Avacta Group Plc

Avacta Group Plc, a clinical stage biopharmaceutical company, develops cancer therapies and diagnostics based on its proprietary Affimer and pre|CISION platforms in the United Kingdom, North America, South Korea, and rest of Asia and Europe. It operates through Diagnostics and Therapeutics segments. The company develops custom Affimer proteins for customer products and in-house diagnostic assays. It also develops AffiDX SARS-CoV-2 lateral flow rapid antigen tests, as well as Affimer reagents for third party products; and novel cancer immunotherapies combining proprietary platforms. The company has a research collaboration with pre|CISION technology incorporates a substrate that is sensitive to cleavage by fibroblast activation protein alpha; drug development collaboration with LG Chem Life Sciences; partnership with Tufts University School of Medicine for developing Affimer drug conjugate therapies; licensing agreement with POINT Biopharma Inc. for the development of tumour activated radiopharmaceuticals; and drug development partnership with AffyXell to develop engineered mesenchymal stem cells to treat autoimmune diseases. Avacta Group Plc was incorporated in 2003 and is based in Wetherby, the United Kingdom.

Operations

The mission of the company is to improve patients’ lives and grow shareholder value by developing novel cancer therapies and powerful diagnostics using our proprietary Affimer® and pre|CISION™ platforms.

Management

The Avacta Group Board of Directors provide experienced strategic and practical guidance to the Company to help ensure that the interests of all shareholders are met and that corporate good practice is followed.

Dr Eliot Forster Non-executive Chairman

Eliot was appointed as Chairman to the Board in June 2018, bringing with him three decades of experience in the pharmaceutical and biotechnology industry. He is currently the Chief Executive Officer of F-star and also Non-executive Director of Immatics NV, a clinical stage biopharmaceutical company developing TCR-based therapeutics for the treatment of cancer (NASDAQ IMTX). Prior to joining F-star, Eliot was Chief Executive Officer at Immunocore, Creabilis Therapeutics and Solace Pharmaceuticals Inc. The early part of Eliot’s career was at GSK and Pfizer.

Eliot holds a PhD in neurophysiology from the University of Liverpool and an MBA from Henley Management College. He is an Honorary Visiting Professor at the University of Liverpool and at the University of Pavia. He is a Board member of OSCHR (UK Office for Strategic Coordination of Health Research) and the National Genomics Board.

Eliot is a member of the Remuneration Committee and the Audit Committee.

Dr Alastair Smith Chief Executive Officer

Alastair was the Founder of Avacta and has been Chief Executive Officer since its inception in 2005. Alastair has extensive management, strategic planning and transactional experience, having led the public and private M&A activities of the Group including the IPO of the Group in 2006 via a reverse merger. He is well known in the UK public markets; a respected and trusted executive with many years’ experience of investor relations in the UK, Europe and the US. He has successfully delivered multiple follow-on fundraisings for the Group.

Alastair is also Non-executive Chairman of SPARTA Biodiscovery, an Imperial College spin-out providing cuttingedge analytical instrumentation to biopharmaceutical developers to enable nano-formulations of next-generation therapeutics.

Alastair is a scientist by training with a degree and PhD in Physics from Manchester University. Following a period of working in the US, he returned in 1995 to take up an academic position at Leeds University, becoming Professor of Molecular Biophysics at the age of 38. Over a ten-year period, through close collaboration with life scientists, he built one of the leading biophysics research groups in Europe before leaving his academic career in 2007 to focus full time on delivering value to Avacta shareholders.

Tony Gardiner Chief Financial Officer

Tony joined Avacta in 2016 as Chief Financial Officer and is a member of the Institute of Chartered Accountants of England and Wales. He has over 25 years’ experience of senior financial and operational management roles across several different sectors including extensive M&A transactional and fundraising experience. Between 2007 and 2011, Tony was the Chief Financial Officer of AIM-listed Fusion IP plc, an IP commercialisation company, which was subsequently acquired by IP Group plc in 2014. He played a key role in supporting the growth of the business and oversaw all finance activities as well as directly supporting life sciences and health technology companies in Fusion’s portfolio.

Prior to joining Avacta, Tony worked for AHR (formerly Aedas), an international architecture and building consultancy practice, where he had been Finance Director since 2011. Tony has also held senior finance roles within Eversheds LLP, KCOM Group plc and Hickson International.

