Final Results

RNS Number : 8369K

Advanced Oncotherapy PLC

30 June 2014

 



30 June 2014

ADVANCED ONCOTHERAPY PLC

("Advanced Oncotherapy" or "the Company")

Final Results for the year ended 31 December 2013

Advanced Oncotherapy (AIM: AVO), the developer of innovative radiation technology for cancer treatment, announces final results for the year ended 31 December 2013.

Highlights:

·     Appointment of Bob Rose to establish Global Manufacturing and Supply Chain function

·     Expanding the Medical Advisory Board with Dr Jay Loeffler, Dr Nick Plowman and Dr Hanne Kooy

·     Appointment of NED, Dr Enrico Vanni

·     Successful completion of the purchase of ADAM

·     Raised a total of £2.4 million in cash in four equity placings

Post Period End Highlights:

·     Successful equity placing to raise £6m completed

·     Appointment of Sanjeev Pandya as CEO to drive the Company forward into commercialisation

·     Strengthening of the Board with the appointment of Euan Thomson, NED

·     Establishing the Senior Management team with key appointment of Eric Ferret as Director of Project Planning

Sanjeev Pandya, CEO of Advanced Oncotherapy commented:  "In the latter half of 2013, we refined our strategy and operating model.  We plan to deliver and install the first LIGHT accelerator at the beginning of 2016. This, together with the continued support of our investors and our growing internal expertise, puts us in a strong position to become a major player and contributor in the proton radiation treatment arena. "A copy of the annual report is today being posted to shareholders together with a notice of general meeting and is also available from the Company's website at www.avoplc.com.

For further information contact:

Advanced Oncotherapy Plc	www.avoplc.com
Sanjeev Pandya, CEO	Tel: [phone]
Westhouse Securities (Nomad & Joint Broker)	Tel: [phone]
Antonio Bossi / David Coaten
Peterhouse Corporate Finance (Joint Broker)	Tel: [phone]
Lucy Williams
Walbrook PR (Financial PR & IR)
Anna Dunphy/Mike Wort	Tel: [phone] or [e-mail]

Chairman and CEO Report

We are pleased to report that during 2013 Advanced Oncotherapy (AVO) made significant progress in its strategic aim of providing wider access to radiation treatment with protons with significant commercial advantages over the current competitor machines. We anticipate that LIGHT, the AVO ground breaking radiotherapy system, will offer clinical advantages at more than half the capital outlay currently required. AVO has now established itself in a competitive position to supply the next generation of proton radiotherapy systems for cancer treatment.

Financials

These results reflect the development nature of the Company.

During the 12-month period ended 31 December 2013 the Group had revenues of £68,916 (31 December 2012: £100,000).

The loss on ordinary activities before taxation was £3.43 million (31 December 2012: £1.88 million).

The comprehensive loss for the period was £3.97 million (31 December 2012: £2.74 million).

Total assets at 31 December 2013 were £10.75 million (31 December 2012: £5.64 million).

Net assets at 31 December 2013 were £5.37 million (31 December 2012: (£0.14) million).During 2013 AVO raised a total of £2.4 million in cash in four equity placings. The market response to AVO's LIGHT system has resulted in the Board reassessing its overall financing plans. A number of new and attractive financing options have been presented, including the provision of scientific grants, and it is hoped that these will be finalised and reported to shareholders during 2014. As a result of this review and in light of market receptiveness, the Company undertook a financing in April 2014 that raised £6.0 million before expenses from a number of new and existing investors including UK institutional investors. As part of its plans, the Company intends to use the net proceeds of the fundraising to continue the development of its LIGHT machine, which the board expects will be delivered and installed by the beginning of 2016 and will contribute to building the first facility in conjunction with SUNY Upstate Medical University in Syracuse, New York.

ADAM Technology

At the heart of AVO is the technology that was acquired during 2013 from ADAM SA, the particle physics CERN spin-off company on the CERN campus in Geneva. Not only does this provide an exciting new technology platform for AVO, it also allows us to use the experts and facilities at CERN to raise awareness of the technology and medical potential in terms of bringing proton beam treatment to more patients.

