TIDMAVCT
RNS Number : 6339M
Avacta Group PLC
17 October 2016
17 October 2016
Avacta Group plc
("Avacta" or "the Group" or "the Company")
Preliminary Results for the Year Ended 31 July 2016
Affimer therapeutic platform technology significantly de-risked
following positive outcome of first animal studies
Commercialisation strategy progressing well in key strategic
markets
Avacta Group plc (AIM: AVCT), the developer of Affimer(R)
biotherapeutics, research and diagnostic reagents, is pleased to
announce its preliminary results for the year ended 31 July
2016.
Substantial progress has been made against key objectives and
the Group reports revenues and losses in line with market
expectations. The Company is well funded with cash balances of
GBP19.52m at year end.
Highlights
Commercial
-- Collaboration agreement with UK lateral flow diagnostics
company Mologic, to demonstrate key benefits of Affimer reagents in
this application.
-- Affimer immunoassay development programme progressing according to plan.
-- Excellent progress made in demonstrating the key benefits of
Affimer reagents in affinity purification application.
-- First commercial evaluation of Affimers for affinity
purification initiated with a biological products manufacturer.
-- Multiple third party evaluations of the Affimer technology are currently in progress.
-- Competitive advantages of Affimer technology demonstrated by
rapid generation and validation of three highly specific Affimer
binders to Zika virus within just thirteen weeks of receiving the
virus target.
Therapeutics
-- First animal study of an Affimer therapeutic molecule
initiated with no adverse effects observed.
-- Lead immuno-oncology programme (PD-L1 blockade) on track.
-- Pre-clinical programme underway with Leeds General Infirmary
to develop blood clotting modulators by targeting fibrinogen and
other proteins in the clotting cascade.
-- Scientific Advisory Board appointed to provide
immuno-oncology target selection advice and to critically review
programme progress.
-- Partnership established with Glythera aimed at developing a
disruptive new targeted drug conjugate therapeutic platform.
Financial
-- Group revenues increased 19% to GBP2.17 million (2015: GBP1.81 million)
o Avacta Life Sciences revenue GBP0.70 million (2015: GBP0.44
million)
o Avacta Animal Health revenue GBP1.46 million (2015: GBP1.37
million)
-- Loss from continuing operations reduced to GBP4.65 million (2015: GBP4.89 million)
-- Total loss for the period reduced to GBP4.65 million (2015: GBP9.99 million)
-- Loss per share reduced to 6.86 pence (20.09 pence)
-- Cash balance increased to GBP19.52 million (2015: GBP7.33 million)
Facilities
-- New laboratory and office facilities in Cambridge and
Wetherby completed and fully operational.
Animal Health
-- Animal Health traded in line with expectations in the period and ahead of prior year.
-- Margins were improved and costs (pre-amortisation) were
reduced compared to the prior period.
-- Developments identified with the help of the Veterinary
Advisory Board, key partners in industry and academia are expected
to lead to further product launches in the forthcoming financial
year.
Post-Period
-- Affimer therapeutic platform significantly de-risked
following positive outcome of first efficacy study with an Affimer
molecule:
o Affimer PD-L1 inhibitor treatment demonstrated reduced tumour
growth in mouse model
o Good pharmacokinetic properties observed
o Affimer molecules well tolerated at all dosing levels
o No adverse effects observed
o Confirms potential of the Affimer technology as a therapeutic
platform
Alastair Smith, Avacta Group Chief Executive commented:
"We have made excellent progress in our strategy to
commercialise Affimer reagents for research, diagnostics and
therapeutics. There are a significant number of Affimer technology
evaluations ongoing and we continue to grow our pipeline of
partnerships that will ultimately deliver a stream of "Affimer
powered" products to help underpin long term revenue growth from
non-therapeutic applications.
Importantly, the positive results from the first animal safety
and efficacy studies with our Affimer therapeutic programmes were
an important milestone for the Company. They significantly de-risk
the Affimer technology as a therapeutic platform, demonstrating
that Affimers have the right properties to be drugs in terms of
serum half-life, functionality and efficacy in vivo. We have
strengthened our belief that Affimers have the potential to become
an important new class of biological drug that could eventually
rival antibodies.
We were pleased with the success of our programme to develop
specific Affimer binders to the Zika NS-1 protein as this is a good
example of the speed with which high quality Affimer reagents can
be developed to answer an urgent need where there is a gap in the
antibody offering.
We are very optimistic about 2017 and I look forward to updating
the market as we develop these and other products further with
clinical and commercial partners."
Notes to Editors
For further information from Avacta Group plc, please
contact:
Avacta Group plc
Alastair Smith, Chief Executive Tel: +44 (0) 844
Officer 414 0452
Tony Gardiner, Chief Financial www.avacta.com
Officer
finnCap Ltd
Geoff Nash / Giles Rolls - Nominated Tel: +44 (0) 207
Adviser 220 0500
Tim Redfern / Alice Lane - Corporate www.finncap.com
Broking
WG Partners
David Wilson Tel: +44 (0) 203
Nigel Barnes 705 9318
Claes Spang Tel: +44 (0) 203
705 9217
www.wgpartners.co.uk
FTI Consulting (Financial Media
and IR) Tel: +44 (0) 203
Simon Conway / Stephanie Cuthbert 727 1000
/ Natalie Garland-Collins avacta@fticonsulting.com
About Avacta Group plc (www.avacta.com)
Avacta's principal focus is on its proprietary Affimer(R)
technology which is a novel engineered alternative to antibodies
that has wide application in Life Sciences for diagnostics,
therapeutics and general research and development.
