What changed in this filing

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Item 1. Financial Statements

2022-05-11 compared with 2021-11-12 · 400 added, 358 removed, 431 unchanged (64% of the section changed)

10 unchanged sentences

(IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)

September 30,

Current assets:

5 unchanged sentences

Property and equipment, net

Intangible assets, net

Right of use assets, net

Deferred tax assets

LIABILITIES, REDEEMABLE PREFERRED SHARES AND SHAREHOLDERS’ DEFICIT

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

4 unchanged sentences

Total current liabilities

Convertible loan notes – non current

Lease liability – non current

Contingent consideration

Deferred tax liability, net

Other non-current liabilities

Total liabilities

Commitments and contingencies (Note 13)

Series A redeemable convertible preferred shares (Series A shares);

£ 0.10 nominal value;

no shares issued and outstanding ;

(December 31, 2020:

issued and outstanding:

Series B redeemable convertible preferred shares (Series B shares);

£ 0.10 nominal value;

no shares issued and outstanding;

(December 31, 2020:

issued and outstanding :

no shares issued or outstanding)

Shareholders’ equity:

4 unchanged sentences

63,443 shares authorized , issued and outstanding (December 31, 2021:

no shares issued or outstanding)

authorized , issued and outstanding:

Deferred B shares, £ 0.01 nominal value;

570,987 shares authorized, issued and outstanding (December 31, 2020:

no shares issued or outstanding )

570,987 shares authorized, issued and outstanding (December 31, 2021 authorized, issued and outstanding:

Deferred C shares, £ 0.000007 nominal value, 27,828,231 shares authorized , issued and outstanding (December 31, 2021:

5 unchanged sentences

Total shareholders’ equity

Total liabilities, redeemable convertible preferred shares and shareholders’ equity

Total liabilities and shareholders’ equity

1 Indicates amount less than thousand

4 unchanged sentences

Three months ended

Nine months ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

License revenue

6 unchanged sentences

Total operating expenses

Loss from operations

Income/(loss) from operations

Other income (expense):

5 unchanged sentences

Research and development incentives

Total other (expense) income

Tax (expense)/benefit

Net (loss)/ income

Net loss/ (income) attributable to noncontrolling interest

Net (loss)/ income attributable to Vaccitech plc Shareholders

Total other income (expense)

Net income/(loss)

Net loss attributable to noncontrolling interest

Net income/(loss) attributable to Vaccitech plc Shareholders

Weighted-average ordinary shares outstanding, basic

Weighted-average ordinary shares outstanding, diluted

Net( loss)/ income per share attributable to ordinary shareholders, basic

Net (loss)/ income per share attributable to ordinary shareholders, diluted

Net (loss)/ income

Other comprehensive (loss)/ income – foreign currency translation adjustments

Comprehensive (loss)/ income

Comprehensive loss/ (income) attributable to noncontrolling interest

Comprehensive (loss)/ income attributable to Vaccitech plc shareholders

Net income/(loss) per share attributable to ordinary shareholders, basic

Net income/(loss) per share attributable to ordinary shareholders, diluted

Net income/(loss)

Other comprehensive loss-foreign currency translation adjustments

Comprehensive loss

Comprehensive loss attributable to noncontrolling interest

Comprehensive loss attributable to Vaccitech Plc Shareholders

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3 unchanged sentences

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

Nine months ended September 30, 2021

Convertible Preferred

Preferred Shares

Three months ended March 31, 2022

Ordinary Shares

5 unchanged sentences

Shareholders’

(Deficit)/Equity

Balance, January 1, 2021, as previously reported

Share-based compensation – restatement (see note 1)

Balance, January 1, 2021, as restated

Balance, January 1, 2022

Share based compensation

Issue of Series B shares, net of issuance costs

Series B Shares issued on conversion of convertible notes

Issue of Deferred A shares

Issue of ordinary shares

1 unchanged sentence

Balance, March 31, 2022

Share-based compensation

Initial public offering, net of underwriting discounts

Offering Cost

Conversion of Series A shares

Conversion of Series B shares

Issue of share to non-controlling interest

Foreign currency translation adjustments

Balance, June 30, 2021

Share-based compensation

Offering cost refund

Foreign currency translation adjustments

Balance, September 30, 2021

1 Indicates amount less than thousand

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

VACCITECH PLC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED SHARES

AND SHAREHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

Nine months ended September 30, 2020

Three months ended March 31, 2021

Series A Redeemable

Series B Redeemable

Convertible Preferred

Preferred Shares

Convertible Preferred

Ordinary Shares

Deferred A Shares

Deferred B Shares

Deferred C Shares

Comprehensive

1 unchanged sentence

Shareholders’

Balance, January 1, 2020, as previously reported

Share-based compensation - restatement (see note 1)

Balance, January 1, 2020, as restated

Balance, January 1, 2021

Share based compensation

Issue of Series B shares, net of issuance costs

Series B Shares issued on conversion of convertible notes

Issue of Deferred A shares

Issue of ordinary shares

Exercise of stock options

Foreign currency translation adjustments

Balance, March 31, 2021

Share-based compensation

Foreign currency translation adjustments

Balance, June 30, 2020

Share-based compensation

Exercise of stock options

Foreign currency translation adjustments

Balance, September 30, 2020

1 Indicates amount less than thousand

3 unchanged sentences

(IN THOUSANDS)

Nine months ended

September 30, 2021

September 30, 2020

Three months ended

March 31, 2022

March 31, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash used in operating activities:

Net income/(loss)

Adjustments to reconcile net income/loss to net cash used in operating activities:

Share based compensation

Depreciation and amortization

ROU asset and liability

Right of use asset and liability

Fair valuation gain on embedded derivatives

1 unchanged sentence

Non-cash interest expense on convertible loan notes

Fair value change in contingent consideration

Deferred tax benefit

Loss on conversion of convertible loan notes

Other non-cash expenses

Changes in operating assets and liabilities:

11 unchanged sentences

Issue of shares and exercise of stock options

Repayment of debt

Initial public offering costs

1 unchanged sentence

Proceeds from issue of Series B shares

Proceeds from issue of shares to noncontrolling interest

Proceeds from issuance of ordinary shares, net of underwriters fees

Transaction costs for convertible loan notes

Proceeds from convertible loan notes

Net cash provided by financing activities

Net cash (used)/provided by financing activities

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of the period

2 unchanged sentences

Cash paid for interest

Cash paid for income taxes

Non-Cash investing and financing activities

Issue of ordinary shares

Capital expenditures included in accounts payable

Issue of deferred A shares

Issue of deferred B shares

Issue of deferred C shares

Issue of Series B shares

ROU assets obtained in exchange for operating lease liabilities

1 Indicates amounts less than thousand

Changes to right-of-use asset resulting from lease reassessment event

Asset retirement obligation

1 Indicates amount less than thousand

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3 unchanged sentences

Vaccitech plc (Vaccitech) is a public limited company incorporated pursuant to the laws of England and Wales in March 2021.

Vaccitech is engaged in the discovery and development of novel immunotherapeutics and vaccines for the treatment and prevention of infectious disease and cancer.

Vaccitech is engaged in the discovery and development of novel immunotherapeutics and vaccines for the treatment and prevention of infectious diseases, autoimmunity, and cancer.

Vaccitech is headquartered in Oxford, United Kingdom.

Vaccitech and its five direct and indirect subsidiaries, Vaccitech (UK) Limited, Vaccitech Australia Pty Limited, Vaccitech Oncology Limited (“VOLT”), Vaccitech USA Inc.

Vaccitech and direct and indirect subsidiaries, Vaccitech (UK) Limited, Vaccitech Australia Pty Limited, Vaccitech Oncology Limited (“VOLT”), Vaccitech USA Inc., Vaccitech North America, Inc.

and Vaccitech Italia S.R.L, are collectively referred to as the “Company”.

1 unchanged sentence

The group reorganization under common control constitutes a change in reporting entity and has been given retrospective effect reflecting the net assets of Vaccitech (UK) Limited (formerly Vaccitech Limited) and its subsidiaries and Vaccitech plc at their historical carrying amounts.

As a result of the reorganization these unaudited condensed consolidated financial statements have been presented for all periods as if Vaccitech plc was the holding company of the group.

As a result of the reorganization the comparative period presented these unaudited condensed consolidated financial statements have been presented as if Vaccitech plc was the holding company of the group.

The Company operates in an environment of rapid technological change and substantial competition from pharmaceutical and biotechnology companies.

6 unchanged sentences

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

Certain notes or other information that are normally required by GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements.

Accordingly, the unaudited condensed consolidated financial statements should be read in connection with the Company’s audited financial statements and related notes as of and for the year ended December 31, 2020 contained in our prospectus dated April 30, 2021.

On May 4, 2021, the Company effected a 309 -for-1 stock split of ordinary shares.

Each resultant ordinary share from the stock split was redesignated as one ordinary share and one deferred C share.

Accordingly, all ordinary share and per share amounts for all periods presented in the accompanying unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the stock split.

Accordingly, all ordinary share and per share amounts for the comparative prior period presented in the accompanying unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the stock split.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated balance sheet and statement of changes in redeemable convertible preferred shares and shareholders’ equity include the correction of an error related to the Company’s consolidated financial statements for the period ended December 31, 2019.

The error related to the omission of share-based compensation expense totaling $ 2,129 thousand in the period ended December 31, 2019.

The correction of this error has been recorded as an adjustment to previously reported additional paid-in-capital and accumulated deficit as of January 1, 2020 and consequently as of December 31, 2020.

There is no impact on net loss or cash flows, and no material impact on financial position for the periods presented.

Unaudited Condensed Financial Information

The accompanying Condensed Consolidated Balance Sheet as of September 30, 2021, the Condensed Consolidated Statements of Operations and Comprehensive loss and Condensed Consolidated Statements Of Changes In Redeemable Convertible Preferred Shares and Shareholders’ Equity (Deficit) for the three months and nine months ended September 30, 2021 and 2020 and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 are unaudited.

The accompanying Condensed Consolidated Balance Sheet as of March 31, 2022, the Condensed Consolidated Statements of Operations and Comprehensive Loss, Condensed Consolidated Statements of Changes In Redeemable Convertible Preferred Shares and Shareholders’ Equity (Deficit) and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 are unaudited.

These unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements.

