At a signing event due to be held at Lancaster House today, Sinophi Healthcare CEO Dr Hanif Kanji and Professor Zhao GuoQing, President of the China-Japan Union Hospital of Jilin University will confirm a contract to build a Sinophi Proton Centre at the hospital and announced a purchase order with Advanced Oncotherapy plc for a LIGHT proton therapy machine for the facility. The China-Japan Union Hospital is located in Changchun, Jilin Province and with 3,328 beds it is one of the largest hospitals in NE China. This represents the second purchase order from China and follows the first that was signed in March 2015, when Sinophi Healthcare and Advanced Oncotherapy plc announced that Sinophi Healthcare agreed a purchase agreement for one LIGHT proton therapy system to be installed in Huai’an. As a result of today’s announcement, an oncology hospital with a proton centre and a maternity hospital will be built in partnership with the Huai’an First People’s Hospital (3,000 beds) and with Huai Yin Hospital (1,000 beds). Sinophi China Hospital Holdings Limited, a company invested by Sinophi Healthcare, Morgan Stanley Private Equity Asia, Sihuan Pharmaceutical and Euromax will invest in the two hospitals. Sinophi China Hospitals Holdings has already invested in Huai Yin Hospital. The purchase order itself is large, being worth between $75-80m (subject to final configuration of the treatment rooms) and relates to a single LIGHT system to be installed at the heart of a five treatment room facility.
Beaufort Securities view: A huge endorsement! The second LIGHT purchase order from China, along with the prospect of construction of a further four Proton Centres in the country (with an overall costing of some £800m) that will also use AVO technology. This is quite clearly a massive testament to AVO’s successful partnership with Sinophi. It is perhaps even more important to recognise that this has come from the hardest of task-masters (namely Sinophi’s scientists and Chinese hospitals specialists) who genuinely have the ability to understand the science behind LIGHT and to determine whether-or-not AVO can actually deliver a working device within the price, specification and time schedule suggested. Together with the various Letters of Intent from other interested parties and the CEO, Sanjeev Pandya’s own confidence that “this deal is the first of many commercial opportunities for our LIGHT system around the world”, AVO looks set to take the medical instruments world by storm. Indeed, the scale of the Chinese opportunity alone could be huge; the size of the cancer treatment challenge there is illustrated by data from the World Health Organisation’s ‘World Cancer Report’. In 2012, China had 3.07 million newly diagnosed cancer cases, 21.8% of the world total; China also had 2.2 million or 26.9% of the world’s total cancer deaths. The report states China registered the most new cancer cases and deaths from four types of malignant cancer: liver, oesophagus, stomach and lung. In summary, the reality is that by delivering exactly ‘what it says on the tin’, the operational and cost advantages LIGHT offers will effectively render first generation proton therapy devices all but obsolete. Its principal limitation would then become simply its capacity to deliver to a global opportunity that will grow dramatically beyond its current US$2.5bn size. Given such an outcome, of course, major international competitors wishing to remain in the game will almost certainly be willing to pay a handsome price, one way or another, to get their hands on AVO’s proprietary technologies. Advanced Oncotherapy plc is one of Beaufort’s key investment picks for 2015.
Beaufort Securities acts as corporate broker to Advanced Oncotherapy plc
