What changed in this filing

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Item 1. Financial Statements

2023-05-12 compared with 2022-11-10 · 262 added, 502 removed, 497 unchanged (61% of the section changed)

4 unchanged sentences

Condensed Consolidated Statements of Operations and Comprehensive Loss

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Shares and Shareholders’ Equity (Deficit)

Condensed Consolidated Statements of Changes in Shareholders’ Equity

Condensed Consolidated Statements of Cash Flows

3 unchanged sentences

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

September 30,

Current assets:

12 unchanged sentences

Accrued expenses and other current liabilities

Deferred revenue

Operating lease liability - current

Total current liabilities

Operating lease liability – non current

Non-Current liabilities:

Operating lease liability

Contingent consideration

11 unchanged sentences

Deferred B shares, £ 0.01 nominal value;

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

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

nil shares authorized, issued and outstanding (December 31, 2022:authorized, issued and outstanding :

Deferred C shares, £ 0.000007 nominal value, nil shares authorized , issued and outstanding (December 31, 2022:

authorized , issued and outstanding:

12 unchanged sentences

Three months ended

Nine months ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

March 31, 2023

March 31, 2022

License revenue 1

Service revenue

Research grants and contracts

3 unchanged sentences

General and administrative

Total operating (income)/expense

Income/(loss) from operations

Total operating expenses

(Loss)/income from operations

Other income/(expense):

Change in fair value of derivatives embedded in convertible loan notes

Change in fair value of contingent consideration

Unrealized exchange gain on convertible loan notes

Loss on extinguishment of convertible loan notes

Interest income

1 unchanged sentence

Research and development incentives

Total other (expense)/income

Net income/(loss)

Total other income/(expense)

(Loss)/profit before income tax

Net (loss)/income

Net loss attributable to noncontrolling interest

Net income/(loss) attributable to Vaccitech plc shareholders

Net (loss)/income attributable to Vaccitech plc shareholders

Weighted-average ordinary shares outstanding, basic

Weighted-average ordinary shares outstanding, diluted

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

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

Net income/(loss)

Other comprehensive loss – foreign currency translation adjustments

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

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

Net (loss)/income

Other comprehensive gain/(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 three and nine month periods ended September 30, 2022, of $ 6.2 million and $ 38.2 million, respectively.

1 Includes license revenue from related parties for the three month periods ended March 31, 2023 and 2022, of $ 0.5 million and $ 15.0 million, respectively.

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

VACCITECH PLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED SHARES

AND SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

SHAREHOLDERS’ EQUITY

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

Nine months ended September 30, 2022

Three months ended March 31, 2023

Ordinary Shares

9 unchanged sentences

Foreign currency translation adjustments

Cancellation of deferred shares

( 27,828,231 )

Balance, March 31, 2023

Share based compensation

Issue of ordinary shares

Foreign currency translation adjustments

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

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

VACCITECH PLC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED SHARES

AND SHAREHOLDERS’ EQUITY

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)

Nine months ended September 30, 2021

Series A Redeemable

Series B Redeemable

Convertible Preferred

Three months ended March 31, 2022

Ordinary Shares

5 unchanged sentences

Shareholders’

(Deficit)/Equity

Balance, January 1, 2021, as previously reported

Share based compensation – restatement

Balance, January 1, 2021, as restated

Balance, January 1, 2022

Share based compensation

Issue of Series B shares, net of issuance costs

Series B Shares issued on conversion of convertible notes

Issue of Deferred A shares

Issue of ordinary shares

1 unchanged sentence

Balance, March 31, 2022

Share based compensation

Initial public offering, net of underwriting discounts

Offering Cost

Conversion of Series A shares

Conversion of Series B shares

Issue of share to non-controlling interest

Foreign currency translation adjustments

Balance, June 30, 2021

Share based compensation

Offering cost refund

Foreign currency translation adjustments

Balance, September 30, 2021

1 Indicates amount less than thousand

3 unchanged sentences

(IN THOUSANDS)

Nine months ended

September 30, 2022

September 30, 2021

Three months ended

March 31, 2023

March 31, 2022

CASH FLOWS FROM OPERATING ACTIVITIES:

4 unchanged sentences

Non-cash lease expenses

Unrealized foreign exchange gain

Change in fair value of derivatives embedded in convertible loan notes

Unrealized foreign exchange gain on convertible loan notes

Non-cash interest expense on convertible loan notes

Change in contingent consideration

Profit on sale of property and equipment

Deferred tax benefit

Loss on extinguishment of convertible loan notes

Non-cash loss on foreign currency remeasurement and other non-cash adjustments

Other non-cash expenses

Changes in operating assets and liabilities:

8 unchanged sentences

Purchases of property and equipment

Proceeds from sale of property and equipment

Investment in subsidiary

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Issue of shares and exercise of stock options

Issue of shares from the exercise of stock options

Proceeds from issue of ordinary shares

Payment of contingent consideration

Repayment of debt

Initial public offering costs

Transaction costs for Series B shares

Proceeds from issue of Series B shares

Proceeds from issue of shares to noncontrolling interest

Proceeds from issuance of ordinary shares, net of underwriters fees

Net cash (used in)/provided by financing activities

Net cash provided by/(used in) financing activities

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

Net (decrease)/ increase in cash and cash equivalents

Net (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of the period

4 unchanged sentences

Non-Cash investing and financing activities

Capital expenditures included in accounts payable

ROU assets obtained in exchange for operating lease liabilities

Issue of ordinary shares

Capital expenditures included in accounts payable and accrued expenses

Asset retirement obligation

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

Issue of ordinary shares

Issue of deferred A shares

Issue of deferred B shares

Issue of deferred C shares

Issue of Series B shares

1 Indicates amounts less than thousand

6 unchanged sentences

Vaccitech is headquartered in Harwell, Oxfordshire, United Kingdom.

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

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

In connection with the initial public offering of American Depositary Shares (“ADSs”), in March 2021, Vaccitech completed a corporate reorganization wherein the shareholders of Vaccitech (UK) Limited (formerly Vaccitech Limited) exchanged each of their ordinary shares, Series A Shares and Series B Shares of the Company for the same quantity of ordinary shares, series A shares (“Vaccitech plc Series A Shares”) and series B shares (“Vaccitech plc Series B Shares”) in Vaccitech plc (resulting in the shareholders of the Company holding the same percentage and class of shares in Vaccitech plc (formerly Vaccitech Rx Limited) as they had in Vaccitech (UK) Limited (formerly Vaccitech Limited).

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

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

In addition, on April 4, 2022, a merger was effected between subsidiaries Vaccitech USA, Inc.

Vaccitech and its direct and indirect subsidiaries, Vaccitech (UK) Limited, Vaccitech Australia Pty Limited, Vaccitech Oncology Limited (“VOLT”), Vaccitech North America, Inc., Vaccitech Switzerland GmbH and Vaccitech Italia S.R.L, are collectively referred to as the “Company”.

In connection with the initial public offering of American Depositary Shares (“ADSs”), in March 2021, Vaccitech completed a corporate reorganization wherein the shareholders of Vaccitech (UK) Limited exchanged each of their ordinary shares, series A shares and series B shares of Vaccitech (UK) Limited (formerly Vaccitech Limited) for the same quantity of ordinary shares, series A shares and series B shares in Vaccitech plc (resulting in the shareholders of the Company holding the same percentage and class of shares in Vaccitech plc (formerly Vaccitech Rx Limited) as they had in Vaccitech (UK) Limited.

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

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

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

13 unchanged sentences

The condensed consolidated balance sheet as of December 31, 2022, 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.

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

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

As of March 31, 2023, the Company had cash and cash equivalents of $ 191.3 million and an accumulated deficit of $ 121.4 million, the Company expects to incur losses for the foreseeable future.

The Company expects that its cash and cash equivalents will be sufficient to fund current operations for at least the next twelve months from the issuance of the financial statements.

The Company expects to seek additional funding through equity financings, government or private-party grants, debt financings or other capital sources, including collaborations with other companies or other strategic transactions.

The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborations or other arrangements.

The terms of any financing may adversely affect the holdings or rights of the Company's stockholders.

If the Company is unable to obtain sufficient capital, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs,

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

product portfolio expansion or future commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

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

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

Unaudited Condensed Financial Information

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.

The accompanying Condensed Consolidated Balance Sheets as of March 31, 2023, and December 31, 2022, the Condensed Consolidated Statements of Operations and Comprehensive Loss, Condensed Consolidated Statements of Changes in Shareholders’ Equity and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 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, 2022, filed with the Securities Exchange Commission (the “Annual Report”) on March 24, 2023.

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.

In our opinion, the unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of March 31, 2023, our results of operations for the three months ended March 31, 2023, and 2022, and our cash flows for the three months ended March 31, 2023, and 2022.

The results of operations for the three months ended March 31, 2023, are not necessarily indicative of the results to be expected for the year ending December 31, 2023, 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, 2022, except as discussed below related to newly adopted accounting pronouncements.

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

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

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

1 unchanged sentence

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

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.

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

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

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

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

1 unchanged sentence

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.

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 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)

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We have reviewed all recently issued standards and have determined that such standards will not have a material impact on our condensed consolidated financial statements or do not otherwise apply to our current operations.

