Avacta Group Regulatory News (AVCT)

Avacta Group plc

("Avacta", or "the Company")

£5.13 million Conditional Placing with Existing Investors

Proposed Acquisition of Aptuscan Limited

Proposed New Equity Incentive Schemes

Waiver of Rule 9 of the City Code and Notice of General Meeting

Avacta Group plc (AIM:AVCT), a leading healthcare technology, reagents and consumables company providing proprietary analytical and diagnostics solutions to the life sciences/healthcare sector, today announces the placing of up to 1,026,000,000 Ordinary Shares (the "Placing Shares") at a price of 0.5 per share (the "Placing Price"), to raise £5.13 million before expenses (the "Placing"). Conditional upon the Placing, the Group will acquire Aptuscan Limited ("Aptuscan") for approximately £1.48 million payable in ordinary shares (the "Consideration Shares") at a price of 0.65p (the "Consideration Share Price").

Key Points:

·; Net proceeds from the Placing of approximately £4.83 million to be used on activities which the Directors believe will accelerate the growth of Avacta, in particular driving faster growth of recurring revenue from proprietary reagents and consumables including the development of the intellectual property acquired with Aptuscan.

·; Significant investment proposed by the IP Group Concert Party which will control approximately 33.60 per cent. of the voting rights in the Enlarged Issued Share Capital.

·; Rule 9 Waiver for the IP Group Concert Party granted by the Panel, subject to approval on a poll by the Independent Shareholders.

·; The Placing Price represents a discount of 36.31 per cent. to the closing mid market price of 21 December 2011, being the last day prior to this announcement.

·; Irrevocable undertakings and letters of intent to vote in favour of Resolutions 1, 2, 3, 5 and 6 in respect of 906,085,788 Ordinary Shares in aggregate have been received by the Company, including from the Independent Directors, representing 54.33 per cent. of the Existing Ordinary Shares and in favour of Resolution 4 (the ''Rule 9 Waiver'') in respect of 476,821,353 Ordinary Shares in aggregate, representing 38.53 per cent. of the Existing Ordinary Shares held by Independent Shareholders. The Independent Directors unanimously recommend that Shareholders vote in favour of all Resolutions, as they have irrevocably committed to do with respect to their aggregate shareholding of approximately 5.0 per cent. of the Existing Ordinary Shares.

The proceeds of the Placing will be used to:

·; provide development capital for a wide range of analytical and diagnostic reagents based on Aptuscan's proprietary affinity protein scaffold;

·; accelerate the Avacta Animal Healthcare business through the more rapid expansion of the range of tests for its AX-1 diagnostic units and through the support of a blended sales/placement business model to grow the installed base quickly; and

·; provide development capital for further analytical and diagnostic products (with associated consumables and reagents), for which the Group has identified demand in the markets it currently serves.

The Directors believe that these activities will further accelerate the growth of Avacta and in particular drive faster growth of recurring revenue from proprietary reagents and consumables.

Rationale for the Acquisition

Antibodies currently dominate the biotechnology and molecular diagnostics markets for affinity reagents. The core intellectual property of Aptuscan relates to a non-antibody affinity protein, the structure of which can be modified easily using existing techniques to create a very wide range of affinity reagents for different targets, with potential applications as research reagents, as key elements in analytical and diagnostic tests, as purification reagents and as therapeutic agents. The Directors consider that this may enable the Group to develop a broad range of proprietary affinity reagents for its markets with significant technical and commercial advantages over antibodies.

The Acquisition will provide the Group with near term commercial opportunities through:

·; the generation of in-house reagents to replace third party antibodies and improve the margins of the consumables used to carry out the tests on AX-1;

·; the expansion of the range of tests that can be carried out on AX-1 where third party antibodies are not available; and

·; the creation of biotechnology R&D and bioprocessing reagents for sale through the Group's established routes to market in its analytical business.

In addition, the acquisition will provide longer term commercial opportunities to:

·; enter the valuable1, rapidly growing, protein microarrays market for high throughput drug/biomarker discovery; and

·; develop applications for the human health diagnostics market.

Dr. Alastair Smith, Chief Executive Officer of Avacta said:

"The Company has made an excellent start to this financial year with good growth in Optim orders, growing revenues in Optim consumables, and a very successful launch of AX-1 at the London Vet Show.

The acquisition of Aptuscan, proposed in the circular to shareholders, would add a disruptive reagents platform to the Avacta portfolio, capable of enhancing the product offerings of both Avacta Analytical and Avacta Animal Health. It is this opportunity that has catalysed the placing: to fund the development and integration of the Aptuscan technology, to resource future product development and accelerate the expansion of the AX-1 test range.

The structure of the Group will allow the two operating businesses to remain entirely focused on commercialising Optim and AX-1, with the Aptuscan technology becoming integrated into and managed by the Group's centralised product development function.

The combination of current and proposed new technologies and intellectual property transforms the scale of Avacta's opportunities and, following the Placing, can be fulfilled without the need to return to the market. Avacta is set on a very exciting course for the future."

Additional Summary Information

·; The New Shares will represent approximately 39.7 per cent. of the Enlarged Issued Share Capital. Accordingly the Placing is conditional on the passing of resolutions to be considered at a general meeting of the Company, to take place at the offices of Walker Morris, 12 King Street, Leeds, LS1 2HL at 9.30 a.m. on 9 January, 2012.

