TIDMAVCT
RNS Number : 9119N
Avacta Group PLC
28 September 2023
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 as it forms part of
UK domestic law by virtue of the European Union (Withdrawal) Act
2018 ('MAR'). Upon the publication of this announcement via a
Regulatory Information Service ('RIS'), this inside information is
now considered to be in the public domain.
28 September 2023
Avacta Group plc
("Avacta", the "Group" or the "Company")
Interim Results for the Period Ending 30 June 2023
A period of substantial clinical progress and continued
growth
Avacta Group plc (AIM: AVCT), a life sciences company focused on
improving healthcare outcomes through targeted cancer treatments
and diagnostics, is pleased to announce its unaudited interim
results for the six months ending 30 June 2023 ("H1 2023").
Operating highlights
Therapeutics Division - Encouraging clinical progress with
AVA6000 and strong preclinical progress with other programmes
-- Avacta's lead pre|CISION(TM) programme, AVA6000, a tumour
microenvironment activated form of a chemotherapeutic agent,
doxorubicin, made significant progress in a Phase 1 a clinical
trial (ALS-6000-101) during H1 2023, with an excellent safety
profile continuing to be observed through the dose cohorts as
detailed in the Company's announcements.
-- Expansion of dosing into the US under the Group's
Investigational New Drug Application in Avacta's Phase 1
multi-centre trial.
-- Post period, the sixth dose cohort (310 mg/m(2) ) was
successfully completed and escalation to the seventh and final
cohort (385 mg/m(2) ) was approved in September, with a significant
reduction in tumour volume confirmed in a patient with soft tissue
sarcoma.
o In light of the highly positive Phase 1a data, the Company has
adapted its clinical development strategy with the aim of bringing
forward the start of a potentially pivotal Phase 2 study, subject
to receiving the necessary regulatory approvals.
-- Preclinical data regarding AVA3996, the second pre|CISION(TM)
programme, a tumour targeted proteasome inhibitor, were presented
at the American Association of Cancer Research Annual Meeting in
April, supporting confidence in the potential of this molecule to
restrict tumour growth.
-- 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 will result in an increase in Avacta's shareholding in
AffyXell to approximately 25% from its current 19%, which will be
determined when a formal valuation has been completed as was done
for the first milestone payment.
-- Avacta's Board of Directors has been strengthened with the
appointment of Shaun Chilton as Non-Executive Director in June
2023.
Diagnostics Division - Second acquisition in M&A-led growth
strategy completed and integration progressing well
-- The Group continues to pursue an M&A-led growth strategy
for the Diagnostics Division to support the building of an in-vitro
diagnostics product portfolio for professional use, including those
against infectious respiratory diseases.
-- Avacta's Diagnostics Division completed the acquisition of
Belgium-based Coris Bioconcept SRL on 1 June 2023, for an upfront
consideration of GBP7.3 million with an earnout based on future
business performance of up to GBP3.0 million payable in cash,
adding a broad range of marketed professional-use rapid tests to
the Division:
o This acquisition supports the strategy of acquiring commercial
routes into the diagnostics market and appropriate IP-rich product
portfolios, complementing the acquisition of Launch Diagnostics in
October 2022 has been successfully integrated into the Diagnostics
Division .
o Adjusted EBITDA loss (before non-cash and non-recurring items)
of the Diagnostics Division reduced to GBP0.4 million (H1 2022:
GBP2.6 million; year ended 31 December 2022: GBP5.1 million).
Financial highlights
-- Revenues increased to GBP11.9 million (H1 2022: GBP5.5
million; year ended 31 December 2022: GBP9.7 million).
-- Adjusted EBITDA loss (before non-cash and non-recurring
items) of GBP7.9 million (H1 2022: GBP5.4 million; year ended 31
December 2022: GBP15.1 million).
-- Operating loss from continuing operations of GBP11.9 million
(H1 2022: GBP9.6 million; year ended 31 December 2022: GBP32.6
million).
-- Reported loss from continuing operations of GBP11.5 million
(H1 2022: GBP9.0 million; year ended 31 December 2022: GBP39.5
million).
-- Loss per ordinary share from continuing operations of 4.3p
(H1 2022: 3.6p; year ended 31 December 2022: 15.5p).
-- Cash and short-term deposit balances at 30 June 2023 of
GBP26.0 million (30 June 2022: GBP17.0 million; 31 December 2022:
GBP41.8 million).
Outlook
The continuing success of AVA6000 in the Phase 1a clinical study
is important not only for the potential to improve outcomes for
patients with cancers suitable for treatment with doxorubicin, but
also as a validation of the pre|CISION(TM) platform more widely.
The Company aims to complete the AVA6000 three-weekly dose
escalation safety study and to provide a detailed data read-out
during Q4 2023.
In parallel, the Company will also initiate a fortnightly dosing
safety study in order to determine the dosing regimen for a Phase 2
registrational study in soft tissue sarcoma planned to start during
2024, in advance of previous estimates. Subject to positive data,
this could potentially bring the first pre|CISION(TM) targeted
chemotherapy to market for the benefit of patients with soft tissue
sarcoma towards the end of 2026.
The Company is progressing pre-clinical programmes based on both
the pre|CISION(TM) and Affimer (R) platforms and anticipates
providing detailed updates on these programmes in the coming
months.
The Group's Diagnostics Division is focused on the integration
of its first two acquisitions and finding synergies across the
enlarged division. The Group is aiming to grow the Diagnostics
Division organically and through geographical expansion into the
German market, with the near-term aim of achieving an overall
EBITDA positive position.
Dr Eliot Forster, Chairman of Avacta Group plc added:
"Targeting of cancer therapies to tumour tissue has been a long
sought after goal for many oncology drug companies, clinicians and
patients. There are many potent anti-cancer drugs, the
effectiveness of which is limited by the systemic toxicities and
lack of tolerability for patients.
"The clinical data emerging for our lead pre|CISION(TM) drug,
AVA6000, is ground-breaking. We are seeing a dramatic reduction in
the usual toxicities associated with anthracycline chemotherapy and
we have clear indications that doxorubicin is being released in
active form in the tumour microenvironment.
"Across the board we're proud and encouraged by the momentum
we're seeing in both divisions of this business and see huge
potential value both for patients and investors in the next
period."
Dr Alastair Smith, Chief Executive Officer of Avacta Group plc,
commented:
"I am delighted to report substantial progress across the board
as Avacta's two divisions execute on their strategies.
"In our Therapeutics Division, the pre|CISION(TM) platform is
doing exactly what it was designed to do - target the release of
active chemotherapy to the tumour tissue, minimising systemic
exposure and allowing for dosing at higher and potentially more
efficacious therapeutic levels. We are all hugely excited about its
potential to deliver profound improvements in cancer care for many
patients.
" Not only are the initial safety data emerging from the AVA6000
Phase 1 study, across all dose cohorts, remarkably good, but
targeted release of doxorubicin in the tumour has been confirmed
both by analysis of tumour biopsies and now by clear clinical
responses.
"Even at this early stage and in this patient group, we have a
confirmed, significant reduction in tumour volume in a patient with
soft tissue sarcoma, as well as other positive signals across a
number of patients. This excellent progress means that we are
aiming to accelerate the timetable for the start of the pivotal
Phase 2 efficacy study in soft tissue sarcoma into 2024.