In our opinion, the unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of September 30, 2021, our results of operations for the three and nine months ended September 30, 2021 and 2020, and our cash flows for the nine months ended September 30, 2021 and 2020.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or any other interim periods.

In our opinion, the unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of March 31, 2022, our results of operations and our cash flows for the three months ended March 31, 2022 and 2021.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or any other interim period.

Summary of Significant Accounting Policies

1 unchanged sentence

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of costs and expenses during the reporting period.

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of costs and expenses during the reporting period.

The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances.

3 unchanged sentences

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment.

In respect of the international situation in Ukraine, we have assessed the impact on the Company as minimal.

We have no operations or suppliers based in Ukraine, Belarus, or Russia, and there is consequently no additional risk or negative impact on the unaudited condensed consolidated financial statements.

We have no operations or suppliers based in Turkey either, and therefore the Company is not impacted by the potential hyperinflationary environment in that country.

As of the date of issuance of these unaudited condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.

These estimates may change as new events occur and additional information is obtained and are recognized in the unaudited condensed consolidated financial statements as soon as they become known.

These estimates may change as new events occur and additional information is obtained and are recognized in the condensed consolidated financial statements as soon as they become known.

Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements.

VACCITECH PLC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recently issued accounting pronouncements

2 unchanged sentences

The Company adopted ASU No.

2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”) on January 1, 2021.

The new standard did not have an impact on the Company’s financial position and results of operations.

Net Loss Per Share

Because the Company has reported a net loss attributable to ordinary shareholders for the periods presented, basic and diluted net loss per share attributable to ordinary shareholders are the same for the periods presented, except for the period ended September 30, 2020 in which the Company reported net income attributable to ordinary shareholders.

The following table sets forth the computation of basic and diluted net loss per share for the three months and nine months ended September 30, 2021 and 2020 (in thousands, except number of shares):

Three months ended September 30,

Nine months ended September 30,

Net (loss)/income

Net (loss)/income attributable to noncontrolling interest

Net (loss)/income attributable to Vaccitech shareholders

2021-10 - Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance on January 1, 2022.

The new standard did not have an impact on the Company’s unaudited condensed consolidated financial statements.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Net income/(loss) per share

The following table sets forth the computation of basic and diluted net income/loss per share for the three months ended March 31, 2022 and 2021 (in thousands, except number of shares):

Three months ended March 31,

Net income/(loss)

Net loss attributable to noncontrolling interest

Net income/(loss) attributable to Vaccitech shareholders

Weighted-average ordinary shares outstanding, basic

Effect of dilutive securities

Stock Options

Series A Shares

Effect of dilutive stock options

Weighted-average ordinary shares outstanding, diluted

Net (loss)/ income per share attributable to ordinary shareholders, basic

Net (loss)/ income per share attributable to ordinary shareholders, diluted

The weighted-average ordinary shares outstanding for the three months and nine months ended September 30, 2021 includes 514,923 shares issuable on vesting of the restricted stock units with a performance condition linked to the IPO resolution date (see note 11).

Potential ordinary shares issuable for stock options that are excluded from the computation of diluted weighted-average shares outstanding because including them would have had an anti-dilutive effect are as follows:

Nine months ended September 30,

Stock options

Net income/(loss) per share attributable to ordinary shareholders, basic

Net income/(loss) per share attributable to ordinary shareholders, diluted

Potential ordinary shares issuable upon conversion or exercise of Series A & Series B Shares and stock options that are excluded from the computation of diluted weighted-average shares outstanding are as follows:

Three months ended March 31,

Series A shares

VACCITECH PLC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Series B shares

Stock options

Prepaid and other current assets (in thousands)

September 30, 2021

December 31, 2020

Prepayments and accrued income

Value Added Tax receivable

Current tax receivable

Employee retention and payroll tax credit

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

September 30, 2021

December 31, 2020

Accrued manufacturing and clinical expenses

4 unchanged sentences

Accrued other

Ordinary Shares

On May 4, 2021, the Company closed its initial public offering (“IPO”) of 6,500,000 ADS representing 6,500,000 ordinary shares having a nominal value of £ 0.000025 per share, at a public offering price of $ 17.00 per share, for aggregate net proceeds of $ 102,765 thousand after deducting underwriting commissions of $ 7,735 thousand and incurred offering costs of $ 2,165 thousand.

All ordinary shares rank pari passu as a single class.

The following is a summary of the rights and privileges of the holders of ordinary shares as of September 30, 2021:

Liquidation preference:

in the event of the liquidation, dissolution or winding up of the Company, the assets of the Company available for distribution to holders of the ordinary shares shall be distributed amongst all holders of the ordinary shares in proportion to the number of shares held irrespective of the amount paid or credited as paid on any share.

holders of the ordinary shares are entitled to dividend, as may be recommended from time to time by the Board and declared by the ordinary shareholders out of legally available funds.

Voting Rights:

each holder of ordinary shares is entitled to one vote for each share on all matters to be voted on by ordinary shareholders .

Preemption rights:

pursuant to section 561 of the Companies Act 2006, shareholders are granted preemptive rights when new shares are issued for cash.

However, it is possible for our Articles, or shareholders at a general meeting representing at least 75 % of our ordinary shares present (in person or by proxy) and eligible to vote at that general meeting, to disapply these preemptive rights.

Such a disapplication of preemption rights may be for a maximum period of up to five years from the date of the shareholder special resolution.

In either case, this disapplication would need to be renewed by our shareholders upon its expiration (i.e., at least every five years ) to remain effective.

Value Added Tax payable

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On April 21, 2021, our shareholders approved the disapplication of preemptive rights for a period of five years from the date of approval by way of a special resolution of our shareholders.

This included the disapplication of preemption rights in relation to the allotment of our ordinary shares in connection with the IPO.

This disapplication will need to be renewed upon expiration (i.e., at least every five years ) to remain effective, but may be sought more frequently for additional five-year terms (or any shorter period).

Series A and Series B shares

Series B shares

On March 15, 2021, the Company issued 28,957 Series B preferred shares (‘‘Series B Shares’’) amounting to $ 125,239 thousand and incurred transaction costs of $ 3,402 thousand.

On March 31, 2021, Vaccitech plc subdivided each of the Series A shares and Series B shares (including the Series B shares issued on conversion of the convertible loan notes) into one share of the same class and one deferred A share with a nominal value of £ 1.00 per share.

On March 31, 2021, the Company subdivided each of the Series A shares and Series B shares (including the Series B shares issued on conversion of the convertible loan notes) into one share of the same class and one deferred A share with a nominal value of £ 1.00 per share.

On May 4, 2021 prior to the closing of the Company’s initial public offering and pursuant to the terms of its articles of association, all of the Series A Shares and Series B Shares were converted into 19,603,887 ordinary shares, 570,987 deferred B shares and 19,603,887 deferred C shares.

Convertible loan notes

The Company recognized interest expense of $ 2,650 thousand and a change in fair value of $ 5,994 thousand in relation to the conversion and redemption features embedded in the convertible loan notes in the condensed consolidated statements of operations and comprehensive loss for the period ended September 30, 2021.

For the period ended September 30, 2020, interest expense was $ 969 thousand and change in fair value in relation to the conversion and redemption features embedded in the convertible loan notes was $ 3 thousand.

The Series B funding on March 15, 2021 constituted a qualified equity financing in accordance with the terms of the convertible loan notes.

1 unchanged sentence

The conversion was accounted for as an extinguishment of the convertible loan notes.

As a result, the 12,421 Series B preferred shares issued on conversion was recognized at the settlement-date fair value of the Series B shares ($ 53,721 thousands) and a loss of $ 13,789 thousand for the nine month period was recognized in earnings for the difference between (1) the fair value of those shares and (2) the sum of the carrying amounts of the convertible loan notes ($ 25,557 thousand) and the bifurcated conversion and redemption feature liability ($ 14,375 thousand).

Deferred Shares

All deferred shares rank pari passu as a single class.

The deferred shares do not have rights to dividends or to participate in profits on a return of assets on liquidation, the deferred shares confer on the holders thereof an entitlement to receive out of the assets of the Company available for distribution amongst the shareholders (subject to the rights of any new class of shares with preferred rights) the amount credited as paid up on the deferred shares held by them respectively after (but only after) payment shall have been made to the holders of the ordinary shares of the amounts paid up or credited as paid up on such shares and the sum of £ 1,000 thousand ($ 1,373 thousand) in respect of each ordinary share held by them respectively.

The deferred shares shall confer on the holders thereof no further right to participate in the assets of the Company.

As a result, the 12,421 Series B preferred shares issued on conversion was recognized at the settlement-date fair value of the Series B shares ($ 53,721 thousand) and a loss of $ 13,789 thousand was recognized in earnings for the difference between (1) the fair value of those shares and (2) the sum of the carrying amounts of the convertible loan notes ($ 25,557 thousand) and the bifurcated conversion and redemption feature liability ($ 14,375 thousand).

Deferred A Shares

On March 31, 2021, Vaccitech Plc subdivided each of the Series A shares and Series B shares into one share of the same class and one deferred A share with a nominal value of £ 1.00 per share.

The deferred A shares do not have rights to dividends or to participate in profits on a return of assets on liquidation, the deferred A shares shall confer on the holders thereof an entitlement to receive out of the assets of the Company available for distribution amongst the shareholders (subject to the rights of any new class of shares with preferred rights) the amount credited as paid up on the deferred A shares held by them respectively after (but only after) payment shall have been made to the holders of the ordinary shares of the amounts paid up or credited as paid up on such shares and the sum of £ 1,000 thousand ($ 1,373 thousand) in respect of each ordinary share held by them respectively.

The deferred A shares shall confer on the holders thereof no further right to participate in the assets of the Company.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, security deposit, accounts payable, certain accrued expenses, and contingent consideration.

The carrying amounts of cash and cash equivalents, accounts receivable, security deposit, accounts payable and accrued expenses approximated their respective fair value due to the short-term nature and maturity of these instruments.

As of March 31, 2022, the Company had a contingent consideration liability of $ 2,444 thousand related to the acquisition of Avidea Technologies, Inc.

The fair value of the contingent consideration is a Level 3 valuation with the significant unobservable inputs being the probability of success of achievement of the milestone and the expected date of the milestone achievement.

Significant judgment is employed in determining the appropriateness of certain of these inputs.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other liabilities.

