What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-09 · 284 added, 428 removed, 715 unchanged (50% of the section changed)

10 unchanged sentences

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

September 30,

Current assets:

8 unchanged sentences

Right of use assets, net

LIABILITIES AND SHARESHOLDERS’ EQUITY

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

2 unchanged sentences

Deferred revenue

Current portion of operating lease liability

Operating lease liability - current

Total current liabilities

29 unchanged sentences

Three months ended

Six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine months ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

License revenue 1

5 unchanged sentences

General and administrative

Total operating expenses

Total operating (income)/expense

Income/(loss) from operations

8 unchanged sentences

Total other (expense)/income

Tax benefit /(expense)

Net income/(loss)

6 unchanged sentences

Net income/(loss)

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

Other comprehensive loss – foreign currency translation adjustments

Comprehensive loss

1 unchanged sentence

Comprehensive loss attributable to Vaccitech plc shareholders

(1) Includes license revenue from related parties for the 3 and 6 month period ended June 30, 2022 of $ 17.1 million and $ 32.1 million, respectively.

1 Includes license revenue from related parties for the three and nine month periods ended September 30, 2022, of $ 6.2 million and $ 38.2 million, respectively.

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

3 unchanged sentences

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

Six months ended June 30, 2022

Nine months ended September 30, 2022

Ordinary Shares

14 unchanged sentences

Balance, June 30, 2022

Share based compensation

Issue of ordinary shares

Foreign currency translation adjustments

Balance, September 30, 2022

1 Indicates amount less than thousand

4 unchanged sentences

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

Six months ended June 30, 2021

Nine months ended September 30, 2021

Series A Redeemable

10 unchanged sentences

(Deficit)/Equity

Balance, January 1, 2021

Balance, January 1, 2021, as previously reported

Share based compensation – restatement

Balance, January 1, 2021, as restated

Share based compensation

10 unchanged sentences

Conversion of Series B shares

Issue of shares to non-controlling interest

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

3 unchanged sentences

(IN THOUSANDS)

Six months ended

June 30, 2022

June 30, 2021

Nine months ended

September 30, 2022

September 30, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

4 unchanged sentences

Non-cash lease expenses

Change in fair value of derivatives embedded in convertible loan notes

Unrealized foreign exchange gain

Change in fair value of derivatives embedded in convertible loan notes

Unrealized foreign exchange gain on convertible loan notes

1 unchanged sentence

Change in contingent consideration

Profit on sale of property and equipment

Deferred tax benefit

10 unchanged sentences

Purchases of property and equipment

Proceeds from sale of property and equipment

Net cash used in investing activities

31 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 disease, cancer and immune tolerance.

Vaccitech is headquartered in Harwell, Oxfordshire, United Kingdom.

16 unchanged sentences

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

All intercompany accounts and transactions have been eliminated on consolidation.

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, 2021.

The condensed consolidated balance sheet at December 31, 2021, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

The condensed consolidated balance sheet as of December 31, 2021, was derived from the audited financial statements but does not contain all of the footnote disclosures from the annual financial statements.

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

5 unchanged sentences

Unaudited Condensed Financial Information

The accompanying Condensed Consolidated Balance Sheets as of June 30, 2022, and December 31, 2021, the Condensed Consolidated Statements of Operations and Comprehensive Loss, Condensed Consolidated Statements Of Changes In Redeemable Convertible Preferred Shares and Shareholders’ Equity and the Condensed Consolidated Statements of Cash Flows for the three months and six months ended June 30, 2022 and 2021 are unaudited.

The accompanying Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021, the Condensed Consolidated Statements of Operations and Comprehensive Loss, Condensed Consolidated Statements Of Changes In Redeemable Convertible Preferred Shares and Shareholders’ Equity and the Condensed Consolidated Statements of Cash Flows for the three months and nine months ended September 30, 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 contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities Exchange Commission (the “Annual Report”) on March 25, 2022.

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 June 30, 2022, our results of operations for the three and six months ended June 30, 2022, and 2021, and our cash flows for the six months ended June 30, 2022, and 2021.

The results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, 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 September 30, 2022, our results of operations for the three and nine months ended September 30, 2022, and 2021, and our cash flows for the nine months ended September 30, 2022, and 2021.

The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or any other interim periods.

Summary of Significant Accounting Policies

The accounting policies of the Company are set forth in Note 2 to the consolidated financial statements as of and for the year ended December 31, 2021, except as discussed below related to newly adopted accounting pronouncements.

Foreign currency translation

The Company’s reporting currency is the U.S.

The functional currency of the parent and each subsidiary is the currency of the country and economic environment in which it is located.

Assets and liabilities of each legal entity are first translated into pound sterling and then consolidated.

The consolidated balances are then converted into U.S.

dollars at period-end exchange rates.

Revenues and expenses are translated into pound sterling, and then into U.S.

dollars at average exchange rates for each reporting period.

Translation adjustments are reflected as accumulated other comprehensive income within shareholders’ equity (deficit).

Gains and losses on foreign currency transactions are included in the consolidated statement of operations and comprehensive loss.

The aggregate, net foreign exchange gain or loss included in determining net income recognized in general and administrative expenses for the three and six months ended June 30, 2022, was a gain of $ 15,182 thousand and a gain of $ 20,451 thousand, respectively.

The aggregate, net foreign exchange gain or loss included in determining net income recognized in general and administrative expenses for the three and six months ended June 30, 2021, was a loss of $ 370 thousand and a gain of $ 655 thousand, respectively.

The Company adopted ASU No.

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.

Use of Estimates

3 unchanged sentences

The Company’s actual results may differ from these estimates under different assumptions or conditions.

We have experienced and expect to continue to experience disruptions as a result of the COVID-19 pandemic that could severely impact the Company’s clinical and pre-clinical development timelines for the Company’s clinical and pre-clinical programs.

COVID-19 continues to have an impact, both directly and indirectly, on our business and operations, including continuing disruption to our clinical trial activities and pre-clinical development timelines for the Company’s clinical and pre-clinical programs.

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

2 unchanged sentences

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

As of the date of issuance of these unaudited

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

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

1 unchanged sentence

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company can adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

The Company adopted ASU No.

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.

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 and six months ended June 30, 2022, and 2021 (in thousands, except number of shares):

Three months ended June 30,

Six months ended June 30,

The following table sets forth the computation of basic and diluted net income (loss) per share for the three months and nine months ended September 30, 2022, and 2021 (in thousands, except number of shares):

Three months ended September 30,

Nine months ended September 30,

Net income / (loss)

6 unchanged sentences

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

For the three and six month period ended June 30, 2022, 3,245,537 and 2,646,562 potential ordinary shares issuable for stock options, respectively, were excluded from the computation of diluted weighted-average shares outstanding because including them would have had an anti-dilutive effect.

For the three and six month period ended June 30, 2021, 2,909,685 and 2,320,586 potential ordinary shares issuable for stock options, respectively, were excluded from the computation of diluted weighted-average shares outstanding because including them would have had an anti-dilutive effect.

For the three and nine month period ended September 30, 2022, 3,201,290 and 2,697,808 potential ordinary shares issuable for stock options, respectively, were excluded from the computation of diluted weighted-average shares outstanding because including them would have had an anti-dilutive effect.

For the three and nine month period ended September 30, 2021, 3,325,748 and 2,611,526 potential ordinary shares issuable for stock options, respectively, were excluded from the computation of diluted weighted-average shares outstanding because including them would have had an anti-dilutive effect.

Property and equipment, net

During the six months ended June 30, 2022, the Company's additions to property and equipment was $ 5,975 thousand which primarily related to leasehold improvements of the Company's corporate headquarters (Six months ended June 30, 2021:

$ 604 thousand).

During the nine months ended September 30, 2022, the Company's additions to property and equipment were $ 6.8 million which primarily related to leasehold improvements of the Company's corporate headquarters (nine months ended September 30, 2021:

$ 0.7 million).

Prepaid expenses and other current assets (in thousands):

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Prepaid expenses and other current assets (in thousands):

September 30,

Prepayments and accrued income

1 unchanged sentence

Employee retention and payroll tax credit

Lease incentive receivable

Accrued expenses and other current liabilities

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

September 30,

Accrued manufacturing and clinical expenses

5 unchanged sentences

Series A preferred shares and Series B preferred 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 cost of $ 3,402 thousand.

On March 15, 2021, the Company issued 28,957 Series B preferred shares (‘‘Series B Shares’’) amounting to $ 125.2 million and incurred transaction costs of $ 3.4 million.

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 six month period ended June 30, 2021.

The Company recognized interest expense of $ 2.6 million and a change in fair value of $ 6.0 million 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 month period ended September 30, 2021.

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.

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 were recognized at the settlement-date fair value of the Series B shares ($ 53.7 million) and a loss of $ 13.8 million 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 ($ 25.6 million) and the bifurcated conversion and redemption feature liability ($ 14.4 million).

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 were 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).

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 cost of $ 2,165 thousand.

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 $ 102.8 million after deducting underwriting commissions of $ 7.7 million and incurred offering cost of $ 2.2 million.

