Avacta Group Regulatory News (AVCT)

7th July 2015

Avacta Group plc

("Avacta" or "the Group")

Pre-Close Trading Update

Affimers: Substantial operational and commercial progress and strong validation of future therapeutics opportunity through in-house development programme and Moderna Therapeutics partnership.

Avacta Group plc (AIM: AVCT), the global provider of proprietary diagnostic tools, consumables and reagents for life sciences, provides the following pre-close trading update:

Avacta Life Sciences

Substantial progress has been made against the operational and commercial objectives set for the current financial year, and the Group expects to report revenues from sales of Affimers that are at least in line with market expectations for the twelve months ending 31 July 2015:

- Commercial traction

i. The Directors expect the Group to report revenue from the commercialisation of Affimers for the year ending 31 July 2015 of approximately £0.5m, including:

a. Approximately £0.48m from custom Affimer services and custom Affimer research and development collaborations including the Moderna Therapeutics partnership; and

b. Approximately £0.02m from the online Affimer catalogue which was launched in September 2014.

ii. In addition, the Group is expecting to carry into the next financial year ending 31 July 2016:

a. An order book for custom Affimer projects of approximately £0.2 million;

b. A total pipeline of approximately £1.0m; and

c. The Moderna research partnership which should deliver significant contracted research services, and potentially the first milestone payments and future option fees.

iii. An experienced business development team was put in place with senior sales executives hired from major antibody suppliers such as Abcam and Cell Signaling Technologies;

iv. This team has delivered order intake of 30 custom Affimer projects from customers including several large biopharmaceutical and pharmaceutical companies, smaller biotechs, diagnostics and other life sciences companies and academics;

v. The Group has made significant progress in establishing awareness of its proprietary Affimer technology through digital marketing campaigns and conference/exhibition attendance;

vi. The Group's on-line catalogue of Affimer reagents targets a number of different areas of research. Following excellent market feedback and strong key opinion leader support, product development resources are now focused in the near term on reagents and assay kits for the ubiquitin proteasome system, a significant gap in the offering of antibodies. It is expected that such assay kits will be available during the year ending 31 July 2016.

- Operational scale-up

i. A high throughput Affimer screening and characterisation operation has been established that is capable of generating new Affimers in around eight weeks from the date of receiving a client's target molecule and which has a capacity that is capable of supporting the expected level of demand in the medium term; and

ii. An Affimer production facility has been put in place that is capable of fulfilling the expected demand from customers with material supply requirements as well as production demand for the on-line catalogue.

- Product development

i. An experienced team of five biotech scientists led by Dr Amrik Basran has been put in place at the Stevenage Bioscience Catalyst to spearhead the development of the Affimer platform for the generation of novel bio-therapeutics. The output from that team is ahead of target in generating the planned proof of concept therapeutic data pack. The Group has established that Affimers have a number of very favourable properties with regards to therapeutic applications. These include:

a. High manufacturing yield without any problems caused by aggregation.

b. Rapid generation of inhibitory binders against some major drug targets.

c. Acceptable serum half-life when formatted in conventional ways.

d. The ability to form bi-specifics and Fc-fusions - both important new formats for biotherapeutics.

These data strongly suggest that Affimers could become a leading bio-therapeutic platform with key competitive advantages over both antibodies, and also over other non-antibody protein scaffolds;

ii. Therapeutic Affimer development partnership established with Moderna, a leader in messenger RNA therapeutics.

iii. The target of 100 Affimer products for the online catalogue has been achieved;

iv. Development of Affimer microarrays for drug and biomarker discovery is nearing completion with the second planned validation study being carried out. The Directors anticipate that this will conclude before 31st October 2015; and

v. Assay kit development will be focused around products for the ubiquitin proteasome system research area. The development of these assay kits is now planned for the year ending 31 July 2016.

Avacta Animal Health

The Group is expecting to report revenues of approximately £1.4m for Avacta Animal Health for the year ending 31 July 2015 which includes a small contribution from its new diagnostic test for canine lymphoma.

Following recent progress the Directors strongly believe that Affimers present the most significant opportunity for the Group to deliver value growth for shareholders and have therefore decided that the Company should focus its product development resources on its Affimer technology. The Company has therefore paused the development of its Sensipod point of care diagnostic device whilst it finds alternative ways of delivering its tests at the point of care such as on third party platforms. Accordingly, the Group is not expecting to generate revenue from that product for the foreseeable future and, consequently, the Directors expect to impair the associated capitalised development costs of approximately £2.5m.

Alastair Smith, Chief Executive, commented:

"I am very pleased indeed with the progress this year. We have clearly demonstrated significant commercial traction for Affimers in the first few months of commercialisation in a wide range of application areas including therapeutics well ahead of plan.

The operational scale up for Affimers that we targeted this financial year has delivered a truly world class high throughput reagent screening and characterisation facility which will support our medium term growth plans.

A significant proportion of the interest for custom Affimers has come from the biopharmaceutical sector and during the period we signed our first substantial deal with a pharma partner in this area which could see Affimers enter Moderna Therapeutic's drug development pipeline. The progress we have made in-house on therapeutic Affimer assets is also very encouraging indeed and I anticipate that therapeutics will now form a key part of our future strategy for growth."

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Notes to Editors

Avacta Group plc (www.avacta.com)

Avacta Group plc is a global provider of innovative technologies, consumables and reagents for the life science markets, from drug discovery to diagnostics. Avacta's principal focus is on its proprietary Affimer® technology which is a novel engineered alternative to antibodies that has wide application in Life Sciences for diagnostics, therapeutics and general research and development.

Antibodies dominate markets worth in excess of $50bn despite their shortcomings. Affimers have been designed to address many of these negative performance issues, principally: the time taken to generate new antibodies, the reliance on an animal's immune response, poor specificity in many cases, and batch to batch variability. Affimers are based on a small protein that can be quickly generated to bind with high specificity and affinity to a wide range of protein targets.

Avacta is commercialising the Affimer reagents through custom Affimer services to provide bespoke solutions to customers, via a growing on-line catalogue of Affimer reagents and, in the longer term, by developing Affimers with therapeutic properties for out-licensing.