As of September 30, 2021, and December 31, 2020, the carrying amount of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments.

As of December 31, 2020, the Company had an embedded derivative liability of $ 20,109 thousand related to the conversion features, the cash redemption feature on maturity and the cash redemption feature upon an exit event that settles in noncash consideration embedded in convertible loan notes.

For the three months ended March 31, 2021, the Company had an embedded derivative liability related to the conversion features, the cash redemption feature on maturity and the cash redemption feature upon an exit event that settles in noncash consideration embedded in convertible loan notes.

The fair value of the embedded derivatives is a Level 3 valuation with the significant unobservable inputs being the probability of exercise of conversion and cash redemption features.

Significant judgment is employed in determining the appropriateness of certain of these inputs.

The changes in the fair value of the embedded derivatives was as follows (in thousands):

Nine months ended September 30,

The following table summarizes changes to our financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy (in thousands):

Three months ended

Beginning balance

Change in fair value recognized in net loss

Settlement via conversion

Change in fair value recognized in net income/loss

Foreign exchange translation

Ending balance

During the first quarter of 2022, the Company identified qualitative indicators of impairment due to sustained decline in the price of the Company’s American Depositary Shares.

Therefore, the Company performed an interim qualitative assessment as of March 31, 2022 to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

Based on this assessment, management determined it is not more likely than not that the fair value of the reporting unit is less than its carrying amount.

The Company will perform its annual goodwill impairment test as of November 30, 2022.

Share-Based Compensation

On April 8, 2021, the Board of the Company adopted the Vaccitech plc Share Award Plan 2021 (“the Plan”) and the Vaccitech plc Non-Employee Sub-Plan which is a sub-plan of the Plan.

Under the terms of the Plan, the Board is permitted to grant awards to employees as restricted share units, options, share appreciation rights, restricted shares.

The aggregate number of shares initially available for issuance under the Plan and the Vaccitech plc Non-Employee Sub-Plan cannot exceed 3,675,680 ordinary shares (the “Initial Limit”).

Beginning calendar year 2022, the total number of ordinary shares available for issuance under the Plan shall be increased on January 1 of each year in an amount equal to the lesser of (i) 4 % of the Company’s issued and outstanding ordinary shares (which 4 % limit shall be measured as of January 1 of such year) and (ii) such number of ordinary shares as determined by the Board in its discretion (the “Annual Increase”).

The awards generally vest based on the grantee’s continued service with the Company during a specified period following grant as determined by the Board and generally expire ten years from the grant date.

Option awards generally vest over one to four years , but vesting conditions can vary at the discretion of the Company’s Board.

As of September 30, 2021, 2,131,214 ordinary shares are available for future grants.

On April 30, 2021, the Company granted 1,513,566 options under the Plan to employees and directors with a grant date fair value $ 11.33 per option and a weighted average exercise price of $ 17.00 per option.

On September 30, 2021, the Company granted 30,900 options under the Plan with a grant date fair value of $ 12.83 and a weighted average exercise price of $ 14.96 per option.

For the nine months ended September 30, 2021, the Company granted 1,909,086 options with a weighted average grant date fair value of $ 10.94 per option and a weighted average exercise price of $ 13.72 of which 364,620 options were issued under the Enterprise Management Incentive Share Option Scheme which has been discontinued on adoption of the Plan.

For the nine months ended September 30, 2020, the Company granted 302,820 options to employees and directors under the Enterprise Management Incentive Share Option Scheme with a weighted average grant date fair value of $ 4.98 and a weighted average exercise price of $ 0.00036 per share.

VACCITECH PLC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three month period ended March 31, 2022, in accordance with the terms of the Annual Increase of the Vaccitech plc Share Award Plan 2021, the total number of ordinary shares available for issuance under the Plan increased by 4 % of the Company’s issued and outstanding ordinary shares as of January 1, 2022.

During the three months ended March 31, 2022, the Company granted 1,632,922 options to employees and directors with a grant date fair value of $ 3.75 and a weighted average exercise price of $ 11.24 per share.

For the three months ended March 31, 2021, the Company granted 364,620 options to employees and directors with a grant date fair value of $ 9.14 and a weighted average exercise price of $ 0.00003 per share.

The fair value of each stock option issued to employees was estimated at the date of grant using Black-Scholes with the following weighted-average assumptions:

Nine months ended September 30,

Three months ended

Expected volatility

2 unchanged sentences

Expected dividend yield

On April 22, 2021, the exercise price of 267,903 options was changed from $ 0.0004 (£ 0.0003 ) to $ 4.84 (£ 3.49 ) in order to enable employees to benefit from tax advantages under the Enterprise Management Incentive Scheme.

This modification did not result in an incremental compensation cost and the Company continues to recognize compensation cost on these options equal to the grant date fair value of the original award.

At September 30, 2021 3,356,648 options with a weighted average exercise price of $ 7.98 were outstanding of which 741,219 with a weighted average exercise price of $ 0.38 were exercisable.

At September 30, 2021, there was $ 16,061 thousand unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 2.37 years.

During the six months ended June 30, 2021, 514,923 restricted stock units with a performance condition linked to the IPO resolution date vested on occurrence of the IPO resulting in $ 5,760 thousand recognized as compensation cost .

Share-based compensation expense is classified in the unaudited condensed consolidated statement of operations and comprehensive loss as follows (in thousands):

Three months ended September 30,

Nine months ended September 30,

As of March 31, 2022 4,814,173 options with a weighted average exercise price of $ 9.52 were outstanding.

As of March 31, 2022, there was $ 14,840 thousand unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 2.36 years.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

No Restricted Stock Units (“RSUs”) were issued in the three months ended March 31, 2022, and there were no RSUs outstanding during the period ended March 31, 2022.

During the three months ended March 31, 2021, 263,886 Restricted Stock Units (“RSUs”) were converted into ordinary shares.

The RSUs granted on January 9, 2020 contains a nondiscretionary antidilution provision which entitles the grantee to additional RSUs to ensure that the aggregate RSUs granted equal 1.5 % of the total fully diluted share capital of the Company.

As of March 31, 2021, 264,042 RSUs were outstanding.

No compensation cost has been recognized in respect of these outstanding RSUs which vests on the IPO Resolution Date as the initial public offering is not considered probable until it occurs.

Share based compensation expense is classified in the condensed consolidated statement of operations and comprehensive loss as follows (in thousands):

Three months ended

Research and development

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Contract assets primarily relate to the Company’s conditional right to consideration for work completed but not billed at the reporting date.

As of September 30, 2021, the Company did not have any contract assets.

As of March 31, 2022, the Company did not have any contract assets.

Contract liabilities primarily relate to payments received from customers in advance of performance under the contract and are disclosed as deferred revenue separately in the Condensed Consolidated Balance Sheet.

The Company’s contract liabilities arise when payment is received upfront for various multi-period extended license and service arrangements.

Changes in the contract liabilities during the period are as follows:

September 30,

Balance at December 31, 2020

Changes in the contract liabilities during the period are as follows (in thousands):

March 31, 2022

Balance as of January 1, 2022

Revenue recognized related to contract liability balance

Foreign exchange translation

Balance at September 30, 2021

VACCITECH PLC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Balance as of March 31, 2022

Revenue recognized related to the contract liability balance for the three months ended March 31, 2021 was $ 16 thousand.

During the three months ended March 31, 2022, the Company recognized revenue of $ 14,993 thousand (three months ended March 31, 2021:

$ Nil ) in relation to the Amendment, Assignment and Revenue Sharing Agreement (“License Agreement Amendment”) with Oxford University Innovation Limited entered into in April 2020, which vested and assigned all intellectual property rights in relation to any ChAdOx1 or ChAdOx2 vector-based vaccine in the field of SARS-CoV2 to Oxford University Innovation Limited.

Commitments and Contingencies

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The agreements cover a variety of fields, including influenza, cancer, HPV, HBV and MERS.

The Company’s obligations for future payments under these arrangements are dependent on its ability to develop promising drug candidates, the potential market for these candidates and potential competing products, and the payment mechanisms in place in countries where the Company retains the right to sell.

The Company’s obligations for future

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

payments under these arrangements are dependent on its ability to develop promising drug candidates, the potential market for these candidates and potential competing products, and the payment mechanisms in place in countries where the Company retains the right to sell.

Each agreement provides for specific milestone payments, typically triggered by achievement of certain testing phases in human candidates, and future royalties ranging from 1 to 5 % for direct sales of a covered product to 3 to 7 % of net payments received for allowable sublicenses of technology developed by the Company.

The obligation to make these payments is contingent upon the Company’s ability to develop candidates for submission for phased testing and approvals, and for the development of markets for the products developed by the Company.

The Company has not made any material payments under these license agreements during the periods ended September 30, 2021 and September 30, 2020.

The Company has not made any material payments under these license agreements during the periods ended March 31, 2022 and March 31, 2021.

The Company leases certain laboratory and office space under operating leases, which are described below.

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Variable payments include amounts due to the lessor for additional services and cost reimbursements.

On February 1, 2022 the Company gave notice to terminate The Oxford Science Park lease.

The lease will be terminated on July 30, 2022, by which date the Company will have relocated its corporate headquarters from Oxford to The Harwell Science and Innovation Campus, Oxfordshire.

The Harwell Science and Innovation Campus, Oxfordshire

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The Company’s right-of-use asset and lease liability are as follows (in thousands):

September 30,

Right-of-use asset

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Lease liability, noncurrent

VACCITECH PLC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Weighted average remaining lease term (years)

Weighted average discount rate

Other information

Nine months ended September 30,

Cash paid for amounts included in the measurement of lease liabilities

During the nine months ended September 30, 2021, the Company recorded $ 372 thousand (nine months ended September 30, 2020:

Three months ended March 31,

Short-term lease expense

Operating cash flows from operating leases

During the three months ended March 31, 2022, the Company recorded $ 488 thousand (three months ended March 31, 2021:

$ 92 thousand) in operating lease costs (including short-term lease expense and variable lease costs).

Future annual minimum lease payments under operating leases as of September 30, 2021 were as follows (in thousands):

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Future annual minimum lease payments under operating leases as of March 31, 2022 were as follows (in thousands):

Remainder of 2022

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Total lease liability

During the current period, we recognized an asset retirement obligation (“ARO”) for leasehold improvements in relation to the Harwell Science and Innovation Campus premises where in accordance with the terms of the lease, the Company has to restore part of the building upon vacating the premises.

