Good morning, ladies and gentlemen, and welcome to the Avacta Group plc final results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Given the attendance on today's call, the company will not be in a position to answer every question it receives during the meeting itself. Before we begin, we would like to submit the following poll, and if you would give that your kind attention, I'm sure the company would be most grateful. I'd now like to hand over to CEO, Alastair Smith. Good morning.
Morning. Thank you. Thanks very much. Morning, everyone. Thank you for attending the preliminary results presentation for 2022. Let me just start by running through some of the key highlights. Obviously, we'll touch on these as we go through the presentation, but it's... I think it's absolutely true to say a very significant year of progress right across the group. In particular, very pleased to see the progress with AVA6000 phase I study, which we'll talk through in a little bit more detail. In summary, we're seeing a very positive safety profile through the first 4 patient cohorts in the dose escalation study. Of course, we have also confirmed the release of doxorubicin at therapeutically significant levels in the tumor biopsy.
We are seeing a very much improved safety profile, but also release of doxorubicin in the tumor tissue, as we would have hoped. That, that really very strongly supports the principle of FAP activation, the pre|CISION targeting of drugs into the, into the tumor tissue. That's led, you know, led us to accelerate the development of AVA3996, which is the second of the pre|CISION drug candidates. It's a tumor-targeted proteasome inhibitor, which, recently at the AACR meeting, we presented a poster with the preclinical data, and then I went through a video to explain that data. I'll touch on a little bit of that in the presentation today, but it's a very exciting opportunity to think about proteasome inhibitors in solid tumors, which has never been, you know, never been the case before.
That's a very exciting opportunity. Across our partnerships with AffyXell and LG Chem, good progress. I'll touch on that. Of course, you're aware that we moved the therapeutics division during the year as well from Cambridge into London. In the diagnostics division, we are engaged in an M&A-led growth strategy for that division. We raised capital in October, as I'm sure you're aware, and executed the first of those acquisitions of Launch Diagnostics in October. I'll talk through as time allows the strategy for that M&A led growth. Certainly later in the year, we'll have, perhaps at the AGM, a lot more opportunity to go into that in a great deal of detail.
Finally, the last point on this slide, strengthened the board further with the addition of another expert medical oncologist, Chris Coughlin. Okay. I'll hand over to Tony to go through the financial slides and then go through the business update.
Thanks, Alastair. Good morning, everybody, and thank you for joining us today. I'd like to just walk you through the preliminary results for this year. Without a doubt, they have probably been the most complex accounts that we've ever prepared in Avacta's history, given the number of transactions that have gone on this year, starting with the sale of the Avacta Animal Health division at the start of the year, followed by the acquisition of Launch Diagnostics in October and the associated fundraising, the convertible bond. There is a fair amount of complex accounting within this.
What we've tried to do is the way that we presented results this year is to draw a line on the face of the income statement called Adjusted EBITDA, which will give everyone a real feel for more the cash burn within the business that's closely associated to that because there's a lot of non-cash items on the profit and loss account. Please, when you look at these numbers, the Adjusted EBITDA loss of GBP 15 million is far more consistent with the cash flow position as opposed to the loss in the year of GBP 39 million because of some of the adjustments that we'll walk through. Just stepping down through the P&L. The revenue this year was just shy of GBP 10 million, which is probably the highest revenue number we've ever reported as a group.
That was driven by a couple of milestone payments on the therapeutic side, which we'll touch on shortly, and the impact of the Launch Diagnostics business on the diagnostics segment. That delivered us a gross profit of just over GBP 7 million. We then step through, and we've got the research, manufacturing costs from the therapeutics business on its development programs and also the diagnostics business in terms of the development of the products it's working on. The SG&A costs have stepped up during the year, that's primarily because we're obviously now rolling in the Launch Diagnostics SG&A costs as well as the business grows and expands. Our Adjusted EBITDA loss position was GBP 15 million in the year compared to just under GBP 22 million the previous year.
If we step further down the P&L, there's amortization and depreciation charges, again, which you appreciate are non-cash items, which are set below there. We have share-based payments. We also take a share of AffyXell, which is our JV, its losses. There's just over a GBP 1 million charge there from recognizing our share of the JV. We own 19% of that at the end of the year. That gives us an operating loss of GBP 32 million compared to GBP 29 million the previous year. There are then some costs that go through the income statement to do with the convertible bonds. We take through the commission costs, the interest costs, part of the bond is effectively valued as a derivative.
We take through the charge on that, and that is really driven by the fluctuations in the share price. The share price had increased 20% from the time we took the bond out to the end of the year, which drives effectively a further charge through the P&L. Again, that is a non-cash-based item. Further down the P&L, we've got taxation of GBP 2 million, which again, we claim through R&D tax credits, so that will come back as cash into the business in the future, which leaves us with a retained loss of GBP 39 million compared to GBP 26 million the previous year. If I move on to the next slide, which breaks down the operating segments. You clearly see we've got two clear segments now.
