform is based on the
peptide drug conjugate delivery model which is
then conjugated to a biologic protein moiety such
as the Fc region of an antibody or Affimer XT to
significantly extend the half-life and optimise the
pharmacokinetics of the peptide drug conjugate.
Significant extension of the half-life of the
pre|CISIONTM warhead will benefit certain warheads
that target tumours in ways other than traditional
cytotoxics. Examples of such pre|CISION+ warheads
include cancer pathway targeted therapies or
immune modulators where more consistent and
concentrated delivery to the TME is optimal.
Biologic conjugates such as the Fc region of
monoclonal antibodies are preserved from
degradation by naturally occurring means within the
immune system such as antibody recycling by the
neonatal Fc receptor (Roopenian 2007, Rath 2015).
Delivery of the warhead by a pre|CISION+ drug leverages
the tumour-specific expression of FAP combined with
the half-life extension of the biologic conjugation.
pre|CISION-ADC
The Avacta pre|CISION-ADC platform leverages the
FAP-activated tumour-specific release mechanism
of the pre|CISIONTM technology with the tumour-
targeting capability of an antibody or Affimer®.
The mechanism of action of the pre|CISION-ADC
model optimises warhead delivery by targeting the
warhead to the TME in two ways: with the antibody
or Affimer® target and FAP-release in the TME.
Optimisation of the bystander effect is a key benefit
of the mechanism of the pre|CISION-ADC platform.
The biologic targets the molecule to the TME through
a non-internalising mechanism and membrane-
bound FAP releases the warhead in the extracellular
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Strategic Report
space, thus equally targeting both antigen-positive
and antigen-negative tumour cells.
The dual-delivery by a pre|CISION-ADC drug
leveraging both a tumour antigen to target and FAP
to release the warhead will significantly reduce the
off-tumour toxicities associated with traditional
ADC mechanisms.
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 and 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?
Avacta’s lead pre|CISIONTM peptide drug conjugate
programme, AVA6000, is a tumour-targeted form of
doxorubicin, an anthracycline that is used to treat
several indications both as a monotherapy (e.g. for
advanced soft tissue sarcoma) and in combination with
other drugs (e.g. for breast cancer). Its dosing schedule
and long-term use is limited by severe systemic
toxicities, in particular, by haematological toxicities and
cardiotoxicities.
AVA6000 targets the release of doxorubicin to the FAP-
rich tumour tissue thereby reducing the amount that is
found in the bloodstream of the patients. This lowers
the systemic exposure to the drug whilst concentrating
its release in the tumour and therefore reduces the
systemic toxicities and the cumulative exposure of the
heart to doxorubicin.
This offers the potential to not only increase the dose
level and frequency of dosing of doxorubicin but
also allows for an increase in the number of cycles
of treatment which is currently limited by the risk of
cumulative heart damage.
This potential improvement in dosing schedule (dose,
dose frequency and number of cycles) due to reduced
toxicities could improve the efficacy of doxorubicin in
certain tumours and therefore improve the outcomes
for patients.
AVA6000 clinical trial update
• A ‘first-in-human’ (‘FIH’) dose escalation study of
AVA6000 is currently dosing patients in the UK and
US (ClinicalTrials.gov Identifier: NCT04969835).
• Safety and tolerability of AVA6000 are being
assessed in a Phase 1a dose escalation study. Data
to date from the three-weekly dosing arm of the
trial demonstrated that the pre|CISIONTM platform
targets the release of the chemotherapy to the
tumour as intended, that AVA6000 significantly
improved the safety and tolerability of doxorubicin
and that AVA6000 is already showing encouraging
preliminary clinical signs of anti-tumour activity.
• Cohort 7 was the final cohort in the three-weekly
study and even at this dose level (385 mg/m2),
which is approximately 3.5x the equivalent standard
dose of doxorubicin, dose-limiting toxicities were
not observed and the Safety Data Monitoring
Committee ('SDMC') has concluded that this dose
level is safe. A number of patients remain on the
three-weekly study at this time in several different
cohorts. A two-weekly dosing safety study has now
commenced in the US on the basis that this is likely
to lead to better efficacy.
• The combined data from the three-weekly and
two-weekly studies will provide information to allow
the Company to define the dose and schedule to
be used in future efficacy studies. Patients can be
dosed in parallel in the two-weekly dose escalation
study and Avacta remains on track to begin the
dose expansion efficacy study in the second half
of 2024. The data from the expansion study will
be used to inform the optimal choice of a single
orphan indication for the Phase 2 efficacy study
which will follow on immediately.
>
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Avacta Report and Accounts 2023
AffyXell was established in January
2020 by Avacta and Daewoong as
a joint venture to develop novel
mesenchymal stem cell (‘MSC’)
therapies. AffyXell combines Avacta's
Affimer® platform with Daewoong's
MSC platform such that the stem cells
are genetically modified to produce
and secrete therapeutic Affimer® proteins with immuno-modulatory effects in situ
in the patient. The Affimer® proteins are designed to enhance the therapeutic
effects of the MSC creating a novel, next generation cell therapy platform.
Avacta has successfully developed and characterised Affimer® proteins against
the second target of interest for AffyXell and has filed a patent application for
the associated intellectual property triggering the second milestone in the
agreement during the reporting period. The second milestone resulted in an
increase in Avacta’s shareholding in AffyXell, from 19% to 25%.
Therapeutics Division (continued)
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.
Avacta has a strategic partnership with
LG Chem Life Sciences focused on
the development of Affimer® based
therapeutics. The partnership provides
LG Chem with rights to develop and commercialise a number of Affimer® and
non-Affimer biotherapeutics combined with Affimer XT® half-life extension for
a range of indications.
The Company will provide further updates on the partnership with LG Chem at the
next material milestone.
AffyXell
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Strategic Report
Early in 2021, Avacta signed a licensing
agreement with POINT Biopharma
Inc. (‘POINT’), 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.
Avacta is bound by confidentiality clauses in the licensing agreement with POINT
and is therefore unable to provide a detailed update on progress outside of the
information that has been placed in the public domain by POINT (POINT has
named its pre|CISIONTM based programmes CanSeekTM).
POINT’s acquisition by Eli Lilly has not affected the licensing arrangements.
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Avacta Report and Accounts 2023
Avacta
Diagnostics
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Strategic Report
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Avacta Report and Accounts 2023
Diagnostics Division
In October 2022 Avacta set out a strategy to grow
its Diagnostics Division through acquisitions to build
a stand-alone in vitro diagnostics (‘IVD’) business
taking advantage of post-pandemic opportunities to
develop products in-house and to capture proprietary
routes to market to maximise profitability. The focus
of the Division is on professional healthcare in both
the centralised setting such as hospital pathology
laboratories and the decentralised setting such as
primary healthcare, clinics and pharmacies. The
strategy also has the potential to benefit from the
competitive advantages of the Affimer® platform to
differentiate immunodiagnostic products, such as
lateral flow tests, in what is a competitive market.
Avacta has focused its acquisitions on businesses with
clear growth opportunities through product portfolio
or geographic expansion, improved commercial
processes and partners.
Avacta has successfully executed two acquisitions
of businesses that fit with this strategy: Launch
Diagnostics Ltd (‘Launch’), a leading independent
distributor of IVDs to the professional, centralised
hospital laboratory testing market in the UK and
France, and Coris BioConcept SRL (‘Coris’), a developer
and supplier of rapid diagnostic test kits, mainly
lateral flow tests. These acquisitions have allowed the
Division to build scale and put it on a trajectory to
become EBITDA positive in the near future.
The Diagnostics Division now has well-established
routes to market in the UK and France and is
expanding into other European countries including
Germany. Alongside third-party products it has a
market-leading portfolio of AMR test products that
form part of the clinical workflow in many countries.
From this base it is possible to build a significant, full
spectrum, European IVD business through organic
growth which is likely to be attractive ultimately to
both strategic and financial acquirers.
As announced on 28 February 2024, the Avacta Board
has taken the strategic decision to focus its cash
resources on growing the Therapeutics Division which
the Board believes is now the main value driver of the
Group. Whilst the Diagnostics Division is expected to
be cash generative in the near future, it is strategically
important for the Group to simplify its structure in
order to attract specialist healthcare investors with the
ability to support the growing pre-clinical and clinical
pipeline of pre|CISIONTM and Affimer® therapeutics
and it will do so in a manner which maximises value
for its shareholders.
Avacta’s Diagnostics Division is focused on supporting healthcare
professionals and broadening access to high quality diagnostics.
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Strategic Report
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Avacta Report and Accounts 2023
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Strategic Report
>
Launch Diagnostics
After Avacta completed the acquisition
of Launch Diagnostics, the UK’s largest
independent IVD distributor, Launch 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.
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.
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 enzyme immunoassays (EIA),
single test devices, serology products, molecular
assays and instrumentation.
New site
At the end of February 2024, Launch Diagnostics
moved to new facilities at Crossways Business
Park in Dartford. The new office incorporates a
demonstration laboratory, training room and open
plan working areas with several collaboration areas,
where products can be showcased to customers and
scientific symposia held.
In addition to the new site, Launch customers in France
are now benefiting from a French language website
which was developed and launched in January 2024.
Sales and marketing activities
The marketing team works closely with suppliers to
support Launch’s customers. They also introduce new
products and undertake due diligence to ensure new
products fit to the needs of customers.
The sales team are responsible for the customers in
their territory where strong relationships ensure the
business stays up to date with the requirements of
the NHS and other customers, as well as being able
to discuss new assays and equipment introduced into
the product portfolio. This approach has enabled a
year-on-year sales growth of all key product ranges.
Advertising in scientific journals, trade conferences
and sponsoring scientific meetings are all part of
the strategy to promote key products. In September
2023 Launch won the ‘Best Stand Award’ at the IBMS
Congress for a sustainability themed stand, which
used recycled pallets to build the main wall, recycled
cardboard signage and living plants. The stand was
also made to be re-usable.
Awards and recognition
Launch has also received a Bronze Award for
the second year running for sales from Dynex
technologies, suppliers of the DS2 automated ELISA
platform. In addition, Launch received an award from
Vircell for Best distributor by sales volume for their
Amplirun range, a series of external controls which
can be used with molecular assays.
Technical activities
Launch’s technical department remains a pivotal
function in the business. As the automation
portfolio grows, due to the rapid change in specialist
diagnostics, a lot of time is devoted to ensuring
the team are fully prepared to support customers’
advancing needs. Customer service is a priority;
the focus is to deliver quick, effective, and efficient
support to customers who are providing laboratory
services to patients throughout the UK, Ireland, France
and Belgium. The constant monitoring of performance
levels across all territories allows the team to
accurately identify potential issues before they arise,
resulting in short turnaround time for resolutions.
The Quality and Regulatory department has been kept
busy due to the ever-changing regulatory landscape
for the UK and Europe. All the products distributed
by Launch are market-compliant and the Quality and
Regulatory department helps us to stay informed of
new and developing regulations, especially around the
IVDD and IVDR.
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Avacta Report and Accounts 2023
Launch Diagnostics (continued)
Product Updates
Liofilchem antimicrobial resistance assays and
culture media
Liofilchem products for antimicrobial resistance (‘AMR’)
testing have been an area of consistent growth for
Launch Diagnostics since distribution commenced, with
sales primarily of MIC testing strips. In 2023 Launch
expanded their Liofilchem offering to include agar
plates which optimise the performance of Liofilchem
MTS strips for antimicrobial resistance monitoring,
whilst also following the EUCAST European guidelines.
A number of other Liofilchem AMR products such as
ComASP microbroth dilution panels are also becoming
the test of choice for many reference laboratories and
general microbiology laboratories.
Coris BioConcept AMR test products
Coupled with the success of Liofilchem AMR
business, Launch has also started to sell products
from Avacta’s Coris BioConcept business in both
the UK and France. The products include a range
of rapid tests for detecting antibiotic resistance
mechanisms in bacteria, and complement the
Liofilchem range, allowing laboratories to screen and
confirm antimicrobial resistance. The combination of
Liofilchem and Coris products will enable Launch to
grow within the AMR testing business by covering all
assays required in the current testing guidelines and
shows the successful integration and growth within
Avacta’s Diagnostics Division, reflecting the Group’s
strategy in this area.
Vircell VirClia Lotus
The new VirClia Lotus from Vircell was launched in July
2023. This is a chemiluminescence serology analyser
with more than 90 assays in a monotest format
including Aspergillus galactomannan antigen, Candida,
HEV, CMV, TORCH Mycoplasma pneumoniae and
syphilis antibody. The instrument is ideal for running a
combination of tests and a stat function allows urgent
assays to be incorporated as required. The instrument
allows for continual loading of both reagents and
samples for added flexibility. The first instrument
has been placed and a further two are scheduled
in the coming months. New assays are constantly
being developed by Vircell, with a VirClia test for
Helicobacter pylori being released in March 2024.
Anatolia Molecular assays
Following internal verification work, the Bosphore
Gastroenteritis v3 assay from Anatolia Geneworks
was launched in July 2023. This assay provides a
fully comprehensive PCR test for the detection of all
clinically relevant bacteria, viruses and parasites from
one test, with a simple workflow and runtime.
HOB
Since the HOB Clia systems for testing auto-immune
disease were launched to the UK market at the end of
2022, Launch has installed two instruments, and three
further instruments are anticipated for placement
this year. These are currently going through the NHS
tender procurement process.
There are two instruments in the HOB range, the
BioClia 6500 and the BioClia 500, and therefore
laboratory workload can determine the best
instrument based on the sample numbers and
required throughput. The instruments can run
multiple assays at the same time, which aids in the
laboratory workflow.
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Strategic Report
>
Biosystems A15s
The Biosystems A15s analyser can test for
Calprotectin and Faecal Occult Blood (FOB) using an
immunoturbidimetric method. Since its introduction
to the UK market, there has been a lot of interest
for this system both in the UK and ROI. There are
currently four laboratories completing validation work
and another four about to start evaluations.
Traditionally, sample processing for both the
Calprotectin and FOB assays is time consuming with
multiple steps, but the Biosystem A15s method uses
a dedicated sample collection tube that requires no
special pre-treatment, and reduces the laboratory
sample preparation time.
Gold Standard Diagnostics AIX1000
The AIX1000 is a dedicated analyser and assay for testing
syphilis by the Rapid Plasma Reagin (‘RPR’) method.
Syphilis case in both the UK and France have increased
dramatically in the last few years and traditional manual
testing is time consuming and subjective.
The AIX1000 from Gold Standard allows for the
automatic processing, dilution, testing and reading
of results by a modified RPR method. Since its launch,
the instrument and assay have been placed in both
the UK and France within public laboratories and
reference centres.
FlashDx
The FlashDx molecular analyser and assays were
launched for sale in Belgium in Q3 of 2023. This
is a plug-and-play instrument with a small range
of multiplexed nucleic acid microbiology tests,
covering respiratory diseases, SARS CoV and sexually
transmitted diseases. Each assay can detect the DNA
from more than one organism.
Sustainability
Launch Diagnostics is committed to the principles
of sustainability and a sustainability policy has been
implemented as a central tenet of all operations. This
covers environmental, social, and economic aspects
together with the health, safety and well-being of all
employees and visitors.
A carbon reduction plan is in place and there is a
commitment to achieving net zero emissions by 2050,
which is in line with the NHS net zero roadmap. This
is also aligned with the requirements of the British in
vitro diagnostics association (‘BIVDA’).
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Avacta Report and Accounts 2023
Coris, based in Gembloux, Belgium, was established
in 1996 and specialises in developing, manufacturing
and marketing rapid diagnostic kits for the detection
of human respiratory, gastro-enteric and blood-
borne pathogens and for the detection of antibiotic
resistance markers (RESIST range). These tests are
based on the lateral flow immunochromatography
technology with colloidal gold particles or latex
microspheres and are CE marked for professional use.
Coris is ISO 13485 certified and markets its products
through distributors in Europe, Asia, South America,
Africa and Oceania.
Operationally, Coris employs 35 members of staff
split across production, sales, marketing, quality
control, regulation and administration. In March
2023, the business entered into a nine-year lease of
a new 10,700 ft2 production, offices and warehouse
facility in Gembloux.
Coris’ product portfolio comprises diagnostic tests
for respiratory, gastro-enteric and blood-borne
pathogens (bacteria, viruses and parasites) and for the
detection of antibiotic resistance markers. Antibiotic
resistance is a major global challenge and there are
good future growth prospects for the market
for antimicrobial resistance (‘AMR’) testing and is a key
area in which Avacta expects to grow the Coris business.
Research and innovation are at the core of Coris, with
R&D activities producing a history of world firsts:
• Coris produced the first lateral flow test for
the detection of Rotavirus, in 1997, quickly
followed by other products for the diagnosis of
gastroenterological and respiratory diseases. Other
tests allowing the detection of chemical molecules
in urine are also part of the catalogue, as well as
several molecular biology tests from European
research programs.
• Coris produced the first lateral flow test for
the detection of carbapenemase-producing
enterobacteria (CPE) in 2015. This range has been
enriched with tests specific to Acinetobacters and
for the detection of extended spectrum beta-
lactamase (ESBL).
• Coris was one of the first two companies, and the
first in Europe, to offer a Covid-19 diagnostic test.