Foreign currency translation in General and Administrative Expenses

The aggregate, net foreign exchange gain or loss included in determining net (loss)/income recognized in general and administrative expenses for the three months ended March 31, 2023, was a loss of $ 3.5 million (three months ended March 31, 2022:

$ 5.3 million gain).

Net (Loss)/Income Per Share

The following table sets forth the computation of basic and diluted net (loss)/income per share for the three months ended March 31, 2023, and 2022 (in thousands, except number of shares):

Three months ended March 31,

Net (loss)/income

Net loss attributable to noncontrolling interest

Net income / (loss) attributable to Vaccitech shareholders

Net (loss)/income attributable to Vaccitech shareholders

Weighted-average ordinary shares outstanding, basic

1 unchanged sentence

Weighted-average ordinary shares outstanding, diluted

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

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

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.

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

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

For the three month period ended March 31, 2023 and 2022, 4,134,286 and 2,014,204 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 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:

During the three months ended March 31, 2023, the Company’s additions to property and equipment, net were $ 4.8 million, which primarily related to an increase in leasehold improvements from the Company’s U.S.

office in Germantown, Maryland (three months ended March 31, 2022:

$ 3.2 million, related to leasehold improvements of the Company’s corporate headquarters).

Depreciation expense for the three months ended March 31, 2023 was $ 0.4 million (March 31, 2022:

$ 0.2 million).

Prepaid expenses and other current assets (in thousands):

Intangible assets, net

The gross amount of amortizable intangible assets, consisting of developed technology, was $ 31.6 million and $ 31.6 million as of March 31, 2023 and December 31 2022, respectively, and accumulated amortization was $ 4.1 million and $ 3.3 million as of March 31, 2023 and December 31, 2022, respectively.

The amortization expense for the three months ended March 31, 2023 was $ 0.8 million (three months ended March 31, 2022:

$ 0.8 million).

The estimated annual amortization expense is $ 3.1 million for the years 2023 through to 2031.

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30,

Prepaid expenses and other current assets (in thousands):

Prepayments and accrued income

Value Added Tax receivable

Employee retention and payroll tax credit

2 unchanged sentences

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

September 30,

Accrued manufacturing and clinical expenses

3 unchanged sentences

Accrued professional fees

Accrued leasehold improvements

Accrued other

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 $ 125.2 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 in aggregate.

Convertible loan notes

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

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 $ 102.8 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 September 30, 2022:

The following is a summary of the rights and privileges of the holders of ordinary shares as of March 31, 2023:

Liquidation preference:

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

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

the Company may, subject to the provisions of the Companies Act 2006 and our Articles, by ordinary resolution from time to time declare dividends to be paid to shareholders not exceeding the amount recommended by the Company’s board of directors.

Subject to the provisions of the Companies Act 2006, in so far as, in the board of directors’ opinions, the Company’s profits justify such payments, the board of directors may pay interim dividends on the Company’s ordinary shares.

Voting Rights:

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

each holder of ordinary shares has the right to receive notice of, and to vote at, the Company’s general meetings.

Each holder of ordinary shares who is present (in person or by proxy) at a general meeting on a show of hands has one vote and, on a poll, every such holder who is present (in person or by proxy) has one vote in respect of each share of which they are the holder.

Preemption rights:

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

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

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

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

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

In either case, this disapplication would need to be renewed by our shareholders upon its expiration ( i.e.

, at least every five years ) to remain effective.

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

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

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

This included the disapplication of preemption rights in relation to the

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

allotment of our ordinary shares in connection with the IPO.

This disapplication will need to be renewed upon expiration ( i.e.

, at least every five years ) to remain effective, but may be sought more frequently for additional five-year terms (or any shorter period).

Deferred Shares

All deferred shares rank pari passu as a single class.

The deferred shares do not have rights to dividends or to participate in profits on a return of assets on liquidation, the deferred shares confer on the holders thereof an entitlement to receive out of the assets of the Company available for distribution amongst the shareholders (subject to the rights of any new class of shares with preferred rights) the amount credited as paid up on the deferred shares held by them respectively after (but only after) payment shall have been made to the holders of the ordinary shares of the amounts paid up or credited as paid up on such shares and the sum of £ 1.0 million ($ 1.3 million) in respect of each ordinary share held by them respectively.

The deferred shares do not have rights to dividends or to any other right of participation in the profits of the Company.

On a return of assets on liquidation, the deferred shares shall confer on the holders thereof an entitlement to receive out of the assets of the Company available for distribution amongst the shareholders (subject to the rights of any new class of shares with preferred rights) the amount credited as paid up on the deferred 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 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.

On March 29, 2023, the Company transferred back to the Company and subsequently cancelled all of its deferred B shares (nominal value of £ 0.01 each) and deferred C shares (nominal value of £ 0.00000736245954692556 each) which were previously in issue.