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 June 30, 2022:

The following is a summary of the rights and privileges of the holders of ordinary shares as of September 30, 2022:

Liquidation preference:

13 unchanged sentences

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 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 £ 1.0 million ($ 1.3 million) 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.

1 unchanged sentence

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

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022, the Company had a contingent consideration liability of $ 2,727 thousand related to the acquisition of Avidea Technologies, Inc.

As of September 30, 2022, the Company had a contingent consideration liability of $ 2.8 million 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.

For the six months ended June 30, 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.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 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.

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

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

Six months ended

Nine months ended

September 30,

Beginning balance

3 unchanged sentences

Ending balance

1 In the quarter ended March 31, 2022, change in fair value amounting to $ 143 thousand was recognized in interest expense which has been reclassified to Change in fair value of contingent consideration in the condensed consolidated statements of operations and comprehensive loss during the three months ended June 30, 2022.

During the first quarter of 2022, the Company identified qualitative indicators of impairment due to a sustained decline in the price of the Company’s American Depositary Shares, whereby the market capitalization fell below the value of the net assets of the Company.

Therefore, the Company performed an interim qualitative assessment as of March 31, 2022, and June 30, 2022, to determine whether it was more likely than not that the fair value of the reporting unit is less than its carrying amount.

The Company identified qualitative indicators of impairment due to a sustained decline in the price of the Company’s American Depositary Shares, whereby the market capitalization fell below the value of the net assets of the Company.

Therefore, the Company performed an interim qualitative assessment as of September 30, 2022, to determine whether it was 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.

No additional qualitative indicators of impairment were identified during the three month period ended June 30, 2022.

No additional qualitative indicators of impairment were identified during the three month period ended September 30, 2022.

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

Share-Based Compensation

During the six month period ended June 30, 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.

For the six months ended June 30, 2022, the Company granted 1,807,703 options to employees and directors with a weighted average grant date fair value of $ 3.72 and a weighted average exercise price of $ 10.59 per share.

For the six months ended June 30, 2021, the Company granted 1,878,186 options to employees and directors with a weighted average grant date fair value of $ 10.91 and a weighted average exercise price of $ 13.70 per share of which 364,620 options were issued under the Enterprise Management Incentive Share Option Scheme which has been discontinued on adoption of the Vaccitech plc Share Award Plan 2021.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Six months ended

During the nine month period ended September 30, 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.

For the nine months ended September 30, 2022, the Company granted 2,265,040 options to employees and directors with a weighted average grant date fair value of $ 3.53 and a weighted average exercise price of $ 9.15 per share.

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

For the nine months ended September 30, 2022, the Company canceled 372,916 options to employees and directors for forfeitures on unvested options when leaving the Company.

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

Nine months ended

September 30,

Expected volatility

2 unchanged sentences

Expected dividend yield

As of June 30, 2022, 4,944,406 options with a weighted average exercise price of $ 9.37 were outstanding.

As of June 30, 2022, there was $ 11,464 thousand unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 2.24 years.

No Restricted Stock Units (“RSUs”) were issued in the six months ended June 30, 2022, and there were no RSUs outstanding during the period ended June 30, 2022.

During the three months and 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.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2022, 4,976,180 options with a weighted average exercise price of $ 8.90 were outstanding.

As of September 30, 2022, there was $ 8.7 million unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 2.13 years.

No Restricted Stock Units (“RSUs”) were issued in the nine months ended September 30, 2022, and there were no RSUs outstanding during the period ended September 30, 2022.

During the nine months ended September 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 $ 5.8 million recognized as compensation cost.

No RSUs were issued in the three months ended September 30, 2021, and there were no RSUs outstanding during the period ended September 30, 2021.

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Research and development

3 unchanged sentences

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

As of June 30, 2022, the Company did not have any contract assets.

As of September 30, 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 Sheets.

1 unchanged sentence

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

June 30, 2022

September 30, 2022

Balance as of December 31, 2021

1 unchanged sentence

Foreign exchange translation

Balance as of June 30, 2022

Revenue recognized related to the contract liability for the three and six months ended June 30, 2022, was $ 14 thousand and $ 29 thousand respectively.

Revenue recognized related to the contract liability balance for the three and six months ended June 30, 2021, was $ 16 thousand and $ 32 thousand respectively.

Balance as of September 30, 2022

Revenue recognized related to the contract liability for the three and nine months ended September 30, 2022, was $ 0.01 million and $ 0.04 million respectively.

Revenue recognized related to the contract liability balance for the three and nine months ended September 30, 2021, was $ 0.02 million and $ 0.05 million respectively.

During the three months and nine months ended September 30, 2022, the Company recognized revenue of $ 6.2 million and $ 38.2 million respectively (three months and nine months ended September 30, 2021:

$ Nil and $ Nil respectively) 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.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the three months and six months ended June 30, 2022, the Company recognized revenue of $ 17,050 thousand and $32,043 thousand respectively (three months and six months ended June 30, 2021:

Commitments and Contingencies

7 unchanged sentences

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 June 30, 2022, and June 30, 2021.

The Company has not made any material payments under these license agreements during the periods ended September 30, 2022, and September 30, 2021.

Operating Leases

1 unchanged sentence

The Oxford Science Park, Oxford

The Company leases an office and laboratory space from a related party in Oxford, England under an operating lease with a contractual term expiring in 2028.

The lease does not contain renewal terms.

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 Company leased an office and laboratory space from a related party in Oxford, England under an operating lease with a contractual term expiring in 2028.

The lease was terminated on July 31, 2022, and the Company has relocated its corporate headquarters to The Harwell Science and Innovation Campus, Oxfordshire.

5 unchanged sentences

Germantown, Maryland

On June 14, 2022, the Company entered into a lease agreement for lease of approximately 19,700 square feet in Germantown, Maryland.

On June 14, 2022, the Company entered into a lease agreement for the lease of approximately 19,700 square feet in Germantown, Maryland.

The site will house the Company’s, state-of-the-art wet laboratory in the United States of America.

The lease expires on February 28, 2034, with the Company having a single right to extend for an additional five years on same terms and conditions other than for the base rent.

The Company has a rent-free period up to February 29, 2024, and is entitled to up to $ 3,446 thousand for

The lease expires on February 28, 2034, with the Company having a single right to extend for an additional five years on the same terms and conditions other than for the base rent.

The Company has a rent-free period up to February 29, 2024, and is entitled to up to $ 3.5 million for leasehold improvements to the premises desired by the Company.

The Company has provided the lessor with a refundable security deposit of $ 192 thousand which is included in Other assets.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

leasehold improvements to the premises desired by the Company.

The Company has provided the lessor with a refundable security deposit of $ 192 thousand which is included in Other assets.

The Company recorded a right-of-use asset and a lease liability on the effective date of the lease term.

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

September 30,

Right-of-use asset

4 unchanged sentences

Other information

Six months ended June 30,

Nine months ended September 30,

Operating cash flows from operating leases

For the three months and six months ended June 30, 2022, the Company recorded $ 103 thousand and $ 204 thousand respectively in short-term lease expense.

No short-term lease expense was incurred for the three months and six months ended June 30, 2021.

During the three months and six months ended June 30, 2022, the Company recorded $ 573 thousand and $ 1,079 thousand respectively (three months and six months ended June 30, 2021:

For the three months and nine months ended September 30, 2022, the Company recorded $ 152 thousand and $ 356 thousand respectively in short-term lease expense.

No short-term lease expense was incurred for the three months and nine months ended September 30, 2021.

During the three months and nine months ended September 30, 2022, the Company recorded $ 490 thousand and $ 1.6 million respectively (three months and nine months ended September 30, 2021:

$ 183 thousand and $ 372 thousand respectively) in operating lease costs (including short-term lease expense and variable lease costs).

Future annual minimum lease payments under operating leases as of June 30, 2022, were as follows (in thousands):

Future annual minimum lease payments under operating leases as of September 30, 2022, were as follows (in thousands):

Remainder of 2022

2 unchanged sentences

Total operating lease liability

During the current period, the Company 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 must restore part of the building upon vacating the premises.

The ARO liability totaled $ 776 thousand and $ Nil as of June 30, 2022, and December 31, 2021, respectively and is included in other non-current liabilities on the Condensed Consolidated Balance Sheets.

The Company 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 must restore part of the building upon vacating the premises.

The ARO liability totaled $ 0.7 million and $ Nil as of September 30, 2022, and December 31, 2021, respectively and is included in other non-current liabilities on the Condensed Consolidated Balance Sheets.

Other contingencies

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The Company does not believe that the resolution of these matters will have a material adverse effect on its financial position or results of operations.

Related Party Transactions

During the three months and nine months ended September 30, 2022, the Company paid $ 24 thousand and $ 78 thousand (after offsetting lease costs for laboratory and office space in Oxford of $ 206 thousand against a refund of $ 129 thousand) respectively

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions

During the three months and six months ended June 30, 2022, the Company paid $ 109 thousand and $ 54 thousand (after offsetting lease costs for laboratory and office space in Oxford of $ 74 thousand against a refund of $ 129 thousand) respectively (three months and six months ended June 30, 2021:

(three months and nine months ended September 30, 2021:

$ 110 thousand and $ 236 thousand respectively) to its shareholder, Oxford Science Enterprises plc, mostly related to the lease of a laboratory and office space in Oxford.

