Earnings Transcript for AVCT.L - Q2 Fiscal Year 2024

Operator: Good morning and welcome to the Avacta Group Plc Investor presentation. Throughout this recorded meeting, investors will be in listen-only mode. Questions can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Just simply type in your question and press end. 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.

Christina Coughlin: 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 30 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 $0.1 million, increasing from a loss of $0.4 million in the first-half of 2023. This change has been driven by first 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 Corus laboratories. In the Therapeutics Division, investment has been made in AVA6000 on two fronts. The first is to accelerate the enrollment in the trial to complete the Phase 1a, as we reported at ESMO. And second, drug supply manufacturing costs, which are going to allow the company to move to Phase 2 development in 2025. Other research costs have been controlled. As the company has now moved to a focus, the research team is now focused on the next generation of precision medicines. In the cash flow analysis, the operating activities inflow from diagnostics of 1 million from the operating activities. The financing activities reflects the March fund raise 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 precision-enabled peptide drug conjugate to doxorubicin, continues to demonstrate a highly encouraging tolerability profile, robust preliminary efficacy signals that will take you through a few of the examples in both study arms of our Phase 1a trial. The ongoing expansion cohorts will further refine our understanding of the safety and the efficacy ahead of the Phase 2 trial. At this half-year stage, our preclinical studies and the data from the ongoing Phase 1a clinical study of AVA6000 continue to support our growing confidence in the wider potential of the precision platform. The 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 a dual listing on NASDAQ, and an update will be provided in due course on this strategy. Let's first look a bit at the precision platform. Over on the left-hand side of the slide, you can see a schematic here with the first precision molecule, AVA6000. This is a warhead. In this example, doxorubicin is attached to a FAP cleavable or the precision 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 half PK, short half-life minutes to hours. We have 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 Affimer. The precision platform is used then as a overhead 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-to-1, but we increase 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 to tell you about a new research program looking at both the expression and the biology of FAP, since precision is uniquely poised to leverage the FAP enzymatic activity. In the tumor microenvironment, we are noting that the spatial organization supports the precision 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've 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 delineates this bystander effect delivery. What do we mean by this? Let's look at the three 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 effect, and it is the entire mechanism of action of the precision 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 precision, 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 precision 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 precision 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 compounds 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 over 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 two 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 precision 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 precision 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 precision 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 Maleimided Cysteine conjugation, again, borrowed from those that have pioneered in the ADC space, works really well there. We've been implementing that chemistry directly here. We've engineered Cysteines into our own proprietary Affimers. We can also use the existing Cysteines within antibodies, and we can create a link between our precision FAP cleavable peptide, the biologic, and the warhead. The capping group that allows this, it allows the Maleimide Cysteine 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 precision 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 bloodstream and this is leading to a distinctly favorable safety profile. Precision-enabled or peptide drug-conjugated doxorubicin in AVA6000 results in a robust widening of the therapeutic index and some key fundamental changes in the kinetics of the release doxorubicin. All three 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 weeks ago at ESMO with Professor Twelves. First, let's look again and recall the design of the AVA6000 Phase 1 trial, as well as the patient population. We began the trial in Arm 1 within every three weeks dosing regimen. That is very consistent with the way that doxorubicin, standard or conventional doxorubicin, is dosed in the clinic. We started with two dose levels there that you can see in faint pink, one lower than conventional doxorubicin and one 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 five cohorts from a 1.3 to an almost 4 times the dose level of standard dose doxorubicin in the clinic. Based on a favorable safety profile that was first reported at ACR earlier this year, we then moved to Arm 2 in Phase 1, which is an every two weeks dosing regimen. And you can see the three 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 endpoints. Let's take a look first at three 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 five severe hematologic toxicities against CTCAE Grade 3/4 toxicities that are experienced either with a published dataset 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% experience 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 docs or below. Most of the patients received 1.3 times to almost 4 times 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 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 one patient in the AVA6000 trial that saw their LVEF reduced below normal for 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 five 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 two weeks versus the every three weeks. To give you an illustration of the similar toxicity profile that we're seeing between the two 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 the 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 two 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 1 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 early evidence of activity, one partial response and one minor response. You can see here, multiple patients with the teal bars are ongoing at the time of the data cutoff. I 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 AV6000 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 4 times the dose of conventional doxorubicin. He was noted in the biopsy 24-hours post to have the highest level of intertumoral 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 in follow-up at the time of the data cutoff. You can see his CAT scans there on the left, and we're demonstrating here two 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 three different types of tissue at the same time using three 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 as 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 five bars, five patients that were treated with the high-grade sarcomas. Two partial responses were noted in this patient population. And importantly, we see two 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 19 of August. This gentleman, as you'll recall, a 60-year-old gentleman, one prior line of therapy, developed a minor response and then developed a confirmed partial response, he had near complete resolution of the multiple pleural metastasis. Happy to report that his duration as of the data cutoff of 19 of August, the duration of response is now more than 55 weeks. 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 FAPhigh and in black in patients with FAPmid. 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 underrepresented 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 the two, of FAP activity that we would see in patients with FAPmid. We are getting these high levels of intra-tumoral doxorubicin. This underpins the entire mechanism of the precision 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 precision technology. You've heard me mention before that there are three 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 FAPmid 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 non-severe. There was no MTD despite dosing up to almost 4 times conventional dose doxorubicin. Phase 1a 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 precision 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 and 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 1 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 cohort, importantly, is already ongoing. These expansion cohorts together, and we are still planning three of them, as we noted at the AGM, these will lead us directly into the Phase 2 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 four. 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 release in the tumor microenvironment 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 1. 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 non-specific protease cleavable linkers used in most ADCs. This is where we see the lung toxicity. We see zero lung toxicity, and we have looked and needed to report to the health -- we see zero lung toxicity, zero 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 one-to-one ratio versus a four-to-eight that is needed for the traditional ADC. We have small molecule timelines and cost of manufacturing. The manufacturing of ADCs is somewhat complex with three 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 1 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 weeks ago in September. We've 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 they're 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 precision 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 1 data will be in the second quarter of 2025. The AVA6000 Phase 2 trial is slated to begin in the second-half of 2025, and as we move toward that goal, we will give further guidance. Also happy to report that the next-gen precision 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?