Coris BioConcept
In May 2023, Avacta completed the acquisition
of Belgian diagnostics business Coris BioConcept.
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Strategic Report
All Coris’ diagnostic products are intended to be sold to
medical analysis laboratories (both public and private),
with the sales taking place mainly via a network of
distributors present in more than 70 countries, who
are regularly trained in the new products offered. The
presence of the sales teams at various international
congresses and exhibitions ensures product visibility
among new distributors and customers.
Recently, to meet the growing demand for antibiotic
resistance assays Coris has invested in a fully
automated production line. In addition Coris has
strengthened the production and sales teams as
well as the team responsible for certifications and
registrations to speed up the market approval of new
products already underway in R&D.
Coris is also now exploring new markets including
the US and lower-income countries such as India in
which a new business model is being tested. In this
new model, Coris will produce and provide the basic
nitrocellulose test strips and other components for
its products to a third party manufacturer/distributor
in the country who will assemble product kits at a
lower overall costs than can be achieved in Europe
that is more suitable for the local market. In this way
Coris plans to grow its global coverage for its market-
leading AMR products.
To date, Coris has been involved in more than 30
international projects including 18 EC-funded projects
and a wide range of Belgian collaborative projects.
These projects have resulted in patents, publications
and commercialised products, all manufactured
since 2023 in a new facility located in Gembloux,
Belgium. Coris also provides services for custom test
development and contract manufacturing.
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Avacta Report and Accounts 2023
Revenue
Reported Group revenues for the year ended
31 December 2023 increased to £23.25 million
compared to £9.65 million for the year ended 31
December 2022 (‘2022’).
Revenues for the Therapeutics Division were £2.06 million
(2022: £5.48 million), with the achievement of a further
milestone in the collaboration with AffyXell (realised in additional
equity in the joint venture). The reduction from the prior year is
because milestones were received from both AffyXell and
LG Chem in 2022.
Revenues for the Diagnostics Division were £21.19 million
(2022: £4.17 million). This significant increase reflects both a
full year impact of Launch Diagnostics (acquired in October
2022), contributing £17.87 million, and the acquisition of Coris
BioConcept in May 2023, contributing £3.27 million in the post-
acquisition period. On a like-for-like annualised basis, revenues
of the acquired businesses grew by approximately 10% in 2023.
Acquisitions
On 31 May 2023, the Group acquired 100% of the shares and
voting interests in Coris BioConcept SRL. Coris, established in
1996, develops, manufactures and markets rapid diagnostic
test kits, mainly lateral flow tests, for use by healthcare
professionals. Coris is ISO13485 certified and markets its
products through distributors in Europe, Asia, South America,
Africa and Oceania. Total consideration for Coris included
an initial consideration of £7.31 million in cash payable upon
completion of the acquisition, in addition to £2.80 million
for other short-term non-operating assets and an additional
deferred earn-out element. The earn-out element provides
additional consideration of 100% of the revenue achieved in
excess of €5.5 million for the year ended 31 December 2023,
and 90% of the revenue achieved in excess of €6.5 million for
the year ended 31 December 2024, with the total earn-out
payment capped at €3.5 million. The additional consideration to
be paid based on future gross margin was estimated to be £nil
at 31 December 2023.
The acquisition of Coris is part of building critical mass in
the Group’s Diagnostics Division, which is aiming to build an
integrated and differentiated IVD business with a global reach
serving healthcare professionals.
For the period from acquisition to 31 December 2023, Coris
contributed revenue of £3.27 million and a reported loss of
£0.28 million to the Group’s results. Further details on the
acquisition are provided in Note 26 to the Financial Statements.
Research costs
During the year, the Group expensed through the income
statement £14.53 million (2022: £11.10 million) research
costs relating to the preCISIONTM and Affimer® therapeutic
programmes, which are expensed given their early stage in
the development pathway, in addition to the expansion and
enhancement of the Group’s existing diagnostic test offering.
Selling, general and administrative expenses
Administrative expenses have increased during the year to
£16.86 million (2022: £11.23 million). This reflects a full year of
Launch Diagnostics, £6.89 million, and the acquisition of Coris,
£1.13 million.
Amortisation and impairment expense
Amortisation charges of £1.03 million (2022: £1.05 million)
have been recognised in the period, with a full year of
amortisation recognised on acquired intangible assets arising
from the Launch acquisition, £0.84 million, and amortisation
of Coris acquired intangible assets, £0.16 million. The 2022
amortisation expense, £0.82 million, was recognised on Affimer®
development costs that were fully impaired in the prior period.
Share of loss of associate
The share of loss of associate of £0.85 million (2022: £1.15
million) arises from the Group’s equity-accounted investment
in AffyXell Therapeutics Co., Ltd. The share of losses reflects
the Group’s 25% ownership share of the losses accumulated
in the year. The Group investment increased from 19% to 25%
at 31 December 2023 as a result of additional equity issued
due to the Group achieving its second technical milestone for
the collaboration.
Share-based payment expense
The non-cash charge for the year decreased to £2.91 million
(2022: £7.49 million), due to a limited number of new options
being issued in the prior year, and the prior year charge being
increased by changes to the assumptions around the likelihood
of vesting of options.
Convertible bond
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 focused 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. The bondholder also has the option
Financial Review
38
Strategic Report
to convert Bonds in full outside of the usual quarterly
amortisation repayments. This has occurred twice during
the period with a total principal amount converted of
£3.7 million. For all repayments to date, the Group has
elected to settle through the issue of shares. The share
price underlying the quarterly amortisation repayment
is 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 conversion
date. For other conversions, shares are issued at the
conversion price, which may reset downwards at 18
months depending on share price performance, subject
to a reset price floor of £0.95.
The bond agreement contains embedded derivatives
in conjunction with an ordinary host debt liability. The
derivative element is measured at fair value using a
Monte-Carlo option pricing model, which estimates the
fair value based on the probability-weighted present value
of expected future investment returns, considering each
of the possible outcomes available to the bondholders.
The fair value of the derivative liability has reduced during
the year to £18.32 million (2022: £39.10 million) as a
result of fluctuations in the share price during the period
and a reduction in the principal amount remaining from
£55.00 million to £40.80 million. This has resulted in a
gain on revaluation of derivative of £15.68 million (2022:
charge of £4.10 million).
The host debt liability is measured at amortised cost,
being adjusted to reflect revisions in estimated cashflows
arising from early conversion events, resulting in an
implied interest charge of £14.73 million (2022: £2.61
million) and a liability at year-end of £16.10 million (2022:
£18.73 million). The increased interest charge reflects a
full year charge following the issuance of the bonds in
October 2022.
Net finance costs
Finance income increased to £0.66 million (2022: £0.09
million) due to an increase in interest rates and a higher
average cash balance during the year following the
fundraise in October 2022.
Other finance costs of £0.57 million (2022: £0.01 million)
relate primarily to IFRS 16 interest charges.
Losses before taxation
Losses before taxation from continuing operations for the
year were £27.32 million (2022: £41.64 million).
Taxation
The taxation credit has decreased to £2.37 million (2022,
restated: £4.66 million). 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, resulting in a credit of £2.05
million (2022: £2.23 million). The larger credit in the prior
year reflects the recognition of a previously unrecognised
deferred tax asset of £2.56 million in relation to tax
losses, on acquisition of Launch Diagnostics.
Loss for the period
The reported loss for the period was £24.95 million (2022,
restated: £36.63 million). The loss per ordinary share
reduced to 9.15p (2022, restated: 14.34p) based on a
weighted average number of shares in issue during the
period of 272,683,485 (2022: 255,369,066).
Cash flow
The Group reported cash and cash equivalent balances of
£16.63 million at 31 December 2023 (2022: £41.78 million).
Operating cash outflows from operations amounted to
£21.85 million (2022: £15.95 million).
During the year, research and development tax credit
cash rebates were received in relation to the years ending
31 December 2022 and 2021, resulting in a cash inflow of
£6.63 million from income tax received (2022: £0.17m paid).
Net cash outflow from investing activities amounted to
£9.00 million (2022: £25.04 million) arising principally
from the acquisition of Coris, an outflow of £6.93 million
net of cash acquired. In 2022, the acquisition of Launch
resulted in an outflow of £24.88 million net of cash
acquired. Other investing cash outflows include purchase
of property, plant and equipment of £1.12 million (2022:
£0.56 million).
There was a net cash outflow from financing activities
of £1.30 million (2022: inflow of £56.90 million), arising
primarily from the principal elements of lease payments
of £1.45 million (2022: £0.80 million). In the prior period,
the inflow arose from the proceeds of issue of share
capital, £9.02 million, and the issue of convertible
bonds, £52.25 million, in October 2022. There were also
proceeds from the exercise of share options of £0.40
million (2022: £0.47 million).
Financial position
Net assets as at 31 December 2023 were £21.80
million (2022, restated: £21.00 million) of which cash
and cash equivalents amounted to £16.63 million
(2022: £41.78 million).
The IFRS 16 Leases presentation results in the
recognition of right-of-use asset amounting to £7.07
million (2022: £5.42 million) in relation to the Group’s
>
39
Avacta Report and Accounts 2023
leasehold properties and other leased assets, together with
a corresponding lease liability of £7.03 million (2022: £5.11
million) with the increase arising due to the acquisition of Coris.
Intangible assets increased to £30.84 million (2022: £26.32
million) due to the acquisition of Coris and the recognition of
£2.82 million of goodwill. Further details on the acquisition
accounting are detailed in Note 26 to the Financial Statements.
Liabilities in relation to the convertible bond have been
recognised with £18.32 million (2022: £39.10 million) relating to
the fair value of the derivative element at 31 December 2023
and £16.10 million (2022: £18.73 million) relating to the debt
liability element.
Dividends
No dividends have been proposed for the year ended 31
December 2023 (2022: £nil).
Key performance indicators
At this stage of the Group’s development, the non-financial key
performance indicators focus on two areas:
• The progression of the preCISIONTM and Affimer®
technologies into clinical stage assets within the
Therapeutics Division.
• The integration of the acquired Diagnostics businesses,
Launch and Coris, together with expansion into further
markets with existing and new products.
These are discussed in more detail within the Operational
Review on pages 16 to 37.
The financial key performance indicators focus around three
areas, which allow an assessment of the performance of
the businesses as the Diagnostics Division moves towards
profitability, and of the funding available as the Therapeutics
Division technologies progress into clinical stage assets.
• Group revenues
• Adjusted EBITDA
• Cash and cash equivalent balances
Financial Review (continued)
40
Strategic Report
>
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(N) 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 strategic development and progress of the Group’s lead
clinical asset, AVA6000 through Phase 1 clinical trials;
• the appointment of Shaun Chilton as a Non-executive
Director to the Board, bringing with him a wealth of
pharmaceutical and pharmaceutical services experience
from global companies across Europe and the US to
support the Diagnostics Division as it progresses with its
growth strategy; and
• the acquisition of Coris BioConcept as part of the strategic
development of the Diagnostics Division into a European
IVD business providing innovative solutions to healthcare
professionals.
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 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.
41
Avacta Report and Accounts 2023
The Board is responsible for risk management and
reviewing the internal control 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. The 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
Senior Management. 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 here:
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 1 trials on its first
clinical programme (AVA6000) relationships are established with
clinical stage third parties (including the recent appointment of
a specialist clinical CRO to support the AVA6000 trial) which has
enabled the reduction in the number of third party consultants.
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 with timely approvals.
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 - Diagnostics
Change ^
The Group relies on both its own (Coris) and third party
manufacturers (Launch) for the supply of products.
The Group’s companies maintain ISO13485 and other
ISO standard quality systems to ensure that products
manufacturer by it or supplied to it are of high quality.
The Group continuously works to expand the range of
products, including potential replacement products, from
global suppliers.
Commercial - Diagnostics
Change < >
The regulatory changes in relation to the IVDR/CE marking
processes have been deferred by the relevant authorities
alleviating time pressure for existing Group products to become
compliant. However, the Coris products which are already on
the market and those which are developed in the future need
to go through the IVDR/CE/FDA regulatory processes to ensure
they remain competitive and approved in the markets they are
sold in. These processes are dependent on validation data and
the bandwidth of Notified Bodies and therefore delays in com-
mercialisation are possible. The risk of 'IVDR approved products'
fast-tracked through Chinese Notified Bodies is a risk that needs
to be managed and monitored.
Principal Risks and Uncertainties
42
Strategic Report
Expanding the existing markets and launching new products
is a key commercial risk. The establishment of Launch
Diagnostics Germany and set up of commercial operations is a
key risk for 2024.
Integration and growth - Diagnostics Change ^
The Group has successfully completed two acquisitions in
2022 and 2023 and is now integrating and growing those
businesses.
A key risk for the Group lies in ensuring that the anticipated
growth and synergies can be realised. This is managed by
experienced senior teams in both Launch and Coris as well as
at Board level.
Research and development
Change < >
The Group’s research and development activities are focused
around the pre|CISIONTM and Affimer® technologies in the
Therapeutics Division.
There is a risk, consistent with similar biotechnology compa-
nies developing new and innovative technology platforms, that
the scientific results required for specific internal development
programmes, product development projects, customer-related
evaluations or third-party collaborations will not be achieved.
This risk is in specific applications of the pre|CISIONTM or
Affimer® technologies rather than in the individual technology
platform as a whole.
Positive progress has been made with the pre|CISIONTM
platform through the AVA6000 phase I clinical trials to date
and the Therapeutics team continue to progress the Affimer®
platform in preclinical programmes.
With the Group’s first asset (AVA6000) progressing through
clinical trials there is a risk that the trials might not be suc-
cessful 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.
Diagnostics development risk has changed given the Coris ac-
quisition which has brought an experienced IVD development
team into the Group. The focus is now on developing and
improving IVD solutions, primarily rapid point of care tests, in
infectious diseases and antimicrobial resistance. There is a risk
that these products may not achieve the required specification
to be commercially successful. Coris develops products under
the ISO 13485 quality standard in order to manage the risks of
diagnostics product development.
Funding
Change ^
The development of the Group’s Affimer® and pre|CISIONTM
technologies in the Therapeutics Division is resource and cash
intensive.
As at 31 December 2023, the Group had cash of £16.6 million.
Subsequent to the year end in March 2024, the Group com-
pleted a £31.1 million fund raise with institutional and private
shareholders to ensure there was a strong cash runway to
support the Group’s plans. The fundraise required a significant
discount to the share price immediately prior to the fundraise
reflecting the challenging nature of the capital markets.
Progress in the Group’s Therapeutic programmes may impact
the timing and ability to raise future funding.
External market and economic factors, such as the Ukraine
and Palestine conflicts together with UK recession, may impact
the timing and amount of future funding available through
capital markets.
Intellectual property
Change < >
The success of the Group’s pre|CISIONTM and Affimer®
technology platforms depend on its ability to obtain and
maintain patent protection for its proprietary technology.
Failure to protect the pre|CISIONTM and Affimer® 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.
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 recruited, where
required, senior specialist roles within the Therapeutics
Division covering scientific, regulatory and clinical development
areas, having relocated its operations from Cambridge to
London during 2022.
>
43
Avacta Report and Accounts 2023
Strategic Report
Key staff (continued)
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 and security access levels are reviewed
on a regular basis, including the two acquisitions within the
Diagnostics Division, to ensure comparable levels of security
are in place. 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 the UK and Europe
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 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 Uncertainties
(continued)
44
Avacta Report and Accounts 2023
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
69
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 Levicept, a UK-
based biotechnology company
developing a biological therapy for
chronic pain. He also holds Non-
executive Director roles in Immatics
NV (NASDAQ IMTX) and Protalix
Biotherapeutics Inc (NYSE PLX), as well
as private biotechnology companies.
Eliot was Chief Executive Officer of
F-star until its acquisition by inovX
Pharma in March 2023. Prior to this,
he 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.
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 2023
Dr Christina Coughlin
Executive Director - Head of Research
and Development
Christina was appointed to the role as Head
of Research and Development in February
2024, having served as a Non-executive
Director since March 2022. Christina was
previously the Chief Executive Officer of
Cytolmmune Therapeutics LLC, 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.
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 30
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 plc.
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).
Prior to his retirement at the end of
2020, he 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 Iota Sciences Limited, a spin-out
company from the University of Oxford
which is commercialising innovative
microfluidic technology for cell biology
and gene therapy, 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.
>
47
Governance
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. Until recently,
Paul was the 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.
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
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).
Shaun Chilton
Non-executive Director
Shaun was appointed as a Non-
executive Director in June 2023.
Shaun was the Chief Executive Officer
of the formerly London-listed Clinigen
Group plc, a global pharmaceutical
and pharmaceutical services platform
business, which he led through a
significant growth journey. During his
tenure, the company expanded through
both an organic and a buy-and-build
strategy which included successfully
completing several transformational
acquisitions. The company was
eventually sold to Triton Partners for a
total consideration of c.£1.3 billion in
April 2022.
Shaun was also Non-executive
Chairman of C7Health, a disruptive,
venture capital-backed medical
technology and services business which
executed an acquisitive growth journey
before successfully being acquired by a
strategic buyer in 2022.
Shaun has held a number of senior
and executive commercial positions
over more than 30 years in companies
in pharmaceutical and pharmaceutical
services industries. These include at
Pfizer, Sanofi, Wolters Kluwer Health
and KnowledgePoint360 Group (now
part of UDG Healthcare).