" Avacta's Diagnostic Division also continues to grow and
provide more comprehensive capabilities. We have completed a second
acquisition, that of Coris Bioconcept, and I am very pleased with
the progress and integration of Coris and Launch Diagnostics as the
Division moves closer towards an EBITDA positive position."
For further information from Avacta Group plc, please
contact:
Avacta Group plc Tel: +44 (0) 1904 21 7070
Alastair Smith, Chief Executive www.avacta.com
Officer
Tony Gardiner, Chief Financial
Officer
Michael Vinegrad, Group Communications
Director
Stifel Nicolaus Europe Limited Tel: +44 (0) 207 710 7600
(Nomad and Joint Broker) www.stifel.com
Nicholas Moore / Nick Adams /
Samira Essebiyea / Nick Harland
/ William Palmer-Brown
Peel Hunt (Joint Broker)
James Steel / Chris Golden / Patrick www.peelhunt.com
Birkholm
ICR Consilium
Mary-Jane Elliott / Jessica Hodgson avacta@consilium-comms.com
/ Sukaina Virji
About Avacta Group plc - www.avacta.com
Avacta Group is a UK-based company focused on improving
healthcare outcomes through targeted cancer treatments and
diagnostics.
Avacta has two divisions: an oncology biotech division
harnessing proprietary therapeutic platforms to develop novel,
highly targeted cancer drugs, and a diagnostics division, which is
executing on an M&A led growth strategy to create a
full-spectrum diagnostics business focused on supporting healthcare
professionals and broadening access to testing. Avacta's two
proprietary platforms, Affimer(R) and pre|CISION(TM) underpin its
cancer therapeutics whilst the diagnostics division leverages the
Affimer(R) platform to drive competitive advantage in its
markets.
The pre|CISION(TM) 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 "precision medicine". The lead
pre|CISION(TM) programme, AVA6000 a tumour activated form of
doxorubicin, is in Phase 1 studies and has shown dramatic
improvement in safety compared with standard doxorubicin, and early
signs of clinical activity.
Affimer(R) 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.
With a balanced business and capital allocation model: 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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Chairman and Chief Executive Officer's Statement
Avacta Therapeutics Division Update
Avacta's Therapeutics Division aims to leverage its two
proprietary technology platforms, pre|CISION (TM) and Affimer(R) ,
to develop innovative oncology therapies that make a significant
difference to cancer patients' treatment experience and
outcomes.
AVA6000: a tumour-activated form of doxorubicin
Anthracyclines such as doxorubicin, a generic chemotherapy for
which the broader market is expected to grow to $1.38 billion by
2024, are widely used as part of standard of care in several tumour
types, but their dosing regimen and long-term use is limited by
severe systemic toxicities, in particular, by haematological
toxicities and cardiotoxicities.
Avacta's pre|CISION(TM) tumour-activation platform is designed
to reduce the systemic exposure of healthy tissues to the active
chemotherapy, leading to improved dosing regimens, improved safety
and tolerability for patients and better treatment outcomes.
The ALS-6000-101 Phase 1 clinical trial involves a
dose-escalation Phase 1 study in patients with locally advanced or
metastatic-selected solid tumours, known to be
FAP<ALPHA>-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).
Doxorubicin is used as a monotherapy for the treatment of
soft-tissue sarcoma ("STS"), a relatively rare mesenchymal
malignancy which accounts for less than 1% of adult tumours.
Despite the successful advancement of localised therapies such as
surgery and radiotherapy, these tumours can recur, often with
metastatic disease. The American Cancer Society estimates that in
2022 approximately 13,190 new soft tissue sarcomas were diagnosed
and about 5,130 people were expected to die of the disease in the
US.
The Phase 1a three-weekly dose escalation study is being carried
out at several sites in the UK and United States and is now dosing
patients in the seventh and final dose escalation cohort at 385
mg/m(2) , which is approximately 3.5 times the normal dose of
doxorubicin.
The data emerging from the dose escalation study show an
excellent safety profile. In the first six completed dose cohorts,
AVA6000 has been well tolerated by patients, with a marked
reduction in the incidence and severity of the typical toxicities
associated with the standard doxorubicin chemotherapy
administration. Typical toxicities include alopecia,
myelosuppression, nausea, vomiting, mucositis and cardiotoxicity.
Importantly, even at the highest dosing levels, equivalent to
several-fold higher than the normal dose of doxorubicin, the
typical drug-related cardiotoxicity of doxorubicin has not been
observed.
Analysis of a number of tumour biopsies obtained from patients
in different cohorts has also confirmed the release of the active
chemotherapy, doxorubicin, in the tumour tissue. This analysis
shows that AVA6000 targets the release of doxorubicin to the tumour
tissue at therapeutic levels which are much higher than the levels
being detected in the bloodstream at the same timepoint.
Post-period, the Company announced that it had confirmed a
significant reduction in tumour size in a patient on the trial with
a sub-type of STS in which doxorubicin is expected to be effective.
Several other patients have also shown positive responses to the
treatment.
Preliminary clinical data on AVA6000 have demonstrated that the
pre|CISION(TM) modification has resulted in targeted release of the
active drug to the tumour microenvironment, dramatically reducing
the systemic toxicities being observed in patients and resulting in
clinically effective levels of the active drug in the tumour.
In light of AVA6000's continued strong clinical progress, the
Company has reviewed its clinical development strategy with the aim
of accelerating a pivotal Phase 2 study in STS which could lead to
the first regulatory approval for the drug.
The excellent safety profile of AVA6000 opens up the potential
to dose patients more frequently, as well as with higher doses or
more cycles of treatment. In order to determine the recommended
Phase 2 dose, the Company will initiate a short fortnightly dosing
study in place of the much longer multi-arm Phase 1b efficacy study
previously envisaged.
This fortnightly dosing study should be completed by the middle
of 2024 which the Company expects will allow the Phase 2 study to
start much earlier than planned, in 2024.
The Company expects to release detailed Phase 1a data in Q4 2023
following completion of cohort 7.
Pipeline of pre|CISION(TM) chemotherapies
Avacta's pre|CISION(TM) platform is a proprietary chemical
modification that renders the modified chemotherapeutic drug
inactive in the circulation until it enters the tumour
microenvironment, where it is activated by an enzyme called
FAP<ALPHA>. FAP<ALPHA> is in high abundance in most
solid tumours but not in healthy tissues.
The data emerging from the AVA6000 Phase 1a study have validated
the performance of the pre|CISION(TM) platform, opening up the
opportunity to apply it to a broad range of existing chemotherapies
and new, more potent cytotoxins.
The next most advanced pre|CISION(TM) pre-clinical candidate is
AVA3996, a tumour-activated proteasome inhibitor based on an
analogue of Velcade. The global proteasome inhibitors' market size
is expected to be worth $2.3 billion by 2026 and Velcade represents
just over half of that market.
As with all chemotherapies, the benefit of these drugs is
limited by toxicities and tolerability for patients. In the case of
Velcade, there are significant side effects such as peripheral
neuropathy, which has limited its approval, principally in treating
multiple myeloma. A potentially safer proteasome inhibitor, such as
AVA3996, could be used to treat solid tumours.
During the period, the Company presented pre-clinical data
regarding AVA3996 in a poster entitled 'AVA3996, a novel
pre|CISION(TM) medicine, targeted to the tumor microenvironment via
Fibroblast Activation Protein-alpha (FAP- a ) mediated cleavage' ,
at the American Association for Cancer Research ("AACR") 2023
Annual Meeting. The poster and a video explainer are available on
the Company's web site (see
https://avacta.com/avacta-presents-ava3996-pre-clinical-data-at-the-american-association-for-cancer-research-meeting/
).
