Avacta Group Plc (AVCT) Earnings Call Transcript & Summary

Good morning, and welcome to the Avacta Group Plc Investor Presentation. [Operator Instructions] Due to the number of attendees on today's meeting, the company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today, and will publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Christina Coughlin, CEO. Good morning.

Good morning, Mark. Thank you for hosting, and looking forward to the conversation. My name is Christina Coughlin, and I am the CEO of Avacta. We are here today to present our interim results for the period ending 30th of June 2024, and we are here as well for the business update. We're going to start with the interim financial results for the Avacta Group. Key messages in the financial results published this morning is that the performance of the group was in line with Board expectations. We have increased revenue and gross profit of the Diagnostics division as we signaled earlier this year. The Diagnostics division has achieved an adjusted EBITDA of GBP 0.1 million, increasing from a loss of GBP 0.4 million in the first half of 2023. This change has been driven by, first, a growth in revenue as well as savings associated with the closure of the Wetherby laboratory facilities and a move of these R&D activities to the Coris laboratories. In the Therapeutics division, investment has been made in AVA6000 on 2 fronts. The first is to accelerate the enrollment in the trial to complete the Phase Ia, as we reported at ESMO. And second, drug supply manufacturing costs, which are going to allow the company to move to Phase II development in 2025. Other research costs have been controlled as the company has now moved to focus -- the research team is now focused on the next generation of pre|CISION medicines. In the cash flow analysis, the operating activities inflow from Diagnostics of GBP 1 million from the operating activities. The financing activities reflects the March fundraise. And our outlook, Diagnostics is expected to continue into the second half in terms of being EBITDA positive. The operating cash outflow on Therapeutics is expected to accelerate as the trial progresses. Let's turn now to our business update. In the Avacta business update, let me give you a summary of a few of the highlights that we're reporting. First, AVA6000, our pre|CISION-enabled peptide drug conjugate to doxorubicin continues to demonstrate a highly encouraging tolerability profile, robust preliminary efficacy signals that we'll take you through a few of the examples in both study arms of our Phase Ia trial. The ongoing expansion cohorts will further refine our understanding of the safety and the efficacy ahead of the Phase II trial. At this half year stage, our preclinical studies and the data from the ongoing Phase Ia clinical study of AVA6000 continue to support our growing confidence in the wider potential of the pre|CISION platform. Process to divest the group's Diagnostics division has commenced. The company has started to receive indicative offers, they are, of course, subject to diligence. But this will allow the company to move to a pure-play therapeutics biotech entity, which brings me to our fourth highlight. As we communicated first at the AGM, the company is looking at a sustainable long-term funding strategy, which includes exploring opportunities for our dual listing on NASDAQ, and an update will be provided in due course on this strategy. Let's first look a bit at the pre|CISION platform. Over on the left-hand side of the slide, you can see a schematic here with the first pre|CISION molecule, AVA6000. This is a warhead in this example, doxorubicin, is attached to a FAP-cleavable or the pre|CISION peptide. This is a small molecule entity, a peptide drug conjugate. The addition of the peptide to the warhead inactivates the warhead, essentially making it inert. The advantages here is we have a short plasma, 1/2 PK, short half-life, minutes to hours. We have a high tumor concentration as we reported first at AACR. There is no targeting moiety here other than the FAP-specific release, and this has small molecule manufacturing. We can then implement these peptide drug conjugates in a biologic drug conjugate, either an antibody or an Affimer. The pre|CISION platform is used then as a warhead release mechanism with a drug conjugate, again ADC or Affimer, and we can now get multiple drug-to-antibody ratio. Look again at the peptide drug conjugate, it's a ratio of 1:1, but we increased that ratio as we move to the biologic drug conjugates. Advantages here. we see in our preclinical models, minimal plasma exposure with sustained tumor exposure. We have tumor targeting via a second mechanism through the antibody or the Affimer binding, and these use standard ADC conjugation chemistry methods, so the manufacturing made simple by many others ahead of us in the ADC space, having optimized these methods. Here is an intro to my new favorite slide in the deck. I'll tell you about the new research program, looking at both the expression and the biology of FAP, since pre|CISION is uniquely poised to leverage the FAP enzymatic activity. In the tumor microenvironment, we are noting that the spatial organization supports the pre|CISION mechanism of action of bystander effect delivery. Let me tell you a little bit about what we mean here. The highest expression of FAP in the CAFs, or the cancer-associated fibroblast, is concentrated right at the tumor-stroma interface. We have seen this in a number of tumors that have been stained with this new method that we have immunofluorescence. It allows us to look at in a given tumor biopsy, multiple different antigens in different colors. Now at that tumor-stroma interface, we see that the FAP-positive CAFs are co-located with the blood vessels, which again underpins or delineate this bystander effect delivery. What do we mean by this? Let's look at the 3 steps. The blood vessels, which are noted in red, deliver the conjugated molecule, AVA6000 being the first one, to the local FAP-positive CAFs in green. This is all in the stroma. The FAP on the cell surface of the CAFs now cleaves the conjugated molecule and creates that activated warhead, it releases it. Active warhead now is free to move into FAP-negative tumor cells in aqua or teal or the FAP-positive CAFs. Critically important in this slide, it's important to note this is a patient with triple-negative breast cancer. This is not a patient treated in the trial, but is an example. Many solid tumors will have FAP-negative tumor cells, but FAP-positive CAFs. This is the bystander standard effect, and it is the entire mechanism of action of the pre|CISION platform. Drug is delivered in the stroma, and that active release warhead, because it's extracellular, is now free to move to tumor cells or the CAFs alike. Let's look a bit at the evolution of the chemistry around pre|CISION and a little bit of a teaser as to what the pipeline will look like. All the way over on the left-hand side, you can see in the first generation of our pre|CISION medicines, we see