20 January 2017

Avacta Group plc

("Avacta" or "the Group" or "the Company")

AGM business update and notice of results

Substantial progress in therapeutic programme

Multiple third party technology evaluations ongoing

Avacta Group plc (AIM: AVCT), the developer of Affimer^® biotherapeutics and research reagents, is today holding its Annual General Meeting at 10.00 am GMT. In conjunction with this meeting the Company is pleased to provide a business and trading update ahead of its results for the six months ending 31 January 2017, which the Company expects to announce in full on Monday 3 April 2017.

Highlights

·      Custom Affimer order book grown 70% YOY.

·      Half year revenue, operating losses and cash balances are in line with market forecasts.

·      Multiple paid-for technology evaluations and collaborations now ongoing with:

o  4 out of the top 10 global large pharma and more than 10 other biotech and pharma companies

o  8 research tools companies

o  Several diagnostics companies including 1 of the top 3

·      Several technology evaluations underway that could lead to the first reagents license deals during 2017.

·      Excellent progress being made with in-house immuno-oncology therapeutic programme: still targeting the clinic in 2019.

o  Multiple therapeutic lead Affimers identified

o  First animal efficacy study completed with positive results

o  First PK studies completed with positive results

o  Expansion of immuno-oncology pipeline underway

o  Ongoing immunogenicity studies expected to conclude in next few months

·      Research partnership with Moderna continues to progress.

·      Collaboration agreement with Memorial Sloan Kettering Cancer Centre NY to generate Affimer CAR-T proof-of-concept data later in 2017.

·      Affimer technology patent granted in Europe.

The presentation to shareholders at today's AGM is available on the Company's web site (www.avacta.com).

Dr Alastair Smith, Avacta Group Chief Executive Officer, commented:

"We have made substantial progress over the past year in demonstrating the performance and differentiation of our Affimer technology in key applications. It is pleasing that this is now translating into a custom Affimer order book and paid-for commercial evaluations that could ultimately lead to licensing deals. While it will take time for these evaluations to conclude, it is reasonable to expect to see the first of these in 2017.

Our in-house therapeutic development programme continues apace and we are delighted to have seen positive results from the first in vivo studies that demonstrate efficacy, tolerability and suitable pharmacokinetics properties of Affimer molecules. These are huge steps forward that we believe de-risks the platform considerably. Our collaborations with partners such as Moderna, Glythera and the Memorial Sloan Kettering Cancer Centre provide additional opportunities to develop therapeutic applications of the Affimer technology.

With our expectation of strong news flow to underpin increasing shareholder value this year, we start 2017 with great enthusiasm."

Avacta Life Sciences

Avacta's principal focus is on its proprietary Affimer^® technology which is a novel engineered alternative to antibodies that has wide application in a multi-billion life sciences market for diagnostics, therapeutics and as general research tools. Avacta's strategy is to build a profitable business unit licensing Affimer technology into third parties' diagnostic and research product development pipelines, whilst generating valuable therapeutic assets both in-house and with partners.

Licensing deals are secured through technology evaluations. Successful evaluations have a good likelihood of leading to royalty bearing commercial licenses to develop and market products powered by Affimers. Multiple Affimer technology evaluations and collaborations are ongoing with four out of the top ten large pharma, over 20 other biotech and research tools companies and several diagnostics companies including one of the top three.

The order book for evaluations and other custom Affimer projects has grown 70% compared with the same period last year, which is an encouraging sign of increasing awareness of the technology and the positive effects of building solid technical marketing data to support business development.

The evaluation process may take six months to a year, or longer, depending on the nature of the application. Some of the many paid-for evaluations/collaborations that are now underway could lead to licensing for product development which is the principal objective. Others may lead to third party internal use only via a supply arrangement, or to repeated custom Affimer orders. Therefore it is essential to build the pipeline of evaluations and focus efforts on those third parties most likely to develop royalty bearing products for sale. Several of these ongoing evaluations are with third parties that could lead to first reagents license deals during 2017.

The Company is collaborating with Mologic, a UK developer of rapid point-of-care tests - one of the three areas of commercial focus for the Company. This collaboration aims to demonstrate the benefits of Affimer technology in lateral flow tests and to develop novel Affimer-based diagnostic assays for human healthcare. Basic proof of concept in this application has been demonstrated and Avacta is now generating Affimer binders to a number of commercially valuable diagnostic targets, as well as making its Zika virus binders available, to support the development of commercial products. Work remains to fully demonstrate the performance of Affimer based lateral flow devices which will be carried out during 2017. Both companies will share in the future revenues from the commercialisation of the marketed diagnostics.

A number of early custom Affimer evaluations have concluded successfully and have now led to multiple repeat orders of Affimer reagents by those customers. For example, the Company is now working on the fifth Affimer tool for one such customer with a sixth in discussion. The Company anticipates that some of these customers may agree to disclose details of these projects during 2017. Such independent endorsement is a powerful business development tool for a technology in the early stages of commercialisation. Other longer established collaborations with smaller partners have generated useful validation data but are now on-hold due to the funding requirements of the partner or changes in their priorities.

The Company continues to work with a small number of partners with interests in ubiquitination, generating data that plays an important role in demonstrating that Affimer reagents can be generated to targets that are difficult for antibodies to hit. This data is powerful in supporting other business development activities focused on generating Affimer licensing deals. The Company expects to be able to present new and compelling data from one of its academic collaborators targeting the K6 di-ubiquitin linkage within the next few months showcasing the Affimer technology. The pharma sector is only very slowly turning its attention to targeting the ubiquitin system. Therefore, whilst this activity in pharma grows, the Company has focused its development efforts on larger immediate opportunities in affinity separation, immunoassays and rapid diagnostics, and the Company is well placed to provide tools for drug development in the ubiquitination field as it grows.