The ARO liability totaled $ 434 thousand and $ Nil as of March 31, 2022 and December 31, 2021, respectively and are included in other non-current liabilities on the condensed consolidated balance sheets.

Other contingencies

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Related Party Transactions

During the three months and nine months ended September 30, 2021, the Company paid $ 110 thousand and $ 236 thousand respectively (three months and nine months ended September 30, 2020:

$ 80 thousand and $ 250 thousand respectively) to its shareholder, Oxford Sciences Enterprises plc (formerly, Oxford Sciences Innovation plc), mostly related to the lease of a laboratory and office space in Oxford.

At September 30, 2021, the Company owed $ 0 thousand (December 31, 2020:

$ 0 ) to Oxford Sciences Enterprises plc.

During the nine months ended September 30, 2021, the interest on convertible loans issued to Oxford Sciences Enterprises plc and the University of Oxford, shareholders of the Company was $ 429 thousand (nine months ended September 30, 2020:

$ 368 thousand).

At September 30, 2021 these convertible loan notes including the embedded derivative was $ 0 (December 31, 2020:

$ 7,356 thousand).

On March 15, 2021 Oxford Sciences Enterprises plc subscribed to 3,468 Series B Shares in an amount of $ 14,999 thousand.

During the three months ended March 31, 2022, the Company recognized net income of $ 55 thousand after offsetting lease costs for laboratory and office space in Oxford of $ 74 thousand against a refund of $ 129 thousand (three months ended March 31, 2021:

$ 40 thousand expense) from its shareholder, Oxford Science Enterprises plc.

As of March 31, 2022, the Company had a receivable of $ 154 thousand (December 31, 2021:

$ 32 thousand payable) from Oxford Science Enterprises plc.

During the three months ended March 31, 2022, the Company incurred expenses of $ 1 thousand (three months ended March 31, 2021:

$ 19 thousand) to its shareholder, the University of Oxford, related to clinical study costs.

As of March 31, 2022, the Company owed $ 1 thousand (December 31, 2021:

$ Nil ) to University of Oxford.

During the three months ended March 31, 2022, the Company incurred expenses of $ 193 thousand (three months ended March 31, 2021:

$ 116 thousand) and recognized license revenue of $ 14,993 thousand (three months ended March 31, 2021:

$ Nil ) from Oxford University Innovation Limited which is a wholly owned subsidiary of the Company’s shareholder, the University of Oxford.

As of March 31, 2022, the Company was owed $ 17,791 thousand (December 31, 2021:

$ Nil ) from Oxford University Innovation Limited.

There were no convertible loans outstanding during the three months period ended March 31, 2022.

During the three months ended March 31, 2021, the interest on convertible loans issued to Oxford Science Enterprises plc and the University of Oxford, shareholders of the Company was $ 429 thousand.

There were no convertible loans outstanding as of March 31, 2021.

There were no Series B Shares issued or outstanding during the three months period ended March 31, 2022.

On March 15, 2021 Oxford Science Enterprises plc subscribed to 3,468 Series B Shares in an amount of $ 14,999 thousand.

The Company also recognized a loss of $ 2,125 thousand on the conversion of the convertible loan notes into 2,008 Series B Shares.

On May 4, 2021 prior to the closing of the Company’s initial public offering and pursuant to the terms of its articles of association, the Series B Shares were converted into 1,692,084 ordinary shares.

At December 31, 2021 there were no Series B Shares outstanding.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Events

On April 4, 2022 a merger was effected between subsidiaries Vaccitech USA, Inc.

and Vaccitech North America, Inc, with Vaccitech North America, Inc.

being the surviving entity.

On April 28, 2022 the cash was received in full in respect of the license revenue and corresponding outstanding accounts receivable as of March 31, 2022 with Oxford University Innovation Limited.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes for the year ended December 31, 2020 included in our final prospectus for our initial public offering filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the Securities and Exchange Commission, on April 30, 2021.

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes appearing elsewhere in this Unaudited Quarterly Report on Form 10-Q and our audited financial statements and related notes thereto for the year ended December 31, 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 25, 2022.

Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties, and assumptions.

Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those set forth in our final prospectus for our initial public offering filed pursuant to Rule 424(b), as supplemented by our subsequent filings with the SEC.

We are a clinical-stage biopharmaceutical company engaged in the discovery and development of novel immunotherapeutics and vaccines for the treatment and prevention of infectious diseases and cancer.

Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those set forth in our Annual Report on Form 10-K and in other filings with the SEC.

We are a clinical-stage biopharmaceutical company engaged in the discovery and development of novel immunotherapeutics and vaccines for the treatment and prevention of infectious diseases, autoimmunity, and cancer.

We use our proprietary platform to develop product candidates that stimulate powerful, targeted immune responses against pathogens and tumor cells.

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Our current prophylactic programs include VTP-400 for the prevention of herpes zoster, or shingles, and VTP-500 for the prevention of Middle East respiratory syndrome, or MERS.

Preclinical, IND-enabling programs are underway to utilize the SNAPvax platform in both cancer and an immune tolerance indication.

In addition, we co-invented a COVID-19 vaccine candidate with the University of Oxford, which we assigned to Oxford University Innovation, or OUI, to facilitate the license of those rights by OUI to AstraZeneca UK Limited, or AstraZeneca.

The product candidate, which we refer to as AZD1222, is now authorized for use under the name Vaxzevria in a number of countries.

As of August 12, 2021, AstraZeneca has announced that AZD1222 has been granted emergency use authorization in the United Kingdom, India and Japan, among other countries.

AstraZeneca has exclusive worldwide rights to develop and commercialize AZD1222.

On May 4, 2021, we completed our initial public offering, or IPO, pursuant to which we issued and sold 6,500,000 ADSs at a public offering price of $17.00 per ADS, resulting in net proceeds of $102.8 million, after deducting underwriting discounts and commissions and offering expenses.

Prior to our IPO, we funded our operations primarily from private placements of our ordinary and preferred shares, private placements of loan notes convertible into ordinary shares, as well as from grants and licensing agreements, research tax credit payments, investments from non-controlling interest a $2.4 million upfront payment from OUI in July 2020 in connection with the Amendment, Assignment and Revenue Share Agreement, or the OUI License Agreement Amendment, related to the licensing of the COVID-19 vaccine candidate now known as AZD1222, or Vaxzevria.

The vaccine, formerly referred to as AZD1222, is now authorized for use under the marketing name Vaxzevria in a number of countries.

AstraZeneca has exclusive worldwide rights to develop and commercialize Vaxzevria.

On May 4, 2021, we completed our initial public offering, or IPO, pursuant to which we issued and sold 6,500,000 American Depository Shares, or ADSs, at a public offering price of $17.00 per ADS, resulting in net proceeds of $102.8 million, after deducting underwriting discounts and commissions and offering expenses.

We do not expect to generate revenue from any of our own product candidates until we obtain regulatory authorization for one or more of such product candidates, if at all, and commercialize our products, or we enter into out-licensing agreements with third parties.

We may receive some revenue pursuant to the OUI License Agreement Amendment with OUI with respect to the AstraZeneca COVID-19 vaccine candidate AZD1222 in certain circumstances if it receives marketing approval from regulatory authorities and is sold commercially.

Substantially all of our net losses have resulted from costs incurred in connection with our research and development activities and from general and administrative costs associated with our operations.

On March 28, 2022, pursuant to the OUI License Agreement Amendment, we were notified of the commencement of the royalty payments, arising from AstraZeneca’s commercial sales of Vaxzevria.

Under the terms of an exclusive worldwide license agreement between OUI and AstraZeneca, OUI is entitled to milestone payments and royalties on commercial sales of Vaxzevria that began after the pandemic period.

As part of the assignment from us to OUI, we are entitled to receive approximately 24% of payments received by OUI from AstraZeneca.

Our share of the milestone and royalty payments received by OUI from AstraZeneca in the first quarter of 2022 amounted to approximately $15.0 million.

There is, however, no guarantee that such royalty payments will continue in the future and, if they do, that we will be notified of such royalty and milestone payment in a timely manner.

If we do not receive notification of our share of the royalty and milestone payments in a timely manner, we may not be able to recognize the milestone and royalty payments as revenue in the quarter they are earned.

We have incurred net losses each year since inception.

For the three and nine months ended September 30, 2021, we incurred net losses of $4.6 million and $35.9 million, respectively.

For the three and nine months ended September 30, 2020, we generated a net income of $0.2 million and incurred a net loss of $7.4 million, respectively.

As of September 30, 2021, we had an accumulated deficit of $93.5 million and we do not expect positive cash flows from operations in the foreseeable future.

For the three months ended March 31, 2022, we generated net income of $2.6 million.

For the three months ended March 31, 2021, we incurred net loss of $15.4 million.

As of March 31, 2022, we had an accumulated deficit of $106.0 million and we do not expect positive cash flows from operations in the foreseeable future.

We expect to continue to incur net operating losses for at least the next several years as we advance our product candidates through clinical development, seek regulatory approval, prepare for approval, and in some cases proceed to commercialization of our product candidates, as well as continue our research and development efforts and invest to establish a commercial manufacturing facility, as and when appropriate.

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● receipt and maintenance of necessary regulatory and marketing approvals from applicable regulatory authorities, in the light of the commercial environment then existent;

● scale-up of our manufacturing processes and formulation of our product candidates for later stages of development and commercial production;

● availability and successful procurement of raw materials required to manufacture our products for clinical trials, scale-up of our manufacturing processes and formulation of our product candidates for later stages of development and commercial production;

● establishing either our own manufacturing capabilities or satisfactory agreements with third-party manufacturers for clinical supply for later stages of development and commercial manufacturing;

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A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and/or timing associated with the development of that product candidate or could prevent continuation of that program being in the company’s interests.

For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we might be required to expend significant additional financial resources and time on the completion of clinical development.

For example, if the FDA or another regulatory authority were to require us to conduct clinical

trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we might be required to expend significant additional financial resources and time on the completion of clinical development.

In some circumstances, such as the emergence of a significantly more effective therapy from a competitor, it may be appropriate to discontinue a product candidate program.

Including the net proceeds from our IPO, we expect that our cash balance as of September 30, 2021 will enable us to fund our operating expenses and capital requirements into 2024.