AVA6000 here. This is the exact chemical structure of AVA6000. Doxorubicin is attached directly to the FAP-cleavable peptide that forms the pre|CISION platform and a capping group is added here, an engineered amino acid. We have no PK extension in this. The half-life of the first-generation compound is short minutes in the clinic shown as well as animal models, with extension of released warhead half-life. Important to note here, we talk about the half-life of the conjugate versus the released warhead. There is no spacer to modulate the enzyme efficiency. We're using a true chemistry term here, kcat/KM, which just refers to the efficiency of the enzyme in cleaving, which is baseline high efficiency. That's our first molecule, AVA6000. Let's look at the second generation here where we've optimized the chemistry in 2 important ways. The first is we can alternate multiple different capping groups with PEG links, these enhanced plasma protein binding and can significantly extend the half-life of the pre|CISION molecule. Recall this is the conjugated molecule, not the released warhead. Linkers, self-immolative linkers, so they fall apart once they've been cleaved. These linkers can allow many additional warheads to attach to the peptide. We've borrowed several of them from the ADC space and developed some of our own. What these allow us to do is modulate the efficiency of the enzyme. Both of these innovations, I'll tell you, with the chemistry of pre|CISION, are allowing us to extend the half-life, pretty dramatically, of the released warhead. And so this allows us now not only to fix the therapeutic index of warheads, but we can also significantly impact the PK of the released warhead. Let's look at the third generation together. Here is the pre|CISION biologic conjugate drug. First gen and second gen are both peptide drug conjugates versus the third generation, which is now a biologic drug conjugate. We're now using enabled MMAE as an example here, with the PEG cap/maleimide/cystine conjugation again, borrowed from those that have pioneered in the ADC space, works really well there. We've been implementing that chemistry directly here. With engineered cysteins into our own proprietary Affimers, we can also use the existing cysteines within antibodies, and we can create a link between our pre|CISION FAP-cleavable peptide, the biologic and the warhead. The capping group that allows this, it allows the maleimide/cystein conjugation to biologics. The biologic conjugation we have seen in our preclinical models, significantly extends the half-life to days, to weeks. The warhead now is delivered intratumorally in a highly sustained release mechanism. It allows also, through that biologic conjugate, another mechanism of targeting to either the tumor microenvironment, the stroma or the tumor cells themselves. Let's dive in now to the clinical data. We're looking at our Gen 1 pre|CISION molecule. This is FAP-enabled doxorubicin AVA6000. AVA6000 delivers high concentrations of doxorubicin to the tumor microenvironment relative to plasma, resulting in durable tumor shrinkage in patients whose tumors have over-expression of FAP and sensitivity to the anthracycline mechanism. Exposure-response modeling suggests that released doxorubicin is generated primarily by cleavage in the TME as opposed to in the blood stream, and this is leading to a distinctly favorable safety profile. Pre|CISION-enabled or peptide drug conjugated doxorubitin in AVA6000 results in a robust widening of the therapeutic index and some key fundamental changes in the kinetics of the release doxorubicin. All 3 of these conclusions will show you the data coming up. As you know, we've published these first this year, earlier this year at AACR with Professor Banerji, and most recently, just a couple of weeks ago at ESMO with Professor Twelves. First, let's look again and recall the design of the AVA6000 Phase I trial as well as the patient population. We began the trial in Arm 1, with an every 3-weeks dosing regimen. That is very consistent with the way that doxorubicin, standard or conventional doxorubicin is dosed in the clinic. We started with 2 dose levels there that you can see in faint pink: 1, lower than conventional doxorubicin and 1, pretty much at the same dose level. So the 80 and 120 in the brackets there, you can see the molar equivalent dose of doxorubicin at 54 and 81. We then escalated through another 5 cohorts, from a 1.3 to an almost 4x the dose level of standard dose doxorubicin in the clinic. Based on a favorable safety profile that was first reported at AACR earlier this year, we then moved to Arm 2 in Phase I, which is an every 2-weeks dosing regimen. And you can see the 3 dose levels enrolled there. The population is patients with a diagnosis of known FAP-positive cancers with acceptable performance status, adequate organ function and recovery from prior therapy. Based on the cumulative cardiac toxicity, the prior therapy with any anthracycline was limited to a total cumulative dose of 350, and the trial has been analyzed for our safety and our efficacy end points. Let's take a look first at 3 safety findings in the trial. First, conventional cytotoxics, including doxorubicin, are limited in the clinic by severe hematologic toxicities that are observed pretty much across the board with these drugs. What we are looking at here in this graph are 5 severe hematologic toxicities can CTCAE Grade 3/4 toxicities, that are experienced either with published -- a published data set with conventional doxorubicin. You'll see the reference there, it is a recent trial published in 2020 by one of our investigators as the lead author, Dr. William Tap. These patients were treated with soft tissue sarcoma in the first or second-line setting. So it is a particularly relevant trial for us to compare to. Let's just look at the top there, neutropenia, which is the key toxicity that limits dosing in the clinic. Nearly 50% of patients, 49% experienced severe hematologic toxicity there, neutropenia, and that is reduced to 14% patients treated with AVA6000. Recall again, only a few patients in the trial were treated with that dose of conventional dox or below. Most of the patients received 1.3 to almost 4x the molar equivalent dose of doxorubicin, and yet we see this pretty dramatic reduction in all of the severe hematologic toxicities. Importantly, and for the first time at ESMO, we were happy to report that we see a lack of severe cardiac toxicity associated with conventional doxorubicin when patients are dosed with AVA6000. Let's look at this in a couple of different ways. I'm going to start in the middle box here with severe cardiac toxicity. In these graphs, we're comparing again to the same doxorubicin Arm in the trial that was published by Dr. Tap, but also updated for the cardiac data by Robin Jones. What you can see here is with regards to severe cardiac toxicity, which is Grade 3/4 cardiomyopathy or cardiac dysfunction. No patients with AVA6000 experienced severe toxicity versus 3% treated in this particular trial. With regards to mild