The Animal Health business has been treated, discontinued in both years, so isn't in these numbers. The way of presenting this is obviously the Diagnostics is a very different structured business, and we are looking to grow that into a profitable EBITDA-based business. This set out of the presentation will help you see how we look to move that over the coming years into a profitable business as we then continue through the M&A process. The, the revenues in the Diagnostics business, GBP 4 million, come primarily from the Launch business in the period that we had that this year. The Therapeutics has got just over GBP 5 million. Again, that's from milestones from LG Chem and Affyxell.
As we step down, again, this breaks down the operating loss through to the each business from the different segments, and we have a central cost. All the costs to do with running the group, whether that be central costs in terms of finance, HR, IT, the directors or the advisor costs and brokers and registrars are all not allocated across the 2 segments. There's a separate column there. We will progress these and continue to report on a consistent basis so there's clear visibility between the 2 trading divisions of the group as we work through these numbers. If I move on to the cash flow. We started 2022 with GBP 26 million of cash.
Operating cash outflows from the trading of the business and movements in working capital used GBP 16 million, which is fairly consistent with that operating EBITDA loss of GBP 15 million that was on the face of the P&L. That gives you the consistency of how those numbers tie through. The investing activities were the acquisition of Launch Diagnostics business for GBP 24 million, proceeds from the sale of the Avacta Animal Health business, which was just under GBP 1 million on the first tranche, and then some CapEx costs that sit alongside that. In terms of the Launch Diagnostics acquisition, GBP 24 million was an upfront payment.
There is deferred consideration of up to GBP 13 million to do with the future sale of COVID products over which exceed GBP 2 million in any of the next three years. Our assessment at the end of this year is that there is unlikely to be more than GBP 2 million of COVID sales in any one of these years, so we do not envisage paying any more of the GBP 13 million deferred consideration. That's clearly stated in the accounts as we sit there. The financing activities of the just shy of GBP 57 million reflects the bond that was received, which was GBP 55 million at a 5% discount, so that was just over GBP 52 million of cash we received.
The placing proceeds and the open offer, which totaled another GBP 9 million gross from that, less than any other transaction costs associated with that. That left us with just shy of GBP 42 million cash at the end of the year. Just to give you a bit more of an update and some reassurance, the cash position at the end of March this year, March 2023, is circa GBP 39 million because we've had the benefit of the financial year 2021 R&D tax credits coming through, which was GBP 2.8 million, which came through in January this year. GBP 39 million, good strong cash runway to see us through 2023, well into 2024. As you'll appreciate, the level of spend on the therapeutics programs can vary quite significantly depending on how quickly those programs are accelerated.
Well, well-positioned from a cash perspective to take us well through into the back half of next year. If I move on to the balance sheet, just to explain some of the categories on here, because again, there's been a lot of different accounting as we look through this. The non-current assets of GBP 37 million reflects plant and equipment. The leases that we have to account for the buildings that we have around the group. That's the current Vax buildings, plus those that we acquired with Launch, plus the goodwill in terms of the acquisition from Launch, and also our investment in the AffyXell JV.
Current assets have increased to just shy of GBP 14 million. Again, we've taken on the current assets, so the trade debtors and things of the Launch business. We would expect that to grow. Cash of GBP 42 million. The assets held for sale last year was the Animal Health business, as we had to reflect that at the end of last year. Current liabilities of GBP 14 million. Then non-current of GBP 60 million. That GBP 60 million consists of our leases to do with properties, also the convertible bond. That's reflected in a couple of different ways because you have to value a derivative component of it, which has a value of GBP 39 million. There is a debt value of GBP 19 million.
Those combined together give you your GBP 55 million overall bond value, because at the end of the year, none of the bonds had been repaid. Since the end of the year, we have had two quarterly amortizations, which have been settled in shares, and there was an early conversion in February. The value of the overall bond at today is just under GBP 47 million. We've settled the conversion on those previous ones through the issue of further issue of shares, and that will continue as we progress our way through this year over the term of that bond. Just to summarize, GBP 42 million cash at the end of the year, GBP 39 million at the end of March, well-funded to drive us through into well into 2024.
I'm gonna hand back to Alastair to give the business update.
That's great. Thanks, Tony. Thanks very much. Okay, so I'm gonna start with the therapeutics division. I assume that some people on the call perhaps are not familiar with Avacta in detail, so a little bit of background. The therapeutics division is a clinical stage oncology drug company. Our vision is to deliver genuinely, you know, transforming treatments that improve the outcomes for cancer patients and improve their lives. Our approach to doing that is to harness our two proprietary platforms, so the pre|CISION platform and the Affimer platform, which obviously we'll go through more in the presentation. We focused very much in the last couple of years on the pre|CISION platform because of its potential to drive near-term value.
I'll certainly touch on the Affimer platform, and we'll talk much more about that later in the year as well at the AGM. Our approach is to leverage those two platforms to develop best-in-class and first-in-class cancer therapies. Very much a focus on growing our clinical pipeline alongside focused but selective out-licensing opportunities. It's important that we maintain our own in-house clinical pipeline. I know there's a question later on about licensing strategy, and we certainly would not be looking to out-license our lead clinical assets to a third party. Combine our in-house drug development capabilities with partnerships that allow us to develop, you know, off our balance sheet, the two platforms in different therapeutic areas.