As of June 30, 2022, the Company has a receivable of $ 143 thousand (December 31, 2021:

payable of $ 32 thousand) from Oxford Science Enterprises plc, which is included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

During the three months and six months ended June 30, 2022, the Company incurred expenses of $ 191 thousand and $ 217 thousand respectively (three months and six months ended June 31, 2021:

The Company also received proceeds of $ 368 thousand from the sale of property plant and equipment and earned a profit of $ 331 thousand during the three months and nine months ended September 30, 2022.

As of September 30, 2022, the Company has a net receivable of $ Nil (December 31, 2021:

net payable of $ 32 thousand) from Oxford Science Enterprises plc.

During the three months and nine months ended September 30, 2022, the Company incurred expenses of $ nil and $ 217 thousand respectively (three months and nine months ended September 31, 2021:

$ 170 thousand and $ 189 thousand respectively) to its shareholder, the University of Oxford, related to clinical study costs.

As of June 30, 2022, the Company owed $Nil (December 31, 2021:

As of September 30, 2022, the Company owed $ nil (December 31, 2021:

$ Nil thousand) to University of Oxford.

During the three months and six months ended June 30, 2022, the Company incurred expenses of $ 68 thousand and $ 261 thousand respectively (three months and six months ended June 30, 2021:

$ 24 thousand and $ 141 thousand respectively), and recognized license revenue of $ 17,050 thousand and $ 32,043 thousand respectively (three months and six months ended June 30, 2021:

During the three months and nine months ended September 30, 2022, the Company incurred expenses of $ 120 thousand and $ 381 thousand respectively (three months and nine months ended September 30, 2021:

$ 134 thousand and $ 275 thousand respectively), and recognized license revenue of $ 6.2 million and $ 38.2 million respectively (three months and nine months ended September 30, 2021:

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

As of June 30, 2022, the Company was owed $ 17,048 thousand (December 31, 2021:

$ 21 thousand) by Oxford University Innovation Limited.

During the three months and six months ended June 30, 2022, the Company incurred expenses of $Nil and $ 1 thousand respectively (three months and six months ended June 30, 2021:

As of September 30, 2022, the Company was owed $ 6.2 million (December 31, 2021:

$ 21 thousand) from Oxford University Innovation Limited.

During the three months and nine months ended September 30, 2022, the Company incurred expenses of $ nil and $ 1 thousand respectively (three months and nine months ended September 30, 2021:

$ 32 thousand and $ 81 thousand respectively) to its shareholder, the Oxford University Hospitals, related to clinical study costs.

As of June 30, 2022, the Company owed $Nil (December 31, 2021:

As of September 30, 2022, the Company owed $ nil (December 31, 2021:

$ Nil ) to Oxford University Hospitals.

There were no convertible loans outstanding during the three months and six months period ended June 30, 2022.

During the three months and six months ended June 30, 2021, the interest on convertible loans issued to Oxford Science Enterprises plc and the University of Oxford, shareholders of the Company, was $ Nil thousand and $ 429 thousand.

There were no convertible loans outstanding as of June 30, 2022, and December 31, 2021.

There were no Series B Shares issued or outstanding during the three months and six months period ended June 30, 2022.

On March 15, 2021, Oxford Sciences 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.

There were no convertible loan notes outstanding during the three months and nine months period ended September 30, 2022.

During the nine months ended September 30, 2021, the interest on convertible loan notes issued to Oxford Science Enterprises plc and the University of Oxford, shareholders of the Company, was $ Nil and $ 429 thousand.

There were no convertible loan notes outstanding as of September 30, 2022, and December 31, 2021.

There were no Series B Shares issued or outstanding during the three months and nine months period ended September 30, 2022.

On March 15, 2021, Oxford Science Enterprises plc subscribed to 3,468 Series B Shares in an amount of $ 15.0 million.

The Company also recognized a loss of $ 2.1 million 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.

As of June 30, 2022, and December 31, 2021, there were no Series B Shares outstanding.

As of September 30, 2022, and December 31, 2021, there were no Series B Shares outstanding.

Foreign currency translation

The aggregate, net foreign exchange gain or loss included in determining net income recognized in general and administrative expenses for the three and nine months ended September 30, 2022, was a gain of $ 18.7 million and a gain of $ 39.1 million, respectively.

The aggregate, net foreign exchange gain or loss included in determining net income recognized in general and administrative expenses for the three and nine months ended September 30, 2021, was a gain of $ 5.8 million and a gain of $ 6.4 million, respectively.

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

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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.

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

In addition, we co-invented a COVID-19 vaccine with the University of Oxford, the rights to 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 vaccine, formerly referred to as AZD1222, is now authorized for use under the marketing name Vaxzevria in a number of countries.

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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.

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, Vaxzevria.

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, and 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, Vaxzevria.

We do not expect to generate revenue from any of our own product candidates, excluding Vaxzevria, 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.

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 payments, arising from AstraZeneca’s commercial sales of Vaxzevria.

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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 payments in the first and second quarters of 2022 amounted to approximately $15.0 million and $17.1 million, respectively, representing the amounts we have been notified of as due by OUI to date.

Because of the limited history of receipts and the lack of visibility we have of the arrangements between AstraZeneca and OUI, we continue to fully constrain any revenue beyond the amounts that we have been notified of by OUI to date.

There is, however, no guarantee that such payments will continue in the future

and, if they do, that we will be notified of such payments in a timely manner.

Our share of payments in the three and nine months ended September 30, 2022, recognized as revenue amount to approximately $6.2 million and $38.2 million, respectively, representing the amounts we have been notified of as due by OUI to date.

Because of the limited history and continued volatility of receipts and the lack of visibility we have of the arrangements between AstraZeneca and OUI, we continue to fully constrain any revenue beyond the amounts that we have been notified of by OUI to date.

There is, however, no guarantee that such payments will continue in the future and, if they do, that we will

be notified of such payments in a timely manner.

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

On August 9, 2022, we filed a Registration Statement on Form S-3, as amended, or the Shelf, with the Securities and Exchange Commission in relation to the registration and potential future issuance of ordinary shares, including ordinary shares represented by ADSs, debt securities, warrants and/or units of any combination thereof in the aggregate amount of up to $200.0 million.

The Shelf was declared effective on August 17, 2022.

We also simultaneously entered into a sales agreement with Jefferies LLC, as sales agent, providing for the offering, issuance and sale by us of up to an aggregate of $75.0 million of our ordinary shares represented by ADSs from time to time in “at-the-market” offerings under the Shelf.

As of September 30, 2022, we have not issued or sold any ordinary shares represented by ADSs under the sales agreement.

We have incurred net losses each year since inception through to December 31, 2021.

For the six months ended June 30, 2022, we generated net income of $18.3 million.

For the six months ended June 30, 2021, we incurred net losses of $31.4 million.

As of June 30, 2022, we had an accumulated deficit of $90.3 million and we do not currently 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.

For the nine months ended September 30, 2022, we generated net income of $26.5 million.

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

As of September 30, 2022, we had an accumulated deficit of $82.1 million and we do not currently expect positive cash flows from operations in the foreseeable future.

We expect 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.

At this time, we cannot reasonably estimate, or know the nature, timing and estimated costs of all of the efforts that will be necessary to complete the development of any of our product candidates that we develop through our programs.

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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.

We expect that our cash balance as of June 30, 2022 will enable us to fund our operating expenses and capital requirements into the fourth quarter of 2024.

We expect that our cash balance as of September 30, 2022 will enable us to fund our operating expenses and capital requirements into the first quarter of 2025.

Recent Developments

An Immunotherapeutic Targeting Chronic HBV Infection

In May 2022, we completed the last patient visit in our HBV001 Phase 1 clinical trial in the United Kingdom.

Two types of participants were enrolled:

healthy participants and participants with CHB infection whose infection has been suppressed with oral antiviral therapies.

The primary objective of the HBV001 trial is to evaluate the safety and tolerability of different doses of a single vaccination of ChAdOx1-HBV.

In addition, the secondary objectives are to determine the immunogenicity of ChAdOx1-HBV and to determine the effect of ChAdOx1-HBV on the level of HBsAg in the participants with CHB infection.

All cohorts of healthy volunteers and patients with chronic hepatitis B (CHB) have completed treatment and follow up.

No serious adverse events have been reported.

We have used genotype C HBV antigen sequences in our VTP-300 vectors to target the most prevalent CHB genotype.

However, we believe VTP-300 may induce cross-reactive T cell responses with other prevalent genotypes.

Therefore, we also aim to determine if the T cell responses induced by the ChAdOx1-HBV viral vector used in this trial can potentially cross-react with other common HBV genotypes.

The criteria for CHB patients to be enrolled in this trial were (i) infection that has been suppressed with oral antiviral medication (HBV DNA < 40 copies/mL) and (ii) relatively low levels of cccDNA markers (HbsAg < 10,000 IU/ml).

As higher levels of CD8+ T cell induction are likely to occur in healthy controls, these samples are utilized to map the responses induced by VTP-300, to reactivity with peptides, representing consensus sequences from genotypes B and D, which are more common in both the United States and Europe.

