Final Results

RNS Number : 1509I

Advanced Oncotherapy PLC

28 June 2013

 



28 June 2013

ADVANCED ONCOTHERAPY PLC

("AVO" or "the Company")

Final Results for the year ended 31 December 2012

 

Highlights

 

·    The change of focus of the Group, from healthcare property to innovative and cost effective cancer treatment provider, is complete with the sale of The Healthcare Property Company in December 2012

·    The Group is delivering a managed service for the NHS and private healthcare sector in the UK for the treatment of early stage breast cancer, and colo-rectal cancer through its SD-IORT™ service operated by its subsidiary Oncotherapy Resources Ltd.

·    The Group has entered into a conditional purchase agreement to buy the whole share capital of ADAM SA of Geneva, a spin off from CERN. AVO's acquisition of ADAM focuses on development of technology for clinical applications in hospitals to improve cancer outcomes. This will dramatically reduce the cost of delivering treatments. ADAM aims to be a world leading centre of excellence for research, engineering and industrialisation of linear accelerators and detectors for medical applications from its base on the CERN Campus near Geneva.

 

CEO Mike Sinclair said, "As 2012 came to a close, we were well on our way to securing the foundations of our cancer service strategy. These new developments underpin our vision to be an internationally recognised technology company for advanced treatments of both common and rare cancers."

 

For further information, please visit www.advancedoncotherapy.com or contact:

Michael Sinclair, Chief Executive	Sandy Jamieson	Jon Levinson	Simon Hudson
Advanced Oncotherapy Plc	Libertas Capital Corporate Finance Ltd	Peterhouse Corporate Finance	Tavistock Communications
	(NOMAD & Joint Broker)	(Joint Broker)	(Financial PR & IR)
[phone]	[phone]	[phone]	[phone]

 

Chairman's statement

While the 2012 calendar of events in the UK was packed with significance and an abundance of national pride - the Queen's Diamond Jubilee and the Olympic Games - AVO embarked on a new strategy to become a leading provider of internationally endorsed, cost effective and patient-focused cancer treatments which are clinically superior to those currently available.

 

As many of us know from first-hand experience, radiation therapy is an essential and effective treatment for many cancers and is often combined with surgery and chemotherapy depending on the patient. Around the world today, more than 50% of cancer patients receive radiotherapy as part of their cancer care.

 

In recognition of the new business model, we changed our name to Advanced Oncotherapy Plc following approval by shareholders in September.

 

Today I am proud to share with you the Group's new structure of three integrated business units:

1.   Advanced Proton Solutions (APS), of which AVO has a 28.75% ownership

2.   Oncotherapy Resources Ltd (ORL), a 90% owned subsidiary of AVO

3.   ADAM, the first UK CERN spin-off company (which will be wholly owned on completion of the transaction)

 

The next generation of cancer treatment throughout the world is proton beam therapy. This cutting edge particle technology offers advances over conventional treatments. Proton therapy destroys tumours with greater precision and control than other radiation therapies, resulting in less damage to surrounding healthy tissue and organs. This technology enables oncology teams to more precisely target tumour cells by sculpting the dose of radiation, shielding healthy tissue and delivering more radiation to a very specific and localised area. The results in selected patients are having better outcomes, with improved quality of life and lower side effects.

 

2012 Results

The results reported for the year to 31 December 2012 are clearly not representative of the Group as it is currently constituted and comprises the initial costs associated with the establishment of two of our cancer treatment businesses and the discontinued property development business, which was sold for a consideration of up to £2.7 million in December 2012. The initial consideration received in January 2013 in respect of the transaction was £1.2 million and a further £1.5 million is contingent on future profits generated from future developments.

 

During the year under review, the Group had revenues from discontinued activities of £1.9 million (2011: £7.9 million). The loss on ordinary activities from continuing operations before taxation was £1.9 million (2011: loss of £2.6 million). The comprehensive loss for the period was £2.7 million (2011: £6.7 million). Total assets at the end of the year were £5.6 million (2011: £7.1 million), reflecting the disposal of the healthcare real estate development business.