The pipeline really reflects that strategy and that vision. I won't read through all of this, we'll go through it in subsequent slides. The, you know, the two lead programs are the pre|CISION programs, AVA6000 and AVA3996, which I'll spend some time on. The Affimer programs, the multi-specific Affimer programs and the TMAC program, as well as a number of undisclosed pre|CISION and Affimer targets that are very much in the early research phase. At the bottom of this pipeline are our partner programs, which I'll give you an update on towards the back end of the presentation. Again, assuming there are some people on the call who are not familiar with the pre|CISION platform, just take a minute to introduce that technology.
The pre|CISION technology is a proprietary chemical modification. We're all familiar with the systemic toxicities of chemotherapies which really affect the tolerability for patients and thereby the efficacy. It's the systemic toxicities rather than the efficacies of these toxins that are the issue. A solution to that is to target the release or the activation of the chemotherapy to the tumor tissue. pre|CISION allows us to do that because it allows the chemotherapy to be selectively activated in the tumor tissue by an enzyme that is upregulated in most solid tumors and at a low level in healthy tissue. It gives us a tumor-specific activation of the pre|CISION chemotherapy. That therefore is designed to improve the safety and tolerability because you reduce the systemic exposure and thereby improve the efficacy.
I can illustrate that with AVA6000 in particular. AVA6000 is a pre|CISION-modified form of doxorubicin. You can see in the left-hand panel on this slide, the doxorubicin molecule that's circled, and then the pre|CISION chemistry, which is a simple dipeptide, that pre|CISION chemistry which is added to doxorubicin to create AVA6000. The key point here is that AVA6000, that modification prevents the molecule from crossing the cell membrane and therefore getting into cells to kill them. AVA6000, to put it crudely, is inert when administered to the patients as it goes round in the circulation. As it goes round in the circulation, it will go through the tumor microenvironment, where it will encounter the enzyme that I mentioned, FAP, fibroblast activation protein alpha, FAP alpha.
When it encounters, when AVA6000 encounters that enzyme, which is primarily in stromal tissue, on fibroblasts, as well as on some cancer cells, but predominantly in the tumor tissue, as I said, and not in healthy tissue. When AVA6000 encounters FAP. It removes the pre|CISION chemistry that we've added. You can see in the panel on the right, the removal by the enzyme of the chemistry that we've added, releasing doxorubicin, which can, at that point in the tumor, enter stromal and other cells in the tumor tissue, causing the cell killing that we're looking for. Okay, we are in the later stages of a dose escalation study. This is a safety study. We'll talk a little bit more about that when we talk about the dose expansion phase as well.
I know there's a question or two on this as well. The phase I-A dose escalation study is designed to deliver safety and tolerability information. The patients that are recruited into this study are not recruited specifically to give a potential of an efficacy signal. They will be heavily pre-treated, late stage, cancer patients. The dose escalation study is exactly as the name suggests, beginning at a relatively low dosing of AVA6000, equivalent to approximately the normal dose of doxorubicin in cohort one, escalating through increasing doses in order to identify the maximum tolerated dose, the dose range for AVA6000. When we designed the original clinical trial, we designed it for four cohorts.
We have not, in the first four cohorts, reached the maximum tolerated dose, which is obviously better than we could have hoped and extremely promising. We've now progressed on to the fifth cohort. We've opened a couple of U.S. sites as well that'll contribute into the phase I-A study as well as the phase I-B, which I'll touch on in a second. To summarize in the interest of time, the phase I-A dose escalation data from a safety perspective, AVA6000 has been well-tolerated across those first four dose cohorts. We've seen a really significant reduction in the frequency and the severity of the usual toxicities, including the serious hematological toxicities, neutropenia, thrombocytopenia, anemia, and also the cardiotoxicity, which we've not observed.
It is the cardiotoxicity that is responsible for causing the lifetime maximum cumulative dose that a patient can have of doxorubicin. From a safety and tolerability perspective, very promising safety profile. Seeing a very marked reduction in the sorts of toxicities, and in particular, not seeing the cardiotoxicity that is a key issue for doxorubicin. There is, of course, the potential that we're never releasing, AVA6000 is never releasing doxorubicin.
That clearly would not be the objective, but I'm very pleased that in January we could confirm from tumor biopsies, which were not mandatory in the dose escalation phase, but from tumor biopsies, analysis of those biopsies taken from six patients, we can confirm that we are seeing doxorubicin released in the tumor tissue at a much higher level than we're seeing systemically at the same time point. To summarize, really promising safety profile, and the biopsy data do indicate that we're getting release of doxorubicin reflecting the preclinical data that we saw, and obviously supporting the concept of the pre|CISION targeting of FAP-rich tumor tissue.
Just to move on to the phase I-B study, which will start later this year, as we complete the phase I-A. The phase I-B is designed and the patient recruitment will be such that we can see an efficacy signal. The group of patients, the rationale for selecting soft tissue sarcoma as the indication to go into is that doxorubicin is the only therapy that's indicated first line for advanced soft tissue sarcoma. Doxorubicin itself has a, you know, has a fairly marginal efficacy of 18% overall response rate, with six months progression-free survival.