48
Avacta Report and Accounts 2023
49
Governance
The Directors present their report and the
audited financial statements for the year
ended 31 December 2023.
Principal activity
The principal activities of the Group are focused on improving
healthcare outcomes through targeted cancer treatments and
diagnostics.
Avacta Therapeutics is a clinical stage oncology biotech division
harnessing proprietary therapeutic platforms to develop novel,
highly targeted cancer drugs.
Avacta Diagnostics focuses on supporting healthcare
professionals and broadening access to diagnostics.
Avacta has two proprietary platforms, pre|CISION™ and Affimer®.
The pre|CISION™ platform is a highly specific substrate
for fibroblast activation protein (FAP) which is upregulated
in most solid tumours compared with healthy tissues. The
pre|CISION™ platform harnesses this tumour specific
protease to activate pre|CISION™ peptide drug conjugates
and pre|CISION™ antibody/Affimer® drug conjugates in the
tumour microenvironment, reducing systemic exposure and
toxicity, allowing dosing to be optimised to deliver the best
outcomes for patients.
The lead pre|CISION™ programme AVA6000, a peptide drug
conjugate form of doxorubicin, is in Phase 1 studies. It has
shown a dramatic improvement in safety and tolerability in
clinical trials to date compared with standard doxorubicin and
preliminary signs of clinical activity in multiple patients.
Business review and future developments
A review of the Group’s operations and future developments is
covered in the Strategic Report on pages 16 to 37. 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, including events
after the end of the reporting period, are set out in the
Consolidated Statement of Profit or Loss and other
components on pages 81 to 133.
The Directors have reviewed the results for the years ended
31 December 2023 and 31 December 2022, 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 40.
Dividends
The Directors do not recommend the payment of a dividend
(2022: £nil).
Going concern
These financial statements have been prepared on a going
concern basis, notwithstanding a loss of £24.95 million and
operating cash outflows from operations of £21.8 million for
the year ended 31 December 2023. 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 clinical trials,
product development projects together with the Launch and
Coris sales pipelines, 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 development programmes.
Whilst there are inherent uncertainties regarding the
cash flows associated with the development of both the
therapeutic platforms, the Directors are satisfied that there
is sufficient discretion and control as to the timing and
quantum of cash outflows to ensure that the Company and
Group are able to meet their liabilities as they fall due for at
least twelve months from the date of approval of the financial
statements. The key factors considered in reaching this
conclusion are summarised below:
• As at 31 December 2023, the Group’s cash and cash
equivalents were £16.6 million (2022: £41.8 million).
• The Group completed an equity fundraise in March 2024,
which raised gross proceeds of £31.1 million (£29.4 million
net proceeds).
• While the Group does have external borrowings in the form
of a convertible bond with principal amount remaining of
£40.8 million, this liability can be settled by the issue of new
equity, rather than 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 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.
Directors’ Report
50
Avacta Report and Accounts 2023
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
• Shaun Chilton
Appointed 19 June 2023
• Dr Alastair Smith
• Tony Gardiner
• Dr Christina Coughlin
Under the Articles of Association of the Company, one third of
the Directors are required to retire at the forthcoming 2024
AGM, notice of which accompanies this Report and Accounts.
The Directors retiring by rotation at the forthcoming 2024
AGM are Paul Fry, Mark Goldberg and Tony Gardiner. Shaun
Chilton, who was appointed prior to the 2023 AGM, held
on 28 June 2023, had not been appointed when the 2023
AGM resolutions were sent with the 2023 AGM Notice to
shareholders. Shaun’s appointment subsequently ceased at
the 2023 AGM and he was re-appointed following the 2023
AGM by the Directors under their powers within the Articles
of Association. He will therefore be subject to re-appointment
by shareholders at the 2024 AGM. All four 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 four Directors continue to be effective and to demonstrate
commitment to the Company. Details of the Directors offering
themselves for re-election at the 2024 AGM can be found on
pages 46 to 48.
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 29 April 2024, there was one
individual registered shareholding, Lombard Odier Investment
Managers (holding 3.3%), with more than 3% of the Company’s
issued share capital.
Directors’ shareholdings
The beneficial interests of the Directors in the share capital of
the Company at 31 December 2023 and at 29 April 2024 were
as follows:
31 December
2023
number of
shares
29 April
2024
number of
shares
Non-executive Directors
Eliot Forster
169,593
189,593
Trevor Nicholls
107,455
107,455
Paul Fry
-
-
Mark Goldberg
-
-
Shaun Chilton
-
40,000
Executive Directors
Alastair Smith
431,100
451,100
Tony Gardiner
8,196
8,196
Christina Coughlin
-
50,000
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.
The middle market price of the Company’s ordinary shares
on 31 December 2023 was 116.5p and the range during the
period was 92p to 185p with an average price of 125p.
Information on Directors’ remuneration and share option
rights is given in the Remuneration Committee Report on
pages 62 to 66.
>
51
Governance
Post balance-sheet events
On 22 January 2024, 3,425,373 new ordinary shares were
issued in settlement of the quarterly principal of £2.55 million
and interest repayment of £0.66 million in respect of the
Group’s unsecured convertible bond, reducing the principal
remaining to £38.25 million.
On 4 March 2024, 27,390,485 ordinary shares of 10p each
were allotted and issued at 50p further to a placing of shares,
with a further 130,000 ordinary shares of 10p each being
allotted and issued in relation to a management subscription
of shares. On 19 March 2024, a further 23,879,124 conditional
placing shares and 10,896,948 REX offer shares of 10p each
were allotted and issued at 50p.
On 22 April 2024, 7,529,825 new ordinary shares were issued in
settlement of the quarterly principal of £2.55 million and interest
repayment of £0.62 million in respect of the Group’s convertible
bond, reducing the principal remaining to £35.70 million.
Research and development
During the year, the Group expensed through the income
statement £14.53 million (2022: £11.10 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 costs of the diagnostic
programmes.
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.
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 page 58.
Political and charitable donations
There were no charitable or political donations in the year
ended 31 December 2023 (2022: £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
One Moorgate Place, London EC2R 6EA, on Wednesday 26 June
2024 at 2.30 p.m. Full details of the business to be transacted
at the Annual General Meeting can be found in the Notice of
Annual General Meeting on pages 136 to 137 of this report.
This Director’s Report and the Strategic Report on pages 14 to
44 were approved by the Board on 29 April 2024 and signed on
its behalf.
By order of the Board
Dr Alastair Smith
Tony Gardiner
Chief Executive Officer
Chief Financial Officer &
Company Secretary
29 April 2024
29 April 2024
Avacta Group plc (Registered number - 04748597)
Directors’ Report (continued)
52
Avacta Report and Accounts 2023
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 has two divisions: A clinical stage oncology biotech
division harnessing proprietary therapeutic platforms to
develop novel, highly targeted cancer drugs, and a diagnostics
division focused on supporting healthcare professionals.
• The Therapeutics Division is leveraging Avacta’s proprietary
technologies to develop innovative oncology drugs that transform
treatment outcomes to improve cancer patients’ lives.
• The Diagnostics Division is focused on supporting healthcare
professionals and broadening access to testing.
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 products that address multi-
billion dollar markets.
• The pre|CISION™ platform is a highly specific substrate
for fibroblast activation protein (FAP) which is highly
upregulated in most solid tumours compared with healthy
tissues. The pre|CISION™ platform harnesses this tumour
specific protease to activate pre|CISION™ peptide drug
conjugates and pre|CISION™ antibody drug conjugates
in the tumour microenvironment, reducing systemic
exposure and toxicity, allowing dosing to be optimised to
deliver the best outcomes for patients.
• Affimer® molecules are engineered alternatives to
antibodies that have significant competitive advantages
including size, stability, versatility, rapid development and
ease of production.
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.
• AVA6000, a peptide drug conjugate form of doxorubicin, is
in Phase 1 studies. It has shown a dramatic improvement in
safety and tolerability compared with standard doxorubicin
and preliminary signs of clinical activity.
• Data from the Phase I trial for the first candidate, AVA6000,
confirms the pre|CISIONTM platform’s ability to target a toxin
to the tumour microenvironment and transform the safety
profile of such cancer therapies.
• The second pre|CISION™ tumour-targeted chemotherapy
candidate for development was announced in January 2022
and is a proteasome inhibitor referred to as AVA3996.
• Preclinical data regarding AVA3996, the second pre|CISION™
programme, a tumour targeted proteasome inhibitor, were
presented at the American Association of Cancer Research
Annual Meeting in April, and at AACR-NCI-EORTC International
Conference on Molecular Targets and Cancer Therapeutics in
October along with data from other research programmes.
• There is also significant longer-term potential to combine
the two platforms to create next generation targeted ‘drug
conjugate’ cancer treatments.
• AffyXell Therapeutics ('AffyXell'), the joint venture between
Avacta and Daewoong Pharmaceutical ('Daewoong')
continued to progress well with the triggering of a second
milestone payment, resulting in an increase in Avacta’s
shareholding in AffyXell to 25% from its previous 19%.
• The growing body of clinical and pre-clinical data validating
the pre|CISIONTM platform has supported an acceleration in
the Group’s commercial activities including the appointment
of Dr Simon Bennett as Chief Business Officer of the
Therapeutics Division.
Diagnostics Division
• Avacta’s Diagnostics Division completed the acquisition
of Belgium-based Coris BioConcept SRL, a developer and
manufacturer of rapid tests focused on infectious diseases,
on 31 May 2023 for an upfront consideration of £7.3 million
with an earn-out based on future business performance of
up to £3.0 million payable in cash, adding a broad range of
marketed professional-use rapid tests to the Division.
• The Diagnostics Division, which also includes Launch
Diagnostics, a leading UK IVD distributor that was acquired
in October 2022, reports revenue of £21.2 million and an
adjusted EBITDA loss of £1.2 million.
• The Group’s strategy is to divest the Diagnostics Division
to create a pure-play oncology biopharmaceutical company
in a manner which maximises value and strategic benefits
for shareholders.
The Board believes it has a balanced business and capital
allocation model, and a high-value oncology pipeline supported
by a revenue-generating, fast-growing diagnostics business,
which seeks to create long-term shareholder value alongside
patient benefit.
Corporate Governance Report (continued)
54
Avacta Report and Accounts 2023
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 2023,
the Board comprised six Non-executive Directors and two
Executive Directors. Subsequent to the year end, in February
2024, the composition of the Board changed to five Non-
executive Directors and three 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 pre|CISION™ and Affimer® 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 fundraising 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.
Shaun Chilton was appointed as a Non-executive Director
in June 2023. 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. Shaun has
held a number of senior and executive commercial positions
over more than 30 years in companies in pharmaceutical and
pharmaceutical services industries. Shaun’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
was considered independent up to July 2023. In late July 2023
Christina undertook an additional consulting role to assist the
Therapeutics Division with the clinical trials of its lead asset,
AVA6000. This consulting role continued through to the end
of January 2024, at which point Christina joined Avacta full
time to become an Executive Director and Head of Research
and Development. 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
from February 2024 is full time.
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.
>
55
Governance
Conflicts of interest
Each Director has a duty to avoid situations in which he or
she has or can have a direct or indirect interest that conflicts,
or possibly may conflict, with the interests of the Group.
The Board requires each Director to declare to the Board
the nature and extent of any direct or indirect interest in a
proposed transaction or arrangement with the Group and the
Company Secretary maintains a register of Directors’ other
interests. The Board has power to authorise any potentially
conflicting interests that are disclosed by a Director.
Board evaluation and performance
The performance of the Board is evaluated on an ongoing
basis informally with reference to all aspects of its operation
including, but not limited to: the appropriateness of its skill
level; the way its meetings are conducted and administered
(including the content of those meetings); the effectiveness
of the various Committees; whether corporate governance
issues are handled in a satisfactory manner; and whether
there is a clear strategy and objectives.
A new Director, on appointment, is briefed on the activities
of the Company. Professional induction training is also given
as appropriate. The Chairman briefs Non-executive Directors
on issues arising at Board meetings if required and Non-
executive Directors have access to the Chairman at any
time. Ongoing training is provided as needed. Directors are
continually updated on the Group’s business by means of
Board presentations on risk and compliance matters as well
as issues covering pensions, social, ethical, environmental and
health and safety.
In the furtherance of their duties or in relation to acts
carried out by the Board or the Company, each Director has
been informed that they are entitled to seek independent
professional advice at the expense of the Company. The
Company maintains appropriate cover under a Directors and
Officers insurance policy in the event of legal action being
taken against any Director.
Each Director is appraised through the normal appraisal
process. The Chief Executive is appraised by the Chairman,
the executive Board members by the Chief Executive and
the non-executive Board members by the Chairman. Each
Director has access to the services of the Company Secretary
if required.
The Non-executive Directors are considered by the Board
to be independent of management and are free to exercise
independence of judgement. The Non-executive Directors
have never been employees of the Company nor do they
participate in any of the Company’s pension schemes or
bonus arrangements. They receive no remuneration from
the Company other than the Directors’ fees. Dr Eliot Forster,
shortly after his appointment to the Board in 2018, received
an award of share options, which were equivalent to one
year’s fee for his services as Chairman. The share options
which are now fully vested do not carry any performance
obligations (further details are provided within the
Remuneration Report). The Board and Company’s advisers do
not consider the share options, given their relatively low value
in relation to Dr Forster’s fee for his services and his income
from other roles outside of the Avacta Group, to impact his
independence.
Directors are subject to re-election at the Annual General
Meeting following their appointment. In addition, at each
Annual General Meeting one third (or whole number 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
10/11
Member
4/5
Member
1/1
Trevor Nicholls
Non-executive
10/11
Member
5/5
Chairman
1/1
Paul Fry
Non-executive
10/11
Chairman
5/5
Member
1/1
Mark Goldberg
Non-executive
9/11
-
-
-
-
Christina Coughlin
Non-executive
10/11
-
-
-
-
Shaun Chilton¹
Non-executive
5/5
-
-
-
-
Alastair Smith
Executive CEO
11/11
-
4/5
-
1/1
Tony Gardiner
Executive CFO
11/11
-
5/5
-
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 Shaun Chilton was appointed as a Non-executive Director on 19 June 2023.
56
Avacta Report and Accounts 2023
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 to his role, including roles as Chief Financial Officer
of Argenta and 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 revenue, production, regulatory and
supply chain considerations within the Diagnostics Division
and the clinical trials and pre-clinical development work 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, with over 100
shareholders attending the 2023 AGM in person.
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)
Shareholder communications and engagement (continued)
The Company also holds science days, where investors and
significant 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 seeks 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, many of whom are
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.
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 2023 was 52% female and 48% 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
and Tony Gardiner are the Executive Directors 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 the impact of its
operations and comply with relevant regulations and legislation.
The Group continues to develop processes to measure
and report on the Group’s GHG emissions, and provides
the below voluntary disclosures on Scope 1 & Scope
2 greenhouse gas (‘GHG’) emissions to aid a better
understanding of its environmental impact and the measures
being taken to minimise this.
58
Avacta Report and Accounts 2023
In the table below:
• Scope 1 emissions cover direct emissions of GHG 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.
GHG Emissions (CO2e metric tons)
2023
2022
Scope 1
210
24
Scope 2
109
59
Total 1
319
83
The increase in Scope 1 CO2e metric tons in 2023 is largely
attributable to the inclusion of a full year of emissions data
relating to Launch Diagnostics, compared with a shorter two
month period post-acquisition in 2022. These emissions are
predominantly driven by car fleets of sales representatives and
field service engineers. Launch Diagnostics is in the process of
phasing out diesel vehicles in favour of hybrid or fully electric
vehicles in an effort to reduce its Scope 1 emissions.
The increase in Scope 2 CO2e metric tons in 2023 is again
attributable to the inclusion of a full year of emissions data for
Launch Diagnostics, in addition to seven months of emissions
post-acquisition for Coris. In the year, Launch Diagnostics
signed a lease for a new more energy efficient premises, with a
better EPC rating. The new premises also has electric charging
points for vehicles to support the change in car fleet.
In addition, the 2023 emissions data also includes reporting
for Coris BioConcept SRL since its acquisition date. Coris
installed solar panels at their premises in Gembloux, Belgium
to help minimise non-renewable energy usage.
This report was approved by the Board of Directors and
authorised for issue on 29 April 2024 and was signed on its
behalf by:
Dr Eliot Forster
Chairman
29 April 2024
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 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 clinical trials,
product development projects together with the Launch
and Coris sales pipelines, 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 development programmes.
Whilst there are inherent uncertainties regarding the
cash flows associated with the development of both the
therapeutic platforms, 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 and therefore have prepared the financial
statements on a going concern basis.
Revenue recognition – Judgements arise from the application
of IFRS 15 to the Group’s revenue streams, as disclosed in
Note 1C, as to the timing and nature of revenue recognised
in relation to the achievement of milestones.