Antibodies dominate markets worth in excess of $75bn despite
their shortcomings. Affimer technology has been designed to address
many of these negative performance issues, principally; the time
taken to generate new antibodies, the reliance on an animal's
immune response, poor specificity in many cases, and batch to batch
variability. Affimer technology is based on a small protein that
can be quickly generated to bind with high specificity and affinity
to a wide range of targets to enable diagnostics, research assays
and therapeutics.
Avacta has a pre-clinical therapeutic development programme with
an in-house focus on immuno-oncology and bleeding disorders as well
as partnered development programmes. Avacta is commercialising
non-therapeutic Affimer reagents through licensing to developers of
life sciences research tools and diagnostics.
Chairman's Statement
Overview
2016 has been a year of significant progress for Avacta and its
Affimer technology.
Following the successful fund raising of GBP21 million in August
2015, the Group is well on track to deliver the plans we set out at
that time: to progress our therapeutic programmes and begin to
commercialise Affimer reagents. Our knowledge of and experience
with Affimers is expanding rapidly, enabling us to identify clear
competitive strengths in therapeutic, diagnostic and research
applications. On this basis, the Company is now targeting
attractive, high value segments in each of these three areas.
We have made excellent progress in the Affimer therapeutic
programmes, achieving a significant objective by initiating the
first animal studies involving Affimer molecules. The dosing was
well tolerated with no adverse effects observed and the results of
a pharmacokinetic study of two PD-L1 Affimer inhibitors has read
out positively, showing that the Affimer constructs have good serum
half lives. A parallel efficacy study in a mouse syngeneic tumour
model has also produced positive results demonstrating the efficacy
of the PD-L1 blockade in reducing tumour growth rate.
Our therapeutic partnership with Moderna Therapeutics continues
to progress positively.
We have delivered on some important commercial objectives
including demonstrating the performance of Affimer technology in
our three initial areas of strategic focus: affinity separation,
immunoassays and lateral flow diagnostics. We have also established
collaborations with Mologic and Glythera to help validate Affimer
reagents in key applications and continue to explore other
collaboration opportunities to broaden the application base.
There are a significant number of Affimer technology evaluations
now ongoing and we continue to grow the pipeline of such
partnerships that will ultimately deliver a stream of "Affimer
powered" third party products to underpin long term revenue growth
through licensing royalties.
The success of our programme to develop specific Affimer binders
to the Zika NS-1 protein is an excellent example of the speed with
which high quality Affimer reagents can be developed to answer an
urgent need where there is a gap in the antibody offering.
We also opened new laboratories and offices in both Cambridge
and Wetherby, which provide first class facilities to accommodate
the increased commercial demands and the expanding research and
development programmes.
Our Animal Health business has also had another successful year,
with growth in both revenues and margins. Development of new
diagnostic solutions and tests via assays and algorithms has
continued with the end customer being companion animal vets and
laboratories.
Our Team
During the year, Tim Sykes chose to step down as Chief Financial
Officer, a role he had held since 2006, to become the full-time
Chief Financial Officer of Proactis Holdings plc.
In January 2016, Tony Gardiner joined the Board as Chief
Financial Officer and Philippe Cotrel was appointed to the role of
Chief Commercial Officer, both bringing invaluable experience and
insight to the business as we continue to strengthen our scientific
and management team.
In April we established a Scientific Advisory Board, with Dr
Mike Owen, ex-Senior Vice President and global Head of Research of
Biopharmaceuticals at GSK, chairing this new board in addition to
his role as a Non-Executive Director on the Board. The Scientific
Advisory Board has appointed Professor Terence Rabbitts, Professor
Paul Moss and Professor Adrian Hayday to provide immuno-oncology
target selection advice and to critically review the therapeutic
programme progress.
Outlook
As a Board, we are extremely optimistic about 2017 and beyond as
we look to progress our Affimer therapeutic programmes and
commercialise the Affimer research and diagnostic reagents with
clinical and commercial partners. On behalf of the Board I would
like to thank our shareholders for their continued support and we
look forward to reporting on further progress in the coming
months.
Trevor Nicholls
Non-executive Chairman
14 October 2016
Chief Executive's Review
Introduction
Avacta is a UK biotechnology company that is developing
biotherapeutics and reagents based on its proprietary Affimer(R)
technology - an engineered alternative to antibodies.
Since inception in 2006 Avacta's mission has been to develop
products and services for the life sciences and healthcare markets.
Following the acquisition of the Affimer technology intellectual
property from the University of Leeds and others in 2012 the
Company has focused on developing and commercialising this
technology.
The Company is committed to providing high quality Affimer
reagents for licensing into third party research and diagnostic
products, and to creating new Affimer medicines for partnering with
large pharma.