These deferred shares had previously been issued to certain pre-IPO shareholders in connection with the implementation of certain stages of the Company’s pre-IPO share capital reorganization.

The Company received shareholder approval on April 21, 2021 (pursuant to the shareholder resolutions passed on that date) in order to effect the transfer back and cancellation of the deferred shares for nil consideration in accordance with sections 659 and 662 of the Companies Act 2006.

The Company’s deferred A shares with a nominal value of £ 1.00 each remain in issue for the purposes of satisfying the minimum share capital requirements for a public limited company as prescribed by the Companies Act 2006.

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

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.

As of September 30, 2022, the Company had a contingent consideration liability of $ 2.8 million related to the acquisition of Avidea Technologies, Inc.

As of March 31, 2023, the Company had a contingent consideration liability of $ 1.7 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.

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 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

Nine months ended

September 30,

Beginning balance

Change in fair value recognized in net income/(loss)

Settlement via conversion

Change in fair value recognized in net (loss)/ income

Foreign exchange loss

Foreign exchange translation recognized in other comprehensive loss

Ending balance

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 September 30, 2022.

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

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

Therefore, the Company performed an interim qualitative assessment as of March 31, 2023 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

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 March 31, 2023.

Share-Based Compensation

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,

During the three month period ended March 31, 2023, in accordance with the terms of the Annual Increase of the Vaccitech plc Share Award Plan 2021 (the “Plan”), 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, 2023.

For the three months ended March 31, 2023, the Company granted 1,987,289 options to employees and directors with a weighted average grant date fair value of $ 2.01 and a weighted average exercise price of $ 2.53 per share.

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

For the three months ended March 31, 2023, the Company canceled 57,970 options to employees and directors for forfeitures on unvested options when leaving the Company (March 31 2022:

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:

Three months ended

Expected volatility

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Expected dividend yield

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.

As of March 31, 2023, 6,807,859 options with a weighted average exercise price of $ 9.69 were outstanding.

As of March 31, 2023, there was $ 9.0 million unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 2.1 years.

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

As of March 31, 2022, there was $ 14.8 million unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.36 years.

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

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Research and development

General and administrative

Contract Assets and Liabilities

The Company discloses Accounts receivable separately in the Condensed Consolidated Balance Sheets at the net amount expected to be collected.

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

As of September 30, 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.

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

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

September 30, 2022

Balance as of December 31, 2021

Revenue recognized related to contract liability balance

Foreign exchange translation

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

Commitments and Contingencies

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As part of execution of these arrangements, the Company paid certain upfront fees, which have been expensed as incurred because the developing technology has not yet reached technical feasibility, the lack of alternative use, and the lack of proof of potential value.

The agreements cover a variety of fields, including influenza, cancer, human papillomavirus, hepatitis B virus and middle east respiratory syndrome.

The agreements cover a variety of fields, including influenza, cancer, human papillomavirus infection, (“HPV”), hepatitis B virus (“HBV”) and middle east respiratory syndrome (“MERS”).

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

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

Each agreement provides for

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Operating Leases

The Company has not made or accrued any material payments under these license agreements during the three months ended March 31, 2023, and March 31, 2022.

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

The Oxford Science Park, Oxford

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.

The Harwell Science and Innovation Campus, Oxfordshire

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As the Company’s leases typically do not provide an implicit rate, the Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date, being the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

The Company has provided the lessor with a refundable security deposit of $ 594 thousand (£ 534 thousand) which is included in Other assets.

The Company has provided the lessor with a refundable security deposit of $ 0.7 million which is included in Other assets.

Germantown, Maryland

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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

The Company has provided the lessor with a refundable security deposit of $ 0.2 million 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

Operating lease liability, current

Operating lease liability, noncurrent

Operating lease liability, non-current

Weighted average remaining lease term (years)

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Other information

Nine months ended September 30,

Operating cash flows from operating leases

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 September 30, 2022, were as follows (in thousands):

Short-term lease costs

Operating cash flows operating leases

VACCITECH PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Future annual minimum lease payments under operating leases as of March 31, 2023, were as follows (in thousands):

Remainder of 2023

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Total operating lease liability

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

The Company is a party in various contractual disputes, litigation, and potential claims arising in the ordinary course of business.

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.

As of the date of this Quarterly Report on Form 10-Q, we do not believe we are party to any claim or litigation the outcome of which, if determined adversely to us, would individually or in the aggreagate be reasonably expected to have a material adverse effect on our business.

However, from time to time, we could be subject to various legal proceedings and claims that arise in the ordinary course of our business activities.

Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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

(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.

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

$ Nil thousand) to University of Oxford.

