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Advanced Oncotherapy Plc

Advanced Oncotherapy will receive £16.5m through exclusive distribution agreement just signed

Advanced Oncotherapy (LON:AVO), the developer of next-generation proton therapy systems for cancer treatment, announced this morning that it has signed an exclusive distribution agreement with Yantai CIPU Medical Technology Co. Ltd. to market and sell Advanced Oncotherapy’s LIGHT system across China, Macau, Taiwan, Hong-Kong and South Korea. Under the agreement, Yantai CIPU will make a payment of GBP16.5 million to Advanced Oncotherapy.

Commenting, Nicolas Serandour, CEO of Advanced Oncotherapy LON:AVO, said: “I am delighted that we have been able to conclude deals to provide shareholders not only with the security of longer-term financing, but which also introduce a new experienced strategic investor with strong distribution capacity and already established commercial interest in Asia, particularly in one of our key target markets, China.

“It is a little over a year now since I took on the role of Chief Executive Officer and I am pleased to note that as the calendar year draws to a close we have successfully integrated and tested the proton source, RFQ and SCDTL significantly de-risking the development process. We are also pleased with the progress of the Harley Street site with the next stage of sub-structural work well underway.

“This deal is consistent with our strategy to focus our resources on the technological development of the first LIGHT system and to establish partnerships with those businesses that have a strong track record of market access and a unique expertise in their own geographies. With our long-term financing arrangements now well engaged we can continue to focus on making our unique proton therapy technology available to patients around the world.”

At the same time, the Company has secured GBP20.9 million of equity investments to fund the continuing technical development of its first LIGHT system and its installation at the Harley Street Proton Therapy Centre.

Key highlights

— Advanced Oncotherapy to raise a total GBP37.4 million of financing, of which GBP30.0 million from Yantai CIPU and GBP7.4 million from other investors;

— Yantai CIPU to pay Advanced Oncotherapy GBP16.5 million to market and sell Advanced Oncotherapy’s LIGHT systems across China, Macau, Taiwan, Hong-Kong and South Korea;

— Yantai CIPU to subscribe for 45 million shares at 30p, raising GBP13.5 million equity finance;

— Other investors to subscribe for 24.6 million shares at 30p, raising GBP7.4 million. These other investors include members of the Board, as well as the members of the consortium formed by AB Segulah who are converting the loan made to the Company in July 2017 and interests of a total of GBP4.1 million;

— The subscription price of 30p per share represents a premium of 2% to the volume-weighted average share price of one month prior to 1 December 2017.

Distribution Agreement with Yantai CIPU

Yantai CIPU and the Company have entered into a distribution agreement whereby Yantai CIPU has been appointed as the exclusive distributor in the People’s Republic of China, Hong Kong, Macau, Taiwan and South Korea of the LIGHT system, the Company’s proprietary proton accelerator. As part of the distribution agreement, Yantai CIPU has agreed to pay Advanced Oncotherapy GBP16.5 million. The receipt of funds is subject to approval from the Government of the People’s Republic of China for the transfer of monies to the United Kingdom.

Having already identified eleven potential installation sites for the LIGHT system, Yantai CIPU and the Company have committed to a target of three installations over the first four years and the financing of ten further systems following the regulatory approval of the LIGHT system in China. Going forward, the Board remains confident that there will be a high demand for the product, particularly as precision medicine has been listed as one of the strategic industries to receive support in the People’s Republic of China’s 13(th) Five-Year Plan for economic and social development (2016-20).

As part of the distribution agreement, Advanced Oncotherapy will issue to Yantai CIPU 500,000 warrants to subscribe for Ordinary Shares pursuant to the terms of a warrant deed to be executed by the Company at the time of admission of the new Ordinary Shares as detailed below (the “Warrants”) in respect of each binding purchase agreement for the sale of a LIGHT system up to a maximum of 11 purchase agreements. The Warrants are exercisable for five years after issuance at an exercise price equal to 130% of the one-month average share price prevailing on the date of the delivery of a LIGHT System.

About Yantai CIPU

Based in Yantai, China, Yantai CIPU invests in the health industry, including the field of high-end medical equipment companies, both in China and internationally. Yantai CIPU is ultimately owned by the Han family.

Equity Investment from Yantai CIPU

In addition, Advanced Oncotherapy has signed a subscription agreement with Yantai CIPU, whereby Yantai CIPU will subscribe for 45,000,000 ordinary shares of GBP0.25 each in the capital of Advanced Oncotherapy (“Ordinary Shares”) at a price of 30p per Ordinary Share (the “Subscription Shares”), providing gross funds of GBP13,500,000. Shareholders should be aware that these funds are not currently in the UK and the receipt of these funds and of the funds under the Distribution Agreement is subject to approval from the Government of the People’s Republic of China for the transfer of monies to the United Kingdom.

In addition, the Equity Investment by Yantai CIPU is subject to the approval of the Advanced Oncotherapy shareholders as set out below and to completion of customary due diligence in relation to a new substantial shareholder in an AIM quoted company.

It is expected that Mrs. Zhang RenHua and Mr. Chunlin Han, will join the Board of Advanced Oncotherapy following completion of the subscription by Yantai CIPU and completion of the requisite due diligence procedures for the appointment of directors to the board of an AIM quoted company. A further announcement regarding their appointment will be made in due course. The Board expects that the Company’s strategy for the LIGHT system’s commercial roll-out in Asia will benefit greatly from the Han family’s extensive knowledge and experience in this area. Together, the Company and Yantai CIPU intend to explore opportunities to manufacture parts of the LIGHT system in the region.

Additional Subscriptions

Conditional upon completion of the subscription by Yantai CIPU, certain existing or new shareholders in the Company have also agreed to subscribe for, and/or convert outstanding loans into, new Ordinary Shares.

This includes the consortium formed by AB Segulah, a significant shareholder of the Company, AFMS Radgivning Och Invest AB, Peter Gyllenhammar AB, Mijesi AB and Emendum AB, who are converting the loan made to the Company in July 2017 and interests of a total of GBP4.1 million into 13,555,617 Ordinary Shares (the “Conversion”).

Executive Directors Dr. Michael Sinclair, Pr. Stephen Myers, Nicolas Serandour, and Non-Executive Directors Henri Vanni, and Dr Nick Plowman have agreed to subscribe in total for 4,279,050 Ordinary Shares at a price of GBP0.30 per Ordinary Share, providing additional funds of GBP1,283,715.

The subscription by Yantai CIPU, the directors and other investors and the Conversion will be subject to shareholder approval for the authority to issue the relevant Ordinary Shares as set out in a Circular to be sent to shareholders shortly. Following completion of these transactions, the total number of shares in Advanced Oncotherapy will amount to 150,501,672. Yantai CIPU will hold 29.9% of the enlarged issued share capital of the Company.

The participations by Yantai CIPU, AB Segulah, other investors and certain directors in the transactions set out above and their resulting holdings in the enlarged share capital of the Company will be as follows:

of enlarged 
share capital 
Number of              held after 
newly subscribed              completion 
Investment              shares     of the transactions 
----------------------------------------  ----------------  ------------------  ---------------------- 
Yantai CIPU                                GBP 13,500,000          45,000,000                   29.9% 
----------------------------------------  ----------------  ------------------  ---------------------- 
Consortium led by AB Segulah (Loan 
Conversion)                                GBP 4,066,685          13,555,617                   12.6% 
----------------------------------------  ----------------  ------------------  ---------------------- 
Dr Michael Sinclair, Executive 
Chairman                                     GBP 500,000           1,666,667                    4.4% 
----------------------------------------  ----------------  ------------------  ---------------------- 
Nicolas Serandour, CEO                        GBP 500,000           1,666,667                    1.2% 
----------------------------------------  ----------------  ------------------  ---------------------- 
Prof Stephen Myers, Executive Chairman 
of ADAM                                      GBP 100,000             333,333                    0.5% 
----------------------------------------  ----------------  ------------------  ---------------------- 
Henri Vanni, NED                              GBP 137,500             458,333                    1.1% 
----------------------------------------  ----------------  ------------------  ---------------------- 
Dr. Nick Plowman, NED                          GBP 46,215             154,050                    2.4% 
----------------------------------------  ----------------  ------------------  ---------------------- 
Other investors                             GBP 2,019,543           6,731,812                    4.9% 
----------------------------------------  ----------------  ------------------  ---------------------- 
Total                                      GBP 20,869,943          69,566,479 
----------------------------------------  ----------------  ------------------  ---------------------- 

Lancea LLP advised the Company on the Subscription and Distribution agreements made by Yantai CIPU.

Status of loan facility by Metric Capital Partners

Advanced Oncotherapy and Metric Capital Partners have confirmed their intention to continue to work towards the provision of a GBP24 million loan facility. Terms and conditions are being updated to reflect the developments since the initial announcement of the agreement with Metric Capital Partners in May 2016.


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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.