The Company comprises around 90 employees based at two sites in
Wetherby and Cambridge that have recently been fitted-out to create
state-of-the-art laboratory facilities.
Affimer technology
An Affimer molecule is a small protein that is capable of
binding to a target molecule (such as another protein, a peptide or
a small molecule) in the same way that an antibody does. This
ability to capture or bind a target molecule can then be used to
detect or quantify it in a diagnostic test or research assay, or to
enrich or purify it from a complex mixture, for example.
Additionally, if the target is involved in a disease pathway and
the 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 to bind to a target in
order to stimulate an immune response 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:
-- antibodies are often not specific to the target and
cross-react with other targets causing uncertainty in the results
that are obtained, for example, in a diagnostic test;
-- 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 that are produced by the immune response
of the animal from its 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 of antibodies on a sensor surface is
required; and
-- many applications require the antibody to be modified to
carry a payload or signaling 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 some limitations arising from the
nature of the target. This screening process can also be finely
controlled to maximise the specificity and optimise other
properties of the Affimer molecules that are pulled out of the
library for a particular application. Affimer molecules are ten
times smaller than antibodies and very stable, being resistant to
extremes of pH and temperature, which makes them better suited to
some applications where harsh conditions are experienced or where
the small size leads to better sample penetration or a higher
density of binding sites on a surface. Their small size and ease
with which they can be modified means that the amount of time a
therapeutic Affimer molecule stays in the blood stream 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. The opportunity therefore, for an alternative such as the
Affimer technology, is very large with the potential to generate
near-term revenue from minimally regulated, low-risk life sciences
research tools and diagnostics applications, as well as potentially
generating much higher rewards from therapeutics but with
associated greater development risk.
Business model and strategy
Avacta is addressing both therapeutic and non-therapeutic
opportunities for Affimer technology. The Company is focused on
building a profitable business through licensing of Affimer
reagents to research tools and diagnostics developers to power
their products, whilst developing a pipeline of Affimer therapeutic
candidates for in-house development and partnering.
Research and Diagnostics Reagents
Avacta is addressing the non-therapeutic opportunity for the
Affimer technology through licensing to third party research tools
and diagnostic test developers. In this way the Company can focus
on its strengths - generating high quality Affimer reagents for the
customers' applications - and maximise the reach of the technology
in every application area without the need to build multiple routes
to market. Near term revenues are being derived from
fee-for-service generation of new Affimers for evaluation and
product development by third parties, and longer term royalties
will be generated based on the third party sales of "Affimer
powered" products.
Market focus and competitive strengths
Affimer reagents can be developed for a very wide range of
applications in many markets therefore market focus is critical in
order to maximise the benefits of research and development
(R&D) investment and business development effort. The Company
has chosen areas of focus that combine the competitive strengths of
the Affimer technology with attractive market opportunities.
In the near term the Company is concentrating in three areas:
affinity separation, immunoassays and lateral flow diagnostics.
The Company is now working with a number of potential commercial
partners in these markets to provide custom Affimer reagents, which
will undergo evaluation in their applications. Successful
evaluations will lead to commercial licensing agreements and
product development programmes which would be expected to take 12 -
24 months for the third party to complete.
Market Market Overview Affimer Technology
Competitive Strengths
------------- ------------------------------------------------------------ ---------------------------------------------------------------
Affinity
Separation * Estimated market size $500 million growing at 10% * Good specificity allows for discrimination between
- the compound annual growth rate (CAGR). protein complexes, different conformations and
capturing folding variants.
of a target
from * Concentrated market with a few major players for
a complex standard purification products: e.g. GE Healthcare * Small Affimer molecule size has potential to increase
mixture (>50% market share), Pall Corp, ThermoFisher, EMD column capacity due to higher packing density on
in order to Millipore. surfaces.
purify
that target.
For example, * Customised product opportunities beginning to emerge * Affimer reagents can be tailored to withstand desired
the as bioprocessing becomes more bespoke. operating conditions.
purification
of a
clotting * Small scale sample preparation for clinical * Short development time of Affimer reagents benefits
factor from diagnostics procedures. custom product developments.
whole
blood, or a
therapeutic * Excellent stability (thermal and pH) of Affimer
protein from molecules leads to good product lifetimes.
the output
of
a * Batch-to-batch consistency and low cost of production
bioreactor. of Affimer reagents.
* Reduction of use of animals meets growing regulatory
pressures.
------------- ------------------------------------------------------------ ---------------------------------------------------------------
Immunoassays
- very * Enzyme linked immunoassay (ELISA) is the prevailing * Ability to identify Affimer pairs and/or
widely assay format for protein quantitation. complementary Affimer reagents to make a pair with an
used established antibody.
biochemical
tests that * Estimated market size is over $500 million for
detect research ELISAs (with R&D Systems the market leader) * Small size of the Affimer reagents means higher
the presence and over $3 billion for diagnostic ELISA tests (with density of capture Affimer which improves
of, or a large number of both large and small "in-vitro sensitivity.
quantify, immunodiagnostics" providers).
a target in
a * Better specificity means reduction in
sample for * Most emerging protein quantification platforms use cross-reactivity and less interference in multiplex
research "sandwich assay formats" (e.g. Luminex, MSD, analysis.
purposes or Singulex) which requires pairs of antibodies that
diagnostics. will both bind to the target simultaneously.
