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Avacta Group plc (AIM: AVCT), the developer of Affimer® biotherapeutics and research reagents, is pleased to announce a proposed Placing and Subscription (together the "Fundraising") to raise gross proceeds of up to £9 million through the issuance of up to 59,777,013 new ordinary shares ("Ordinary Shares") at a price of 15 pence per share. The Fundraising comprises of up to 59,577,013 placing shares (the "Placing Shares") and 200,000 subscription shares (the "Subscription Shares"). Admission of both the Placing Shares and the Subscription Shares is subject to, amongst other things, shareholder approval at the general meeting ("General Meeting"), notice of which will be sent to shareholders shortly.

finnCap is acting as nominated adviser and joint broker, alongside WG Partners and Turner Pope who will also be acting as joint brokers in connection with the Placing (together the "Joint Brokers"). Neither the Placing or Subscription is to be underwritten.

Introduction

The Company today announced the proposed Fundraising comprising the Placing and the Subscription to raise up to £9 million for the Company (before expenses) to help to deliver the next key value inflection points, being:

• the phase 1 clinical trial of AVA6000 pro-doxorubicin;
• continuing to advance Affirmer immunotherapy pipeline with partners; and
• delivering further commercial progress for therapeutics and diagnostics.

On 19 July 2019, the Company obtained advance assurance from HMRC that a subscription for New Ordinary Shares was capable of qualifying for EIS tax reliefs. Further details as regards EIS relief are set out in paragraph 10 below.

The Issue Price is at a discount of approximately 11.8 per cent to the closing price of the Ordinary Shares on AIM to 17 October 2019, being 17 pence per Ordinary Share.

The Fundraising is, amongst other things, subject to Shareholder approval, which will be proposed at the General Meeting.

Background on the Company

Avacta is developing novel cancer immunotherapies combining its two proprietary platforms - Affimer® biotherapeutics and tumour targeted chemotherapy. With this approach, the Company aims to address the lack of a durable response to current immunotherapies experienced by most patients. The Company is also generating near-term revenues from Affimer® reagents for diagnostics, bioprocessing and research, through a separate business unit.

The Affimer® platform is an alternative to antibodies derived from a small human protein. Affimer® technology has been designed to address many of the negative performance issues of antibodies, principally: the time taken, and the reliance on an animal's immune response, to generate new antibodies; poor specificity in many cases; large size and cost. The Board believes that the Affimer® technology has significant commercial and technical benefits that provide major competitive advantages in both drug development and diagnostics.

Avacta's lead targeted chemotherapy programme, AVA6000 Pro-doxorubicin, is seeking to address the significant toxicity of a well established cancer drug, Doxorubicin, which limits the duration of dosing and eligible patient population. Doxorubicin has been the standard of care treatment for over 40 years for patients with advanced soft tissue sarcomas ("ASTS"). However, patients are taken off the treatment due to irreversible heart failure once the cumulative dose reaches 450 mg/m2, even if they are experiencing clinical benefit. As a result, median progression free survival for ASTS patients is approximately six months, with median overall survival of 12 to 15 months. This severe cardiotoxicity limits the size of the Doxorubicin market, but it is still nearly $1bn. AVA6000 Pro-doxorubicin is inert when given to the patient until activated in the tumour by an enzyme called fibroblast activation protein ("FAP"). This tumour-targeted activation reduces the exposure of the heart and other healthy tissues to the active chemotherapy drug and concentrates the active drug in the tumour. The improved safety and efficacy of AVA6000 compared with standard Doxorubicin has been demonstrated in mouse models of cancer. Avacta is looking to initiate phase I clinical trials in patients with soft tissue sarcomas with AVA6000 Pro-doxorubicin in mid-2020.

