Avacta Group Plc (AVCT) Earnings Call Transcript & Summary

Good afternoon and good morning, ladies and gentlemen, and welcome to Avacta plc preliminary results investor presentation. [Operator Instructions] Before we begin, we would like to submit the following poll. And if you give your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to Alastair Smith, CEO. Good morning.

Good morning. Thanks very much, Mark. Good morning, everyone. Welcome to our results for 2021. Thank you very much for sparing the time to attend. So you've got myself and Tony on the line this morning. I think most of you are familiar with us. I'm Chief Executive. Tony is Chief Financial Officer. We're just going to turn our cameras off actually to make those slides a little bit bigger as we move forward. Just do that. Great. Okay. So a few of you may not be familiar with the company. So a brief little bit of background. Avacta Group is formed of 2 divisions, the therapeutics division and the diagnostics division. Therapeutics division is now a clinical stage Oncology drug company. We have actually some exciting news that we are co-locating our research team that's been based in Cambridge for a number of years with the clinical development team in London. We'll talk a little bit more about that as we go through the presentation and the diagnostics division based in Wetherby in Yorkshire. Okay. Tony, could I hand over to you to go through the results for 2021, please?

Thanks, Alastair. Good morning, everybody. Just to take you through the results. So these are the results for the year-end in December 2021. And just to point out from the offset, these results are based on our continuing operations, as you may have seen. Our Animal Health division was sold in March 2022 and from a financial reporting point of view, that's treated as a discontinued operation, even though the sale took place after the year-end. So the results that you can see in front of you reflect the diagnostics and therapeutics divisions with the revenue for the year, just shy of GBP 3 million, up from GBP 2.1 million the previous year. And as we just walk away down through the profit loss account, you'll see the research cost is the big area of development spend, where we've got obviously the clinical and preclinical development costs for the therapeutics business together with all the product development costs of the diagnostics division and in particular, the SARS-CoV-2 lateral flow test. The manufacturing costs are reflected there. And those costs, which is a new cost during 2021 was the cost of the technical transfer and production batches of the lateral flow tests, which were made with our partners, [indiscernible] and Abingdon Health. The cost of those was taken through the income statement in 2021 but given the decision to pause the tests, which we will pick up and cover later. Carried on then the income statement. Admin costs have increased during the year as we have scaled up both the diagnostics and therapeutics business with the diagnostics building up its regulatory and quality functions as it's now a fully ISO-13485 IVD company. And also the therapeutics is transitioning to a clinical stage. The taxation line there is a credit of GBP 2.8 million. And as some of you have heard me talk about previously, we reclaim R&D tax credits and that helps us continue with the development costs. So that GBP 2.8 million will come back as cash into the business later on this year. The retained loss for the year is just over GBP 26 million compared to GBP 19 million in the prior year. And that gives a loss per share of just under 10.6p per share compared to 7.3p in the previous year. I move on just in terms of the segmental analysis in terms of the different businesses to give you a bit of a flavor around the revenues of these teams. So the diagnostics revenue includes license fees from our partner, Astrea Bioseparations. There are some custom Affimer reagent projects there and some revenues from the antigen lateral flow tests. Whereas the therapeutics revenues come from our collaborations and milestones with LG Chem, some licensing fees from POINT Biopharma and some FTE income from the collaboration that we've got with LG Chem and AffyXell, and we'll update you on progress on those later on. The research costs, as you can see, sent primarily around the therapeutics business as the developments there scale up. Just a brief note, just to pick up on the Animal Health side. Obviously, that was sold in March. We received an up-front payment of [indiscernible] of GBP 900,000 and then there was contingent deferred consideration of up to a further GBP 1.4 million and that will be based on the sales of that division as it combines with [indiscernible] U.K. business over the coming 12 months. Moving on to the cash flows. The cash flows during 2021 was basically an outflow of GBP 21 million covering all the development activities of the Group. There was no fundraising that took place during the course of the year. So from a cash perspective, the cash position at the end of the year was GBP 26 million, moved down from the GBP 48 million that was there at the end of 2020. We have net assets of GBP 41 million on that cash flow that takes us through well into 2023 to continue to develop the programs that we have. And I do appreciate there is a significant amount of discretionary and committed -- noncommitted spend on the different development projects as we move through those. So there's a good opportunity to manage that cash flow very carefully as we always have done. I will now hand you back over to Alastair to pick up on the therapeutics division.

