Advanced Oncotherapy Plc (LON:AVO), the developer of next-generation proton therapy systems for cancer treatment, announces that it has signed an exclusive distribution agreement (the “Distribution Agreement”) with Yantai CIPU Medical Technology Co. Ltd. (“Yantai CIPU”) 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 £16.5 million to Advanced Oncotherapy.
At the same time, the Company has secured £20.9 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 £37.4 million of financing, of which £30.0 million from Yantai CIPU and £7.4 million from other investors;
Yantai CIPU to pay Advanced Oncotherapy £16.5 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 £13.5 million equity finance;
Other investors to subscribe for 24.6 million shares at 30p, raising £7.4 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 £4.1 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 £16.5 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 13th 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 £0.25 each in the capital of Advanced Oncotherapy (“Ordinary Shares”) at a price of 30p per Ordinary Share (the “Subscription Shares”), providing gross funds of £13,500,000. 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.