The Company is continuing its pre-clinical development of
AVA3996 (pre-clinical models of safety, pharmacokinetics and
efficacy) with the aim of an investigational new drug ("IND")
filing in H2 2024.
Affimer(R) immunotherapy programmes
Translation of the Affimer(R) platform into the clinic to
demonstrate the safety and tolerability of this novel therapeutic
protein platform is an important objective for the Company and
represents a key value inflection point for the Affimer(R)
technology.
In the oncology field recent studies have shown that single
cancer immunotherapies, or 'monotherapies', have potentially
limited overall response rates. The Company's Affimer(R)
immunotherapy strategy aims to harness the benefits of the
Affimer(R) platform to build bispecific drug molecules which can
address two drug targets simultaneously, and to use Affimer(R)
molecules to target toxic payloads using conventional and
pre|CISION(TM) linkers.
Whilst the Company is prioritising its pre|CISION (TM)
programmes as the nearest term driver of key value inflection
points for both patients and Avacta shareholders, good progress has
been made in the in-house Affimer(R) programmes which, along with
the Company's commercial collaborations, are a key part of the
in-house research activities.
Avacta will be presenting an update on its lead Affimer (R)
PD-L1/cytokine bispecific programme as a poster presentation at the
AACR - NCI-EORTC International Conference on Molecular Targets and
Cancer Therapeutics (October 11-15, 2023 , Boston, USA). This
information will be made available on the Company's website
following the meeting.
Ongoing Drug Development Collaborations
LG Chem Life Sciences
Avacta has a strategic partnership with LG Chem Life Sciences
focused on the development of a novel PD-L1 checkpoint inhibitor
utilising the Affimer(R) platform incorporating Affimer XT(R)
half-life extension. The partnership also provides LG Chem with
rights to develop and commercialise other Affimer(R) and
non-Affimer biotherapeutics combined with Affimer XT(R) half-life
extension for a range of indications, and Avacta could earn up to
$55 million in milestone payments for each of these new products.
In addition, under the agreement Avacta will earn royalties on all
future Affimer XT(R) product sales by LG Chem.
At the end of June 2022, LG Chem exercised its option to renew
its rights under the ongoing collaboration with Avacta, triggering
a licence renewal fee payment to Avacta of $2 million. LG Chem is
focused on progressing the PD-L1/XT oncology drug candidate towards
the clinic and has commenced pre-clinical studies which are
intended to form the basis of an IND submission.
AffyXell Therapeutics
AffyXell was established in January 2020 by Avacta and Daewoong
as a joint venture to develop novel mesenchymal stem cell ("MSC")
therapies. AffyXell is combining Avacta's Affimer (R) platform with
Daewoong's MSC platform such that the stem cells are genetically
modified to produce and secrete therapeutic Affimer (R) proteins
with immuno-modulatory effects in situ in the patient. The Affimer
(R) 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 (R)
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 will result in an increase
in Avacta's shareholding in AffyXell, which currently stands at
19%. The exact shareholding will be determined, as with the first
milestone payment which was achieved in April 2022, following a
formal valuation of AffyXell and is expected to be approximately
25%.
POINT Biopharma Inc.
Early in 2021, Avacta signed a licensing agreement with POINT
Biopharma Inc. ("POINT"), to provide access to Avacta's
pre|CISION(TM) 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 FAP<ALPHA>-activated drug totalling $9.5
million. Avacta will also receive milestone payments for subsequent
radiopharmaceutical FAP<ALPHA>-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 license
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|CISION based
programmes CanSeek(TM) . See
https://www.pointbiopharma.com/our-products/pipeline ).
Avacta Diagnostics Division Update
Avacta's Diagnostics Division is driving ambitious growth
through an M&A-led strategy with the aim of supporting
healthcare professionals and broadening access to high quality
diagnostics. The strategy is founded on acquiring both the routes
into the diagnostics market and the appropriate IP-rich product
portfolios.
In October 2022, the Company completed its first acquisition,
Launch Diagnostics, a leading independent distributor in the UK in
vitro diagnostics ("IVD") market. This has provided Avacta with
well-established sales channels in the professional, centralised
hospital laboratory testing market in the UK and France. Avacta's
plan to grow the Launch Diagnostics business includes expanding the
company's product portfolio and investing in the sales teams in the
UK and France. The most significant opportunity for growth lies in
the geographical expansion of the business into Germany, which is
Europe's largest diagnostics market. Avacta is actively pursuing
this strategy.
During the reporting period, Avacta completed its second
acquisition, Coris Bioconcept SRL ("Coris"), a developer and
supplier of rapid diagnostic test kits, for an upfront cash
consideration of GBP7.3 million (on a debt-free/cash-free basis and
subject to customary working capital adjustments), with an earnout
based on future business performance, payable in cash, of up to
GBP3.0 million.
Coris, based in Gembloux, Belgium and established in 1996,
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.
Operationally, Coris employs 35 members of staff split across
Production, Sales, Marketing, Quality Control, Regulation and
Administration. In March 2023, the business completed the
construction of a new 10,700 ft(2) 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.
The existing Coris management team have remained with the
business and are working closely with Avacta Diagnostics'
businesses to drive growth and margins through improved
distribution channels and an expanded product range. Avacta will
transfer its lateral flow product development activities to Coris
and support that activity through ongoing development of Affimer(R)
reagents for new products or to enhance existing ones.
Avacta Diagnostics intends to continue to pursue a careful and
disciplined M&A strategy focused on expanding routes to market
for professional products, while adding further IVD products
suitable for these markets to our portfolio. Avacta Diagnostics
will focus on integrating the acquired businesses and delivering
the near-term financial performance of both companies, seeking
synergies including the use of Affimers where appropriate and
driving longer term growth through:
- Expansion of the geographical sales footprint;
- Expansion of product portfolios; and
- Improved management of distribution partners.
Financial Review
Revenue
Revenue for the 6 months ended 30 June 2023 increased to
GBP11.89 million compared to the same period in 2022 (H1 2022:
GBP5.52 million; year ended 31 December 2022: GBP9.65 million).
Revenue contribution from the Therapeutics Division was GBP1.99
million (H1 2022: GBP5.44 million; year ended 31 December 2022:
GBP5.48 million) due to achieving a further milestone in our
collaboration with AffyXell (which leads to additional equity in
the joint venture). Revenue from the Diagnostics Division increased
to GBP9.90 million (H1 2022: GBP0.07 million; year ended 31
December 2022: GBP4.17 million) as the reporting period included a
full six months trading for Launch Diagnostics and one month from
the recent acquisition of Coris.
Acquisitions
On 1 June 2023, the Group acquired 100% of the shares and voting
interests in Coris. Coris 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. Total consideration for Coris included an
initial consideration of GBP7.31 million on a debt-free / cash-free
basis, in addition to a further GBP2.81 million in relation to
customary working capital adjustments, payable in cash upon
completion of the acquisition. There is also additional
consideration of up to GBP3.0 million based on revenue exceeding
certain targets over the next two financial years. The additional
consideration to be paid based on future revenues is estimated to
be GBP1.59 million as at 30 June 2023.
The acquisition of Coris is a further step in the M&A-led
growth strategy for the Group's Diagnostics Division, designed to
build an integrated and differentiated IVD business with global
reach servicing professionals and consumers.