Dr Trevor Nicholls Non-executive Director

Trevor brings considerable experience in the commercialisation of innovative life science technologies from his previous roles as Non-executive Chairman of Oxford Nanopores Technologies, Chief Commercial Officer at Affymetrix, founder and Chief Executive Officer of UK biotech company Oxagen Ltd and Commercial Director of the Life Sciences business at Amersham International (now part of Danaher Corporation).

Trevor, prior to his retirement at the end of 2020, was Chief Executive Officer of the Centre for Agriculture and Bioscience International, a not-for-profit intergovernmental organisation whose mission is to improve lives worldwide by providing information and applying scientific expertise to solve problems in agriculture and the environment.

Trevor is also Non-executive Chairman of Fargro Limited a provider of products and services for Horticulture, Nonexecutive Chairman of Iota Sciences Limited, a spin-out company from the University of Oxford which is commercialising innovative microfluidic technology for the life sciences sector, a Non-executive Director of Conidia Bioscience Limited, which develops and sells patented lateral flow tests for the detection of microbial contamination of aviation and diesel fuels, and a Nonexecutive Director of Wobble Genomics Ltd, a spin-out of the Roslin Institute, specialising in DNA analytics and diagnostics. Previously Trevor has been Non-executive Chairman of Activiomics Limited, a biomarker discovery specialist, as well as a Non-executive Director of hVivo plc, a clinical research organisation. Trevor is Chair of the Remuneration Committee and a member of the Audit Committee.

Paul Fry Non-executive Director

Paul was appointed as a Nonexecutive Director in February 2020. Paul has extensive financial experience across several industries including biotech, pharmaceutical and telecommunications. Paul is currently Chief Financial Officer of Argenta, a global CRO and CDMO specialising in animal health. Prior to this he was Chief Financial Officer of Vectura Group Ltd, an industry-leading inhaled drug delivery specialist which up until 2021 was listed on the FTSE Main Market.

Paul was also Chief Financial Officer of Immunocore Limited, a leading biotech company focused on the development of a new class of immunotherapeutic drugs based on proprietary T-cell receptor technology. Paul has also served as Director of Global Finance Operations at Vodafone plc and spent more than 25 years at GlaxoSmithKline (‘GSK’), where he held several senior roles including Head of Global Finance Services and Chief Financial Officer for GSK’s Italian pharmaceutical business.

Paul holds a degree from Oxford University and is a member of the Chartered Institute of Management Accounts.

Paul is Chair of the Audit Committee and a member of the Remuneration Committee.

Dr Mark Goldberg Non-executive Director

Mark was appointed as a Non-executive Director in August 2021 and is a medical oncologist, haematologist and a biotechnology executive. Mark currently serves on the boards of ImmunoGen, GlycoMimetics, Blueprint Medicines, and Walden Biosciences.

Mark was part of the executive management team of Synageva Biopharma from 2011 until 2014. Prior to that, he served in various management capacities of increasing responsibility at Genzyme Corporation from 1996 until 2011, including as Senior Vice President of Clinical Development. Prior to joining Genzyme, he was a full-time staff physician at Dana-Farber Cancer Institute and Brigham and Women’s Hospital, where he still holds an appointment. He is currently a Lecturer in Medicine (part-time) at Harvard Medical School.

Mark is also a long-time American Cancer Society (ACS) and ACS Cancer Action Network volunteer. He was a member of the American Cancer Society New England Division Board from 2010 to 2017 and has been a member of the national Board of Directors of the American Cancer Society since 2019, currently servicing as Scientific Officer of the board.

Mark received his AB from Harvard College (magna cum laude) and his MD (cum laude) from Harvard Medical School (Harvard MIT Program in Health Sciences and Technology).

Dr Christina Coughlin Non-executive Director

Christina was appointed as a Nonexecutive Director in March 2022. Christina is the Chief Executive Officer of Cytolmmune Therapeutics LLC, which is a clinical stage biotechnology company focused on development and commercialisation of novel cancer immunotherapy products designed to use the patient’s own immune system to eliminate cancer cells. Christina has a broad background in biotechnology and global pharmaceuticals, with a comprehensive drug development background from pre-IND to filing experience and has a track record of building drug development teams in global companies.