In addition, we are conducting a Phase 1b/2a clinical trial, HBV002, to evaluate the safety and reactogenicity of VTP-300 with or without an anti-PD-1 in CHB patients whose infection has been suppressed with oral antiviral medication.

HBV002 enrollment was completed in May 2022.

In the HBV002 trial, we enrolled CHB patients in four treatment groups.

The primary objective of this trial is to determine the safety and reactogenicity of the following in participants with CHB infection and virally suppressed with oral antiviral medication:

MVA-HBV (prime-boost);

ChAdOx1-HBV and MVA-HBV (prime-boost);

3 and 4 ChAdOx1-HBV and MVA-HBV and nivolumab (prime-boost + anti-PD-1).

The secondary objectives are to evaluate immunogenicity, anti-PD-1 blockade timing, and the effect on the levels of hepatitis B markers, including HbsAg, hepatitis B surface antibody seroconversion, hepatitis B DNA, HbeAg, in CHB patients.

The majority of the patients were recruited in Taiwan and South Korea and these territories were selected due to the high prevalence of HBV genotype C virus in Asia.

Patients were also enrolled in the United Kingdom.

In participants already immunologically primed by prior infection, it is possible that natural priming may eliminate the need for the prime-boost regimen, as was noted in human trials using the ChAdOx1 and MVA vector for influenza, in which all participants had pre-existing T cell responses induced by natural infection.

Hence, group 1 of the HBV002 trial was designed to compare MVA-HBV given twice with the ChAdOx1-HBV plus MVA-HBV heterologous approach used in group 2.

We expected that the regimen given to group 2 would be more immunogenic and planned to further explore this prime/boost regimen in groups 3 and 4.

The dosing regimen was ChAdOx1-HBV (day 0) and MVA-HBV and low-dose nivolumab (day 28) for group 3 and ChAdOx1-HBV and low-dose nivolumab (day 0) and MVA-HBV and low-dose nivolumab (day 28) for group 4.

In the cancer field, the use of the anti-PD-1 prior to vaccination has been reported to result in diminished T cell responses as compared to later administration.

Whether the anti-PD-1 can be given simultaneously with the priming dose, or should follow it, is yet to be determined.

Thus, in this protocol, we evaluated both regimens.

Group 3 employed the low dose nivolumab given only at the boost, whereas group 4 administered the nivolumab at both the prime and the boost dose.

Nivolumab has been used safely in earlier immunotherapy trials at 1/10 the licensed dose for oncology indications and has been shown to give full peripheral blood T cell receptor occupancy for up to over one month.

An interim analysis of HBV002 was conducted in November 2021, after which the protocol was amended to stop enrollment in two cohorts:

those receiving MVA prime and boost, group 1, and those receiving VTP-300 with low dose nivolumab administered with both the ChAdOx1 prime and the MVA booster dose, group 4.

Enrollment continued in the cohort receiving VTP-300 as a monotherapy and the cohort receiving VTP-300 with a single low dose of nivolumab administered with the MVA booster dose.

We believe that the interim analysis from the HBV002 Phase 1b/2a suggests that VTP-300 could become part of a regimen that can attain a functional cure.

We plan to open HBV003, a Phase 2b clinical trial to explore the optimal regimen, in the fourth quarter of 2022.

Although VTP-300 encodes genotype C antigens, many of these peptides are also expressed by other HBV genotypes.

If data indicate that VTP-300 may be capable of inducing responses to non-genotype C HBVs, then we will aim to demonstrate activity against non-genotype C infected patients.

We will also plan to evaluate additional combination regimens, such as next-generation modalities including RNA interference molecules, and may evaluate further potential collaboration partnerships.

We may also evaluate VTP-300 in a trial in mainland China.

EASL Poster and Update to Interim Analysis of Safety and Efficacy Data from HBV002 Study

On June 22, 2022, we announced an update to the interim analysis of safety and efficacy data from the HBV002 study (NCT04778904), which was presented as a poster at the 2022 EASL International Liver Congress TM .

The updated analysis, which included 39 patients with three-months of follow up, shows that VTP-300 as a monotherapy or in combination with low-dose nivolumab was administered with no treatment-related serious adverse events and two patients with mild, rapidly resolving transaminitis.

Meaningful and durable reductions of HbsAg were seen in some patients who received VTP-300 as either a monotherapy or in combination with a single low dose of nivolumab at the booster dose.

Declines were most prominent in patients with lower baseline HbsAg at the time of enrollment.

In all patients who had a HbsAg decline greater than 0.5 log 10, the reductions of HbsAg were durable until the last measurement (up to eight months after the last dose).

A robust T cell response against all encoded antigens, measured by overnight stimulation, was observed following VTP-300 administration, notable for marked CD8+ T cell predominance.

Enrollment in the HBV002 study is complete with 55 patients enrolled.

An updated interim analysis for all patients at the six-month follow-up timepoint is expected at the end of 2022.

Future Development

The Company plans to open a Phase 2b clinical trial of VTP-300 (NCT05343481) to explore the timing of low dose nivolumab and additional doses of the MVA boost component of VTP-300 in the fourth quarter of 2022.

In addition, a trial that uses a lead-in of the Arbutus siRNA Ab729, followed by a blinded randomization to either placebo or VTP-300, is now underway with a planned enrollment of 20 patients per arm (placebo vs VTP-300 after the 6 month siRNA lead-in).

The trial also plans a prospective, well-defined, nucleotide discontinuation protocol for those patients who reach substantial reduction in the level of hepatitis B surface antigen.

Developing a Potential Non-Invasive Treatment for Persistent High-Risk HPV

Enrollment in our Phase 1b/2 clinical trial of VTP-200, HPV001 (NCT04607850), is ongoing.

We expect initial data from a pre-planned interim analysis of this trial in the first quarter of 2023 when 60 of the patients in the main phase of the trial have reached the six-month evaluation timepoint.

Preclinical Studies

Extensive preclinical studies were conducted using VTP-200, with resulting data showing that:

● VTP-200 was well tolerated in preclinical toxicology studies;

● VTP-200 is highly immunogenic in inbred and outbred mice.

Toxicology Studies

In a GLP-compliant toxicology study, outbred mice were dosed with ChAdOx1-HPV and MVA-HPV at dose levels approximating the maximum anticipated clinical dose.

Dosing resulted in an immune response, but with no significant toxicology findings.

Immunogenicity Studies

In preclinical immunogenicity studies, the HPV antigen was delivered by plasmid DNA, ChAdOx1 and MVA vectors in prime-boost regimens to inbred and outbred mice.

ChAdOx1-HPV prime followed by MVA-HPV boost was shown to induce higher magnitude

and more durable HPV-specific T cell responses than other regimens, as shown in the figure below.

VTP-200-induced T cells were polyfunctional and persisted at high frequencies for at least six weeks.

Heterologous and Homologous Prime Boost Regimens in Inbred and Outbred Mice

In the preclinical immunogenicity studies, HPV-specific effector CD8+ T cells were detected in the cervix following systemic administration of ChAdOx1-HPV prime and followed by MVA-HPV boost and increased in frequency over time, indicating continued trafficking of T cells to the cervix.

Finally, T cells specific for the HPV-encoded antigens were detected in women with current or past hrHPV infections, confirming the presence of immunogens relevant to natural immune control.

The MVA vector assessed in initial studies contains the HPV antigen at the thymidine kinase locus under the control of the p7.5 promoter.

However, a more immunogenic MVA vector, which contains the HPV antigen under the control of the endogenous F11 promoter, was constructed.

We determined that the T cell immunogenicity of the more immunogenic MVA promoter was superior to the MVA vector assessed in the initial preclinical studies and decided to use the next-generation vector in our clinical trials.

Clinical Development

Our HPV001 Phase 1b/2 clinical trial of VTP-200 is designed to assess the safety and efficacy of VTP-200 and determine the optimal immunotherapeutic dose regimen.

We plan to enroll a total of 105 healthy women with low grade lesions who have had persistent high-risk HPV, or hrHPV, for at least six months.

Patients with high-grade squamous intraepithelial lesions, or HSIL, or early cancer will be excluded.

The trial is running in the United Kingdom and the European Union.

We expect the initial interim data in the first quarter of 2023 when 60 of the patients in the main phase of the trial have reached the six-month evaluation timepoint.

The diagram below provides an overview of the Phase 1b/2 clinical trial design.

The HPV001 Phase 1b/2 clinical trial is designed to identify an efficacious dose based on a joint response index of CD8+ T cell magnitude, CD4+T cell magnitude and CD4+ T cell avidity.

The primary objective of the trial is to evaluate the safety and tolerability of ChAdOx1-HPV plus MVA-HPV when administered in a prime-boost regimen.

The secondary objectives of the trial are to determine the optimal dose and to evaluate the efficacy of HPV001 on the clearance of hrHPV infection and on the cervical intraepithelial neoplasia, or CIN.

Future Development

Following the HPV001 Phase 1b/2 clinical trial, if successful, we intend to initiate further clinical trials of VTP-200, such as an expansion trial in patients with early grade CIN (squamous intraepithelial lesions, or LSIL) indication and additional trials in patients with more advanced CIN, vulval intraepithelial neoplasia, or VIN, and anal intraepithelial neoplasia, or AIN.