We expect that our cash balance as of March 31, 2022 will enable us to fund our operating expenses and capital requirements into the fourth quarter of 2024.

Recent Developments

On September 3, 2021, we announced the publication of new preclinical data indicating that Vaccitech Oncology Limited’s ChAdOx1/MVA prime-boost immunotherapeutic has potential as a novel cancer treatment.

This research from the University of Oxford and the Ludwig Institute for Cancer Research shows that the cancer immunotherapeutic generates effective anti-tumor immune responses and, in combination with immunotherapy, decreases tumor size and increases the survival rates in mouse models.

The technology is comprised of the ChAdOx vector, which underpins the Oxford-AstraZeneca COVID vaccine.

The prime-boost viral vector product is licensed to Vaccitech Oncology Limited (VOLT), a strategic initiative between the Ludwig Institute for Cancer Research and Vaccitech plc.

In October 2021, we opened a first-in-human clinical trial of the immunotherapeutic (VTP-600) in patients with non-small cell lung cancer.

On September 7, 2021 we announced that we entered into a lease within the Zeus development at Harwell Science and Innovation Campus, Harwell, United Kingdom.

We plan to relocate our headquarters to the site from Oxford by mid-2022.

In October 2021 we completed recruitment for cohorts 1-5 for our Phase 1 (HBV001) clinical trial for VTP-300.

We have already presented interim data from cohorts 1 and 2, and further results are expected to be available in the fourth quarter of 2021 and the first quarter of 2022.

On November 4, 2021, VTP-500 results from the Saudi Arabia Phase 1 study were published in The Lancet Microbe.

The Phase 1 data showed that VTP-500 was generally well tolerated in patients, and we plan to continue further development of the product candidate.

On April 6, 2022, we announced that we were notified of the commencement of royalty payments relating to commercial sales of Vaxzevria.

Our share of the milestone and royalty payments received by OUI from AstraZeneca in the first quarter of 2022 amounted to approximately $15.0 million.

In April 2022, we launched a program in HPV-associated cancer utilizing the SNAPvax platform, for which we expect to file an Investigational New Drug, or IND, application in the first quarter of 2023.

In addition, we are moving forward with an immunotherapeutic designed to induce regulatory T cells.

The first indication we will target is celiac disease which should enter the clinic in a similar timeframe.

On April 29, 2022, we received scientific advice from the European Medicines Agency defining a licensure pathway for our candidate MERS vaccine, VTP-500, which allows us to estimate expenses of the development pathway more accurately.

Impact of the COVID-19 Pandemic

The spread of COVID-19, which we refer to as the COVID-19 pandemic, and the policies and regulations implemented by governments in response to the COVID-19 pandemic have had a significant impact, both directly and indirectly, on the global economy and our business and operations, including continuing disruption to our clinical trial activities.

Of note, the initiation of our Phase 1 clinical trial for VTP-500, which is being conducted at the University of Oxford, was paused due to COVID-19.

In addition, the COVID-19 pandemic has had a negative affect on the operations of our third-party manufacturers and the supply chain for our product candidates and clinical trial materials, due to limitations on travel imposed or recommended by federal, state/provincial or municipal governments, employers and others.

Our study protocols have been amended so that participants who have previously received Vaxzevria (or any other adenovirus-based vaccine) wait for a minimum of 3 months between their last adenovirus vaccine and injection with our immunotherapeutic product candidates to prevent prior vector immunity affecting the study.

In the VTP-200 program the initiation of investigational sites for the Phase 1/2a clinical trial (HPV001) across all countries has been impacted by COVID-19.

The ongoing spread of COVID-19, which we refer to as the COVID-19 pandemic, and the policies and regulations implemented by governments in response to the COVID-19 pandemic have had a significant impact, both directly and indirectly, on the global economy and our business and operations, including continuing disruption to our clinical trial activities.

Of note, the initiation of our Phase 1 clinical trial for VTP-500, which was being conducted at the University of Oxford, was paused and discontinued due to COVID-19.

In addition, the COVID-19 pandemic has had a negative effect on the operations of our third-party manufacturers and the supply chain for our product candidates and clinical trial materials, due to limitations on travel imposed or recommended by federal, state/provincial, or municipal governments, employers and others.

Our study protocols have been amended so that participants who have previously received Vaxzevria (or any other adenovirus-based vaccine) wait for a minimum of three months between their last adenovirus vaccine and injection with our immunotherapeutic product candidates to prevent prior vector immunity affecting the study.

In the VTP-200 program, the initiation of investigational sites for the Phase 1b/2 clinical trial (HPV001) across all countries has been impacted by COVID-19.

The UK is particularly affected as resources to support set up of trials not related to COVID-19 have been low across sites.

Other pandemic related issues affecting recruitment include the mass vaccination programs and the adverse publicity early in the second quarter of 2021 specifically around Vaxzevria.

Participant recruitment continues to be delayed with last patient first visit anticipated in the first quarter of 2022, and the interim analysis is expected to be available in the third quarter of 2022.

Other pandemic related issues affecting recruitment include the mass vaccination programs and the adverse publicity early in the second quarter of 2021 around Vaxzevria.

Participant recruitment continues to be delayed with last patient first visit anticipated in the second quarter of 2022 and the interim analysis is expected to be available in the fourth quarter of 2022.

For our Phase 1 (HBV001) clinical trial for VTP-300, recruitment of patients with Chronic Hepatitis B (CHB) in the UK has been challenging, due to COVID-19 lockdowns.

We completed recruitment for cohorts 1-5 in October 2021 and results of the study are expected to be available in the first quarter of 2022.

For our Phase 1b/2a (HBV002) clinical trial for VTP-300, CHB patient recruitment continues with delays in Taiwan due to the ongoing COVID-19 lockdown in the country.

We completed recruitment for all cohorts in first quarter of 2022.

For our Phase 1b/2a (HBV002) clinical trial for VTP-300, CHB patient recruitment continues with delays in Taiwan, South Korea, and the United Kingdom due to the ongoing COVID-19 restrictions in those countries.

Patient recruitment has also been delayed in South Korea due to the roll out of Vaxzevria vaccine and vaccine hesitancy.

Patient recruitment is estimated to be completed in the first quarter of 2022, with interim data also expected toward the beginning of the first quarter of 2022.

Patient recruitment is estimated to be completed in the second quarter of 2022, with full efficacy data expected in the second half of 2022.

If the disruption due to the COVID-19 pandemic continues, our planned future preclinical and clinical development for our other product candidates could also be delayed due to government orders and site policies as a result of the pandemic.

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and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen.

In response to the spread of COVID-19, we have mandated that our non-laboratory based employees, such as clinical, manufacturing, finance, administrative, quality, regulatory and program managers split their time between working from home and the office, being sure to maintain social distancing and adhere to COVID-19 working guidelines when on the office premises.

In addition, we continue to limit the number of staff in any given research and development laboratory at any time to maintain social distancing.

In response to the spread of COVID-19, in most of 2020 and 2021, we mandated that our non-laboratory based employees, such as clinical, manufacturing, finance, administrative, quality, regulatory and program managers split their time between working from home and the

office, being sure to adhere to COVID-19 working guidelines when on the office premises.

Our increased reliance on personnel working from home may negatively impact productivity, increase the potential risks of data privacy or security breaches, or disrupt, delay, or otherwise adversely impact our business.

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No assurances can be given that this analysis will enable us to avoid part or all of any impact from the COVID-19 pandemic, including downturns in business sentiment generally or in our sector in particular.

The Delta variant increased, and other variants may increase, COVID-19 case counts significantly, which may further impact our ability to conduct our business.

Additionally, as new variants may arise, COVID-19 case counts may continue to rise significantly, which may further impact our ability to conduct our business.

The impact of government regulations, vaccine adoption rates (including boosters), the effectiveness of vaccines, and the continuing economic effects of the pandemic and containment measures may also further adversely impact our business.

We cannot currently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties on whom we rely or with whom we conduct business were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and adversely impacted.

Impact of the Ukraine Crisis

In respect of the international situation in Ukraine, we have assessed the impact on the Company as minimal.

We have no operations or suppliers based in Ukraine, Belarus, or Russia, and there is consequently no additional risk or negative impact on the unaudited condensed consolidated financial statements.

Components of Our Operating Results

To date, we have not generated any revenue from product sales and do not expect to do so in the near future, if at all.

Our revenue to date has been derived from a research grant from BARDA, a research collaboration and license agreement with Enara Bio and the OUI License Agreement Amendment with OUI relating to AZD1222.

To date, we have not generated any revenue from direct product sales and do not expect to do so in the near future, if at all.

In April 2020, we entered into the OUI License Agreement Amendment with OUI in respect of our rights to use the ChAdOx1 technology in COVID-19 vaccines to facilitate the license of those rights by OUI to AstraZeneca.

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As a direct result of the OUI License Agreement Amendment, we received a payment of $2.4 million, of which we have recognized $2.4 million as revenue during the year ended December 31, 2020.

In March 2022, we were notified of the commencement of royalty payments relating to commercial sales of Vaxzevria.

Our share of the milestone and royalty payments received by OUI from AstraZeneca in the first quarter of 2022 amounted to approximately $15.0 million.

We determined that we have no further performance obligations under the terms of the OUI License Agreement Amendment, which comprised the transfer of intellectual property rights only.

Accordingly, we plan to recognize these and any future amounts as revenue when received.

Accordingly, we plan to recognize these and any future amounts as revenue when earned, which is defined as an estimate of the transaction price when uncertainty is suitably resolved, and it is probable that a significant reversal of revenue will not occur.

Operating Expenses

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Research and Development Expenses

Since our inception, we have focused significant resources on our research and development activities, including establishing and building on our adenovirus platform, further enhancing our in-licensed ChAdOx1, ChAdOx2 and MVA vectors, developing a new next-generation adenoviral vector, conducting preclinical studies, developing various manufacturing processes, and advancing clinical development of our programs including Phase 2 clinical trials for VTP-100, which we subsequently discontinued development of, as well as initiating the clinical trials for VTP-200 and VTP-300, and readying VTP-600 and VTP-850 for clinical trials.

development activities account for the major portion of our operating expenses.

