You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes for the year ended December 31, 2020 included in our final prospectus for our initial public offering filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the Securities and Exchange Commission, on April 30, 2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties and assumptions. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those set forth in our final prospectus for our initial public offering filed pursuant to Rule 424(b), as supplemented by our subsequent filings with the SEC.

Overview

We are a clinical-stage biopharmaceutical company engaged in the discovery and development of novel immunotherapeutics and vaccines for the treatment and prevention of infectious diseases and cancer. We use our proprietary platform to develop product candidates that stimulate powerful, targeted immune responses against pathogens and tumor cells. We design our 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. 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 and cancer, 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. Our current prophylactic programs include VTP-400 for the prevention of herpes zoster, or shingles, VTP-500 for the prevention of Middle East respiratory syndrome, or MERS, and VTP-950, our next-generation product candidate for the prevention of COVID-19 infection. In addition, we co-invented a COVID-19 vaccine candidate with the University of Oxford, which we assigned to Oxford University Innovation, or OUI, to facilitate the license of those rights by OUI to AstraZeneca UK Limited, or AstraZeneca. The product candidate, which we refer to as AZD1222, is now authorized for use under the name Vaxzevria in a number of countries. As of August 12, 2021, AstraZeneca has announced that AZD1222 has been granted emergency use authorization in the United Kingdom, India and Japan, among other countries. AstraZeneca has exclusive worldwide rights to develop and commercialize AZD1222.

On May 4, 2021, we completed our initial public offering, or IPO, pursuant to which we issued and sold 6,500,000 ADSs at a public offering price of $17.00 per ADS, resulting in net proceeds of $102.8 million, after deducting underwriting discounts and commissions and offering expenses. Prior to our IPO, we funded our operations primarily from private placements of our ordinary and preferred shares, private placements of loan notes convertible into ordinary shares, as well as from grants and licensing agreements, research tax credit payments, investments from non-controlling interest a $2.4 million upfront payment from OUI in July 2020 in connection with the Amendment, Assignment and Revenue Share Agreement, or the OUI License Agreement Amendment, related to the licensing of the COVID-19 vaccine candidate now known as AZD1222, or Vaxzevria. We do not expect to generate revenue from any of our own product candidates until we obtain regulatory authorization for one or more of such product candidates, if at all, and commercialize our products, or we enter into out-licensing agreements with third parties. We may receive some revenue pursuant to the OUI License Agreement Amendment with OUI with respect to the AstraZeneca COVID-19 vaccine candidate AZD1222 in certain circumstances if it receives marketing approval from regulatory authorities and is sold commercially. Substantially all of our net losses have resulted from costs incurred in connection with our research and development activities and from general and administrative costs associated with our operations.



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We have incurred net losses each year since inception. For the three and six months ended June 30, 2021, we incurred net losses of $16.0 million and $31.4 million, respectively. For the three and six months ended June 30, 2020, we incurred net losses of $3.7 million and $7.6 million, respectively. As of June 30, 2021, we had an accumulated deficit of $88.9 million and we do not expect positive cash flows from operations in the foreseeable future. We expect to continue to incur net operating losses for at least the next several years as we advance our product candidates through clinical development, seek regulatory approval, prepare for approval, and in some cases proceed to commercialization of our product candidates, as well as continue our research and development efforts and invest to establish a commercial manufacturing facility, as and when appropriate.

At this time, we cannot reasonably estimate, or know the nature, timing and estimated costs of all of the efforts that will be necessary to complete the development of any of our product candidates that we develop through our programs. We are also unable to predict when, if ever, material net cash inflows will commence from sales of product candidates we develop, if at all. This is due to the numerous risks and uncertainties associated with developing product candidates to approval and commercialization, including the uncertainty of:

? successful completion of preclinical studies and clinical trials;

? 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;

? successful enrollment and completion of clinical trials;

data from our clinical program supporting approvable and commercially

? acceptable risk/benefit profiles for our product candidates in the intended

populations;

receipt and maintenance of necessary regulatory and marketing approvals from

? applicable regulatory authorities, in the light of the commercial environment

then existent;

? scale-up of our manufacturing processes and formulation of our product

candidates for later stages of development and commercial production;

establishing either our own manufacturing capabilities or satisfactory

? agreements with third-party manufacturers for clinical supply for later stages

of development and commercial manufacturing;

