Prelim Results for the Year Ended 31 July 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® 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 £19.52m 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 £2.17 million (2015: £1.81 million)
o Avacta Life Sciences revenue £0.70 million (2015: £0.44 million)
o Avacta Animal Health revenue £1.46 million (2015: £1.37 million)
· Loss from continuing operations reduced to £4.65 million (2015: £4.89 million)
· Total loss for the period reduced to £4.65 million (2015: £9.99 million)
· Loss per share reduced to 6.86 pence (20.09 pence)
· Cash balance increased to £19.52 million (2015: £7.33 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:
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Avacta Group plc Alastair Smith, Chief Executive Officer Tony Gardiner, Chief Financial Officer
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Tel: +44 (0) 844 414 0452 |
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finnCap Ltd Geoff Nash / Giles Rolls - Nominated Adviser Tim Redfern / Alice Lane - Corporate Broking
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Tel: +44 (0) 207 220 0500 www.finncap.com |
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WG Partners David Wilson Nigel Barnes Claes Spang
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Tel: +44 (0) 203 705 9318 Tel: +44 (0) 203 705 9217
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FTI Consulting (Financial Media and IR) Simon Conway / Stephanie Cuthbert / Natalie Garland-Collins |
Tel: +44 (0) 203 727 1000 |
About Avacta Group plc (www.avacta.com)
Avacta's principal focus is on its proprietary Affimer® 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 £21 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® 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.
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Market |
Market Overview |
Affimer Technology Competitive Strengths |
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Affinity Separation - the capturing of a target from a complex mixture in order to purify that target. For example, the purification of a clotting factor from whole blood, or a therapeutic protein from the output of a bioreactor. |
• Estimated market size $500 million growing at 10% compound annual growth rate (CAGR). • Concentrated market with a few major players for standard purification products: e.g. GE Healthcare (>50% market share), Pall Corp, ThermoFisher, EMD Millipore. • Customised product opportunities beginning to emerge as bioprocessing becomes more bespoke. • Small scale sample preparation for clinical diagnostics procedures. |
• Good specificity allows for discrimination between protein complexes, different conformations and folding variants. • Small Affimer molecule size has potential to increase column capacity due to higher packing density on surfaces. • Affimer reagents can be tailored to withstand desired operating conditions. • Short development time of Affimer reagents benefits custom product developments. • Excellent stability (thermal and pH) of Affimer molecules leads to good product lifetimes. • Batch-to-batch consistency and low cost of production of Affimer reagents. • Reduction of use of animals meets growing regulatory pressures. |
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Immunoassays - very widely used biochemical tests that detect the presence of, or quantify, a target in a sample for research purposes or diagnostics. |
• Enzyme linked immunoassay (ELISA) is the prevailing assay format for protein quantitation. • Estimated market size is over $500 million for research ELISAs (with R&D Systems the market leader) and over $3 billion for diagnostic ELISA tests (with a large number of both large and small "in-vitro immunodiagnostics" providers). • Most emerging protein quantification platforms use "sandwich assay formats" (e.g. Luminex, MSD, Singulex) which requires pairs of antibodies that will both bind to the target simultaneously.
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• Ability to identify Affimer pairs and/or complementary Affimer reagents to make a pair with an established antibody. • Small size of the Affimer reagents means higher density of capture Affimer which improves sensitivity. • Better specificity means reduction in cross-reactivity and less interference in multiplex analysis. • 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.
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Lateral Flow Diagnostics - a simple diagnostic test technology that uses an absorbent strip to draw the sample and reagents over lines of capture reagent to create a visual read-out. e.g. pregnancy test strips in which a positive result is indicated by the appearance of two blue lines when a urine sample is applied at one end. |
• Estimated market size in the region of $5 billion growing at 7% CAGR. • Broad market applications but largest market is clinical (>80%) including infectious disease, cardiovascular and toxicology. • Alere (now part of Abbott) is the largest player (~30% market share). • Opportunities for niche players to develop novel tests and/or improve existing tests. • Outsourcing and contract manufacturing is prevalent.
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• Ability to identify Affimer pairs and/or complementary Affimer reagents to make a pair with an established antibody. • High stability of Affimer reagents beneficial for field applications. • Batch-to-batch consistency and low cost of production of Affimer reagents. • Short Affimer reagents development time means quicker assay development time and lower development cost. • Reduction of use of animals meets growing regulatory pressures. • Beneficial properties of Affimer molecules to improve manufacturing efficiency and shorten analysis time.
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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
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Affimer Technical Benefits for Immuno-therapeutics |
Comments |
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Ease of formatting and creation of multimeric structures / manufacturing yield.
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· Many cancer immunotherapies require multimeric structures such as dimers or trimers. (e.g. for targeting T-cells). · 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. |
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Inhibitors and agonists
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· 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. |
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Small size
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· 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. |
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Rapid development
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· 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 £2.17 million, an increase of 19% (2015: £1.81 million). Revenues for the Affimers business, Avacta Life Sciences, increased to £0.70 million (2015: £0.44 million) as the number of custom Affimer projects increased. Revenues in Avacta Animal Health increased to £1.46 million (2015: £1.37 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 £1.50 million (2015: £0.03 million) in relation to research and development costs. Within the amount expensed, £0.93 million (2015: £Nil) 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 £0.57 million (2015: £0.03 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 £1.73 million (2015: £3.06 million) were capitalised within intangible assets.
Administrative expenses
Administrative expenses have increased during the year to £5.43 million (2015: £4.41 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 £5.57 million (2015: £5.54 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 £0.92 million (2015: £0.65 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 £19.52 million at 31 July 2016 (2015: £7.33 million). On 3 August 2015, the Group completed a placing of £22.00 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 £4.23 million (2015: £2.52 million). During the year capital expenditure of £2.86 million (2015: £0.81 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 £35.86 million (2015: £19.13 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 £3.74 million (2015: £1.55 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 £55.44 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 |
£000 |
£000 |
|
|
|
|
|
|
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 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
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
|
|
Share capital |
Share premium |
Other reserve |
Capital reserve |
Reserve for own shares |
Retained earnings |
Total equity |
|||||
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|||||
|
|
|
|
|
|
|
|
|
|||||
|
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 |
|||||
| Transfer¹ | - | - | - | (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 |
|
|
|
£000 |
£000 |
|
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 £19.52 million (2015: £7.33 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 |
Total |
|
|
|
|
£000 |
£000 |
£000 |
|
|
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 |
Total |
|
|
|
|
£000 |
£000 |
£000 |
|
|
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 |
Total |
|
|
|
£000 |
£000 |
£000 |
|
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 operations1 |
|
|
|
(5,098) |
|
|
|
|
|
------------- |
|
Amount attributable to equity holders of the Company |
(9,991) |
|||
|
|
|
|
|
------------- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Animal |
Life |
Total |
|
|
|
£000 |
£000 |
£000 |
|
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 (£000) |
(4,647) |
(9,991) |
|
Underlying loss1 (£000) |
(4,647) |
(2,486) |
|
|
--------------- |
--------------- |
|
Weighted average number of shares² (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 share1 (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
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