The design of the of the study takes into account the fact that the PK data, so the pharmacokinetics that we're seeing in the phase I-A, so the pharmacokinetics is telling us what the systemic exposure of the patients are to doxorubicin released by AVA6000. That, that's telling us that we can extend the number of cycles at least 2x to 3x because of the targeting of the doxorubicin into the tumor tissue and that reduction in systemic exposure. All of that goes into the design of the phase I-B. As you'll see, there are 3 arms to that. It's intended to be an open label randomized design in metastatic soft tissue sarcoma.
There are two different dose levels of AVA6000 planned as well as a doxorubicin arm to give us that comparative data. When we talked recently on a video we produced about the about the biopsy data, the clinical data to date, I made the point that there really isn't any published data on the levels of doxorubicin that you would see in a tumor. That data isn't out there, at least it's never been published. That third arm will allow us to get comparative data of our own, that will then inform the design of the phase II study, which could be pivotal.
Okay, let me move on to preclinical programs and first of all, to talk about AVA3996, which I think is a really interesting molecule with huge potential. Let me first of all talk about proteasome inhibitors. Again, we recently in that video spoke about the data, the preclinical data for AVA3996 that was presented at AACR. If you want a more fulsome run through the preclinical data, which is quite extensive on that poster, then there's a video on our website you can download as well as the poster. A brief bit of background then on 3996. It is a pre|CISION-modified proteasome inhibitor.
The proteasome inhibitor, you can see in the right-hand panel circled in blue, is a very close analog of bortezomib, which is Takeda's Velcade. It's not identical, but it's very, very close. The pre|CISION chemistry that modifies that proteasome inhibitor, which we call AVA2727D, the pre|CISION is circled in red to give you the AVA3996 molecule as a whole. The proteasome is the part of a cell that gets rid of protein waste. I apologize for the simplification of this, but the garbage disposal system, if you like, of the cell. If you prevent the cell from getting rid of that protein waste, then that can be fatal to the cell, is fatal to the cell.
A proteasome inhibitor that stops the garbage disposal system working is going to lead to cell death in most types of cells. Thinking about the proteasome market, when it's forecast to grow to over GBP 2 billion by 2026, but it's really important to note that is a market that's actually very restricted by the severe dose-limiting toxicity. These types of drugs, proteasome inhibitors, are only really approved in B-cell malignancies, so principally multiple myeloma. This market is very much restricted to hematological tumors because you simply cannot get enough into a patient to get enough into a solid tumor without, you know, without very severe or fatal side effects.
Just to make a comment about drug positioning and AVA3996 positioning, you know, we would not be positioning AVA3996 head-to-head with Velcade in multiple myeloma. That is not the intention. You'll see on the next slide, as we talk about the PDX efficacy data from the AACR poster, that there is, you know, good indication that we can target the AVA2727D, the proteasome inhibitor, to solid tumor tissue, which opens up the possibility of treating solid tumors with a proteasome inhibitor for the first time. Don't think about going head-to-head in the multiple myeloma market. That's not the intention. It's to create an entirely new opportunity in solid tumor treatment.
That data, this is the only data that I pulled in from the poster we recently presented in Orlando, there's quite a lot on this which really sort of tells the story. Let me first of all deal with the top panel. These are mouse models of efficacy. They're called PDX models, so patient-derived xenograft models, where you take cancer tissue or cancer cells from a cancer patient and implant them in mice. If you look at the left-hand graph. The top panel is a melanoma model. This is melanoma PDX model in mice. The, the left-hand graph shows the growth of the tumor in the mouse over time, with the black line being what we call vehicle, which is effectively just a placebo.
The tumor clearly grows quite significantly over the period. Two other groups of animals treated with AVA3996 and bortezomib, which is Velcade. What you see there is that 3996 is as effective as bortezomib in effectively flatlining the growth of that tumor in that melanoma PDX model. What's interesting to see is in the middle panel, where the body weight of the animals is monitored as an indication generally of toxicity of the treatment.
You can see with the blue line, which is the bortezomib, that the animals lost significant body weight, and in fact, had to be given a break from the treatment with bortezomib at 1 mg per kg, in order to recover, whereas those toxicities were not seen with the vehicle or with 3996. You know, very much an indication of that targeting to FAP-rich tumor tissue in the PDX model. We repeated the model on the left-hand panel, and you see the results on the right-hand panel with a reduced level of bortezomib, which is more tolerable for the animals.
There you see a comparison of AVA3996 again with bortezomib at a lower level. Also dosing the animals directly with 2727D, so not being released from 3996, but directly delivered, and also compared with trametinib, which is the standard of care for unresectable melanoma. You'll see that all of those, 3996, 2727D, bortezomib, and trametinib, were all equally effective in stopping the tumor from growing in that melanoma PDX model. As I said, a proteasome inhibitor, you know, is a very, you know, very broad cell-killing instrument. You know, opens up the possibility of at least thinking about tumor-agnostic treatment.