60
Avacta Report and Accounts 2023
Estimates:
The Committee also considered the assumptions and
estimation uncertainties as at 31 December 2023 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 consideration
and 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
29 April 2024
61
Governance
Introduction
This report sets out the remuneration policy operated by the
Company in respect of Executive and Non-executive Directors
as of the date of the report. 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 last exercise 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
in January 2024. It was agreed to increase the Executive
Director’s salaries by a 5% cost of living increase consistent
with Group employees. Therefore, with effect from 1 January
2024, the salary of the Chief Executive Officer would be
increased from £343,000 to £360,000 per annum and
the salary of the Chief Financial Officer be increased from
£237,000 to £249,000 per annum. No further action would be
taken at this stage to address the gap between the Executive
Director’s salaries and the median salary data provided by
Mercer as part of the review carried out in January 2023.
On 1 February 2024, Christina Coughlin was appointed to
the Executive Director position of Head of Research and
Development, having carried out a consulting role with the
Group’s Therapeutics Division from August 2023 in addition
to her Non-executive Director role. Christina’s Non-executive
Director role ceased on 31 January 2024 upon commencing
the full-time Executive Director role, with her basic salary being
set at £375,000 per annum, reflecting the level of experience
that Christina brings to the role and comparable salaries
across US and European biotech companies. In addition to the
basic salary, a one-off fee of $100,000 was paid to Christina on
commencement of the role.
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 2023 financial
year was 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 2022, the Chief Executive
Officer was paid a bonus equivalent to 48% of his current
basic salary and the Chief Financial Officer was paid a bonus
equivalent to 36% of his current basic salary. The bonuses
were paid in March 2023.
Remuneration Committee Report
62
Avacta Report and Accounts 2023
For the year ending 31 December 2023, the Remuneration
Committee reviewed the performance of the Executive
Directors against the agreed targets for the year and
concluded that both the Chief Executive Officer and the Chief
Financial Officer should be paid bonus equivalent to 65% of
their basic salaries. The bonuses were paid in March 2024, a
constructive obligation was recognised at year-end and the
corresponding expense was included in the result for the year
ending 31 December 2023.
Benefits in kind
The Company provides private medical and critical illness
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, a Joint Share Ownership Plan (‘JSOP’) and a Long-Term
Incentive Plan (‘LTIP’).
The individual interests and joint interests (where applicable)
of the Directors in the share capital of the Company are set
out on page 65 and their interests in options held over shares
in the Company are set out on page 51.
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 September 2023. No awards
were made during 2022.
The September 2023 LTIP award was granted with vesting
conditions based on the share price performance of the Group
relative to the FTSE AIM All Share Index over a three-year period
to 31 December 2025, subject to the Board having discretion to
review the exercise conditions in exceptional circumstances.
Christina Coughlin, following her appointment as an Executive
Director, will be eligible to participate in the LTIP when the next
awards are granted.
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
at 31 December 2023 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 as at 31 December 2023 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
Shaun Chilton
19 June 2023
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)
2023
Basic salary
and fees
2023
Bonus
2023
Benefits
in kind
2023
Total
2023
3Pension
contributions
2022
Total
2022
Pension
contributions
£000
£000
£000
£000
£000
£000
£000
Non-executive Directors
Eliot Forster
118
-
-
118
-
100
-
Trevor Nicholls
47
-
-
47
-
40
-
Paul Fry
47
-
-
47
-
40
-
Mark Goldberg
53
-
-
53
-
45
-
¹Christina Coughlin
53
-
-
53
-
37
-
²Shaun Chilton
26
-
-
26
-
-
-
Executive Directors
Alastair Smith
355
223
5
583
20
427
17
Tony Gardiner
238
154
2
394
15
262
11
937
377
7
1,321
35
951
28
The above emoluments include all payments paid to the Directors whilst Directors of the Group.
1. Christina Coughlin, in additional to her fees above, also received fees in respect of a consultancy agreement to support the
Therapeutics Division of the Group from August 2023 amounting to $128,000.
2. Shaun Chilton was appointed as a Director on 19 June 2023.
3. Pension contributions consist of employer-defined contribution benefits, excluding salary sacrifice contributions made by
the employees, plus cash payments in lieu of pension.
The number of Directors accruing benefits under money purchase pension schemes was two (2022: two).
The share-based payments charge to the Consolidated Income Statement in respect of Directors’ share options was £642,000
(2022: £3,248,000). The aggregate gain made by Directors on the exercise of share options was £nil (2022: £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 2023 is set out below. These values are
included within the audited accounts.
64
Avacta Report and Accounts 2023
Details of Directors’ interests in share options in the Executive Share Option Schemes
At 1
Jan 2023
Granted
Waived /
Lapsed
Exercised
At 31
Dec 2023
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
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
31 Dec 2023
7 Jan 2019
7 Jan 2029
Alastair Smith
466,774
-
-
-
466,774
17.25p
31 Dec 2023
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
Alastair Smith
-
1,250,000
-
-
1,250,000
10.0p
Note 1
28 Sept 2023
28 Sept 2033
4,991,426
1,250,000
-
-
6,241,426
-
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
31 Dec 2023
7 Jan 2019
7 Jan 2029
Tony Gardiner
170,108
-
-
-
170,108
17.25p
31 Dec 2023
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
Tony Gardiner
-
1,250,000
-
-
1,250,000
10.0p
Note 1
28 Sept 2023
28 Sept 2033
1,578,384
1,250,000
-
-
2,828,384
Note 1 – The option provides that they can, if they have not lapsed, be
exercised on or after 31 December 2025, assuming the Company’s share price
performance target against the FTSE AIM All Share Index over the period to 31
December 2025 has been achieved.
Details of Directors’ joint interests in the Joint Share Ownership Plan (‘JSOP’)
At 1 Jan 2023
Granted
Waived
Exercised
At 31 Dec 2023
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 29 April 2024 and was signed on its behalf by:
Dr Trevor Nicholls
Chairman of the Remuneration Committee
29 April 2024
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 (rebased¹) for the period ended 31 December 2023.
66
Avacta Report and Accounts 2023
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 2023
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)
70
Avacta Report and Accounts 2023
71
Governance
Independent Auditor’s Report to the Members of
Avacta Group plc (continued)
72
Avacta Report and Accounts 2023
73
Governance
Independent Auditor’s Report to the Members of
Avacta Group plc (continued)
74
Avacta Report and Accounts 2023
75
Governance
Independent Auditor’s Report to the Members of
Avacta Group plc (continued)
76
Avacta Report and Accounts 2023
77
Governance
Independent Auditor’s Report to the Members of
Avacta Group plc (continued)
78
Avacta Report and Accounts 2023
79
Avacta Report and Accounts 2023
Financial
Statements
82
Consolidated Statement of
Profit or Loss
83
Consolidated Statement of
Financial Position
84
Consolidated Statement of
Changes in Equity
85
Consolidated Statement of
Cash Flows
86
Notes to the Consolidated
Financial Statements
126
Company Balance Sheet
127
Company Statement of
Changes in Equity
128
Notes to the Company Balance
Sheet
81
Financial Statements
Consolidated Statement of Profit or Loss
and Other Comprehensive Income for the
Year Ended 31 December 2023
* The comparative information is restated on account of correction of an error relating to deferred taxation, see Note 28.
The notes on pages 86 to 125 form an integral part of these financial statements.
Note
2023
£000
2022 (restated*)
£000
Continuing operations
Revenue
3
23,247
9,653
Cost of sales
(12,003)
(2,410)
Gross profit
11,244
7,243
Research costs
(14,529)
(11,100)
Selling, general and administrative expenses
(16,855)
(11,232)
Adjusted EBITDA
(20,140)
(15,089)
Impairment charge
10
(512)
(5,225)
Depreciation expense
11,21
(2,638)
(1,904)
Amortisation expense
10
(1,033)
(1,050)
Share of loss of associate
23
(847)
(1,152)
Acquisition-related expenses
26
(282)
(735)
Share-based payment expense
5
(2,906)
(7,490)
Operating loss
6
(28,358)
(32,645)
Convertible bond – professional fees
22
-
(2,287)
Convertible bond – interest expense
22
(14,730)
(2,606)
Convertible bond – revaluation of derivative
22
15,684
(4,100)
Finance income
655
91
Other finance costs
(568)
(95)
Loss before tax
(27,317)
(41,642)
Taxation
8
2,370
4,659
Loss from continuing operations
(24,947)
(36,983)
Discontinued operation
Profit from discontinued operation
27
-
351
Loss for the period
(24,947)
(36,632)
Foreign operations – foreign currency translation differences
1
46
Other comprehensive income
1
46
Total comprehensive loss for the period
(24,946)
(36,586)
Loss per share:
Basic and diluted
9
(9.15p)
(14.34p)
Loss per share – continuing operations
Basic and diluted
9
(9.15p)
(14.48p)
82
Avacta Report and Accounts 2023
Note
2023
£000
2022 (restated*)
£000
Assets
Property, plant and equipment
11
2,921
2,380
Right-of-use assets
21
7,065
5,418
Intangible assets
10
30,837
26,324
Investment in associate
23
4,079
2,976
Deferred tax asset
16
253
274
Non-current assets
45,155
37,372
Inventories
12
2,585
1,681
Trade and other receivables
13
6,585
5,579
Income tax receivable
2,239
6,510
Cash and cash equivalents
14
16,627
41,781
Current assets
28,036
55,551
Total assets
73,191
92,923
Liabilities
Lease liabilities
21
(5,735)
(3,753)
Financing liabilities
19
(219)
-
Deferred tax liability
16
(323)
(562)
Non-current liabilities
(6,277)
(4,315)
Trade and other payables
15
(9,225)
(8,423)
Lease liabilities
21
(1,295)
(1,361)
Financing liabilities
19
(166)
-
Convertible bond - debt
22
(16,098)
(18,729)
Convertible bond – derivative
22
(18,325)
(39,100)
Current liabilities
(45,109)
(67,613)
Total liabilities
(51,386)
(71,928)
Net assets
21,805
20,995
Equity
Share capital
17
28,501
26,685
Share premium
18
83,220
62,184
Reserves
18
(4,163)
(4,434)
Retained earnings
18
(85,753)
(63,440)
Total equity
21,805
20,995
* The comparative information is restated on account of correction of an error relating to deferred taxation, see Note 28.
The notes on pages 86 to 125 form an integral part of these financial statements.
The financial statements on pages 82 to 125 were approved by the Board of Directors on 29 April 2024 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 2023
83
Financial Statements
Consolidated Statement of Changes in Equity for the
Year Ended 31 December 2023
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 2022
25,472
54,530
(1,729)
4
(2,961)
(34,093)
41,222
Loss for the period
-
-
-
-
-
(36,632)
(36,632)
Other comprehensive income for the period
-
-
-
46
-
-
46
Total comprehensive loss for the period
-
-
-
46
-
(36,632)
(36,586)
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
-
-
206
7,284
16,357
Balance at 31 December 2022 (Restated*)
26,685
62,184
(1,729)
50
(2,755)
(63,440)
20,995
Loss for the period
-
-
-
-
-
(24,947)
(24,947)
Other comprehensive income for the period
-
-
-
1
-
-
1
Total comprehensive loss for the period
-
-
-
1
-
(24,947)
(24,946)
Transactions with owners of the Company:
Convertible bond – issue of shares
1,563
20,890
-
-
-
-
22,453
Exercise of share options
253
146
-
-
-
-
399
Transfer of own shares
-
-
-
-
270
(270)
-
Equity-settled share-based payment
-
-
-
-
-
2,904
2,904
1,816
21,036
-
-
270
2,634
25,756
Balance at 31 December 2023
28,501
83,220
(1,729)
51
(2,485)
(85,753)
21,805
* The comparative information is restated on account of correction of an error relating to deferred taxation, see Note 28.
Details of the nature of each component of equity are given at Note 18. The notes on pages 86 to 125 form an integral part of
these financial statements.
84
Avacta Report and Accounts 2023
Consolidated Statement of Cash Flows for the Year
Ended 31 December 2023
Note
2023
£000
2022
£000
Operating cash outflow from operations
25
(21,845)
(15,953)
Interest received
655
75
Interest elements of financing liabilities
(11)
-
Interest elements of lease payments
21
(304)
(202)
Income tax received / (paid)
6,633
(168)
Withholding tax paid
-
(184)
Net cash used in operating activities
(14,872)
(16,432)
Cash flows from investing activities
Purchase of property, plant and equipment
11
(1,124)
(558)
Proceeds from sale of property, plant and equipment
60
50
Acquisition of subsidiary, net of cash acquired
26
(6,931)
(24,878)
Disposal of discontinued operation, net of cash disposed of
27
-
705
Payment of deferred consideration on past acquisition
26
(868)
-
Transaction costs related to disposal of discontinued operation
27
-
(160)
Acquisition of right-of-use assets
21
(42)
(165)
Purchase of intangible assets
10
(96)
(36)
Net cash used in investing activities
(9,001)
(25,042)
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
398
470
Principal elements of lease payments
21
(1,450)
(800)
Repayment of financing liabilities
(246)
-
Proceeds from issue of convertible bonds
22
-
52,250
Transaction costs related to issue of convertible bonds
22
-
(3,414)
Net cash (used in) / from financing activities
(1,298)
56,904
Net increase/(decrease) in cash and cash equivalents
(25,171)
15,430
Cash and cash equivalents at 1 January 2023
41,781
26,191
Effects of movements in exchange rates on cash held
17
160
Cash and cash equivalents at 31 December 2023
16,627
41,781
The notes on pages 86 to 125 form an integral part of these financial statements.
85
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 2023 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 £24.95 million and
operating cash outflows from operations of £21.8 million for
the year ended 31 December 2023. 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 clinical trials, and
product development projects, together with the Launch and
Coris sales pipelines, 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 development programmes.
Whilst there are inherent uncertainties regarding the cash
flows associated with the development of both the therapeutic
platforms, 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 opposite:
• As at 31 December 2023, the Group’s cash and cash
equivalents were £16.6 million (2022: £41.8 million).
• The Group completed an equity fundraise in March 2024,
which raised gross proceeds of £31.1 million (£29.4 million
net proceeds).
• While the Group does have external borrowings in the form
of a convertible bond with principal amount remaining of
£40.8 million, this liability can be settled by the issue of new
equity, rather than 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 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 – Judgements 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
86
Avacta Report and Accounts 2023
The Directors consider that the assumptions and estimation
uncertainties at 31 December 2023 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 consideration
and 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 consideration payable.
Convertible bond – Determining the fair value of the
embedded derivative within the convertible bond, both at
conversion dates and at the reporting date. See Note 22.
The estimates and judgements relevant to the Company
financial statements have been disclosed in Note 30.
Changes in accounting policies
a. New standards and interpretations adopted from 1
January 2023
The following amendments to IFRS accounting standard are
mandatorily effective for reporting periods beginning on or
after 1 January 2023. They have impacted the Group financial
statements as follows:
• Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice
Statement 2 Making Materiality Judgements)
In February 2021, the IASB issued amendments to IAS 1
and IFRS Practice Statement 2. The amendments aim to
make accounting policy disclosures more informative by
replacing the requirement to disclose ‘significant accounting
policies’ with ‘material accounting policy information’.
The amendments also provide guidance under what
circumstance, the accounting policy information is likely to
be considered material and therefore requiring disclosure.
These amendments have no effect on the measurement
or presentation of any items in the Consolidated financial
statements of the Group but affect the disclosure of
accounting policies of the Group.
• Definition of Accounting Estimates (Amendments to IAS 8
Accounting policies, Changes in Accounting Estimates and Errors)
The amendments to IAS 8, which added the definition of
accounting estimates, clarify that the effects of a change in an
input or measurement technique are changes in accounting
estimates, unless resulting from the correction of prior period
errors. These amendments clarify how entities make the
distinction between changes in accounting estimate, changes
in accounting policy and prior period errors.
These amendments had no effect on the consolidated
financial statements of the Group.
• Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes)
In May 2021, the IASB issued amendments to IAS 12, which
clarify whether the initial recognition exemption applies
to certain transactions that result in both an asset and a
liability being recognised simultaneously (e.g. a lease in the
scope of IFRS 16). The amendments introduce an additional
criterion for the initial recognition exemption, whereby the
exemption does not apply to the initial recognition of an
asset or liability which at the time of the transaction, gives
rise to equal taxable and deductible temporary differences.
These amendments had no material effect on the
consolidated financial statements of the Group.
b. New standards and interpretations not yet effective
There are a number of standards, amendments to standards,
and interpretations which have been issued by the IASB that
are effective in future accounting periods that the Group has
decided not to adopt early.
The following amendments are relevant to the Group and are
effective for the period beginning 1 January 2024:
• Liability in a Sale and Leaseback (Amendments to IFRS 16
Leases)
• Classification of Liabilities as Current or Non-Current
(Amendments to IAS 1 Presentation of Financial Statements)
The following amendments are relevant to the Group and are
effective for the period beginning 1 January 2025:
• Lack of Exchangeability (Amendments to IAS 21 The Effects
of Changes in Foreign Exchange Rates)
The Group does not expect any accounting standards that are
issued but not yet effective, to have a material impact on the
financial statements of the Group.
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.
87
>
Financial Statements
A - Basis of consolidation (continued)
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 (AffyXell Therapeutics, see Note 23).
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, reduced by distributions received by
the investee, 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. Increases in the investment in AffyXell arise
through the settlement of amounts receivable, for achievement
of milestones under the collaboration agreement, in additional
equity in the entity. See Note 1C for further details.