Thanks very much, Tony. So as Tony said, we will focus initially on the main driver of value in the Group, the therapeutics division and obviously focus on AVA6000, the preCISION platform. So to begin with, I will -- for those of you not familiar with the preCISION platform, let me just take a few minutes to introduce it. So the preCISION technology is a method of targeting therapies to the tumor. AVA6000, as we'll talk about in a moment, is a targeted -- a tumor-targeted chemotherapy. There are other opportunities, which we'll mention, but AVA6000 is a tumor-targeted chemotherapy using the preCISION platform. preCISION is what's called a substrate. So this is a chemical moiety that is specific to an enzyme called fibroblast activation protein alpha. That enzyme is up-regulated in most solid tumors. You see on the right-hand side of this slide, a range of different solid tumors and the amount of FAP alpha in those tumors. So you can see, for example, at the bottom, cancer of unknown primary, sarcoma, salivary, very high levels of FAP in those tumors and so on. So FAP is very specific to tumor tissue and is in a much lower concentration in healthy tissues in the body. The key point about the preCISION chemistry is when a chemotherapy is modified, we'll see in a moment on the next slide -- when a chemotherapy is modified using the preCISION chemistry, it prevents it from entering cells. So that effectively renders it inert because it can't get into cells to kill them, but the preCISION chemistry because it's a substrate for FAP is removed by FAP. And as you see on the right-hand side, that will happen predominantly in the solid tumor mass because that's where FAP resides. So preCISION is a way of rendering a chemotherapy, much less cytotoxic because it can't get into cells and then activating that within the tumor mass when it encounters FAP. Now that gives us an opportunity to play in a very, very large market. So chemotherapy market worth around $60 billion in a solid growth rate and all chemotherapies are limited in their efficacy and therefore, their commercial opportunity because of tolerability for patients. So these are effective drugs, but they have significant toxicities and side effects, making them difficult to tolerate. So the preCISION chemistry allows us to improve that tolerability and open up some huge opportunities, not just with AVA6000 but with a pipeline of other chemotherapies that we can modify. I'll take you through that in a moment. As I mentioned, the preCISION chemistry can also be used in other ways. And although we won't dip into this today, we can use the preCISION chemistry in the linker of what's called a drug conjugate to allow the warhead to be released in the tumor microenvironment. On another occasion, we can talk more about just TMAC program and the use of the linker in that format. And the final point on this slide, I'm sure you're aware that the preCISION platform is exclusively licensed to Avacta from Tufts University Medical School in Boston in The U.S. So that's the preCISION platform itself, which can be used to modify chemotherapies. And then if we look at AVA6000 as an example, specifically. On the left-hand side of this slide, you see the -- you see doxorubicin circled in blue. So that's the chemical structure of doxorubicin, which is a generic chemotherapy that have been there out for many years and first, second, third line for a number of different indications. We'll talk about that a little bit more in a moment, too. And they're attached to it, modifying doxorubicin is the preCISION chemistry circled in red. So that's a small chemical that we attach to doxorubicin to make that inert form AVA6000. Now when that is in the circulation, it will get into the tumor microenvironment through the circulation. And there, it will encounter FAP alpha fibroblast activation protein alpha, as we talked about, primarily on cells that are called fibroblasts in the stromal tissue, but it is present in other cancer cells, but primarily in the fibroblasts. And when it encounters FAP, FAP will do what it does, which is it will cut the preCISION chemistry of doxorubicin releasing active doxorubicin. And as we saw on the previous slide, because the FAP is predominantly in the tumor mass and not in healthy tissue, that release of doxorubicin will be predominantly in the tumor and not in healthy tissue. So through that mechanism, AVA6000 and other preCISION drugs are designed to improve the safety and tolerability by reducing the systemic exposure of these powerful drugs. So we'll have the opportunity next week actually to present a lot more of the preclinical data for AVA6000, and I will take the opportunity to present the poster that is being presented by our team at the American Association of Cancer Research next week in New Orleans. I'll take the opportunity to present that in a simplified form for nonspecialists so that, that poster will be available online once it's been presented, and I will take the opportunity to try and talk through that in a way to get the broader audience to understand the data and the conclusions. But just 1 piece of that preclinical data, I think, really illustrates very well why we are so excited about the preCISION platform and its potential to produce safer chemotherapies and really drive shareholder value over the coming years. So what you see in this figure on the left-hand side, so this is a mouse model of cancer. What you see on the left-hand side is the amount of doxorubicin appearing in the heart and the tumor when the mouse is dosed with doxorubicin. So as you would expect, you see exactly the same amount of doxorubicin appear in the tumor and the heart because the animal is being dosed systemically with doxorubicin. And that, of course, is the issue as we'll see in a moment, doxorubicin has particularly severe cardiotoxicity, and hence the focus on the heart tissue. So when the animal is dosed with doxorubicin, you see effectively the same amount of doxorubicin appear in the heart and in the tumor. And that's the toxicity that we want to avoid. On the right-hand side, the animals are being dosed with AVA6000, and you'll see at the bottom there, actually being given 6x the dose. The animals are being given on the left, a higher concentration of AVA6000 and that is possible with doxorubicin because doxorubicin itself is being released in the tumor. We see a nearly 20x increase in the amount of doxorubicin in the tumor compared to the heart. And that difference is what we call the therapeutic window or the therapeutic index. And obviously, it's dramatically improved in this model using AVA6000. So that's 1 illustration. As I say, next week, the team will be presenting a lot of preclinical data at very prestigious meeting in The U.S., sort of the key meeting