cardiac toxicity, we use a measure of the heart function called left ventricular ejection fraction dysfunction. And what we are looking at here is in patients where that reaches a level that is just below that of a normal patient. Patients treated with doxorubicin 12% of the patients will see an LVEF level that is below normal. There was only 1 patient in the AVA6000 trial that saw their LVEF reduced below normal to 1.8%. Just to give you a little bit more context in the box there, severe cardiac toxicity, cardiomyopathy, is not observed with AVA6000, but it is reported in the doxorubicin label with 6% to 20% of patients treated at the higher dose level of 500 milligrams per meter squared. In the AVA6000 trial, we have liberalized in an amendment to dose patients up to 550 milligrams per meter squared. That amendment has been in force for some time now, and that is underpinning this observation of a lack of severe cardiac toxicity. Turning now to the quality of life for the patients. We have multiple toxicities that impact quality of life. We have selected here 5 from the GI toxicities. These are any grade, not just looking at severe toxicities. And we're looking here and breaking down by also the every 2-weeks versus the every 3-weeks. To give you an illustration of the similar toxicity profile that we're seeing between the 2 Arms, we're comparing again to the same conventional doxorubicin data set at 75 milligrams per meter squared. And what you can see, let's just look at a couple that I know from my clinical practice, were critically important to the many teenagers that I gave doxorubicin to with soft tissue sarcomas. Let's start at the top. Nausea, dropped in half, really impacts the ability of -- just the activities of daily living. One of the things that my teenagers in the clinic used to complain about all the time are the mouth sores that they get from this. I'm happy to report that, again, we see this, as we reported initially at AACR, a dramatic drop in the mouth sores, 40.6% of patients treated with conventional doxorubicin, down to less than 10% in both Arms with the patients here. Also see reductions in the other toxicities noted there. Now a favorable safety profile was very important as we moved into the clinic with AVA6000. It doesn't matter, though, if we aren't shrinking tumors and impacting the time that patients have in terms of progression-free survival and their duration of response. Let's look now at the efficacy together. This is a waterfall plot updated from AACR at ESMO, now with the patients with FAP-high indications. You'll see here, we have multiple patients with high-grade soft tissue sarcomas, undifferentiated pleomorphic sarcoma, liposarcoma as well as patients with a subset of head and neck cancers, salivary gland cancers. Of note, patients who are ongoing at the time of the data cutoff are noted with an asterisk, and we reported 2 patients with histology. Recall back the immunofluorescence, this is a truly important tool that we're going to show you the results of here. Let me help us to sort of hone in on and really focus on patient populations as we try to read the tea leaves of the Phase I trial. Let's recolor this and focus in on the patients with head and neck cancers or salivary gland cancers. Here, we reported and we see that patients with salivary gland cancer have the evidence of activity, 1 partial response and 1 minor response. You can see here multiple patients with the teal bars are ongoing at the time of the data cutoff. I'd like to note that I have some favorite slides in the deck. This is one of them. It impacts the entire platform. Let me explain why. This is a case study of a 79-year-old gentleman, who was treated with salivary gland cancer, ductal histology in the trial. His prior therapy was androgen deprivation therapy, standard in this tumor type, and that was followed by disease progression. He enrolled in the AVA6000 trial in October of 2023, and he was enrolled in the highest dose cohort, 385 milligrams per meter squared. Important to note this gentleman's age, he is 79 years old. And it is possible that he wouldn't have been offered standard dose doxorubicin because of the toxicity. And yet, he's being treated at almost 4x the dose of conventional doxorubicin. He was noted in the biopsy, 24 hours post, to have the highest level of intratumoral doxorubicin in any biopsy taken in the trial. He began with a minor response at the first scan, which was a confirmed partial response at 12 weeks. And now I'm happy to report he has a duration of response that is greater than 18 weeks because he has reached the lifetime maximum of doxorubicin exposure by AUC. He has stopped receiving AVA6000, although his partial response is continuing and follow-up at the time of the data cutoff. You can see his CAT scans there on the left, and we're demonstrating here 2 liver lesions that have shrunk pretty dramatically over the course of his therapy. In the middle of this slide is my favorite figure, well, new favorite figure, I'll call it, in the deck. We're using this same technology, so immunofluorescence, it's allowing us to look at 3 different types of tissue at the same time using 3 colors in the tumor biopsy, prior to this gentleman being treated on the trial. In teal or aqua, we're looking at the tumor cells. In bright green, we're looking at the FAP-positive CAFs. And in bright red, we're looking at the blood vessels. Bystander effect is very important. Important to note here, the tumor cells are negative for FAP. But because FAP is expressed in the extracellular portion of the CAFs, the drug is delivered through those bright red vessels, it immediately interacts with the FAP-positive CAFs. It is cleaved. And the warhead, because it is extracellular, is now able to move right into the FAP-negative tumor cells or truly the FAP-positive CAFs. Seeing responses in patients with FAP-negative tumor cells, critically important for the pipeline, and this will be most of the solid tumors that we will treat. Let's recolor that waterfall plot again with reds. These are depicting the patients with high-grade sarcomas. What you can see here are 5 bars, 5 patients that were treated with the high-grade sarcomas. 