 

At this stage of our development as a provider of new technology for innovative and patient-focused radiation treatments, the Board is not recommending the payment of a dividend.

 

Board and Management

There were a number of appointments to the Board during 2012 to reflect both the interests of investors and the change of focus of the Company. In June, we were pleased to announce the appointment of Trevor Brown as a non-executive director. Trevor has been a great supporter of our move into advanced cancer treatments and brings a depth and breadth of business and investment experience to the Board.

 

Following the disposal of the healthcare real estate development business in December, Paul Stacey, CEO of Care Capital, resigned from the Board to continue running that business under its new ownership. Paul was a founding director of the Company when it was engaged solely in the development of primary healthcare real estate and led the Company through its AIM listing and subsequent growth.

 

Post the year end, there have been additional Board changes as we gear up to grow the Group as a focused provider of technologically advanced cancer treatments.

 

In mid-March, we announced the resignation of Keith Gibbs as a non-executive director and his replacement with Dr Chris Boshoff. Chris is Professor of Cancer Medicine at University College London Hospital (UCLH) and Director of the UCL Cancer Institute. His research expertise will assist us in evaluating commercial opportunities for new technologies. He brings a rare perspective because he uniquely combines a world class reputation for cancer research with patient care UCLH and the UCH Macmillan Cancer Centre.

 

In April, Tim Lebus joined us as a non-executive director of the Company. Tim is a Senior Adviser at Duke Street Capital with over 30 years' experience in private equity and mergers & acquisitions. His broad investment banking experience and knowledge of private equity and venture capital adds a dynamic expertise that will be invaluable to the Board.

 

Most recently, we announced the appointment of Michael Bradfield as a non-executive director following his significant investment in the Company during the recent placing. Michael has over 30 years experience of direct marketing and the insurance industry as founder and CEO of Hospital Plan Insurance Services, a direct seller of low cost health, accident and life insurance. His experience will undoubtedly help us to grow the Group and he has already demonstrated his enthusiasm through his substantial investment.

 

Finally, in May, we were very pleased to announce the appointment of Dr Sneh Khemka as an executive director with the role of Chief Operating Officer. Sneh was Director of Healthcare Development for Bupa Group. Prior to this, Sneh was Medical Director for Bupa International, and interim Chief Medical Officer for Bupa Group. He originally trained as a surgeon, specialising in ophthalmology, with an interest in ocular oncology.

 

The Board, I believe, is truly fit for purpose and, on behalf of shareholders; I welcome our new arrivals and thank Keith and Paul for their service and contributions. Our Board is now constituted as follows: I am non-executive Chairman; Dr Mike Sinclair is Chief Executive; Dr Sneh Khemka is Chief Operating Officer; Don Baladasan is Finance Director; and Trevor Brown, Dr Chris Boshoff, Tim Lebus and Michael Bradfield are non-executive directors.

 

Outlook

Our priority is to complete the acquisition of ADAM and the associated financing that will allow us to complete the development of its ground-breaking technology for the provision of advanced and affordable proton beam therapy for patients around the world. At the same time we will progress our interests in APS and ORL. The directors believe that we have now assembled a group of businesses that will place us at the forefront of cancer treatment and I look forward to working with the high quality management team to turn their visions into reality - and profitable growth for shareholders.

 

Lord Evans of Watford

Chairman

28 June 2013

 

 

Chief Executive's review

As 2012 came to a close, we were well on our way to securing the foundations of our cancer service strategy. These new developments underpin our vision to be an internationally recognised technology company for advanced treatments of both common and rare cancers.

 

Oncotherapy Resources Ltd (ORL)

 

Background

In March 2012, we formed Oncotherapy Resources Ltd (ORL) to provide a fully managed mobile service to both the NHS and private hospitals in the UK and Ireland where we have exclusive licensing of the Xoft® Electronic Brachytherapy System.

 

This advanced technology is an isotope-free radiation treatment cleared by the US Food and Drug Administration and CE marked for use anywhere in the body, including treatment for early-stage breast cancer, endometrial cancer, cervical cancer and skin cancer.