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
Revenue
recognition policies
Research and
development
licences
Diagnostics /
Therapeutics
Payments received during the period in relation to assignment of patent rights to AffyXell are
considered to be a right-to-use the relevant intellectual property (‘IP’), and therefore revenue
is recognised at the point in time the performance obligation is satisfied. The payment is
assessed as for a right to use the relevant IP primarily as a result of the Group not undertaking
activities that significantly affect the IP to which AffyXell has rights during the respective contracts.
Transaction price is determined to be the fair value of shares issued by AffyXell to the Group
as consideration. Revenue is recognised at the point in time that the performance obligation
is satisfied, being the point in time at which the patent rights are assigned to the customer. An
adjustment is made to eliminate profit on the downstream sale, which is reversed over time as
the asset is realised by the investee.
Diagnostic
reagent test
sales
Diagnostics
The performance obligation for these sales is the transfer of control of the goods to the
customer. The timing of this is determined by the terms and conditions of the reagent
transportation but are usually either at the point of despatch or on receipt by the customer.
Revenue is recognised at the point in time this performance obligation is satisfied.
Transaction prices for these performance obligations do not contain any variable elements.
88
Avacta Report and Accounts 2023
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. Fair value
measurement is discussed in more detail in Note 1M below.
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.
Where the terms and conditions on which equity instruments
were granted are modified, such as through a settlement,
the Group accounts for the modification as an acceleration
of vesting and immediately recognises the amount that
would otherwise have been recognised for services over the
remainder of the vesting period.
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. Future taxable profits are determined based
on the reversal of relevant taxable temporary differences. If
the amount of taxable temporary differences is insufficient
to recognise a deferred tax asset in full, then future taxable
profits, adjusted for reversals of existing temporary differences,
are considered, based on the business plans for individual
subsidiaries in the Group and the expected manner of offsetting
existing tax losses against these future taxable profits.
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.
The Group has determined that the global minimum top-
up tax is an income tax in the scope of IAS 12. The Group
has applied a temporary mandatory relief from deferred tax
accounting for the impacts of the top-up tax and accounts for
it as a current tax where it is incurred. The Group’s revenues
reported revenues for the year ended 31 December 2023
mean that it is not subject to the global minimum top-up tax.
G – Inventories
Inventories are measured at the lower of cost and net
realisable value. Cost is determined using the weighted
average cost basis.
At each reporting date, the Group assesses whether
inventories are impaired or if an impairment loss recognised
in prior periods has reversed. Any excess of the carrying
amount of inventory over its estimated selling price less costs
to complete and sell is recognised as an impairment loss in the
income statement.
89
>
Financial Statements
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
Office fixtures and fittings
3 to 10 years
Leasehold improvements
5 to 15 years
Motor vehicles
3 to 5 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
Assets in the course of construction are carried at cost, less
any identified impairment. Cost includes professional fees
and other directly attributable costs that are necessary to
bring the assets to their operating condition. Depreciation
commences when the assets are ready for their intended use.
I – Intangible assets and goodwill
i) Research and development
Research and development – Expenditure on research activ-
ities is recognised in profit or loss as incurred. Development
expenditure is capitalised on a research and development
project only if the expenditure can be measured reliably, the
product or process is technically and commercially feasible,
future economic benefits are probable and the Group intends
to and has sufficient resources to complete development and
to use or sell the asset. Otherwise, it is recognised in profit or
loss as incurred.
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, with the most advanced candidate being in Phase
1 of a clinical trial, there is a significant risk that a commercial
product may not materialise, and so there is not sufficient
certainty that the relevant expenditure satisfies the commercial
or technical feasibility criteria. These criteria would be expected
to be satisfied after regulatory approval, typically following
completion of Phase 3 trials.
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. 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. For Diagnostics projects, the technical feasibility
criteria would generally be expected to be satisfied once
a working prototype was in place and appropriate clinical
validation had been performed.
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.
ii) Goodwill
Goodwill arising on the acquisition of subsidiaries is measured
at cost less accumulated impairment losses.
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 group of assets. These groups of assets are
referred to as cash-generating units (‘CGUs’). Goodwill arising
from a business combination is allocated to CGUs that are
expected to benefit from the synergies of the combination,
with each unit or group of units to which goodwill is allocated
representing the lowest level within the Group at which the
goodwill is monitored for internal management purposes, and
not being larger than an operating segment.
This results in a two-step approach to impairment testing.
An impairment test is first performed for individual cash-
generating units with indicators of impairment or those
containing goodwill. An impairment test is then performed for
the group of CGUs to which goodwill can be allocated.
The recoverable amount of an asset, CGU, or group of CGUs
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. The
recoverable amount of a group of CGUs is the sum of the
individual CGU value in uses.
Notes to the Consolidated
Financial Statements (continued)
90
Avacta Report and Accounts 2023
An impairment loss is recognised if the carrying amount of an
asset, CGU, or group of CGUs including goodwill 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, or group of CGUs, 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.
iii) Other intangible assets
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
is amortised on a straight-line basis over the expected
useful life of the technology, being 5 to 15 years
• Software: amortised over the useful life of the software,
being 3 to 5 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
10 years
• Customer relationships: amortised over the useful life of the
asset, being 10 to 15 years
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. The measurement categories
into which the Group classifies its debt instruments are:
• 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.
• FVPL: Assets that do not meet the criteria for amortised cost
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.
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 FVPL 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.
The Group’s convertible bond is accounted for as a hybrid
instrument, with a non-derivative host contract and an
embedded derivative. The embedded derivative relates to the
ability for the bond to be settled in shares, therefore causing
some of the cashflows of the instrument to vary according to
the Group’s share price. At inception, the host debt contract
was measured at the issue price adjusted for a proportion of
transaction costs and the inception fair value of the embedded
derivative. The host debt contract is subsequently measured
at amortised cost The embedded derivative is measured at
fair value using a Monte-Carlo option pricing model, which
91
>
Financial Statements
estimates 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
is a Level 3 fair value measurement, as described in Note 1M.
Gains or losses on remeasurement of the fair value of the
embedded derivative are recognised through the profit or loss.
The convertible bond contains scheduled quarterly
amortisation events, and the ability for the bondholder to
elect to settle a portion of the bonds early, with both events
settled in shares at the discretion of the Group. Where shares
are issued in settlement of the convertible bond, the total
reduction in liability (of the host debt and derivative elements)
is recognised within share premium. The reduction in the
host debt liability is the aggregate principal and interest
amounts settled. The reduction in the derivative liability is the
value to the bondholder of the shares issued in excess of the
aggregate principal and interest amounts. Early conversion
events revise the future estimated cashflows under the bond,
as such the host debt liability must be remeasured using
the original effective interest rate, with recognition of any
subsequent gain or loss.
Further details on the convertible bond are discussed in Note 22.
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.
The Group has two operating segments, these being the
level at which the CODM makes decisions on strategy and
capital allocation.
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.
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.
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. 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 Group’s incremental borrowing
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
• Lease payments in an optional renewal period if the Group
is reasonably certain to exercise an extension option
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured if the Group
changes its assessment of whether it will exercise an
extension or termination option.
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.
Notes to the Consolidated
Financial Statements (continued)
92
Avacta Report and Accounts 2023
M – Fair value measurement
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.
The fair value measurement of the Group’s financial and
non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs used in determining
fair value measurements are categorised into different levels
based on how observable the inputs used in the valuation
technique utilised are (the ‘fair value hierarchy’):
Level 1: Quoted prices in active markets for identical items
(unadjusted)
Level 2: Observable direct or indirect inputs other than
Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market
data).
The classification of an item into the above levels is based on
the lowest level of the inputs used that has a significant effect
on the fair value measurement of the item.
The Group measures the following financial instruments at fair
value, all considered to be Level 3 measurements:
- Contingent consideration receivable (Note 27)
- Derivative element of the convertible bond (Note 22)
A description of the valuation technique and a reconciliation
of the opening and closing values is provided in the respective
notes listed above.
N – 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 excluded
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.
>
93
Financial Statements
2023
2022
£’000
£’000
UK
12,750
2,532
France
4,120
1,296
Rest of Europe
3,688
158
North America
21
179
South Korea
2,055
5,481
Rest of World
613
7
23,247
9,653
During the year, transactions with one external customer in the Therapeutics segment amounted individually to 10% or more
of the Group’s revenues from continuing operations, being £2,054,000. In the year ended 31 December 2022 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.
2
Segment Reporting
Operating segments
In the view of the Board of Directors, the Group has two (2022:
two) distinct reportable segments, which are Diagnostics and
Therapeutics (2022: Diagnostics and Therapeutics), 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
Therapeutics: development of novel cancer therapies harnessing
proprietary technology
Segment revenue represents revenue from external customers
arising from sale of goods and services, plus inter-segment
revenues. Inter-segment transactions are priced on an arm’s
length basis. Segment results, assets and liabilities include items
directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
The Group’s revenue to destinations outside the UK amounted to
45% (2022: 74%) of total revenue. The revenue analysis below is
based on the country of registration of the customer:
Notes to the Consolidated
Financial Statements (continued)
94
Avacta Report and Accounts 2023
>
Operating segment analysis 2023
Diagnostics
£000
Therapeutics
£000
Central
overheads1
£000
Total
£000
Revenue
21,192
2,055
-
23,247
Cost of goods sold
(11,988)
(15)
-
(12,003)
Gross profit
9,204
2,040
-
11,244
Research costs
(1,421)
(13,108)
-
(14,529)
Selling, general and administrative expenses
(8,963)
(2,489)
(5,403)
(16,855)
Adjusted EBITDA
(1,180)
(13,557)
(5,403)
(20,140)
Impairment charge
(512)
-
-
(512)
Depreciation expense
(1,359)
(1,271)
(8)
(2,638)
Amortisation expense
(1,020)
(10)
(3)
(1,033)
Share of loss of associate
-
(847)
-
(847)
Acquisition-related expenses
-
-
(282)
(282)
Share-based payment expense
(359)
(1,739)
(808)
(2,906)
Segment operating loss
(4,430)
(17,424)
(6,504)
(28,358)
1Central overheads, which relate to operations of the Group functions, are not allocated to the operating segments.
Operating profit/loss is the lowest 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 (excluding goodwill and deferred tax assets) are located in the UK,
except for £1,838,000 located in France and £5,150,000 located in Belgium.
95
Financial Statements
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 lowest 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 (excluding goodwill) are located in the UK, except for £2,281,000 located in France.
Notes to the Consolidated
Financial Statements (continued)
96
Avacta Report and Accounts 2023
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 2022
Year ended 31 December 2023
Diagnostics
£000
Therapeutics
£000
Total
£000
Nature of revenue
Sale of goods
20,019
-
20,019
Provision of services
1,173
3
1,176
Licence-related income
-
2,052
2,052
21,192
2,055
23,247
Timing of revenue recognition
Products or services transferred at a point in time
20,019
2,052
22,071
Products or services transferred over time
1,173
3
1,176
21,192
2,055
23,247
Diagnostics
£000
Therapeutics
£000
Continuing
operations
£000
Animal Health
(discontinued)
£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
3,779
5,252
9,031
391
9,422
Products or services transferred over time
393
229
622
21
643
4,172
5,481
9,653
412
10,065
>
97
Financial Statements
31 December
2023
£000
31 December
2022
£000
Receivables, which are included in 'Trade and other receivables'
3,245
2,442
Contract assets
22
28
Contract liabilities
(302)
(273)
2023
£000
2022
£000
Staff costs:
Wages and salaries
10,375
8,089
Social security costs
1,381
993
Contributions to defined contribution plans
523
397
Share-based payment charges
2,906
7,490
15,185
16,969
Average number of employees (including Directors) during the year:
Commercial and operational
126
91
Administrative
28
29
154
120
b) Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
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 £2,906,000 (2022: £7,490,000).
EMI, unapproved and collaboration options
Details of the EMI, unapproved and collaboration options currently granted and unexercised, which are all equity settled,
are given opposite.
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 £273,000 (2022: £51,000) in contract liabilities at the beginning of the period, £262,000 (2022: £31,000) has been recognised
as revenue for the year ended 31 December 2023.
4
Employees
The remuneration of the Directors (including the details of the highest paid Director) is set out within the audited sections of the
Remuneration Committee Report on pages 62 - 66 which form part of these audited financial statements.
Notes to the Consolidated
Financial Statements (continued)
98
Avacta Report and Accounts 2023
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 September 2024.
Note 3 - This option provides that they can, if they have not lapsed, be exercised in full on or after 31 March 2024.
Note 4 - This option provides that they can, if they have not lapsed, be exercised in full on or after 31 October 2025.
Note 5 - This option provides that they can, if they have not lapsed, with certain revenue, EBITDA and time based milestones achieved, be exercised in full on or after 31 December 2025.
Note 6 - This option provides that they can, if they have not lapsed, be exercised in full on or after 31 March 2026.
Note 7 - This option provides that they can, if they have not lapsed, with certain share price performance conditions achieved, be exercised in full on or after 31 December 2025.
Note 8 - This option provides that they can, if they have not lapsed, with certain commercial milestones in relation to the Diagnostics Division achieved, be exercised in full on or after 2 October 2026.
Note 9 - This option provides that they can, if they have not lapsed, with certain commercial and time-based milestones achieved, be exercised in full on or after 2 October 2026.
Note 10 - This option provides that they can, if they have not lapsed, be exercised in full on or after 2 October 2026.
Note 11 - 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
4
93,933
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
2
161,666
Time served
30.0
Vested
30 June 2029
25 March 2020
8
656,131
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
5,994,736
Share price performance
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
2
2,525,000
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
1
50,000
Time served
10.0
Vested
28 July 2031
8 October 2021
1
3,000,000
Time served
10.0
Note 2
8 October 2031
8 October 2021
2
90,000
Time served
10.0
Note 3
8 October 2031
6 February 2023
1
100,000
Time served
10.0
Note 4
6 February 2033
20 March 2023
3
2,250,000
Time served and commercial
performance
10.0
Note 5
20 March 2033
21 June 2023
2
200,000
Time served
10.0
Note 6
21 June 2033
28 September 2023
2
2,500,000
Share price performance
10.0
Note 7
28 September 2033
2 October 2023
1
1,250,000
Commercial performance
10.0
Note 8
2 October 2033
2 October 2023
1
750,000
Time served and commercial
performance
10.0
Note 9
2 October 2033
2 October 2023
9
800,000
Time served
10.0
Note 10
2 October 2033
2 October 2023
3
65,670
Contractual performance
10.0
Vested
2 October 2033
31 May 2019
1
1,161,582
Technical/regulatory
milestones
29.2
Note 11
31 May 2026
99
>
Financial Statements
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 ten 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 granted in relation to collaboration agreements has also been measured using the above method, as
the fair value of the services received cannot be estimated reliably through other methods.
The inputs into the Black-Scholes models for the options granted during the year were as follows. No options were granted in the
previous year:
2023
£000
2022
£000
Weighted average share price at date of grant
124.64p
-
Weighted average exercise price
10.00p
-
Weighted average fair value at date of grant
116.34p
-
Expected volatility
18.53%
-
Expected life
5.0 years
-
Risk-free rate
4.35%
-
Expected dividends
Nil
-
Notes to the Consolidated
Financial Statements (continued)
100
Avacta Report and Accounts 2023
The options outstanding at 31 December 2023 had a range of exercise prices from 10p to 118.5p (2022: 10p to 118.5p), a
weighted average exercise price of 15.40p (2022: 17.45p), and a weighted average remaining contractual life of seven years and 18
weeks (2022: six years and 31 weeks).
Joint Share Ownership Plan
The Joint Share Ownership Plan (‘JSOP’) covers certain employees who have a joint interest in shares with Avacta Group Trustee
Limited as trustee of The Avacta Employees’ Share Trust. At 31 December 2023, five employees (2022: five) had joint interests in
2,782,306 (2022: 2,782,306) 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 28 February 2023, 55,331 ordinary shares of 10p each were
issued in relation to the Free Share award based on the closing middle market price of 161.0p on 24 February 2023.
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 2023, 19 eligible
employees had binding commitments to subscribe for partnership shares during the year ending 31 December 2023.
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 2023, the Trustee held 627,299 (2022: 1,010,042) 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
20,444,462
17.45
25,545,539
17.99
Granted during the year
7,967,004
10.00
-
-
Exercised during the year
(2,528,156)
15.76
(2,640,682)
18.08
Forfeited or lapsed during the year
(391,668)
10.00
(2,460,395)
22.33
Outstanding at end of period
25,491,642
15.40
20,444,462
17.45
Exercisable at end of period
12,680,060
18.22
14,491,213
17.94
2023
2022
The number and weighted average exercise price of share options are as follows:
101
>
Financial Statements
6
Operating loss
Operating loss is stated after charging/(crediting):
Note
2023
£000
2022
£000
Lease expense relating to lease of low-value assets
21
48
9
Lease expense relating to short-term leases
21
174
33
Depreciation of property, plant and equipment
11
1,129
1,029
Depreciation of right-of-use assets
21
1,509
932
Net (profit) / loss on disposal of property, plant and equipment
(6)
40
Inventories recognised as an expense during the period
10,953
2,179
Employee benefit expense, including share-based payment charges
4
15,185
16,970
Auditor’s remuneration:
• Audit services in respect of the Company’s financial statements
249
197
• Audit services in respect of the Company’s subsidiaries’ financial statements
122
35
7
Net finance costs
2023
£000
2022
£000
Convertible bond – professional fees
-
(2,287)
Convertible bond – interest expense
(14,730)
(2,606)
Convertible bond – revaluation of derivative
15,684
(4,100)
Finance income
655
91
Other finance costs
(568)
(90)
1,041
(8,992)
8
Taxation on loss on ordinary activities
2023
£000
2022 (restated*)
£000
Current tax:
Current period
(1,940)
(2,010)
Changes in estimates related to prior years
(151)
(29)
Deferred taxation:
Origination and reversal of temporary differences
(279)
(63)
Amount of benefit arising from a previously unrecognised tax loss used to reduce
deferred tax expense
-
(2,557)
Tax on loss on ordinary activities
(2,370)
(4,659)
* The comparative information is restated on account of correction of an error relating to deferred taxation, see Note 28.
