Avacta Group plc (LON:AVCT), the developer of Affimer® biotherapeutics and reagents, today announced in response to substantial institutional interest, its intention to raise gross proceeds of up to £45 million by means of a placing to institutional and other investors, a direct subscription with the Company and offers to retail and other investors via the PrimaryBid platform, of up to 37,500,000 new ordinary shares of 10 pence each in the Company, in each case at a price of 120 pence per share.
The Issue Price is at a discount of approximately 4.4 per cent to the 30 day volume weighted average price of the Ordinary Shares on AIM on 3 June 2020, being 125.3 pence per Ordinary Share.
The Placing will be conducted through an accelerated bookbuilding process which will be launched immediately following this announcement. The Placing is subject to the terms and conditions set out in the Appendix to this announcement.
finnCap is acting as nominated adviser and finnCap, Zeus Capital and Beech Hill Securities are acting as joint brokers with regards the Placing.
It is proposed that the Fundraising will comprise of an element of New Ordinary Shares that will be allotted pursuant to existing authorities and powers to allot shares on a non-pre-emptive basis and be admitted to trading on AIM on 10 June 2020. The allotment of the balance of shares (if any) to be issued in connection with the Fundraising will be subject to, amongst other things, Shareholder’s approval, with a circular to Shareholders expected to be despatched shortly.
None of the Placing, the Subscription or PrimaryBid Offers is to be underwritten.
The final number of New Ordinary Shares to be issued pursuant to the Placing will be agreed by the Joint Brokers and the Company at the close of the bookbuild, and the results of the Placing will be announced as soon as practicable thereafter. The timing for the close of the bookbuild and the allocation of New Ordinary Shares shall be at the absolute discretion of the Joint Brokers, in consultation with the Company. The Company and the Joint Brokers reserve the right to issue and sell a greater or lesser number of shares through the Placing.
BACKGROUND TO AND REASONS FOR THE FUNDRAISING
Pursuant to the Fundraising, the Company proposes to raise up to £45 million (before expenses) to fund the rapid scale-up of the broader Affimer® diagnostic products opportunities including COVID-19 antigen rapid testing and accelerated expansion of the in-house Affimer® and pre|CISION™ cancer therapy pipeline.
Use of Proceeds
Rapid Scale-up of Diagnostics Business, £10 million:
· Working capital for the COVID-19 testing opportunity
· Expansion of in-house diagnostics product development capabilities including facilities, capital equipment; scientific, commercial and senior leadership teams
· Acceleration of broader diagnostics product pipeline and commercial partnerships
Accelerated Expansion of Pipeline of Differentiated Cancer Therapies, £35 million:
· Rapidly growing the pre|CISION™ pre-clinical pipeline and delivering pre-clinical packages for several pro-drugs (pre|CISION™ velcade, paclitaxel and oxaliplatin).
· Expanding the Affimer® immunotherapy pipeline (PDL1-TGFβ inhibitor and PDL1-cytokine bispecifics).
· IND/CTA filings for one or more Affimer immunotherapies (TMAC drug conjugate (PDL1-IDASH) or first bispecific candidate) and one or more pre|CISION pro-drugs.
· Obtain first-in-human data for the Affimer® platform.
· UK phase I clinical trial for first pre|CISION™ chemotherapy AVA6000 pro-doxorubicin covered by current balance sheet. Proceeds will fund IND filing AVA6000.
CURRENT TRADING AND PROSPECTS
Revenues for the 17 month period to 31 December 2019 have grown 100% to £5.5 million from £2.76 million (12 months ended 31 July 2018). Importantly, revenues from the Affimer® diagnostics business have grown, over the same period, by 135% as more customer evaluations of the Affimer® platform are underway. The Group’s order intake and sales pipeline into 2020 are the strongest to date.
Diagnostics
Covid-19 antigen testing
As previously announced, Avacta has entered into an exclusive global distribution agreement with Medusa19 Limited (“Medusa19“) for direct-to-consumer sales of its newly developed saliva-based rapid test for the COVID-19 antigen, subject to regulatory approvals. A short time prior to this the Company announced its partnership with Cytiva (formerly GE Healthcare Life Sciences) to develop an Affimer®-based point-of-care rapid antigen test (in the form of a simple test strip), to indicate whether a person has the COVID-19 infection. The test is intended to give a result within minutes and is for use by both healthcare professionals and consumers.
In addition, the Company has announced a collaboration with Adeptrix (Beverly, MA, USA) to develop and manufacture an Affimer®-based BAMS™ (bead-assisted mass spectrometry) coronavirus antigen test that will provide clinicians with a significant expansion of the available testing capacity for COVID-19 infection in hospitals.
The consensus view is that hundreds of millions of antigen tests will be required per month to support the fight against the pandemic and initial easing of the lock-down during 2020, and to deal with the long term challenge of endemic COVID-19.
Key market opportunities:
COVID-19
· PCR testing will not be able to provide daily testing for millions of people.
· A rapid point-of-care antigen test using saliva is ideal for mass screening of populations for COVID 19 infection.
· The directors believe that there are only a few rapid antigen tests in development and none have CE/FDA approval yet.
· Avacta has already put in place one distribution partner for the direct-to-consumer market (Medusa19) and will put in place additional distribution partners for the healthcare professional/work-force testing markets, as well as OEM partnerships in order to maximise the commercial opportunity.
· Given the expected volume of sales for COVID-19 antigen testing products the potential revenue stream has the potential to be transformational for Avacta.