Since our inception, we have focused significant resources on our research and development activities, including establishing and building on our adenovirus platform, further enhancing our in-licensed ChAdOx1, ChAdOx2 and MVA vectors, developing a new next-generation adenoviral vector, conducting preclinical studies, developing various manufacturing processes, and advancing clinical development of our programs including Phase 2 clinical trials for VTP-100, which we subsequently discontinued development of, as well as initiating the clinical trials for VTP-200, VTP-300, and VTP-600 and readying VTP-850 and VTP-500 for clinical trials.

Research and development activities account for the major portion of our operating expenses.

Research and development costs are expensed as incurred.

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General and Administrative Expenses

Our general and administrative expenses consist primarily of personnel costs in our executive, finance, business development and other administrative functions.

Our general and administrative expenses consist primarily of personnel costs, including share-based compensation, in our executive, finance, business development and other administrative functions.

Other general and administrative expenses include consulting fees and professional service fees for auditing, tax, and legal services, rent expenses related to our offices, depreciation, foreign exchange gains and losses on our cash balances and other central non-research costs.

We expect our general and administrative expenses to continue to increase in the future as we expand our operating activities and potentially prepare for manufacturing and/or commercialization of our current and future product candidates.

We expect our general and administrative expenses to continue to increase in the future as we expand our operating activities in both the UK and USA and potentially prepare for manufacturing and/or commercialization of our current and future product candidates.

These costs would normally increase as our headcount rises to allow full support for our operations as a public company, including increased expenses related to legal, accounting, regulatory and tax-related services associated with maintaining compliance with requirements of the Nasdaq Global Market and the Securities and Exchange Commission, directors’ and officers’ liability insurance premiums and investor relations activities.

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Change in Fair Value of Derivatives

We recognized a change in fair value in relation to the conversion and redemption features embedded in the convertible loan notes in the condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2021.

We recognized a change in fair value in relation to the conversion and redemption features embedded in the convertible loan notes in the consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021.

We had an embedded derivative liability related to the conversion features, the cash redemption feature on maturity and the cash redemption feature upon an exit event that settles in noncash consideration embedded in convertible loan notes.

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These notes were issued between July and November 2020 and converted on March 15, 2021 into 12,421 Series B Shares with the conversion price being 0.8 times the Series B Shares issue price.

Interest Income

Interest income results primarily from the interest earned on our short-term cash deposits and cash balances held by Vaccitech (UK) Limited in U.S.

Research and Development Incentives

Research and development incentives contain payments we received from the United Kingdom and Australian governments related to corporation tax relief on research and development projects incentive programs in the United Kingdom and Australia.

Research and development incentives contain payments receivable from the United Kingdom government related to corporation tax relief on research and development projects incentive programs in the United Kingdom.

We account for such relief received as other income.

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Actual results could differ from those estimates.

While our significant accounting policies are more fully described in Note 2 to our annual consolidated financial statements for the year ended December 31, 2020 included in our prospectus on Form S-1 dated April 30, 2021, we believe that revenue recognition, accrued research and development expenses, stock based compensation and fair value of stock options and embedded derivatives are most critical to the process of making significant judgments and estimates in the preparation of our financial statements and understanding and evaluating our reported financial results.

We believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements and understanding and evaluating our reported financial results.

Going Concern

The consolidated financial statements included elsewhere herein have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

We have financed our activities principally from the issuance of ordinary and preferred equity securities and convertible loan notes.

We have experienced recurring losses since inception and expect to incur additional losses in the future in connection with research and development activities.

Our ability to continue as a going concern is dependent upon our ability to raise additional debt and equity capital.

There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to us.

We generated a net income of $2.6 million and used $6.6 million in cash to fund our operating activities during the quarter ended March 31, 2022.

During the quarter ended March 31, 2021, we incurred a net loss of $15.4 million and used $8.0 million in cash to fund our operating activities.

We had an accumulated deficit of $106.0 million as of March 31, 2022.

As of March 31, 2022, we had $200.6 million in cash and cash equivalents mainly as a result of equity issuance and the IPO in 2021.

Our management believes that we have sufficient cash to support our operations into the fourth quarter of 2024, without additional financing.

If we are unable to obtain additional financing in sufficient amounts or on acceptable terms, we may be forced to delay, reduce, or eliminate some or all of our research and development programs and product portfolio expansion, which could adversely affect our operating results or business prospects.

Although our management continues to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.

After considering the uncertainties, management consider it is appropriate to continue to adopt the going concern basis in preparing the consolidated financial statements.

Convertible Loan Notes and Embedded Derivatives

In 2020, we entered into a series of unsecured convertible loan notes arrangements on various dates between July through November 2020.

The convertible loan notes accrue interest daily at 8% per annum, which is payable in (a) cash upon an event of default or (b) cash

or shares at the Board’s discretion upon conversion.

The convertible loan notes will mature on June 6, 2023.

On maturity, the lenders can elect cash redemption in lieu of conversion, in an amount that equals all outstanding principal plus a redemption premium.

The convertible loan notes may not be prepaid without the consent of the lenders.

We review the terms of convertible loan notes and other financing arrangements to determine whether there are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument.

Derivative financial instruments are initially measured at fair value, and then re-valued at each reporting date, with changes in the fair value reported as charges or credits to consolidated statement of operations and comprehensive loss.

To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument exceed the total proceeds received an immediate charge to consolidated statement of operations and comprehensive loss is recognized in order to initially record the derivative instrument at fair value.

The discount from the face value of the convertible loan notes resulting from allocating some or all of the proceeds to the derivative instruments, together with the stated rate of interest on the instrument, is amortized over the life of the instrument through periodic charges to consolidated statement of operations and comprehensive loss, using the effective interest method.

Embedded derivatives bifurcated are presented along with the host contract on the balance sheet.

The Series B funding on March 15, 2021 constituted a qualified equity financing in accordance with the terms of the convertible loan notes.

As a result, the convertible loan notes were converted on March 15, 2021 into 12,421 Series B Shares with the conversion price being 0.8 times the Series B Shares issue price.

Recognition of Revenue from Contracts with Customers

In 2020, we entered into the OUI License Agreement Amendment with OUI to facilitate the license of our rights to the COVID-19 vaccine we co-invented with OUI to AstraZeneca, which is now known as Vaxzevria.

Our performance obligations under the terms of this agreement are limited to the transfer of intellectual property rights (licenses and other rights).

Payments by AstraZeneca to OUI under this agreement include an up-front payment, payments based upon the achievement of defined milestones, royalties on product sales, and may include payments of commercial and other milestones, if certain future conditions are met.

We are entitled to a specified percentage of payments, including royalties and milestones, received by OUI from that license agreement with AstraZeneca as set out in the OUI License Agreement Amendment.

We evaluate our collaboration and licensing arrangements pursuant to Accounting Standards Codification 606, or ASC 606.

To determine the recognition of revenue from arrangements that fall within the scope of ASC 606, we perform the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize determinable revenue when, or as, the company satisfies a performance obligation or (if later) when such revenue becomes payable.

We use judgment to determine whether milestones or other variable consideration, except for sales-based royalties, should be included in the transaction price.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied.

In validating its estimated standalone selling price, we evaluate whether changes in the key assumptions used to determine its estimated standalone selling price will have a significant effect on the allocation of arrangement consideration between performance obligations.

For sales-based and clinical development milestones and royalties, when the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales or milestone achievement occurs or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

This could require management to estimate the amount of revenue to recognize in the period if the actual data has not been provided.

Amounts received by us as non-refundable upfront payments under the OUI License Agreement Amendment prior to satisfying the above revenue recognition criteria would be recorded as deferred revenue in our consolidated balance sheets.

Such amounts would be recognized as revenue over the performance period of the respective services on a percent of completion basis for each of the obligations.

Research and Development Costs

Research and development costs are expensed as incurred.

Research and development expenses consist of costs incurred in performing research and development activities, including salaries and bonuses, share-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation, manufacturing expenses and external costs of vendors engaged to conduct preclinical development activities and clinical trials as well as the cost of licensing technology.

Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses.

The prepaid amounts are then expensed as the related goods are delivered or the services are performed.

All patent-related costs incurred in connection with filing and prosecuting patent applications are classified as research and development costs and expensed as incurred due to the uncertainty about any future recovery of the expenditure.

Upfront payments, milestone payments and annual payments made for the licensing of technology are generally expensed as research and development in the period in which they are incurred.

Incremental sublicense fees triggered by contracts with customers are capitalized and expensed as research and development expenses over the period in which the relating revenue is recognized.

Share-based Compensation

We grant options and restricted shares to employees and directors and account for share-based compensation using a fair value method.

All of these arrangements are settled in equity at a predetermined price and generally vest over a period of three years.

All share options have a life of 10 years before expiration.

To the extent such incentives are in the form of share options, up until the first quarter of 2021, the options may have been granted pursuant bilateral EMI option awards or unapproved option awards.

The EMI option award agreements provide for the grant of potentially tax favored Enterprise Management Incentive, or EMI, options, to our U.K.

employees and directors.

Options issued pursuant to such agreements have an exercise price agreed with HM Revenue & Customs.

On April 8, 2021, we adopted the Vaccitech plc Share Award Plan 2021 and the Vaccitech plc Non-Employee Sub-Plan which is a sub-plan of the Vaccitech plc Share Award Plan 2021.

Under the terms of the Vaccitech plc Share Award Plan 2021, the Board is permitted to grant awards to employees as restricted share units, options, share appreciation rights, restricted shares.

Upon adoption of the Vaccitech plc Share Award Plan 2021, no further awards are granted pursuant bilateral EMI option awards or unapproved option awards.

Share based compensation awards are measured at the grant date fair value.

For service-based awards, compensation expense is generally recognized over the requisite service period of the awards, usually the vesting period.

We apply the “multiple option” method of allocating expense.

In applying this method, each vesting tranche of an award is treated as a separate grant and recognized on a straight-line basis over that tranche’s vesting period.

For performance-based awards where the vesting of the awards may be accelerated upon the achievement of certain milestones.

vesting and the related share-based compensation is recognized as an expense when it is probable the milestone will be met.

We have elected to recognize the effect of forfeitures on share-based compensation when they occur.

Any differences in compensation recognized at the time of forfeiture are recorded as a cumulative adjustment in the period where the forfeiture occurs.

We measure share-based awards granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model for options.

Black-Scholes utilizes assumptions related to expected term, forfeitures, volatility, the risk-free interest rate, the dividend yield (which is assumed to be zero, as we have not paid any cash dividends).