The growing in vitro and in vivo Affimer® therapeutics data packages are improving the potential for substantial deal-making. The Group has established a significant drug development partnership with LG Chem Life Sciences ("LG Chem"), part of the South Korean LG Group, to develop Affimer® therapeutics in several disease areas. Following a research collaboration with Moderna Therapetuics Inc. ("Moderna"), the two companies also entered into an exclusive licensing agreement with respect to certain Affimers® against a potential therapeutic target. Moderna was granted exclusive access to Avacta's Affimer® technology for certain collaboration targets and the option to enter into exclusive licence agreements on pre-agreed terms to further research, develop and commercialise Affimers® selected by Moderna. Most recently Avacta has entered into a collaboration and licence option agreement with ADC Therapeutics SA ("ADC Therapeutics") to combine Affimer® proteins that bind to certain cancer biomarkers with ADC Therapeutics' PBD warheads in Affimer® drug conjugates. Each of these collaborations and commercial agreements is fully funded by the partner.

The Avacta reagents business unit works with partners world-wide to develop Affimers® for evaluation by those third parties with the objective of establishing royalty bearing license deals with a particular focus on the diagnostics sector. The Company is also developing a small in-house pipeline of Affimer®-based diagnostic tests for licensing. The Group has made good progress in establishing a revenue stream based on the non-therapeutic applications of Affimer® technology and is aiming to establish a significant number of license and supply deals for Affimer® reagents as quickly as possible that could generate recurring royalty-based revenue such as the deal announced recently with New England Biolabs.

Current trading and outlook

Recently the Company entered a collaboration and option agreement with ADC Therapeutics SA, a clinical-stage oncology-focused biotechnology company pioneering the development of highly potent and targeted antibody-drug conjugates for patients suffering from haematological malignancies and solid tumours. Under the terms of the agreement, ADC Therapeutics will cover all Avacta's costs during the collaboration. Upon ADC Therapeutics entering into each of the commercialisation licences and successfully bringing new Affimer® drug conjugates to market, Avacta will receive option fees, development and commercialisation milestones, as well as a single-digit royalty on sales.

AVA6000

Avacta expects to file an IND/CTA application by the end of 1Q2020, to dose first patients with AVA6000 Pro-doxorubicin by the end of 2Q2020 with initial read-out expected in 3Q/4Q2020. A positive outcome to this phase I study would require only an improved safety profile compared with standard Doxorubicin since the efficacy of this existing chemotherapy is well known. Positive data could lead to a significant licensing opportunity for AVA6000 with companies currently marketing existing Doxorubicin products or with companies that are currently carrying out clinical studies combining Doxorubicin with their checkpoint inhibitors. A successful outcome to the study would also open the potential to using the FAP targeting technology developed at Tufts University and exclusively licensed by Avacta to improve the safety profile of many other chemotherapies.

AVA004

The Group has remained on track to enter the clinic for first-time-in-human trials of the Affimer® platform in 2020 and has selected a specific Affimer® molecule (AVA004-251Fc) as its clinical candidate because of its excellent in vitro and in vivo pharmacological properties. This Affimer® has been shown to have equivalent tumour growth inhibition to three approved monoclonal antibody inhibitors of PD-L1 (Tecentriq, Imfinzi and Bavencio) in several in vivo animal efficacy models. The Group is now close to completing cell line development, the first stage in the manufacturing process, with its partner Selexis. The next step of GMP manufacturing of AVA004-251 with a partner that has been identified and is expected to cost the Group approximately £5 million and therefore, following completion of the Fundraising, this will be paused whilst the Group focuses on the nearest major value inflection point of delivering phase I data for AVA6000.

Research and Diagnostics Reagents

The combined revenue plus order intake figure for the research and diagnostics business unit for the 12 months ending 31 July 2019 of £1.2 million shows strong growth of 130 per cent. compared with previous 12 months and the Board believes that this provides a solid platform to deliver on full year revenues.

There is a pipeline of ongoing paid-for technology evaluations and custom Affimer® services projects with global commercial partners:

• 7 diagnostics evaluations including 4 with top ten global in vitro diagnostic companies, all of which could lead to licensing deals;
• 14 projects with pharma and biotech companies including 4 out of the top 10 largest pharmaceutical companies; and
• 2 evaluations with bioprocessing companies, one being a global leader in affinity purification, and both with the potential to deliver licensing deals.

Having identified the diagnostics market as the main area of opportunity for Affimer® reagents, the Group will now focus its resources on business development and research activities in this market, and continue to develop a small pipeline of Affimer® based diagnostic tests for licensing. This focus on the diagnostics market will also enable the Company to reduce the cost base associated with its research and diagnostics reagents activities but with the objective of maintaining good revenue growth.