* Short Affimer reagents development time means quicker
assay development time and lower development cost.
* Batch-to-batch consistency and low cost of production
of Affimer reagents.
* Reduction of use of animals meets growing regulatory
pressures.
------------- ------------------------------------------------------------ ---------------------------------------------------------------
Lateral Flow
Diagnostics * Estimated market size in the region of $5 billion * Ability to identify Affimer pairs and/or
- growing at 7% CAGR. complementary Affimer reagents to make a pair with an
a simple established antibody.
diagnostic
test * Broad market applications but largest market is
technology clinical (>80%) including infectious disease, * High stability of Affimer reagents beneficial for
that uses an cardiovascular and toxicology. field applications.
absorbent
strip
to draw the * Alere (now part of Abbott) is the largest player * Batch-to-batch consistency and low cost of production
sample (30% market share). of Affimer reagents.
and reagents
over lines
of * Opportunities for niche players to develop novel * Short Affimer reagents development time means quicker
capture tests and/or improve existing tests. assay development time and lower development cost.
reagent
to create a
visual * Outsourcing and contract manufacturing is prevalent. * Reduction of use of animals meets growing regulatory
read-out. pressures.
e.g.
pregnancy
test * Beneficial properties of Affimer molecules to improve
strips in manufacturing efficiency and shorten analysis time.
which
a positive
result
is indicated
by the
appearance
of two blue
lines
when a urine
sample is
applied
at one end.
------------- ------------------------------------------------------------ ---------------------------------------------------------------
Therapeutics
Avacta has chosen to focus its investment in therapeutics in the
area of immuno-oncology (IO) because certain technical benefits of
the Affimer technology make it highly competitive in IO therapeutic
modalities, and due to the intense commercial interest in IO assets
at the present time.
Avacta's therapeutic strategy is to generate a commercially
valuable pipeline that is biased towards "best-in-class" IO
medicines which target well understood biology and seek to deliver
superior medicines by way of the benefits of the Affimer
technology. This strategy balances the risks of a new therapeutic
platform with a lower target biology risk.
Our knowledge of how the human immune system interacts with the
tumour microenvironment and how to manipulate the immune system to
attack the tumour and improve outcomes for patients has increased
dramatically in recent years. The inevitable consequence of this
explosion in knowledge is the resulting highly competitive drug
discovery and development environment. The use of clinically
precedented targets decreases the risk of clinical attrition but
"backloads" the risk to reimbursement and it is therefore essential
to develop clinically differentiated medicines that will be able to
perform better than current standard of care treatments. In order
to minimise all of these technical, intellectual property (IP) and
commercial risks Avacta has appointed a world-class Scientific
Advisory Board, chaired by Dr Mike Owen, to support the Company in
its strategic decision making in this area.
Clinical focus: Immuno-oncology
Cancer immunotherapy harnesses the power of the patient's own
immune system to attack the cancer. The approach relies on the fact
that tumour cells have certain proteins on their surface that can
be used for targeting therapies, or can be blocked or stimulated to
create an immune attack. There are numerous proteins that could be
targeted and, in most cases, their biology is not fully understood,
but there have been many recent clinical successes with
immunotherapy treatments particularly with combination therapies
that address two drug targets simultaneously. Ongoing clinical
trials will provide further insight over the coming few years and
Avacta's immuno-oncology programme will be informed by this
increasing clinical knowledge.
In addition to these inhibitory and agonistic immunotherapies a
large number of companies are developing cellular therapies in
which T-cells, and other immune system "killer" cells, are targeted
to tumours via binders to tumour cell surface proteins. This
targeting may take the form of a bispecific molecule in which one
part targets the tumour and the other part binds a T-cell, for
example. In other modalities, such as CAR-T, a patient's T-cells
are removed from them, engineered to present a cancer targeting
molecule on their surface, and then put back into the patient to
attack the tumour.
Targeting is also central to the principles of "cytotoxic drug
conjugates". A drug conjugate is a combination of a cytotoxic agent
which kills the tumour cell and a targeting molecule such as an
antibody to direct the toxin to the tumour as specifically as
possible to avoid systemic toxicity and associated side effects.
Several large pharmaceutical companies have drug conjugate
programmes based on antibodies.
The Affimer technology has the potential to provide superior
technical solutions in all of these cancer immunotherapies and has
competitive strengths that Avacta is working to exemplify in-house
and with collaborators with a view to licensing the platform or
specific assets into third party pipelines.
Collaborations and Partnerships
In 2015 Avacta entered into a collaboration, licensing and
option agreement with Moderna Therapeutics.
Under the terms of the agreement, Moderna made an upfront
payment of $500,000 which provides them with exclusive access to
Affimer molecules that bind certain targets which may be extended
to include additional targets by a further payment. Moderna is also
making certain payments to Avacta for research services to deliver
pre-clinical development milestones.