For options granted prior to our IPO, we applied a discount for lack of marketability calculated using the Finnerty model.

The assumptions used in the Black-Scholes model to determine fair value for the share option grants during the three months ended March 31, 2022 and March 31, 2021 and were:

March 31, 2022

March 31, 2021

Expected volatility

Expected term (years)

Risk-free interest rate

Expected dividend yield

For the three months ended March 31, 2022, 1,632,922 share options were granted and 364,620 share options were granted for the three months ended March 31, 2021.

Business Combinations

We acquired Avidea Technologies, Inc.

on December 10, 2021 and have accounted for the acquisition using the acquisition method of accounting.

This required us to assess and make judgments as to whether the acquisition met the criteria of a business combination or an asset acquisition.

In determining that the acquisition of Avidea Technologies, Inc.

met the criteria of a business combination we first used the “screen” to assess whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

As the screen was not met, we then applied the “framework” for determining whether the acquired set included at minimum, an input and substantive process that together significantly contribute to the ability to create output.

We concluded that the framework criteria are met because the scientists make up an organized workforce that has the necessary skills, knowledge, or experience to perform processes that when applied to the developed technology (input) is critical to the ability undertake research and development of a product that can be provided to a customer.

The more than-insignificant amount of goodwill (including the fair value associated with the workforce) was also an indicator that management considered in determining that the workforce is performing a critical process.

We recognize tangible and identifiable intangible assets acquired and liabilities assumed at their estimated fair values as of the acquisition date.

Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities is allocated to goodwill.

The estimate of fair value as of the acquisition date required the use of significant assumptions and estimates.

The developed technology was valued using the cost approach.

The critical assumptions and estimates included, but were not limited to, developer margins, mark up on costs, opportunity costs, discount rates and market rates for salary, bonus and benefits of staff involved in the development of the technology.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, we will continue to evaluate certain assets, liabilities and tax estimates that are subject to change within the measurement period (up to one year from the acquisition date).

We acquired Avidea for an up-front amount of $33.3 million, of which $12.2 million was payable in cash and $21.1 million in 2,163,694 of American Depositary Shares.

In addition, Avidea’s stockholders may be entitled to receive an aggregate of up to $40 million in additional payments, payable in a mixture of cash and ADSs, upon the achievement of certain milestones.

This contingent consideration is included within the purchase price and is recognized at its fair value on the acquisition date, and subsequently remeasured to fair value at each reporting date until the contingency is resolved.

Changes in fair value are recognized in earnings.

The fair value of Contingent Consideration is determined based on the probability of pursuit, the probability of success of the achievement of the milestone, the expected date of milestone achievement and applying the relevant discount rate.

Transaction costs are expensed as incurred in general and administrative expenses.

Results of operations and cash flows of acquired companies are included in our operating results from the date of acquisition.

Goodwill and Purchased Intangible Asset

We test goodwill for impairment at least annually on November 30, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable.

We have elected to assess goodwill for impairment by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis of determining whether it is necessary to perform the quantitative goodwill impairment test.

We have one reporting unit.

Accordingly, our review of goodwill impairment indicators is performed at the entity-wide level.

This requires us to assess and make judgments regarding a variety of factors, including clinical data results, business plans, anticipated future cash flows, economic projections and other market data.

Because there are inherent uncertainties involved in these factors, significant differences between these estimates and actual results could result in future impairment charges and could materially impact our future financial results.

The goodwill of $12.6 million recognized to March 31, 2022 wholly relates to the acquisition of Avidea Technologies, Inc.

on December 10, 2021.

During the first quarter of 2022, the Company identified qualitative indicators of impairment due to sustained decline in the price of the Company’s American Depositary Shares.

Based on this assessment, management determined it is not more likely than not that the fair value of the reporting unit is less than its carrying amount.

The Company will perform its annual goodwill impairment test as of November 30, 2022.

Our purchased intangible assets were recently acquired in connection with the Avidea Technologies, Inc.

business combination, and consist of developed technologies, notably SNAPvax.

We have determined a useful life of 10 years and will amortize the developed technology over this period.

If we were to identify an impairment indicator in the future, we may conclude that the carrying value of the

intangible asset is not recoverable within the remaining useful life of the asset and recognize a non-cash impairment charge.

An impairment of this asset could have a material impact on our results of operations.

Results of Operations

Comparison of the Three Months Ended September 30, 2021 and September 30, 2020

Comparison of the Three Months Ended March 31, 2022 and March 31, 2021

The following table sets forth the significant components of our results of operations (in thousands):

ended September 30,

Revenue from Licenses, Grants & Services

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Total operating expenses

Loss from operations

Other income (expense)

Change in fair value of derivatives

Unrealized exchange gain on convertible loan notes

Interest expense

Research and development incentives

Total other (expense) income

Tax (expense)/benefit

Net (loss)/income

For the three months ended September 30, 2021, our revenue consisted of license revenue from a research, collaboration and license agreement with Enara Bio.

For the three months ended September 30, 2020, our revenue primarily consisted of $2.4 million from the OUI License Agreement Amendment with respect to the AstraZeneca COVID-19 vaccine candidate AZD1222, $0.5 million of reimbursement of research and development expenses from BARDA and $0.1 million of service revenue from a research, collaboration and license agreement with Enara Bio.

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2021 and September 30, 2020:

ended September 30,

Direct research and development expenses by program:

VTP-600 NSCLC

VTP-800/850 Prostate cancer

Other and earlier stage programs

Internal research and development expenses:

Personnel-related (including share-based compensation)

Facility related

Other internal costs

Total research and development expense

Our research and development expenses for the three months ended September 30, 2021 and 2020 were $4.4 million and $3.7 million, respectively.

Personnel-related expenses were $1.4 million and $0.7 million, respectively, as a result of the relative increase in our headcount across both the UK and US.

Direct expenses for outside services and consultants and laboratory materials were $2.9 million for the three months ended September 30, 2021 and $2.7 million for the three months ended September 30, 2020 and mainly comprised of costs for clinical trials, manufacturing of clinical trial materials, as well as costs for external preclinical services and sample testing.

The Other and earlier stage programs for the three months ended September 30, 2021 include a refund of $0.3 million received in respect of the closure of the MVA-based influenza prophylactic, VTP-100, which did not meet defined primary clinical endpoints in 2020.

General and Administrative Expenses

General and administrative expenses for the three months ended September 30, 2021 were $1.2 million, which were mainly attributable to personnel expenses of $4.4 million, including the share-based payment charge of $2.9 million, insurance costs of $1.8 million and legal and professional fees of $0.8 million, netted by unrealized foreign exchange gain on cash revaluation of $5.8 million.

For the three months ended September 30, 2020, general and administrative expenses were $1.0 million, including personnel expenses of $0.7 million, and professional fees and consulting fees of $0.3 million.

Research and Development Incentives

For the three months ended September 30, 2021 and 2020, we accrued research and development incentives of $1.0 million and $1.6 million, respectively.

Such research and development incentives relate to corporation tax relief on research and development projects incentive programs in the United Kingdom.

We account for such relief received as other income.

Comparison of the Nine Months Ended September 30, 2021 and September 30, 2020

The following table sets forth the significant components of our results of operations (in thousands):

ended September

Revenue from Licenses, Grants & Services Operating expenses:

Operating expenses:

Research & development

General and administrative

Total operating expenses

Loss from operations

Income/(loss) from operations

Other income (expense)

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Research and development incentives

Total other (expenses) income

For the nine months ended September 30, 2021, our revenue primarily consisted of $0.2 million of reimbursement of research and development expenses from BARDA and $0.05 million of license revenue from a research, collaboration and license agreement with Enara Bio.

For the nine months ended September 30, 2020, our revenue primarily consisted of $2.4 million from the OUI License Agreement Amendment with respect to the AstraZeneca COVID-19 vaccine candidate AZD1222, $1.4 million of reimbursement of research and development expenses from BARDA and $0.4 million of service revenue from a research, collaboration and license agreement with Enara Bio.

Total other income (expenses)

Net income/(loss)

For the three months ended March 31, 2022, our revenue primarily consisted of $15.0 million from the OUI License Agreement Amendment with respect to milestone and royalty payments, arising from AstraZeneca’s commercial sales of Vaxzevria.

For the three months ended March 31, 2021, our revenue primarily consisted of $0.2 million of reimbursement of research and development expenses from BARDA.

Research and Development Expenses

The following table summarizes our research and development expenses for the nine months ended September 30, 2021 and September 30, 2020:

ended September

The following table summarizes our research and development expenses for the three months ended March 31, 2022 and March 31, 2021:

Direct research and development expenses by program:

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Total research and development expense

Our research and development expenses for the nine months ended September 30, 2021 and 2020 were $13.5 million and $11.8 million, respectively.

Personnel-related expenses were $3.8 million and $2.3 million, respectively, as result of the relative increase in our headcount across both the UK and US.

Direct expenses for outside services and consultants and laboratory materials were $9.4 million for the nine months ended September 30, 2021 and $8.7 million for the nine months ended September 30, 2020 and mainly comprised of costs for clinical trials, manufacturing of clinical trial materials, as well as costs for external preclinical services and sample testing.

The Other and earlier stage programs for the nine months ended September 30, 2021 includes a refund of $0.3 million received in respect of the closure of the MVA-based influenza prophylactic, VTP-100, which did not meet defined primary clinical endpoints in 2020.

Our research and development expenses for the three months ended March 31, 2022 and 2021 were $10.7 million and $4.6 million, respectively.

Personnel-related expenses were $2.7 million and $1.0 million, respectively, as a result of the relative increase in our headcount across both the UK and US.

Direct expenses for outside services and consultants and laboratory materials were $7.6 million for the three months ended March 31, 2022 and $3.6 million for the three months ended March 31, 2021 and mainly comprised of costs for clinical trials, manufacturing of clinical trial materials, as well as costs for external preclinical services and sample testing.

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2021 were $15.3 million, which were mainly attributable to personnel expenses of $15.5 million, including the share-based payment charge of $11.6 million, insurance costs of $3.0 million and legal and professional fees of $2.2 million, netted by unrealized foreign exchange gain on cash balances of $6.2 million.

The share-based payment charge includes a one-off expense relating to the RSUs that vested upon the successful completion of our IPO.