2 partial responses were noted in this patient population. And importantly, we see 2 other patients with tumor shrinkage, one of the patients reaching that minus 10% of a minor response. So multiple patients with activity here. Let's take a look at a quick update of the first partial response in a patient that was treated. This is a figure that we're reprising essentially from our AACR annual meeting in April of 2024. This patient, as we will note, all the way on the right-hand side of the waterfall plot with the asterisk, remains on study at the time of the data cutoff on the 19th of August. This gentleman, as you'll recall, a 60-year-old gentleman, 1 prior line of therapy, developed a minor response and then developed a confirmed partial response. He had near complete resolution of the multiple pleural metastases. Happy to report that his duration as of the data cutoff of 19th of August, the duration of response, is now more than 55 weeks. Next favorite, next favorite slide in the deck. We're reprising again an important figure here from our AACR presentation, where we're taking a look at the biopsies that were taken 24 hours after the dose was administered. We're looking in red at patients with FAP-high and in black in patients with FAP-mid. As you'll recall, these dots are all mixed up, but essentially, most of the patients, the vast majority of the patients, are seeing this two-log difference between the tumor and the plasma concentration. Critical to note, this was under-represented in the animal models. And so the patients where we see this were better than what our animal models would have predicted. Now looking over to the right-hand side, we're updating the figure using a log scale representation of FAP activity versus doxorubicin concentration. It is important to note here that even at these lower levels, [ 10 to 2 ] of FAP activity that we would see in patients with FAP-mid, we are getting these high levels of intratumoral doxorubicin. This underpins the entire mechanism of the pre|CISION platform. Even at these lower levels of FAP activity, the release of the warhead is particularly efficient with AVA6000. Why is that important? Let's move to the next figure. This now allows us to dramatically widen the patient populations that are addressable by the pre|CISION technology. You've heard me mention before that there are 3 diseases where we see doxorubicin activity in the clinic, and these are particularly interesting to us with AVA6000: subset of head and neck cancer, salivary gland cancer, subsets of soft tissue sarcoma as well as breast cancer. But this observation in the FAP-mid and the lower FAP activity that we see in the biopsies really now allows us to go after multiple diseases, pancreatic, non-small cell lung, HER2 breast cancer, gastric cancer. Multiple other diseases where other warheads in the pipeline might be critically important, and we might see differential sensitivity. It's important as the pipeline reveal is coming and optimizing more potent warheads for these particular diseases truly in the cards for us. Summary and conclusions. AVA6000 is safe and well-tolerated in both Arms. We have a lack of severe cardiac toxicity and early limited cardiac safety signal in the nonsevere. There was no MTD, despite dosing up to almost 4x conventional dose doxorubicin. Phase Ia enrollment has completed, and the recommended dose for expansion cohort begun enrollment. Multiple responses in patients with high-grade sarcomas and salivary gland cancers. Our biopsy data importantly indicate that tumor cell expression of FAP is not required for the release of doxorubicin and not required for responses in the clinic. The pre|CISION-enabled doxorubicin AVA6000, there are multiple fundamental changes in the PK. These are important as we look at the pipeline going forward in optimizing the PK, again of the released warhead. It includes an extended half-life of the released warhead and a reduction in the Cmax or the maximal concentration and the volume of distribution, essentially showing in the clinic that we can shield normal tissues from the effects of this warhead. Reprising again from the AGM is our AVA clinical development strategy and showing you exactly where we are. We've now completed the blue diamond, the Phase I dose escalation data release at ESMO. We have now moved to our RDE cohort. The expansions will begin in the second half of 2024. The RDE cohorts, importantly, is already ongoing. These expansion cohorts together, and we are still planning 3 of them as we noted at the AGM, these will lead us directly into the Phase II trial. One of the questions that we get asked a lot is what are the advantages of the peptide drug conjugate platform of Avacta over the traditional ADC approaches? Importantly, we see 4. The first, I hope you're seeing how much work is being put into understanding this bystander effect, understanding the biology of FAP. We intend to be the company and the scientists that understand FAP better than anyone. This bystander effect is critically important. Extracellular warhead released in the tumor micro environment allows that warhead to now move into a FAP-negative tumor cell as well as the FAP-positive stromal cells. Critically important, as most of the tumors and the indications that we're looking at are going to be FAP-negative, and we already see responses in the Phase I. The traditional ADC approach is that the warhead attached to the antibody is internalized into an antigen-positive cell. The bystander effect is really only active once that warhead is essentially kicked out. And so an antigen-negative tumor cell can only be killed by the warhead being kicked out. The linker is important, and there is a big difference between the Avacta linker and the traditional ADC. Our tumor-specific warhead release by the FAP-cleavable linker is in contrast to nonspecific protease-cleavable linkers used in most ADCs. This is where we see the lung toxicity. We see 0 lung toxicity, and we have looked and needed to report to the health-- we see 0 lung toxicity, 0 liver toxicity with our PDCs versus the ADCs. And then our manufacturing as well as the DAR. The AVA peptide drug conjugates are simple, with a 1:1 ratio versus a 4:8 that is needed for the traditional ADC. We have small molecule timelines and cost of manufacturing. The manufacturing of ADCs is somewhat complex with 3 different processes and quite costly compared to our ADCs. Our milestones. Let's revise this slide from the AGM and take a look at where we are. Initiate the expansion cohorts, we've completed that. Phase I enrollment is complete, the RDE expansion is ongoing. Update the AVA6000 clinical data, we've completed this. The ESMO presentation went very well at the Congress just a couple of weeks ago in September. We have also committed in the second half of 2024 to release pipeline updates as well as to host a live R&D Spotlight to take a look at the innovative science in the Avacta pipeline. Let's look at both of these that are in progress. Updates on the pipeline will be ongoing throughout the month of October. And our live R&D Spotlight has been scheduled in London on October 30. We look forward to updating you on the pipeline and the next generation of pre|CISION molecules. Also important that we bring to our investors today, setting goals for the pipeline into 2025. The AVA6000, initial look at expansion cohort data and update of the Phase I data will be in the second quarter of 2025. The AVA6000 Phase II trial is slated to begin in the second half of 2025. And as we move towards that goal, we will give further guidance. Also happy to report that the next-gen pre|CISION candidate selection for the next molecule to enter the clinic will be in the second half of 2024, and we will give further guidance as to the timing of the IND as we move forward. Thank you for joining us today. We are now looking forward to answering some of your questions. Mark?