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

$ Nil ) to Oxford University Hospitals.

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 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.

During the three months ended March 31, 2023, the Company incurred $ Nil expenses from its shareholder, Oxford Science Enterprises plc.

During the three months ended March 31, 2022, the Company recognized net income of $ 55 thousand after offsetting lease costs for laboratory and office space in Oxford of $ 74 thousand, against a refund of $ 129 thousand from its shareholder, Oxford Science Enterprises plc.

During the three months ended March 31, 2023, the Company incurred expenses of $ Nil (three months ended March 31, 2022:

$ 1 thousand) to its shareholder, the University of Oxford, related to clinical study costs.

As of March 31, 2023, the Company owed $ Nil (December 31, 2022:

$ Nil ) to the University of Oxford.

During the three months ended March 31, 2023, the Company incurred expenses of $ 98 thousand (three months ended March 31, 2022:

$ 193 thousand) and recognized license revenue of $ 0.5 million (three months ended March 31, 2022:

$ 15.0 million) from Oxford University Innovation Limited which is a wholly owned subsidiary of the Company’s shareholder, the University of Oxford.

As of March 31, 2023, the Company was owed $ 0.8 million (December 31, 2022:

$ 5.5 million) from Oxford University Innovation Limited.

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

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We have a broad pipeline of both clinical and preclinical stage therapeutic and prophylactic programs.

Our current therapeutic programs include VTP-300 for the treatment of chronic hepatitis B infection, or CHB, VTP-200 for the treatment of human papilloma virus infection, or HPV, VTP-850 for the treatment of prostate cancer, VTP-600 for the treatment of non-small cell lung cancer, or NSCLC, VTP-1000 for treatment of celiac disease, and VTP-1100 for treatment of HPV-associated cancers.

Our current therapeutic programs include VTP-300 for the treatment of chronic hepatitis B infection, or CHB, VTP-200 for the treatment of HPV, VTP-850 for the treatment of prostate cancer, VTP-600 for the treatment of non-small cell lung cancer, or NSCLC, VTP-1000 for treatment of celiac disease, and VTP-1100 for treatment of HPV-associated cancers.

The latter two programs are designed to utilize our SNAPvax platform.

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.

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

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.

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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.

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

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

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

Our share of 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.

For the three months ended March 31, 2023, we recognized $0.5 million as revenue (three months ended March 31, 2022:

$15.0 million).

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.

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.

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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.

As of March 31, 2023, we have sold 945,835 ordinary shares represented by ADSs under the sales agreement, amounting to net proceeds of $2.5 million.

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

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.

For the year ended December 31, 2022, we generated net income of $5.3 million, primarily as a result of revenues arising from AstraZeneca sales of Vaxzevria and our agreement with OUI.

For the three months ended March 31, 2023, we incurred a net loss of $18.2 million.

As of March 31, 2023, we had an accumulated deficit of $121.4 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.

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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 September 30, 2022 will enable us to fund our operating expenses and capital requirements into the first quarter of 2025.

We expect that our cash balance as of March 31, 2023 will enable us to fund our operating expenses and capital requirements into the first quarter of 2025.

Recent Developments

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, 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 UK was challenging, due to COVID-19 lockdowns.

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

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

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 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.

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

An Immunotherapeutic Targeting Chronic HBV Infection

On March 28, 2023, we announced positive topline final data from the HBV002 phase 2 clinical trial.

The completed trial, which included 55 patients with chronic hepatitis B, supported the generally favorable tolerability profile previously reported with VTP-300, with no incidents of VTP-300-related Grade 3 adverse events or product-related serious adverse events, or SAEs, following study dosing.

VTP-300 was observed to induce meaningful, sustained reductions of Hepatitis B surface antigen (HBsAg) in patients with chronic HBV.

Declines were most prominent in patients with lower baseline HbsAg.

The final results of the immunology assays are currently being analyzed and the full data, including tolerability results and immunology pharmacodynamic biomarker readouts, will be presented at the upcoming European Association for the Study of the Liver (EASL) Congress, June 21-24, 2023.

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

On April 20, 2023, our Chief Medical Officer, Dr.

Meg Marshall, presented topline data from the VTP-200 HPV001 phase 1b/2 clinical trial at the 35 th Annual International Papillomavirus Conference (IPVC).

The poster showed data for 42 women at Day 35, 7 days after the last dose of VTP-200, split by active treatment versus placebo.

VTP-200 was generally well-tolerated and was administered with no product-related grade 3 unsolicited adverse events and no product-related SAEs.

While the placebo group

showed no antigen-specific T cell responses as measured by IFNg ELISpot, 26 of 29 women receiving varying doses of VTP-200 showed a response.

