Enjoy this free share recommendation on Advanced Oncotherapy extracted from the latest edition of the premium Trendwatch newsletter…
Proton beam therapy is coming to the UK… at last…
IN THE SPRING of 2014, a 5 year-old boy called Ashya was seriously ill in Southampton General Hospital with a brain tumour. His parents, Brett and Naghmeh King researched his condition themselves and concluded that the best hope for Ashya was for him to be sent abroad to have proton beam therapy. But the NHS refused. His doctors said Ashya was too ill to travel, and that anyway, proton beam therapy wouldn’t be suitable for his condition. A furious row erupted between the doctors and parents. Finally, the parents removed Ashya from hospital against the will of the doctors.
What happened next sparked a media feeding frenzy all over Europe. You probably remember it. The couple boarded a cross-Channel ferry to seek treatment abroad, bringing down upon their heads the full wrath of the State. An international arrest warrant was issued as though the family were are bunch of gangsters. Two days later, after an international manhunt, they were arrested in Madrid, spending several nights in prison separated from their son, who was sent to Malaga hospital.
A few days later, a High Court hearing was urgently convened. The court ruled that Ashya could receive proton beam therapy in Prague. The NHS later agreed to fund his treatment.
Then what happened? Were the doctors, in their infinite wisdom, triumphantly vindicated, and the poor misguided parents proved wrong? No. In March 2015, Ashya was declared to be cancer-free. And the family moved back to the UK. The last we heard of him about three months ago, he was back at school – and Mum and Dad are still battling the doctors, claiming that the NHS is refusing Ashya vital follow-up treatment (out of spite?).
So it seems that proton beam therapy can be highly effective, at least for certain cancers. The reason: the beam of hy-drogen protons they produce is much more tightly focused on the tumour itself, with little damage to surrounding tissue, even behind the tumour. Consequently, the side effects are much less compared to conventional radiotherapy.
Trouble is, these machines are monstrous in size and cost. Apart from one lower-power machine designed to treat eye problems, there is still no operational proton beam machine in Britain. A private company called Proton Partners International recently took delivery of its first machine at the Rutherford Cancer Centre in South Wales. It won’t be operational until next year. Their machine weighs 55 tonnes. Given the cost, the surprise is not so much that we don’t yet have an operational machine in the UK. The surprise is that a relatively less well off country like the Czech Republic has one; Poland has two and Italy has three. There are only about 60 operational machines worldwide.
You can’t buy shares in Proton Partners (incidentally, star investment manager Neil Woodford is one of its prime movers – though he has lost some of his twinkle recently). But there’s another company that is pursuing a more revolutionary approach. That company is the AIM-listed Advanced Oncotherapy (formerly CareCapital).
To understand the origins of the company, you have to travel back in time to 2007, and the formation of a company called ADAM. This was a spin-off from CERN (the European Organisation for Nuclear Re-search). ADAM scientists were involved in the Large Hadron Collider project. ADAM’s objective was the development of a second-generation proton beam machine called LIGHT (Linac Image Guided Hadron Technology).
In 2013, Advanced Oncotherapy acquired ADAM.
The company claims several major advantages for LIGHT:
• A reduction in cost for a fully equipped facility from around $175m to around $40m.
• LIGHT is about a quarter of the size, and lighter, reducing construction costs.
• LIGHT has higher beam precision.
• LIGHT is modular, enabling operators to more easily tailor their facility to particular treatments.
• LIGHT’s radiation shielding requirements are much lower.
Make no mistake: This is a very high risk company, and definitely not one for widows and orphans. Investors have lost a lot of money on this share. In April 2015, the share price was 300p. As recently as June last year, it was as high as 200p. It’s now a lowly 7.75p. Most investors appear to have given up on it. It is perhaps not surprising, given that the various modules that make up a LIGHT machine have still to be fully integrated. In other words, the company still doesn’t have a working prototype, let alone a machine ready for full production. And even then, it will still need to get the necessary regulatory approvals.
It does has a manufacturing agreement with French giant Thales, with the objective of producing eight LIGHT machines a year from two production lines.
Its balance sheet is weak too. It raised a gross £10m in a placing its last financial year; and more recently took on a £3.9m loan from a group of significant Scandinavian shareholders, on fairly horrendous terms. And it has no revenue. For what it’s worth, here’s the track record to date.
|Pre-tax profit (£m)||(2.71)||(3.94)||(7.46)||(6.56)||(10.3)|
|Earnings per share (p)||(15.7)||(14.6)||(11.5)||(9.81)||(17.1)|
We’ve seen forecasts for this company for 2017 and 2018, but we’re not publishing them because they look like nonsense. The forecast shows a profit in 2018, but the first patient is not due to be treated at Harley Street until the second quarter of 2020.
So why are we going for Advanced Oncotherapy now? Several reasons.
First, the best time to buy a share can often be when the last bull has capitulated. At that point (assuming that the company does indeed have a long-term future), the only way is up. The price has been flat-lining for several weeks. The fact that it has reappeared in our uptrend list suggests that a saucer shaped price recovery may be in the offing. Such a chart formation often presages a climb back from the depths. But then again, it could be the twitching of a dead cat.
The second reason for buying is that the technological risk is beginning to diminish – note: only beginning to diminish. The latest technological updates, the latest of which was issued a few days ago, are most encouraging.
Third, it’s already talking to potential customers around the world. Demand is high, and LIGHT’s relatively low cost has the potential to disrupt the market.
Fourth, when the first machine is operational, it will be installed in… of all places… a basement in a Grade II listed building in Harley Street, London, the construction of which is already under way. The fact that such a machine can be installed in a converted building in a residential area rather than a purpose-built three-storey building in the middle of nowhere will be a dramatic illustration to the world of the disruptive nature of the company’s technology.
If you have nerves of steel… BUY (19.5p; forecast yield: nil; market capitalisation: £14.6 million; initial stop-loss: 15p; EPIC: AVO; sector: Healthcare; classification: AIM; website: www.advancedoncotherapy.com; tel: 020 36178728 ).
We hope you enjoyed this this free share recommendation extracted from the latest edition of the premium Trendwatch newsletter…