Christina previously served as Chief Medical Officer to Rubius Therapeutics. Inc, where she led the clinical development, translational medicine and regulatory efforts in the allogeneic red cell therapy platform. Prior to Rubius, Christina was with Tmunity Therapeutics, Inc., where she served as Chief Medical Officer and was responsible for the development of autologous CAR-T and TCR-T cellular therapies.

Christina has held other leadership roles in the pharmaceutical and biotechnology fields in her career including Chief Medical Officer at Immunocore, where she led the development of Kimmtrak™, recently approved for the treatment of metastatic uveal melanoma. Christina was also an Oncology Asset Team Leader at Pfizer and Clinical Program Team Lead at Novartis. She received her MD and PhD from the University of Pennsylvania and completed fellowships in Haematology and Oncology at the Children’s Hospital of Philadelphia and in the Translational Research Group under the direction of Carl June, MD at the University of Pennsylvania.

Risks

The principal risks and uncertainties that could have a significant impact on the Group are set out below:

Reliance on third parties supporting clinical and pre-clinical programmes - Therapeutics

Avacta relies heavily upon other parties (including clinical research organisations) for many important stages of its therapeutic development programmes, including execution of some pre-clinical studies and later-stage development for its compounds and drug candidates, and management of its clinical trials, including medical monitoring and data management. Underperformance by any of these other parties could adversely impact the Group’s ability to operate effectively. With the Group now progressing Phase I trials on its first clinical programme (AVA6000) there continues to be significant recruitment within the clinical development team, led by Neil Bell, and they are working to ensure the performance of the third parties that are contracted to ensure that the quality and timeliness of these services provided are acceptable. The regulatory approval processes of the MHRA and FDA and other comparable regulatory authorities can be lengthy and time consuming. The Group consults, where appropriate, with regulatory advisers and regulatory-approved bodies to ensure that all regulatory requirements are met, as demonstrated by the submission and timely approval of the CTA and IND submissions for the AVA6000 programme. The Group uses experienced and reputable clinical research organisations and requires its clinical and manufacturing partners to comply with Good Clinical Practice and Good Manufacturing Practice.

Manufacturing and supply risk - Diagnostics

The Group develops, with manufacturing partners, lateral flow tests which require formal clinical validation and CE marking. The Group has identified third-party manufacturing partners and established an appropriate supply chain for the manufacture of approved lateral flow tests. The ability to produce tests within the UK to a cost price which would make tests competitive with Chinese-manufactured tests has been a significant challenge and the Group continues to explore alternative production routes for the manufacture of future tests. The Group has established contractual relationships with several key manufacturers and suppliers of kit components in order to ensure availability of supply and not place overreliance on any one supplier/manufacturer.

Commercial risk - Diagnostics

The price point of lateral flow tests has been under significant pressure given the surplus production capacity from cheaper Chinese production facilities now that the sales of COVID-19 lateral flow tests have subsided. Establishing commercial sales channels within the UK, Europe and other countries for the future diagnostic tests in development will involve substantial business development and management/legal time to ensure the partnerships established are as commercially rewarding as possible and sustainable without creating any significant commercial risk in terms of working capital.

The regulatory changes in relation to the IVDR/CE marking process in 2022 have led to delays in obtaining approvals from Notified Bodies (such as BSI) which will delay the launch of future products not yet for sale within Europe. The Diagnostics Division has embarked on an M&A-led growth strategy to build additional routes to market through established distributors (with the acquisition of Launch Diagnostics) and will continue to look at opportunities across Europe to expand the diagnostic product portfolio and additional distribution channels for centralised and de-centralised testing.

M&A risk - Diagnostics

The Group’s Diagnostics Division has recently embarked on an M&A-led growth strategy to build an integrated and differentiated IVD business with global reach. To achieve the strategy the Group needs to successfully identify the right M&A targets with the correct attributes in terms of products, people and geographies. The Group also needs to ensure that businesses are acquired on favourable terms from an acquiror’s perspective. As part of the M&A process, adequate levels of due diligence need to be carried out to substantiate the acquisition value and identify any risks that exist, whether they be financial, legal, regulatory or similar. The Group has built a strong internal team who run the M&A process and work alongside experienced professional advisors advisers in areas such as legal, regulatory and financial/ taxation. The established process has numerous go/no-go points that are reviewed and discussed with the Board and strategic advisers.