 

The Xoft® System uses a proprietary electronic x-ray source instead of a radioactive isotope to deliver radiation internally with increased accuracy and less damage to normal tissues and bones. The low energy and rapid dose fall-off of the electronic source means that clinicians can offer treatments in operating theatres or clinical rooms with reduced shielding requirements compared to conventional radiation therapy.

 

SD-IORT™ with Xoft® eliminates the high barriers to entry of radiotherapy markets for hospitals not equipped with a radiotherapy department (linac machines); ORL's managed service eliminates the need for all major capital expenditures including equipment, special shielding, construction for the special shielding, maintenance costs and annual service fees. We charge the hospital on a per patient treated basis. There are around 20,000 patients annually receiving lumpectomy surgery in the UK, of which most would benefit from SD-IORT™.

 

In April 2013, we launched our new managed mobile service with consultants at both BMI Healthcare and Spire Healthcare Hospitals.

 

We own 90% of Oncotherapy Resources (ORL) with the balance held equally by two companies, the principal European distributor of the Xoft® System, Pergentium Ltd, and Duncan Hynd Associates Ltd.

 

We have the option to acquire the remaining 10% of ORL after four years.

 

Advanced Proton Solutions

 

Background

In August 2012, we became a 28.75% shareholder in Advanced Proton Solutions (APS), a Jersey registered company. APS intends to design, build and operate proton beam therapy centres around the world.

 

With the benefit of AVO's local knowledge and contacts, APS intends to build the first comprehensive proton beam centre in the UK to treat both NHS and private patients which will provide both improved outcomes and lower side effects for appropriately selected paediatric and adult cancer patients.

 

Only one proton beam therapy centre exists in the UK at this time. It is a low energy machine (70 MeVs) used only to treat very rare eye cancers at the Clatterbridge Cancer Centre NHS Foundation Trust on the Wirral, Cheshire.

 

In September 2011, we announced that APS obtained a resolution to grant planning permission from the City of London to develop the UK's first comprehensive proton beam therapy centre.

 

The proposed Moorgate location is at the centre of a cluster of world renowned medical facilities including hospitals such St Bartholomew's Hospital (Barts), Guys Hospital, the Royal London, Moorfields Eye Hospital, Great Ormond Street and St Thomas' Hospital.

 

APS, which will operate the facility, is also involved in the development and operation of proton beam therapy centres internationally. The London facility is intended to be the first of a number of projects.

 

ADAM

Application of Detectors and Accelerators to Medicine

 

Background

 

On 24 April 2013 we announced our first corporate acquisition. We have signed a definitive Share Purchase Agreement for the acquisition of 100% of the share capital of ADAM, a CERN spin-off company, for a consideration to the vendor of stock and warrants in Advanced Oncotherapy that will be equivalent to 29.9% of the then issued ordinary share capital and warrants of the Company prior to the completion of the transaction.

 

AVO's acquisition of ADAM focuses on development of technology for clinical applications in hospitals to improve cancer outcomes. This will dramatically reduce the cost of delivering treatments. ADAM aims to be a world leading centre of excellence for research, engineering and industrialisation of linear accelerators and detectors for medical applications from its base on the CERN Campus near Geneva.

 

ADAM was founded in 2007 by Swiss-Italian Alberto Colussi who brought together a team of experts in accelerator and detector technology from CERN. ADAM's research and development activities have focused on two main fields: the design and construction of compact linear accelerators for conventional radiotherapy, and of compact linear accelerators for proton beam therapy.

 

We announced on 11 April 2013, a Collaboration Agreement with ADAM and CERN to complete the development of ADAM's proton beam technology for clinical application in hospitals. Their offices and research facilities will remain on the CERN campus.

 

Completion of the acquisition of ADAM will take place upon the closing of financing by AVO which will, among other things, fund the completion of the development of ADAM's proprietary Linear Accelerator based proton beam therapy technology. On completion and subject to regulatory approval, Alberto Colussi, the Founder and President of ADAM, and Niccolo Colussi, the CEO of ADAM will join the Board of AVO. This will be a very exciting acquisition for AVO as it will bring us technology with the potential, in a relatively short time frame, to revolutionise the economics of the provision of advanced proton beam therapy to patients worldwide.

 

Dr Michael Sinclair

Chief Executive

28 June 2013

 

Consolidated statement of comprehensive income

For the year ended 31 December 2012

	Group	Group
	2012	2011
	£	£
Revenue	100,000	71,000
Cost of sales	(713)	-
Gross Profit	99,287	71,000
Administrative expenses	(1,159,024)	(1,642,626)
Development costs written off	(504,779)	(300,000)
Operating loss	(1,564,516)	(1,871,626)
Finance income	3,723	-
Finance costs	(322,940)	(694,091)
Loss on ordinary activities before taxation	(1,883,733)	(2,565,717)
Taxation	-	288,066
Loss after taxation from continuing operations	(1,883,733)	(2,277,651)
Discontinued operations
Profit/(Loss) for the year from discontinued operations	(852,997)	(4,452,108)
Loss after discontinued operations	(2,736,730)	(6,729,759)
Loss for the period
Attributable to equity shareholders	(2,713,612)	(6,493,895)
Non-controlling interests	(23,118)	(235,864)
	(2,736,730)	(6,729,759)
Other comprehensive income
Exchange differences on translation of foreign operations	-	56,537
Total comprehensive loss for the year net of tax	(2,736,730)	(6,673,222)
Total comprehensive loss attributable to:
Equity shareholders	(2,713,612)	(6,443,012)
Non-controlling interests	(23,118)	(230,210)
	(2,736,730)	(6,673,222)
Loss per ordinary share
Basic and diluted
Continuing operations	(1.07)p	(2.89)p
Discontinued operations	(0.48)p	(5.80)p
	(1.55)p	(8.69)p
Weighted average number of shares (000s)	176,157	76,754

Consolidated statement of financial position

As at 31 December 2012

	Group	Group
	2012	2011
	£	£
Non-current assets
Investment properties	3,049,357	3,049,357
Development properties	-	2,384,258
Leasehold improvements	-	-
Plant and equipment	205,422	10,160
Trade & Other Receivables	872,441	168,000
	4,127,220	5,611,775
Current Assets
Amounts receivable on contracts	-	1,123,066
Trade and other receivables	1,451,961	315,722
Cash and cash equivalents	57,767	24,158
	1,509,728	1,462,946
Total assets	5,636,948	7,074,721
Current liabilities
Trade and other payables	(1,972,217)	(2,793,800)
Borrowings	(3,804,013)	(3,801,871)
	(5,776,230)	(6,595,671)
Non-current liabilities
Borrowings	-	-
Deferred tax	-	-
	-	-
Total liabilities	(5,776,230)	(6,595,671)
Net (liabilities)/assets	(139,282)	479,050
Equity
Share capital	2,594,104	767,541
Share premium reserve	1,665,998	1,397,500
Share option reserve	581,333	557,996
Reverse acquisition reserve	11,038,204	11,038,204
Exchange movements reserve	(388,330)	(388,330)
Accumulated losses	(15,630,591)	(12,893,861)
Equity attributable to shareholders of the Parent Company	(139,282)	479,050
Non-controlling interests	-	-
Total equity (deficit)/funds	(139,282)	479,050