The tax on loss in the year relates solely to continuing operations.
Notes to the Consolidated
Financial Statements (continued)
102
Avacta Report and Accounts 2023
Factors affecting the tax credit for the current period
2023
£000
2022 (restated*)
£000
Loss on ordinary activities before taxation
(27,317)
(38,211)
Tax using the Group’s domestic rate1
(6,420)
(7,260)
Effect of tax rates in foreign jurisdictions
(24)
2
Effects of:
• Expenses not deductible for tax purposes
3,617
3,774
• Tax-exempt income
(3,686)
(684)
• Deferred tax losses not recognised
6,234
4,112
• Government tax incentives
(1,940)
(2,230)
• Changes in estimates related to prior periods
(151)
-
• Recognition of previously unrecognised tax losses
-
(2,557)
• Withholding tax expense
-
184
(2,370)
(4,659)
1 The UK domestic tax rate increased from 19.0% to 25.0% with effect from 1 April 2023. This results in an effective tax rate for 2023 of 23.5% (2022: 19.0%).
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 2023, 25,491,642 options (2022: 20,444,462) 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 2023, no potentially dilutive shares relating to the convertible bond (2022: 5,314,010) 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 2024, 3,425,373 new ordinary shares of 10p each were issued in settlement of the quarterly principal of £2.55 million
and interest repayment of £0.66 million in respect of the unsecured convertible bond.
On 4 March 2024, 27,390,485 ordinary shares of 10p each were allotted and issued at 50p further to a placing of shares, with a
further 130,000 ordinary shares of 10p each being allotted and issued in relation to a management subscription of shares. On
19 March 2024, a further 23,879,124 conditional placing shares and 10,896,948 REX offer shares of 10p each were allotted and
issued at 50p.
In April 2024, 7,529,825 new ordinary shares of 10p each were issued in settlement of the quarterly principal of £2.55 million and
interest repayment of £0.62 million in respect of the unsecured convertible bond.
2023
Continuing
operations
Continuing
operations
2022 (restated)
Discontinued
operation
Total
Loss (£000)
(24,947)
(36,983)
351
(36,632)
Weighted average number
of shares (number)
272,683,485
255,369,066
Basic and diluted loss per
ordinary share (pence)
(9.15p)
(14.48p)
0.14p
(14.34p)
103
>
Financial Statements
10
Intangible fixed assets
Goodwill
£000
Development
costs
£000
Brands
£000
Customer
relationships
£000
Software
£000
Patents
£000
Total
£000
Cost
At 1 January 2022
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
Acquisitions – business combinations
2,824
753
631
1,716
-
60
5,984
Acquisitions – purchases
-
-
-
-
52
44
96
Disposals
-
-
-
-
-
-
-
Effect of movements in exchange rates
(20)
6
(2)
(32)
2
-
(46)
At 31 December 2023
17,037
10,959
1,849
12,453
285
368
42,951
Amortisation and impairment
At 1 January 2022
-
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
Amortisation
-
46
158
787
16
26
1,033
Disposals
-
-
-
-
-
-
-
Impairment loss
-
-
63
424
-
-
487
Effect of movements in exchange rates
-
1
1
(2)
-
1
1
At 31 December 2023
-
10,247
246
1,347
225
49
12,114
Net book value
At 31 December 2023
17,037
712
1,603
11,106
60
319
30,837
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
Development costs
The specific judgements applied by management when
capitalising development costs are discussed in Note 1I.
Development costs relate to acquired intangible assets
associated with the acquisition of Coris BioConcept, see Note 26.
Notes to the Consolidated
Financial Statements (continued)
104
Avacta Report and Accounts 2023
Goodwill
Goodwill arising on business combinations is allocated to the Group’s cash-generating units (‘CGUs’) based on an assessment of
which CGUs, or group of CGUs, will derive benefit from each acquisition. See Note 1I for the definition of a cash-generating unit.
The Therapeutics goodwill relates to the individual Therapeutics CGU. Goodwill arising from the acquisitions of Launch Diagnostics
and Coris BioConcept is allocated to the group of Diagnostics CGUs, being the lowest level at which goodwill is monitored for
internal management purposes, and the level at which benefit is expected to be derived from the acquisitions.
Goodwill is not amortised, but is tested annually for impairment at this CGU, or group of CGUs, level.
2023
£000
2022
£000
Therapeutics
1,539
1,539
Diagnostics
15,498
12,694
Goodwill
17,037
14,233
Impairment review
Goodwill is not amortised, but is tested annually for impairment at the CGU, or group of CGUs, level. Impairment tests are
mandatory for CGUs, or groups of 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 Therapeutics CGU contains goodwill and so is tested annually for impairment. 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 time frame 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 time frame exceeds the usual five-year period
due to the stage of the development pipeline, 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 £60 million over the modelled growth period. Growth rates are based on
management’s risk-adjusted expectations of commercial licence revenues from the existing development pipeline, and existing
collaborations.
• Terminal growth rate after the modelled growth phase of 4.1% (2022: 3.5%), approximating the long-term average growth rate
• Pre-tax discount rate of 19.0% (2022: 19%), derived from a weighted-average cost-of-capital of 15% (2022: 15%)
Using the assumptions listed above, the value in use of the Therapeutics CGU exceeds its carrying amount by £48.5 million.
AVA6000, the lead development candidate, is in Phase 1 clinical trials and the risk associated with the remaining clinical trial
pathway presents a risk that future commercial revenues may not occur in the quantum or within the time frame estimated by
management, which may result in the carrying amount exceeding the recoverable amount of the CGU.
With an assumption that future cashflow estimates remain unchanged, the pre-tax discount rate would need to increase to 26% to
result in an impairment.
105
>
Financial Statements
Diagnostics
As set out in Note 1I, a two-step approach to impairment testing is followed for the Diagnostics segment, with individual CGUs
tested for impairment where there are specific indicators, such as operating losses, and then a mandatory impairment test
performed at the level of the group of Diagnostics CGUs due to the presence of goodwill.
Indicators of impairment were identified in one constituent CGU of the Diagnostics group, a French distribution operation. An
impairment charge of £512,000 arose due to the carrying amount of the CGU exceeding its recoverable amount (value-in-use)
of £2,349,000. The impairment charge is considered to have arisen from the faster than expected reduction in COVID sales. This
impairment charge has been recognised pro rata against those non-current assets of the CGU whose value is not supported by
their estimated fair value. Impairment charges of £28,000 against right-of-use assets, £73,000 against brand intangible assets
and £487,000 against customer relationship intangible assets were recognised. Key assumptions used in the estimation of the
recoverable amount include:
• Modelled growth over a ten-year period of 10% p.a., exceeding the usual five-year period, which reflects historical growth rates
and management’s best estimate of the period expected to be taken for the CGU to reach a steady-state of growth, due to
recent expansion of the CGU and the elongated time frame for revenue growth to be realised due to tender cycles.
• Terminal growth rate after the forecast period of 3.10%, approximating the long-term average growth rate
• Gross margin of 35%, based on historical gross margins achieved
• Overhead growth rates reflecting forecast revenue growth rates or long-term inflation rates depending on the nature of the
cost.
• Pre-tax discount rate of 12.5%, derived from a weighted average cost-of-capital of 11% (2022: 12.0%).
An increase in the discount rate by 1%, or a decrease in the revenue growth rate by 1% p.a. over the modelled growth period,
would result in an increase in impairment charge by £482,000 and £774,000 respectively.
No other indicators of impairment were identified in individual CGUs.
For the group of Diagnostics CGUs, where a mandatory impairment assessment is performed due to the presence of goodwill, the
key assumptions used in the estimation of the value-in-use recoverable amount are as follows:
• Modelled growth over a five-year period, except for one CGU as discussed above, with compound annual growth rates ranging
from 9% to 21%.
• Terminal growth rate after the forecast period approximating the long-term average growth rate and ranging from 2.30% to
4.10% depending on the territory of operation
• Gross margins based on historical gross margins achieved, with adjustments to reflect management’s best estimate of future
achievable margins, ranging from 36% to 64%.
• Overhead growth rates reflecting forecast revenue growth rates or long-term inflation rates depending on the nature of the
cost.
• Pre-tax discount rates ranging from 12.5% to 19.5% derived from weighted average cost-of-capitals of 12.5% to 14.0%.
• Management’s best estimate of the increase in future cashflows arising from synergies achievable following the acquisition of
Coris BioConcept (see Note 26) have been included within that CGU’s value-in-use.
Using these key assumptions, a recoverable amount for the group of CGUs of £32,772,000 was determined, exceeding the
carrying amount of the group of CGUs by £1,900,000. Reasonably possible changes in key assumptions underlying the recoverable
amount would cause the group of CGU’s carrying amount to exceed its recoverable amount. An increase in the discount rate
applied to each CGU within the group of CGUs by 0.5%, or a reduction in the compound annual growth rate by 6% would result in
the recoverable amount being equal to the carrying amount.
Notes to the Consolidated
Financial Statements (continued)
106
Avacta Report and Accounts 2023
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 2022
143
2,434
5,432
433
-
8,442
Acquisitions - purchases
-
17
310
225
6
558
Acquisitions – business
combinations
-
-
123
43
127
293
Transfers between categories
(143)
7
138
(2)
-
-
Disposals
-
(1,064)
(292)
(89)
-
(1,445)
Effect of movements in exchange
rates
-
-
1
-
2
3
At 31 December 2022
-
1,394
5,712
610
135
7,851
Acquisitions - purchases
336
120
588
74
6
1,124
Acquisitions – business
combinations
-
-
258
48
62
368
Transfers from right of use
assets
-
-
241
-
-
241
Effect of movements in exchange
rates
-
-
-
-
(4)
(4)
Disposals
-
(214)
(311)
(131)
(63)
(719)
At 31 December 2023
336
1,300
6,488
601
136
8,861
Depreciation
At 1 January 2022
-
1,499
4,028
303
-
5,830
Charge for the period
-
382
543
101
3
1,029
Disposals
-
(1,019)
(282)
(88)
-
(1,389)
At 31 December 2022
-
862
4,289
317
3
5,471
Charge for the period
-
197
736
140
56
1,129
Disposals
-
(213)
(272)
(112)
(63)
(660)
At 31 December 2023
-
846
4,753
345
(4)
5,940
Net book value
At 31 December 2023
336
454
1,735
256
140
2,921
At 31 December 2022
-
532
1,423
293
132
2,380
At 31 December 2021
143
935
1,404
130
-
2,612
107
>
Financial Statements
13
Trade and other receivables
2023
£000
2022
£000
Trade receivables
3,245
2,442
Prepayments
1,701
1,760
Other receivables
509
535
Contract assets
22
28
Contingent consideration receivable
27 717
717
Other taxes and social security
391
97
6,585
5,579
2023
£000
2022
£000
Under 30 days overdue
891
726
Between 30 and 60 days overdue
628
197
Between 60 and 90 days overdue
69
88
Over 90 days overdue
127
79
1,715
1,090
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.
The Group assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at
amortised cost. 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. The expected loss rates are based on the Group’s historical credit losses and
current and forward-looking information on factors affecting the Group’s customers. The resulting implied expected credit loss for
the current financial period is not material.
12
Inventories
2023
£000
2022
£000
Raw materials and components
871
198
Work in progress
399
-
Finished goods and goods for resale
1,315
1,483
2,585
1,681
Trade and other receivables denominated in currencies other than sterling comprise £nil (2022: £7,000) of trade receivables
denominated in US dollars and £2,026,000 (2022: £1,153,000) denominated in euros. The fair values of trade receivables are the
same as their book values.
Trade receivables includes £nil due from related parties (2022: £nil), see Note 24.
The ageing analysis of trade receivables past due is as follows:
Notes to the Consolidated
Financial Statements (continued)
108
Avacta Report and Accounts 2023
14
Cash and cash equivalents
2023
£000
2022
£000
Cash and cash equivalents
16,627
41,781
16,627
41,781
15
Trade and other payables
2023
£000
2022
£000
Trade payables
3,730
2,487
Other taxes and social security
1,049
876
Accruals
4,026
3,767
Other payables
118
152
Deferred consideration
26
-
868
Contract liabilities
302
273
9,225
8,423
16
Deferred tax liabilities
At 31 December 2023
2023
At 1 January
2023
(restated)
£000
Recognised
in profit or
loss
£000
Acquisitions
– business
combinations
£000
Transfer1
Effect of
movements
in exchange
rates
£000
Net
£000
Deferred
tax
assets
£000
Deferred
tax
liabilities
£000
Property, plant and
equipment
(162)
11
-
(1)
(152)
-
(152)
Right of use assets
-
(1,309)
(351)
-
(2)
(1,662)
-
(1,662)
Intangible assets
(2,957)
239
(662)
-
9
(3,371)
105
(3,476)
Interest in associate
(744)
744
-
-
-
-
-
-
Lease liabilities
-
1,323
351
-
2
1,676
1,676
-
Equity-settled share-
based payments
274
54
-
(274)
-
54
54
-
Tax losses carried
forward
3,873
(1,353)
860
-
5
3,385
3,385
-
Convertible bond
(572)
572
-
-
-
-
-
-
Tax assets /
(liabilities) before
set-off
(288)
281
198
(274)
13
(70)
5,220
(5,290)
Set-off of tax 2
(4,967)
4,967
Net deferred tax
asset / (liability)
253
(323)
>
1 Transfer of tax loss deferred tax asset to income tax receivable on carry back of losses.
2 Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to offset the amounts and intends to settle on a net basis.
109
Trade and other payables denominated in currencies other than sterling comprise £515,000 (2022: £92,000) of trade payables
denominated in US dollars, £799,000 (2022: £951,000) denominated in euros, and £13,000 (2022: £13,000) denominated in Swiss
Francs (CHF). The fair values of trade payables are the same as their book values.
Financial Statements
At 31 December 2022 (restated)
2022
(restated)
At 1 January
2022
£000
Recognised
in profit
or loss
£000
Acquisitions
– business
combinations
£000
Effect of
movements in
exchange rates
£000
Net
£000
Deferred
tax assets
£000
Deferred tax
liabilities
£000
Property, plant and
equipment
752
(729)
(185)
-
(162)
(162)
-
Development costs
(1,512)
1,512
-
-
-
-
-
Other intangible assets
-
41
(2,991)
(7)
(2,957)
(2,395)
(562)
Interest in associate
-
(744)
-
-
(744)
(744)
-
Tax losses carried
forward
760
3,112
275
-
4,147
4,147
-
Convertible bond
-
(572)
-
-
(572)
(572)
-
-
2,620
(2,901)
(7)
(288)
274
(562)
16
Deferred tax liabilities (continued...)
Notes to the Consolidated
Financial Statements (continued)
110
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. The unrecognised tax losses do not have an expiry date.
Deferred tax has been measured using the substantively enacted rate due to prevail in the year of reversal.
The comparative period has been restated to retrospectively correct the lack of recognition of a deferred tax asset on losses
of £2,557,000. The Group historically had significant unrecognised losses, relating to the activities of its subsidiary Avacta Life
Sciences Limited. Having acquired a profitable subsidiary in October 2022, Launch Diagnostics Limited, a significant deferred tax
liability was recognised in respect of intangible assets recognised in accordance with IFRS3. This liability should have been offset
by a deferred tax asset recognised in relation to the historic losses. Further information on the restatement of the prior period is
included in Note 28.
2023
2022 (restated)
£000
Gross amount
Tax effect
Gross amount
Tax effect
Deductible temporary
differences
21,290
5,322
18,410
4,602
Tax losses
61,197
15,299
31,908
7,977
Total
82,487
20,621
50,318
12,579
Avacta Report and Accounts 2023
17
Share capital
2023
£000
2022
£000
Allotted, called up and fully paid:
- 284,240,834 (2022: 266,081,715) ordinary shares of 10p each
28,424
26,608
- 19,327,344 deferred shares of 0.4p each
77
77
28,501
26,685
During the period, the following ordinary share issues occurred in respect of the unsecured convertible bond:
• On 23 January 2023, 3,068,421 new ordinary shares of 10p each in settlement of the quarterly principal of £2.75 million and
interest repayment of £0.89 million.
• On 10 February 2023, 2,400,000 new ordinary shares of 10p each in settlement of an additional conversion of principal of
£2.85 million.