Operator: Fantastic. Thank you, Christina. Thank you for the presentation. I'll just pop your camera up if you don't mind. I'd like to remind you that recording 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 we can start with the first one, which is around licensing. The first question we've got here is, Avacta has 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 the licensing deal?

Christina Coughlin: 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 and our platform, which has enabled us to have these multiple conversations. This is a new technology. We have exciting but still somewhat early data in our Phase 1 trial with 57 patients treated. We also really should remember why we're interested in such deals, such collaborations. There's really two 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 precision technology won't be worth near to what an asset with Phase 2 data will be worth. We have spoken to a number of smaller or mid-sized 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 than 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, you know, 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 2, a defined patient population with a defined objective response rate, progression free survival, you know, 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, has also cooled just a bit as there have been multiple Phase 3 failures here. So, you know, 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. And we will have further conversations planned, but we also very much want to set the expectations. 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.

Operator: Fantastic, Thank you, Christina. And a bit of a follow-on really for that around licensing. I know some of this you just covered off in 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?

Christina Coughlin: 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 gain here in a quick deal that we can do in Phase 1 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 precision 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 2 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.

Operator: Fantastic. Perhaps moving on now to AVA6000. We've got a number of questions, some pieces you may have touched on as well 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 1a dose escalation study, is there now firm intention to fast track Phase 2 with a focus on a single indication and if so which indication is likely to be prioritized and which route sorts?

Christina Coughlin: 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 responses is quite nice, the durability. But we wouldn't fast track to Phase 2 for two 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 2, we have to select, we select one indication. The Phase 2 is really a large investment of cash, time, and resource. And so at the current time, because we have at least three 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 2 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 1, both safety, efficacy, and the biology is now helping us to de-risk where we go with AVA6000X, 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.

Operator: Fantastic. Next question we've got here is based on the safety data so far even if Phase 2 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?

Christina Coughlin: 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, a 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 2 indication. We're looking for a shorter more effective trial for AVA6000 with evidence of superiority.