The pooled active groups showed meaningful responses, with the average being greater than 1,000 spot-forming units per million peripheral blood mononuclear cells.

Responses were strongest to the E1, E2 and E6 antigens.

In addition, intracellular cytokine staining data from the active groups showed both CD4 and CD8 responses.

The final dataset, including data on clearance of infection and cervical lesions at 12 months post-treatment, is expected in the second quarter of 2024.

Management Team

On April 28, 2023, we announced the that our Chief Operating Office, Chris Ellis has notified the Company that he intends to retire, effective October 31, 2023.

Impact of the Ukraine Crisis

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

Most of our revenue to date has been derived from a research grant from the Biomedical Advanced Research and Development Authority, or BARDA, a research collaboration and license agreement with Enara Bio, and the OUI License Agreement Amendment with OUI relating to Vaxzevria.

Most of our revenue to date has been derived from the OUI License Agreement Amendment with OUI relating to Vaxzevria.

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

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 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.

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.

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.

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

Our revenue for the three months ending March 31, 2023 was $0.5 million (three months ending March 31, 2022:

$15.0 million), representing the amounts we have been notified of as due by OUI to date and an estimate of future receipts, constrained to the extent that it is probable that a significant reversal of revenue would not occur.

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.

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Operating Expenses

Our operating expenses since inception have consisted of research and development costs and general administrative costs.

Our operating expenses since inception have consisted of research and development costs and general and administrative costs.

Research and Development Expenses

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

Research and development activities account for the major portion of our operating expenses, and we expect research and development expenses to increase in the future.

Since our inception, we have focused significant resources on our research and development activities, including establishing and building on our adenovirus platform, further enhancing our in-licensed ChAdOx1, ChAdOx2 and MVA vectors, developing a new next-generation adenoviral vector, acquiring new technology platforms including SNAPvax, conducting preclinical studies, developing various manufacturing processes, and advancing clinical development of our programs including Phase 2 clinical trials for

VTP-100, which we subsequently discontinued development of, as well as initiating the clinical trials for VTP-200, VTP-300, VTP-600 and VTP-850 and readying VTP-500, VTP-1000 and VTP-1100 for clinical trials.

Research and development activities account for a large portion of our operating expenses, and we expect research and development expenses to increase in the future.

Research and development costs are expensed as incurred.

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● expenses incurred in connection with the development of our programs including preclinical studies and clinical trials of our product candidates, under agreements with third parties, such as consultants, contractors, academic institutions and CROs;

● the cost of manufacturing drug products for use in preclinical development and clinical trials, including under agreements with third parties, such as CMOs, consultants and contractors;

● the cost of manufacturing drug products for use in preclinical development and clinical trials, including agreements with third parties, such as CMOs, consultants and contractors;

● laboratory costs;

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

For the three month period ended March 31, 2023, 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 on December 10, 2021.

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

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

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

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

Other Income (Expense)

Change in Fair Value

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 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.

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.

Loss on Extinguishment of Convertible Loan Notes

On March 15, 2021, we issued 28,957 Series B preferred shares, or Series B Shares, amounting to $125.2 million.

Each Series B Share is convertible into 309 ordinary shares and nine deferred shares at the holders’ option at any time.

The Series B funding 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 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

Interest expense results primarily from our convertible loan notes, which carry a market rate of interest.

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

Interest Income

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Research and Development Incentives

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

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

We account for such relief received as other income.

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That exception requires the company to be creating, taking steps to create or managing intellectual property, as well as having qualifying research and development expenditure in respect of connected parties, which does not exceed 15% of the total claimed.

If such exception does not apply, this could restrict the amount of payable credit that we claim.

If such an exception does not apply, this could restrict the amount of payable credit that we claim.

From April 2023 under the SME program the additional deduction will decrease from 130% to 86% and the SME credit rate will reduce from 14.5% to 10%.

Unsurrendered UK losses may be carried forward indefinitely to be offset against future taxable profits, subject to numerous utilization criteria and restrictions.

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Critical Accounting Policies and Use of Estimates

This discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or US GAAP.

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.

This discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S.

The preparation of unaudited condensed consolidated 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 contingent consideration, impairment of goodwill and intangible assets, and the fair value of ordinary shares and share-based compensation.

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Actual results could differ from those estimates.

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

Going Concern

The 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.

We have experienced recurring losses since inception through to December 31, 2021 and expect to incur additional losses in the future in connection with research and development activities and general and administrative expenses.

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

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

We generated a net income of $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 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 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 and are no longer outstanding.

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

Recognition of Revenue from Contracts with Customers

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

We are entitled to receive approximately 24% of payments, including royalties and milestones, received by OUI from that license agreement with AstraZeneca as set out in the OUI License Agreement Amendment.