We are in the early stages of collaborating on an NIH-funded trial to be conducted by the University of California San Francisco in more advanced CIN and AIN in human immunodeficiency virus, or HIV, positive patients, to be recruited in Mexico and Puerto Rico.

Our Next-Generation Immunotherapeutic Candidate for Prostate Cancer

We are developing our prostate cancer immunotherapy candidate, VTP-850, for prostate cancer.

The product candidate will build upon the positive data from a Phase 1 and Phase 2 clinical trials of VTP-800, an earlier version of the product, sponsored by the University of Oxford.

VTP-800 is composed of a heterologous prime-boost regimen with ChAdOx1 prime and MVA boost;

both components encode 5T4, an antigen expressed by most prostate cancers.

VTP-800 has been administered to patients with prostate cancer in two clinical trials sponsored by the University of Oxford.

We are developing VTP-850 as our next-generation prostate cancer immunotherapeutic, with the goal of inducing a broader response by targeting additional antigens expressed by prostate cancer cells.

Current Development Status

We are developing VTP-850, our next-generation prostate cancer product candidate, to improve upon VTP-800.

Both VTP-800 and VTP-850 are composed of a heterologous prime-boost regimen with ChAdOx1 prime and MVA boost;

however, VTP-800 encodes only one antigen, 5T4, while VTP-850 encodes four antigens, including 5T4.

We designed VTP-850 to induce a broader immune response by encoding multiple antigens to reduce the ability of cancer cells to evade the immune response by mutating or losing expression of any one antigen.

The antigens we encode in VTP-850 are expressed in most prostate cancers but have little or no expression on healthy tissues other than prostate.

Clinical Development

Phase 1 and Phase 2 clinical trials of VTP-800 were sponsored and conducted by the University of Oxford in the United Kingdom.

VANCE was a first-in-human, open-label, randomized, Phase 1 clinical trial designed to evaluate the safety and immunogenicity of heterologous prime-boost ChAdOx1-MVA administration as compared with homologous prime-boost with MVA alone, with and without low dose cyclophosphamide in localized prostate cancer.

Thirty-nine patients with early stage localized, castration-sensitive prostate cancer were treated.

Thirty-three patients received heterologous prime-boost with ChAdOx1-5T4 and MVA-5T4, while six patients received homologous prime-boost with MVA-5T4 alone.

Patients received both regimens alone or with cyclophosphamide preconditioning.

VTP-800 was generally well tolerated, with side effects of local injection site reaction and myalgia, which are consistent with those observed for these vectors in other clinical trials.

There were no reported treatment-related serious adverse events.

It was also observed that 59% of participants had no detectable T cell response at baseline and developed a new 5T4-specific T cell response, as measured by an ex vivo gamma interferon ELISpot.

Two patients had a baseline response, and the frequency of 5T4-specific T cells was increased following administration.

The mean peak response of the 5T4-specific T cells in the responders was 198 cells per one million PBMCs, which is notable given that the 5T4 is a self-antigen.

T cell infiltration into the resected prostate was also observed.

The figure below shows the 5T4-specific T cell responses to VTP-800.

The peak response, expressed as the number of 5T4-specific T cells secreting IFN-γ per one million PBMCs, in each patient who mounted a 5T4-specific T cell response following administration was compared to the 5T4 response detected prior to the first dose.

The bars represent medians.

T Cell Response in Patients

ADVANCE was an open label, non-randomized Phase 2 clinical trial of VTP-800 in combination with anti-PD-1 checkpoint inhibitor, nivolumab, in 23 patients with metastatic prostate cancer.

The primary objectives of the ADVANCE trial were to assess the safety and response rate of VTP-800 when administered in combination with nivolumab.

The secondary objectives were to assess the immune responses in peripheral blood and to evaluate radiographic progression-free survival and overall survival.

Patients received ChAdOx1-5T4 prime and MVA-5T4 boost one month later.

Nivolumab was administered at months one, two and three.

In most patients, VTP-800 was also given at months three and four.

All patients received 2.5 x 10 10 vp of ChAdOx1-5T4, 2.0 x 10 10 pfu of MVA.5T4 and 480mg of nivolumab.

VTP-800 was generally well tolerated.

The most common treatment emergent adverse events were bone pain, injection site pain, muscle pain, stomatitis, and constipation, and most were mild and grade 1 or 2.

The only grade 3 adverse event was a chest infection, which was not related to study drug.

There were no grade 4 or 5 treatment-related adverse events.

Three of eight patients with measurable disease had partial tumor responses.

Five of 23, or 22%, of patients had greater than 50% reduction of prostate specific antigen, or PSA, at any timepoint, as shown in the figure below.

PSA Reduction in Patients

Future Development

We are planning PCA001, a Phase 1/2 open-label clinical trial of VTP-850 in patients with rising PSA after definitive local therapy for prostate cancer, to begin in the second half of 2022.

We plan to conduct the trial in several countries, including the United States.

The trial will involve a Phase 1 dose finding stage with boost dose administered either intramuscularly or intravenously to determine the Phase 2 recommended dose and route of administration, followed by a two-stage expansion phase to evaluate immunogenicity and anti-tumor activity of VTP-850.

Combination cancer immunotherapy for HPV16+ cancers

VTP-1100 is our first product leveraging the SNAPvax TM platform technology – brought into Vaccitech following the acquisition of Avidea Technologies in December 2021 – that will enter clinical testing.

VTP-1100 differs from VTP-200 in composition and patient population targeted:

VTP-1100 will use a configuration of SNAPvax that is designed to elicit antigen-specific CD8+ T cells against HPV16+ cancers, either when administered alone or when used in a potent heterologous prime-boost vaccine with the established ChAdOx1 platform.

These regimens will be provided in combination with anti-

PD-1 (checkpoint inhibitor) to fully unleash the potential of the T cells for mediating tumor killing.

Preclinical studies in mice have shown that the SNAPvax-ChAdOx prime-boost induces superior T cell responses as compared with single or dual agent therapies (see figure below).

Status and Future Development

VTP-1100 is currently in the preclinical stage with GMP manufacturing and pivotal IND-enabling studies underway.

We recently concluded a pre-IND review with the FDA in July 2022, and based on the agency’s feedback expect to enter clinical testing in the first half of 2023.

Antigen-specific tolerizing immunotherapy for celiac disease

Patients with celiac disease have an unwanted immune response against gluten proteins and can become severely ill following exposure to gluten found in various cereal grains, especially wheat.

VTP-1000 is a tolerizing immunotherapy that is designed to induce antigen-specific regulatory T cells (Tregs) that promote tolerance and suppress the unwanted immune response to gluten.

VTP-1000 is the second product based on the SNAPvax TM platform, leveraging its plug-and-play modularity to induce an entirely different type of T cell compared to the configuration utilized in VTP-1100.

VTP-1000 comprises multiple gluten antigens (representing the key epitopes linked to celiac disease) and an immunomodulator co-delivered in nanoparticles of precise size and composition that are optimized to target immune cells that prime and expand Tregs.

While the SNAPvax tolerance vaccine is based on the same platform technology as the SNAPvax cancer vaccine enabling VTP-1100, an important distinction is that the tolerance vaccine includes an immunosuppressive immunomodulator that drives Tregs expansion and which prevents proinflammatory responses.

Status and Future Development

VTP-1000 is currently in the preclinical stage.

Preclinical lead optimization studies were recently completed and the product is entering engineering manufacturing, which we expect will enable us to enter first-in-human testing in a dose-escalation and challenge study by end of 2023.

Vacccitech plans to include immune correlates analysis as part of the phase 1 study to provide an indication that the immunotherapy is inducing Tregs.

Importantly, Vaccitech also intends to include a controlled gluten challenge in the phase 1 study (for example, see Goel G, et al.

Science Advances (2019) Cytokine release and gastrointestinal symptoms after gluten challenge in celiac disease ).

This controlled gluten challenge is intended to provide an early biologic signal that VTP-1000 suppresses pathological inflammation.

As VTP-1000 is our first product directed towards the treatment of an inflammatory disease, demonstration of Treg induction and/or suppression of unwanted immune responses to gluten would pave the way for other therapies based on the SNAPvax tolerance vaccine platform, including those for allergies and other autoimmune indications.

Impact of the COVID-19 Pandemic

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 due to COVID-19, and subsequently resumed and was completed.

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.

On September 20, 2022, we announced the promotion of Gemma Brown to Chief Financial Officer.

On October 27, 2022, we announced the publication of research from VTP-1100 in Cell online that demonstrates anti-tumor activity achieved with intravenous, or IV, vaccination of a SNAPvax construct in an animal model.

The study demonstrates that IV administration of SNAPvax primes and expands antigen-specific T cells and reverses suppression in the tumor microenvironment, which promotes T cell infiltration and tumor cell killing.

An IND application submission is expected during the first half of 2023 for HPV related cancer.

On October 31, 2022, we announced the dosing of the first patient in HBV003, a Phase 2b clinical trial of VTP-300 to evaluate the optimal timing of low dose nivolumab and the impact of additional doses of the MVA boost for a sustained decline in HBsAG.

