Half-year Report

RNS Number : 0488O

Advanced Oncotherapy PLC

30 September 2019

 

ADVANCED ONCOTHERAPY PLC

("Advanced Oncotherapy" or the "Company")

Half-year Report

Advanced Oncotherapy (AIM: AVO), the developer of a next generation proton therapy system for cancer treatment, announces its unaudited results for the six months ended 30 June 2019. 

Highlights:

·     All key hardware manufactured, and technical design now validated

·     Receipt of the ISO 13485:2016 certification, the internationally recognised quality standard to ensure the consistency and the safety of the design, development, production, installation and sale of medical devices

·     Comparative studies confirming the competitive advantages of the LIGHT system in terms of cost and expected improved medical outcomes as well as its breakthrough potential for FLASH therapy

·     Additional equity and debt financing secured for a total amount of £12.3 million, including a non-dilutive, two-year secured debt facility with Credit Suisse AG for £10.0 million

·     Appointment of Moataz Karmalawy as Chief Commercial Officer and President of the US division

Post Period End Highlights:

·     Further equity and debt funding totalling £18.4 million announced in August 2019, of which the final tranche is expected to be completed in early October 2019 for an increased amount of £2.9 million taking the total fundraising quantum to c. £18.8 million

·     Structural building work at the Harley Street clinical site completed; site now ready for the fit-out phase

·     Company featured in the Global Innovation Index 2019, the 10^th edition of the Review of Accelerator Science & Technology and at the International Conference on Medical Accelerators and Particle Therapy, among others

Milestones and Outlook:

·     All remaining modules expected to be delivered to the assembly site by end of 2019

·     Resources of the Company increasingly focused on verification and validation activities, an important regulatory step for certification

·     Expanding demand for proton therapy: with 190,000 patients treated to date, the opening of the first NHS proton centre and the growing number of clinical studies (more than 230 ongoing clinical studies), the acceptance of proton therapy as a treatment of choice continues to grow rapidly

·     Pricing environment increasingly favourable towards proton therapy systems which are capable of treating patients in fewer visits through hypofractionation and FLASH, such as LIGHT

Nicolas Serandour, CEO of Advanced Oncotherapy, commented:

"We are delighted with the progress we have made over the first six months of 2019, on the technological as well as on the financial fronts.

"With the initial hardware manufacturing process and technical design now validated, we remain committed to completing the verification and validation needed to ensure the delivery of our plan. Focusing on the high energy testing of the LIGHT proton therapy system in compliance with the highest standards for safety and product performance will allow us to secure the approval of the medical device file and to make LIGHT available for first patient treatment.

"Proton therapy is currently available in only 209 treatment rooms worldwide; yet more than 9,000 additional treatment rooms are needed by 2040. This market - characterised by a highly unmet medical need - is, we believe, on the cusp of a significant inflection point which is supported by the growing support of the medical community for more efficient systems providing better medical outcomes. Now more than ever, Advanced Oncotherapy stands out as an incredibly exciting opportunity within this attractive medical segment."

Advanced Oncotherapy Plc	www.avoplc.com
Dr. Michael Sinclair, Executive Chairman	Tel: [phone]
Nicolas Serandour, CEO
Allenby Capital Limited (Nominated Adviser & Joint Broker)
Nick Athanas / Liz Kirchner / Nicholas Chambers	Tel: [phone]
Stifel Nicolaus Europe (Joint Broker)
Jonathan Senior	Tel: [phone]
Walbrook PR (Financial PR & IR)	Tel: [phone] or [e-mail]
Paul McManus	Mob: [phone]

About Advanced Oncotherapy Plc www.avoplc.com

Advanced Oncotherapy is a provider of particle therapy in the treatment of cancer, which harnesses the very best in modern technology. Advanced Oncotherapy's R&D team, ADAM, in Geneva, focuses on the development of a proprietary proton accelerator - LIGHT (Linac Image Guided Hadron Technology). LIGHT accelerates protons to the energy levels achieved in legacy machines but in a compact and truly modular unit, offering significant cost advantages. LIGHT also delivers proton beams in a way that facilitates greater precision and electronic control, which are not achievable with currently available alternative technologies.

Advanced Oncotherapy offers healthcare providers affordable systems that will enable them to treat cancer with an innovative technology, intended to offer better health outcomes and lower treatment related side effects.

Advanced Oncotherapy continually monitors the market for any emerging improvements in delivering proton or particle therapy and actively seeks working relationships with providers of these innovative technologies. Through these relationships, the Company remains the prime provider of cutting edge, cost-effective systems for particle therapy.

CHAIRMAN'S STATEMENT

I am pleased to update shareholders and to provide a review for the six months ended 30 June 2019 of the further progress the Company has made in the technical development, assembly and integration of our next-generation proton therapy system, the securing of additional financing to provide a stable platform for the completion of the regulatory clearance of the LIGHT system, and the construction of the centre in Harley Street ahead of our first installation.

Update on the manufacturing activities

The LIGHT system includes innovative linear accelerators which are integrated with a fully functional treatment room system and operated through a suite of software components. All the units composing the LIGHT system are assembled on our assembly site in the Daresbury Laboratory. Thanks to the support of all our industrial partners, we have made good progress and I am pleased to say that most of the key parts of the LIGHT system that will be installed in Harley Street have been manufactured. We are very excited about the next steps and milestones.  

The following table summarises the current manufacturing and delivery status and a guideline for upcoming milestones.

		Delivered at Daresbury (assembly site)
Components	Manufactured	As of 25 July 2019	As of 30 September 2019
Proton source	P	By end of September 2019	Delivered
RFQ	P	Already delivered	-
4 SCDTLs	P	By end of September 2019	1 delivered, 2 shipped in the week starting 30 September and 1 to be delivered in week starting 14 October 2019
13 CCLs	P	6 already delivered, 7 to be delivered by early Q4:2019	No change
Patient Positioning	P	By end of 2019	No change

  Note: RFQ: Radio Frequency Quadrupole; SCDTL: Side-Coupled Drift Tube Linac; CCL: Coupled-Cavity Linac

Update on the installation activities

Progress on the Harley street site remains on track and post period end has seen the completion of the building work and refurbishment reaching an important milestone. We will now move onto the fit-out phase where we can focus on the detailed design to support the installation of the LIGHT system.

Our ability to install our proton therapy equipment in narrow existing buildings such as the Harley Street building, without the need for significant building costs, is predicated on the nature of the LIGHT system's modular design. The LIGHT modules weigh less than 1,800 kg each, making it possible for them to be transported directly into the accelerator hall via a conventional lift. This modularity and weight offer significant cost benefits in comparison to the costs associated with the 2-3 diameter 90-tonne proton accelerators currently on the market.

The benefits of using a modular proton therapy system such as LIGHT - in terms of reduced building, transportation and installation costs - are further compounded by the much greater efficiency of the equipment. A highly efficient radiation system implies a limited loss of radiation within the building housing the equipment, hence minimising the need for expensive shielding requirements. A recent study showed that LIGHT has a transmission of more than 95%. Comparatively the transmission of a conventional cyclotron with energy degraders is less than 20% for an energy of 170MeV. This is highly relevant to address the challenges observed with the construction of buildings equipped with legacy technologies, the latter necessitating shielding walls sometimes in excess of 5 metres and doors in excess of 120 tonnes to block access to the accelerator hall.

Towards improved medical outcomes and increased patient throughput

The ability of a proton therapy equipment to enhance the damaging power of radiation on the tumour whilst avoiding the healthy surrounding tissue is subject to various criteria amongst which (i) the speed at which protons and their killing energy can cover the whole volume of the tumour, (ii) the size of the proton spots and (iii) the ability to deliver more radiation per patient's visit through hypofractionation and FLASH techniques.

LIGHT can deposit more than 200 pulses of protons with differing energy per second. In contrast, legacy systems can deliver only one to two pulses of differing energy per second. This fast energy modulation provides a major clinical breakthrough, particularly for targeting moving tumours, opening up the opportunity for treating a much wider range of cancer types, such as lung tumours.

Reducing the size of the proton spots carries significant benefits; more specifically, this allows us to deliver a more targeted therapy, which is particularly relevant when treating the edge of the tumour whilst sparing the healthy surrounding tissue. With our partner RaySearch AB, the Treatment Planning System (TPS) of LIGHT has been successfully upgraded to calculate sub-millimetre proton beam sizes, such as LIGHT is designed to produce. Calculations with the LIGHT beam, up to 5 times smaller than in existing systems, show expected improvement in conforming the radiation dose to the tumour - impactful for improving patient outcomes and hypofractionation (see below). The TPS now offers the ability to plan patient treatments in the seated position (as opposed to a lying position). This provides an essential tool to identify those patients who will benefit the most from the unique properties of the LIGHT system in comparison to conventional x-ray therapy.

The hypofractionation and FLASH techniques allow patients to be treated in fewer visits or even in one single visit in the case of FLASH - as opposed to 20 to 35 visits which are currently the norm. FLASH represents a clear shift in the treatment paradigm, given the improved convenience for patients and the increased patient throughput for clinical operators. This FLASH technique which is not yet on the market necessitates the delivery of a significantly higher dose of radiation (vs the current standards) in less than half of a second. Current studies suggest that the existing cyclotrons may offer FLASH treatment but only for a small set of deep-seated tumours. In contrast, data published by AVO scientists support the use of FLASH technique for all indicated tumours, regardless of their (deep or not) location within the body. The results of the study, "Investigation on FLASH therapy using a high frequency linac for protons" were presented at the Particle Therapy Co-Operative Group (PTCOG).    

In parallel, the performance tests for further improving the reliability of the system and hence maximising the patient throughput are being successfully performed in Geneva. These are expected to limit the down-time and improve the financial returns of clinical operators.

In this context, we are proud to report that the scientific and clinical communities have shown a continued interest in Advanced Oncotherapy's innovative, compact, modular, linear accelerator technology, which got most recently featured in the Global Innovation Index 2019, in the 10^th edition of the Review of Accelerator Science & Technology and at the International Conference on Medical Accelerators and Particle Therapy, among others. 

Update on the regulatory process

In the period the Company has gained ISO 13485:2016 certification which was awarded following an audit by Lloyd's Register, an independent compliance specialist. This is an internationally recognised quality standard to ensure consistent, design, development, production, installation and sale of medical devices are safe for their intended purposes. The certification reflects our commitment to safety and the high quality of our product performance.

With the initial hardware manufacturing process and technical design now validated, we are shifting resources towards the completion of the verification and validation, a regulatory step aimed at ensuring that the system manufactured is based on the highest specifications, a pre-requisite for regulatory clearance.

Update on the financing activities

In May 2019 we secured additional equity and debt funding totalling £12.4 million in the form of a two-year secured debt facility with Credit Suisse AG for £10.0 million alongside a direct equity subscription raising a total of £2.4 million.

The new funds have supported the continued manufacturing, integration and testing of our first LIGHT system in Daresbury, ahead of the first commercial installation at the Harley Street site.

The interest rate on the loan from Credit Suisse AG is 2% above LIBOR per annum and the loan is repayable in full in May 2021. The loan is secured against an aggregated amount of £10.5 million with Nerano Pharma acting as Third Party Pledgor having placed £10 million in a pledged account and the remaining £0.5 million placed in a pledged account by the Company

In accordance with the equity subscription, we issued 5,862,500 new ordinary shares of 25 pence each in the capital of the Company at a price of 40 pence per share. These shares were subscribed for predominantly by Swiss institutional investors and admitted to trading on AIM on 14 May 2019.

Post period-end, we have announced further equity and debt facility to fund the progression of verification and validation activity. As announced on 7 August 2019, a total of £14.4 million of equity was subscribed for by new and existing investors, alongside a loan facility of £4.0 million from Nerano Pharma. The Company is also pleased to announce that with respect to the fundraising announced on 7 August 2019, it has, following additional investor demand, raised c. £2.9 million at 40p per share as part of the final tranche of the fundraising exceeding the anticipated final tranche amount of £2.5 million (the "Subscription"). The final tranche of the Subscription is expected to complete on 7 October 2019 and a further announcement has been released by the Company today providing further details.

Senior management appointment

Moataz Karmalawy was appointed as Chief Commercial Officer and President of the US division. Prior to his appointment, Mr. Karmalawy served as General Manager of the worldwide Particle Therapy Business for Varian Medical Systems Inc., the world's largest manufacturer of radiotherapy equipment; he has been responsible for all aspects of leading the proton therapy business unit for 12 years. Prior to that, he has also served in several senior executive roles at Philips Medical for 10 years.

Bringing someone of Mr Karmalawy's calibre and experience to the Company provides us with a great opportunity as we move closer towards the next generation of proton beam technology and the commercialisation of the LIGHT system.

Financials

The Company recorded a loss of £11.2 million in the six months to 30 June 2019 (H1 2018: £11.5 million), with shareholder funds increasing to £37.4 million over the same period (H1 2018: £34.8 million).

Cash and cash equivalents at 30 June 2019 were £3.6 million (as at 30 June 2018: £3.3 million).

Outlook

We believe the we have the necessary technology to deliver a system which offers more affordable, adaptive and precise proton therapy treatment. The LIGHT system is designed to have clear advantages over current proton therapy technologies in terms both of cost and clinical effectiveness. Our ability to generate proton beams with energies required to treat superficial tumours and the key intermediary steps to achieve such result - all as per the schedule communicated 30 months ago - have been significant steps forward. The additional funding we have received has contributed to de-risking the business model and provides a better position to pursue longer-term financing options. As indicated in the directors' report of our latest annual report, the Board remains committed to maintain the pace of our manufacturing and installation activities. This will involve further funding to support our plan.

On behalf of the Board and the rest of the staff, I would like to thank our shareholders for their continued support, and I look forward to updating the market with more positive news very soon.

Dr. Michael Sinclair

Executive Chairman

30 September 2019

Consolidated statement of profit or loss and other comprehensive income	Unaudited	Unaudited	Audited
	6 months to	6 months to	year to
	30-Jun-19	30-Jun-18	31-Dec-18
Revenue	-	-	-
Cost of sales	-	-	(1,908,925)
Gross loss	-	-	(1,908,925)
Administrative expenses	(11,005,001)	(11,307,101)	(19,890,746)
Operating loss	(11,005,001)	(11,307,101)	(21,799,671)
Finance income	2,921	-	13,496
Finance costs	(588,638)	(173,239)	(80,187)
Loss on ordinary activities before taxation	(11,590,718)	(11,480,340)	(21,866,362)
Taxation	375,728	-	759,413
Loss after taxation from continuing operations	(11,214,990)	(11,480,340)	(21,106,949)
Profit/(Loss) for the period from discontinued operations	(25,122)	-	(47,794)
Loss after discontinued operations	(11,240,112)	(11,480,340)	(21,154,743)
Loss for the period
Equity of shareholders of the parent company	(11,240,112)	(11,480,340)	(21,154,743)
Non-controlling interests	-	-	-
	(11,240,112)	(11,480,340)	(21,154,743)
Other comprehensive income
Items that will not be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign operations	821,035	444,122	991,530
Total comprehensive loss for the period net of tax	(10,419,078)	(11,036,218)	(20,163,214)
Total comprehensive loss attributable to:
Equity of shareholders of the parent company	(10,419,078)	(11,036,218)	(20,158,434)
Non-controlling interests	-	-	(4,779)
	(10,419,078)	(11,036,218)	(20,163,214)

Consolidated statement of financial position		Unaudited	Unaudited	Audited
		6 months to	6 months to	Year to
		30-Jun-19	30-Jun-18	31-Dec-18
Non-current assets
Intangible assets		45,061,007	35,198,019	40,165,073
Property, plant and equipment		15,263,633	1,198,155	4,086,730
Investment property		350,000	310,000	310,000
Trade and other receivables		699,941	850,592	1,210,874
		61,374,582	37,556,766	45,772,677
Current Assets
Inventories		11,681,528	9,681,042	10,014,086
Trade and other receivables		2,414,698	1,327,881	1,964,695
Corporation tax R&D refund		685,764	2,850,000	685,764
Cash and cash equivalents		3,592,879	3,321,835	1,013,053
		18,374,869	17,180,758	13,677,598
Total assets		79,749,451	54,737,524	59,450,275
Current liabilities
Trade and other payables		(4,961,920)	(3,445,434)	(5,954,777)
Lease liabilities		(1,329,998)	-	-
Borrowings		(2,230,000)	-	(3,000,000)
		(8,521,918)	(3,445,434)	(8,954,777)
Non-current liabilities
Licence Fee Received		(16,500,000)	(16,500,000)	(16,500,000)
Lease liabilities		(7,944,167)	-	-
Borrowings		(9,348,904)	-	-
		(33,793,071)	(16,500,000)	(16,500,000)
Total liabilities		(42,314,989)	(19,945,434)	(25,454,777)
Net assets		37,434,462	34,792,090	33,995,498
Equity
Share capital		50,107,148	38,907,308	42,391,523
Share premium reserve		55,087,750	47,405,823	50,724,177
Share option reserve		8,011,287	6,100,016	7,198,580
Reverse acquisition reserve		11,038,204	11,038,204	11,038,204
Exchange movements reserve		2,272,975	545,266	1,451,939
Accumulated losses		(89,082,902)	(69,204,527)	(78,808,925)
Equity attributable to shareholders of the Parent Company		37,434,462	34,792,090	33,995,498
Total equity funds		37,434,462	34,792,090	33,995,498

Consolidated statement of changes in equity
Six months to 30 June 2019
	Share capital	Share premium reserve	Share option reserve	Reverse acquisition reserve	Loan note conversion reserve	Exchange movement reserve	Accumulated losses	Equity share holders interest	Non-Controlling interest	Total
Balance at 01 January 2018	20,233,799	43,259,389	5,743,609	11,038,204	5,650,631	460,410	(57,724,185)	28,661,858	-	28,661,858
Loss for the year	-	-	-	-	-	-	(21,149,965)	(21,149,965)	(4,779)	(21,154,744)
other comprehensive income exchange movement	-	-	-	-	-	991,531	-	991,531	-	991,531
Total comprehensive Income	-	-	-	-	-	991,531	(21,149,965)	(20,158,435)	(4,779)	(20,163,214)
Shares Issued in the period	17,448,866	7,473,151	760,031	-	-	-	-	25,682,048	-	25,682,048
Expenses deducted from share premium	-	(950,135)	-	-	-	-	-	(950,135)	-	(950,135)
Lapsed and cancelled options	-	-	(34,497)	-	-	-	34,497	-	-	-
Lapsed and cancelled warrants	-	-	(35,506)	-	-	-	35,506	-	-	-
Conversion of loan notes	4,708,859	941,772	-	-	(5,650,631)	-	-	-	-	-
Share based payments
- Share option charge	-	-	49,072	-	-	-	-	49,072	-	49,072
- Share warrants charge	-	-	715,870	-	-	-	-	715,870	-	715,870
Group provision for minority interest	-	-	-	-	-	-	(4,779)	(4,779)	4,779	-
Balance at 31 December 2018	42,391,523	50,724,177	7,198,580	11,038,204	-	1,451,941	(78,808,926)	33,995,499	-	33,995,499
Balance at 01 January 2019	42,391,523	50,724,177	7,198,580	11,038,204	-	1,451,941	(78,808,926)	33,995,499	-	33,995,499
Loss for the year	-	-	-	-	-	-	(11,240,112)	(11,240,112)	-	(11,240,112)
Lapsed and cancelled options	-	-	(966,135)	-	-		966,135	-	-	-
other comprehensive income exchange movement	-	-	-	-	-	821,035	-	821,035	-	821,035
Total comprehensive Income	-	-	(966,135)	-	-	821,035	(10,273,977)	(10,419,078)	-	(10,419,078)
Shares Issued in the period	7,678,099	4,606,859	-	-	-	-	-	12,284,958	-	12,284,958
Expenses deducted from share premium	-	(262,800)	-	-	-	-	-	(262,800)	-	(262,800)
Share based payments
- Share option charge	-	-	919,553	-	-	-	-	919,553	-	919,553
- Share warrants charge	-	-	859,289	-	-	-	-	859,289	-	859,289
- Share Issued for debt	37,527	19,514	-	-	-	-	-	57,040	-	57,040
Group provision for minority interest	-	-	-	-	-	-		-		-
Balance at 30 June 2019	50,107,148	55,087,750	8,011,287	11,038,204	-	2,272,975	(89,082,903)	37,434,461	-	37,434,462

Consolidated statement of cash flows	Unaudited	Unaudited	Unaudited	Audited	Audited
	6 months to	6 months to	6 months to	year to	year to
	30-Jun-19	30-Jun-19	30-Jun-18	31-Dec-18	31-Dec-18
	Continuing operations	Discontinued operations	Continuing operations	Continuing operations	Discontinued operations
Cash flow from operating activities
Loss after taxation	(11,214,990)	(25,122)	(11,480,340)	(21,106,949)	(47,794)
Adjustments to cash flows from non-cash items
Depreciation and amortisation	850,408	-	182,858	411,134	-
Finance income	(2,921)	-	-	(13,496)	-
Finance costs	336,734	-	173,239	80,187	-
Taxation	-	-	-	(759,413)	-
Share based payments	1,835,882	-	2,411,351	4,202,625	-
Impairment of inventory	-	-	-	1,908,925	-
Foreign exchange	154,491	-	-	346,285	-
Cash flows from operations before changes in working capital	(8,040,396)	(25,122)	(8,712,892)	(14,930,702)	(47,794)
Changes in inventories	(1,667,442)	-	(2,051,750)	(4,293,719)	-
Property deposits made	-	-	(11,705)	(371,988)	-
Change in trade and other receivables	(450,003)	-	636,911	97	-
Change in trade and other payables	(945,010)	(41,168)	(3,160,337)	(1,387,909)	23,651
Deferred licence fees received	-	-	16,500,000	16,500,000	-
Cash (used) / generated from operations	(11,102,851)	(66,290)	3,200,227	(4,484,221)	(24,143)
Interest paid	(653)	-	(644,947)	(80,187)	-
Convertible loan costs paid	-	-	(229,589)	-	-
Corporation Tax Receipt	-	-	-	2,923,649	-
Cash flows from operating activities	(11,103,504)	(66,290)	2,325,691	(1,640,759)	(24,143)
Cash flows from investing activities:
Interest received	2,921	-	-	13,496	-
Purchase of buildings plant and equipment	(1,911,442)	-	(200,076)	(3,293,238)	-
Capital expenditure on intangible assets	(4,895,934)	-	(4,628,040)	(8,799,893)	-
Cash flows from investment activities	(6,804,455)	-	(4,828,116)	(12,079,635)	-
Cash flows from financing activities:
Proceeds from issue of ordinary shares	12,284,958	-	14,415,000	21,052,563	-
Costs of share issue	(262,800)	-	-	(650,135)	-
Short term loan receipts	-	-	-	4,500,000	-
Short term loan payments	(770,000)	-	(8,647,218)	(10,247,218)	-
Long term loan receipts	9,300,000		-	-	-
Intra Group Cash Transfers	(66,330)	66,330	-	(24,483)	24,483
Cash flows from financing activities	20,485,828	66,330	5,767,782	14,630,727	24,483
Increase/(decrease) in cash and cash equivalents	2,577,869	40	3,265,357	910,334	340
Exchange gain on cash and cash equivalents	1,920	-	-	45,899	-
Cash and cash equivalents at the beginning of the period	995,057	17,994	56,478	38,824	17,654
Cash and cash equivalents at the end of the period	3,574,845	18,034	3,321,835	995,057	17,994

Notes to interim results:

1.    Accounting policies

The same accounting policies, presentation and methods of computation are followed in the interim consolidated financial information as were applied in the Group's latest annual audited financial statements except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2019, and will be adopted in the 2019 annual financial statements. As of 1 January 2019, IFRS "16 Leases", became effective and requires lessees to recognise all lease assets and liabilities on the balance sheet for both finance leases and operating leases. The main impact has been to recognise right of use assets of £10.1m in property, plant and equipment and a lease liability for future payments of £9.3m.

 

END

 

 

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