Consolidated statement of changes in equity

For the year ended 31 December 2012

			Share	Reverse	Exchange		Equity	Non-
	Share	Share	options	acquisition	movement	Accumulated	share holders'	controlling
	capital	premium	reserve	reserve	reserve	losses	interest	interest	Total
	£	£	£	£	£	£	£	£	£
Balance at 1 January 2011	767,541	1,397,500	557,996	11,038,204	(439,213)	(6,300,810)	7,021,218	131,054	7,152,272
Exchange rate movement	-	-	-	-	50,883	-	50,883	5,654	56,537
Loss for the year	-	-	-	-	-	(6,493,895)	(6,493,895)	(235,864)	(6,729,759)
Total comprehensive Income	-	-	-	-	50,883	(6,493,895)	(6,443,011)	(230,210)	(6,673,222)
Group provision for minority interest	-	-	-	-	-	(99,156)	(99,156)	99,156	-
Balance at 31 December 2011	767,541	1,397,500	557,996	11,038,204	(388,330)	(12,893,861)	479,050	(0)	479,050
Balance at 1 January 2012	767,541	1,397,500	557,996	11,038,204	(388,330)	(12,893,861)	479,050	(0)	479,050
Loss for the year	-	-	-	-	-	(2,713,612)	(2,713,612)	(23,118)	(2,736,730)
Total comprehensive income	-	-	-	-	-	(2,713,612)	(2,713,612)	(23,118)	(2,736,730)
Arising on issues of ordinary shares	1,826,563	268,498	-	-	-	-	2,095,061	-	2,095,061
Share based payment
- employee services	-	-	-	-	-	-	-	-	-
- cost of raising finance	-	-	23,337	-	-	-	23,337	-	23,337
Group provision for minority interest	-	-	-	-	-	(23,118)	(23,118)	23,118	-
Balance at 31 December 2012	2,594,104	1,665,998	581,333	11,038,204	(388,330)	(15,630,591)	(139,282)	(0)	(139,282)

Consolidated statement of cash flows

For the year ended 31 December 2012

	Group	Group		Group	Group
	continuing	discontinued		continuing	discontinued
	operations	operations	Group	operations	operations	Group
	2012	2012	2012	2011	2011	2011
Cash flow from operating activities
Loss after taxation	(1,883,733)	(852,997)	(2,736,730)	(2,277,651)	(4,452,108)	(6,729,759)
Adjustments:
Taxation	-	-	-	(288,066)	-	(288,066)
Finance costs	322,972	28,992	351,964	696,495	726,381	1,422,876
Finance income	(3,723)	-	(3,723)	-	(403)	(403)
Net portfolio losses / (gains)	-	244,516	244,516	-	5,649,762	5,649,762
Depreciation	-	-	-	98,977	-	98,977
Write-off of development costs incurred	504,779	610,774	1,115,553	300,000	-	300,000
Share based payments	23,340	-	23,340	-	-	-
Cash flows from operations before changes in working capital	(1,036,365)	31,285	(1,005,080)	(1,470,245)	1,923,632	453,387
Changes in amounts recoverable on contracts	-	204,115	204,115	-	666,582	666,582
Change in trade and other receivables	(230,320)	(142,500)	(372,821)	(718,862)	369,073	(349,789)
Change in trade and other payables	(276,244)	172,020	(104,224)	429,767	(340,117)	89,650
Cash (used) / generated from operations	(1,542,928)	264,919	(1,278,009)	(1,759,340)	2,619,170	859,830
Interest paid	(70,225)	(28,992)	(99,217)	(463,815)	(726,381)	(1,190,196)
Costs associated with disposal of companies	-	-	-	-	(443,828)	(443,828)
Cash flows from operating activities	(1,613,153)	235,927	(1,377,226)	(2,223,154)	1,448,961	(774,193)
Cash flows from investing activities:
Disposal of investment properties	-	-	-	-	22,903,434	22,903,434
Disposal of development property	-	-	-	-	711,124	711,124
Loss on disposal of investment and development property	-	-	-	-	844,388	844,388
Cash disposed with subsidiary	-	(5,292)	(5,292)	-	-	-
Capital expenditure on development properties	-	(485,809)	(485,809)	-	(322,621)	(322,621)
Purchase of plant and equipment	(190,983)	-	(190,983)	(11,530)	-	(11,530)
Interest received	-	-	-	-	403	403
Cash flows from investment activities	(190,983)	(491,101)	(682,084)	(11,530)	24,136,728	24,125,198
Cash flows from financing activities:
Development loans	-	-	-	-	(1,524,120)	(1,524,120)
Equity share capital raised	1,318,885	-	1,318,885	-	-	-
Repayment of loans	-	-	-	(75,726)	(22,645,824)	(22,721,550)
Other short term loans	1,127,247	-	1,127,247	804,250	-	804,250
Intra Group Cash Transfers	(234,538)	234,538	0	1,288,177	(1,288,177)	-
Cash flows from financing activities	2,211,594	234,538	2,446,132	2,016,701	(25,458,121)	(23,441,420)
Decrease in cash and cash equivalents	407,458	(20,636)	386,822	(217,983)	127,568	(90,415)
Cash and cash equivalents at 1 January 2012	(349,826)	20,636	(329,190)	(131,843)	(106,932)	(238,775)
Cash and cash equivalents at  31 December 2012	57,632	0	57,632	(349,826)	20,636	(329,190)