of the year, and I will take an opportunity to go through that with a wider audience next week sometime. Okay. A quick word on doxorubicin. As I mentioned, it is a standard of care for advanced soft tissue sarcoma, second, third line for other cancers. It's generic. It's been around for many years. And as I mentioned, it has very serious dose-limiting toxicities, in particular, cardiotoxicity, but also myelosuppression. And despite that, it's a $1 billion drug, even as a generic. So AVA6000 presents the opportunity to bring a proprietary -- Avacta's proprietary safer form of doxorubicin into this market. And we've done quite an extensive piece of work with external consultants, Global Life Sciences to try and understand what that market potentially is. And just in the U.K. and The U.S., so not even including the rest of the world and just looking at 3 cancer types, advanced soft tissue sarcoma, breast and ovarian. The peak sales should be around $1.5 billion for that proprietary drug. So it is a significant commercial opportunity on its own. But as I mentioned earlier, one of the really exciting things about the preCISION platform is that it can be widely applied to a range of other chemotherapies. And of course, the drug conjugates that we spoke about, but just focusing here entirely on chemotherapies. There are numerous other forms of chemotherapy that are appropriate for preCISION to be used to modify it and improve the safety and tolerability. One that we spoke about earlier in the year is, we call it, AVA3996, that's the next most advanced in our pipeline, and that is a preCISION form of proteasome inhibitor. The main proteasome inhibitor in the market is a drug called Bortezomib or Velcade, which is Takeda drug that has annual sales of around $1.2 billion. But as I mentioned, as with all chemotherapies, it has significant toxicities that limit its tolerability for patients. And in the case of Velcade, it is only approved in multiple myeloma because of peripheral neuropathy and other side effects. So AVA3996 is a preCISION form of proteasome inhibitor, which is an analog of Velcade so very similar to Velcade, but not precisely Velcade. Just to step back in AVA6000, you will have seen that AVA6000 releases doxorubicin -- actual doxorubicin. In the case of 3996, it's a very similar analog to Velcade. We've now selected AVA3996 for preclinical development. And that will carry on through this year, and we expect to file CTA or IND in the first half of next year and hopefully dosing first patient later in 2023. So as I said, on the right-hand side, there is a significant future pipeline. And that's not exhaustive by any means. We have made some very early progress with some of the other assets listed there. But Velcade is -- the preCISION form of Velcade, AVA3996, is by far and away our most advanced in the preclinical pipeline. So AVA6000 is in the clinic. As you are aware, we are in the middle of the dose escalation phase, the Phase Ia. I'll talk about the objectives, the primary and secondary objectives of that in a moment. So I won't dwell on them here. We are dosing a patient population that is a broad range of different advanced and metastatic cancers. So not specifically choosing any particular cancer type other than FAP positive. So we are in the second cohort. I'll give you a little bit more detail on that in a moment. The first cohort, because of COVID at the back end of last year, was a little bit slow just because of clinical sites having trouble keeping going. But we are now, as I said, in the middle of the second cohort, and we'll talk about that in a moment. So I expect we will finish by -- the Phase Ia by the end of Q2 or possibly creeping into Q3. That's how I've illustrated it there just because of those earlier delays. But the middle of the year, we will see the output of the dose escalation study, which I will go through in a moment. That will be followed after a review of those data by the Safety Data Monitoring Committee. We will progress into Phase Ib dose expansion phase, which will focus on 2 or 3 particular tumor types with around 20 or so patients in each of those different tumor types. So that we can talk about more later in the year as we head into the Phase Ib. So the progress of Phase Ia dose escalation study. We have up to 6 clinical trial sites in the U.K. St. James is in Leeds, The Royal Marsden in London and The Christie in Manchester are all active and dosing patients. The Beatson, Glasgow is now open and screening patients. And we expect The Freeman in Newcastle and Western Park in Sheffield to be open in the second quarter as well and contributing to the dose escalation phase. So the starting dose, as you saw on the previous slide, was 80 milligrams per meter squared of AVA6000, which delivers just below the normal dose of doxorubicin and it is about 90% of the normal dose of doxorubicin around 54 milligrams per meter square. And that first patient was dosed in August last year at The Royal Marsden. Since then, in February, we reported dose escalation. So that follows a review of the data from the first cohort by the Safety Data Monitoring Committee and we dose escalated by 50% to 120 milligrams per meter squared, and we're in the middle of that second cohort now. We have 2 -- we filed an IND, and that was approved by the FDA in November of 2021. And we have 2 U.S. clinical trial sites that are being initiated now and should contribute to the dose escalation phase in Q2. So just to focus on the objectives of the Phase Ia dose escalation study. So what we will learn as we get into the middle of the year this year. So the primary objectives, of course, are around safety and tolerability. That's the primary objective of Phase I study, the Phase Ia and to determine what's called the maximum tolerated dose and then the recommended Phase II dose or the recommended dose for the Phase Ib expansion phase. So those are the 2 primary objectives for the Phase Ia study. But then the secondary objectives are also -- well, certainly the first bullet point there is very important. And the study has been designed to be very data rich because we are going to get an opportunity here to see how the precision platform behaves in humans for the first time. So the study has been designed to deliver a lot of information, which I've really just summarized here. And that's around what are called the pharmacokinetics. So effectively, where is the drug and for how long in the plasma, in the urine, in the tumor. And what we'll be analyzing will be the presence of AVA6000, the drug that's delivered to the patient, the presence of the preCISION leaving group, so the bit that's removed by FAP, end of the active metabolites of AVA6000, which, of course, one of them is doxorubicin. That's one of the -- the