I'd like to remind you that recording of the presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. Christina, we have received a number of questions, both pre-submitted and throughout today's meeting. And these fall into a bunch of themes really. And perhaps of the first one, which is around licensing. The first question we've got here is Avacta told shareholders, we've been in deal value discussion since June 2023. The data has improved every juncture. When will the company find and deliver on the multiple promises made over the past year and announce a licensing deal?

Thanks, Mark. So let me first answer this by stating we've been working very hard on this over the last few months. We, the management team, have met many companies, U.S., Europe and in Asia. There's genuinely a lot of interest in Avacta, in our platform, which has enabled us to have these multiple conversations. This is a new technology. We have exciting, but somewhat early data in our Phase I trial with 57 patients treated. We also really should remember why we're interested in such deals, such collaborations. There's really 2 reasons. The first is validation from well-known players in the oncology space. And second, secure some upfront, non-dilutive funding. But recall, the amount of funding received in the form of that upfront payment to execute on the deal is going to be based on the stage of the deal and the asset. So for example, a preclinical deal with another company's medicine and the pre|CISION technology won't be worth near to what an asset with Phase III data will be worth. We have spoken to a number of smaller or midsized biotechs who can move very quickly and are interested to collaborate at an early stage. But whilst we could do some deals with these types of companies, often they're not going to give us the validation that we would really like. To be honest, we may even help them more in this respect and they help us as the medicine would be in their pipeline. And their ability to provide meaningful funding is somewhat limited. We have also spoken to large pharma companies, which would partner entire assets, for example, AVA6000, and can provide the validation we're interested in as well as that meaningful financial terms. But these larger pharmaceutical companies tend to work very slowly, want more data on these -- with these types of deals. And they really do typically require clinical data into Phase II, a defined patient population with a defined objective response rate, progression-free survival, multiple endpoints. And we're just not there yet. We're continuing to have these conversations, and we continue the work here. Deal-making at least among several of the players in the ADC space is also cooled just a bit as there have been multiple Phase III failures here. So really important for us to consider the external factors as well. We commit, we will keep this dialogue open with investors and we do keep the dialogue open with our partners. We will have further conversations planned, but we also very much want to set the expectations. We have decided -- we will not strike a deal just for the sake of a deal where we don't feel we're getting either the right validation or the funding that the technology really deserves.