• On 21 April 2023, 2,906,097 new ordinary shares of 10p each in settlement of the quarterly principal of £2.60 million and
interest repayment of £0.80 million.
• On 21 July 2023, 3,752,652 new ordinary shares of 10p each in settlement of the quarterly principal of £2.60 million and interest
repayment of £0.76 million.
• On 20 September 2023, 715,789 new ordinary shares of 10p each in settlement of an additional conversion of principal of
£0.85 million.
• On 23 October 2023, 2,788,004 new ordinary shares of 10p each in settlement of the quarterly principal of £2.55 million and
interest repayment of £0.70 million.
Additionally, during the year a total of 2,528,156 (2022: 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 18.57p (2022: 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.
>
111
Financial Statements
18
Capital reserves
Share premium
The share premium account of £83,220,000 (2022: £62,184,000) 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 (2022: 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 £2,485,000 (2022: negative £2,754,000) 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 (2022: 2,782,306) 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 £270,000 in the period (2022: £206,000).
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 focused 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.
Notes to the Consolidated
Financial Statements (continued)
112
Avacta Report and Accounts 2023
Interest rate and currency profile
At 31 December 2023 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 5.00% at 31 December 2023 (2022: nil% and
2.85%).
Bank loans are all denominated in euros and attracted interest rates between 1.37% and 4.02% per annum at 31 December 2023.
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 2023, 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% (2022: 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 2023.
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.
2023
'000
2022
'000
Cash at bank (floating interest rate) - £
13,799
39,445
Cash at bank (floating interest rate) - $
267
2,217
Cash at bank (floating interest rate) - €
2,561
561
Bank loans - €
(385)
-
113
>
Financial Statements
Financial assets
2023
£000
2022
£000
Trade receivables
3,245
2,442
Other receivables
509
535
Contingent consideration receivable (measured at fair value, Level 3)
27
717
717
Cash
16,627
41,781
21,098
45,475
All financial assets are receivable or expected to be receivable within one year.
Financial liabilities
2023
£000
2022
£000
Trade payables
3,730
2,487
Deferred consideration
-
868
Accruals
4,026
3,767
Other payables
118
152
Lease liabilities
21
7,030
5,114
Financing liabilities1
385
-
Convertible bond – debt component
22
16,098
18,729
Convertible bond – derivative component (measured at fair value, Level 3)
22
18,325
39,100
49,712
70,217
Maturity profile of
financial liabilities
£000
In one year or
on demand
2023
In more than
one year
Total
In one year or
on demand
2022
In more than
one year
Total
Lease liabilities
1,295
5,735
7,030
1,361
3,753
5,114
Convertible bond – debt
component
16,098
-
16,098
18,729
-
18,729
Convertible bond – derivative
component
18,325
-
18,325
39,100
-
39,100
Financing liabilities1
166
219
385
Other financial liabilities
7,874
-
7,874
7,274
-
7,274
43,758
5,954
49,712
66,464
3,753
70,217
1 Financing liabilities are made up of bank loans, denominated in euros with an aggregate carrying amount of £385,000. The loans
attract interest rates between 1.37% and 4.02% per annum and are all due for repayment prior to 30 June 2027.
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. The values below represent the carrying amounts of the financial
liabilities.
Notes to the Consolidated
Financial Statements (continued)
114
Avacta Report and Accounts 2023
Right-of-use assets
Property
£000
Laboratory
equipment
£000
Total
£000
Total
£000
As at 1 January 2022
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
Additions
1,312
392
351
2,055
Acquisitions through business combinations
1,388
-
17
1,405
Disposals
(15)
-
(30)
(45)
Impairment
(25)
-
-
(25)
Depreciation charge
(1,157)
(155)
(197)
(1,509)
Transfers to owned assets
-
(241)
-
(241)
Effect of movements in exchange rates
7
-
-
7
As at 31 December 2023
5,871
678
516
7,065
20
Pensions
The Group operates defined contribution pension schemed 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 £523,000 (2022:
£397,000). There were outstanding contributions at 31 December 2023 of £70,000 (2022: £79,000).
21
Leases
See accounting policy in Note 1L.
The Group leases a small number of properties for office and laboratory use, as well as 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
£000
2023
Laboratory
equipment
£000
Motor
vehicles
£000
Total
£000
Property
£000
2022
Laboratory
equipment
£000
Motor
vehicles
£000
Total
£000
Lease liabilities
Current
1,055
109
131
1,295
941
279
141
1,361
Non-current
5,014
332
389
5,735
3,469
48
236
3,753
6,069
441
520
7,030
4,410
327
377
5,114
115
>
Financial Statements
b) Amounts recognised in profit or loss
2023
£000
2022
£000
Depreciation charge on right-of-use assets
Property
1,157
845
Laboratory equipment
155
55
Motor vehicles
197
-
1,509
900
Interest on lease liabilities
304
228
Expenses relating to leases of low-value assets
48
9
Expense relating to short-term leases
174
33
The total cash outflow for leases in the period was £1,754,000 (2022: £1,003,000).
c) Capital commitments
At 31 December 2023, the Group had £700,000 of capital commitments (2022: £nil).
Reconciliation of change in lease liability
£000
As at 1 January 2022
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
Acquisitions through business combinations
1,399
Additions
2,011
Remeasurement of lease liability
(66)
Payment of lease liability – principal element
(1,450)
Payment of lease liability – interest element
(287)
Interest expense
304
Effect of movement in exchange rates
5
As at 31 December 2023
7,030
Notes to the Consolidated
Financial Statements (continued)
116
Avacta Report and Accounts 2023
>
£000
As at 1 January 2022
-
Additions
4,128
Share of loss of associate
(1,152)
As at 31 December 2022
2,976
Additions
3,548
Elimination of unrealised profit on downstream sales
(1,598)
Share of loss of associate
(847)
As at 31 December 2023
4,079
Convertible bond - derivative
£000
Convertible bond - debt
£000
At 1 January 2023
39,100
18,729
Repayments 1
(5,091)
(17,361)
Interest expense
14,730
Revaluation of derivative
(15,684)
-
At 31 December 2023
18,325
16,098
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 focused 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. The bondholder also has the option to convert Bonds in full outside of the usual quarterly amortisation repayments,
which has occurred twice during the period with a total principal amount converted of £3,700,000. For all repayments to date, the
Group has elected to settle through the issue of shares. The share price underlying the quarterly amortisation repayment is 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 conversion date. For other conversions, shares are issued at the conversion price, which may reset downwards at 18 months
depending on share price performance, subject to a reset price floor of £0.95.
The bond contains embedded derivatives in conjunction with an ordinary host debt liability. The derivative element is 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 falls under Level 3 of
the fair value hierarchy.
Significant assumptions used in the fair value analysis include the volatility rate. A volatility of 84.7% was used in the determination of the
fair value of the derivative element. A reduction of 25% would have resulted in a reduction in the fair value at inception by £1,839,000,
corresponding increases in volatility do not have a significant impact on the valuation.
The host debt liability is measured at amortised cost, being adjusted to reflect revisions in estimated cashflows arising from early
conversion events, resulting in an implied interest expense of £14,730,000.
In the comparative period, transaction costs of £3,413,000 were apportioned between the derivative and debt liability components
according to the relative inception values. This 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
1 Repayments relate to the issue of new ordinary shares in settlement of the liability, see Note 17.
117
Financial Statements
2023
£000
2022
£000
Percentage ownership interest
25%
19%
Non-current assets
11,213
9,373
Current assets
3,787
8,668
Non-current liabilities
-
(303)
Current liabilities
(239)
(632)
Net assets (100%)
14,761
17,106
Group’s share of net assets
3,690
3,167
Revenue
82
26
Total comprehensive loss for the year (100%)
(4,485)
(4,781)
Group’s share of total comprehensive loss for the year
(1,121)
(899)
2023
£000
2022
£000
Provision of services
Associate - AffyXell Therapeutics Co., Ltd 1
3,653
3,798
Purchase of services
Non-executive Director – Dr Christina Coughlin 2
143
-
There were £nil amounts outstanding with related parties at 31 December 2023 (2022: £nil).
1 Representing the achievement of a milestone under the collaboration agreement with the associate,
and corresponding to a £3,548,000 increase in the Group’s investment in the associate based on the
exchange rate applicable on issue of shares.
2 These amounts exclude expenses payable totalling £32,000 (2022: £nil).
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 38 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, and to purchase of consulting medical adviser services between the Group and a
Non-executive Director. These transactions were made on terms equivalent to those that prevail in arm’s length transactions.
AffyXell Therapeutics Co., Ltd is an associate in which the Group has a 25% ownership (2022: 19%). 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.
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. This milestone achievement corresponds to the transfer of an intellectual
property asset to the associate, representing a downstream transaction between the Group and its associate. The Group’s share
of the associate’s gain or loss arising from the transaction is therefore eliminated, and instead recognised over a time period
commensurate to that over which the associate recognises the cost of the asset.
Notes to the Consolidated
Financial Statements (continued)
118
Avacta Report and Accounts 2023
2023
£000
2022
£000
Short-term employee benefits
1,288
1,056
Post-employment benefits
33
28
Share-based payment
643
3,248
1,964
4,332
Short-term employee benefits include employers’ NI of £163,000 (2022: £105,000). The aggregate remuneration of the highest
paid Director was £598,000, including £20,000 of post-employment contributions (2022: £444,000, including £17,000 of post-
employment contributions).
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:
>
2023
£000
2022 (restated)
£000
Loss for the period
(24,947)
(36,632)
Adjustments for:
Amortisation expense
1,033
1,051
Impairment losses
512
5,225
Depreciation
2,638
1,961
Net (profit) / loss on disposal of property, plant and equipment
(2)
52
Deferred income movement
28
-
Share of loss of associate
847
1,152
Equity-settled share-based payment transactions
2,906
7,490
Profit on lease modification
1
(31)
Gain on sale of discontinued operation
-
(308)
Net finance costs
(1,277)
9,000
Increase in investment in associate
(1,950)
(4,127)
Taxation
(2,370)
(4,659)
Operating cash outflow before changes in working capital
(22,581)
(19,826)
Decrease in inventories
196
52
Decrease in trade and other receivables
841
2,225
(Decrease) / increase in trade and other payables
(301)
1,596
Operating cash outflow from operations
(21,845)
(15,953)
25
Operating cash outflow from operations
119
Financial Statements
1 Of which, £7,312,000 relates to the agreed initial consideration before net working capital amounts, and £2,804,000 relates to
amounts paid in relation to net working capital balances net of financing liabilities.
In addition, the Group has agreed to pay the selling shareholders additional consideration of one times the sales exceeding €5.5
million in the year ending 31 December 2023 and 0.9 times the sales exceeding €6.5 million in the year ending 31 December 2024,
capped at a total of €3.5 million . Based on an assessment of forecast future sales, the fair value of this contingent consideration at
the acquisition date is £22,000. At 31 December 2023, the contingent consideration estimated has been revised to £nil.
B. Acquisition-related costs
The Group incurred acquisition-related costs of £282,000 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 £1,033,000 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.
26
Aquisition of subsidiary
Coris BioConcept
On 31 May 2023, the Group acquired 100% of the shares and voting interests in Coris BioConcept SRL (‘Coris’). Coris develops,
manufactures and markets rapid diagnostic test kits, mainly lateral flow tests, for use by healthcare professionals. Coris is
ISO13485 certified and markets its products through distributors in Europe, Asia, South America, Africa and Oceania.
For the period from acquisition to 31 December 2023, Coris contributed revenue of £3,270,000 and loss of £278,000 to the
Group’s results. If the acquisition had occurred on 1 January 2023, management estimates that consolidated revenue would have
been £24,499,000 and consolidated loss for the year would have been £25,666.000. 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 2023.
Notes to the Consolidated
Financial Statements (continued)
120
A. Consideration transferred
£000
Cash 1
10,116
Deferred consideration
22
Total consideration transferred
10,138
£000
Property, plant and equipment
368
Right-of-use assets
1,405
Intangible assets – brand
631
Intangible assets – customer relationships
1,716
Intangible assets – development projects
753
Intangible assets – other
60
Deferred tax asset
198
Inventories
1,103
Trade and other receivables
1,479
Cash and cash equivalents
3,208
Trade and other payables
(1,585)
Lease liabilities
(1,394)
Financing liabilities
(628)
Total identifiable net assets acquired
7,314
Avacta Report and Accounts 2023
D. Goodwill
Goodwill arising from the acquisition has been recognised as follows:
The goodwill is attributable mainly to the skills and technical talent of Coris’ work-force and the synergies expected to be achieved
from integrating the company into the Group’s wider Diagnostics business. None of the goodwill recognised is expected to be
deductible for tax purposes.
Launch Diagnostics
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 was 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 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.
A. Consideration transferred
In addition, the Group 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 was £nil. At both
31 December 2022 and 31 December 2023, the contingent consideration estimated has remained at £nil.
B. Acquisition-related costs
In the year ended 31 December 2022, the Group incurred acquisition-related costs of £712,000 on legal fees and due diligence
costs. These costs were 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.
£000
Consideration transferred
A
10,138
Fair value of identifiable net assets
C
(7,314)
Goodwill
2,824
£000
Cash
28,350
Deferred consideration
851
Total consideration transferred
29,201
121
£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
>
Trade receivables comprised 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.
Financial Statements
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.
The fair value of the contingent consideration has been estimated to be £717,000 as at 31 December 2023 (2022: £717,000).
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 of fair value is
an approximation to the expected value, being the value of each payment multiplied by its probability of being achieved. The
probability of achievement is estimated using information on performance for the period to 31 December 2023 and growth rates
expected over the remaining earn-out period. In order to achieve an earn-out payment of £717,000, growth rate in revenues of
4.7% would be required over the remaining earn-out period.
D. Goodwill
Goodwill arising from the acquisition has been recognised as follows:
The goodwill was attributable mainly to the skills and technical talent of Launch Diagnostics’ workforce and the synergies expected
to be achieved from integrating the company into the Group’s Diagnostics business. None of the goodwill recognised was
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
Notes to the Consolidated
Financial Statements (continued)
122
A. Effect of the disposal on the financial position of the Group
The carrying amounts of assets and liabilities in the disposal group as at 15 March 2022 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 2023
B. Results of discontinued operation
2022
£000
Revenue
411
Cost of sales
(117)
Gross profit
294
Research costs
(6)
Selling, general and administrative expenses
(233)
Depreciation expense
(10)
Share-based payment charge
-
Operating profit
45
Finance costs
(2)
Profit before tax
43
Taxation
-
Profit from operating activities
43
Gain on sale of discontinued operation
308
Profit for the period
351
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
Net cash used in operating activities
(47)
Net cash from investing activities
505
Net cash used in financing activities
(6)
Net cash flows for the period
452
28
Restatement of comparative information
During 2023, the Group identified an error in the 2022 financial statements. On acquisition of Launch Diagnostics in 2022, a
deferred tax asset should have been recognised in relation to previously unrecognised losses in different taxable entities but
within the same taxation authority as the Launch Diagnostics UK taxable entity. This asset should have been recognised to the
extent that the losses offset taxable temporary differences of the Launch Diagnostics UK taxable entity.
This error has been corrected by restating each of the affected financial statement line items in the comparative period. The
following tables summarise the impacts on the Group’s consolidated financial statements.
In the restated consolidated statement of financial position this leaves a net deferred tax asset relating to the UK taxation
authority, and a net deferred tax liability relating to the French taxation authority, which cannot be offset against one another.
123
>
Financial Statements
A.
Consolidated statement of profit or loss and other comprehensive income
B.
Consolidated statement of financial position
At 31 December 2022
As previously
reported
£000
Adjustment
£000
2022
(restated)
£000
Assets
Other non-current assets
37,098
-
37,098
Deferred tax asset
-
274
274
Non-current assets
37,098
274
37,372
Current assets
55,551
-
55,551
Total assets
92,649
274
92,923
Liabilities
Other non-current liabilities
(3,753)
-
(3,753)
Deferred tax liability
(2,845)
2,283
(562)
Non-current liabilities
(6,598)
2,283
(4,315)
Current liabilities
(67,613)
-
(67,613)
Total liabilities
(74,211)
2,283
(71,928)
Net assets
18,438
2,557
20,995
Notes to the Consolidated
Financial Statements (continued)
124
Year ended 31 December 2022
As previously
reported
£000
Adjustment
£000
2022
(restated)
£000
Loss before tax
(41,642)
-
(41,642)
Taxation
2,102
2,557
4,659
Loss from continuing operations
(39,540)
2,557
(36,983)
Loss for the period
(39,189)
2,557
(36,632)
Total comprehensive loss for the period
(39,143)
2,557
(36,586)
Loss per share:
Basic and diluted
(15.34p)
1.00p
(14.34p)
Loss per share – continuing operations:
Basic and diluted
(15.48p)
1.00p
(14.48p)
Avacta Report and Accounts 2023
29
Events after the reporting period
On 22 January 2024, 3,425,373 new ordinary shares of 10p each were issued in settlement of the quarterly principal of £2.55
million and interest repayment of £0.66 million in respect of the unsecured convertible bond.