You know, we've run more models than this, now, and we continue to run other models. There are two here in the bottom panel, a sarcoma PDX model and a colorectal cancer PDX model. Again, you see that AVA3996 and bortezomib are certainly comparable in their reduction in tumor growth rate in both of those PDX models. As I say, you know, potential to be at least thinking about a tumor-agnostic therapy. The key takeaways, at least from this, you know, this set of data, is that AVA3996 is as effective in releasing a proteasome inhibitor in FAP-rich tumor tissue, as effective as bortezomib, Velcade, and trametinib, the standard of care for melanoma in that melanoma model.
That we didn't see the same level of toxicities in that first set of experiments with AVA3996 compared to when the animals were treated with 1 mg per kg of bortezomib. Very encouraging. We're now obviously pushing through the IND-enabling preclinical studies, toxicity, you know, tox models and so on, with a view to IND filing as soon as possible, probably early next year. We don't have a huge amount of time today, and I want to talk in some depth about the diagnostics division.
I'll just go through a couple of slides on the Affimer platform, but also just put a marker down that at the AGM this year we'll spend a lot more time talking about the Affimer platform and have an opportunity for a lot more Q&A across the board. Just very briefly, for those who aren't familiar with the Affimer platform, the second of our proprietary technologies is an antibody mimetic, so an antibody alternative, if you like, which is a small protein that's engineered to have a binding surface so that you can develop inhibitors or agonists as you would do with an antibody.
There's a number of technical benefits to having a small, stable binding protein that you can select against different targets in an in vitro selection assay, rather than generating antibodies through any other method. Those technical benefits are driving our strategy to differentiate the Affimer biotherapies. First of all, they allow us to address some difficult targets that have historically been very challenging for antibodies to address, such as GPCRs. It allows us to also drive the selectivity during the phage display and the way we generate the Affimers to get exquisite selectivity for the target antigens. That's another key advantage to differentiate this platform from antibodies and other mimetics.
And to be able to build multispecifics, but importantly developable, and by that I mean, when you build dimers and trimers, they are stable, and you can manufacture them with reasonable yields, so developable multispecifics. And that's reflected in the summary of our internal research programs on the next slide, which, as I say, we will at the AGM, take more time to go through these and update on some progress. So there are three main programs. One bispecific combination of PD-L1 antagonist with cytokine. One, a PD-L1 bispecific with LAG-3. And the other, a tumor microenvironment-activated drug conjugate.
Actually combining the pre|CISION chemistry in the linker with an Affimer or of course, potentially an antibody, but an Affimer in our case, the pre|CISION linker with a very potent toxin that can be released in the tumor microenvironment. Okay, in the interest of time, let me touch on the partnerships and then into the diagnostics section, because I do want to get to some of the questions that have been asked. From a partnerships perspective, AffyXell is a joint venture that we have in South Korea with Daewoong Pharmaceutical. As Tony mentioned, we have a 19% shareholding in that joint venture now. It's a really interesting basis for a cell and gene therapy company.
What we have demonstrated with Daewoong and AffyXell is that we can modify stem cells to be able to make and secrete Affimer immunotherapies, such that the stem cell in situ in the body can make its own immunotherapies to support the stem cell activity. There are two key programs there. One is based on mesenchymal stem cells secreting an anti-CD40 ligand Affimer for use in something called graft-versus-host disease. And the second is MSC secreting an agonist that hasn't been disclosed yet, but this data will be presented later in the year for use in MS and type 1 diabetes. AffyXell itself has made good progress over the last 12 months in terms of partnerships and fundraising.
As I mentioned, a 19% shareholding, which the way we've structured this arrangement is that we can claw back equity. We don't put cash into this joint venture, so when we're diluted through funding rounds, we can claw back equity as we put Affimer IP into the business, for example, the anti-CD40 ligand Affimer IP. LG Chem is by coincidence, another South Korean pharmaceutical company, obviously a subsidiary of LG. The key program here, which quite likely will be the first Affimer program into the clinic, into human, is a PD-L1 antagonist. What's really interesting from our perspective is not only is it an Affimer PD-L1 inhibitor and immunotherapy, but also it's a bispecific using an Affimer for half-life extension.
This really will prove the platform in terms of the multi-specificity that I've talked about, the selectivity. Of course, the key data in human is the safety and tolerability to the Affimer platform, which is significant value add for the platform and the company as a whole. We expect LG to take that into the clinic before we do. We don't have a precise timing on that. I think it's unlikely to be this calendar year, but that probably suggests next calendar year. It is a PD-L1 antagonist with a human serum albumin Affimer binder to extend the half-life towards antibody-like half-lives, despite the fact that this is a much smaller molecule.
Let me move on then to the diagnostics division. The vision that we have now having embarked on an M&A-led growth strategy for the diagnostics division is to build a fully integrated and through the use of the Affimer platform in terms of immunodiagnostics, a differentiated IVD business, a European IVD business with significant global reach. We'll talk about the strategy in a moment on the next slide. The mission is straightforward, is to support professional healthcare professionals, but also broaden access, broaden diagnostic access to diagnostics for everyone to improve treatment monitoring and improve health and fitness. Let me again, we certainly will at the AGM, take more time to go through the strategy.
You know, we don't have a huge amount of time today if we're gonna get through questions. Let me sort of set the scene about how we look at the IVD sector, how we think about that, and then also the diagnostics value chain and how that's driving our strategy in terms of the M&A led growth of the diagnostics division. As I said, the key objectives are to support healthcare professionals and improve access to diagnostics. The way we look at the diagnostics market to be able to address both of those objectives is through centralized testing, which is in hospitals effectively.