? entry into collaborations where appropriate to further the development of our

product candidates;

obtaining and maintaining intellectual property and trade secret protection or

? regulatory exclusivity for our product candidates as well as qualifying for,

maintaining, enforcing and defending such intellectual property rights and

claims;

? successfully launching or assisting with the launch of commercial sales of our

product candidates following approval;

? acceptance of each product's benefits and uses by patients, the medical

community and third-party payors following approval;

? the prevalence and severity of any adverse events experienced with our product

candidates in development;

? establishing and maintaining a continued acceptable safety profile of

the product candidates following approval;

? obtaining and maintaining healthcare coverage and adequate reimbursement from

third-party payors if necessary or desirable; and

? effectively competing with other therapies.




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A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and/or timing associated with the development of that product candidate or could prevent continuation of that program being in the company's interests. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we might be required to expend significant additional financial resources and time on the completion of clinical development. In some circumstances, such as the emergence of a significantly more effective therapy from a competitor, it may be appropriate to discontinue a product candidate program. Including the net proceeds from our IPO, we expect that our cash balance as of June 30, 2021 will enable us to fund our operating expenses and capital requirements into 2024.

Recent Developments

On July 6, 2021 we announced that we entered into a clinical trial collaboration agreement with Arbutus Biopharma Corporation ("Arbutus") to evaluate an innovative therapeutic combination for the treatment of subjects with chronic hepatitis B virus (HBV) infection (CHB) who are already receiving standard-of-care nucleos(t)ide reverse transcriptase inhibitor (NrtI) therapy. The multi-center, Phase 2a clinical trial will evaluate the safety, pharmacokinetics, immunogenicity, and antiviral activity of Arbutus's proprietary GalNAc delivered RNAi therapeutic, AB-729, followed by our proprietary immunotherapeutic, VTP-300, in NrtI-suppressed subjects with CHB. The Phase 2a clinical trial is expected to initiate in the first half of 2022 and will be managed by Arbutus, subject to oversight by a joint development committee composed of representatives from both companies. The parties retain full rights to their respective product candidates and will split all costs associated with the clinical trial. Pursuant to the agreement, the parties intend to undertake a larger Phase 2b clinical trial depending on the results of the initial Phase 2a clinical trial.

Despite challenges related to COVID-19 pandemic, the lead-in phase of HPV001, a Phase 1/2 clinical trial of VTP-200, is now fully enrolled with 12 participants screened and 9 dosed across multiple clinical trial sites in Belgium and the United Kingdom. The main phase has been opened to dosing as of July 22, 2021 and we are working to open all remaining clinical trial sites.

Impact of the COVID-19 Pandemic

The spread of COVID-19, which we refer to as the COVID-19 pandemic, and the policies and regulations implemented by governments in response to the COVID-19 pandemic have had a significant impact, both directly and indirectly, on the global economy and our business and operations, including in particular the interruption of our clinical trial activities and potential interruption to our supply chain. Namely, the initiation of our Phase 1/2a clinical trial for VTP-200 and our Phase 1 clinical trial for VTP-500, which are being conducted at the University of Oxford sites, were delayed and paused, respectively due to COVID-19. For our Phase 1/2a clinical trial for VTP-200, participant recruitment is delayed by approximately 3 months. Sites are affected in both the UK and Belgium. In the UK, the availability of resources to support set up of trials not related to COVID-19 has been low but recently has showed some signs of easing. Other pandemic related issues affecting recruitment include the mass vaccination programs and the adverse publicity early in the second quarter of 2021 specifically around Vaxzevria. The VTP-200 protocol had to be amended so that participants who have previously received Vaxzevria (or any other adenovirus-based vaccine) wait for a minimum of 3 months between their last adenovirus vaccine and injection with our immunotherapeutic product to prevent prior vector immunity affecting the study.

For our Phase 1 (HBV001) clinical trial for VTP-300, recruitment of patients with Chronic Hepatitis B (CHB) in the UK has been challenging, due to COVID-19 lockdowns. Recruitment is estimated to be completed by the end of the third quarter of 2021 and results of the study are expected to be available in the fourth quarter of 2021. For our Phase 1b/2a (HBV002) clinical trial for VTP-300, CHB patient recruitment continues with delays in Taiwan due to a recent COVID-19 lockdown in the country. Patient recruitment has also been delayed in South Korea due to the roll out of Vaxzevria vaccine. Patient recruitment is estimated to be completed toward the end of the third quarter or the beginning of the fourth quarter of 2021 and with interim data from all patients expected toward the beginning of the first quarter of 2022.



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If the disruption due to the COVID-19 pandemic continues, our planned future preclinical and clinical development for our other product candidates could also be delayed due to government orders and site policies as a result of the pandemic. The pandemic and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the spread of COVID-19, we have mandated that our non-laboratory based employees, such as clinical, manufacturing, finance, administrative, quality, regulatory and program managers continue their work outside of our offices and limited the number of staff in any given research and development laboratory at any time. Our increased reliance on personnel working from home may negatively impact productivity, increase the potential risks of data privacy or security breaches, or disrupt, delay, or otherwise adversely impact our business.

We are still assessing our business plans and the impact the COVID-19 pandemic may have on our ability to advance the development of our product candidates as a result of adverse impacts on the research sites, service providers, vendors, or suppliers on whom we rely, or to raise financing to support the development of our ongoing product candidate development. No assurances can be given that this analysis will enable us to avoid part or all of any impact from the COVID-19 pandemic, including downturns in business sentiment generally or in our sector in particular. 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.

Components of Our Operating Results

Revenue

To date, we have not generated any revenue from product sales and do not expect to do so in the near future, if at all. Our revenue to date has been derived from a research grant from BARDA, a research, collaboration and license agreement with Enara Bio and the OUI License Agreement Amendment with OUI relating to AZD1222.

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 have recognized $2.4 million as revenue during the year ended December 31, 2020.

We determined that we have no further performance obligations under the terms of the OUI License Agreement Amendment, which comprised the transfer of intellectual property rights only. Accordingly, we plan to recognize these and any future amounts as revenue when received.

Operating Expenses

Our operating expenses since inception have consisted of research and development costs and general 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 and VTP-300, and readying VTP-600 and VTP-850 for clinical trials. Research and development activities account for the major portion of our operating expenses. Research and development costs are expensed as incurred. These costs include:

? salaries, benefits and other related costs, including share-based compensation,

for personnel engaged in research and development functions;




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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;

? laboratory costs;

? leased facility costs, equipment depreciation and other expenses, which include

direct and allocated expenses; and

? intellectual property costs incurred in connection with filing and prosecuting

patent applications as well as third-party license fees.

General and Administrative Expenses

Our general and administrative expenses consist primarily of personnel costs 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 and other central non-research costs. We expect our general and administrative expenses to continue to increase in the future as we expand our operating activities and potentially prepare for manufacturing and/or commercialization of our current and future product candidates. 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.

Other Income (Expense)

Change in Fair Value of Derivatives

We recognized a change in fair value in relation to the conversion and redemption features embedded in the convertible loan notes in the condensed consolidated statements of operations and comprehensive loss for the six months ended June 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 $125,239 thousand. 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 was recognized at the settlement-date fair value of the Series B shares and a loss was recognized in earnings for the difference between (1) the fair value of those shares and (2) the sum of the carrying amounts of the convertible loan notes and the bifurcated conversion and redemption feature liability.

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.



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Research and Development Incentives

Research and development incentives contain payments we received from the United Kingdom and Australian governments related to corporation tax relief on research and development projects incentive programs in the United Kingdom and Australia. We account for such relief received as other income.

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 expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to accruals for external manufacturing of clinical trial material as well as clinical study conduct, fair value of assets and liabilities, and the fair value of ordinary shares and share-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

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

Results of Operations

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



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


                                                        Three               Three
                                                        months              months
                                                    ended June 30,      ended June 30,
                                                         2021                2020           Change
Revenue from Licenses, Grants & Services           $             35    $            511       (476)
Operating expenses:
Research & development                                        4,509               3,877         672
General and administrative                                   12,371                 970      12,033
Total operating expenses                                     16,880               4,847      11,451
Loss from operations                                       (16,845)             (4,336)    (12,509)
Other income (expense)
Research and development incentives                             875                 679         196
Other                                                           (3)                   -         (3)
Total other (expense) income                                    872                 679         193
Tax (expense)/benefit                                          (12)                   -        (12)
Net loss                                           $       (15,985)    $        (3,657)    (12,328)




Revenue

For the three months ended June 30, 2021, our revenue consisted of service revenue from a research, collaboration and license agreement with Enara Bio. For the three months ended June 30, 2020, our revenue primarily consisted of $0.3 million of reimbursement of research and development expenses from BARDA and $0.1 million of service revenue from a research, collaboration and license agreement with Enara Bio.



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Research and Development Expenses

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




                                                        Three               Three
                                                        months              months
                                                     ended June 30,     ended June 30,
                                                          2021                2020          Change
Direct research and development expenses by
program:
VTP-200 HPV                                                      728                785        (57)
VTP-300 HBV                                                    1,391              1,006         385
VTP-600 NSCLC                                                    171                281       (110)
VTP-800/850 Prostate cancer                                      335                  -         335
Other and earlier stage programs                                 295                745       (450)
Internal research and development expenses:
Personnel-related (including share-based
compensation)                                                  1,472                766         706
Facility related                                                  43                 53        (10)
Other internal costs                                              67                240       (173)
Total research and development expense             $           4,509    $         3,877         632




Our research and development expenses for the three months ended June 30, 2021 and for the three months ended June 30, 2020 were $4.5 million and $3.9 million, respectively. Personnel-related expenses were $1.5 million and $0.8 million, respectively, as a result of the relative increase in our headcount across both the UK and US. Direct expenses for outside services and consultants and laboratory materials were $2.9 million for the three months ended June 30, 2021 and $2.8 million for the three months ended June 30, 2020 and mainly comprised of costs for clinical trials, manufacturing of clinical trial materials, as well as costs for external preclinical services and sample testing.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2021 were $12.4 million, which were mainly attributable to personnel expenses of $8.4 million, including the share-based payment charge, and insurance costs of $1.2 million. The share-based payment charge includes a one-off expense relating to the RSUs that vested upon the successful completion of our IPO. For the three months ended June 30, 2020, general and administrative expenses were $1.0 million, including personnel expenses of $0.7 million, and professional fees and consulting fees of $0.3 million. General and administrative expenses for the two periods included foreign exchange gains and losses on our cash balances.

Research and Development Incentives

For the three months ended June 30, 2021 and the three months ended June 30, 2020, we accrued research and development incentives of $0.9 million and $0.7 million, respectively. Such research and development incentives relate to corporation tax relief on research and development projects incentive programs in the United Kingdom and Australia. We account for such relief received as other income.



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Comparison of the Six Months Ended June 30, 2021 and June 30, 2020



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


                                                       Six months       Six months
                                                       ended June       ended June
                                                         30, 2021        30, 2020       Change
Revenue from Licenses, Grants & Services Operating
expenses:                                             $         250    $      1,216       (966)
Research & development                                        9,119           8,119       1,000
General and administrative                                   14,148           2,082      12,066
Total operating expenses                                     23,267          10,201      13,066
Loss from operations                                       (23,017)         (8,985)    (14,032)
Other income (expense)
Change in fair value of derivatives                           5,994               -       5,994
Unrealized exchange gain on convertible loan notes              209               -         209
Loss on extinguishment of convertible loan notes           (13,789)               -    (13,789)
Interest income                                                   2               -           2
Interest expense                                            (2,650)               -     (2,650)
Research and development incentives                           1,830           1,377         453
Others                                                          (3)               -         (3)
Total other (expenses) income                               (8,407)           1,377     (9,783)
Tax benefit                                                      53               -          53
Net loss                                              $    (31,195)    $    (7,608)    (23,587)




Revenue

For the six months ended June 30, 2021, our revenue primarily consisted of $0.2 million of reimbursement of research and development expenses from BARDA and $0.04 million of service revenue from a research, collaboration and license agreement with Enara Bio. For the six months ended June 30, 2020, our revenue primarily consisted of $0.9 million of reimbursement of research and development expenses from BARDA and $0.3 million of service revenue from a research, collaboration and license agreement with Enara Bio.

Research and Development Expenses

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




                                                           Six months       Six months
                                                           ended June       ended June
                                                             30, 2021        30, 2020      Change

Direct research and development expenses by program: VTP-200 HPV

                                                       1,406           1,621      (215)
VTP-300 HBV                                                       3,077           1,821      1,256
VTP-600 NSCLC                                                       585             891      (306)
VTP-800/850 Prostate cancer                                         708               -        708
Other and earlier stage programs                                    733           1,671      (938)
Internal research and development expenses:
Personnel-related (including share-based compensation)            2,445           1,649        796
Facility related                                                     86             112       (26)
Other internal costs                                                 78             354      (276)
Total research and development expense                    $       9,119    $      8,119      1,000




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Our research and development expenses for the six months ended June 30, 2021 and for the six months ended June 30, 2020 were $9.1 million and $8.1 million, respectively. Personnel-related expenses were $2.4 million and $1.6 million, respectively, as result of the relative increase in our headcount across both the UK and US. Direct expenses for outside services and consultants and laboratory materials were $6.5 million for the six months ended June 30, 2021 and $6.0 million for the six months ended June 30, 2020 and mainly comprised of costs for clinical trials, manufacturing of clinical trial materials, as well as costs for external preclinical services and sample testing.

General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2021 were $14.1 million, which were mainly attributable to personnel expenses of $9.6 million, including the share-based payment charge, and insurance costs of $1.2 million. The share-based payment charge includes a one-off expense relating to the RSUs that vested upon the successful completion of our IPO. For the six months ended June 30, 2020, general and administrative expenses were $2.1 million, including personnel expenses of $1.5 million, and professional fees and consulting fees of $0.6 million. General and administrative expenses for the two periods included foreign exchange gains and losses on our cash balances.

Change in fair value of derivatives

For the six months ended June 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.

Loss on extinguishment of convertible loan notes

For the six months ended June 31, 2021, we recognized a loss of $13.8 million related to conversion of convertible loan notes into 12,421 Series B preferred shares. The loss is a difference between (1) the fair value of those shares ($53.7 million) and (2) the sum of the carrying amounts of the convertible loan notes ($25.6 million) and the bifurcated conversion and redemption feature liability ($14.4 million).

Interest Expense

For the six months ended June 30, 2021, interest expense was $2.7 million, which primarily relate to our convertible loan notes, which carry a market rate of interest. Interest expense was nil for the six months ended June 30, 2020.

Research and Development Incentives

For the six months ended June 30, 2021 and the six months ended June 30, 2020, we accrued research and development incentives of $1.8 million and $1.4 million, respectively. Such research and development incentives relate to corporation tax relief on research and development projects incentive programs in the United Kingdom and Australia. We account for such relief received as other income.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have funded our operations primarily through private and public placements of our ordinary and preferred shares as well as from grants and research incentives, various agreements with public funding agencies, and most recently from an upfront payment from OUI in connection with the OUI License Agreement Amendment and the issuance of convertible loan notes. Through June 30, 2021, we had received gross proceeds of approximately $324.8 million from the issuance of our ordinary and preferred shares and convertible loan notes. As of June 30, 2021, we had cash and cash equivalents of $243.6 million. 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.




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? 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.

We do not expect positive cash flows from operations in the foreseeable future, if at all. Historically, we have incurred operating losses as a result of ongoing efforts to develop our heterologous ChAdOx1-MVA prime-boost immunotherapy platform and our product candidates, including conducting ongoing research and development, preclinical studies, clinical trials, providing general and administrative support for these operations and developing our intellectual property portfolio. We expect to continue to incur net operating losses for at least the next few years as we progress clinical development, seek regulatory approval, prepare for and, if approved, proceed to manufacture and commercialization of our most advanced product candidates. Operating profits may arrive earlier if programs are licensed or sold to third parties before final approval, but this cannot be guaranteed.

Cash Flows

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




                                                           Six months       Six months
                                                            ended June      ended June
                                                             30, 2021         30, 2020
Net cash used in operating activities                     $    (22,593)    $     (5,271)
Net cash used in investing activities                             (594)             (68)
Net cash provided by financing activities                       224,120                -
Effect of exchange rates on cash and cash equivalents             (580)            (817)

Net increase (decrease) in cash and cash equivalents $ 200,353 (6,156)

Cash Used in Operating Activities

During the six months ended June 30, 2021, net cash used in operating activities was $22.6 million, primarily resulting from our net loss of $31.4 million, adjusted by fair value gain on embedded derivatives of $6.0 million, loss on conversion of convertible loan notes of $13.8 million, share based compensation of $9.5 million, depreciation and amortization of $0.2 million and changes in our operating assets and liabilities, net of $9.3 million. During the six months ended June 30, 2020, net cash used in operating activities was $5.3 million, primarily resulting from our net loss of $7.6 million, adjusted by share based compensation of $1.3 million, and changes in our operating assets and liabilities, net of $1.0 million.

Net Cash Used in Investing Activities

During the six months ended June 30, 2021 and the six months ended June 30, 2020, cash used in investing activities was $0.6 million and $0.07 million, respectively, which resulted from capital expenditures in connection with new labs, improvements to expand our laboratory space and purchases of property and equipment.

Net Cash Provided by Financing Activities

During the six months ended June 30, 2021, cash provided by financing activities was $224.1 million consisting of $121.8 million of net proceeds from the issuance of Series B shares and $102.8 million of net proceeds from our initial public offering. During the six months ended June 30, 2020, cash provided by financing activities was nil.





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Future Funding Requirements

To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, undertaking preclinical studies and conducting clinical trials of our product candidates. As a result, we are not yet profitable and have incurred losses in each period since our inception in 2016. As of June 30, 2021, we had an accumulated deficit of $88.9 million. We expect to continue to incur significant losses for the foreseeable future. We anticipate that our expenses will increase substantially as we:

? pursue the clinical and preclinical development of our current product

candidates;

? use our technologies to advance additional product candidates into preclinical

and clinical development;

? seek marketing authorizations for product candidates that successfully complete

clinical trials, if any;

? attract, hire and retain additional clinical, regulatory, quality control and

other scientific personnel;

establish our manufacturing capabilities through third parties or by ourselves ? and scale-up manufacturing to provide adequate supply for clinical trials and

commercialization, including any manufacturing finishing and logistics

personnel;

expand our operational, financial and management systems and increase personnel ? appropriately, including personnel to support our manufacturing and

commercialization efforts and our operations as a public company;

? maintain, expand, enforce, and protect our intellectual property portfolio as

appropriate;

establish sales, marketing, medical affairs and distribution teams and ? infrastructure to commercialize any products for which we may obtain marketing

approval and intend to commercialize on our own or jointly;

? acquire or in-license other companies, product candidates and technologies; and

incur additional legal, accounting and other expenses in operating our ? business, including office expansion and the additional costs associated with

operating as a public company.

Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditure to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other factors that may adversely affect our business. 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.

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

Since our foundation, we have invested a significant portion of our efforts and financial resources in research and development activities for our ChAdOx1, ChAdOx2 and MVA technologies and our product candidates derived from these technologies. Preclinical studies and especially clinical trials and additional research and development activities will require substantial funds to complete. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the development of our current product candidates and programs as well as any future product candidates we may elect to pursue, as well as the gradual gaining of control over our required manufacturing capabilities and other corporate functions. These expenditures will include costs associated with conducting preclinical studies and clinical trials, obtaining regulatory approvals, and potentially in-house manufacturing and supply, as well as marketing and selling any products approved for sale. 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.



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

the scope, progress, results and costs of researching and developing our ? current and future product candidates and programs, and of conducting

preclinical studies and clinical trials;

the number and development requirements of other product candidates that we may ? pursue, and of other indications for our current product candidates that we may

pursue;

the stability, scale and yield of future manufacturing processes as we scale-up ? production and formulation of our product candidates either internally or

externally for later stages of development and commercialization;

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;

? our ability to establish and maintain collaborations, strategic licensing or

other arrangements and the financial terms of such agreements;

the cost to the company of commercialization activities for our current and ? future product candidates that we may take on, whether alone or with a

collaborator;

the costs involved in preparing, filing, prosecuting, maintaining, expanding, ? defending and enforcing patent and other intellectual property claims,

including litigation costs and the outcome of such litigation;

? the timing, receipt and amount of sales of, or royalties or other income from,

our future products, if any; and

? the emergence and success or otherwise of competing oncology and infectious

disease therapies and other market developments.

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.

Based on our research and development plans, we expect that the net proceeds from our IPO, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements into 2024. These estimates are based on assumptions that may prove to be wrong, and we could use our available capital resources more quickly than we expect.

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

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



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Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

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

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