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Hardman & Co – Advanced Oncotherapy (AVO) – China- an emerging opportunity
Advanced Oncotherapy (AVO) – Focused on delivering a more affordable, novel proton-based radiotherapy system, based on a technology originally developed and tested at the world renowned CERN facility in Switzerland. Commercial momentum is building, having recently secured a second purchase order in China, formed a JV with Circle to operate potentially the first proton therapy facility in the UK (Harley Street, London) and further expanded its order book which amounts potentially to $480m. AVO’s system has many attributes (affordability, modularity, versatility) that should appeal to the growing healthcare demands of China, amongst others.
- China: AVO announced that it had received a purchase order for its LIGHT system from the China-Japan Union Hospital of Jilin University in October 2015, valued at $75-80m. This represented the second purchase order in China. Additionally, the Company has four further framework agreements in place.
- Addressable market: China represents a significant opportunity with the capacity for at least 100 proton therapy centres. With only two currently operational and a further eight in the pipeline, AVO appears well placed within this significant emerging market, having already secured a 20% share of pipeline.
- Competition: AVO (market cap £103m) is a pure play on proton therapy. The nearest direct competitor in terms of proton therapy is Ion Beam Applications or IBA (market cap £643m), in which proton therapy represented ca.57% of 1H 2015 revenues and 62% of EBITDA. Varian Medical Systems (market cap £4.9bn) and Elekta (market cap £1.89bn) are the leading providers of radiotherapy systems whilst Accuray (market cap £283m) sells the only robotic radiosurgery system, CyberKnife. Of these, Varian also has a presence in proton therapy. Comparative valuations for radiotherapy companies * Valuation ratios adjusted for calendar year end Prices at close of business on 1st February 2016 Source: Hardman & Co Life Sciences Research.
- Valuation: With two system sales, a potential order book of 12 systems ($480m+) and the capacity to produce up to 30 systems p.a., operational momentum is building. We have not altered our forecasts. Timing of revenues from this purchase order is not yet clear.
- Risks: Delays to completing LIGHT installation in Harley Street in 2017 and first patient treatment in 4Q 2017 – both mitigated by partnership supplier network, and the small size relative to its principal competitors which impacts potentially on vendor financing capability as well as external perceptions.
Investment summary: Advanced Oncotherapy Plc is entering a market on the cusp of a steepening adoption curve, not least in China, with a PT solution that is unique with respect to its competitors and addresses the needs of all key stakeholders. The Company has sufficient cash to achieve its near term goal of first patient treatment in 2017 beyond which additional capital may be required.
Download full report Hardman_AVO-01.02.16
Advanced Oncotherapy announces 2nd commercial sale of proton therapy system in China, plus further agreements for four new proton therapy centres.
Advanced Oncotherapy announces the second commercial sale of proton therapy system in China, plus further Framework Agreements for four new proton therapy centres.
Advanced Oncotherapy announces that, further to the announcement of 20 August 2015, it has now received a purchase order for its LIGHT machine from the China-Japan Union Hospital of Jilin University, through its partnership with Sinophi Healthcare Limited.
The China-Japan Union Hospital is one of the largest hospitals in NE China with over 3,300 beds and is located in Changchun, Jilin Province. The purchase order, worth between $75-80m (subject to final configuration of the treatment rooms), relates to a single LIGHT system to be installed at the heart of a five treatment room facility.
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.
Sinophi is a UK company investing in and managing public general and speciality hospitals in China, providing them with the best and most affordable technology to improve patient outcomes. Sinophi has an exclusive 15-year agreement with Advanced Oncotherapy to distribute the Company’s LIGHT system in China and a number of other countries in Southeast Asia.
In addition, and to coincide with the UK State Visit of China’s President His Excellency Mr Xi Jinping, Sinophi have announced that further Framework Agreements will be confirmed at a signing ceremony to be held later today. In total the signing ceremony will ratify the building and establishment of various hospital facilities in China at a total cost of approximately £800m. These include the building of the two hospitals in Huai’an City and Changchun, Jilin Province where Advanced Oncotherapy has now received purchase orders for its LIGHT system, as well as four additional Sinophi Proton Centres that are expected to use Advanced Oncotherapy’s technology, and the development of a maternity hospital.
The Framework Agreements with the four additional Sinophi Proton Centres agreements do not as yet constitute purchase orders for the LIGHT machine. As and when these are received the Company will update shareholders.
Commenting, Sanjeev Pandya, CEO of Advanced Oncotherapy, said: “I am delighted to have signed our second commercial purchase order for our LIGHT system. This, and the further Framework Agreements being signed today, are a testament to the successful partnership between Sinophi’s strong healthcare network in China and our ground-breaking proton therapy technology. The advantages of our technology over existing products is generating strong interest across China. With over 20% of the world’s newly diagnosed cancer cases coming from China this market represents a huge opportunity for us.”
Commenting on the signings, Dr Hanif Kanji, CEO of Sinophi Healthcare Limited said: “The UK and China have many shared challenges dealing with cancer. Our Sinophi Proton Centres in five of China’s leading cities will expand to more Chinese cities to support the objectives of the Chinese Government’s healthcare reform programme by making proton treatment widely available at reduced cost, saving lives and improving the quality of life of cancer patients.”
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Advanced Oncotherapy Plc |
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Sanjeev Pandya, CEO |
Tel: +44 (0)20 3617 8728 |
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Nicolas Serandour, CFO |
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Westhouse Securities (Nomad & Joint Broker) |
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Antonio Bossi / David Coaten |
Tel: +44 (0)20 7601 6100 |
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Beaufort Securities (Joint Broker) |
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Jon Levinson / Elliot Hance |
Tel: +44 (0)20 7382 8300 |
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Walbrook PR (Financial PR & IR) |
Tel: +44 (0)20 7933 8780 or avo@walbrookpr.com |
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Paul McManus / Anna Dunphy |
Mob: +44 (0)7980 541 893 / Mob: +44 (0)7876 741 001 |