To help accelerate completion of the acquisition, BRAHMA AG, the original owner of ADAM, waived the financing condition in the purchase contract. BRAHMA was issued shares in Advanced Oncotherapy plc that gave it a 29.9% holding in the Company on completion of the acquisition, and a shareholding of 25.1% upon completion of the original planned financing.

The patented ADAM technology produces the proton beam that is at the core of the AVO LIGHT system. It has taken over 10 years and an investment of €17 million, largely made by the previous owners of ADAM SA, to develop and is now being commercialised by AVO. We are firmly convinced that the LIGHT system will replace existing cyclotrons and synchrotrons by creating three-room treatment centres at a quarter of the current cost with a footprint that will allow them to be integrated with existing medical facilities. The board of AVO believes that it has the necessary technological and financial resources to complete the development of the products.

Strengthening the Management Team

As already mentioned, there have been a number of key appointments, both executive and non-executive, during 2013. To give AVO access to specialists in each of the fields of particle physics, engineering and medical radiology, we have had to build up the Board of Directors and, importantly, our Medical Advisory Board. It is rare for a company of our size and age to access worldwide expertise in multiple fields, so to the outsider there may appear to be an unusually high number of appointments. We feel this aggregated knowledge of industry and treatment will enable us to surpass customer expectations, addressing both clinical and financial needs as we create and produce the next generation of proton therapy equipment.

Main Board

Sanjeev Pandya trained as an orthopaedic surgeon before following a career in the City. He joined AVO as Chief Operating Officer responsible for the commercialisation of our LIGHT system. He was appointed Chief Executive Officer in June 2014.

Prof Christopher Nutting is a Consultant Clinical Oncologist and Chair in Radiation Oncology at the Royal Marsden Hospital and The Institute of Cancer Research in London. He has been appointed as anNED and member of the AVO Medical Advisory Board.

Dr Enrico Vanni is an independent consultant with more than 25 years' experience in the pharmaceutical industry and currently Vice Chairman of the Novartis Board of Directors, has been appointed as an NED of AVO.

Euan Thomson, PhD is internationally recognised as an expert in the field of radiation therapy. He has nearly 20 years of experience in research, clinical practice, consulting and corporate management. He was previously CEO of Accuray, Inc. from March 2002 to October 2012.

Medical Advisory Board

Dr Nick Plowman is head of Clinical Oncology at St Bartholomew's Hospital, Senior Clinical Oncologist at St Bartholomew's Hospital and Great Ormond Street Hospital, and Director of the CyberKnife Centre in London. He has joined as Chairman of the AVO Medical Advisory Board.

Dr Jay Loeffler has also joined the Medical Advisory Board. A world authority on the use of proton therapy for benign, vascular and malignant brain tumours. He is currently the Herman and Joan Suit Professor of Radiation Oncology at the Harvard Medical School and Chair of the Department of Radiation Oncology at the Massachusetts General Hospital in Boston.

Dr Hanne Kooy, Associate Professor at Harvard Medical School, joined as Chairman of the Product Development Committee. Dr. Kooy's interests lie in the effective deployment of the appropriate, advanced and integrated technologies to support proton radiation therapy. His expertise will be invaluable in the development of a new fully integrated patient software management programme that incorporates the best in established software architecture to ensure improved patient outcomes, safe and efficient patient treatment management which will maximise the unique characteristics of our linac accelerator based technology.

Another extremely important appointment was Bob Rose as the Global Director of Manufacturing and Supply Chain Management. A precision engineer by profession and an expert in global sourcing and procurement, he will be responsible for sourcing the units required to build and then install the LIGHT systems worldwide.

The Market

AVO is now potentially established as the most cost- effective provider of treatment centres in a growing market for proton beam therapy that is expected to treble by 2018. Global belief in the ability of AVO to bring the LIGHT system to market has led to significant advance orders. During 2013 agreements were signed to provide eight LIGHT systems to locations in both the UK and the USA; the order pipeline now stands at over £200 million. Delivery and installation of the first machine is currently scheduled for the beginning of 2016. Milestone-related stage payments are anticipated from purchasers of the technology, which will make significant contributions to Group cash flow ahead of 2016.