· Avacta intends to commercialise further the COVID-19 Affimer reagents that it has generated through additional diagnostic development partnerships
Other diagnostic opportunities
The Group has made good commercial progress which is reflected in strong revenue growth and a growing pipeline of Affimer® technology evaluations with a range of partners. These evaluations are progressing well, and the primary objective remains converting these into license deals that will drive future royalty revenue. Additionally, the Group is making very good progress with its own pipeline of diagnostic tests which will also deliver licensing opportunities in the medium term
Therapeutic pipeline
AVA6000
Avacta will file an IND/CTA application as soon as possible for a phase I dose escalation study for its lead pre|CISION™ pro-drug chemotherapy AVA6000 pro-doxorubicin. A positive outcome to this phase I study would require 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 pre|CISION™ tumour targeting technology developed at Tufts University and exclusively licensed by Avacta to improve the safety profile of many other chemotherapies.
AVA004
The Group’s lead Affimer® therapeutic molecule (AVA004-251Fc) 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 has completed 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 was placed on hold in 2019 in order to focus the Group’s limited resources on the AVA6000 clinical trial. The Group intends to use the Placing proceeds to further develop the PD-L1 clinical candidate as part of bispecific therapies in order to maximise the potential commercial value of the investment in clinical development.
OUTLOOK
The ongoing development of COVID-19 antigen tests, including a saliva-based lateral flow test strip, requires the expansion of the Group’s research and development, and production facilities at its site in Wetherby to meet the anticipated demand for Affimer reagent production. The Group is also growing its senior team in the diagnostics division to include regulatory affairs and product management roles, and expand the commercial and technical teams to support the development and commercialisation of the COVID-19 test and its wider product pipeline.
The Group will grow the therapeutics development team in Cambridge and add further clinical development resources to support the transition of several Affimer and pre|CISION therapeutic programmes through preclinical development into the clinic.
The Board anticipates strong near-term newsflow relating to the COVID-19 test developments with Cytiva and Adeptrix, further commercial partnerships to exploit the COVID-19 Affimer reagents and from ongoing commercial and technical progress in the core therapeutic and diagnostic businesses.
PLACING AGREEMENT
Pursuant to the placing agreement dated 4 June 2020, the Joint Brokers, as agents for the Group, have conditionally agreed to use reasonable endeavours to procure subscribers for the New Ordinary Shares at the Issue Price pursuant to the Placing.
The Joint Brokers intend to conditionally place the Placing Shares with certain institutional and other investors at the Issue Price. As noted above, the Placing will comprise an element of New Ordinary Shares that will be allotted pursuant to existing authorities and powers to allot shares on a non-pre-emptive basis and, subject to demand, the allotment of the balance of the Placing Shares being subject to, amongst other things, Shareholder approval. The Placing of the First Placing Shares will be conditional upon (amongst other things) the Placing Agreement not having been terminated and admission of the First Placing Shares to trading on AIM occurring on or before 8.00 a.m. on 10 June 2020 (or such later date and/or time as the Joint Brokers and the Company may agree, being no later than 8.00 a.m. on 10 July 2020. The Placing of the Second Placing Shares will be conditional upon (amongst other things) the Placing Agreement not having been terminated and admission of the Second Placing Shares to trading on AIM occurring on or before 8.00 a.m. on 25 June 2020 (or such later date and/or time as the Joint Brokers and the Company may agree, being no later than the Longstop Date).
The Placing Agreement contains customary warranties from the Company in favour of the Joint Brokers in relation to, inter alia, the accuracy of the information in this announcement and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify the Joint Brokers in relation to certain liabilities that they may incur in respect of the Placing.
The Joint Brokers (acting together and in good faith) have the right to terminate the Placing Agreement in certain circumstances prior to Second Admission, including (but not limited to): in the event that any of the warranties in the Placing Agreement were untrue or inaccurate in any material respect, or were misleading in any respect when given or in the event of a material adverse change affecting the business, financial trading position or prospects of the Company. The Joint Brokers shall also have a further right to terminate the Placing Agreement, following consultation with the Company to the extent practicable, if, at any time before Second Admission there has been a change in national or international financial, political, economic or stock market conditions (primary or secondary); an incident of terrorism, outbreak or escalation of hostilities, war, declaration of martial law or any other calamity or crisis; a suspension or material limitation in trading of securities generally on any stock exchange; any change in currency exchange rates or exchange controls or a disruption of settlement systems or a material disruption in commercial banking, in each case as would be likely in the opinion of the Joint Brokers (acting in good faith) to materially prejudice the success of the Placing.
The Placing Agreement also provides for the Company to pay all agreed costs, charges and expenses of, or incidental to, the Placing, First Admission and Second Admission including all legal and other professional fees and expenses up to the specified amounts stipulated in the Placing Agreement.
The Placing of the First Placing Shares is not conditional upon the Placing of the Second Placing Shares (or any other New Ordinary Shares). However, the Placing of the Second Placing Shares, the Subscription and the PrimaryBid Offers are conditional upon First Admission becoming effective as referred to above.
PRIMARYBID OFFERS
PrimaryBid intends to conduct offers for subscription on behalf of the Company on the terms set out in a separate announcement to be made by the Company immediately after this announcement.
The PrimaryBid Offers are conditional upon (amongst other things) the Placing Agreement not having been terminated and Second Admission occurring on or before 8.00 a.m. on 25 June 2020 (or such later date and /or time as the Joint Brokers and the Company may agree, being no later than 8.00 a.m. on 10 July 2020 in respect of the Placing).
The Joint Brokers are playing no role in connection with the PrimaryBid Offers.
GRANT OF OPTIONS
The Company also announces its intention to grant a total of 6,321,880 new options (“Options”) over the Ordinary Shares to certain PDMRs pursuant to the Avacta Group plc Long Term Incentive Plan. The Options will be granted for nil consideration with exercise prices ranging from 10 pence to 17.25 pence per Ordinary Share and vest subject to a combination of share price targets and the achievement of commercial milestones. A further announcement will be made in due course with further information related to the grant.