Financial Statements & Audit Opinion

1. Accounting convention, basis of preparation and going concern

These financial statements have been prepared under International Financial Reporting Standards ("IFRS") as adopted by the European Union and applied in accordance with the Companies Act 2006.

The financial statements have been prepared on the historical cost basis modified to include certain assets and liabilities at fair value.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and opinions or statements received from competent professional advisors. These advisors include qualified valuers and financial institutions which have provided senior debt and associated facilities.

2. The most significant assumptions in the financial statements are:

a) The values ascribed to investment and development properties.

The investment property is valued at cost less an impairment considered necessary by the Directors to reduce the property to market value. Development properties are valued at cost prior to the commencement of construction. During the period of construction, properties are valued at fair value having regard to the overall estimated value and the stage of construction. This is only done if the market value can be determined with sufficient certainty during the period of construction.

b) An asset of £472,441 has been recognised in respect of a deferred receivable relating to the sale of the German subsidiaries as disclosed in note 18. Included within this balance are amounts that have been estimated in respect of the closing net assets of the subsidiaries at the date of disposal. At the time of signing the deferred receivable of £472,441 was still outstanding. The delay in settlement is due to ongoing discussions with the purchaser of the German portfolio regarding adjustments holdbacks defined in the SPA. The Directors believe this receivable is still due from the purchaser but recognise there is a delay as discussions continue. To expedite the settlement the Directors have engaged an independent accountant in Germany to confirm the final balance due. At the time of signing this independent verification is still ongoing.

c) An asset of £400,000 has been recognised in respect of a deferred receivable in respect of the group's Southampton site. The directors have negotiated an exit from the development with a third party and expect to receive this amount in 2014 based on their assessment of the market value of the residual site and the likely professional fees that will be incurred in respect of the exit. As a result of these negotiations the carrying value of the site has been written down by £504,779 from £904,779 at 31 December 2011 to £400,000 at 31 December 2012. Also the asset has been transferred from development properties, as disclosed in note 14, to trade and other receivables, as disclosed in note 18.

d) The Directors have taken advantage of the exemption offered by Section 408 of the Companies Act not to present a separate statement of comprehensive income for the Parent Company.

3. As at 31 December 2012, the Group had current liabilities of £4.3 million. This figure includes the £2.6 million proportion of a loan which is due in over 1 year, but where several covenant breaches have occurred, putting the loan into default. The position is being managed with the lender although a formal waiver of the covenant breaches has not been received.

In addition, the Directors have prepared trading and cash flow forecasts for the Group for the  period to 31 December 2015 as part of a three year plan. The forecasts indicate that additional funding will be required within the next twelve months to deliver the business plans and the Directors are in discussions with current and potential new investors to raise new equity to provide the necessary funding. The Directors believe that the trading forecasts are realistic and that a fund raising will be able to be completed and, accordingly, the Financial Statements have been prepared on a going concern basis. However, due to the need to successfully identify investors and complete a placing, there is a material uncertainty which may cast significant doubt about the ability of the Group and the Company to continue as a going concern.

4. A copy of the Annual Report & Accounts will be shortly available on the Company's web site at www.advancedoncotherapy.com. Printed copies of the financial statements are being sent to shareholders today.

-ends-

 

END

 

 

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