We are entitled to receive approximately 24% of receipts, including royalties and milestones, received by OUI from that license agreement with AstraZeneca as set out in the OUI License Agreement Amendment.

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

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

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

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

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

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

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

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

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

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

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

Amounts received by us as non-refundable upfront payments 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.

(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 for the period has not been provided.

Research and Development Costs

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

The EMI option award agreements provide for the grant of potentially tax favored Enterprise Management Incentive, or EMI, options, to our United Kingdom employees and directors.

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

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

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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 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 nine months ended September 30, 2022 and 2021 were:

September 30, 2022

September 30, 2021

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

The volatility assumption utilizes both the Company’s historical volatility and those of a portfolio of listed peer companies, weighted towards the Company as we build the historical records following IPO.

The assumptions used in the Black-Scholes model to determine fair value for the share option grants during the three months ended March 31, 2023 and 2022 were:

March 31, 2023

March 31, 2022

Expected volatility

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Expected dividend yield

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.

For the three months ended March 31, 2023, 1,987,289 share options were granted and 1,632,922 share options were granted for the three months ended March 31, 2022.

Business Combinations

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

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

The developed technology was valued using the cost approach.

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

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

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

We acquired Avidea for an up-front amount of $32.8 million (after working capital adjustments), of which $11.8 million was payable in cash and $21.0 million in 2,151,831 of American Depositary Shares of the Company.

In addition, Avidea’s stockholders may be entitled to receive an aggregate of up to $40.0 million in additional payments, payable in a mixture of cash and ADSs, upon the achievement of certain milestones.

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

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

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

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.

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Goodwill and Purchased Intangible Asset

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

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

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

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

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, which continued through the second and third quarters of 2022.

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 September 30, 2022.

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

The goodwill of $12.2 million recognized to March 31, 2023 wholly relates to the acquisition of Avidea on December 10, 2021.

During the year ended December 31, 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, which continued through to the first quarter of 2023.

Therefore, the Company performed an interim assessment as of March 31, 2023 to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

Based off this assessment, the Company has not recognized any impairment losses related to goodwill or intangible assets for the three months ending March 31, 2023.

Results of Operations

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

Comparison of the Three Months Ended March 31, 2023 and 2022

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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Total operating (income)/expenses

Income/(loss) from operations

(Loss)/income from operations

Other income (expense)

Change in fair value of contingent consideration

Interest income

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Total other income

Net income/(loss)

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 September 30, 2022 and 2021:

ended September

Direct research and development expenses by program:

VTP-600 NSCLC

VTP-800/850 Prostate cancer

Other and earlier stage programs

Total direct research and development expenses

Internal research and development expenses:

Personnel-related (including share-based compensation)

Facility related

Other internal costs

Total research and development expense

Our research and development expenses for the three months ended September 30, 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 $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 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 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 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 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

Operating expenses:

Research & development

General and administrative

Total operating expenses

Income/(loss) from operations

Other income (expense)

Change in fair value of derivatives embedded in convertible loan notes

Change in fair value of contingent consideration

Unrealized exchange gain on convertible loan notes

Loss on extinguishment of convertible loan notes

Interest income

Interest expense

Research and development incentives

Total other income/(expenses)

Net income/(loss)

1 indicates amount less than thousand

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.

(Loss)/profit before income tax

Net (loss)/income

For the three months ended March 31, 2023, and 2022, our revenue consisted of $0.5 million and $15.0 million respectively, primarily from the OUI License Agreement Amendment with respect to payments from OUI in connection with commercial sales of Vaxzevria, which reduced due to lower sales in the period.

Research and Development Expenses

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

ended September

The following table summarizes our research and development expenses for the three months ended March 31, 2023 and 2022 (in thousands):

Direct research and development expenses by program:

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VTP-850 Prostate cancer

VTP-1000/VTP-1100 (SNAPvax candidates)

Other and earlier stage programs

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Other internal costs

Total research and development expense

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 $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.

Other and earlier stage programs increased $3.3 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.

Total internal research and development expenses

Total research and development expenses

Our research and development expenses for the three months ended March 31, 2023 and 2022 were $9.8 million and $10.7 million, respectively.

Direct expenses for the three months ended March 31, 2023 and 2022 were $5.8 million and $7.6 million, respectively, and consisted of outside services, consultants, laboratory materials, clinical trials, manufacturing of clinical trial materials, as well as costs for external preclinical services and sample testing.

Of the $1.8 million decrease, $2.1 million pertains to VTP-300, as a result of completing the HBV002 Phase 2 clinical trial with topline data announced in March 2023, and continuing enrollment in the HBV003 Phase 2 clinical and the AB-729-202 Phase 2a clinical collaboration with Arbutus.