Centralized pathology, laboratory testing, and also decentralized testing, which does occur in hospitals, in triage, for example, but also in GP clinics, in pharmacies, and via obviously selling tests directly to consumers, but also selling sampling kits to get consumers, patients to sample themselves and then send the test off where the test can be run within a professional environment. I think that's probably a key theme that's central to our thinking is the execution of the test to be within that professional environment. As I say, centralized testing, pathology laboratories in hospitals, but also some rapid near patient point of care testing, which is predominantly lateral flow tests.
Although there are certainly new technologies to allow molecular testing, PCR-type testing, to be carried out at point of care. Point of care tests and lateral flow tests and self-sampling to improve that access in the more decentralized setting in GP clinics, pharmacies and at home. We'll talk about Launch on the next couple of slides, but Launch very much fits. You know, that picture is a piece of the jigsaw, if you like, that fits that picture in the centralized testing, whether that's through rapid tests or automated equipment and reagents and consumables in the pathology laboratory. That's the way we are looking at the market and certainly how Launch fits as a first piece of that jigsaw.
It is worth just talking again, in order to understand what's driving our M&A strategy, talking about the diagnostics value chain. From the left-hand side of the value chain, which is the IP-rich product development, innovation, the generation of value at that end of the value chain to the right-hand side of the value chain, where the value is through, obviously, the sales revenue, the customer relationships, you know, that market intelligence that then drives future product development. Manufacturing in the middle is not something that we are focused on. We are interested in what we would think of as the higher value parts of the value chain at the right-hand side, the commercial customer relationships, and the left-hand side, the innovation and product development. Okay.
Launch, as I said, really fits in that strategy in terms of the centralized pathology laboratory and near-patient testing in the hospital setting. Launch was the largest independent UK IVD distributor, obviously now part of the Avacta Group. As Tony mentioned, we acquired the business in October last year for GBP 24 million , as a significant business in the U.K. and also growing in France as well as some activity in some other countries I'll talk about in the next slide. Been around for over 30 years. Very well-established business with a very good reputation in the industry.
As I said, the rationale is to buy a profitable distribution capability into that centralized part of the diagnostic market that I've just described. Just to talk through a little bit more detail. Founded in 1990. Provides a broad range of immunodiagnostic and molecular test products, along with the reagents and consumables that have that sort of recurring annuity of revenue to go into those products, as well as the technical support and maintenance, primarily in the U.K. and France, about 75%/25% split U.K. and France, but with some business in Belgium, Luxembourg, and the Republic of Ireland as well. Customers are primarily public and private hospitals, obviously NHS in the U.K. as well as private hospitals, and a mix in France.
A very, very experienced management team that have been with the business a long time. Very, very good reputation in the industry, as I've said, so a great business model to think about expanding into other geographies, which I'll mention in a moment. Sales delivered largely through tenders, contracts, long-term contracts that have a high level of repeat business. Quite sticky revenues that we get, you know, very good visibility on in terms of planning. If we think about Launch, in terms of the numbers, what's really important to emphasize is that like, you know, a number of diagnostic businesses, there was significant COVID windfall.
We've been very careful first of all, when we acquired the business, not to value that, because we don't see it continuing, and it's not continuing. To also describe this very transparently, you know, the core business in 21 was a GBP 14.2 million non-COVID business. In 22 recovered to pretty much pre-pandemic levels at GBP 16.5 million . Stifel forecast for 23 is GBP 18 million non-COVID, nothing to do with COVID, revenue. That's from the sale of a broad range of products and reagents and consumables in the U.K. and France, as I described.
Most of the activity and people are in the U.K., but there is a logistics, a new logistics facility in Lille, in northern France, which obviously services France and potentially other countries as well. Just a final slide on Launch Diagnostics then. I mean, it's clearly important that we grow this business as we expect to do in 23 and onwards. There's a number of opportunities for growth, short, medium, and long term. Obviously growing the sales and marketing activity can drive near-term sales, particularly into the base of a much larger base of PCR equipment that's now in place because of the pandemic. In the medium term, adding new products, which may be developed by us, may be small acquisitions of product portfolios that we can put down this channel.
But certainly, we added a new automated autoimmune assay system into the business last year from HOB. Expanding the portfolio of products is clearly a way of growing this business. The most significant opportunity that we believe for growing this business is to expand it geographically. There are no sales in Germany at the moment, which is the largest European diagnostics market. That is a key part of our strategy to grow this business. As we make progress with that project, I'll update the market at the right moment. That brings us to the summary slide. We can get into some of the questions.
Really just to sort of highlight, those comments I made at the start. You know, it's, it has been a very, very good, phase I study for AVA6000. Very pleased with the results we're seeing in terms of the safety profile, but also the very clear, significant release of doxorubicin in the tumor tissue. That's as good as we could have hoped for. That, that has meant that we've really accelerated AVA3996, which is the tumor-targeted proteasome inhibitor. Again, just to underline, you know, the market currently is really focused around hematological B-cell malignancies. That's not the disease positioning that we are thinking about.