Research and development

The Group’s research and development activities continue to focus around the Affimer® technology within the Diagnostics Division and the Affimer® and pre|CISIONTM technologies in the Therapeutics Division. There is a risk, consistent with similar biotechnology companies developing new and innovative technology platforms, that the scientific results required for specific internal development programmes, product development projects, customer-related evaluations or third-party collaborations. This risk is in specific applications of the Affimer® or pre|CISIONTM technologies rather than in the individual technology platform as a whole. The development teams continue to work on improving the core Affimer® and pre|CISIONTM technology platforms and expanding the potential areas where the technology has significant benefits over existing antibody technologies with oversight from the Senior Management Teams, the Board and Scientific Advisory Board. With the Group’s first asset (AVA6000) progressing through clinical trials there is a risk that the trials might not be successful and that the Group is unable to develop marketable products. There is a risk that the clinical trials could lead to unanticipated results, which require further development leading to time delays. The Group has built an experienced and reputable team of clinical advisers who are monitoring the outputs of the clinical trials to ensure appropriate decisions based on data outcomes are taken at the right time.

Funding

The development of the Group’s Affimer® and pre|CISIONTM technologies in the Therapeutics Division is resource and cash intensive. The new Diagnostics Division M&A strategy also requires sufficient funding to enable attractive acquisitions to be acquired. The Group successfully raised £61.3 million (gross) during the year to continue the Group’s plans; however, there will be future funding requirements which will need to fund expanded clinical development programmes. As at 31 December 2022, the Group had cash and short-term deposits of £41.78 million, which leaves it in a good position to deliver on its short to medium term objectives. As with all fundraising activities in the biotech sector, there are external market and economic factors, such as the Ukraine conflict and UK recession, which may impact the timing and amount of funding available through capital markets.

Intellectual property

The success of the Group’s Affimer® and pre|CISION™ technology platforms depends on its ability to obtain and maintain patent protection for its proprietary technology. Failure to protect the Affimer® and pre|CISION™ technology platforms, or to obtain patent protection with a scope that is sufficiently wide, could significantly impact the Group’s ability to commercialise the technology. Should the patents be challenged, there could be a considerable cost in defending the patent rights, with an uncertain outcome. The Board regularly reviews the patent portfolio and its protection. Specialist patent attorneys are engaged to apply for and defend intellectual property rights in appropriate territories.

Key staff

The Group has in place experienced and motivated Senior Leadership Teams across the Diagnostics and Therapeutics Divisions, together with a significant number of highly skilled senior scientists and technical specialists. Loss of key staff could lead to a delay in the Group’s plans and operations. During the year, the Group has successfully continued to recruit senior specialist roles within the Therapeutics Division covering scientific, regulatory and clinical development areas whilst relocating its operations from Cambridge to London. The Diagnostics Division, in the light of its recently announced M&A strategy, has reviewed the levels of staff required to progress its product development of diagnostic devices, with suitable experienced staff within quality assurance and regulatory teams. The Group aims to provide remuneration packages, including share incentive plans, and working conditions that will attract and retain staff of the required level, informally benchmarking the level of benefits provided to its staff against comparator companies.

Cybersecurity

Unexpected events such as failures of IT systems or the increasing threat of targeted cyber attacks could disrupt the Group’s operations from any of its sites or lead to a loss of data. The Group continues to place reliance on third-party cloudhosted applications, which provide cost-effective services with significant redundancies and disaster prevention and recovery strategies. The Group has in place disaster recovery plans which are periodically tested and third-party specialists are used to assess any potential vulnerabilities in the Group’s systems. The Group ensures that all software and systems are regularly updated to latest software versions and firmware updates. Its cyber security plans are reviewed on a regular basis and recently upgraded security access levels have been established. It also provides training to staff on dealing with potential cyber attacks and security risks.

Loss of facilities

Should the Group’s facilities become inaccessible through damage caused by fire, flooding or theft, the ability to carry on development programmes and meet customer deadlines may be affected depending on the severity of the incident. The Group has purpose-built facilities in both Wetherby and London with specialist equipment and working environments that potentially may not be easily repaired or replaced. The Group has established business continuity plans in place for each location, which are regularly reviewed and tested. Resilience exists between sites so that certain operations could be quickly transferred from one facility to another where appropriate. Health and Safety safety procedures and policies exist for each site with routine checks on facilities, equipment and infrastructure. The Group also maintains adequate insurance to cover any business damage or interruption.