products of the reaction is doxorubicin. And there are others, several others actually such as doxorubicinol and so -- and we'll be analyzing those in plasma, urine and tumor tissue when the drug is given as a monotherapy, as we've described. Now the point here I think worth making is the information around the tumor tissue as well as the plasma and urine pharmacokinetics because it's very important that we also understand that doxorubicin is being released in the tumor tissue and that we will get from biopsies, which are not mandatory in the Phase I, but I'm confident we will get that data and be able to say something about the release of doxorubicin as well as the PK of the other components that we just discussed there. So in certain tumor types where doxorubicin is an appropriate treatment, we may also get an initial look at antitumor activity. Of course, the Phase Ib is more designed to do that on the Phase II, but we may get some early initial antitumor activity against some very standard criteria in those cancer types where doxorubicin is an appropriate treatment. We're taking quite a broad range of cancer types, and it's obviously very -- doxorubicin is specific to certain tumors. So those are the primary and secondary objectives of the study, and we will have that data in the middle of the year, which is a really significant pivotal point for preCISION and for the company, of course. Okay. So to move on to our partner programs and really focusing on the 2 key programs where we are actively involved. Tony mentioned POINT Therapeutics, which is a licensing deal. We're not practically involved in that activity with POINT, but I have a license to use the preCISION platform in their own ready pharmaceutical setting. But the 2 partner programs where we are very actively involved are with LG Chem and Daewoong through the joint venture we have in South Korea called AffyXell. So let me just give you a quick run through those. I won't read through all the pre history. But LG Chem is a multi-target deal. They are focused primarily on what's called a PDL1 inhibitor, PD-L1 antagonist, which is a checkpoint inhibitor. It is an Affimer checkpoint inhibitor, not Affimer PD-L1 inhibitor. Formed as a bispecific with an Affimer half-life extension, which we call XT. So this is a true Affimer bispecific molecule, which last year, LG Chem took the decision based on preclinical data to take that asset through into full preclinical development and that triggered a milestone payment to Avacta in autumn of last year. So really, really good progress with LG Chem. Now in preclinical development and hopefully heading towards IND filing in the clinic. So successful preclinical development through this year will trigger further development milestones and obviously, hopefully, one of the first, if not the first half of that into the clinic. As we've said, a number of times. So very, very good progress at LG Chem, a great partnership. Daewoong and AffyXell, similarly, actually, really good progress. So the AffyXell partnership is different. It is about harnessing the Affimer platform to really enhance the therapeutic benefits of cell and gene therapies. So very briefly, what we have demonstrated with Daewoong is the ability to get stem cells in this case to express, to make and secrete Affimer immunotherapy. So to be able to produce immunotherapies in the surroundings around the stem cell to really augment the therapeutic benefits of the stem cell. This gives us through AffyXell's -- the joint venture AffyXell, this gives us access into a very significant cell and gene therapy market, which is growing very, very rapidly. And just I can't talk about a huge amount of detail, I'm afraid, at this point. Hopefully, there will be some significant events this calendar year, which will give us an opportunity to talk about these programs in more detail, but just to say that we at Avacta have successfully produced and characterized and handed over to AffyXell, the first -- Affimer is against the first 2 targets of interest. And AffyXell's team where obviously the stem cell expertise lies, is currently focused on characterizing in vitro and in vivo, the stem cells and the Affimer molecules to support the next stage in AffyXell's development. So equally, both of those partnerships going really well. I'm very pleased with how they're progressing. So I mentioned -- well, for us, an exciting [ but in news or move ] in to London. So it's a fantastic opportunity for us to co-locate the research team and the clinical development organization into a single facility in Scale Space in White City in West London. So it's part of Imperial College's campus, gives us an opportunity to mix with a whole bunch of really exciting companies, investors, potential partners. It's a really vibrant environment in West London. Potentially, we could run an event perhaps around the science to give people an opportunity to see it firsthand some time in the future. But it's a great environment for us to be and you see a few of the companies and organizations that are in the space. We have about same space success. We had in Cambridge about 5,000 square feet of lab and office, and we are literally moving right now. So we should have completed that on schedule by the end of April. And yes, it's a very, very exciting transition for us as we bring the whole company together within 1 facility. I won't -- well, I certainly won't read through the text here on the slide, but just to -- I mean, certainly another very important highlight for us during the year, appointments of 2 very eminent biotech executives to the Board, Mark Goldberg and Christina Coughlin. You can read that [ bias ] in detail on the website, but a significant addition to the Board for us as we move forward as a clinical stage biotech. Okay. So let me move on to the diagnostics division. And I wanted to start by just giving you -- well, just giving you a little sort of run-through of the key trends in the diagnostics market and certainly what drives our decision making. And I think there's 3 key points that I want to bring out. So the first one is the most important by a long way, which is the very strong trend to decentralized testing. So by that time, [ main ] testing outside of laboratory, pathology -- hospital pathology laboratories have centralized testing. So it can include GP clinics and other forms of satellite health care providing as well as consumer home testing. And within the things that are driving that move are a significant increase in chronic disease primarily, I'm sorry to say, due to a poor lifestyle but a significant need to monitor chronic disease, a real desire to do health screening to get early indications of disease to drive early intervention, which obviously improves outcomes but also improves the