For the period from acquisition to 30 June 2023, Coris
contributed revenue of GBP0.82 million and operating profit of
GBP0.19 million to the Group's results.
Research costs and selling, general and administrative costs
Research costs relating to new diagnostic tests in the
Diagnostics Division and the clinical and pre-clinical development
work of the Affimer(R) and pre|CISION(TM) therapeutics programmes
in the Therapeutics Division were GBP6.01 million (H1 2022: GBP6.00
million; year ended 31 December 2022: GBP11.10 million).
Selling, general and administrative costs have increased to
GBP8.65 million (H1 2022: GBP4.69 million; year ended 31 December
2022: GBP11.23 million) as the Group expands the Diagnostics
Division.
Adjusted EBITDA
The Consolidated Statement of Profit or Loss shows an Adjusted
EBITDA loss position (before non-recurring and non-cash items) of
GBP7.91 million (H1 2022: GBP5.42 million; year ended 31 December
2022: GBP15.09 million).
Other costs and charges
Depreciation has increased to GBP1.28 million (H1 2022: GBP0.88
million; year ended 31 December 2022: GBP1.90 million).
Amortisation expense has remained almost constant at GBP0.44
million (H1 2022: GBP0.41 million; year ended 31 December 2022:
GBP1.05 million) with amortisation of acquired intangible assets
now comprising the majority of the expense, instead of the
comparative period's amortisation of capitalised development
costs.
The share of the costs from the AffyXell joint venture in the
period was GBP0.42 million (H1 2022: GBP0.65 million; year ended 31
December 2022: GBP1.15 million).
Acquisition related expenses during the period amounted to
GBP0.28 million (H1 2022: GBPnil; year ended 31 December 2022:
GBP0.74 million).
Share-based payment charges have reduced to GBP1.55 million (H1
2022: GBP2.29 million; year ended 31 December 2022: GBP7.49
million).
Operating loss
The Group's operating loss increased to GBP11.88 million (H1
2022: GBP9.65 million; year ended 31 December 2022: GBP32.65
million).
Convertible bond costs
During the reporting period there have been two quarterly
amortisation repayments (of GBP2.75 million and GBP2.60 million
respectively in equity) and a further early redemption (of GBP2.85
million in equity) which reduces the original GBP55.00 million
senior unsecured convertible bonds issued in October 2022 at par
value to GBP46.80 million. Subsequent to the period end in July
2023 a third quarterly amortisation of GBP2.60 million in equity
was settled leaving the remaining balance of bonds at par value of
GBP44.20 million. On 20 September 2023, 715,789 new ordinary shares
were issued in settlement of GBP0.85 million of the principal
amount of the unsecured convertible bond, reducing the principal
remaining to GBP43.35 million.
The bond agreement contains embedded derivatives in conjunction
with an ordinary host debt liability. As a result, the convertible
bonds are shown in the Consolidated Statement of Financial Position
in two separate components, being 'Convertible bond - debt' and
'Convertible bond - derivative'. The derivative element has been
measured at fair value using a Monte-Carlo option pricing model,
which estimates the fair value based on the probability-weighted
present value of expected future investment returns, considering
each of the possible outcomes available to the bondholders.
The derivative element, taking into account the amortisations
and early redemption, was revalued as at 30 June 2023 at GBP28.90
million (30 June 2022: GBPnil; 31 December 2022: GBP39.10 million),
which has resulted in a credit within the period of GBP5.86
million.
The debt element of the bond has reduced from GBP18.73 million
at 31 December 2022 to GBP15.68 million at 30 June 2023 (30 June
2022: GBPnil), with an associated non-cash interest expense of
GBP6.85 million.
Loss for the period
The reported loss from continuing operations after taxation was
GBP11.53 million (H1 2022: GBP8.99 million; year ended 31 December
2022: GBP39.54 million).
The basic loss per share from continuing operations was 4.28p
(H1 2022: 3.58p; year ended 31 December 2022: 15.48p).
Cash flow
The Group reported cash and cash-equivalent balances of GBP25.97
million (30 June 2022: GBP17.02 million; 31 December 2022: GBP41.78
million).
There was a cash outflow from operations and working capital
movements of GBP11.19 million (H1 2022: GBP9.43 million; year ended
31 December 2022: GBP15.95 million) and an outflow from investing
activities of GBP7.35 million from the acquisition of Coris and
capital expenditure (H1 2022: inflow of GBP0.09 million; year ended
31 December 2022: outflow of GBP25.04 million). Cash outflow from
financing activities, being principal elements of lease payments
net of amounts received from the exercise of share options amounted
to GBP0.56 million (H1 2022: inflow of GBP0.37 million; year ended
31 December 2022: inflow of GBP56.90 million).
Financial position
Net assets as at 30 June 2023 were GBP22.74 million (30 June
2022: GBP35.98 million; 31 December 2022: GBP18.44 million) of
which cash and cash equivalents amounted to GBP25.97 million (30
June 2022: GBP17.02 million; 31 December 2022: GBP41.78
million).
The IFRS 16 Leases presentation results in the recognition of a
'right-of-use' asset amounting to GBP6.18 million (30 June 2022:
GBP4.65 million; 31 December 2022: GBP5.42 million) in relation to
the Group's leasehold properties and other leased assets, together
with a corresponding lease liability of GBP6.10 million (30 June
2022: GBP4.83 million; 31 December 2022: GBP5.11 million).
Intangible assets increased to GBP33.46 million (30 June 2022:
GBP7.50 million; 31 December 2022: GBP26.32 million) due to the
acquisition of Coris and the recognition of a further GBP7.61
million in goodwill, which is expected to be allocated in part to
other intangible assets as a result of the purchase price
allocation exercise currently being undertaken.
Liabilities in relation to the unsecured senior convertible
bonds issued in October 2022 and subsequent amortisations and
redemptions during the period, result in a fair value of the
derivative element of GBP28.90 million (30 June 2022: GBPnil; 31
December 2022: GBP39.10 million). The convertible bond debt element
at 30 June 2023 was GBP15.68 million (30 June 2022: GBPnil; 31
December 2022: GBP18.73 million).