Additional revenues will be generated through service contracts to maintain the LIGHT units over the 30-year life cycle of the systems. The margin on each unit will increase as global orders grow and we move towards a semi-automatic production line

Oncotherapy Resources Ltd (ORL)

While there has been a delay in establishing a sales pipeline for ORL, it is gratifying to report that single dose treatment (SD-IORT) for breast cancer has now commenced in a number of leading hospitals throughout the UK, including key relationships with BMI Healthcare and Spire Healthcare hospital groups. These relationships facilitate the adoption and use of the SD-IORT within the relevant hospitals and clinical settings around the UK. With the appointment of an additional radiographer to help promote the service, there is now a strong flow of patients being booked in for this single-dose radiation treatment for early-stage breast cancer.

Outlook

Over the past few years, our people have been the foundation of our growth. We share a mission to advance patients' clinical treatments and improve their everyday lives by harnessing innovative science and focusing it to develop the most effective and affordable cancer treatments. It is our skilled, engaged and empowered employees who deliver value to our investors, contribute to our business and lay the groundwork for 2014 and beyond. We would like to thank all our staff and advisors for their hard work and dedication to the Company.

As has been announced subsequent to year end, Lord David Evans became Deputy Chairman of the Company and Michael Sinclair has replaced him as Executive Chairman. As a result of these changes, it has also been announced that Sanjeev Pandya was appointed Chief Executive Officer.

On behalf of everyone at AVO we thank you, our investors, for your support in 2013, and we look forward to an exciting and productive 2014. Together we will make a difference.

Consolidated statement of comprehensive income

Fort the year ended 31 December 2013

	Group	Group
	2013	2012
	£	£
Revenue	68,916	100,000
Cost of sales	(155,952)	(713)
Gross (loss)/profit	(87,036)	99,287
Administrative expenses	(2,036,949)	(1,159,024)
Impairment charge for investment and development properties	(1,049,357)	(504,779)
Operating loss	(3,173,342)	(1,564,516)
Finance income	8	3,723
Finance costs	(257,812)	(322,940)
Loss on ordinary activities before taxation	(3,431,146)	(1,883,733)
Taxation	-	-
Loss after taxation from continuing operations	(3,431,146)	(1,883,733)
Loss for the year from discontinued operations	(539,351)	(852,997)
Loss after discontinued operations	(3,970,496)	(2,736,730)
Attributable to equity shareholders	(3,936,291)	(2,713,612)
Non-controlling interests	(34,205)	(23,118)
	(3,970,496)	(2,736,730)
Exchange differences on translation of foreign operations	-	-
	(3,970,496)	(2,736,730)
Equity shareholders	(3,936,291)	(2,713,612)
Non-controlling interests	(34,205)	(23,118)
	(3,970,496)	(2,736,730)
Continuing operations	(0.86)p	(1.07)p
Discontinued operations	(0.13)p	(0.48)p
	(0.99)p	(1.55)p
Weighted average number of shares (000's)	401,624	176,157

Consolidated statement of financial position

As at 31 December 2013

		Group	Group
		2013	2012
		£	£
Non-current assets
Investment properties		2,000,000	3,049,357
Investments		6,020	-
Intangible assets		6,690,381	-
Plant and equipment		672,864	205,422
Trade & Other Receivables		-	872,441
		9,369,265	4,127,220
Current Assets
Trade and other receivables		1,196,514	1,451,961
Cash and cash equivalents		148,804	57,767
Inventories		37,199	-
		1,382,517	1,509,728
Total assets		10,751,782	5,636,948
Current liabilities
Trade and other payables		(2,196,141)	(1,972,217)
Borrowings		(3,190,315)	(3,804,013)
		(5,386,456)	(5,776,230)
Non-current liabilities
Borrowings		-	-
Deferred tax		-	-
		-	-
Total liabilities		(5,386,456)	(5,776,230)
Net assets		5,365,327	(139,282)
Equity
Share capital		6,044,415	2,594,104
Share premium reserve		6,874,185	1,665,998
Share option reserve		1,397,940	581,333
Reverse acquisition reserve		11,038,204	11,038,204
Exchange movements reserve		(388,330)	(388,330)
Accumulated losses		(19,601,087)	(15,630,591)
Equity attributable to shareholders of the Parent Company		5,365,327	(139,282)
Non-controlling interests		-	-
Total equity funds		5,365,327	(139,282)