On November 7, 2022 Dr.

Young-Suk Lim, Professor of Gastroenterology in the Liver Center at University of Ulsan College of Medicine presented a poster Phase 1b/2a clinical trial data on VTP-300 at the American Association for the Study of Liver Disease, or AASLD, Liver Meeting.

The poster presentation showed VTP-300 immunotherapy, as monotherapy and when combined with low dose nivolumab at the boosting time point, was immunogenic and showed a reduction in HBsAg in well-controlled CHB patients, while exhibiting an excellent safety profile.

Two of five patients dosed in cohort 3 (ChAdOx1-HBV + MVA-HBV with low dose nivolumab given at the boost) with starting HBSAg levels below 100, achieved non-detectable levels of surface antigen.

Impact of COVID-19

COVID-19 continues to have an impact, both directly and indirectly, on our business and operations, including continuing disruption to our clinical trial activities.

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 was impacted by COVID-19.

The United Kingdom was 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 included the mass vaccination programs and the adverse publicity early in the second quarter of 2021 around Vaxzevria.

Participant recruitment was delayed, the last patient’s first visit is anticipated to be in the fourth quarter of 2022 with the last visit due by the end of 2023.

In the VTP-200 program, participant recruitment was delayed, and the last patient’s first visit is anticipated to be in the fourth quarter of 2022 with the last visit due by the end of 2023.

Initial data is expected to be available in the first quarter of 2023.

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

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

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

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

Patient recruitment was completed in May 2022, an update to the interim efficacy data was announced on June 22, 2022 and additional efficacy data update is 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.

The pandemic and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred;

supply chains have been disrupted;

facilities and production have been suspended;

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, 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.

In response to the challenges presented by the COVID-19 pandemic, we have adopted more flexible working arrangements, including hybrid location work policies.

While having positive impact on staff retention, 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.

We continue to assess our business plans and the impact the COVID-19 pandemic is having on our ability to advance the development of our product candidates as a result of adverse impacts on the research sites, service providers, vendors, or suppliers on whom we rely, or to raise financing to support the development of our ongoing product candidate development.

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.

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

Patient recruitment was completed in May 2022, an update to the interim efficacy data was announced on June 22, 2022 and updated efficacy data was presented at AASLD on November 7, 2022.

We continue to assess our business plans and the impact the COVID-19 is having on our ability to advance the development of our product candidates as a result of adverse impacts on the research sites, service providers, vendors, or suppliers on whom we rely, or to raise financing to support the development of our ongoing product candidate development.

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

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.

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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.

Impact of Global Economic Conditions and Inflationary Pressures

Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on the Company’s results of operations and financial condition.

These inflationary pressures and rising interest rates in the United States, the United Kingdom and elsewhere have given rise to increasing concerns that the U.S., U.K.

and other economies are now in, or may soon enter, economic recession.

Sustained inflationary pressures, increased interest rates, an economic recession or continued or intensified disruptions in the global financial markets could adversely affect our future financing capability or ability to access the capital markets.

Additionally, we may incur future increases in operating costs due to additional inflationary increases.

Components of Our Operating Results

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Under this agreement, we are entitled to receive from OUI a share of payments, including royalties and milestones, received by OUI from AstraZeneca in respect of this vaccine.

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.

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

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

We therefore recognized revenue in the first and second quarters of 2022 that amounted to approximately $15.0 million and $17.1 million, respectively, representing the amounts we have been notified of as due by OUI to date.

Our share of payments for the three and nine month periods ended September 30, 2022, amount to approximately $6.2 million and $38.2 million respectively, representing the amounts we have been notified of as due by OUI to date.

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 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.

Accordingly, we plan to recognize these and any future amounts as revenue when earned, and it is probable that a significant reversal of revenue will not occur.

Operating Expenses

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Change in Fair Value

For the three and six months ended June 30, 2022, we recognized a change in fair value in relation to the updated assumptions in the assessment of the contingent consideration fair value recognized from the acquisition of Avidea Technologies, Inc., or Avidea, on December 10, 2021.

For the three and nine months ended September 30, 2022, we recognized a change in fair value in relation to the updated assumptions in the assessment of the contingent consideration fair value recognized from the acquisition of Avidea Technologies, Inc., or Avidea, on December 10, 2021.

Significant judgment is used to determine the probability of success of achievement of the milestone and the date of the expected milestone.

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 six months ended June 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 condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 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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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 and a loss 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 and the bifurcated conversion and redemption feature liability.

As a result, the 12,421 Series B preferred shares issued on conversion were recognized at the settlement-date fair value of the Series B shares and a loss 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 and the bifurcated conversion and redemption feature liability.

Interest Expense

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The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

On an ongoing basis, management evaluates its estimates, including those related to revenue, expenses, accruals and prepayments for external manufacturing of clinical trial material as well as clinical study conduct, fair value of assets and liabilities, impairment of goodwill and intangible assets, and the fair value of ordinary shares and share-based compensation.

On an ongoing basis, management evaluates its estimates, including those related to revenue, expenses, accruals and prepayments for external manufacturing of clinical trial material as well as clinical study conduct, fair value of contingent consideration, impairment of goodwill and intangible assets, and the fair value of ordinary shares and share-based compensation.

Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances.

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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.

The condensed 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.

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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 $18.3 million and used $15.0 million in cash to fund our operating activities during the six months ended June 30, 2022.

During the six months ended June 30, 2021, we incurred a net loss of $31.4 million and used $22.6 million in cash to fund our operating activities.

We had an accumulated deficit of $90.3 million as of June 30, 2022.

As of June 30, 2022, we had $192.3 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.

We generated a net income of $26.5 million and used $3.1 million in cash to fund our operating activities during the nine months ended September 30, 2022.

During the nine months ended September 30, 2021, we incurred a net loss of $35.9 million and used $24.6 million in cash to fund our operating activities.

We had an accumulated deficit of $82.1 million as of September 30, 2022.

As of September 30, 2022, we had $200.1 million in cash and cash equivalents mainly as a result of equity issuance and the IPO in 2021, and revenues received from Vaxzevria in 2022.

Our management believes that we have sufficient cash to support our operations into the first quarter of 2025, 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.

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

Convertible Loan Notes and Embedded Derivatives

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 in the condensed consolidated statements 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 in the condensed consolidated statements 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 in the condensed consolidated statements of operations and comprehensive loss, using the effective interest method.

Embedded derivatives bifurcated are presented along with the host contract on the condensed consolidated balance sheets.

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.

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 statements 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 statements 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 statements of operations and comprehensive loss, using the effective interest method.

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

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.

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 and are no longer outstanding.

Recognition of Revenue from Contracts with Customers

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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.

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 prior to satisfying the above revenue recognition criteria would be recorded as deferred revenue in our consolidated balance sheets.

Amounts received by us as non-refundable upfront payments prior to satisfying the above revenue recognition criteria would be recorded as deferred revenue in our condensed 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.

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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 or 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.

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

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

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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).

Black-Scholes utilizes assumptions related to expected term, forfeitures, volatility, the risk-free interest rate and 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 six months ended June 30, 2022 and 2021 and were:

June 30, 2022

June 30, 2021

The assumptions used in the Black-Scholes model to determine fair value for the share option grants during the nine months ended September 30, 2022 and 2021 were:

September 30, 2022

September 30, 2021

Expected volatility

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Expected dividend yield

For the six months ended June 30, 2022, 1,807,703 share options were granted and 1,878,186 share options were granted for the six months ended June 30, 2021.

For the nine months ended September 30, 2022, 2,265,040 share options were granted and 1,909,086 share options were granted for the nine months ended September 30, 2021.

Business Combinations

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As the “screen test” was not met, as the identifiable assets were not substantially all of the fair value of the gross assets acquired, we then applied the “framework” for determining whether the acquired assets 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.

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 to 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.

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Changes in fair value are recognized in the condensed consolidated statements of operations and comprehensive loss.

The fair value of contingent consideration is 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.

The fair value of contingent consideration is based on the probability of pursuit of the activity associated with the milestone, 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.

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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.

amount as a basis of determining whether it is necessary to perform the quantitative goodwill impairment test.

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.

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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 June 30, 2022 wholly relates to the acquisition of Avidea on December 10, 2021.

Therefore, the Company performed an interim qualitative assessment as of March 31, 2022 and June 30, 2022 to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

The goodwill of $12.6 million recognized to September 30, 2022 wholly relates to the acquisition of Avidea on December 10, 2021.

Therefore, the Company performed an interim qualitative assessment as of September 30, 2022 to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying

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.

No additional qualitative indicators of impairment were identified during the three months period ended June 30, 2022.

No additional qualitative indicators of impairment were identified during the three months period ended September 30, 2022.

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 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 June 30, 2022 and 2021

Comparison of the Three Months Ended September 30, 2022 and 2021

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

ended September

Revenue from Licenses, Grants & Services

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General and administrative

Total operating expenses

Total operating (income)/expenses

Income/(loss) from operations

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Total other income

Tax benefit/ (expense)

Net income/(loss)

For the three months ended June 30, 2022, our revenue primarily consisted of $17.1 million from the OUI License Agreement Amendment with respect to payments from OUI in connection with commercial sales of Vaxzevria.