Moderna has the option to enter into exclusive license
agreements for selected therapeutic Affimer candidates for clinical
development and in each case Avacta will be entitled to milestone
payments. The total value of these payments could reach several
tens of millions of dollars. Avacta is also entitled to royalties
in connection with future product sales.
Avacta also has development collaborations with Phoremost
(phenotypic screening for drug target and drug discovery), Glythera
(Affimer drug conjugates), Blueberry Therapeutics (antibiotic
resistance) and D'Liver (liver metabolism).
Therapeutics - competitive strengths
Affimer Technical Comments
Benefits for
Immuno-therapeutics
--------------------- --------------------------------------------------------------
Ease of formatting
and creation * Many cancer immunotherapies require multimeric
of multimeric structures such as dimers or trimers. (e.g. for
structures / targeting T-cells).
manufacturing
yield.
* CAR-T therapies require the targeting protein to be
fused to a signaling domain protein, produced by a
T-cell and displayed on its surface.
* Therapeutic proteins which have the benefit of small
size like Affimer molecules (see below) need
formatting for half-life extension.
* Generally, these complex formats are not easy to
achieve with antibody-based technology and when they
are achieved they are challenging to manufacture with
economically reasonable yields.
* All of these formats have been demonstrated with ease
using Affimer molecules and manufactured with high
yields using as yet un-optimised processes so even
greater manufacturing efficiencies are likely to be
realised in future.
--------------------- --------------------------------------------------------------
Inhibitors and
agonists * Generating inhibitory effects is straightforward to
achieve with an antibody or other technology. Agonism,
the stimulation of a process in a cell by targeting a
surface protein, is more difficult to achieve and
requires multimeric structures with specific
structural properties.
* Agonism has been shown with Affimer molecules in
vitro cell based assays.
--------------------- --------------------------------------------------------------
Small size
* The much smaller size of an Affimer protein compared
with an antibody can be an advantage in terms of
tissue penetration. This is important when the target
is a solid tumour for example.
* Small size is also important in topical delivery
(e.g. applied to the skin or inhaled into the lung)
for better tissue penetration and to deliver more
drug to the site of the disease.
* In some applications (e.g. drug conjugates), small
size leads to rapid clearance of the therapeutic
protein that has not bound to its target, reducing
systemic dosing and side effects.
--------------------- --------------------------------------------------------------
Rapid development
* The rapid generation of high affinity Affimer lead
molecules shortens pre-clinical development times and
reduces costs. The ease of manufacturing of Affimer
proteins means that development is made much easier
by having large quantities of material available even
at the very early stages of the drug discovery
process.
--------------------- --------------------------------------------------------------
Animal Health
Business and strategy
Our strategy is to provide vets, directly and through
laboratories, with solutions that enable them to diagnose and treat
companion animals more effectively.
To do this we develop, manufacture or source, market and then
support diagnostic solutions and related treatments. We work
closely with leading experts in academia and industry and aim to
present vets with well researched and evidenced tools that enable
faster and more reliable decisions in practice.
Competitive strengths
Our aim is to be different to our competitors in a number of
ways, each presenting value to our customers:
- we develop and manufacture most of our own products allowing
us to provide the highest level of insight and support
- we provide especially strong customer service first-line, with
in-house veterinary support and specialist KOL assistance
- we have an innovative and well-resourced research and
development team, and
- we have access to proprietary Avacta Life Sciences
technology.
Market focus
Our customers are companion animal vets and the laboratories
serving them. We listen to their feedback through surveys, our
sales and customer services teams and our Veterinary Advisory
Board. We are privileged to work with Jason Atherton, Laura
Playforth, Mark Dunning and Kirsten Pantenburg as our Veterinary
Advisory Board members and they help to inform our development and
commercial choices.
Development focus
Our development priorities are increasingly set by market
feedback and then driven by our R&D team, either towards new
assays, algorithms or delivery methods. We involve and work closely
alongside industry key opinion leaders from the UK and the US to
ensure our work is based upon the latest and best research
available.
Financial Review
Revenue
Reported Group revenues grew to GBP2.17 million, an increase of
19% (2015: GBP1.81 million). Revenues for the Affimers business,
Avacta Life Sciences, increased to GBP0.70 million (2015: GBP0.44
million) as the number of custom Affimer projects increased.
Revenues in Avacta Animal Health increased to GBP1.46 million
(2015: GBP1.37 million) as a result of growing sales from existing
allergy tests together with the introduction of a new equine
allergy test.
Research and development costs
During the year the Group expensed through the income statement
GBP1.50 million (2015: GBP0.03 million) in relation to research and
development costs. Within the amount expensed, GBP0.93 million
(2015: GBPNil) relates to the costs associated with the in-house
Affimer therapeutic programme which has commenced in the current
year and in-line with other therapeutics based companies are
expensed given their pre-clinical stage of development. In
addition, an amortisation charge of GBP0.57 million (2015: GBP0.03
million) has been recognised against previously capitalised
development costs from the custom Affimer reagents and diagnostics
programme and new Animal Health allergy tests.
In addition, development costs amounting to GBP1.73 million
(2015: GBP3.06 million) were capitalised within intangible
assets.