For the nine months ended September 30, 2020, general and administrative expenses were $3.1 million, including personnel expenses of $3.3 million, and professional fees and consulting fees of $0.7 million, netted by unrealized foreign exchange gains on our cash balances of $0.4 million.

General and administrative expenses for the three months ended March 31, 2022 were $3.7 million, which were mainly attributable to personnel expenses of $4.3 million, including the share-based payment charge of $3.1 million, insurance costs of $1.7 million and legal and professional fees of $1.3 million, netted by unrealized foreign exchange gain on cash balances of $5.3 million.

General and administrative expenses for the three months ended March 31, 2021 were $1.8 million, which were mainly attributable to lease costs, plus personnel expenses of $1.2 million and professional fees and consulting fees of $0.6 million.

Change in fair value of derivatives

For the nine months ended September 30, 2021, and 2020, we recognized a change in fair value of $6.0 million and $0.003 million, respectively, in relation to the conversion and redemption features embedded in the convertible loan notes.

For the three months ended March 31, 2021, we recognized a change in fair value of $6.0 million in relation to the conversion and redemption features embedded in the convertible loan notes.

Loss on extinguishment of convertible loan notes

For the nine months ended September 30, 2021, we recognized a loss of $13.8 million related to conversion of convertible loan notes into 12,421 Series B preferred shares.

For the three months ended March 31, 2021, we recognized a loss of $13.8 million related to conversion of convertible loan notes into 12,421 Series B preferred shares.

The loss is a difference between (1) the fair value of those shares ($53.7 million) and (2) the sum of the carrying amounts of the convertible loan notes ($25.6 million) and the bifurcated conversion and redemption feature liability ($14.4 million).

Interest Expense

For the nine months ended September 30, 2021, and 2020, interest expense was $2.7 million and $1.0 million respectively, which primarily relate to our convertible loan notes, which carry a market rate of interest.

For the three months ended March 31, 2022, interest expense was $0.7 million, which primarily relates to the interest unwinding on the contingent consideration recognized on the acquisition of Avidea Technologies, Inc.

on December 10, 2021.

For the three months ended March 31, 2021, interest expense was $2.7 million, which primarily relate to our convertible loan notes, which carry a market rate of interest.

Interest Income

For the three months ended March 31, 2022 and March 31, 2021, interest income was $0.08 million and $0.002 million respectively, which primarily result from the interest earned on our short-term cash deposits and cash balances held by Vaccitech (UK) Limited in U.S.

Research and Development Incentives

For the nine months ended September 30, 2021 and 2020, we accrued research and development incentives of $2.8 million and $3.0 million, respectively.

For the three months ended March 31, 2022 and March 31, 2021, we accrued research and development incentives of $1.0 million and $1.0 million, respectively.

Such research and development incentives relate to corporation tax relief on research and development projects incentive programs in the United Kingdom.

We account for such relief received as other income.

For the three months ended March 31, 2022 and March 31, 2021, the tax benefit was $0.9 million and $0.1 million respectively, which primarily relates to movements in deferred tax.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have funded our operations primarily through private and public placements of our ordinary and preferred shares as well as from grants and research incentives, various agreements with public funding agencies, and most recently from an upfront payment from OUI in connection with the OUI License Agreement Amendment and the issuance of convertible loan notes.

Through September 30, 2021, we had received gross proceeds of approximately $324.8 million from the issuance of our ordinary and preferred shares and convertible loan notes.

As of September 30, 2021, we had cash and cash equivalents of $233.9 million.

Since our inception, we have funded our operations primarily through private and public placements of our ordinary and preferred shares as well as from grants and research incentives, various agreements with public funding agencies, and most recently from an upfront, royalty and milestone payments from OUI in connection with the OUI License Agreement Amendment and the issuance of convertible loan notes.

Through March 31, 2022, we had received gross proceeds of approximately $324.8 million from the issuance of our ordinary and preferred shares and convertible loan notes.

As of March 31, 2022, we had cash and cash equivalents of $200.6 million.

Key financing and corporate milestones include the following:

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The following table sets forth a summary of the primary sources and uses of cash (in thousands) for each period presented:

ended September

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash (used)/provided by financing activities

Effect of exchange rates on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net (decrease)/increase in cash and cash equivalents

Cash Used in Operating Activities

During the nine months ended September 30, 2021, net cash used in operating activities was $24.6 million, primarily resulting from our net loss of $35.9 million, adjusted by fair value gain on embedded derivatives of $6.0 million, loss on conversion of convertible loan notes of $13.8 million, share-based compensation of $12.9 million, non-cash interest expense of $0.8 million, depreciation and amortization of $0.3 million, foreign exchange gain on convertible loan notes of $0.2 million and changes in our operating assets and liabilities, net of $10.2 million.

During the nine months ended September 30, 2020, net cash used in operating activities was $6.1 million, primarily resulting from our net loss of $7.4 million, adjusted by share-based compensation of $1.4 million, and changes in our operating assets and liabilities, net of $0.3 million.

During the three months ended March 31, 2022, net cash used in operating activities was $6.6 million, primarily resulting from our net income of $2.6 million, adjusted by share based compensation of $3.9 million, depreciation of $1.0 million and changes in our operating assets and liabilities, net of $13.6 million.

During the three months ended March 31, 2021, net cash used in operating activities was $8.0 million, primarily resulting from our net loss of $15.4 million, adjusted by fair value gain on embedded derivatives of $6.0 million, loss on conversion of convertible loan notes of $13.8 million, share-based compensation of $0.8 million, non-cash interest expense of $0.8

million, depreciation and amortization of $0.1 million, foreign exchange gain on convertible loan notes of $0.2 million and changes in our operating assets and liabilities, net of $1.9 million.

Net Cash Used in Investing Activities

During the nine months ended September 30, 2021 and 2020, cash used in investing activities was $0.7 million and $0.1 million, respectively, which resulted from capital expenditures in connection with new labs, improvements to expand our laboratory space and purchases of property and equipment.

Net Cash Provided by Financing Activities

During the nine months ended September 30, 2021, cash provided by financing activities was $222.7 million consisting of $121.8 million of net proceeds from the issuance of Series B shares, $102.8 million of net proceeds from our initial public, offering costs of $2.2million and $0.3 million of proceeds from issuance of shares to noncontrolling interest.

During the nine months ended September 30, 2020, cash provided by financing activities was $25.0 million consisting of net proceeds from the issuance of convertible loan notes.

During the three months ended March 31, 2022, cash used in investing activities was $1.1 million primarily resulted from capital expenditures related to our new offices in the United Kingdom.

During the three months ended March 31, 2021, cash used in investing activities was $0.4 million, which resulted from capital expenditures in connection with the new laboratory, improvements to expand our laboratory space and purchases of property and equipment.

Net Cash (Used)/Provided by Financing Activities

During the three months ended March 31, 2022, cash used by financing activities was $0.2 million resulted from the repayment of debt incurred previously by Avidea Technologies.

During the three months ended March 31, 2021, cash provided by financing activities was $121.8 million primarily consisting of net proceeds from the issuance of Series B shares.

Effect of exchange rates on cash and cash equivalents

During the nine months ended September 30, 2021 and 2020, the effect of foreign exchange on cash and cash equivalents was $6.8 million and $0.5 million respectively, primarily as a result of fluctuations between the U.S dollar and pound sterling exchange rates.

During the three months ended March 31, 2022 and 2021, the effect of foreign exchange on cash and cash equivalents was losses of $5.6 million loss and $0.8 million respectively, primarily as a result of fluctuations between the U.S dollar and pound sterling exchange rates.

Future Funding Requirements

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As a result, we are not yet profitable and have incurred losses in each period since our inception in 2016.

As of September 30, 2021, we had an accumulated deficit of $93.5 million.

As of March 31, 2022, we had an accumulated deficit of $106.0 million.

We expect to continue to incur significant losses for the foreseeable future.

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We may require substantial additional financing in the future to meet any such unanticipated factors and a failure to obtain this necessary capital could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.

Since our foundation, we have invested a significant portion of our efforts and financial resources in research and development activities for our ChAdOx1, ChAdOx2 and MVA technologies and our product candidates derived from these technologies.

Since our foundation, we have invested a significant portion of our efforts and financial resources in research and development activities for our ChAdOx1, ChAdOx2 and MVA technologies, acquisition of additional complementary platforms, development of new technologies in house, and our product candidates derived from these technologies.

Preclinical studies and especially clinical trials and additional research and development activities will require substantial funds to complete.

We believe that we will continue to expend substantial resources for the foreseeable future in connection with the development of our current product candidates and programs as well as any future product candidates we may elect to pursue, as well as the gradual gaining of control over our required manufacturing capabilities and other corporate functions.

These expenditures will

include costs associated with conducting preclinical studies and clinical trials, obtaining regulatory approvals, and potentially in-house manufacturing and supply, as well as marketing and selling any products approved for sale.

These expenditures will include costs associated with conducting preclinical studies and clinical trials, obtaining regulatory approvals, and potentially in-house manufacturing and supply, as well as marketing and selling any products approved for sale.

In addition, other unanticipated costs may arise as outlined above.

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Furthermore, our operating plans may change in the future owing to research outcomes or other opportunities, and we may need additional funds to meet operational needs and capital requirements associated with such altered operating plans.

Based on our research and development plans, we expect that the net proceeds from our IPO, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements into 2024.

These estimates are based on assumptions that may prove to be wrong, and we could use our available capital resources more quickly than we expect.

Lease, Purchase, and Other Obligations

We have operating lease obligations related to our property, plant and equipment.

The obligations related to both short- and long-term lease arrangements is set forth in Note 13 “Commitment and Contingencies” to our consolidated financial statements.

We enter into contracts in the normal course of business with CROs and other third parties for clinical trials and preclinical research studies and testing.

These contracts are generally cancellable by us upon prior notice.

Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancellable obligations of our service providers, up to the date of cancellation.

We have contingent payment obligations that we may incur upon achievement of clinical, regulatory and commercial milestones, as applicable, or royalty payments that we may be required to make under our licenses;

however, the amount, timing and likelihood of such payments are not known as of March 31, 2022.

Emerging Growth Company Status

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As an emerging growth company, we may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the closing of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our ADSs held by non-affiliates exceeded $700.0 million as of the prior September 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the closing of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our ADSs held by non-affiliates exceeded $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements