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Item 7. Management’s Discussion and Analysis

2024-03-20 compared with 2023-03-24 · 141 added, 231 removed, 187 unchanged (67% of the section changed)

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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K.

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

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You should carefully read the “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” sections of this Annual Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements contained in the following discussion and analysis.

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

We aim to treat and prevent infectious

diseases and cancer by using our proprietary platforms to develop product candidates that stimulate powerful, targeted immune responses against pathogens, infected cells, and tumor cells.

We design these product candidates to stimulate immune responses that are robust, highly specific, and are differentiated by the magnitude of the T cell populations induced, which exhibit critical functionality and durability.

In the field of autoimmunity, we use our proprietary platform to develop product candidates that are designed to induce regulatory T cells to suppress specific immune responses and prevent/reverse autoimmunity.

We are focused on applying our platform capabilities and the expertise of our team to address significant unmet medical needs in two settings - the therapeutic setting, for the treatment of chronic infectious diseases, cancer, and autoimmunity and the prophylactic setting, for the prevention of infectious diseases, based on our platform’s ability to respond rapidly to epidemic and pandemic threats.

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 and 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.

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

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

AstraZeneca has exclusive worldwide rights to develop and commercialize Vaxzevria.

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

We are a clinical-stage biopharmaceutical company developing novel T cell immunotherapeutic candidates designed to guide the immune system to overcome chronic infectious diseases, autoimmunity and cancer.

Helping patients and their families is the guiding principle at the heart of Barinthus Bio.

The Company stands apart through its broad pipeline, built around four proprietary platform technologies;

two viral vector platforms, ChAdOx and MVA;

and two synthetic SNAP platforms, SNAP-Tolerance Immunotherapy ("SNAP-TI") and SNAP-Cancer Immunotherapy ("SNAP-CI").These platforms are enabling us to develop antigen-specific immunotherapeutic candidates designed to optimize the disease-fighting capabilities of T cells and guide them towards a healthy balance.

Our immunotherapeutic candidates are designed to work by increasing disease-specific CD8+ T cell activity in the case of chronic infectious diseases and cancers, or by dampening CD4+ and CD8+ T cells, and increasing regulatory T cells in autoimmunity.

Harnessing our range of proprietary viral vector and synthetic platform technologies, we are advancing a pipeline of four product candidates across a diverse range of therapeutic areas, including:

VTP-300, a Phase 2 immunotherapeutic candidate designed as a potential component of a functional cure for chronic HBV infection;

VTP-200, a Phase 2 non-surgical product candidate for persistent high-risk HPV with near term clinical read-outs;

VTP-1000, our first preclinical autoimmune candidate designed to utilize the SNAP-TI platform to treat patients with celiac disease;

and VTP-850, a second-generation Phase 2 immunotherapeutic candidate designed to treat recurrent prostate cancer.

Alongside these proprietary programs, we have partnerships in place to advance three additional prophylactic and therapeutic product candidates in MERS, Zoster and Non-Small Cell Lung Cancer ("NSCLC").

The Company also co-invented a COVID-19 vaccine with the University of Oxford, which has been exclusively licensed worldwide to AstraZeneca.

The co-invention of the COVID-19 vaccine demonstrated our ability to navigate a changing environment with speed and efficiency and lead the way in responding to urgent medical needs, as well as providing a strong proof-of-concept for the ChAdOx platform.

We believe our proven scientific expertise, diverse portfolio and focus on product candidate development uniquely positions us to navigate towards delivering treatments for patients with infectious diseases, autoimmune disorders and cancers that have a significant impact on their every day lives.

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

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

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

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

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

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.

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

For the year ended December 31, 2022, we recognized approximately $43.7 million as revenue (year ended December 31, 2021:

There is, however, no guarantee or expectation 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.

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

obtain regulatory authorization for one or more of such product candidates, if at all, and commercialize our products, or we enter into out-licensing agreements with third parties.

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

The Shelf was declared effective on August 17, 2022.

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• sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;

● acceptance of investigational new drug applications, or INDs, for our planned clinical trials or future clinical trials;

• acceptance of INDs for our planned clinical trials or future clinical trials;

• successful and timely enrollment and completion of clinical trials;

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• effectively competing with other therapies.

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

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

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 December 31, 2022 will enable us to fund our operating expenses and capital requirements into the first quarter of 2025.

Recent Developments

On January 18, 2023, we incorporated Vaccitech Switzerland GmbH, a wholly owned subsidiary of Vaccitech (UK) Limited.

On January 30, 2023, we announced the appointment of Nadège Pelletier, Ph.D., as Chief Scientific Officer.

On March 20, 2023, we announced topline interim data from HPV001, a Phase 1b/2 clinical trial of VTP-200, a potential treatment for low grade HPV-related cervical lesions, which demonstrated favorable safety and immunogenicity data at interim analysis in patients with low-grade cervical HPV lesions.

The HPV001 clinical trial will continue as planned to the 12-month primary endpoint.

Impact of the COVID-19 Pandemic

COVID-19 continues to have an impact, both directly and indirectly, on our business and operations, including continuing disruptions 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 due, in part, to patient availability and site staff availability, and the last patient’s first visit occurring in January 2023 with the last visit due by January 2024.

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

We recently announced topline initial interim immunogenicity and safety data from 58 patients that reached their six-month evaluation timepoint.

We expect to announce the full data from this trial in the first quarter of 2024.

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 but 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 due to patient availability, patient hesitancy and site staff availability.

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 COVID-19 is having on our ability to advance the development of our product candidates as a result of adverse impacts on the availability of raw materials for manufacturing, research sites, contract service providers 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 other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially adversely impacted.

A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate, in either direction.

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.

Unless and until we can generate a substantial amount of revenue from our product candidates, if approved, 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 and other financial resources, will enable us to fund our operating expenses and capital expenditure requirements into the fourth 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.

Impact of Israel and Gaza Conflict

In respect of the international conflict in Israel and Gaza, we have no operations or suppliers based in Israel or Gaza, and as a result, as of the date of this Annual Report, we believe the impact on our business, operations and financial condition will be minimal.

Impact of the Ukraine Crisis

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

In respect of the international situation in Ukraine, we have assessed the impact on us 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 consolidated financial statements.

Impact of Global Economic Conditions and Inflationary Pressures

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

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

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

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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, a research, option and license agreement with Scancell 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.

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

Our revenue for the year ending December 31, 2022 was $43.7 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.

No revenue was recognized as a result of this agreement for the year ended December 31, 2021.

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, 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 revenue for the year ending December 31, 2023 was $0.8 million (year ended December 31, 2022 $43.7 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.

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

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

Operating Expenses

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Research and Development Expenses

Since our inception, we have focused significant resources on our research and development activities, including establishing and building on our adenovirus platform, further enhancing our in-licensed ChAdOx1, ChAdOx2 and MVA vectors, developing new next-generation vector platforms, acquiring new nanoparticle based technologies, 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, VTP-850 and readying VTP-400, VTP-500, VTP-1100 and VTP-1000 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 new next generation adenoviral vector, acquiring new technology platforms including SNAP (SNAP-TI and SNAP-CI), 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 and VTP-1000 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 under agreements with third parties, such as contract manufacturing organizations, consultants and contractors;

• laboratory costs;

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General and Administrative Expenses

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

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

For the year ended December 31, 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 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.

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

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 used in the valuation model of the contingent consideration.

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 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.

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

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

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

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 carried 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

Interest income results primarily from the interest earned on our short-term cash deposits and cash balances held by Vaccitech (UK) Limited in United States dollars and pounds sterling.

Interest income results primarily from the interest earned on our short-term cash deposits and cash balances held by Barinthus Biotherapeutics (UK) Limited in United States dollars and pounds sterling.

Interest Expense

Interest expense results primarily from the asset retirement obligation provision discounted over the length of the lease in respect of our headquarters.

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.

The Company benefits from the United Kingdom research and development tax credit regime, being the Small and Medium-sized Enterprises R&D tax relief program, or SME Program, and, to the extent that our projects are grant funded or relate to work subcontracted to us by third parties, the Research and Development Expenditure Credit program, or RDEC Program.

Under the SME program, the Company is able to surrender some of its trading losses that arise from qualifying research and development activities for a cash rebate of up to 33.35% of such qualifying research and development expenditure.

The Company benefits from the United Kingdom research and development tax credit regime, being the Small and Medium-sized Enterprises R&D tax relief program ("SME Program"), and, to the extent that our projects are grant funded or relate to work subcontracted to us by third parties, the Research and Development Expenditure Credit program ("RDEC Program").

Until March 2023, under the SME Program, we were able to surrender some of its trading losses that arise from qualifying research and development activities for a cash rebate of (after taking into account the enhanced rate of deduction) up to 33.35% of such qualifying research and development expenditure.

Qualifying expenditures largely comprise employment costs for research staff, consumables, outsourced contract research organization costs and utilities costs incurred as part of research projects.

Certain subcontracted qualifying research and development expenditures are eligible for a cash rebate of up

Certain staff, consumables (including utilities), subcontractors and externally provided workers qualifying research and development expenditures are eligible for a cash rebate of up to 21.67%.

A large portion of costs relating to research and development, clinical trials and manufacturing activities are eligible for inclusion within these tax credit cash rebate claims.

From the 1 st April 2023, it is expected that the SME additional deduction and credit rates will decrease, reducing the tax credit claim available for the Company.

From April 2023, under the SME Program the enhanced rate of deduction has decreased from 230% to 186%, the SME credit rate has was or has been reduced from 14.5% to 10% (except for R&D intensive SMEs, which are expected to benefit form a credit rate of 14.5%), and the SME cash rebate for us was or has been reduced from an effective rate of 33.35% to 18.6% (or 26.97% for R&D intensive SMEs) and from 21.67% to 12.1% for subcontractors.

Furthermore, the SME credit rate will decrease to 10% for expenditure incurred on or after April 1, 2023 unless the SME qualifies as an R&D intensive business, i.e., R&D expenditure constitutes at least 40% (from April 1, 2023) or 30% (from accounting periods starting on or after April 1, 2024) of total expenditure.

The Company may not be able to continue to claim research and development tax credits under the SME program in the future because it may no longer qualify as a small or medium-sized company.

In addition, the EU State Aid cap limits the total aid claimable in respect of a given project to €7.5 million which may impact the Company’s ability to claim R&D tax credits in future.

In addition, the EU State Aid cap limits the total aid claimable in respect of a given project to €7.5 million which may impact our ability to claim R&D tax credits in future.

Further, the U.K.

Finance Act of 2021 introduced a cap on payable credit claims under the SME Program in excess of £20,000 with effect from April 2021 by reference to, broadly, three times the total Pay As You Earn, or PAYE, and National Insurance Contributions, or NICs, liability of the company, subject to an exception which prevents the cap from applying.

Finance Act of 2021 introduced a cap on payable credit claims under the SME Program in excess of £20,000 with effect from April 2021 by reference to, broadly, three times the total Pay As You Earn ("PAYE"), and National Insurance Contributions ("NICs"), liability of the company, subject to an exception which prevents the cap from applying.

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.

For the year ended December 31, 2022, the R&D tax credits was further restricted by the available tax losses in the UK for the period.

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

For the year ended December 31, 2022, the R&D tax credits were further restricted by the available tax losses in the UK for the period.

There was no tax loss restriction applied to the R&D tax credits in the UK for the year ended December 31, 2023.

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 consolidated financial statements, which have been prepared in accordance with U.S.

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

On an ongoing basis, management evaluates its estimates, including those related to revenue, expenses, leases, 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.

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

On an ongoing basis, management evaluates its estimates, including those related to fair value of contingent consideration and impairment of goodwill and intangible assets.

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

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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.

Recognition of Revenue from Contracts with Customers

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

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

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

We are entitled to 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.

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

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 for the period has not been provided.

Research and Development Costs

Research and development costs are expensed as incurred.

Research and development expenses consist of costs incurred in performing research and development activities, including salaries and bonuses, share-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation, manufacturing expenses and external costs of vendors engaged to conduct preclinical development

activities and clinical trials as well as the cost of licensing technology.

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

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

Research and development costs are accrued when the related services or goods are delivered ahead of being billed.

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

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

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

Share-based Compensation

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

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

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

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

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

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

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

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

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

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

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

For performance-based awards where the vesting of the awards may be accelerated upon the achievement of certain milestones, vesting and the related share-based compensation is recognized as an expense when it is probable the milestone will be met.

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

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

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

Black-Scholes utilizes assumptions related to expected term, 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.

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 years ended December 31, 2022 and 2021, were:

Expected volatility

Expected term (years)

Risk-free interest rate

Expected dividend yield

For the years ended December 31, 2022 and 2021, 2,296,303 and 1,947,402 share options were granted, respectively.

In January and February 2023, we granted a further 1,973,529 share options with a weighted average exercise price of $2.53.

Business Combinations

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

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

In determining that the acquisition of Avidea met the criteria of a business combination we first used the “screen test” to assess whether

substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

As the “screen test” was not met, as the identifiable assets were not substantially all of the fair value of the gross assets acquired, we then applied the “framework” for determining whether the acquired assets included at minimum, an input and substantive process that together significantly contribute to the ability to create output.

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

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

We therefore determined the acquisition to meet the definition of a business combination.

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

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

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 earnings in the 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.

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

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

Impairment of Goodwill and Intangible Assets

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.

Goodwill and Purchased Intangible Assets

We assess goodwill and intangible assets for impairment at least annually, or more frequently if events or changes in circumstances indicate that the carrying amounts 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 $12.2 million recognized to December 31, 2022 wholly relates to the acquisition of Avidea on December 10, 2021.

The Company performed the annual impairment test to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

Based on this assessment, the Company has not recognized any impairment losses related to goodwill or intangible assets for the years ended December 31, 2022 and 2021.

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 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 consolidated statements of operations and comprehensive loss is recognized in order to initially record the derivative instrument at fair value.

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

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

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 21,2021 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.

The goodwill of $12.2 million and the intangible asset of $25.1 million recognized as at December 31, 2023 wholly relate to the acquisition of Avidea on December 10, 2021.

The Company performed the annual impairment assessment as of December 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 on this assessment, the Company has not recognized any impairment losses related to goodwill or intangible assets for the year ended December 31, 2023.

Contingent consideration

The Company recognizes a contingent consideration liability related to the acquisition of Avidea.

The liability is remeasured to fair value at each reporting date until the contingency is resolved.

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

Changes in fair value are recognized in general and administrative expenses in the consolidated statement of operations and comprehensive loss.

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

Changes in fair value are recognized in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Results of Operations

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ended December

Revenue from Licenses, Grants & Services

Revenue from Licenses, Grants and Services

$ 802 $ 44,703 $ (43,901)

Operating expenses:

Research & development

Research and development

44,874 42,350 2,524

General and administrative 39,842 6,394 33,448

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Other income/(expense):

Change in fair value of derivatives embedded in convertible loan notes

Unrealized exchange gain on convertible loan notes

Loss on extinguishment of convertible loan notes

Interest income 2,877 3,103 (226)

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Other income, net 1,082 567 515

Total other income/(expense)

Net income/(loss)

For the year ended December 31, 2022, our revenue primarily consisted of $43.7 million from the OUI License Agreement Amendment with respect to amounts owed to us by OUI for the commercial sales of Vaxzervria, and $0.8 million attributable to upfront fees associated with a research and license agreement with Scancell.

For the year ended December 31, 2021, our revenue consisted of $0.2 million of reimbursement of research and development expenses from BARDA and $0.1 million of license revenue from a research, collaboration and license agreement with Enara Bio.

The collaboration and license agreement with Enara Bio was terminated in 2022.

Total other income

7,392 4,891 2,501

(Loss)/profit before income tax

(76,522) 850 (77,372)

Tax benefit 3,075 4,471 (1,396)

Net (loss)/income

$ (73,447) $ 5,321 $ (78,768)

For the year ended December 31, 2023, our revenue consisted of $0.8 million from the OUI License Agreement Amendment with respect to amounts owed to us by OUI for the commercial sales of Vaxzevria.

The decrease in revenue from the OUI License Agreement Amendment, compared to the prior period, resulted from substantially declined sales of Vaxzevria in 2023.

There is no guarantee that further payments will be received pursuant to the agreement in the future and, if such payments are made, that we will be notified of such payments in a timely manner.

For the year ended December 31, 2022, our revenue primarily consisted of $43.7 million from the OUI License Agreement Amendment with respect to amounts owed to us by OUI for the commercial sales of Vaxzevria, and $0.8 million attributable to upfront fees associated with a research and license agreement with Scancell.

Research and Development Expenses

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Direct research and development expenses by program:

VTP-200 HPV $ 4,950 $ 4,050 $ 900

VTP-300 HBV 11,276 13,700 (2,424)

VTP-600 NSCLC 597 532 65

VTP-850 Prostate cancer

VTP-1000/VTP-1100 (SNAPvax candidates)

2,726 5,011 (2,285)

VTP-1000/VTP-1100 Celiac/HPV Cancer

8,420 5,118 3,302

Other and earlier stage programs 1,787 1,916 (129)

Total direct research and development expenses $ 29,756 $ 30,327 $ (571)

Internal research and development expenses:

Indirect research and development expenses:

Personnel-related (including share-based compensation) 12,702 10,424 2,278

Facility related 1,339 1,308 31

Other internal costs

Total internal research and development expenses

Other indirect costs

1,077 291 786

Total indirect research and development expenses

15,118 12,023 3,095

Total research and development expenses $ 44,874 $ 42,350 $ 2,524

Our research and development expenses for the years ended December 31, 2022 and 2021 were $42.4 million and $20.4 million, respectively, and consisted of direct and internal research and development expenses.

Our research and development expenses for the years ended December 31, 2023 and 2022 were $44.9 million and $42.4 million, respectively, and consisted of direct and indirect research and development expenses.

Direct expenses for the years ended December 31, 2023 and 2022 were $29.8 million and $30.3 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 $16.3 million increase, $7.3 million pertains to progress in VTP-300, having completed the last patient visit in the HBV001 Phase 1 clinical trial in May 2022, completing enrollment in the HBV002 Phase 2 clinical trial in May 2022, and dosing the first patient in the HBV003 Phase 2 clinical trial in October 2022.

$5.1 million of the increase pertains to the commencement of VTP-1000 Celiac disease and VTP-1100 HPV cancer programs in 2022.

$2.6 million of the increase pertains to VTP-800/850, which has progressed to FDA clearance of our IND for PCA001, a Phase 1/2 open-label clinical trial, in December 2022.

$1.0 million of the increase pertains to VTP-200, having completed enrollment into the Phase 1b/2 clinical trial, HPV001, in December 2022.

Internal research and development expenses for the years ended December 31, 2022 and 2021 were $12.0 million and $6.4 million, respectively.

Of the $5.6 million increase, $4.6 million pertains to personnel-related expenses as a result of the relative increase in headcount across locations in the United Kingdom and United States, including those individuals that joined the Company through the acquisition of Avidea in December 2021.

Facility related costs increased $0.9 million primarily due to the relocation of the Company headquarters in the third quarter of 2022, and the U.S.

facility expenses being incurred for the full year following the Avidea acquisition in December 2021.

Of the $0.6 million decrease, a $2.4 million decrease pertains to VTP-300 as a result of completing the HBV002 Phase 2 clinical trial with final data that was presented at the EASL Congress in June 2023, and continuing enrollment in the HBV003 Phase 2b clinical trial and the AB-729-202 Phase 2a clinical collaboration with Arbutus.

A $2.3 million decrease pertains to VTP-850 which is currently enrolling PCA001, a Phase 1/2 open-label clinical trial, compared to the prior year which was a result of manufacturing spend.

These decreases were partially offset by a $3.3 million increase in SNAP candidates, namely in VTP-1000 Celiac disease program costs which increased as the program progresses to regulatory submissions and towards the clinic.

Indirect research and development expenses for the years ended December 31, 2023 and 2022 were $15.1 million and $12.0 million, respectively.

Of the $3.1 million increase, $2.3 million pertains to personnel-related expenses as a result of an increase in headcount across locations in the United Kingdom and United States and $0.8 million increase relates to other indirect cost mainly due to overhead allocations from the new U.S.

laboratory and office facility that we relocated to in June 2023.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2022 were $6.4 million, which were mainly attributable to personnel expenses of $16.8 million, including the share-based compensation charge of $7.2 million, due to an increase in headcount, insurance cost of $6.2 million, legal and professional fees of $4.3 million, and other general and administrative expenses, offset by un unrealized foreign exchange gain on the revaluation of cash balances of $26.4 million, resulting from the fluctuations between the United States dollar and pound sterling exchange rates.

For the year ended December 31, 2021, general and administrative expenses were $25.1 million, which were mainly attributable to personnel expenses of $20.4 million, including the share-based compensation charge of $14.2 million, insurance costs of $4.8 million and legal and professional fees of $2.9 million, netted by unrealized foreign exchange gain on cash balances of $6.0 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 year ended December 31, 2022, there were no outstanding convertible loan notes.

For the year ended December 31, 2021, we recognized a gain of $6.0 million in relation to the conversion and redemption features embedded in the convertible loan notes.

Loss on extinguishment of convertible loan notes

There was no loss on extinguishment of convertible loan notes for the year ended December 31, 2022, as there were no outstanding loan notes in the year.

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

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

General and administrative expenses for the years ended December 31, 2023 and 2022 were $39.8 million and $6.4 million, respectively.

The increase of $33.4 million relates primarily to a change in foreign exchange gains and losses of $33.8 million from a gain of $26.0 million for the year ended December 31, 2022 to a loss of $7.8 million for the year ended December 31, 2023.

Interest Income

For the years ended December 31, 2022 and 2021, interest income was $3.1 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 and pound sterling.

For the years ended December 31, 2023 and 2022, interest income was $2.9 million and $3.1 million respectively, which primarily resulted from the interest earned on our short-term cash deposits and cash balances held by Barinthus Biotherapeutics (UK) Limited in United States dollars and pound sterling.

Interest Expense

For the years ended December 31, 2022, interest expense was $0.02 million which mainly relates to dilapidation provision discounted over the length of the lease in respect of the Company headquarters, and $0.003 million interest paid on the debt recognized on the acquisition of Avidea, which was repaid in full in the first quarter of 2022.

For the year ended December 31, 2021 interest expense was $2.7 million which primarily related to our convertible loan notes, which carried a market rate of interest.

For the year ended December 31, 2023, interest expense was $0.03 million which related to an asset retirement obligation provision discounted over the length of the lease term in respect of the laboratory and office facilities in the United Kingdom and the United States.

For the year ended December 31, 2022 interest expense was $0.02 million which related to an asset retirement obligation provision discounted over the length of the lease in respect of our headquarters in the United Kingdom, and $0.003 million interest paid on the debt recognized on the acquisition of Avidea, which was repaid in full in the first quarter of 2022.

Research and Development Incentives

For the years ended December 31, 2022 and 2021, we accrued research and development incentives of $1.2 million and $4.0 million respectively, with the decrease attributable to a reduction in losses available to surrender for the receipt of the research and development incentives in Vaccitech (UK) Limited , due to amounts payable to the Company from the commercial sales of Vaxzevria.

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

For the years ended December 31, 2023 and 2022, we accrued research and development incentives of $3.5 million and $1.2 million respectively, with the increase mainly attributable to an increase in losses available to surrender for the receipt of research and development incentives in Barinthus Biotherapeutics (UK) Limited due to a reduction in revenue received from commercial sales of Vaxzevria.

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

We account for such relief received as other income.

For the years ended December 31, 2022 and 2021, the tax benefit was $4.5 million and $0.03 million respectively, which primarily relates to movements in deferred tax resulting from the deferred tax liability recognised in respect of the acquired intangible asset.

For the years ended December 31, 2023 and 2022, the tax benefit was $3.1 million and $4.5 million respectively, which primarily relates to movements in deferred tax resulting from the deferred tax liability recognized in respect of the acquired intangible asset.

Liquidity and Capital Resources

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Key financing and corporate milestones include the following:

● In March 2016, we raised gross proceeds of approximately $14.0 million from the issuance of our seed round of ordinary shares.

● Between November 2017 and December 2018, we raised gross proceeds of $33.9 million from the issuance of our Series A Shares.

• Between July 2020 and November 2020, we raised gross proceeds of $41.2 million from the issuance of convertible loan notes.

• In March 2021, we raised gross proceeds of $125.2 million from the issuance of our Series B shares.

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

● In 2022, we received $38.2 million of cash from OUI for the commercial sales of Vaxzevria.

● In December 2022, we raised gross proceeds of $0.7 million from the issuance of shares represented by ADSs through “at-the-market” offerings under the sales agreement with Jefferies LLC.

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.

• In May 2021, we raised gross proceeds of $110.5 million from the IPO of our ordinary shares on NASDAQ.

• Between April 2022 and December 2023, we received $44.5 million of cash from OUI for the commercial sales of Vaxzevria.

• Between December 2022 and December 2023, we raised net proceeds of $3.0 million from the issuance of shares represented by ADSs through “at-the-market” offerings under the sales agreement with Jefferies LLC.

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

The Shelf was declared effective on August 17, 2022.

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

As of December 31, 2022, we sold 307,139 ordinary shares represented by ADSs under the sales agreement, amounting to gross proceeds of $0.7 million.

As of December 31, 2023, we have sold 1,139,444 ordinary shares represented by ADSs under the sales agreement, amounting to net proceeds of $3.0 million.

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

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

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

In most periods, we have incurred operating losses as a result of ongoing efforts to develop our novel T cell immunotherapeutic candidates, including conducting ongoing research and development, preclinical studies, clinical trials, providing general and administrative support for these operations and developing our intellectual property portfolio.

We expect to continue to

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

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

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Effect of exchange rates on cash and cash equivalents 2,171 187

Net (decrease)/increase in cash and cash equivalents

Net decrease in cash and cash equivalents

$ (52,295) $ (19,669)

Cash Used in Operating Activities

During the year ended December 31, 2023, net cash used in operating activities was $50.9 million, primarily resulting from our net loss of $73.4 million, adjusted by foreign exchange loss on translation of $7.5 million, share based compensation of $5.1 million, depreciation and amortization of $5.4 million, deferred tax benefit of $3.1 million and changes in our operating assets and liabilities, net decrease of $6.2 million primarily related to a $5.8 million decrease in accounts receivable, a $2.2 million decrease in prepaid expenses and other current assets, a $3.4 million decrease in accounts payable and a $2.0 million increase in accrued expenses.

During the year ended December 31, 2022, net cash used in operating activities was $14.4 million, primarily resulting from our net income of $5.3 million, adjusted by foreign exchange gain on translation of $24.8 million, share-based compensation of $9.9 million, depreciation and amortization of $4.3 million, and changes in our operating assets and liabilities, net of $5.5 million primarily resulting from the OUI receivable, and an increase in prepaid expense due to the payment of annual insurance premiums that occurred in the second quarter of 2022.

During the year ended December 31, 2021, net cash used in operating activities was $32.6 million, primarily resulting from our net loss of $51.1 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 $16.5 million, non-cash interest expense of $0.8 million, depreciation and amortization of $0.6 million, foreign exchange gain on convertible loan notes of $0.2 million and changes in our operating assets and liabilities, net of $7.0 million.

Net Cash Used in Investing Activities

During the year ended December 31, 2023, cash used in investing activities was $5.4 million primarily resulted from capital expenditures related to leasehold improvements on our new office in Germantown, Maryland, United States.

During the year ended December 31, 2022, cash used in investing activities was $5.8 million, primarily resulted from capital expenditures related to our new headquarters in Harwell, United Kingdom.

During the year ended December 31, 2021, cash used in investing activities was $12.9 million, including $11.8 million which was related to the acquisition of Avidea, and $1.1 million related to capital expenditures.

Net Cash Provided by Financing Activities

During the year ended December 31, 2022, cash provided by financing activities was $0.3 million resulting from $0.5 million net proceeds from the issuance ordinary shares through the “at-the-market” sales agreement, offset by $0.2 million repayment of debt incurred previously by the acquired company Avidea (acquired on December 10, 2021, that subsequently became Vaccitech North America, Inc.).

During the year ended December 3l, 2021, cash provided by financing activities was $222.7 million consisting of $121.8 million of net proceeds from the issuance of Series B shares, $102.8 million of net proceeds from the IPO after offering costs of $2.2 million and $0.3 million of capital contributions from non-controlling interest.

During the year ended December 31, 2023, cash provided by financing activities was $1.9 million primarily resulting from the issuance of ordinary shares in the form of ADSs through the “at-the-market” sales agreement with Jefferies LLC.

During the year ended December 31, 2022, cash provided by financing activities was $0.3 million resulting from $0.5 million from the issuance ordinary shares through the “at-the-market” sales agreement with Jefferies LLC, offset by $0.2 million repayment of debt incurred previously by the acquired company Avidea (acquired on December 10, 2021, that subsequently became Barinthus North America, Inc.).

Effect of exchange rates on cash and cash equivalents

During the year ended December 31, 2022 and 2021, the effect of foreign exchange on cash and cash equivalents was a $0.2 million gain and $6.5 million loss respectively, primarily as a result of fluctuations between the United States dollar and pound sterling exchange rates.

During the years ended December 31, 2023 and 2022, the effect of foreign exchange on cash and cash equivalents was a $2.2 million gain and $0.2 million gain 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 were profitable in 2022 but continue to maintain negative operating cash flows.

We were profitable in 2022, however we have negative operating cash flows for the period ending December 31, 2023.

As of December 31, 2023, we had an accumulated deficit of $176.6 million.

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The size of our future net losses will depend on the rate of future growth of our expenses combined with our ability to generate revenue.

Our prior losses and expected future losses have had and will continue to have an adverse effect on our shareholders’ equity and working capital unless and until eliminated by revenue growth.

Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital unless and until eliminated by revenue growth.

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 such as SNAPvax, 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 SNAP-TI and SNAP-CI, 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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• the timing of, success achieved and the costs involved in obtaining regulatory and marketing approvals and developing our ability to establish license or sale transactions and/or sales and marketing capabilities, if any, for our current and future product candidates if clinical trials and approval processes are successful;

● the success of our collaborations with CanSino, CRUK and the Ludwig Institute and any future collaboration partners;

● the success of OUI’s licensed product candidate with AstraZeneca;

• the success of our collaborations with CEPI, CanSino, CRUK and the Ludwig Institute and any future collaboration partners;

• our ability to establish and maintain collaborations, strategic licensing or other arrangements and the financial terms of such agreements;

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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.

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Lease, Purchase, and Other Obligations

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

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

The details of these leases are disclosed in Item 2.

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These contracts are generally cancellable by us upon prior notice.

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

Payments due upon

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

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

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Emerging Growth Company Status

We are an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act.

We are an emerging growth company under the JOBS Act.

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

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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-K

Item 7. Management’s Discussion and Analysis