Avacta Group Plc

Good morning, ladies and gentlemen, and welcome to the Evactor Group PLC Final Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Given the attendance on today's call, the company will not be in a position to answer every question it receives during the meeting itself. Before we begin, we would like to submit the following poll, and if you would give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to CEO, Alistair Smith. Good morning. Good morning.

Morning. Thank you. Thanks very much. Morning, everyone. Thank you for attending the preliminary results presentation for 2022. Let me just start by running through some of the key highlights. Obviously, we'll touch on these as we go through the presentation. I think it's absolutely true to say a very significant year of progress right across the group. In particular, very pleased to see the progress with ABA 6000 Phase 1 study, which we'll talk through in a little bit more detail. But in summary, we're seeing a very positive safety profile through the first four patient cohorts in the dose escalation study. And of course, we have also confirmed the release of doxorubicin at therapeutically significant levels in the tumor biopsy. So we are seeing a very much improved safety profile, but also release of doxorubicin in the tumor tissue, as we would have hoped. So that really very strongly supports the principle of FAP activation, the precision targeting of drugs into the tumor tissue. And that's led us to accelerate the development of ABA3996, which is the second of the precision drug candidates. It's a tumor-targeted proteasome inhibitor, which recently at the AACR meeting we presented a poster with the preclinical data, and I went through a video to explain that data. I'll touch on a little bit of that in the presentation today. But it's a very exciting opportunity to think about proteasome inhibitors in solid tumors, which has never been, you know, never been the case before. So that's a very exciting opportunity. And then across our partnerships with FXL and LG Chem, good progress, I'll touch on that. And of course, you're aware that we moved the therapeutics division during the year as well from Cambridge into London. The diagnostics division, we are engaged in an M&A-led growth strategy for that division. We raised capital in October, as I'm sure you're aware, and executed the first of those acquisitions of launch diagnostics in October. I'll talk through, as time allows, the strategy for that M&A-led growth strategy. And certainly later in the year, we'll have perhaps at the AGM a lot more opportunity to go into that in a great deal of detail. And finally, the last point on this slide strengthened the board further with the addition of another expert medical oncologist, Chris Coughlin. Okay, I'll hand over to Tony to go through the financial slides and then go through the business update.