health care economics. There's a big consumer push towards general health of well-being monitoring. So that pushes the home testing market. And that's being driven by the big tech companies as well through wearables that provide some of the more physiological information to go alongside actual test results. There's the increasing availability of immunodiagnostic and also molecular -- PCI like molecular testing platforms to be able to do these types of measurements outside of big laboratories, the lateral flow test is the one that's been around for many years in the immunodiagnostics space. And obviously, another big driver is the fact that the -- pretty much everyone in the world now is aware of lateral flow testing and has become very familiar with that. So that has opened up a market, a desire to test for a lot more things. The other 2 points around digital connectivity, I'll touch on very quickly. So there's an increasing use of AI. These are not things of actuaries directly involved in but using AI to combine the wearable information with diagnostics to really produce actionable medical intervention. That's a very hot area and companion diagnostics, which is about identifying patients that will benefit from certain drugs. It's a big focus in Oncology because of the cost of the drugs, but it is heavily driven by the pharmaceutical companies who's obviously on the drug. So it's a slightly challenging market. And again, not something we are specifically looking at the moment. But those are the key drivers, decentralized testing being absolutely fundamental to our thinking going forward. And we are, I believe, uniquely positioned as a U.K. diagnostics company because of the Affimer platform, which allows us to develop, as we've seen numerous times in the past, high-performance, high-quality proprietary tests that give us competitive advantage and obviously, therefore, drive commercial and shareholder value. So our strategy is to maintain a focus on that point-of-care testing as well as in future build a consumer home test market and to continue that primary focus on developing our own products as well as looking at partnerships. So very straightforward strategy to exploit the Affimer immunodiagnostic platform. To briefly mention, as Tony did earlier on, the 1 example of an extremely sensitive and an excellent performing test, AffiDX, SARS-CoV-2 antigen lateral flow test. As I'm sure you're all aware, we had just achieved with our partners, Medusa19, the consumer self-testing CE mark in December as the Omicron variant was emerging. And again, this is old ground, but you'll be aware that more than 30 mutations in Omicron compared to Delta. And for information, more than 30 mutations difference between BA.1 and BA.2, the newly emerging Omicron variant. So this challenge of constant mutation, as we've said many times, will be here for a long time as long as the virus is with us. So we took the decision to pause sales in January, as you're aware, because of the reduction in the performance of the test from really good to only satisfactory in our view and not really good enough to provide the detection of infectious individuals, which is what's needed. We are redeveloping the test to restore that performance, and we're doing it in a manner to be as robust as we can to those future variants because it will continue. So we'll perhaps talk about a little bit more in a moment. The timescale -- we've been asked many times about the timescale. And I'm not being evasive at all. The timescale depends on the development process, which depends on us producing a robust and high-performance test. It's difficult to put a precise time line on that, but it also depends on regulatory requirements, the introduction of the new IVDR regulations in Europe has an impact and so on. So -- when we have a clear time line so that I can update the market, we will, but I can tell you, we are very actively redeveloping that test. We are making good progress actually in detecting BA.1 and BA.2. So as soon as I can give a material update to the market, I will. Now that broader diagnostics vision, driven by primarily that decentralized testing trend that I talked about has driven us to focus in 4 key areas. So infectious disease -- an infectious respiratory which COVID, of course, is one. I'm not going to read through all of these. But infectious disease, a chronic disease as we mentioned -- a big increase in chronic disease as well as a big increase in infectious disease globally. So these are good market opportunities for decentralized testing. And then those 2 markets around health screening and fitness and well-being driven both from a health care perspective, but also a consumer interest perspective. So these are the markets that we're focusing on, and we are developing products in-house in these areas. We'll talk about that more later in the year as well as looking at opportunities to partner. So that brings me to the summary. So I mean, I've said this several times. We said it in the prelim presentation. It has been a transformational 18 months for Avacta with the move from a preclinical research therapeutics business to a clinical stage biotech and the dosing of first patients with AVA6000, that first preCISION chemotherapy and the launch of the first ever Affimer-driven in vitro diagnostic product. So looking forward, therapeutics is, without a doubt, the key value driver for the Group and has been. AVA6000, we're in the middle of that Phase Ia dose escalation study in the U.K. and we'll get U.S. sites onboard in Q2. And we expect -- fully expect to see the readout in Q3. And as I said earlier on, very pleased with progress and very encouraged by what we're seeing so far. That readout from Phase Ia will be pivotal for all the reasons that we've mentioned, pivotal for the preCISION platform because we'll learn a huge amount about the PK of that in human and therefore, pivotal for the Group. So really exciting few months ahead of us. I'm very pleased that we have a rich pipeline of preclinical preCISION and Affimer assets as well as the AVA6000 clinical development to drive milestones through this year and next year. From a diagnostics perspective, we now have a fully ISO-13485 certified IVD product business, and that is developing IVDs, as I've mentioned, with a focus around decentralized testing as well as redeveloping the antigen test as part of that much broader diagnostics pipeline. As Tony mentioned, we're in a strong balance sheet position, so that's great. And obviously, with the progress in AVA6000, the potential for partnering and license deals, we have opportunities for nondiluted funding as well, but we have a strong balance sheet that takes us well through 2023. Okay. I will leave it there. And Mark, if we can take some questions.