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

For the three months ended September 30, 2022, our revenue primarily consisted of $6.2 million from the OUI License Agreement Amendment with respect to payments from OUI in connection with commercial sales of Vaxzevria.

For the three months ended September 30, 2021, our revenue consisted 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 June 30, 2022 and 2021:

The following table summarizes our research and development expenses for the three months ended September 30, 2022 and 2021:

ended September

Direct research and development expenses by program:

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Total research and development expense

Our research and development expenses for the three months ended June 30, 2022 and 2021 were $9.7 million and $4.5 million, respectively.

Our research and development expenses for the three months ended September 30, 2022 and 2021 were $9.7 million and $4.4 million, respectively.

Personnel-related expenses were $2.6 million and $1.4 million, respectively, as a result of the relative increase in our headcount across the offices in both the United Kingdom and United States.

Direct research and development expenses for outside services, consultants and laboratory materials increased $4.3 million to $7.2 million for the three months ended June 30, 2022 from $2.9 million for the three months ended June 30, 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.

Of this, $3.0 million of the increase pertains to progress in VTP-300, having completed the last patient visit in our HBV001 Phase 1 clinical trial in the United Kingdom in May 2022, and also completed enrollment in HBV002 in May 2022.

Expenses related to other and earlier stage programs increased $1.2 million due to an increase in earlier stage activity including the preclinical programs launched in 2022 for VTP-1000 Celiac disease and VTP-1100 HPV cancer.

Direct research and development expenses for outside services, consultants and laboratory materials increased $3.8 million to $6.7 million for the three months ended September 30, 2022 from $2.9 million for the three months ended September 30, 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.

Of this, $1.8 million of the increase relates to other and earlier stage programs due to an increase in earlier stage activity including the preclinical programs launched in 2022 for VTP-1000 Celiac disease and VTP-1100 HPV cancer.

$0.9 million of the increase pertains to progress in VTP-300, as announced at AASLD.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2022 were a gain of $6.4 million due to the foreign exchange gain of $15.2 million primarily on revaluation of cash balances due to the fluctuations between the United States dollar and pound sterling exchange rates.

General and administrative expenses for the three months ended June 30, 2022 excluding foreign exchange were $8.8 million, which were mainly attributable to personnel expenses of $4.3 million, including the share-based payment charge of $2.1 million, insurance costs of $1.6 million and legal and professional fees of $1.0 million.

General and administrative expenses for the three months ended June 30, 2021 were $12.4 million, which were mainly attributable to personnel expenses of $9.5 million, including the share-based payment charge of $8.1 million, and insurance costs of $1.2 million.

General and administrative expenses for the three months ended September 30, 2022 were a gain of $11.1 million due to the foreign exchange gain of $18.7 million primarily on revaluation of cash balances due to the fluctuations between the United States dollar and pound sterling exchange rates.

General and administrative expenses for the three months ended September 30, 2022 excluding foreign exchange were $7.6 million, which were mainly attributable to personnel expenses of $2.8 million, including the share-based payment charge of $0.6 million, insurance costs of $1.5 million and legal and professional fees of $2.3 million.

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, offset by unrealized foreign exchange gain on cash revaluation of $5.8 million.

Change in fair value of contingent consideration

For the three months ended June 30, 2022, we recognized a change in fair value of $0.6 million in relation to the updated assumptions in the fair value assessment of the contingent consideration recognized for the acquisition of Avidea on December 10, 2021.

For the three months ended June 30, 2021, there was no change in fair value of contingent consideration.

For the three months ended September 30, 2022, we recognized a change in fair value of $0.3 million in relation to the updated assumptions in the fair value assessment of the contingent consideration recognized for the acquisition of Avidea on December 10, 2021.

For the three months ended September 30, 2021, there was no change in fair value of contingent consideration.

Interest Income

For the three months ended June 30, 2022, interest income was $0.7 million resulting from the interest earned on our short-term cash deposits held by Vaccitech (UK) Limited in United States dollars.

For the three months ended June 30, 2021, interest income was $nil.

For the three months ended September 30, 2022, interest income was $1.0 million resulting from the interest earned on our short-term cash deposits held by Vaccitech (UK) Limited in United States dollars.

For the three months ended September 30, 2021, interest income was $nil.

Research and Development Incentives

For the three months ended June 30, 2022 and 2021, we accrued research and development incentives of $0.8 million and $0.9 million, respectively.

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

We account for such relief received as other income.

Tax benefit/expense

For the three months ended June 30, 2022 and 2021, the tax benefit was $0.9 million and the tax expense was $0.01 million respectively, which primarily relates to movements in deferred tax.

Comparison of the Six Months Ended June 30, 2022 and 2021

For the three months ended September 30, 2022 research and development incentives were an expense of $0.7 million as a result of a reduction in forecast losses available to surrender for the receipt of the research and development incentive in Vaccitech (UK) Limited.

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

For the three months ended September 30, 2022 and 2021, the tax benefit was $0.7 million and $0.01 million respectively, which primarily relates to movements in deferred tax.

Comparison of the Nine Months Ended September 30, 2022 and 2021

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

ended September

Revenue from Licenses, Grants & Services

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Net income/(loss)

For the six months ended June 30, 2022, our revenue primarily consisted of $32.1 million from the OUI License Agreement Amendment with respect to payments from OUI in connection with commercial sales of Vaxzevria.

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

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For the nine months ended September 30, 2022, our revenue primarily consisted of $38.2 million from the OUI License Agreement Amendment with respect to payments from OUI in connection with commercial sales of Vaxzevria.

For the nine months ended September 30, 2021, our revenue consisted of $0.2 million of reimbursement of research and development expenses from BARDA and $0.05 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 six months ended June 30, 2022 and 2021:

The following table summarizes our research and development expenses for the nine months ended September 30, 2022 and 2021:

ended September

Direct research and development expenses by program:

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Total research and development expense

Our research and development expenses for the six months ended June 30, 2022 and 2021 were $20.4 million and $9.1 million, respectively.

Our research and development expenses for the nine months ended September 30, 2022 and 2021 were $30.2 million and $13.5 million, respectively.

Personnel-related expenses were $7.5 million and $3.8 million, respectively, as a result of the increase in our headcount across the offices in both the United Kingdom and United States.

Direct expenses for outside services and consultants and laboratory materials increased $8.3 million to $14.8 million for the six months ended June 30, 2022 from $6.5 million for the six months ended June 30, 2021 and were mainly comprised of costs for clinical trials, manufacturing of clinical trial materials, as well as costs for external preclinical services and sample testing.

Direct expenses for outside services and consultants and laboratory materials increased $12.1 million to $21.5 million for the nine months ended September 30, 2022 from $9.4 million for the nine months ended September 30, 2021 and were mainly comprised of costs for clinical trials, manufacturing of clinical trial materials, as well as costs for external preclinical services and sample testing.

$6.3 million of the increase pertains to progress in VTP-300, having completed the last patient visit in our HBV001 Phase 1 clinical trial in the United Kingdom in May 2022, and also completing enrollment in HBV002 in May 2022.

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General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2022 were a gain of $2.8 million due to the foreign exchange gain of $20.4 million primarily on revaluation of cash balances due to the fluctuations between the United States dollar and pound sterling exchange rates.

General and administrative expenses for the six months ended June 30, 2022, excluding foreign exchange gain, were $17.6 million, which were mainly attributable to personnel expenses of $9.3 million, including the share-based payment charge of $5.2 million, insurance costs of $3.3 million and legal and professional fees of $2.3 million.

General and administrative expenses for the six months ended June 30, 2021 were $14.1 million, which were mainly attributable to personnel expenses of $11.2 million, including the share-based payment charge of $8.6 million, and insurance costs of $1.2 million.

General and administrative expenses for the nine months ended September 30, 2022 were a gain of $13.9 million due to the foreign exchange gain of $39.1 million primarily on revaluation of cash balances due to the fluctuations between the United States dollar and pound sterling exchange rates, offset by general and administrative expenses.

General and administrative expenses for the nine months ended September 30, 2022, excluding foreign exchange gain, were $25.2 million, which were mainly attributable to personnel expenses of $12.1 million, including the share-based payment charge of $5.8 million, insurance costs of $4.8 million and legal and professional fees of $4.6 million.

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, offset 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.

Change in fair value of derivatives embedded in convertible loan notes

For the six months ended June 30, 2022, the change in fair value of embedded derivatives was $nil.

For the six months ended June, 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.

For the nine months ended September 30, 2022, the change in fair value of embedded derivatives was $nil.

For the nine months ended September 30, 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.

Change in fair value of contingent consideration

The change in fair value of contingent consideration for the six months ended June 30, 2022 was $0.6 million in relation to the updated assumptions in the fair value assessment of the contingent consideration recognized for the acquisition of Avidea on December 10, 2021.

The change in fair value of contingent consideration for the six months ended June 30, 2021 was $nil.

The change in fair value of contingent consideration for the nine months ended September 30, 2022 was a $0.9 million expense in relation to the updated assumptions in the fair value assessment of the contingent consideration recognized for the acquisition of Avidea on December 10, 2021.