Consolidated statement of changes in equity

For the year ended 31 December 2013

							Equity
			Share	Reverse	Exchange		share-	Non-
	Share	Share	options	acquisition	movement	Accumulated	holders	controlling
	capital	premium	reserve	reserve	reserve	losses	interest	interest	Total
	£	£	£	£	£	£	£	£	£
Balance at
01 January 2012	767,541	1,397,500	557,996	11,038,204	(388,330)	(12,893,861)	479,050	-	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)	-	(139,282)
Balance at
01 January 2013	2,594,104	1,665,998	581,333	11,038,204	(388,330)	(15,630,591)	(139,282)	-	(139,282)
Loss for the year	-	-	-	-	-	(3,936,291)	(3,936,291)	(34,205)	(3,970,496)
Total comprehensive
income	-	-	-	-	-	(3,936,291)	(3,936,291)	(34,205)	(3,970,496)
Arising on issues
of ordinary shares	3,450,311	5,208,187	-	-	-	-	8,658,498	-	8,658,498
Share based payment
- other services	-	-	30,422	-	-	-	30,422	-	30,422
- acquisitions of Adam SA	-	-	786,185	-	-	-	786,185	-	786,185
Group provision for
minority interest	-	-	-	-	-	(34,205)	(34,205)	34,205	-
Balance at
31 December 2013	6,044,415	6,874,185	1,397,940	11,038,204	(388,330)	(19,601,087)	5,365,327	-	5,365,327

Consolidated statement of cash flows

For the year ended 31 December 2013

	Group	Group		Group	Group
	continuing	discontinued		continuing	discontinued
	operations	operations	Group	operations	operations	Group
	2013	2013	2013	2012	2012	2012
			£			£
Cash flow from operating activities
Loss after taxation	(3,431,146)	(539,351)	(3,970,497)	(1,883,733)	(852,997)	(2,736,730)
Adjustments:
Taxation	-	-	-	-	-	-
Finance costs	257,812	18,393	276,205	322,972	28,992	351,964
Finance income	(8)	-	(8)	(3,723)	-	(3,723)
Net portfolio losses / (gains)	4,310	(3,103)	1,207	-	244,516	244,516
Depreciation	82,481	-	82,481	-	-	-
Impairment charge for investment and development properties	1,049,357	-	1,049,357	504,779	610,774	1,115,553
Share based payments	30,422	-	30,422	23,340	-	23,340
Cash flows from operations before	(2,006,773)	(524,061)	(2,530,833)	(1,036,364)	31,285	(1,005,079)
changes in working capital
Changes in inventories	(37,199)	-	(37,199)	-	-	-
Changes in amounts recoverable on contracts	-	-	-	-	204,115	204,115
Change in trade and other receivables	(95,672)	12,867	(82,805)	(230,320)	(142,500)	(372,821)
Change in trade and other payables	(184,466)	227,936	43,470	(276,244)	172,020	(104,224)
Cash (used) / generated from operations	(2,324,110)	(283,258)	(2,607,368)	(1,542,928)	264,919	(1,278,009)
Interest paid	(330,937)	-	(330,937)	(70,225)	(28,992)	(99,217)
Costs associated with disposal of companies	-	-	-	-	-	-
Cash flows from operating activities	(2,655,047)	(283,258)	(2,938,305)	(1,613,153)	235,927	(1,377,226)
Cash flows from investing activities:						-
Disposal of subsidiary undertaking	-	1,245,000	1,245,000	-	-	-
Cash disposed with subsidiary	-	-	-	-	(5,292)	(5,292)
Cash acquired with subsidiary	27,574	-	27,574	-	-	-
Capital expenditure on development properties	-	-	-	-	(485,809)	(485,809)
Capital expenditure on intangible assets	(188,349)	-	(188,349)	-	-	-
Purchase of plant and equipment	(543,765)	-	(543,765)	(190,983)	-	(190,983)
Interest received	8	-	8	-	-	-
Cash flows from investment activities	(704,532)	1,245,000	540,468	(190,983)	(491,101)	(682,084)
Cash flows from financing activities:
Equity share capital raised	2,437,000	-	2,437,000	1,318,885	-	1,318,885
Other short term loans	52,008	-	52,008	1,127,247	-	1,127,247
Intra Group Cash Transfers	961,742	(961,742)	-	(234,538)	234,538	0
Cash flows from financing activities	3,450,750	(961,742)	2,489,008	2,211,594	234,538	2,446,132
Decrease in cash and cash equivalents	91,171	-	91,171	407,458	(20,636)	386,822
Cash and cash equivalents at  01 January 2013	57,632	-	57,632	(349,826)	20,636	(329,190)
Cash and cash equivalents at  31 December 2013	148,803	-	148,803	57,632	-	57,632