[Operator Instructions] Alastair versus Tony, as you know, we received quite a considerable amount of questions ahead of today's event, and they did kind of form into different kind of categories or themes and just given the attendance on today's call. I guess to make best use of the time, you've very kindly given me some of those that do cover a number of those topics. So if I may start with the first question. Avacta spoke of the need for biopsies in the last presentation. Appreciating that this is a very sensitive topic, has there been any progress in this regard?

Thank you. Yes. So we've touched on that a little bit. But I mean just to sort of point out that we can't sort of answer this fully, i.e., we can't talk about the number of biopsies taken and we can't give a running commentary on the clinical study for obvious ethical reasons. But I think it's worth just reiterating that point about the importance of the biopsies because the PK data will tell us about the serum and urine levels of AVA6000 doxorubicin [indiscernible] group, but it doesn't tell you about whether it's being -- whether doxorubicin is being released in the tumor. So biopsies are not mandatory in Phase I, but I'm confident we will obtain some tumor material for analysis. And we've worked with partners at a U.K. based -- on our world-leading pathology laboratory in the U.K. and we have put in place the validated assays to properly analyze those very precious biopsy samples. So there has been lots of progress. But I can't sort of go into more detail than that. We will be able to, of course, when we talk about the full results from the Phase Ia study.

That's great. A couple of questions, more than a couple around perhaps the next inflection point. What do you see as the next major shareholder value inflection point?