The change in fair value of contingent consideration for the nine months ended September 30, 2021 was $nil.

Loss on extinguishment of convertible loan notes

There was no loss on extinguishment of convertible loan notes for the six months ended June 30, 2022.

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

There was no loss on extinguishment of convertible loan notes for the nine months ended September 30, 2022.

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.

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 of $25.6 million, and the bifurcated conversion and redemption feature liability of $14.4 million.

Interest Expense

For the six months ended June 30, 2022, interest expense was $0.008 million, which primarily relates to the interest paid on the debt recognized on the acquisition of Avidea on December 10, 2021, which was repaid in full in the first quarter of 2022.

For the six months ended June 30, 2021, interest expense was $2.7 million, which primarily relate to our convertible loan notes, which carry a market rate of interest.

For the nine months ended September 30, 2022, interest expense was $0.003 million, which relates to the interest paid on the debt recognized on the acquisition of Avidea on December 10, 2021, which was repaid in full in the first quarter of 2022.

For the nine months ended September 30, 2021, interest expense was $2.7 million, which primarily relates to our convertible loan notes, which carried a market rate of interest.

Interest Income

For the six months ended June 30, 2022 and 2021, interest income was $0.8 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 United States dollars.

For the nine months ended September 30, 2022 and 2021, interest income was $1.8 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 United States dollars.

Research and Development Incentives

For the six months ended June 30, 2022 and 2021, we accrued research and development incentives of $1.9 million and $1.8 million, respectively.

For the nine months ended September 30, 2022 and 2021, we accrued research and development incentives of $1.2 million and $2.8 million, respectively.

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

We account for such relief received as other income.

For the six months ended June 30, 2022 and 2021, the tax benefit was $1.8 million and $0.05 million respectively, which primarily relates to movements in deferred tax.

For the nine months ended September 30, 2022 and 2021, the tax benefit was $2.5 million and $0.06 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, royalty and milestone payments from OUI in connection with the OUI License Agreement Amendment and the issuance of convertible loan notes.

Through June 30, 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 June 30, 2022, we had cash and cash equivalents of $192.3 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 upfront, royalty and milestone payments from OUI in connection with the OUI License Agreement Amendment and the issuance of convertible loan notes.

Through September 30, 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 September 30, 2022, we had cash and cash equivalents of $200.1 million.

Key financing and corporate milestones include the following:

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● In May 2021, we raised gross proceeds of $110.5 million from the initial public offering of our ordinary shares on NASDAQ.

The Shelf was declared effective on August 17, 2022.

As of September 30, 2022, we have not issued or sold any ordinary shares represented by ADSs under the sales agreement.

We do not currently expect positive cash flows from operations in the foreseeable future, if at all.

Historically, we have incurred operating losses as a result of ongoing efforts to develop our heterologous ChAdOx1-MVA prime-boost immunotherapy platform and

our product candidates, including conducting ongoing research and development, preclinical studies, clinical trials, providing general and administrative support for these operations and developing our intellectual property portfolio.

We expect to continue to incur net operating losses for at least the next few years as we progress clinical development, seek regulatory approval, prepare for and, if approved, proceed to manufacture and commercialization of our most advanced product candidates.

Historically, we have incurred operating losses as a result of ongoing efforts to develop our heterologous ChAdOx1-MVA prime-boost immunotherapy platform and our product candidates, including conducting ongoing research and development, preclinical studies, clinical trials, providing general and administrative support for these operations and developing our intellectual property portfolio.

We expect to continue to incur net negative cash flows from operations for at least the next few years as we progress clinical development, seek regulatory approval, prepare for and, if approved, proceed to manufacture and commercialization of our most advanced product candidates.

Operating profits may arise earlier if programs are licensed or sold to third parties before final approval, but this cannot be guaranteed.

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

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Cash Used in Operating Activities

During the six months ended June 30, 2022, net cash used in operating activities was $15.0 million, primarily resulting from our net income of $18.3 million, adjusted by foreign exchange gain on translation of $18.7 million, share based compensation of $6.7 million, depreciation and amortization of $2.0 million, non-cash lease expenses of $0.5 million, and changes in our operating assets and liabilities, net of $22.6 million primarily resulting from the OUI receivable for the second quarter revenue, and an increase in prepaid expenses due to the payment of annual insurance premiums.

During the six months ended June 30, 2021, net cash used in operating activities was $22.6 million, primarily resulting from our net loss of $31.4 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 $9.5 million, non-cash interest expense of $0.8 million, depreciation and amortization of $0.2 million, unrealized foreign exchange gain on convertible loan notes of $0.2 million and changes in our operating assets and liabilities, net of $9.3 million.

During the nine months ended September 30, 2022, net cash used in operating activities was $3.1 million, primarily resulting from our net income of $26.5 million primarily as a result of $38.2 million in revenue, adjusted by foreign exchange gain on translation of $36.6 million, share based compensation of $7.8 million, depreciation and amortization of $3.1 million, non-cash lease expenses of $0.8 million, and changes in our operating assets and liabilities, net of $2.9 million primarily resulting from the OUI receivable for the third quarter revenue, and an increase in prepaid expenses due to the payment of annual insurance premiums that occurred in the second quarter, netted by an increase in accrued expenses.

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, unrealized foreign exchange gain on convertible loan notes of $0.2 million and changes in our operating assets and liabilities, net of $10.2 million.

Net Cash Used in Investing Activities

During the six months ended June 30, 2022, cash used in investing activities was $3.1 million primarily resulted from capital expenditures related to our new headquarters in Harwell, United Kingdom.

During the six months ended June 30, 2021, cash used in investing activities was $0.6 million, which resulted from capital expenditures in connection with laboratory improvements and purchases of property and equipment for our office in Oxford, United Kingdom.

During the nine months ended September 30, 2022, cash used in investing activities was $5.2 million primarily resulted from capital expenditures related to our new headquarters in Harwell, United Kingdom.

During the nine months ended September 30, 2021, cash used in investing activities was $0.7 million, which resulted from capital expenditures in connection with laboratory improvements and purchases of property and equipment for our office in Oxford, United Kingdom.

Net Cash (Used)/Provided by Financing Activities

During the six months ended June 30, 2022, cash used in financing activities was $0.2 million resulted from the repayment of debt incurred previously by the acquired company Avidea (acquired on December 10, 2021, and subsequently became Vaccitech North America, Inc.).

During the six months ended June 30, 2021, cash provided by financing activities was $224.1 million primarily consisting of $121.8 million net proceeds from the issuance of Series B shares and $102.8 million of net proceeds from the IPO.

During the nine months ended September 30, 2022, cash used in financing activities was $0.2 million resulting from the repayment of debt incurred previously by the acquired company Avidea (acquired on December 10, 2021, and subsequently became Vaccitech North America, Inc.).

During the nine months ended September 30, 2021, cash provided by financing activities was $222.7 million primarily consisting of $121.8 million net proceeds from the issuance of Series B shares and $102.8 million of net proceeds from the IPO.

Effect of exchange rates on cash and cash equivalents

During the six months ended June 30, 2022 and 2021, the effect of foreign exchange on cash and cash equivalents was losses of $3.5 million and $0.6 million respectively, primarily as a result of fluctuations between the United States dollar and pound sterling exchange rates.

During the nine months ended September 30, 2022 and 2021, the effect of foreign exchange on cash and cash equivalents was losses of $5.5 million and $6.8 million respectively, primarily as a result of fluctuations between the United States dollar and pound sterling exchange rates.

Future Funding Requirements

To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, undertaking preclinical studies and conducting clinical trials of our product candidates.

As a result, we are not yet profitable and have incurred losses in each year since our inception in 2016, through to December 31, 2021.

As of June 30, 2022, we had an accumulated deficit of $90.3 million.

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

As a result, we have incurred losses in each year since our inception in 2016, through to December 31, 2021.

We began to be profitable in 2022 but continue to maintain negative operating cash flows.

As of September 30, 2022, we had an accumulated deficit of $82.1 million.

We expect to continue to incur significant losses and negative cash flows from operations for the foreseeable future.

We anticipate that our expenses will increase substantially as we:

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

Because the outcome of any preclinical study or clinical trial is uncertain and the rate of change of third-party costs is also unpredictable, we cannot reasonably estimate now

the actual amounts which will be necessary to complete the development and commercialization of our current or future product candidates successfully.

Because the outcome of any preclinical study or clinical trial is uncertain and the rate of change of third-party costs is also unpredictable, we cannot reasonably

estimate now the actual amounts which will be necessary to complete the development and commercialization of our current or future product candidates successfully.

Our future capital requirements may depend on many factors, including:

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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 the fourth quarter of 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.

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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 15 “Commitment and Contingencies” to our condensed consolidated financial statements.

The obligations related to both short- and long-term lease arrangements are set forth in Note 15 “Commitment and Contingencies” to our condensed 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.

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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 June 30, 2022.

however, the amount, timing and likelihood of such payments are not known as of September 30, 2022.

Emerging Growth Company Status

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Recent Accounting Pronouncements

A description of recently issued accounting pronouncement that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements.

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements.

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