And a bit of a follow-on really for that around licensing. I know some of this you just covered off on that previous question really, but if there's anything further to add. It seems it's been hard for the company to strike a deal. Why is this? What is the complexity here in getting that licensing deal done?

Yes. So as you mentioned, thinking back to our last question, striking a deal isn't hard if we're willing to give away part of our intellectual property. And giving away -- and this is important, the time that our scientists need, and the game here and a quick deal that we can do in Phase I would be to put a molecule, a drug in another party's pipeline. That kind of deal we can strike now. But currently, with our Board's support and collaboration with the Board, we've decided that we will focus on the right deal at the right time, a deal that will surround either our own pipeline assets, such as AVA6000, or a co-development deal, in which case, the novel medicine will be in our pipeline as well as in the potential partners pipeline. We have decided that a quick deal to put a pre|CISION medicine in another company's pipeline is not one that we will pursue. And so these can take longer. They need more clinical data even into Phase II and perhaps even a second asset in the clinic. So stay tuned. We're looking forward to updating you on importantly, that second asset in the clinic.

Perhaps moving on now to AVA6000. We've got a number of questions, some pieces you may have touched on as well as during the presentation, but let's just go through those. The first question we've got here, considering the extremely consistent data observed in the Phase Ia dose escalation study, is it now a firm intention to fast track Phase II with a focus on the single indication? And if so, which indication is likely to be prioritized and which routes sought?

So short answer is no. This might feel like the right path to take, given that we're now seeing exciting responses, the duration of response is quite nice, the durability. But we wouldn't fast track to Phase II for 2 reasons. One, we have multiple options on the table, as we talked about during the presentation. There isn't a clear winner right now having the best data. And the second is we haven't tested in the breast cancer indication. You'll recall that in the Phase II, we have to select -- we select 1 indication. The Phase II is really a large investment of cash, time and resource. And so at the current time, because we have at least 3 indications that we're thinking about, we need some more data to select that one. I can tell you, if we made a decision now on both tumor type and line of therapy, which together form that indication, the chances are that we would be wrong. And so the expansion cohorts, small number of patients, specific line of therapy really allowing us to design and foreshadow that Phase II trial. Drug development, you'll recall, it's about a series of decisions that are all de-risked by our prior knowledge. So what we know from the Phase I, both safety, efficacy and the biology, is now helping us to de-risk where we go with AVA6000 next, but also it's now helping to plan and de-risk additional pipeline assets. And this is how we set the company and the pipeline up to succeed.

Next question we've got here is, based on the safety data so far, even if Phase II for some reason, shows that AVA6000 is no more effective than conventional doxorubicin, can it still be assumed that AVA6000 will replace doxorubicin in chosen indications and therefore, already classed as successful?

Always a good debate. There are multiple pathways by which a drug can be approved. This question is referring to one that is called essentially non-inferiority, meaning that the efficacy is the same, but the safety is better. In order to get a drug approved, though using this path, it is a much larger trial. The statistics to prove that non-inferiority are essentially looking at a much larger trial, longer route to approval as well as a much more expensive trial. But the more favorable scenario for a drug like AVA6000 is to show superior efficacy. And this is one of the reasons that we're spending this bit of time and resource on a very careful selection of what the Phase II indication. We're looking for a shorter, more effective trial for AVA6000 with evidence of superiority.

If your updated clinical data results are replicated in Phase II/III trial with a 13% partial response rate, 3 in 23 or 30 in 230, would that in itself lead to the FDA partial fail in your honest opinion? What does experience suggest that partial response target should reach or surpass for approval?

So important to note in this question that I'd like to reiterate, is one of the challenges of this type of basket trial where multiple diseases are included in Phase I testing, is that we're not able to adequately predict either the response rate or the PFS of the drug in a specific indication in Phase I. The uncertainty here, it makes the expansion cohorts necessary. This is going to help us to identify specific tumor type and line of therapy, the indication for the Phase II testing. There's a really good example out there of this approach. It was used essentially first by Merck in the Phase I trial of pembrolizumab, their expansion cohorts then looked at diseases, but also different doses within the Phase I trial. And so without those expansion cohorts, we're going to struggle with numbers to really calculate a response rate or even a PFS in a given indication. And so we can't benchmark our data using the entire basket trial, so the 3 out of 23. It isn't really a Phase II/III trial that we would do in this heterogeneous mix. We have to select. So despite these issues, we usually do try and read the tea leaves. And so let me tell you a couple of observations that we touched on a bit. Those 6 patients with high-grade sarcomas, we saw 2 responses there. And so that's exciting to us, makes us really want to take a look at that particular indication. The second example, those patients with salivary gland cancer, so the subset of head and neck. We see1 durable partial response, 1 minor response patient that's still ongoing that we reported at ESMO. All of this is very encouraging. Our next step is to assess in a slightly larger group of patients among these 3 diseases that we will select and release a bit later, and that will set us up for that Phase II trial.

If FAP levels do not correlate with warhead release and FAP present does trigger release, why did the FAP-mid results see no partial responses and only a 226 or 8% minor response? Does that result compromise most of the Avacta pipeline?