Dr Eliot Forster Dr Alastair Smith
Chairman Chief Executive Officer
28 September 2023 28 September 2023
Condensed Consolidated Statement of Profit or Loss
for the 6 months ended 30 June 2023
Unaudited Unaudited Audited
6 months 6 months Year ended
Notes ended ended 30 31 December
30 June June 2022 2022
2023
GBP000 GBP000 GBP000
Revenue 4 11,889 5,517 9,653
Cost of sales (5,141) (244) (2,410)
----------- ----------- -------------
Gross profit 6,748 5,273 7,243
Research costs (6,009) (5,999) (11,100)
Selling, general and administrative
expenses (8,646) (4,692) (11,232)
----------- ----------- -------------
Adjusted EBITDA (7,907) (5,418) (15,089)
Amortisation expense (437) (410) (1,050)
Impairment charge - - (5,225)
Share of loss of associate 7 (424) (646) (1,152)
Acquisition related expenses 8 (282) - (735)
Depreciation expense (1,276) (879) (1,904)
Share-based payment charge (1,553) (2,292) (7,490)
-----------
Operating loss (11,879) (9,645) (32,645)
Convertible bond - professional
fees 9 - - (2,287)
Convertible bond - interest
expense 9 (6,847) - (2,606)
Convertible bond - revaluation
of derivative 9 5,862 - (4,100)
Finance income 331 120 91
Finance costs (268) (125) (95)
-----------
Loss before tax (12,801) (9,650) (41,642)
Taxation 1,269 660 2,102
Loss from continuing operations (11,532) (8,990) (39,540)
----------- ----------- -------------
Discontinued operation
Profit from discontinued
operation 1 - 1,055 351
----------- ----------- -------------
Loss for the period (11,532) (7,935) (39,189)
Foreign operations - foreign
currency translation differences (179) (2) 46
----------- ----------- -------------
Other comprehensive income (11,711) (2) 46
----------- ----------- -------------
Total comprehensive loss
for the period (11,711) (7,937) (39,143)
----------- ----------- -------------
Loss per share:
Basic and diluted 5 (4.28p) (3.16p) (15.35p)
Loss per share - continuing
operations
Basic and diluted 5 (4.28p) (3.58p) (15.48p)
Condensed Consolidated Statement of Financial Position
as at 30 June 2023
Unaudited Unaudited Audited as
as at as at at
30 June 30 June 2022 31 December
2023 2022
GBP000 GBP000 GBP000
Assets
Property, plant and
equipment 2,814 2,306 2,380
Right-of-use assets 6 6,175 4,650 5,418
Investment in associate 7 4,539 3,481 2,976
Intangible assets 33,455 7,504 26,324
---------- ------------- ------------
Non-current assets 46,983 17,941 37,098
---------- ------------- ------------
Inventories 3,052 193 1,681
Trade and other receivables 6,770 6,715 5,579
Income tax receivable 4,975 3,595 6,510
Cash and cash equivalents 25,968 17,017 41,781
Current assets 40,765 27,520 55,551
---------- ------------- ------------
Total assets 87,748 45,461 92,649
---------- ------------- ------------
Liabilities
Lease liabilities 6 (4,703) (3,973) (3,753)
Financing liabilities (238) - -
Deferred tax (2,952) - (2,845)
---------- ------------- ------------
Non-current liabilities (7,893) (3,973) (6,598)
---------- ------------- ------------
Trade and other payables (10,805) (4,648) (8,423)
Lease liabilities 6 (1,394) (857) (1,361)
Financing liabilities (339) - -
Convertible bond -
debt 9 (15,679) - (18,729)
Convertible bond -
derivative 9 (28,900) - (39,100)
Current liabilities (57,117) (5,505) (67,613)
---------- ------------- ------------
Total liabilities (65,010) (9,478) (74,211)
---------- ------------- ------------
Net assets 22,738 35,983 18,438
---------- ------------- ------------
Equity attributable
to equity holders
of the Company
Share capital 27,629 25,709 26,685
Share premium 75,698 54,699 62,184
Reserves (4,371) (4,688) (4,434)
Retained earnings (76,218) (39,737) (65,997)
---------- ------------- ------------
Total equity 22,738 35,983 18,438
---------- ------------- ------------
Total equity is wholly attributable to equity holders of the
parent Company.
Approved by the Board and authorised for issue on 28 September
2023.
Dr Alastair Smith Tony Gardiner
Chief Executive Officer Chief Financial Officer
Condensed Consolidated Statement of Changes in Equity
for the 6 months ended 30 June 2023
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Share Share Other Translation Reserve Retained Total
Capital premium reserve reserve for own earnings Equity
shares
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ---------- ---------- ---------- ------------ ---------- ---------- ----------
At 1 January
2022 25,472 54,530 (1,729) 4 (2,961) (34,093) 41,223
Loss for the
period - - - - - (7,935) (7,935)
Other comprehensive
income for the
period - - - (2) - - (2)
---------- ---------- ---------- ------------ ---------- ---------- ----------
Total comprehensive
loss for the
period - - - (2) - (7,935) (7,937)
Transactions
with owners
of the company:
Exercise of
options 237 169 - - - - 406
Equity-settled
share based
payment - - - - - 2,291 2,291
At 30 June
2022 25,709 54,699 (1,729) 2 (2,961) (39,737) 35,983
--------------------- ---------- ---------- ---------- ------------ ---------- ---------- ----------
Loss for the
period - - - - - (31,253) (31,253)
Other comprehensive
income for the
period - - - 48 - - 48
------- ------- -------- -------- -------- --------- ---------
Total comprehensive
loss for the
period - - - 48 - (31,253) (31,205)
Transactions with owners
of the company:
Issue of shares 949 7,448 - - - - 8,397
Exercise of
options 27 37 - - - - 64
Transfer of
own shares - - - - 206 (206) -
Equity-settled
share based
payment - - - - - 5,199 5,199
At 31 December
2022 26,685 62,184 (1,729) 50 (2,755) (65,997) 18,438
--------------------- ------- ------- -------- -------- -------- --------- ---------
Loss for the
period - - - - - (11,532) (11,532)
Other comprehensive
income for the
period - - - (179) - - (179)
------- ------- -------- -------- -------- --------- ---------
Total comprehensive
loss for the
period - - - (179) - (11,532) (11,711)
Transactions with owners
of the company:
Exercise of
options 107 117 - - - - 224
Transfer of
own shares - - - - 242 (242) -
Convertible
bond - issue
of shares 837 13,397 - - - - 14,234
Equity-settled
share based
payment - - - - - 1,553 1,553
At 30 June
2023 27,629 75,698 (1,729) (129) (2,513) (76,218) 22,738
--------------------- ------- ------- -------- -------- -------- --------- ---------
Condensed Consolidated Statement of Cash Flows
for the 6 months ended 30 June 2023
Unaudited Unaudited Audited
6 months 6 months Year ended
Note ended ended 31 December
30 June 30 June 2022
2023 2022
GBP000 GBP000 GBP000
Operating cash outflow from operations
10 (11,194) (9,428) (15,953)
Interest received 331 5 75
Interest elements of lease payments (128) (17) (202)
Income tax received/(paid) 2,942 - (168)
Withholding tax paid - (187) (184)
----------
Net cash used in operating activities (8,049) (9,627) (16,432)
---------- ---------- -------------
Cash flows from investing activities
Purchase of plant and equipment (406) (287) (558)
Proceeds from sale of plant and
equipment - 49 50
Acquisition of right of use asset - (165) (165)
Acquisition of subsidiary, net
of cash acquired (6,896) - (24,878)
Purchase of intangible assets (49) (14) (36)
Disposal of discontinued operation,
net of cash disposed of - 666 705
Transaction costs paid, relating
to disposal of discontinued operation - (160) (160)
Net cash (used in) / generated
from investing activities (7,351) 89 (25,042)
---------- ---------- -------------
Cash flows from financing activities
Proceeds from exercise of share
options 224 406 470
Repayment of financing liabilities (49) - -
Principal elements of lease payments (736) (38) (800)
Proceeds from issue of share capital - - 9,016
Transaction costs relate to issue
of share capital - - (618)
Proceeds from issue of convertible
bonds - - 52,250
Transaction costs related to issue
of convertible bonds - - (3,414)
---------- ---------- -------------
Net cash flow (used in) / generated
from financing activities (561) 368 56,904
---------- ---------- -------------
Net (decrease) / increase in cash
and cash equivalents (15,961) (9,170) 15,430
Cash and cash equivalents at the
beginning of the period 41,781 26,191 26,191
Effect of movements in exchange
rates on cash held 148 (4) 160
---------- ---------- -------------
Cash and cash equivalents at
the end of the period 25,968 17,017 41,781
---------- ---------- -------------
Notes to the unaudited condensed consolidated financial
statements
for the 6 months ended 30 June 2023
1) Basis of preparation
Avacta Group plc ('the Company') is a company incorporated in
England and Wales under the Companies Act 2006. These condensed
consolidated interim financial statements ('interim financial
statements') as at and for the 6 months ended 30 June 2023 comprise
the Company and its subsidiaries (together referred to as 'the
Group').