Yes. Well, I think without doubt, it is that point in the middle of the year where we have the full readout from the dose escalation phase and of course, the full review of that data by the Safety Data Monitoring Committee. So a positive readout, which means good safety, good PK data as well as an indication that doxorubicin is being released in the tumor tissue. That not only adds value to AVA6000 but opens up a broad pipeline, as we've discussed. And that creates all sorts of opportunity. Obviously, if you're taking AVA6000 forwards in the clinic, but taking other programs through preclinical development and potentially licensing some of those earlier programs as well. So genuinely, pivotal for preCISION and for Avacta.

That's great. Moving on, if I may, to the next question. Can you elaborate on the use of human tissue or cells the PDX model in the preclinical mice studies and explain how this makes the preclinical trials much more relevant to the current Phase I in human trials?

That's a really good question. And I think it speaks to that whole point about how translatable are mouse models. So it's just not true to say that if you get these results in a mouse model, you're going to get them in humans. So that's -- we never do that. But of course, the PX model, the patient-derived xenograft model uses an actual patient tumor cells from a patient tumor, implanted into the mouse, that has a reduced immune system, so the tumor cells are not rejected. So those patient-derived cells sort of more diverse, more heterogeneous than sort of, let's say, less realistic models. They've often got a tumor architecture and look from a molecular perspective more like the original tumor. So those cells in the mouse do look more like an actual human patient tumor. So the PDX models are -- I think they are deemed to be the best models for translating certainly, in many cases, the data from mice to human. But as I say, there's obviously clear differences between rodents and humans, right? So the -- for example, the circulating FAP levels in rodent blood higher than they are in humans. So there's a different -- a very relevant difference straight away. I mean, of course, that works in our favor because it's lower in serum in humans. So -- but we can be guided by the data from those PDX models, which I think as I said in the presentation, is why we're so excited. This is a very significant improvement in therapeutic index.

How will Avacta determine the maximum tolerated dose in P1A? They're going to say, theoretically, each dose escalation shows minimal side effects and could get to the maximum lifetime dose in 1 cycle. How would a maximum tolerated dose be determined?

Okay. So this is very technical, but it's worth answering at some level. So the maximum tolerated dose is defined as the dose just below that which 1/3 of the patients experience a dose-limiting toxicity, okay? So in other words 2/3 of patients don't, a 1/3 of the patients do. The MTD is defined just below that level. So as the questioner points out, it may well be that a maximum tolerated dose is not identified due to a lack of dose-limiting toxicity. And then the recommended dose for Phase Ib, that will be based on a combination of the safety data, the tolerability, the PK data and so on by the clinicians involved. So it's not as simple as the MTD of AVA6000 being related to [ DUCs ] lifetime cumulative dose because AVA6000 is targeted to the tumor. So -- I think the question also asked about how many cohorts are likely to be needed? And the final number of cohorts and the dose in each cohort, again, will be determined by the clinicians and the Safety Data Monitoring Committee. We expect to go through 3 or probably 4 and that's certainly the time line that we've described to go through 4 cohorts.

When do you expect the 2 U.S. sites to join the AVA6000 clinical trials and start recruiting and dosing their first cohorts?

Okay. So I touched on that in the presentation. So we expect those 2 sites to become active in Q2. But I think it's an important question because it's important to make clear, I'm judging by the way the question is asked, it's important to make clear that those U.S. sites will not run in an independent fashion. They're not doing a separate study. They're not running independent cohorts. So there could be 2 patients in The U.S. and 1 in the U.K. for particular cohort. So they are in the same study, and the data is combined. So it's not independent and additional in any way.

If I may turn to the next question, all 3 LFTs approved for use by the NHS are based on the nuclear capsid antigen. It appears that the spike protein of COVID-19 is very susceptible to mutation. So why doesn't Avacta's LFT target the nucleocapsid antigen rather than the spike protein antigen?