Administrative expenses
Administrative expenses have increased during the year to
GBP5.43 million (2015: GBP4.41 million) as the scale of the Affimer
business operations increased, with new laboratory facilities in
Cambridge and expanded laboratory facilities in Wetherby together
with increased headcount across production and sales teams.
Losses before taxation
Losses before taxation from continuing operations for the year
were GBP5.57 million (2015: GBP5.54 million).
Taxation
The Group claims each year for research and development tax
credits and, since it is loss-making, elects to surrender these tax
credits for a cash rebate. The amount included within the
consolidated income statement in respect of amounts received and
receivable for the surrender of research and development
expenditure was GBP0.92 million (2015: GBP0.65 million). The Group
has not recognised any tax assets in respect of trading losses
arising in the current financial year or accumulated losses in
previous financial years.
Cash Flow
The Group reported cash and short term deposit balances of
GBP19.52 million at 31 July 2016 (2015: GBP7.33 million). On 3
August 2015, the Group completed a placing of GBP22.00 million
(before expenses) at a price of 1.25 pence per share. The proceeds
from the placing have been placed on deposit with a range of
financial institutions for time periods ranging between instant
access and up to one year in maturity.
Operating cash outflows from operations amounted GBP4.23 million
(2015: GBP2.52 million). During the year capital expenditure of
GBP2.86 million (2015: GBP0.81 million) was incurred as a result of
the new facilities and laboratory equipment at the Cambridge and
Wetherby sites.
Financial position
Net assets as at 31 July 2016 have increased to GBP35.86 million
(2015: GBP19.13 million) as a result of the increased cash balances
from the placing in August 2015 and the subsequent increase in
property, plant and equipment to GBP3.74 million (2015: GBP1.55
million) following the opening of the new facilities in Cambridge
and Wetherby.
Share consolidation and share premium reduction
On 26 January 2016, following approval by shareholders at the
Annual General Meeting on 25 January 2016, Avacta Group plc
completed a share consolidation, creating 1 new ordinary share of
10p each for every 100 existing ordinary shares of 0.1p each.
In addition, following approval by shareholders at the Annual
General Meeting on 25 January 2016 and the subsequent approval of
the Court, an amount of GBP55.44 million was cancelled from the
share premium account and credited to the retained earnings
reserve.
Alastair Smith
Chief Executive Officer
14 October 2016
Consolidated Income Statement for the year ended 31 July
2016
2016 2015
Note GBP000 GBP000
Revenue 2,165 1,813
Cost of sales (895) (526)
------------- -------------
Gross profit 1,270 1,287
Research and development costs (1,500) (33)
Administrative expenses (5,434) (4,414)
Impairment of intangible assets - (2,407)
------------- -------------
Operating loss (5,664) (5,567)
Financial income 99 26
------------- -------------
Loss before taxation from continuing
operations (5,565) (5,541)
Taxation 918 648
------------- -------------
Loss after taxation from continuing
operations (4,647) (4,893)
Loss from discontinued operations,
net of tax - (5,098)
------------- -------------
Loss and total comprehensive loss
for the year attributable to equity
shareholders (4,647) (9,991)
------------- -------------
Loss per ordinary share:
- Basic and diluted 4 (6.86p) (20.09p)
------------- -------------
Consolidated Balance Sheet as at 31 July 2016
2016 2015
GBP000 GBP000
Non-current assets
Intangible assets 11,480 10,360
Property, plant & equipment 3,738 1,546
------------- -------------
15,218 11,906
------------- -------------
Current assets
Inventories 268 333
Trade and other receivables 1,128 767
Income taxes 1,418 1,066
Short term deposits 10,000 -
Cash and cash equivalents 9,521 7,330
------------- -------------
22,335 9,496
------------- -------------
Total assets 37,553 21,402
------------- -------------
Current liabilities
Trade and other payables (1,357) (1,407)
Contingent consideration (315) (395)
------------- -------------
(1,672) (1,802)
------------- -------------
Non-current liabilities
Contingent consideration (25) (468)
------------- -------------
(25) (468)
------------- -------------
Total liabilities (1,697) (2,270)
------------- -------------
Net assets 35,856 19,132
------------- -------------
Equity attributable to equity
holders of the Company
Share capital 6,915 5,057
Share premium 621 35,756
Capital reserve 1,899 2,669
Other reserve (1,729) (1,729)
Reserve for own shares (2,651) (1,590)
Retained earnings 30,801 (21,031)
------------- -------------
Total equity 35,856 19,132
------------- -------------
Consolidated Statement of Changes in Equity for the year ended
31 July 2016
Reserve
Share Share Other Capital for Retained Total
capital premium reserve reserve own earnings equity
shares
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 August
2014 5,045 35,747 (1,729) 2,669 (1,590) (11,305) 28,837
Total transactions with owners, recorded directly
in equity:
Exercise
of share
options 12 9 - - - - 21
------------- ------------- ------------ ------------ ------------- ------------- -----------
12 9 - - - - 21
Total
comprehensive
loss for
the period - - - - - (9,991) (9,991)
Share based
payment
charges - - - - - 265 265
------------- ------------- ------------ ------------ ------------- ------------- -----------
At 31 July
2015 5,057 35,756 (1,729) 2,669 (1,590) (21,031) 19,132
Total transactions with owners, recorded directly
in equity:
Placing
net of
related
expenses 1,760 19,255 - - - - 21,015
Exercise
of share
options 8 76 - - - - 84
Share premium
cancellation - (55,437) - - - 55,437 -
Own shares
acquired 90 971 - - (1,061) - -
------------- ------------- ------------ ------------ ------------- ------------- -----------
1,858 (35,135) - - (1,061) 55,437 21,099
Total
comprehensive
loss for
the period - - - - - (4,647) (4,647)
Share based
payment
charges - - - - - 272 272
Transfer(1) - - - (770) - 770 -
------------- ------------- ------------ ------------ ------------- ------------- -------------
At 31 July
2016 6,915 621 (1,729) 1,899 (2,651) 30,801 35,856
------------- ------------- ------------ ------------ ------------- ------------- -------------
Note 1 - The transfer of equity from the capital reserve to
retained earnings relates to share option warrants which have
expired.