·; Admission of the New Shares, the Theragenetics Shares and the JSOP shares is expected to take place on 10 January 2012.

·; The Placing is a related party transaction as defined by the AIM Rules, as IP Group (together with its subsidiary undertakings) is a substantial shareholder in Avacta and its CEO, Alan Aubrey, is also a non-executive director of Avacta. The Acquisition is also a related party transaction as IP Group is the ultimate parent undertaking of IP2IPO Limited, a substantial shareholder of Aptuscan. Accordingly, appropriate disclosure is being made and Alan Aubrey has refrained from taking part in either the evaluation of the Acquisition by the Avacta Board or the recommendation given in connection with the Proposals; in addition he is required to abstain from recommending Resolutions 1 and 5 to be proposed at the General Meeting. Further details of the related party transaction are given below.

·; The Independent Directors (the directors excluding Alan Aubrey), having consulted with the Company's nominated adviser, Panmure Gordon, consider that the terms of the Acquisition and the participation of certain subsidiaries of IP Group and IP Venture Fund in the Placing are fair and reasonable insofar as shareholders are concerned. In providing advice to the Independent Directors, Panmure Gordon has taken into account the commercial assessments of the Independent Directors.

·; It is proposed that following Admission, options under an existing EMI option scheme and new options under the amended EMI Scheme be granted to four key members of senior management including 2 directors (the CEO and CFO) and the Chief Executives of the Avacta Analytical and Avacta Animal Health divisions. The aggregate equity incentivisation pool for these individuals under the amended EMI scheme and JSOP is 9.16 per cent. of the Enlarged Issued Share Capital.

·; Following the Placing and Acquisition the Company will increase its product development expenditure to support programmes of affinity reagents development, new technology products and consumables and protein microarrays. The Independent Directors believe that the longer term commercial opportunities afforded by the Acquisition and the application of the proceeds of the Placing are substantial and will accelerate shareholder value over time by driving recurring revenues and allowing additional market segments to be addressed through existing sales channels.

Concurrent to admission of the Placing and Consideration Shares (the "New Shares"), the Company is expected to issue 2,386,010 new Ordinary Shares as final deferred consideration for the 2009 acquisition of Theragenetics (the "Theragenetics Shares"), and to issue 232,727,808 new Ordinary Shares to a joint share ownership plan (the "JSOP Shares"), in connection with new equity incentive arrangements being implemented. Immediately following the issue and admission to trading on AIM of the New Shares, Theragenetics Shares and JSOP Shares described above ("Admission"), IP Group and persons deemed to be acting in concert with it (the "IP Group Concert Party"), will hold approximately 33.60 per cent. of the enlarged issued share capital of the Company. A Rule 9 waiver has been granted by the Panel, subject to the approval of Independent Shareholders, which conditionally permits the IP Group Concert Party to acquire these interests without the need for a general offer to be made in accordance with Rule 9 of the City Code to all the holders of ordinary shares in the Company carrying voting rights to acquire the balance of their interests in the Company (the "Rule 9 Waiver").

A circular to shareholders will be dispatched today and will also be available on the Company's website: www.avacta.com pursuant to AIM Rule 26 ("Circular"), together with the documents on display as described in paragraph 10 of part 3 of the Circular.

For further information please contact:

-Ends-

Notes to Editors:

Avacta Group plc, a world leading, UK-based healthcare equipment and instrumentation business, provides innovative, high value proprietary technologies and services to the life sciences/healthcare sector through two operating divisions:

Avacta Analytical provides high-end analytical instrumentation and services to the biopharmaceutical sector, expected to be a $200bn revenues market by 2013 and the fastest growing part of the pharmaceutical industry. The Group's technologies are aimed at reducing the risks and expense associated with biological drug development and thereby reducing the final cost of drugs to patients. The Group's lead analytical instrument, Optim, is distributed through Pall Corporation in the US and South East Asia, Isogen Life Sciences in Europe, Cold Spring Biotech Corp in China and Taiwan and DKSH in Japan. Avacta sells Optim directly in the UK.

Avacta Animal Healthprovides diagnostic products and services for the $1.5bn global veterinary diagnostics market. Its aim is to equip veterinary professionals with high quality animal health and well-being information, through point-of-care diagnostics, reagents and testing kits and laboratory based testing. Avacta's AX-1 point of care immunoassay system is aimed at providing the veterinarian with rapid blood test results in the clinic. The initial range of tests launched with the AX-1 relates to Avacta's world leading allergy testing brand Sensitest®. Avacta is currently developing further assays for the AX-1 system to diagnose other diseases in companion animals. Longer-term this technology will be transferred into the human clinical diagnostics market.

Avacta joined AIM in August 2006 and is based in Wetherby, England.

Panmure Gordon (UK) Limited ("Panmure Gordon"), which is regulated in the United Kingdom by the Financial Services Authority, is acting solely for the Company in relation to the Placing, Acquisition, Implementation of New Equity Incentive Schemes and Rule 9 Waiver and nobody else and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Panmure Gordon nor for providing advice in relation to the Placing, Acquisition, Implementation of New Equity Incentive Schemes and Rule 9 Waiver or any other matter referred to in this announcement or the Circular.