So a critical observation in this trial, I think, is the concept of warhead sensitivity. I've mentioned before that patients with pancreatic cancer, gastric cancer, colorectal cancer, as an oncologist, we wouldn't reach for doxorubicin in that setting. It just really wouldn't work. Where doxorubicin does work, where we know it works is soft tissue sarcoma, the subset of head and neck cancer, salivary gland and importantly, breast cancer. It's important to note that it is also used in many hematologic malignancies, but FAP is not relevant here. It's not expressed. And so we anticipate no market there. But back to the solid tumor space, those 3 important indications. The important point here in this question is that if -- let's think about if there was a warhead instead of doxorubicin that was more relevant for these disease settings. This would be something that we would be very bullish over given the biopsy data. Recall, all of the patients, regardless of FAP activity level or whether they were with a disease characterized as FAP-high or FAP-mid, all of these patients showed a pretty dramatic concentration of the warhead versus the plasma. And everyone had essentially very high levels of doxorubicin despite the biopsies being 24 hours later. So the short answer here is no, the pipeline is not compromised. I'm going to twist it around. I think these data are really compelling for the pipeline, but we have to swap out the warhead. And so the pipeline here, a more potent warhead with more relevance, let's say, to some of these big disease settings. Let's talk about pancreatic, the various types of lung cancer, breast cancer, concentrating that new warhead in the tumor, just the same way AVA6000 works, this is essentially what those data are telling us.

And the next one we've got here is given the Cmax of free doxorubicin in plasma is consistently low with AVA6000 treatment, how many treatment cycles should the pharmacokinetic platform permit for doxorubicin-naive patients without significantly increasing the risk of cumulative toxicity? How the length of treatment be determined for patients going forward?

So good question, and an interesting observation here. It's important to note, Cmax and maximal concentration is low with AVA6000. And that's in contrast at higher dose levels. We see a similar effect of the area under the curve, meaning we see a similar effect with conventional doxorubicin versus AVA6000. The difference is we're dosing 4x, though. We need to balance these 2 factors, the Cmax versus the AUC. I'll give a teaser, we're going to have a bit of discussion at the October 30 event, the live R&D Spotlight around PK/PD and all things biopsy. But back to Cmax and AUC. The length of treatment for patients will be based on population PK parameters, and it's going to be looking at the exposure to the AUC. The reduction in Cmax is probably what's responsible for the favorable safety profile. But with the AUC and the population PK here, we're going to need a decent sized cohort with the selected dose to predict what the length of treatment is going to be that's acceptable. So this is actually a key secondary endpoint for use in the expansion cohort, these pop-PK studies.

Next question we've got here. Given the established role of stroma in treatment resistance, can you confirm whether AVA6000 effectively breaks down the tumor stroma, facilitating access to the tumor and triggering an immune response?

So let me answer this in 2 ways. It's almost 2 questions here. First, does AVA6000 breakdown the stroma? Stromal cells are characteristically of a much lower grade than tumor cells. So this means a lower rate of division. Tumor cells have a very high division rate, so high grade. It's important, as drugs like doxorubicin are designed to kill dividing cells, so they essentially poison cells that are undergoing cell division. Thus, in these cells, the tumors with higher grade -- well, we don't know that the mechanism does not kill stroma. We do know that tumors remain FAP-positive throughout, and this is through FAP -- through serial FAPiPET scanning, suggesting that there may not be as much stroma kills with cytotoxic drugs. However, the stroma does divide and the stroma does grow with the tumor. And so we can assume that there will be some stromal kill. But the money is really in the tumor cell kill. This is what is going to produce the responses and truly produce the durability of responses in the PFS gains. But second, does this trip an immune response? And I've been up front about -- my PhD is in immunology, I've worked in the IO space, and so I love this question. Most chemotherapy drugs -- I'll say with the exception of any of the microtubule inhibitors, and we don't understand why. But they trigger immunogenic cell death. What this means is that the cells essentially implode without a cleaned-up packaging of the contents. And these contents, cytoplasmic proteins, et cetera, are now subject to the immune system. And so this is what creates this concept of immunogenic cell death. So it does have the potential to generate an anti-tumor immune response. And so it's well known that many of these chemos will do this. Doxorubicin has this potential as well. We all know from the field of oncology and specifically the IO field that chemotherapy agents partner well with immuno-oncology agents, such as the PD-1 inhibitor. We see multiple cytotoxic combinations with KEYTRUDA. Interesting question going forward and one that we are thinking about.

I'm just conscious of time. We've got quite a few to get through on some other subjects as well. But the next one we've got here is in previous R&S, Avacta stated that the AVA6000 in Q2W would have been the first-line treatment. Why has this not been the case?

Yes, really quick answer here is that it's really the design of the trial. Several patients in the trial who have not received prior therapy in the metastatic setting, this was permitted. But it wasn't essentially excluding patients with prior therapy. So we do still see a mix, basket trial, wide inclusion, exclusion. And so you will see us hone in on specific lines of therapy as we get to the expansion cohorts.

How many patients being declared as in remission? And if so, how many? Is a patient with a minor response or a partial response better than the patient with remission?

Yes. So this is terminology and oncology. The trial is being conducted in patients who have developed metastatic disease. Those patients who are no longer curable by local control, surgery or radiation. But in the setting where a patient has no detectable cancer, this is what is called being in remission. This is going to be quite rare in a patient population where they've already progressed to metastatic disease. What we are very encouraged by and the data, though, is the number of patients with shrinking tumor, shrinking disease. Minor and partial responses -- partial responses are deeper, and so one would consider those better. Both are tumor shrinkage and qualify for us to report them. But given the number of patients that are still being treated, it's very early for us to comment on things like PFS or OS. But yes, the responders are actually making us pretty bullish on the data.

Perfect. I think let's take one more on AVA6000 before we move on to pre|CISION. How long will it take for AVA6000 to be booking revenues? And what's the chance it will make it to market?