Consolidated Statement of Cash Flows for the year ended 31 July
2016
2016 2015
GBP000 GBP000
Cash flow from operating activities
Loss for the year (4,647) (9,991)
Loss on disposal and impairment
of goodwill on discontinued operations - 4,793
Amortisation and impairment losses 642 2,465
Depreciation 604 518
Loss on disposal of property,
plant and equipment 67 33
Reduction of contingent consideration (443) -
Equity settled share based payment
charges 272 265
Financial income (99) (26)
Income tax credit (918) (648)
------------- -------------
Operating cash outflow before
changes in working capital (4,522) (2,591)
Decrease/(increase) in inventories 65 (210)
(Increase)/decrease in trade and
other receivables (361) 197
(Decrease)/increase in trade and
other payables (80) 56
------------- -------------
Operating cash outflow from operations (4,898) (2,548)
Finance income received 99 26
Income tax received 566 7
------------- -------------
Cash flows from operating activities (4,233) (2,515)
------------- -------------
Cash flows from investing activities
Purchase of plant and equipment (2,863) (806)
Development expenditure capitalised (1,762) (3,060)
Increase in balances on short
term deposit (10,000) -
Disposal of discontinued operations - 2,210
------------- -------------
Net cash flow from investing activities (14,625) (1,656)
------------- -------------
Cash flows from financing activities
Proceeds from issue of shares 21,049 21
------------- -------------
Net cash flow from financing activities 21,049 21
------------- -------------
Net increase/(decrease) in cash
and cash equivalents 2,191 (4,150)
Cash and cash equivalents at the
beginning of the year 7,330 11,480
------------- -------------
Cash and cash equivalents at the
end of the year 9,521 7,330
------------- -------------
Notes to the unaudited preliminary results to 31 July 2016
1 General information
These preliminary results have been prepared on the basis of the
accounting policies which are to be set out in Avacta Group plc's
annual report and financial statements for the year ended 31 July
2016.
The consolidated financial statements of the Group for the year
ended 31 July 2016 were prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted for use in the
EU ("adopted IFRSs") and applicable law.
The financial information set out above does not constitute the
Company's statutory financial statements for the years ended 31
July 2016 or 2015 but is derived from those financial statements.
Statutory financial statements for 2015 have been delivered to the
Registrar of Companies and distributed to shareholders, and those
for 2016 will be respectively delivered and distributed on or
before 31 December 2016. The auditors have reported on those
financial statements and their reports were:
(i) unqualified;
(ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report; and
(iii) did not contain a statement under section 498(2) or (3) of
the Companies Act 2006 in respect if the financial statements for
2015 or 2016.
2 Basis of preparation
The Group financial statements have been prepared and approved
by the Directors in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRS).
The preparation of financial statements in conformity with IFRSs
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from those estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both the current and future
periods.
The Group's activities, together with the factors likely to
affect its future development, performance and position are set out
in the Chairman's Statement and Chief Executive Officer's Review.
The financial position of the Group, its financial performance and
its cash flows and liquidity position are described there also and
within the financial statements presented.
Management prepares detailed working capital forecasts which are
reviewed by the Board on a regular basis. The forecasts include
assumptions regarding the status of customer development projects
and sales pipeline, future revenues and costs together with various
scenarios which reflect growth plans, opportunities, risks and
mitigating actions. The forecasts also include assumptions
regarding the timing and quantum of investment in the Affimer
research and development programme. Whilst there are inherent
uncertainties regarding the cash flows associated with the
development of the Affimer platform, together with the timing of
signature and delivery of customer development projects and future
collaboration transactions, the Directors are satisfied that there
is sufficient discretion and control as to the timing and quantum
of cash outflows to ensure that the Group is able to meet its
liabilities as they fall due for the foreseeable future.
The Financial Reporting Council issued "Going Concern and
Liquidity Risk: Guidance for Directors of UK Companies" in 2009,
and the Directors have considered this when preparing these
financial statements. These have been prepared on a going concern
basis, notwithstanding the loss for the period ended 31 July 2016.
