2015 Year in Review
2015 has been another year of significant progress in our aim of delivering the ground-breaking LIGHT (Linac for Image Guided Hadron Therapy) system, a next generation proton therapy system for treating cancer. During 2015 we have delivered on all of the milestones that we have set out in our various shareholder communications. In the high technology environment in which we work, it is sometimes difficult to understand the complexities of our operations so we - as a management team - have taken the decision to provide as much technical knowledge as possible in our shareholder communications. Ultimately however, we remain a company dedicated to providing cancer patients with more effective and affordable therapy and by implication generating superior returns for our shareholders.
With that in mind, our strategy is to disrupt the business model associated with traditional proton radiotherapy equipment through delivering a cost effective proton therapy unit which can be installed in cancer treatment centres of excellence in conurbations worldwide, based on the LIBO (LInac BOoster) technology that has been developed at CERN.
OVERVIEW OF PROGRESS
During the year we have been successful in a number of key areas. Principal among these have been:
- progression on the development and testing of LIGHT elements;
- first sales and pipeline of commercial opportunities; and
- completion of significant financing round.
PROGRESSION ON THE DEVELOPMENT AND TESTING OF LIGHT ELEMENTS
Progress in the technical development of our first LIGHT systems has continued apace with the delivery of a number of components to the team at our facility in Geneva.
In January 2015, we were able to confirm that the first high-speed accelerator or Coupled Cavity Linac accelerating module ("CCL") was completed and delivered to our Geneva facility. Ten CCL modules are required by the LIGHT system to accelerate the protons to the energies needed to treat all radiosensitive tumours found in a typical clinical setting. In May 2015, this first unit successfully completed its first Radio Frequency Power testing. The second CCL was delivered to our testing facility in July 2015, alongside the Modulator and Klystron power units ready for high power testing.
This commenced in August 2015 and was completed at full power in November 2015.
In May 2015 the first RF Power units, manufactured by ScandiNova Systems AB, were delivered to our facility for testing. RF power units generate the high-power needed to accelerate protons to energies whereby they can effectively target cancer cells. The LIGHT machine requires 12 RF Power units in total and we are now going through the process of testing multiple units together at full operational power.
In early July 2015 we were able to initiate our first tests on the Side Coupled Drift Tube Linac ("SCDTL") module. The SCDTLs sit between the Radio Frequency Quadrupole (“RFQ”), which first accelerates the protons to 5MeV, and the CCLs. When combined, the four SCDTL modules will accelerate protons from 5MeV to 37.5MeV. We have been pleased with the results achieved so far.
The support of our suppliers who have delivered to schedule or even ahead of schedule has been key, and has enabled us to complete this phase of the testing both successfully and on time.
FIRST SALE AND PIPELINE OF COMMERCIAL OPPORTUNITIES
The advantages of proton therapy over conventional radiation therapy have been increasingly demonstrated over the years in a number of target cancers which are difficult to reach or closely associated with sensitive structures such as the brain and spinal cord. The unique way in which the proton beam travels through tissue means that only a small amount of energy is delivered along the path to the cancer and that most of the dose is delivered precisely in the cancerous tissue being targeted. As a result, proton therapy overcomes one of the major limitations associated with conventional radiotherapy, that of irradiating healthy tissue leading to unwanted side effects, such as secondary tumours.
However, proton technology to date has been very expensive to install requiring a very significant footprint for the equipment that generates the proton beam and the treatment rooms required. As a result, there are only 54 facilities in the world providing proton therapy treatment at present. These facilities cost up to $200 million, and each clinical treatment radiotherapy course costing up to $100,000.
We believe that our ground-breaking LIGHT system will significantly change the current market dynamic for proton therapy, enabling more machines to be installed, more patients to be treated, and ultimately creating significant value for our shareholders as LIGHT becomes ’best practice’ for proton therapy.
During 2015, we made a number of significant announcements regarding the building and installation of our first LIGHT system and further commercial sales. One of the most important was our agreement in January 2015 with Howard de Walden Estates to lease 141 and 143 Harley Street, London. Harley Street is the most prestigious medical address in the UK and recognised globally as a centre for medical excellence. The properties comprise approximately 11,800 sq ft, which is sufficient to house the LIGHT system and treatment rooms as well as other services required for a fully functional clinic. This will become the UK’s first Proton Therapy Centre using the LIGHT system. The total cost of the redevelopment will be borne by our partner, Howard de Walden Estates and is estimated at £7 million, which is considerably less expensive than the building costs associated with the comparable units being considered by the UK NHS.