If we can target into solid tumors as those PDX models suggest we can, that creates a, you know, a very, very interesting opportunity for the first time for proteasome inhibitors in solid tumors. That did get a lot of attention at the AACR meeting around the AVA3996 preclinical poster a couple of weeks ago. On the diagnostic side, the funding is there to give us the flexibility, having now acquired Launch Diagnostics, for some careful and focused M&A potentially buying product portfolio. Obviously, we are very mindful of the achievement of the need to achieve the key therapeutic milestones as well. I'll leave it there, Mark, if you want to go through some of the questions, that'd be...
That's great. Alastair, Tony, thank you very much indeed for updating investors. Just before we turn to questions, I'd just like to remind investors that recording of today's presentation, along with a copy of the slides and the published Q&A, can be accessed via your investment company dashboard. Alastair, Tony, we did, as you know, receive a considerable amount of questions submitted today and a number of questions throughout today's meeting, so thank you to everybody for your engagement. What we've tried to do, I guess, is try to put these into themes, and hopefully by addressing these themes, it will address some of the questions that maybe we may not be able to read out specifically, but hopefully that these questions will cover a number of those themes.
Let's kick off, if I may, with the first one, which is, what is Avacta's commercial strategy for its current therapeutic assets, including AVA6000 and AVA3996 and beyond?
I mean, I touched on that in the presentation. I think the key point is that we're committed to the clinical development of both of those assets internally, in-house, to maximize value. It would be a strategic mistake to license our lead assets in any significant way. You know, We would certainly be opportunistic to partnering assets in a sort of well-defined area for high-value licensing opportunities. It's critical that we keep those lead clinical programs and preclinical programs in-house.
There is, of course, the potential to monetize the pre|CISION platform outside of those two assets, you know, more broadly with third parties that have warheads in an ADC setting, or, you know, or toxins that they want to develop to target into the tumor in the way that we're doing with AVA6000. There's an opportunity to monetize that platform outside of AVA6000 and AVA3996 as well.
That's great. Thank you. I know a number of these questions, you may have gone through the presentation, but anything else that you can add would be great. The second question reads as follows: Can the company confirm that the completion of AVA6000's phase I-A is still on track for H1 2023?
Yes. Yeah, broadly on track. I mean, obviously, it depends on the size and number of cohorts that we go through. You're all aware that it's a 3 + 3 dose escalation study. That means if you see a DLT in a cohort, then you expand with another 3 patients, and if you don't see a DLT, you continue to the next cohort. Clearly, if you run 6 patients through a cohort, it takes longer than 3. You know, it's difficult to predict exactly what we're going to see. But yes, we expect to finish around the mid-year and then progress on to the phase I-B. I think if what's behind the question is, you know, is the phase I-A gonna drag on to the back end of the year?
The answer is no. We'll update the market, you know, as appropriate as we go into each cohort and reach the MTD.
Thanks ever so much, Alastair. Why is the company continuing to dose escalate in its phase I-A trial to find a maximum tolerated dose when enough doxorubicin is getting into the tumor in cohort 4?
Yeah. No, it's a good question. I mean, the first point is that the MTD, the maximum tolerated dose, is critical to define the dose range for all future studies, you know, whether that's us or by, you know, a partner as we just discussed. We need to be able to define the maximum dose range so that people can in future, plan their clinical developments of the asset. You know, I think you also need to remember that we're getting as we do this and we reach an MTD, we're getting a very detailed picture of safety, tolerability, PK, pharmacodynamics, and all of that is the, you know, the first time that the pre|CISION platform itself has been into human.
Therefore, you know, all of the data that we're gathering is tremendously valuable in terms of, you know, the value of the platform and partnering and so on. It's really important that we fully explore the dose range, even though it's taking longer than we originally thought. That's a really positive thing 'cause we're way above where we thought we would, you know, get to in terms of dosing.
Thanks very much, Alastair. Next question has a couple of parts to it, so, let's go through those. We've heard a few times, the patients in cohort 1 to 4 were not expected to respond to AVA6000 given their types of tumors. However, 1 of these patients, C1, was ovarian and 1, C3, was soft tissue sarcoma. Why were these patients not anticipated to respond to AVA6000 given their tumor types? How will AVA6000 eventually be administered? Is it not as simple as the more doxorubicin in the tumor microenvironment, the better?
Okay. There's quite a bit in there. Nothing simple in drug development would be the first comment, but let me sort of answer the questions. That point about efficacy, I think I touched on that in the presentation. What you have to note is that the patients that are recruited into a phase I-A safety study are heavily pre-treated, late-stage or end-stage patients, and their cancers will be well advanced and will probably have developed escape mechanisms to evade therapy. You cannot recruit patients into a phase I safety study that have an alternative, you know, if they haven't yet been treated, then they will go into the standard of care for whatever cancer they have. You can't take those patients into a phase I-A safety study.