The Company confirms that following the Fundraising it has sufficient working capital in place for at least the next 12 months.

Reasons for the fundraising and use of proceeds

The Fundraising will raise up to £9 million (before expenses). As referred to above, the Company intends to utilise the net proceeds of the Fundraising to enter the clinic with its first programme, to secure further significant drug development partnerships that help progress the Company's technology platforms, and to continue to grow revenues and secure licensing partnerships for Affimer® diagnostics reagents.

It is proposed that approximately £6.5 million of the proceeds will be:

• deployed into generating phase I data for AVA6000 pro-doxorubicin; and
• used to continue business development activities to generate additional therapeutic partnerships and licensing agreements.

The Company will continue its collaborations and commercial partnerships with LG Chem and ADC Therapeutics that are fully paid for by the partners.

In addition, the balance of proceeds will be invested:

• to continue to grow the custom Affimer® reagents revenue stream with a strong focus on diagnostics; and
• to continue to develop a small pipeline of Affimer® based diagnostic tests for licensing.

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For further information

Avacta Group plc	Tel:  +44 (0) 844 414 0452 www.avacta.com
Alastair Smith, Chief Executive Officer Tony Gardiner, Chief Financial Officer
finnCap Ltd (Nominated Adviser and Joint Broker)	Tel:  +44 (0) 207 220 0500 www.finncap.com
Geoff Nash / Giles Rolls - Corporate Finance Tim Redfern - ECM
WG Partners (Joint Broker)	Tel:  +44 (0) 203 705 9318 Tel:  +44 (0) 203 705 9217 www.wgpartners.co.uk
Nigel Birks / Nigel Barnes David Wilson / Claes Spang
Turner Pope Investments (TPI)	Tel: +44 (0) 203 657 0050 www.turnerpope.com
Zoe Alexander / Andy Thacker
Yellow Jersey PR (Financial Media and IR)	[email protected]
Sarah Hollins Harriet Jackson	Tel: +44 (0)7764 947 137 Tel: +44 (0)7544 275 882
Zyme Communications (Trade and Regional Media)
Katie Odgaard	Tel: +44 (0)7787 502 947 [email protected]

About Avacta Group plc - https://www.avacta.com

Avacta is developing novel cancer immunotherapies combining its two proprietary platforms - Affimer® biotherapeutics and tumour targeted chemotherapy. With this approach, the Company aims to address the lack of a durable response to current immunotherapies experienced by most patients.  The Company's therapeutics development activities are based in Cambridge, UK.

The Company benefits from near-term revenues generated from Affimer reagents for diagnostics, bioprocessing and research, through a separate business unit based in Wetherby, UK.

The Affimer platform is an alternative to antibodies derived from a small human protein. Despite their shortcomings, antibodies currently dominate markets worth in excess of $100bn.  Affimer technology has been designed to address many of these negative performance issues, principally: the time taken, and the reliance on an animal's immune response, to generate new antibodies; poor specificity in many cases; large size and cost. 

Avacta's proprietary targeted chemotherapy platform, releases active drug only in the tumour, thereby limiting systemic exposure and improving the overall safety and therapeutic potential of these powerful anti-cancer treatments. 

By combining these two platforms the Company is building a wholly owned pipeline of novel cancer therapies with the aim of creating effective treatments for all cancer patients including those who do not respond to existing immunotherapies. Avacta expects to take its first drug, a targeted form of the standard-of-care Doxorubicin, into the clinic in the middle of 2020.

Avacta has established drug development partnerships with pharma and biotech, including with Moderna Therapeutics Inc., and a deal with LG Chem worth up to $310m, and actively seeks to license its proprietary platforms in a range of therapeutic areas.

Avacta reagents business unit works with partners world-wide to develop Affimers for evaluation by those third parties with the objective of establishing royalty bearing license deals with a particular focus on the diagnostics sector. The Company is also developing a small in-house pipeline of Affimer-based diagnostic assays for licensing.

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To read the full release, please click here.