Yes. Good question. So both the nucleocapsid and the spike proteins are susceptible to mutations. But it is true to say that the spike protein particularly in this virus looks to be more highly mutated. There are reasons -- so there's a clear reason there for saying target the new click-captured protein. There are also reasons to target the spike protein because it's a more stable, more soluble, more easily retrieved from clinical samples and so on. But what I will say is that it's clear that we need to produce a robust test that is robust to mutations going forward. So despite the fact that some nucleocapsid tests have had their performance affected by these mutations, our redevelopment strategy is to look at -- I can confirm is to look at the nucleocapsid target as well as alternative binders to the spike protein with a view of delivering something that is robust going forward, certainly as robust as we can.

That's great. Can Avacta explain what advantages the preCISION platform has when compared to antibody drug contracts in targeting the chemotherapeutic agents?

Yes. So there is some similarity in the approach given that both the drug conjugates and the preCISION chemotherapy are trying to target the chemotherapy to the tumor. Antibody drug conjugates are a combination of using an antibody or of course, an Affimer using an antibody or an Affimer linked to the chemotherapy. And ADC approaches are totally dependent on -- standard ADC approach is dependent on the target being expressed on the tumor cell, like HER2, for example, 44 and when the drug conjugate binds, it's internalized into the cell to let the cytotoxin kill the cell. As an aside, that is what he is novel and unique about the TMAC program that we use the preCISION chemistry in the linker. So the warhead is released extracellular and doesn't need internalizing. But to go back to the point, a comparison of preCISION chemotherapies and ADCs. ADCs are complex drugs, right? The combinations of biologics [indiscernible] antibodies with the cytotoxic. And tumors actually evolve over time to reduce the amount of the biomarker, which the ADC is targeting. So it's a really interesting area. It's a very hot area, but FAP is expressed both on tumor cells and in the tumor microenvironment, in the fibroblast and gives us an opportunity to be somewhat tumor agnostic so that you can target high FAP expressing tissues. So it's different, but it's similar in many ways.

That's great. A question around funding, really, if I may, what's funding options for further phases of the preCISION platform, both for AVA6000 and other prodrugs are Avacta considering? Will these be in the best interest of shareholders and create minimal dilution?

Yes. So we are -- the company is very mindful of utilizing non-dilutive funding routes, wherever that is possible, okay? So there's clearly a number of potential funding options that include non-dilutive as well as dilutive. Right now, as we've said very clearly, we have a long cash runway well through 2023 with good AVA6000 data in the middle of this year, then that will create obviously huge value across the whole pipeline -- the preCISION pipeline and gives us an opportunity to think about commercial partnerships and licensing to provide that non-dilutive funding. That is obviously attractive to the company as well as shareholders. So we're completely aligned in that way. Licensing AVA6000, our lead clinical asset is unlikely because we can generate a lot more value for shareholders by taking that further forward to ourselves, but really good data from 6000 obviously creates value throughout that whole pipeline. And of course, licensing the preCISION platform to let third parties modify their own chemotherapies. So yes, we're very mindful of using those non-dilutive funding routes.

That's great. Alastair, obviously, we're coming up to the hour, and thank you to all the investors that have pre-submitted questions. And indeed, for all those that have been submitted throughout today's presentation, which, of course, all might be visible to the company. And obviously, we'll publish all those responses where it's appropriate to do so and notify you by e-mail when they're ready for your review. Alastair and Tony, I know investors feedback is important to you both, and I'll shortly redirect investors to give you their thoughts and expectations. But before doing so, I wondered if I may, Alastair, just ask you for a few closing comments to wrap up with. And then as I say, I'll redirect investors to give you their thoughts.

Yes. Thank you. Yes. Well, really just to reiterate, I mean, the company has gone through a transformational growth period on both sides. Obviously, everyone is disappointed with the emergence of the Omicron variant and the effect that had. But we will soon turn that around. The diagnostic business is now much more advanced than it was and it is in a position to deliver a pipeline of products as well as the COVID antigen test. The real value drivers, as I said several times, is around the therapeutics and AVA6000, and we have a very exciting summer ahead of us. So thank you, everyone, for your time, and look forward to catching up again soon.

That's great. Alastair, Tony, thank you once again for updating investors this morning. Ladies and gentlemen, please do to not close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This will only take a few moments for you to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Avacta plc, we'd like to thank you for attending today's presentation. I may wish you all a very good day.