Thanks, Alastair. Good morning, everybody, and thank you for joining us today. I'd like to just walk you through the preliminary results for this year. Without a doubt, they have probably been the most complex accounts that we've ever prepared in a practice history, given the number of transactions that have gone on this year, starting with at the sale of the animal health division at the start of the year, followed by the acquisition of Launch Diagnostics in October and the associated fund raising the convertible bond. So there is a fair amount of complex accounting within this. So what we've tried to do is the way that we presented RALTS this year is to draw a line on the face of the income statement called adjusted EBITDA, which will give everyone a real feel for more I think the cash burn within the business that's closely associated that because there's a lot of non-cash items on the profit loss account so please when you look at these numbers the adjusted EBITDA loss of 15 million is far more consistent with a cash flow position as opposed to the loss in the year of 39 million because some of the adjustments that we'll walk through. So just stepping down through the P&L, the revenue this year was just shy of 10 million which is probably the highest revenue number we've ever reported as a group. That was driven by a couple of milestone payments on the therapeutics side, which we'll touch on shortly, and the impact of the launch business on the diagnostics segment. That delivered us a gross profit of just over £7 million. And we then stepped through and we've got the research manufacturing costs from the therapeutics business on its development programmes and also the diagnostics business in terms of the development of the products it's working on. The SG&A costs have stepped up during the year and that's primarily because we're obviously now rolling in the launch SG&A costs as well as the business grows and expands. So our adjusted EBITDA loss position was 15 million in the year compared to just under 22 million the previous year. If we step further down the P&L, there's amortisation and appreciation charges, again, which we appreciate are non-cash items, which are set below there. And then we have share-based payments. And we also take a share of AFI XL, which is our JV. It's lost, so there's just over a million pound charge there. from recognising our share of the JV. We owe 19% of that at the end of the year. So that gives us an operating loss of 32 million compared to 29 million the previous year. There are then some costs that go through the income statement to do with the convertible bonds. We take through the commission costs, the interest costs, and part of the bond is effectively valued as a derivative. So we take through the charge on that and that is really driven by the fluctuations in the share price. So the share price had increased 20% from the time we took the bond out to the end of the year which drives effectively a further charge through the P&L but again that is a non-cash based item. Further down the P&L we've got a taxation of a couple million pounds which again we claim through R&D tax credits so that will come back as cash into the business in future and which leaves us with a retained loss of 39 million compared to 26 million the previous year. I move on to the next slide which breaks down the operating segments. So you clearly see we've got two clear segments now. The animal health business has been treated, discontinued in both years, so isn't in these numbers. And the way I'm presenting this is obviously the diagnostics is a very different structured business and we are looking to grow that into a profitable EBITDA based business. So this set out of the presentation will help you see how we look to move that over the coming years into a profitable business as we then continue through the M&A process. So the revenues in the diagnostics business, the $4 million come primarily from the launch business in the period that we had that this year. And the therapeutics has got just over $5 million. Again, that's from milestones from LG Chem and AFI Excel. As we step down, again, this breaks down the operating loss through to each business from the different segments. And we have a central cost. So all the costs to do with running the group, whether that be central costs in terms of finance, HR, IT, the directors, all the advisor costs and brokers and registrars are all not allocated across the two segments. So there's a separate column there. But we will progress these and continue to report on a consistent basis. so there's clear visibility between the two trading divisions of the group as we work through these numbers. If I move on to the cash flow, now we started 2022 with £26 million of cash. Operating cash outflows from the trading of the business and movements in working capital used £16 million, which is fairly consistent with that operating EBITDA loss of £15 million that was on the face of the P&L. So that gives you the consistency of how those numbers tie through. The investing activities were the acquisition of the launch business for £24 million, proceeds from the side of the animal health business which was just £100 million on the first tranche, and then some capex costs that sit alongside that. In terms of the launch acquisition, £24 million was an upfront payment. There is deferred consideration of up to £13 million to do with the future sale of COVID products, which exceed £2 million in any of the next three years. Our assessment at the end of this year is that there is unlikely to be more than £2 million of COVID sales in any one of these years. So we do not envisage paying any more of the 13 million deferred consideration. And that's clearly stated in the accounts as we sit there. The financing activities of the just shy of 57 million reflects the bond that was received, which was 55 million at a 5% discount. So that was just over 52 million of cash we received. The placing proceeds and the open offer, which totaled another 9 million gross from that, less than any of the transaction costs associated with that. That left us with 42 million cash at the end of the year. Just to give you a bit more of an update, some reassurance, the cash position at the end of March this year, March 23, is circa £39 million because we've had the benefit of the financial year 21 R&D tax credits coming through, which was £2.8 million, which came through in January this year. 39 million good strong cash runway to see us through 23 well into 24 and as you'll appreciate the the level of spend on the third therapeutics programs can vary quite significantly depending on how quickly those programs are accelerated so well well positioned from a cash perspective to take us well through into the back half of next year If I move on to the balance sheet, just to explain some of the categories on here, because again, there's been a lot of different accounting as we look through this. The non-current assets of 37 million reflects plants and equipment. The leases that we have to account for for the buildings that we have around the group. So that's the current VATS buildings, plus those that we acquired with Launch, plus the goodwill in terms of the acquisition from Launch and also our investment in the AFIX LJB. Current assets have increased to just shy of £14 million but again we've taken on the current assets, so the trade debtors and things of the launch business, so we would expect that to grow. Cash of £42 million, the assets held for sale last year was the animal health business as we had to reflect that at the end of last year. Current liabilities of £14 million and then non-current of £60 million. Now that £60 million consists of our leases to do with So that's reflected in a couple of different ways because you have to value a derivative component of it, which has a value of 39 million. And there is a debt value of 19 million. Those combined together give you your 55 million overall bond value, because at the end of the year, none of the bonds had been repaid. Since the end of the year we have had two quarterly amortisations which have been settled in shares and there was an early conversion in February. So the value of the overall bond at today is just under £47 million and we've settled the conversion on those previous ones. and that will continue as we progress our way through this year over the term of that bond. So just to summarise, 42 million cash at the end of the year, 39 million at the end of March, well funded to drive us through well into 2024. I'll now hand back to Alastair to give the business update.