$1.1 million of the decrease pertains to VTP-850, which progressed to FDA clearance of our IND for PCA001 in December 2022, and is screening patients currently.

These decreases were offset by a $1.5 million increase that pertains to the commencement of VTP-1000 Celiac disease and VTP-1100 HPV cancer programs in the second quarter of 2022.

Internal research and development expenses for the three months ended March 31, 2023 and 2022 were $4.0 million and $3.1 million, respectively.

Of the $0.9 million increase, $0.9 million pertains to personnel-related expenses as a result of the relative increase in headcount across locations in the United Kingdom and United States.

General and Administrative Expenses

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 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 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 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 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.

General and administrative expenses for the three months ended March 31, 2023 were $12.1 million mainly attributable to personnel expense of $3.4 million, including share-based payment charge of $1.1 million, foreign exchange loss of $3.5 million, insurance cost of $1.6 million, legal and professional fees of $1.2 million and other expenses of $1.8 million.

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

Interest Income

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.

For the three months ended March 31, 2023, interest income was $1.6 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 March 31, 2022, interest income was less than $0.1 million.

Research and Development Incentives

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 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.

For the three months ended March 31, 2023 and 2022 research and development incentives were $1.2 million and $1.0 million, respectively.

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

For the three months ended March 31, 2023 and 2022, the tax benefit was $0.5 million and $0.9 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 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.

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, the issuance of convertible loan notes, and most recently from upfront, royalty and milestone payments from OUI in connection with the OUI License Agreement Amendment.

Through March 31, 2023, we had received gross proceeds of approximately $327.3 million from the issuance of our ordinary and preferred shares and convertible loan notes.

As of March 31, 2023, we had cash and cash equivalents of $191.3 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;

● Between April 2022 and March 2023, we received $43.4 million of cash from OUI for the commercial sales of Vaxzevria;

● Between December 2022 and March 2023, we raised net proceeds of $2.5 million from the issuance of shares represented by ADSs through “at-the-market” offerings under the sales agreement with Jefferies LLC.

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

As of March 31, 2023, we have sold 945,835 ordinary shares represented by ADSs under the sales agreement amounting to net proceeds of $2.5 million.

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

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

ended September

Net cash used in operating activities

Net cash used in investing activities

Net cash (used)/provided by financing activities

Net cash provided by/(used in) financing activities

Effect of exchange rates on cash and cash equivalents

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Cash Used in Operating Activities

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.

During the three months ended March 31, 2023, net cash used in operating activities was $3.2 million, primarily resulting from our net loss of $18.2 million adjusted by share based compensation of $2.2 million, depreciation and amortization of $1.2 million, foreign exchange gain of $3.5 million, and changes in our operating assets and liabilities, net of $8.3 million.

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

Net Cash Used in Investing Activities

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 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.

During the three months ended March 31, 2023, cash used in investing activities was $2.5 million primarily resulting from capital expenditures related to leasehold improvements on our new office in Germantown, Maryland, United States.

During the three months ended March 31, 2022, cash used in investing activities was $1.1 million, primarily resulting from capital expenditure related to our corporate headquarters in Harwell, United Kingdom.

Net Cash Provided by/(Used in) Financing Activities

During the three months ended March 31, 2023, cash provided by financing activities was $1.7 million mainly as a result of net proceeds from the issuance of ordinary shares through the “at-the-market” sales agreement.

During the three months ended March 31, 2022, cash used in financing activities was $0.2 million from the repayment of debt incurred previously by the acquired company Avidea (acquired on December 10, 2021, and subsequently became Vaccitech North America, Inc.).

Effect of exchange rates on cash and cash equivalents

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.

During the three months ended March 31, 2023 and 2022, the effect of foreign exchange on cash and cash equivalents was gain of $1.0 million and loss of $5.6 million respectively, primarily as a result of fluctuations between the United States dollar and pound sterling exchange rates.

Future Funding Requirements

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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 were profitable in 2022, however we have negative operating cash flows as March 31, 2023.

As of March 31, 2023, we had an accumulated deficit of $121.4 million.

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

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

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

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

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

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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 first quarter of 2025.

Unless and until we can generate a substantial amount of revenue from our product candidates, we expect to finance our future cash needs through public or private equity offerings, debt financings, collaborations, licensing arrangements or other sources, or any combination of the foregoing.

Based on our research and development plans, we expect that our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2025.

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.

If we raise additional funds through collaborations, strategic alliances, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds when needed, we would be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Lease, Purchase, and Other Obligations

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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 September 30, 2022.

however, the amount, timing and likelihood of such payments are not known as of March 31, 2023.

Emerging Growth Company Status

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

What changed 10-Q

Item 1. Financial Statements