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How lucky Advanced Oncotherapy has been in its investors. Last week the Aim-quoted pioneer of proton beam cancer treatment signed a breakthrough agreement with Yantai CIPU, a Chinese medical technology group, to sell its machines in and around China.
Yantai is paying £16.5m for the distribution rights. It has also agreed to buy just under 30 per cent of Avo for £13.5m, while Segulah, a Swedish private equity business led by Gabriel Urwitz, has raised its stake to 12.6 per cent. That has underpinned Avo’s finances and put the group on firmer footing than it has enjoyed for a while, sparking a 30-plus per cent rise in Avo’s shares last week.
Medi-tech savvy Mr Urwitz is a diehard but not dewy-eyed fan of Avo. He has backed the group since 2012 when Avo bought Adam, the Cern-based business set up to commercialise the breakthroughs coming out of research into subatomic physics and the Large Hadron Collider. Adam had the blue-print for a Light (Linear Accelerator for Image Guided Hadron Therapy) machine that targeted proton beams at hard-to-reach cancers more effectively than conventional radiotherapy. There are a handful of rivals using proton beams to treat tumours, but Light machines are designed to be smaller, cheaper and better controlled than other accelerators.
“At first I thought that the technology was the big risk,” says Mr Urwitz. “But the technology and the people at Avo are outstanding and the connection to Cern is unique. I then became afraid of the financial risk”.
He was right.
A year ago Avo was staring into an abyss. It was guzzling cash, the development of its flagship Harley Street centre had been delayed again and an agreement with another Chinese distributor had just fallen apart. The board had hoped that deal would not only open the door to the all-important Chinese market but would also help it draw in new, mainstream backers. By February, Avo had been forced into the arms of Bracknor, a Dubai-based lender specialising in funding small businesses on hard terms. Bracknor promised to hand over £13m in chunks over two years in return for shares.
The equity drawdown facility meant persistent share issues and repeated dilution. “But we were driven by necessity and needed flexibility,” says Avo’s chief executive Nicolas Serandour, a former banker who joined the company in 2014.
By July, Avo had drawn down £3.9m and its shares had fallen to 15p, from above 80p in January.
That was when Mr Urwitz stepped in. He formed a consortium of like-minded investors, including Swedish small-cap investor Peter Gyllenhammar, to lend Avo enough to pay off Bracknor and end the agreement.
Mr Urwitz’s intervention changed everything for Avo, paving the way for the deal signed last week and making it possible to move on with plans for funding the Harley Street development. Ending the Bracknor contract “was a weight off our shoulders”, sighs Mr Serandour. It would have made it very difficult to bring Yantai on board with the agreement still in place.
The chief executive acknowledges Avo has been “fortunate with its investors”. However, he does not believe Avo has been lucky, unless perhaps in the way that Seneca the Younger defined luck: “what happens when preparation meets opportunity”.
Avo, he says, is not like other biotech hopefuls. “We have the prototype accelerator and we know it works,” he says. That means risk lies less in possible technology failures or regulatory hurdles and more in the process of assembling the machines. “This is more of an engineering project,” he says.
The company is not safe yet. Its losses widened to £13m last year. While its first machine, which will treat superficial tumours, is expected to be up and running in Geneva next year, Avo still has to gain full regulatory approval. The Harley Street centre will not be finished until 2020, assuming no more delays. This is just the start. “The business will require [more funding] eventually,” says Mr Urwitz.
Nonetheless, last week’s deal will shore up the group for a year or so and give other institutions confidence in Avo. “This is the big thing,” the Swede explains.
Few biotech ventures can count on such having such stalwarts at their backs.Mr Serandour may not believe Avo is lucky, but other small business bosses will wish they were as fortunate.