The interim financial statements for the 6 months ended 30 June
2023 are unaudited. This information does not constitute statutory
accounts as defined in Section 435 of the Companies Act 2006. The
financial figures for the year ended 31 December 2022, as set out
in this report, do not constitute statutory accounts but are
derived from the statutory accounts for that financial year. The
statutory accounts for the year ended 31 December 2022 were
prepared under IFRS and have been delivered to the Registrar of
Companies. The auditors reported on those accounts. Their report
was unqualified, did not draw attention to any matters by way of
emphasis and did not include a statement under Section 498 of the
Companies Act 2006.
The Board confirms that, to the best of its knowledge, these
condensed financial statements have been prepared in accordance
with IAS34 Interim Financial Reporting and should be read in
conjunction with the Group's last annual consolidated financial
statements as at and for the year ended 31 December 2022 ('last
annual financial statements'). They do not include all of the
financial information required for a complete set of IFRS financial
statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last annual financial statements. The
comparative results for the 6 month period ended 30 June 2022 and
the year ended 31 December 2022 include those of a discontinued
operation. This relates to the Animal Health segment, which the
Group sold in its entirety on 15 March 2022. Further details of
this discontinued operation can be found in the financial
statements for the year ending 31 December 2022.
The Board approved these interim financial statements for issue
on 28 September 2023.
2) Use of judgements and estimates and significant accounting policies
The preparation of the interim financial statements requires
management to make judgements and estimates that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Although these
estimates are based on management's best knowledge of the amount,
events or actions, actual events ultimately may differ from those
estimates.
The significant judgements made by management in applying the
Group's accounting policies, and the key sources of estimation
uncertainty were the same as those described in the last annual
financial statements.
The accounting policies applied in these interim financial
statements are the same as those applied in the Group's
consolidated financial statements as at and for the year ended 31
December 2022. A number of new standards were effective from 1
January 2023 but they do not have a material effect on the Group's
financial statements.
3) Segmental reporting
The Group has two distinct operating segments: Diagnostics and
Therapeutics. These are the reportable operating segments in
accordance with IFRS 8 Operating Segments. The Directors recognize
that the operations of the Group are dynamic and therefore this
position will be monitored as the Group develops.
Segment revenue represents revenue from external customers
arising from sale of goods and services, plus inter-segment
revenues. Inter-segment transactions are priced on an arm's length
basis. Segment results, assets and liabilities include items
directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
The Group's revenue from continuing operations to destinations
outside the UK amounted to 47% (6 months to 30 June 2022: 100%;
year to 31 December 2022: 74%). The revenue analysis below is based
on the country of registration of the customer:
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2022
2023 2022
GBP000
UK 6,323 14 2,532
France 2,248 - 1,296
Rest of Europe 1,285 1 158
North America 21 50 179
South Korea 1,991 5,444 5,481
Rest of World 21 7 7
11,889 5,516 9,653
---------------- --------- --------- -------------
During the six month period ended 30 June 2023, transaction with
one external customer in the Therapeutics segment, amounted
individually to 10% or more of the Group's revenue, being
GBP1,991,000.
During the six month period ended 30 June 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 GBP3,788,000 and GBP1,656,000
respectively.
During the year 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 GBP3,798,000 and GBP1,682,000 respectively.
Operating segment analysis for the six months ended 30 June
2023
Diagnostics Therapeutics Central Total
overheads
(1)
GBP000 GBP000 GBP000 GBP000
Revenue 9,898 1,991 - 11,889
Cost of goods sold (5,133) (8) - (5,141)
------------- ------------- ------------- -------------
Gross profit 4,765 1,983 - 6,748
Research costs (663) (5,346) - (6,009)
Selling, general and administrative
expenses (4,529) (1,185) (2,932) (8,646)
------------- ------------- ------------- -------------
Adjusted EBITDA (427) (4,548) (2,932) (7,907)
Depreciation expense (640) (632) (4) (1,276)
Amortisation expense (431) (4) (2) (437)
Share of loss of associate - (424) - (424)
Acquisition related expenses - - (282) (282)
Share-based payment expense (403) (600) (550) (1,553)
------------- ------------- ------------- -------------
Segment operating loss (1,901) (6,208) (3,770) (11,879)
------------- ------------- ------------- -------------
(1) Central overheads, which relate to operations of the Group
functions, are not allocated to the operating segments.
Operating profit/loss is the measure of profit or loss regularly
reviewed by the Board. Other items comprising the Group's loss
before tax are not monitored on a segmental basis.
The information reported to the Board does not include balance
sheet information at the segment level.
Operating segment analysis for the six months ended 30 June
2022
Diagnostics Therapeutics Central Total Animal
overheads (continuing) health
(1) (discontinued)
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 73 5,444 - 5,517 411
Cost of goods sold (38) (206) - (244) (117)
------------- ------------- ------------- ------------- -------------
Gross profit 35 5,238 - 5,273 294
Research costs (1,136) (4,863) - (5,999) (6)
Selling, general and administrative
expenses (1,466) (1,354) (1,872) (4,692) (233)
------------- ------------- ------------- ------------- -------------
Adjusted EBITDA (2,567) (979) (1,872) (5,418) 55
Depreciation expense (260) (614) (5) (879) (10)
Amortisation expense (410) - - (410) -
Share of loss of associate - (646) - (646) -
Share-based payment expense (492) (1,250) (550) (2,292) -
------------- ------------- ------------- ------------- -------------
Segment operating (loss)/profit (3,729) (3,489) (2,427) (9,645) 45
------------- ------------- ------------- ------------- -------------
(1) Central overheads, which relate to operations of the Group
functions, are not allocated to the operating segments.
Operating profit/loss is the measure of profit or loss regularly
reviewed by the Board. Other items comprising the Group's loss
before tax are not monitored on a segmental basis.
The information reported to the Board does not include balance
sheet information at the segment level.
Operating segment analysis for the year ended 31 December
2022
Diagnostics Therapeutics Central Total Animal health
overheads (continuing) (discontinued)
(1)
GBP000 GBP000 GBP000 GBP000 GBP000
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) (4,123) (11,232) (240)
------------- ------------- ------------- ------------- -------------
Adjusted EBITDA (5,125) (5,481) (4,123) (15,089) 54
Impairment charge (5,225) - - (5,225) -
Depreciation expense (627) (1,269) (8) (1,904) (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)/profit (13,448) (10,983) (8,214) (32,645) 43
------------- ------------- ------------- ------------- -------------
(1) Central overheads, which relate to operations of the Group
functions, are not allocated to the operating segments.
Operating profit/loss is the measure of profit or loss regularly
reviewed by the Board. Other items comprising the Group's loss
before tax are not monitored on a segmental basis.
The information reported to the Board does not include balance
sheet information at the segment level.
4) Revenue
The Group's operations and main revenue streams are those
described in the last annual financial statements. The Group's
revenue is all derived from contracts with customers.