So much of the answer depends on a specific indication and the path to approval. We have to enroll the expansion cohorts and select that. Once we select that, we'll be able to well predict then what will happen. We intend to start that trial, the Phase II trial in 2025. If we assume it takes 1.5 years to enroll, that brings us to 2027 time for data. And there, we need to determine if there's a path to approval. There could be potential for an approval with a Phase II or a Phase II/III. But again, these are going to readout later and really defining the indication and the path forward is going to be important. Maybe, Mark, we should move to the funding. There's a few good question...

We've got a few on that, and that's obviously something within the time, if we've got time, we can just extend it a little bit further. You're probably right to do so. I can see a few have come in. So let's take this one perhaps first on that. If the pipeline is going to be revealed soon, does the Board have plans on how the pipeline will be funded, won't AVA6000 need more funding?

Yes. So if we set aside Diagnostics for a minute, which we have already said we are going to be divesting. We are a pre-revenue biotech company with an incredibly promising platform. And we'd like to be able to take the opportunity in the pipeline to take a couple more shots on goal. You've seen our financial results today, R&D spend numbers, and the drug development requires at-risk investment. The reason we do this is because we believe in the impact on the pipeline. And so this means, as a company, we need a sustainable funding strategy that's going to allow us to progress the pipeline to a later stage of development where we can either have those partnerships. To date, we have been raising money on AIM or borrowing money in the form of the convertible note. We're also looking at non-dilutive options such as collaborations that I touched on in that first comment. But we're going to be looking now at deep specialist health care funds in the U.S., including the option of the dual listing. And we have to recognize that the U.K. and indeed, the global context for raising money is still fragile. It's still a bit uncertain. And so the reality is, is that we're going to need a combination of these factors for the long-term strategy.

And again, just touching on the offers you see. You said you received offers for the Diagnostics. Can you say how much they're for? Will you get back what you pay for them? A couple of other questions sort of wrap around that. What if the offers undervalue the business? Would you keep it? Is it better to wait and get a better price? Do you think you can sell? So just tying a few of those together, if I may, Christina.

Sure. As you can appreciate, we have a competitive sale process ongoing here. So there's some that I cannot comment. It's not going to be helpful for me to talk about specific numbers now as we're in the middle of the process. What I can say, though, is that the offers are genuine, they're from credible buyers, and we are working with them to get the highest price that we can right now. Not good for me to comment on any of the specific indicative offers. We are moving at a pace. It's difficult to predict how long the negotiations or the closing will take, and we're also expecting some further bids. So we will keep everyone informed as we move forward.

A question here. Are you intending to settle the next convertible loan net payment in cash again?

Yes. So we've been very clear on this point in our previous communications, so I will reiterate that for us, every payment needs to be considered on its own merits, whether we settle in cash or in shares. I can't comment right now ahead of time with those options, but we will update in due course.

You announced at the AGM that Tony will be stepping down as CFO in October. Any news when we'll see a new CFO appointment?

Yes. It's something we've been working very hard on. I'm pleased to say we've made very, very good progress. We have some excellent candidates that have come through. We have seen both significant experience in biotech as well as in U.S. capital markets and dealing with specialist U.S. investors. And we hope to be able to make an announcement, I'll say, over the next month or two.

Probably time for the last one, just coming up to 1 hour mark. And of course, the company can review any further questions that come in and we can look at those responses where appropriate to do so. Are you concerned about some of the possible tax relief changes that the U.K. Chancellor of the Exchequer may make in the budget come October 30?

We are aware of this speculation and the forthcoming autumn budget statement. But like everyone, we're going to have to wait and see what's actually announced before we can comment. We will, of course, on that day, be focused on presenting the exciting opportunities in our pipeline. So October 30 for Avacta is going to be our live R&D Spotlight. And this nicely allows me to close on. I would urge you, if you are able to give us your full attention on that particular day. I know there will be this other announcement. But we're really excited about the pipeline and very excited and trying to pick out what those presentations will be on October 30.

Just coming to that, thank you again for picking up all those questions you can from investors. Before redirecting investors to provide with their feedback which is particularly important to you and the team, Christina, if I could just ask you just for a few closing comments, please.

Sure. We're thrilled. We're moving to the next chapter of Avacta on so many different fronts. We've indicated on the financing side, divestment of Diagnostics moving to the long-term funding strategy. On our pipeline, in AVA6000, Phase I is complete. We've moved to the expansion cohorts. Our pipeline is going to be revealed over the next month. October 30 is a big date for us, and we're looking forward to it. It really feels like a brand-new chapter for Avacta. We're turning the page. We are making good on our commitment to making this a pure-play therapeutics biotech platform with our exciting pipeline of pre|CISION medicines. We're looking forward to revealing that pipeline and continuing to make AVA6000 a success in the clinic. We look forward to our continued conversations with all of you.

Christina, thanks, indeed for updating investors today. Could I please ask investors not to close the session as we'll now automatically redirect you to provide your feedback in order the team can better understand your views and expectations. This will then take a few moments to complete and then it's greatly valued by the company. On behalf of the management of Avacta Group Plc, I would like to thank you for attending today's presentation. That concludes today's session, and good morning to you all.