Principal Accounting Policies and Auditor's Report

 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. The Directors have taken advantage of the exemption offered by Section 408 of the Companies Act 2006 not to present a separate statement of comprehensive income for the Parent Company.

The most significant assumptions in the financial statements are:

1)   The values ascribed to investment properties. The investment property is valued at cost less an impairment provision considered necessary by the Directors to reduce the property to market value. The Directors have written down the value of the investment property at Folkestone to £2,000,000 at 31 December 2013.

2)  An asset of £459,574 has been recognised in respect of a 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 receivable of £459,574 was still outstanding. The delay in settlement is due to a dispute with the purchaser of the German portfolio regarding adjustments to 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. Additional legal costs of £200,000 have been provided for costs incurred in 2014 up to the date of publication and for future legal costs that are expected to be incurred to bring the matter to a conclusion. The asset has been moved from non-current assets to current assets as the Directors believe that the matter will be concluded in the year ended 31 December 2014.

3)  An asset of £400,000 has been recognised in respect of a deferred receivable in respect of the group's Southampton site. The Directors 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. The asset has been moved from non-current assets to current assets as site is expected to be sold by the end of the third quarter of 2014

4)   At 31 December 2013 the Group had net current liabilities of £4 million. This figure includes the £2.6 million proportion of a loan which is due in over 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. Since the year end the loan has been reduced by £1.1m, with the lender receiving equity in the Company in exchange as disclosed in note 33.

5)   Acquired intangible assets - On acquisition of a business, the Group is required to value the assets acquired and recognise intangible assets on the statement of financial position. The valuation of these assets relies on various assumptions, including future revenue and costs derived from those assets and the selection of an appropriate discount rate in order to calculate the present value of those cash flows. Further information including the carrying value of intangible assets acquired is given in note 11.

6) In addition, the Directors have prepared trading and cash flow forecasts for the Group for the period to 31 December 2016 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 or short term borrowings if required 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.

7) Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group's accounting periods beginning on or after 1 January 2013 and these have been adopted in the financial statements. None of these standards had an impact on the current or prior year results or financial position of the Group, therefore no further disclosure is given.

Independent Auditor's report

To the members of Advanced Oncotherapy Plc

We have audited the financial statements of Advanced Oncotherapy plc for the year ended 31 December 2013 which comprise the consolidated statement of comprehensive income, the consolidated and Parent Company statements of financial position, the consolidated and Parent Company statements of changes in equity, the consolidated and Parent Company statements of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and our engagement letter. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditors

As explained more fully in the statement of Directors responsibilities on page 15, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate 

In our opinion:

• the financial statements give a true and fair view of the state of the Group's and of the Company's affairs as at 31 December 2013 and of the Group's profit and Group's and Company's cash flows for the year then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.

Emphasis of matter - uncertain outcome of a dispute

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the uncertain outcome of a dispute between the Company and the purchaser of the German business sold in 2011, regarding the balance of consideration receivable as determined by the completion accounts prepared in accordance with the sale and purchase agreement. The financial statements reflect the amount which the Company expects to receive but this is materially different to the amount being claimed by the purchaser. The ultimate outcome of the matter cannot presently be determined, and no provision for any reduction in the expected amount receivable or liability for amounts that may result has been made in the financial statements.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the strategic report and Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the Parent Company's financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors' remuneration specified by law are not made; or

• we have not received all of the information and explanations we require for our audit.

Paul Randall (Senior Statutory Auditor)

for and on behalf of RPG Crouch Chapman LLP

29 June 2014

62 Wilson Street

London

EC2A 2BU

 

END

 

 

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