Disaggregation of revenue
In the following table, revenue is disaggregated by its nature.
The table also includes a reconciliation of the disaggregated
revenue with the Group's reportable segments (see Note 3).
Six months ended 30 June 2023
GBP'000 Diagnostics Therapeutics Total
------------------------ ------------ ------------- -------
Nature of revenue
Sale of goods 9,379 - 9,379
Provision of services 519 3 522
Licence-related income - 1,988 1,988
------------------------ ------------ ------------- -------
9,898 1,991 11,889
------------------------ ------------ ------------- -------
Six months ended 30 June 2022
GBP'000 Diagnostics Therapeutics Continuing operations Animal Health (discontinued)
------------------------ ------------ ------------- ---------------------- -----------------------------
Nature of revenue
Sale of goods (2) - (2) 258
Provision of services 75 192 267 153
Licence-related income - 5,252 5,252 -
------------------------ ------------ ------------- ---------------------- -----------------------------
73 5,444 5,517 411
------------------------ ------------ ------------- ---------------------- -----------------------------
Year ended 31 December 2022
GBP'000 Diagnostics Therapeutics Continuing operations Animal Health (discontinued)
------------------------ ------------ ------------- ---------------------- -----------------------------
Nature of revenue
Sale of goods 3,779 - 3,779 259
Provision of services 393 229 622 153
Licence-related income - 5,252 5,252 -
------------------------ ------------ ------------- ---------------------- -----------------------------
4,172 5,481 9,653 412
------------------------ ------------ ------------- ---------------------- -----------------------------
5) Earnings per share
Unaudited Unaudited Audited
GBP'000 6 months 6 months ended Year ended
ended 30 30 June 2022 31 December
June 2023 2022
Loss from continuing operations (11,532) (8,990) (39,540)
Profit/(loss) from discontinued
operations - 1,055 351
Loss for the period (11,532) (7,935) (39,189)
------------ --------------- -------------
Weighted average number
of shares (number) 269,159,631 251,096,503 255,369,066
------------ --------------- -------------
* Basic and diluted loss per ordinary share from
continuing operations (p) (4.28) (3.58) (15.48)
------------ --------------- -------------
-
-
------------ --------------- -------------
* Basic and diluted earnings / (loss) per ordinary
share from discontinued operations (p) - 0.42 0.13
------------ --------------- -------------
-
-
------------ --------------- -------------
* Basic and diluted loss per ordinary share for the
period (p) (4.28) (3.16) (15.35)
------------ --------------- -------------
6) Leases
The Group leases a small number of properties for office and
laboratory use, as well as some laboratory equipment. Information
about leases for which the Group is a lessee is presented
below.
a) Amounts recognised in the balance sheet
Right-of-use assets Property Laboratory Motor Total
equipment Vehicles
GBP'000
As at 1 January 2022 1,577 152 - 1,729
Additions 4,195 - - 4,195
Depreciation charge (327) (9) - (336)
Disposals (938) - - (938)
--------- ----------- ---------- ------
As at 30 June 2022 4,507 143 - 4,650
Additions 301 - 26 327
Acquisitions through
business combinations 160 585 376 1,121
Depreciation charge (523) (46) (27) (596)
Remeasurement of lease
liability (85) - - (85)
Effect of movement in
exchange rates 1 - - 1
--------- ----------- ---------- ------
As at 31 December 2022 4,361 682 375 5,418
Additions - - 275 275
Acquisitions through
business combinations 1,446 - 17 1,463
Depreciation charge (549) (87) (97) (733)
Transfers to property,
plant & equipment - (241) - (241)
Effect of movement in
exchange rates (7) - - (7)
--------- ----------- ---------- ------
As at 30 June 2023 5,251 354 570 6,175
--------- ----------- ---------- ------
Presentation of lease liability
30 June 2023 30 June 2022
GBP000 Property Laboratory Motor Total Property Laboratory Motor Total
equipment vehicles equipment vehicles
Lease liabilities
Current 1,070 135 189 1,394 795 62 - 857
Non-current 4,294 28 381 4,703 3,973 - - 3,973
--------- ----------- ---------- ------ --------- ----------- ---------- ------
5,364 163 570 6,097 4,768 62 - 4,830
--------- ----------- ---------- ------ --------- ----------- ---------- ------
31 December 2022
GBP000 Property Laboratory Motor Total
equipment vehicles
Lease liabilities
Current 941 279 141 1,361
Non-current 3,469 48 236 13,753
--------- ----------- ---------- -------
4,410 327 377 5,114
--------- ----------- ---------- -------
Reconciliation of change in lease liability GBP000
As at 1 January 2022 1,703
Payment of lease liability - principal (216)
Payment of lease liability - interest (101)
Interest expense 125
Additions 4,028
Disposals (969)
-------
As at 30 June 2022 4,570
Payment of lease liability - principal (584)
Payment of lease liability - interest (101)
Interest expense 93
Additions 328
Acquisitions through business combinations 893
Remeasurement of lease liability (85)
As at 31 December 2022 5,114
Payment of lease liability - principal (738)
Payment of lease liability - interest (128)
Interest expense 128
Additions 275
Acquisitions through business combinations 1,453
Effect of movement in exchange rates (7)
-------
As at 30 June 2023 6,097
-------
7) Equity-accounted investees
The Group currently holds a 19% equity interest (6 months to 30
June 2022: 21%; year to 31 December 2022: 19%) in its associate
AffyXell Therapeutics Co., Ltd ('AffyXell') based in South Korea.
AffyXell has been established to develop Affimer(R) proteins which
will be used for the generation of new cell and gene therapies.
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(R) proteins which will be
used for the generation of new cell and gene therapies.
During the period, the investment in associate has increased
with the achievement of a milestone within the collaboration which
will result in the issue of equity to the Group. The exact
shareholding will be determined, as with the first milestone
payment which was achieved in April 2022, following a formal
valuation of AffyXell and is expected to be circa 25%.
Reconciliation of change in value of associate GBP000
As at 1 January 2022 -
Additions 4,128
Share of loss of associate (646)
As at 30 June 2022 3,482
Additions -
Share of loss of associate (506)
As at 31 December 2022 2,976
Additions 1,987
Share of loss of associate (424)
---------
As at 30 June 2023 4,539
---------
8) Acquisition of subsidiary
On 31 May 2023, the Group acquired 100% of the shares and voting
interests in Coris Bioconcept. Coris Bioconcept are a Belgium based
company specialising in developing, manufacturing and marketing
rapid diagnostic tests, for use by healthcare professionals,
through distributors in Europe, Asia, South America, Africa and
Oceania.
The acquisition of Coris Bioconcept was a further step forward
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 30 June 2023, Coris
Bioconcept contributed revenue of GBP815,000 and operating profit
of GBP189,000 to the Group's results.
A. Consideration transferred
GBP000
Cash 10,116
Deferred consideration 1,587
-----------
Total consideration transferred 11,703
In addition, the Group has agreed to pay the selling
shareholders additional consideration based on sales for the year
ended 31 December 2023 and 31 December 2024. For 2023, additional
consideration will be calculated at 100% of sales exceeding EUR5.5
million and for 2024 at 90% of sales exceeding EUR6.5 million. The
additional consideration is capped at EUR3.5 million. Based on an
assessment of forecast future sales, the fair value of this
deferred contingent consideration at the acquisition date was
GBP1,587,000 and at 30 June 2023 is GBP1,583,000.