On 4 March 2024, 27,390,485 ordinary shares of 10p each were allotted and issued at 50p further to a placing of shares, with a
further 130,000 ordinary shares of 10p each being allotted and issued in relation to a management subscription of shares. On
19 March 2024, a further 23,879,124 conditional placing shares and 10,896,948 REX offer shares of 10p each were allotted and
issued at 50p. Placing costs of £1.73 million were incurred and offset against the share premium reserve.
On 22 April 2024, 7,529,825 new ordinary shares of 10p each were issued in settlement of the quarterly principal of £2.55 million
and interest repayment of £0.62 million in respect of the unsecured convertible bond.
125
Financial Statements
Note
2023
£000
2022
£000
Non-current assets
Tangible assets
31
7
14
Intangible assets
31
2
5
Investments
32
77,258
75,029
Non-current assets
77,267
75,048
Current assets
Debtors*
33
117,738
103,204
Cash and cash equivalents
10,740
36,249
Current assets
128,478
139,453
Current liabilities
34
(66,988)
(90,832)
Net current assets
61,490
48,621
Net assets
138,757
123,669
Capital and reserves
Called-up share capital
35
28,501
26,685
Share premium account
36
83,220
62,184
Reserve for own shares
36
(2,485)
(2,755)
Retained earnings
29,521
37,555
Shareholders’ funds
138,757
123,669
Company Balance Sheet as at 31 December 2023
– Registered number 04748597
*Of which £116,242,000 (2022: £102,237,000) is expected to be recovered in more than twelve months.
The loss of the Company for the year ended 31 December 2023 was £10,668,000 (2022: loss of £12,222,000).
The notes on pages 128 to 133 form an integral part of these financial statements.
The balance sheet above was approved by the Board of Directors and authorised for issue on 29 April 2024 and signed on its
behalf by:
Dr Alastair Smith
Tony Gardiner
Chief Executive Officer
Chief Financial Officer
126
Avacta Report and Accounts 2023
Share
capital
£000
Share
premium
£000
Reserve for
own shares
£000
Retained
earnings
£000
Total
equity
£000
At 1 January 2022
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 loss 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
Exercise of share options
253
146
-
-
399
Convertible bond- issue of shares
1,563
20,890
-
-
22,453
Total comprehensive loss for the period
-
-
-
(10,668)
(10,668)
Share-based payment charges
-
-
-
2,904
2,904
Transfer1
-
-
270
(270)
-
At 31 December 2023
28,501
83,220
(2,485)
29,521
138,757
Company Statement of Changes in Equity
for the Year Ended 31 December 2023
The notes on pages 128 to 133 form an integral part of these financial statements.
1 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 from ‘Reserve for own shares’ to ‘Retained earnings’.
127
>
Financial Statements
30
Accounting policies
Basis of preparation
As used in the financial statements and related notes, the term
‘Company’ refers to Avacta Group plc.
These financial statements have been prepared in accordance
with applicable UK accounting standards, including Financial
Reporting Standard 102 – The Financial Reporting Standard
applicable in the United Kingdom and Republic of Ireland (‘FRS 102’),
and with the Companies Act 2006. The financial statements
have been prepared on the historical cost basis except for the
modification to a fair value basis for certain financial instruments
as specified in the accounting policies below.
The Company has taken advantage of section 408 of the
Companies Act 2006 and has not included its own profit and
loss account in these financial statements.
The individual accounts of the Company have also adopted the
following disclosure exemptions:
• The requirement to present a statement of cash flows and
related notes
• The reconciliation of number of shares outstanding from the
beginning to the end of the period has not been included a
second time
• Key Management Personnel compensation has not been
included a second time
• Certain disclosures required by FRS 102.11 Basic Financial
Instruments and FRS 102.12 Other Financial Instrument Issues
in respect of financial instruments not falling within the fair
value accounting rules of Paragraph 36(4) of Schedule 1
• 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 2023 that have a significant risk
of resulting in a material adjustment to the carrying amounts
and liabilities in the next financial year are:
Convertible bond derivative liability – Determine the fair value
of the embedded derivative within the convertible bond, both
at conversion dates and at the reporting date. See Note 22 for
further information.
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 rates
would result in an increase in the provision against investment
in subsidiary undertakings by £3,310,000, 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 £607,000.
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
Notes to the Company Balance Sheet
128
Avacta Report and Accounts 2023
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
at inception on behalf of the Company’s subsidiary, Avacta
Finance (Jersey) Ltd. Subsequent changes in the fair value of
this derivative are recognised through profit or loss. Sensitivity
analysis has been disclosed in Note 22.This derivative liability
arises from the future settlement of the bond being through
the issue of ordinary shares by the Company, in its role as
Guarantor to the convertible bond. The Company receives
redeemable preference shares in Avacta Finance (Jersey)
Ltd in exchange for the issue of such ordinary shares. These
redeemable preference shares are included within the cost of
investment, see Note 32.
>
129
Financial Statements
Notes to the Company Balance Sheet (continued)
Tangible
£000
Intangible
£000
Total
£000
Cost at 1 January 2023
57
108
165
Additions
3
-
3
Transfers from / (to) wholly-owned subsidiaries
3
-
3
Disposals
(14)
(14)
At 31 December 2023
49
108
157
Depreciation at 1 January 2023
43
103
146
Charge for the year
8
3
11
Transfers from / (to) wholly-owned subsidiaries
5
-
5
Disposals
(14)
-
(14)
At 31 December 2023
42
106
148
Net book value
At 31 December 2023
7
2
9
At 31 December 2022
14
5
19
Redeemable
preference shares
£000
Investments in
subsidiary
£000
Total
£000
Cost at 1 January 2023
-
78,622
78,622
Additions*,+
17,361
2,099
19,460
Acquisition of subsidiary
-
10,470
10,470
Repayments+
(9,897)
-
(9,897)
At 31 December 2023
7,465
91,191
98,656
Provision at 1 January 2023
-
3,593
3,593
Impairment charge for the year
-
17,805
17,805
At 31 December 2023
-
21,390
21,390
Net book value
At 31 December 2023
7,465
69,793
77,258
At 31 December 2022
-
75,029
75,029
31
Tangible and intangible fixed assets
32
Investments
*Additions in the year to investments in subsidiary are capital contributions relating to share-based payments to employees of
subsidiary undertakings.
+Redeemable preference shares of its subsidiary Avacta Finance (Jersey) Ltd are received by the Company in exchange for the
issue of ordinary shares to settle liabilities arising through conversion of the convertible bond. The paid-up value of the preference
shares represents the aggregate of the principal and interest being settled. During the period, certain preference shares received
were subsequently redeemed against the intercompany loan in place between the Company and Avacta Finance (Jersey) Ltd.
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, or net assets for non-trading subsidiaries, to the carrying value of
the relevant investment balance. Where the carrying value exceeded this recoverable amount, an impairment was recognised.
130
Avacta Report and Accounts 2023
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.
Non-trading
¹US
Ordinary 100%
Indirect
Crossco (1127) Limited
5Non-trading
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
Coris Holdings SRL
Intermediate holding
company
10Belgium
Ordinary 100%
Direct
Coris BioConcept SRL
8Trading
10Belgium
Ordinary 100%
Indirect
Launch Diagnostics Deutschland GmbH
6Trading
9Germany
Ordinary 100%
Indirect
The companies in which Avacta Group plc has an interest at 31 December 2023 and form part of the consolidated Group financial
statements are as follows:
33
Debtors
2023
£000
2022
£000
VAT receivable
6
13
Prepayments and other debtors
386
345
Amounts owed by subsidiary undertakings*
132,238
118,443
Less: provision against amounts owed by subsidiary undertakings
(14,892)
(15,597)
117,738
103,204
*Of which, £116,242,000 (2022: £102,237,000) is expected to be recovered in more than twelve months. The terms of the
intercompany loans are disclosed in Note 38.
>
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, Launch Diagnostics France SAS and Launch
Diagnostics Deutschland GmbH are subsidiaries of Launch Diagnostics Holdings Limited. Coris BioConcept SRL is a subsidiary of
Coris Holdings SRL.
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 2023.
5 Crossco (1127) Limited was the intermediate holding company of Avacta Animal Health Limited which was sold in the prior 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.
8 The main trade being the manufacture and provision of diagnostic reagents.
9 Registered address: Ottenser Haupstr. 2-6, Eingang Hahnenkamp 1, 22765 Hamburg
10 Registered address: Rue Guillaume, Fouquet 11, 5032 Gembloux, Belgium.
131
Financial Statements
Share issues
All share transactions in the period are disclosed in Note 17 of
the Notes to the Consolidated Financial Statements.
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.
36
Reserves
Share premium
The share premium account of £83,220,000 (2022:
£62,184,000) 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 £2,485,000 (2022:
negative £2,755,000) 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 (2022: 2,782,306) 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 £270,000 in the period (2022: £206,000).
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.
35
Share capital
2023
£000
2022
£000
Allotted, called up and fully paid:
- 284,240,834 (2022: 266,081,715) ordinary shares of 10p each
28,424
26,608
- 19,327,344 deferred shares of 0.4p each
77
77
28,501
26,685
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 gain on change in fair value of the derivative of £15,684,000 in the year to 31 December 2023 (2022:
loss on change of £4,100,000).
34
Current liabilities
2023
£000
2022
£000
Trade creditors
105
75
Other taxes and social security
88
63
Accruals and other creditors
957
766
Deferred consideration
-
868
Amounts owed to subsidiary undertakings
47,513
49,960
Convertible bond – derivative liability
18,325
39,100
66,988
90,832
Notes to the Company Balance Sheet (continued)
132
Avacta Report and Accounts 2023
38
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.
2023
£000
2022
£000
Non-cancellable operating lease rentals are payable as follows:
• Less than one year
308
1,091
• Between one and five years
150
526
458
1,617
Management charges made to subsidiaries
Year ended 31
December 2023
£000
Year ended 31
December 2022
£000
Avacta Life Sciences Limited
1,221
3,240
Launch Diagnostics Limited
242
480
Launch Diagnostics France SAS
78
130
Coris BioConcept SRL
127
-
37
Commitments
(a) Capital commitments
At 31 December 2023, the Company had £nil capital commitments (2022: £nil).
(b) Contingent liabilities
The Company has guaranteed the overdrafts of some of its subsidiaries. The amount outstanding at 31 December 2023 was £nil (2022: £nil).
(c) Operating lease commitments
The Company maintains non-cancellable operating lease commitments on three properties.
2023
2022
Avacta Limited
5,865
5,875
Avacta Life Sciences Inc
2
-
Avacta Analytical Limited
3,833
3,833
Avacta Life Sciences Limited
116,242
102,237
Crossco (1127) Limited
5,889
5,889
Avacta Finance (Jersey) Limited
(45,234)
(49,960)
Launch Diagnostics Holdings Ltd
25
-
Launch Diagnostics Ltd
(2,279)
480
Launch Diagnostics France SAS
227
130
Coris Holdings SRL
4
-
Coris BioConcept SRL
149
-
Launch Diagnostics GmbH
1
-
84,724
68,484
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:
133
To be updated to 2023 content
134
Avacta Report and Accounts 2023
Shareholder
information
136
Notice of Annual General Meeting
138
Notice of Meeting Notes
140
Explanation of Resolutions
144
Secretary and Advisers
135
136
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 Glaziers Hall, 9 Montague Close,
London Bridge, SE1 9DD on Wednesday 26 June 2024 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 2023..
2.
To approve the remuneration report contained within the report and accounts for the year ended 31 December 2023.
3.
To re-appoint Shaun Chilton as a Director of the Company in accordance with article 30.2 of the Company’s articles of association (the ‘Articles’) who
offers himself for re-appointment as a Director of the Company.
4.
To re-appoint Paul Fry as a Director of the Company in accordance with article 35 of the Articles who offers himself for re-appointment as a Director of
the Company.
5.
To re-appoint Mark Goldberg as a Director of the Company in accordance with article 35 of the Articles who offers himself for re-appointment as a
Director of the Company.
6.
To re-appoint Tony Gardiner as a Director of the Company in accordance with article 35 of the Articles who offers himself for re-appointment as a
Director of the Company.
7.
To appoint BDO LLP as auditor of the Company to hold office from the conclusion of this meeting until the conclusion of the next general meeting at
which accounts are laid before the Company.
8.
To authorise the Audit Committee of the Board of Directors of the Company to determine the auditor’s remuneration.
9.
To authorise the Directors of the Company generally and unconditionally pursuant to section 551 of the Companies Act 2006 (the ‘Act’) (in
substitution for all existing authorities granted to the Directors of the Company under section 551 of the Act (to the extent that they remain in
force and unutilised) other than resolution 10 passed at the annual general meeting of the Company held on 28 June 2023 which shall remain
in force) to exercise all powers of the Company to allot shares in the Company and to grant rights to subscribe for or to convert any security into
such shares (‘Rights’):
up to an aggregate nominal amount of £12,001,000 (being approximately one third of the issued ordinary share capital of the Company as at the
date of this notice); and
up to an aggregate nominal amount of £24,002,000 (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 10),
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.
Notice of Annual General Meeting
9.1
9.2
To consider and, if thought fit, pass the following resolutions as special resolutions:
10.
To empower the Directors of the Company (subject to the passing of resolution 9 and in substitution for all existing like powers granted to the Directors
of the Company (to the extent that they remain in force and unexercised)) pursuant to sections 570 and 573 of the 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:
in connection with or pursuant to an offer of such securities by way of a pre-emptive offer (as defined below);
(otherwise than pursuant to resolution 10.1 above) up to an aggregate nominal amount of £3,600,000 (being approximately 10% of the issued
ordinary share capital of the Company as at the date of this notice); and
(otherwise than pursuant to resolutions 10.1 or 10.2 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 10.2 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,
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 resolution 9.2 and this resolution 10: 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.
11.
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
10 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:
up to an aggregate nominal amount of £3,600,000 (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
(otherwise than pursuant to resolution 11.1 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 11.1 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.
By order of the Board
Tony Gardiner
Company Secretary
29 April 2024
Registered Office:
Unit 20, Ash Way, Thorp Arch Estate, Wetherby LS23 7FA
Avacta Report and Accounts 2023
137
10.1
10.2
10.3
11.1
11.2
138
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 24 June 2024.
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;
• LinkVote+ is a free app for smartphone and tablet provided by Link Group (the company's registrar). It offers shareholders the
option to submit a proxy appointment quickly and easily online, as well as real-time access to their shareholding records. The
app is available to download on both the Apple App Store and Google Play, or by scanning the relevant QR code below;
• 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 10.30 a.m. on 24 June 2024 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 shareholderenquirires@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, any CREST Proxy Instructions (as described in note 10
below) or appointing a proxy via Proxymity must be completed. In each case so as to be received by Link Group by 2.30 p.m. on 24
June 2024 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. 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, any CREST Proxy Instructions (as described in note 10 below) or appointing
a proxy via Proxymity will not prevent a shareholder from attending the Meeting and speaking and/or voting in person if they wish
to do so.
Notice of Meeting Notes
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.
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 24 June 2024. 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 29 April 2024 (being the latest practicable date prior to the publication of this document), the Company’s ordinary issued
share capital consisted of 360,042,104 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 29 April 2024 were 360,042,104.
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 9 set out in this Notice are ordinary business, and resolutions 10 to 11 are special business.
Avacta Report and Accounts 2023
139
140
Explanation of Resolutions
Ordinary resolutions
Resolutions 1 to 9 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 2023.
b. Resolution 2: The Directors’ remuneration report is set out in the Company’s Annual Report and Accounts for the year
ended 31 December 2023. The vote is advisory and the Directors’ entitlement to remuneration is not conditional on it.
c. Resolution 3: The Company’s Articles of Association require any Director appointed since the last AGM to retire and seek
re-appointment. Shaun Chilton was appointed following the last AGM and will seek re-appointment at the AGM.
d. Resolutions 4, 5 and 6: 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). Paul Fry, Mark
Goldberg and Tony Gardiner are each retiring by rotation and seeking re-appointment 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.
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 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 £12,001,000; and (ii) up to a maximum nominal amount of £24,002,000 (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 29 April
2024, 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 pursuant to this authority except
in connection with employee share schemes.
Explanation of Resolutions
Special resolutions
Resolutions 10 to 11 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.
h. Resolutions 10 and 11: 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 10 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 10 would be limited to a maximum nominal amount of £4,320,500,
which would equate to 43,205,000 ordinary shares in the capital of the Company, representing approximately 12% of
the Company’s issued share capital as at 29 April 2024, being the latest practicable date prior to the publication of this
document. Of the £4,320,500, £720,000 can only be used for the purposes of making a follow-on offer.
Resolution 11 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 £4,320,500, which would equate to 43,205,000 ordinary shares in the capital of
the Company, representing approximately 12% of the Company’s issued share capital as at 29 April 2024, being the
latest practicable date prior to the publication of this document. Of the £4,320,500, £720,000 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.
i.
Avacta Group plc
Registered Office:
Unit 20, Ash Way, Thorp Arch Estate, Wetherby LS23 7FA
www.avacta.com
Avacta Report and Accounts 2023
141
Notes
142
Avacta Report and Accounts 2023
143
Secretary and Registered Office
Tony Gardiner
Avacta Group plc
Unit 20
Ash Way
Thorp Arch Estate
Wetherby
LS23 7FA
Nominated Adviser and Joint 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
Secretary and Advisers
144
Avacta Report and Accounts 2023
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