Operator: That's great, thank you very much indeed. If you're updating clinical data results who are replicated in Phase 2/3 trial with a 13% partial response rate, 3% in ‘23 or 30% in [2030] (ph), would that in itself lead to the FDA pass or fail in your honest opinion? What does experience suggest the partial response target should reach or surpass for approval?

Christina Coughlin: 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 1 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 1. 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 2 testing. There's a really good example out there of this approach. It was used essentially first by Merck in the Phase 1 trial of Pembrolizumab. Their expansion cohorts then looked at diseases, but also different doses within the Phase 1 trial. And so without those expansion cohorts, we're going to struggle with numbers to really calculate a response rate or even a PFS and 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 2/3 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 six patients with high-grade sarcomas, we saw two 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 see one durable partial response, one 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 three diseases that we will select and release a bit later and that'll set us up for that Phase 2 trial.

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

Christina Coughlin: 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 three 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, you know, 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, you know, big disease settings, let's talk 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.

Operator: Fantastic. Thank you very much indeed. 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 and naïve patients without significantly increasing the risk of cumulative toxicity? How the length of treatment be determined for patients going forward?

Christina Coughlin: So a good question and an interesting observation here. It's important to note Cmax, the maximal concentration, is low with AVA6000. And that's in contrast at the 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 4 times though. We need to balance these two 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 PKPD 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, so 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.

Operator: Fantastic. 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?

Christina Coughlin: So let me answer this in two ways. It's almost two questions here. First, does AVA6000 break down the stroma? Stroma 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 a 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, while we don't know that the mechanism does not kill stroma, we do know that tumors remain FAP positive throughout, and this FAP -- through serial FAP PET 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 upfront 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 immune 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.

Operator: Thanks, Christina. 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 RNS, if access, say, to the AVA6000 in Q2W would have been the first line treatment, why has this not been the case?

Christina Coughlin: 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.

Operator: Super thank you. Have any patients been 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?

Christina Coughlin: Yes, so this is terminology on oncology. The trials 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 in the data though is the number of patients with shrinking tumors, 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.

Operator: Perfect. I think -- let's take one more on AVA6000 before we move on to precision. How long will it take for AVA6000 to be booking revenues and what's the chance it will make it to market?

Christina Coughlin: So much of the answer depends on 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 you know well predict then what will happen we intend to start that trial the Phase 2 trial in 2025. If we assume it takes a 1.5 year 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 2 or a Phase 2/3. But again, these are going to read out 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 questions.

Operator: Yes, I was going to say we’ve got a few on that. And that's obviously something within the time, you know, 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. Just the board have plans on how the pipeline will be funded when AVA6000 need more funding?

Christina Coughlin: 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 healthcare funds in the U.S., including the option of the dual listing. 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 that we're going to need a combination of these factors for the long-term strategy.

Operator: That's great. And again, just touching on the offers you received, you said you received offers for the diagnostics. Can you say how much they're for? Will you get back what you paid for them? A couple of other questions sort of wrap around that. What if the offer is undervalued the business? Will 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?

Christina Coughlin: 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.

Operator: Fantastic, thank you. Question here, are you intending to settle with the next Convertible Loan Note payment in cash again?

Christina Coughlin: Yes, so we've been very clear on this point in our previous communication, 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.

Operator: That's great. Thank you. You announced the agent and attorney stepping down as CFO in October. Any news when we'll see a new CFO appointment?

Christina Coughlin: Yes, something we've been working very hard on. I'm pleased to say we've made very good progress. We have some excellent candidates, who 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.

Operator: Super, probably time for the last one, just coming up to the 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 Avacta may make in the budget come October 30?

Christina Coughlin: 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 you know pick out what those presentations will be on October 30.

Operator: Fantastic and just coming to that look, thank you again for picking up all those questions you can from investors. Before redirecting investors provided 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.

Christina Coughlin: 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 1 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 day 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 precision 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.

Operator: Fantastic, Christina. Thanks indeed for updating investors today. Can I please ask investors not to close the session and should be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete and then it's greatly valued by the company. On behalf of the management of Avacta Group Plc, we'd like to thank you for attending today's presentation. That concludes [Technical Difficulty]