B. Acquisition-related costs
The Group incurred acquisition-related costs of GBP282,000 on
legal fees and due diligence costs. These costs have been included
in 'Acquisition-related expenses' in the Condensed Consolidated
Statement of Profit or Loss for the 6 months ended 30 June
2023.
C. Identifiable assets acquired and liabilities assumed
The following table summarises the provisionally recognised
amounts of assets acquired and liabilities assumed at the date of
acquisition. A purchase price allocation (PPA) exercise is in
progress to assess the valuation of intangible assets recognised on
acquisition and the associated deferred tax liabilities. At this
stage, the Group expects these intangible assets to relate to the
brand, development project work and customer relationships
acquired. At this stage, these amounts are included within the
Goodwill figure disclosed in D.
GBP000
Property, plant and equipment 366
Right-of-use assets 1,463
Intangible assets 61
Other non-current receivables 12
Inventories 1,287
Trade and other receivables 1,335
Cash and cash equivalents 3,208
Other Trade and other payables (1,576)
Financing liabilities (628)
Lease liabilities (1,454)
----------
Total identifiable net assets acquired 4,074
D. Goodwill
Goodwill arising from the acquisition has been recognised as
follows:
GBP000
Consideration transferred A 11,703
Fair value of identifiable net assets C (4,074)
-----------
Goodwill 7,629
As set out in C, a PPA exercise is underway to value the
intangible assets acquired and therefore allocate, in part, this
goodwill to other intangible assets. The residual goodwill would be
expected to be attributable to the skills and technical talent of
Coris Bioconcept's workforce, and the synergies expected to be
achieved from integrating the company into the Group's Diagnostics
business. None of the goodwill recognised is expected to be
deductible for tax purposes.
9) Convertible bond
In October 2022, the Group issued senior unsecured convertible
bonds ('the Bonds') of GBP55 million to a fund advised by Heights
Capital Ireland LLC, a global equity and equity-linked focussed
investor.
The Bonds were issued at 95% par value with total net proceeds
of GBP52.25 million and accrue interest at an annual rate of 6.5%
payable quarterly in arrears.
The Bonds contain various conversion and redemption features.
The Bonds have a maturity of five years, and are repayable in 20
quarterly amortisation repayments, of principal and interest over
the five-year term, in either cash or in new ordinary shares at the
Group's option. If in shares, the repayment is at the lower of the
conversion price (118.75p) or a 10% discount to the volume weighted
average price ('VWAP') in the five- or ten-day trading period prior
to election date. The conversion price may reset downwards at 18
months, depending on share price performance, and save in limited
circumstances there is a reset price floor of 95p.
Additionally, the bondholder has the option to partially convert
the convertible bond at their discretion, such as occurred on 10
February 2023.
The bond agreement contains embedded derivatives in conjunction
with an ordinary host debt liability. As a result, the convertible
bonds are shown in the Consolidated Statement of Financial Position
in two separate components, being 'Convertible bond - debt' and
'Convertible bond - derivative'. At issuance, the total inception
value was GBP52,500,000, being the 5% issue discount to the
principal amount of the Bonds, with the initial carrying amount of
the debt liability element being the difference between this
inception value of the convertible bond and the fair value at
inception of the derivative element. Given the option of the
bondholder to convert the bond at their discretion, the debt and
derivative liability elements are classified as current
liabilities.
The derivative element has been measured at fair value using a
Monte-Carlo option pricing model, which estimates the fair value
based on the probability-weighted present value of expected future
investment returns, considering each of the possible outcomes
available to the bondholders. This therefore falls under Level 3 of
the fair value hierarchy. At inception, the fair value of the
derivative component was measured at GBP35,000,000, resulting in an
initial carrying amount of the debt liability element of
GBP16,123,000 (net of transaction costs apportioned to the debt
liability element of GBP1,127,000).
During the 6 month period ended 30 June 2023, the following
conversion events occurred:
- On 23 January 2023, 3,068,421 new ordinary shares were issued
in settlement of the quarterly principal of GBP2.75 million and
interest repayment of GBP0.89 million in respect of the convertible
bond, reducing the principal remaining to GBP52.25 million.
- On 10 February 2023, 2,400,000 new ordinary shares were issued
in settlement of a received Notice of Conversion in respect of
GBP2.85 million of the convertible bond, reducing the principal
remaining to GBP49.40 million.
- On 21 April 2023, 2,906,097 new ordinary shares were issued in
settlement of the quarterly principal of GBP2.6 million and
interest repayment of GBP0.80 million in respect of the convertible
bond, reducing the principal remaining to GBP46.80 million.
At each conversion event, the reduction in the host debt and
derivative liabilities is recognised as an addition to equity. The
fair value as at 30 June 2023 was measured to be GBP28,900,000
resulting in a gain on revaluation of the derivative being
recognised of GBP5,862,000.
The debt liability incurred finance costs of GBP6,847,000 during
the period, though reduced to GBP15,679,000 as a result of the
conversion events set out above.
Significant assumptions used in the fair value analysis include
the volatility rate and recovery amount. A volatility of 68.1%
(2022: 67.4%) was used in the determination of the fair value of
the derivative element, a change by 10% in the volatility rate
would result in a change in the fair value of the derivative
element by GBP3,300,000. An estimated recovery amount of 75% (2022:
75%) was also used in the determination of fair value, with a
change by 10% resulting in change in fair value of the derivative
element by GBP1,400,000.
Convertible Convertible
bond - derivative bond - debt
GBP000 GBP000
At inception 35,000 16,123
Interest expense - 2,606
Revaluation of derivative 4,100 -
----------- -----------------
At 31 December 2022 39,100 18,729
Settlement of liability through
issue of shares (4,338) (9,897)
Interest expense - 6,847
Revaluation of derivative (5,862) -
----------- -----------------
At 30 June 2023 28,900 15,679
----------- -----------------
10) Operating cash outflow from operations
Unaudited Unaudited Audited
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2022
2023 2022
GBP000 GBP000 GBP000
Cash flow from operating activities
Loss for the period (11,532) (7,935) (39,189)
Adjustments for:
Amortisation 437 435 1,051
Impairment losses - - 5,225
Depreciation 1,276 888 1,961
Net (gain) / loss on disposal
of property, plant and equipment 23 (41) 52
Share of loss of associate 424 646 1,152
Profit on lease modification - - (31)
Equity-settled share-based payment
charges 1,553 2,292 7,490
Gain on sale of discontinued operation - (1,004) (308)
Increase in investment in associate (1,988) (4,127) (4,127)
Net finance costs 653 119 9,000
Taxation (1,270) (660) (2,102)
---------- ----------
Operating cash outflow before
changes in working capital (10,424) (9,387) (19,826)
Decrease / (increase) in inventories (85) (4) 52
Increase in trade and other receivables 144 (953) 2,225
Increase in trade and other payables (829) 916 1,596
---------- ---------- -------------
Operating cash outflow from operations (11,194) (9,428) (15,953)
11) Events after the reporting period
On 21 July 2023, 3,752,652 new ordinary shares were issued in
settlement of the quarterly principal of GBP2.60 million and
interest repayment of GBP0.76 million in respect of the convertible
bond, reducing the principal remaining to GBP44.20 million.
On 20 September 2023, 715,789 new ordinary shares were issued in
settlement of GBP0.85 million of the principal amount of the
unsecured convertible bond, reducing the principal remaining to
GBP43.35 million.
- Ends -
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