Therapeutic Update

Substantial progress has been made in the Company's in-house immuno-oncology programme.

Multiple Affimer inhibitors of PD-L1 (one of the better understood drug targets in immuno-oncology and therefore one of the lowest risk in terms of progression into the clinic) have been rapidly identified and characterised. The first animal studies (with any Affimer), of pharmacokinetics and efficacy in a mouse tumour model, have been completed with positive results and the expansion of the portfolio of immuno-oncology Affimer binders beyond PD-L1 is well underway. It is a notable achievement, and an indication of the ease with which Affimer therapeutics can be developed, that data from these animal models was obtained within nine months of screening the library with the target.

The efficacy data set is the single most important Affimer therapeutic data set to be generated by the Company to date because it demonstrates that for an appropriately formatted Affimer therapeutic, the serum residence time in the circulation was sufficient to see a clinical effect which means that the Affimer proteins reached the site of action and were functional in vivo. This is a major step in demonstrating the potential of Affimer technology per se as a therapeutic platform.

The Company expects to provide the market with more information about the build-out of the immuno-oncology portfolio and the strategy for expanding the in-house pipeline in the next few months as well as report on key data from immunogenicity studies - the first such data indicating whether the Affimer technology and individual Affimers show immunogenicity in human models.

The collaboration with Phoremost, a UK drug discovery company, has long term goals to discover and commercialise new drug targets, Affimer reagents and therapeutics. PhoreMost is using Affimers in tandem with its SiteSeeker technology to discover new drug targets and screen for small molecule therapeutics that act on these targets. In addition, this discovery programme will generate novel Affimers which could be used as reagents to assist in the drugs' development, or as therapeutics themselves. Under the terms of the agreement, Avacta is entitled to a royalty on all PhoreMost's revenues that are generated using Affimers. Early proof of concept with the Affimer library is promising showing Affimers clearly generating phenotypic effects in cell lines. We anticipate being able to update the market in more detail in the next twelve months.

The research partnership with Glythera, a UK biotech, to evaluate the use of Glythera's PermaLink™ conjugation chemistry in combination with Avacta's Affimer technology with the aim of developing a new class of highly targeted bio-therapeutics as a superior alternative to the established class of antibody drug conjugates (ADCs) is also progressing well. Initial work has focused on optimising the PermaLink attachment of cytotoxic agents to Affimer proteins that will be used in the early part of 2017 in cell killing assays to determine potency. As part of the collaboration Affimer technology has now been shown to withstand the harsh solvent environments required to optimise such conjugation chemistries and give tight control of the drug-Affimer ratio. Work is ongoing to demonstrate cell killing capability of Affimer drug conjugates. The Company will update the market further when this collaboration concludes mid-2017.

During the reporting period the Company signed a collaboration agreement with the Memorial Sloan Kettering Cancer Centre NY to generate Affimer CAR-T proof-of-concept data. CAR-T immunotherapy is a form of cancer treatment in which the patient's own immune system T cells are modified to give them greater potency with which to attack cancer cells. The simple structure and biophysical properties of Affimers potentially provide significant advantages over antibody fragment technology currently used in CAR-T cell modification and the collaboration is intended to demonstrate a new class of CAR-T cell therapy that incorporate Affimer molecules which could lead to future licensing deals for Affimer technology into the CAR-T space. The Company expects to report on the progress with this collaboration later in 2017.

The Company's established Research partnership with Moderna continues to progress but the Company is restricted from providing any detailed progress updates at this time.

Good progress is being made in the Company's second programme in coagulation in collaboration with Dr Ramzi Ajjan at the Leeds General Infirmary. A range of Affimer molecules has been generated which modulate the clotting of blood and the breakdown of the clots via two different targets. These Affimer molecules are being characterised in Dr Ramzi's laboratory in vitro prior to planned use in in vivo models later in 2017 and 2018 with the objective of licensing these assets or taking them into phase 1 clinical trials in-house. The data show that different Affimer molecules affect blood clotting and clot breakdown to varying degrees in pure samples, in serum and in whole human and mouse blood. Work is ongoing to select the best candidates to take forwards for in vivo testing.

The Company also strengthened its immuno-oncology Scientific Advisory Board with the appointment of Professor Gerard Evan during the reporting period. Professor Evan's research focuses on the molecular basis of cancer. He is the Sir William Dunn Chair of Biochemistry and Head of Biochemistry in the University of Cambridge.

Avacta Animal Health

Avacta Animal Health has traded in line with expectations and ahead of last year. This improvement has been driven by improved sales in the core allergy business, including the recently-launched equine allergy test, and reflects strong sales and marketing efforts.

Development work, primarily of algorithm-based tests, is expected to lead to product launches in the second half of this financial year which we anticipate will contribute to next year financially.

For further information from Avacta Group plc, please contact:

About Avacta Group plc (www.avacta.com)

Avacta's principal focus is on its proprietary Affimer^® technology which is a novel engineered alternative to antibodies that has wide application in Life Sciences for diagnostics, therapeutics and general research and development.

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

Avacta has a pre-clinical biotech development programme with an in-house focus on immuno-oncology and bleeding disorders as well as partnered development programmes. Avacta is commercialising non-therapeutic Affimer reagents through licensing to developers of life sciences research tools and diagnostics.