In October 2015 we signed a joint venture agreement with Circle Health to operate the Company’s proton beam cancer therapy centre in Harley Street. Discussions are also ongoing surrounding an agreement to supply a LIGHT system alongside Circle Health's planned new-build hospital in Birmingham. Circle Health has around 2,000 partners. It runs private hospitals in Bath and Reading, an NHS Treatment Centre in Nottingham, and an NHS whole-population contract for musculoskeletal care in Bedfordshire. The company is part-owned by its staff. Circle Health will take responsibility for all operational and clinical matters at the facility as well as the additional procurement, fit-out and facility testing requirements needed for full commissioning and beyond the testing required during the technical development of the system. Circle Health will also take responsibility for insurance provision for the centre.
During the year we were also able to announce two further commercial sales of the LIGHT proton therapy system in China through our partnership with Sinophi Healthcare Limited ("Sinophi"). Those sales and the distribution agreement with Sinophi have since been terminated, as per the announcement on 6 February 2017.
This is the second commercial sale of the Company’s next-generation proton therapy system in China and follows the announcement in March 2015 that the Company’s LIGHT system will be installed as part of Sinophi’s oncology hospital project in Huai'an City, in Jiangsu province, East China.
COMPLETION OF SIGNIFICANT FINANCING ROUND
The Company is well resourced following an oversubscribed £21 million equity funding in May 2015. The money raised has funded the manufacture and testing of the various components that make up the LIGHT system which is being assembled at the ADAM facility in Geneva. The funding also supports our first commercial site in the UK at 141-143 Harley Street London. This site is being developed in conjunction with the owners, Howard de Walden Estates, and Circle Health who will run the facility once it is completed. The balance is being allocated to general working capital.
In May 2016, we also secured a £24 million Vendor financing agreement with Metric Capital, a pan-European private capital fund manager. This means that the purchase cost of the LIGHT machine and funding for the operations related to our Harley Street project are all in place. Vendor financing has become standard practice in the Proton Therapy Sector and this forms an essential part of our financial strategy, giving us greater confidence to secure new purchase orders and enhancing our returns.
During the year there was an additional cash benefit to the Company from the sale of our property in Southampton for £290,000 which has been available for further development.
In addition, Oncotherapy Resources Ltd, our subsidiary focused on distributing an innovative brachytherapy device, was disposed of for a total of £100,000 of which £75,000 was received in the period.
Progress continues on the sale of our property in Folkestone, the proceeds of which will be used to partially offset against the loan on the property.
We made a number of senior management changes and appointments during the year. These were all focused on creating a commercially focussed business. In November 2015, we appointed Professor Steve Myers OBE, former Director of Accelerators and Technology at CERN, as Executive Chairman of Advanced Oncotherapy’s fully owned subsidiary ADAM. He is internationally recognised for his engineering contributions and leadership in the development of CERN’s particle colliders over the past 40 years, including the Intersecting Storage Ring Accelerator, the Large Electron-Positron collider and the Large Hadron Collider.
In February 2016, we decided to realign the roles and responsibilities of the Executive team to add additional focus to both operational functions and ongoing sales and business development. For this reason, I became the Chief Executive Officer and Executive Chairman; Sanjeev Pandya, former Chief Executive Officer, became Executive Vice President for Global Business Development. Nicolas Serandour, the Chief Financial Officer, became Chief Operating and Financial Officer. These changes were important and followed the agreement with Thales S.A. ("Thales") which marked a shift in the business from just focussing on the development of the first LIGHT system, to the ongoing commercial roll-out of the game-changing technology. The future commercial development of the business will be critical to the long-term success and value creation within the Company.
In March 2016 we also announced that Michel Baelen, who was previously Health Policy Compliance Director and Head of Regulatory Affairs and Quality Assurance of the proton therapy-based company IBA for over 19 years, and Dr. Gerardo d’Auria, who has more than 30 years of experience working with RF systems and linear accelerators, had joined the Company as Head of Regulatory Affairs and Technical Director.
Investing in our people is the most important investment we make in the future of our business. The development, motivation and well-being of staff is vital to the success of Advanced Oncotherapy, and their dedication, professionalism, knowledge and enthusiasm is always of the highest standard. On behalf of all our stakeholders, we would like to thank all our employees for their hard work and their contribution to the Company’s success during a year in which Advanced Oncotherapy once again demonstrated its ability to meet its objectives whilst constantly striving for innovation. We look forward to their continued support as we enter what promises to be a transformational period for the Company.
OUTLOOK FOR 2016
The strong momentum we have seen in 2015 has continued into 2016. We have had a strong start to 2016. In February we announced that we had entered into an industrialisation agreement with Thales, for our proprietary LIGHT system and secured vendor financing for our Harley Street project.
As 2016 develops and we build on the significant progress that we made in 2015, our priorities are to continue the testing and integration of the components of the LIGHT machine to ensure compliance with the associated regulatory requirements resulting in the initial successful installation into the UK. In addition, we will pursue the commercial roll-out of the technology through our existing partners and forge relationships in new territories to further expand our reach.
We would like to thank all of our stakeholders for their continued support this year and we look forward to a new year of growth and development.