They're all heavily pre-treated. They're all late stage cancer patients. They probably have escape mechanisms, for example, tumor cells and other cells develop pumps that take the drugs out of the cell, P-glycoprotein pumps that take the drugs that you put in out of the cell. Another mechanism that's very common is what's called senescence, where the cells simply stop dividing to try and avoid things like topoisomerase inhibitors, which doxorubicin is. You would not expect, even in an ovarian or a soft tissue sarcoma patient that's at this stage, to necessarily respond to a topoisomerase inhibitor like doxorubicin. That's because of the patients that are chosen.
In the phase I-B, a different group of patients will be selected for exactly that reason, so that we can have a good chance of seeing efficacy. Hopefully they will be first line treatment, so anthracycline-naive patients in the phase I-B. That's certainly what we're aiming for. Then I think the next part of the question was, how is it going to eventually be administered, and is it as simple as just getting more doxorubicin into the tumor? The answer to that is almost certainly no. Of course, that's what the phase I-B is designed to evaluate. But we don't think that just getting more drug into the tumor in a short space of time is going to improve the outcomes for patients.
For example, in terms of progression-free survival, we think that, so let's call it a normal level of dosing, but over many more cycles, is gonna be more effective. The phase I-B is designed to determine that, obviously.
That's great. Thank you. Will the US sites be recruiting to help with the final cohorts of AVA6000's phase I-A trial and then play a major role in the phase I-B?
A quick answer to that, yes. The U.K. sites, the US sites, all recruiting into phase I-A, and they will all play, along with other sites, a key role in phase I-B.
That's great. Thank you. You've always talked about the value of AVA6000's data will bring to the pre|CISION platform. Could you in fact elaborate on what successful AVA6000 trial would provide to the platform?
Thinking about the phase I as a whole, the 1A and 1B together, the first thing is proof of concept, which is the evidence that we're seeing that the preclinical data translates into humans. In other words, we're targeting the release of a chemotherapy into FAP-rich tissue and thereby reducing the systemic exposure. We are already seeing the emergence of those data, which is great. The second thing for the platform that is, you know, denotes success is getting really detailed PK, sorry, pharmacokinetic and pharmacodynamic data that really lets us understand exactly that process I've just described, you know, how that happens over time, because that leads to the design of future clinical studies. Getting a clinically clear better safety profile for a drug like doxorubicin.
Those are all indications of success. For the platform as a whole, and then for AVA6000 in particular, of course, it'll come when we get into the phase I-B to see efficacy at least as good as with a much improved safety profile and longer, you know, longer treatment, and possibly better than doxorubicin.
That's great. Thank you very much, Alastair. A few more if we may just tackle these. What is the process for FDA fast track approval? Does a successful phase I-B data readout in soft tissue sarcoma mean that there's potential for the drug to be given fast track approval from the FDA or other means of accelerated approval and ultimately generate revenue for the drug sooner than anticipated?
Yeah. The... Obviously, we are committed to move AVA6000 through clinical development as, you know, through the best possible route and get it, you know, get it generating revenue as soon as possible. The answer to that question is no. The phase I-B data is not sufficient. It would be the phase I-B and the phase II data that would be taken and reviewed for fast track approval. We should bear in mind, you know, and the question, you know, the questions sets it out as well. There are other routes through the regulatory process, which could be more suitable for AVA6000 given that it's releasing doxorubicin, which is an established drug. We're exploring all of those options.
you know, we will pick the best regulatory route to get the drug to market as soon as possible.
Thank you. I am mindful that this is day one of your results roadshow. I'm very grateful that we've got a slot so early on that roadshow, so I'm mindful not to overtake our time. Maybe if we finish up with the last question. Takeda's Velcade patent expired in 2022. Does Avacta see this as a significant market opportunity for AVA3996? As a result, is there an additional focus on partnering with pharma, such as Takeda, to expedite market access?
Again, hopefully I was clear in the presentation that certainly we're not intending to compete with Velcade for use in blood cancers. The idea of AVA3996 is to position it as an FAP-activated treatment for solid tumors. Different market. The answer to the question about partnering is clearly, under the right circumstances, with a high value partnership that doesn't, you know, that isn't detrimental to our own value generation in the clinic. That would certainly be of interest. We can't possibly develop all the pre|CISION chemotherapies that we can think of. We have to partner them in order to get them to market, you know, in a sensible time.
Well, Alastair, Tony, thank you very much indeed. Once again thank you to everybody for your engagement both ahead of today's event and your engagement throughout. I know investor feedback will be important to you both, and I'll shortly redirect those on the call to give you their thoughts and expectations. Alastair, before doing so, I wonder if I may just ask you for a few closing comments, and then I'll send investors to give you their feedback.
Thanks, Mark. I mean, first of all, thank you for everyone sparing the time to go through the presentation with us. Really just to reiterate the point, you know, we haven't managed to get onto the questions about diagnostic strategy and so on. I'm sort of very aware of that, and we will take the first opportunity, if not at the AGM, as I say, we're going to spend more time at the AGM to give shareholders an opportunity to go through these things. Apologies for not getting through all the questions that were submitted. There was a very large number. We will do, we're not ignoring them. Thank you, everyone.
That's great. Alastair, Tony, thank you once again for updating investors. Can I please ask those investors on the call not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Avacta Group plc, we'd like to thank you for attending today's presentation. Good afternoon to you all