The Directors have taken steps to ensure that they believe the
going concern basis of preparation remains appropriate, and that
the carrying value of intangibles remains supported by future cash
flows. The key conclusions are summarised below:
- The Group continues to develop its Affimer platform
technology. This is expected to generate significant revenues for
the Group over the coming years, aiding both profitability and cash
flows.
- As at 31 July 2016 the Group's short term deposits and cash
and cash equivalents were GBP19.52 million (2015: GBP7.33
million).
- The Directors have prepared sensitised cash flow forecasts
extending to the end of the financial year ended 31 July 2018.
These show that the Group has sufficient funds available to meet
its obligations as they fall due over that period.
- The Group does not have external borrowings or any covenants based on financial performance.
- The Directors have considered the position of the individual
trading companies in the group to ensure that these companies are
also in a position to continue to meet their obligations as they
fall due.
- The markets in which the business operates are not considered
to be at significant risk due to the ongoing global economic
recession.
- There are not believed to be any contingent liabilities which
could result in a significant impact on the business if they were
to crystallise.
Following this assessment, the Directors have reasonable
expectation that the Group has adequate resources to continue for
the foreseeable future and that carrying values of intangible
assets are supported. Thus, they continue to adopt the going
concern basis of accounting in preparing these financial
statements.
3 Segmental Reporting
Operating segment analysis 2016
Animal Life
Health Sciences Total
GBP000 GBP000 GBP000
Sale of goods 674 - 674
Provision of services 787 704 1,491
Licence related income - - -
------------- ------------- -------------
Revenue 1,461 704 2,165
Cost of goods sold (444) (451) (895)
------------- ------------- -------------
Gross profit 1,017 253 1,270
Research and development
costs (194) (1,306) (1,500)
Administrative expenses (1,113) (2,671) (3,784)
------------- ------------- -------------
Segment operating loss (290) (3,724) (4,014)
Corporate and other unallocated
items ------------- ------------- (1,650)
Impairment of intangible assets -
-------------
Operating loss (5,664)
Finance income 99
-------------
Loss before taxation (5,565)
Taxation 918
-------------
Amount attributable to equity holders of
the Company (4,647)
-------------
Animal Life
Health Sciences Total
GBP000 GBP000 GBP000
Segment intangible assets 3,999 7,481 11,480
Segment other assets 362 5,986 6,348
------------- ------------- -------------
Segment assets 4,361 13,467 17,828
Corporate and other unallocated
items ------------- ------------- 19,725
-------------
Total assets 37,553
-------------
Segment liabilities (173) (946) (1,119)
Corporate and other unallocated
items ------------- ------------- (578)
-------------
Total liabilities (1,697)
-------------
Operating segment analysis 2015
Animal Life
Health Sciences Total
GBP000 GBP000 GBP000
Sale of goods 706 - 706
Provision of services 668 113 781
Licence related income - 326 326
------------- ------------- -------------
Revenue 1,374 439 1,813
Cost of goods sold (452) (74) (526)
------------- ------------- -------------
Gross profit 922 365 1,287
Research and development
costs - (33) (33)
Administrative expenses (1,124) (1,546) (2,670)
------------- ------------- -------------
Segment operating loss (202) (1,214) (1,416)
Corporate and other unallocated
items (1,744)
Impairment of intangible
assets (2,407)
-------------
Operating loss (5,567)
Finance income 26
-------------
Loss before taxation
from continuing operations (5,541)
Taxation 648
Discontinued operations(1) (5,098)
-------------
Amount attributable to equity holders of
the Company (9,991)
-------------
Animal Life
Health Sciences Total
GBP000 GBP000 GBP000
Segment intangible assets 3,843 6,484 10,327
Segment other assets 307 2,371 2,678
------------- ------------- -------------
Segment assets 4,150 8,855 13,005
Corporate and other unallocated
items ------------- ------------- 8,397
-------------
Total assets 21,402
-------------
Segment liabilities (992) (1,001) (1,993)
Corporate and other unallocated
items ------------- ------------- (277)
-------------
Total liabilities (2,270)
-------------
Note 1 - The Group's Analytical operating segment was disposed
of on 11 February 2015 at which point selected assets and
liabilities were sold.
4 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. The earnings per ordinary share are
the same as the diluted earnings per ordinary share because the
effect of potentially issuable shares is anti-dilutive.
2016 2015
Loss (GBP000) (4,647) (9,991)
Underlying loss(1) (GBP000) (4,647) (2,486)
--------------- ---------------
Weighted average number of shares(2) (number) 67,713,817 49,729,816
--------------- ---------------
Basic and diluted loss per ordinary share (pence) (6.86p) (20.09p)
Underlying basic and diluted loss per ordinary share(1)
(pence) (6.86p) (5.00p)
--------------- ---------------
Note 1 - Excluding discontinued operations and impairment
charges.
Note 2 - Weighted average number of shares adjusted to reflect
the share consolidation on 26 January 2016 which created 1 new
ordinary share of 10p each for every 100 existing ordinary shares
of 0.1p each.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR AKPDKPBDDPKD
(END) Dow Jones Newswires
October 17, 2016 02:00 ET (06:00 GMT)
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