Advanced Oncotherapy PLC (LON:AVO) Chief Executive Officer Nicholas Serandour & Bracknor Investment Group Chief Executive Officer Pierre Vannineuse caught up with DirectorsTalk for an exclusive interview to discuss their £26 million financing agreement
Q1: Gentlemen, good morning and congratulations on the financing agreement announced this morning. For our readers, can you tell us more about Bracknor and the deal with Advanced Oncotherapy PLC?
A1: Nicolas Serandour – The deal itself is a flexible and staged £26 million financing, through issuance of convertible notes and, subsequently, warrants. This facility offers a £13 million funding but, we have the ability to raise an additional £13m at our entire discretion and, in fact, we can also renew the arrangement if we wish. The tranches can be repaid in cash for a proportion of up to 50% cash, again at our discretion, with the remaining being paid back in shares. The transaction also assumes 1 warrant for 5 notes at a 30% premium. The fact that we have influence on the timing was important to us, because it allows us to cover our financing needs in a flexible and optimal manner.
Pierre Vannineuse – Bracknor is an investment firm based in Dubai. We invest in early stage and mid-sized companies located, primarily, in Europe. Since our creation in mid-2015 we have financed over 16 companies, for the most part in the healthcare sector, providing them with capital and technical support.
Q2: Pierre, why did you chose Advanced Oncotherapy?
A2: Pierre Vannineuse – Well, first of all, at Bracknor we receive many queries every day, so we have to be very selective as to how we deploy cash. This is particularly relevant in the case of AVO, since it will be our biggest investment in the UK, which has also managed to build an incredible network of partners such as CERN and Thales. For us, AVO was a perfect match for our primary strategy to be a rock-solid partner regarding what we consider investment grade healthcare companies across the world. There are two aspects to be developed in this regard: the financial adequacy and business development possibilities. The latter will leverage Bracknor’s ability to place AVO’s best-in-class LIGHT technology in the Middle East. AVO’s proprietary linear proton accelerator enables minimally invasive tumour treatment through greater accuracy, while having a lower purchase and maintenance cost making it, ultimately, more affordable for patients. Indeed, Bracknor is focused on healthcare companies and has already started cooperating with numerous med techs to have their products and services distributed and implemented in the GCC region through the extensive network of the Mahmood Saeed family, represented by its chairman Mr. Aboudi Gassam (VP business development of the Mahmood Saeed Collective Companies). On the economic partnership side, we pride ourselves in the firm equity financing commitment we deliver for the companies, allowing management to focus on what matters most: the commercial and scientific development of the company irrelevant of idiosyncratic or macro market conditions.
Q3: Can you comment on dilution?
A3: Nicolas Serandour – This is a convertible instrument and as such it carries some element of future dilution. This transaction allows the company to receive immediate cash on demand, whenever necessary against deferred dilution over time while tracking the valuation of the company. As such we have an opportunity to acquire funding at optimised returns while reducing the risk profile of the business. In turn this is expected to create additional value which should reflect in the share price and provide equity funding with the best possible dilution ratio (post value creation). Importantly, and in the spirit of limiting potential dilution and providing the most optimal financing structure, we have agreed on a number of options: as an example, we have the option but not the obligation to draw down more than £13m. That is entirely at our discretion. We can also repay up to half of the tranches in cash.
Q4: What are the next steps?
A4: Nicolas Serandour – We have agreed with Bracknor to draw down the first tranche, which we can do immediately. The next step will be a shareholder meeting, which is needed as we require shareholder approval to issue the relevant number of shares beyond the first tranche. In the meantime, and while the critical work around the manufacturing of the first LIGHT system continues, we have addressed a number of challenges. This includes the termination of our distribution agreement in China, which allowed us to retain our full Chinese rights; we have looked at ways to improve our governance through the appointment of two new directors, including a Senior Independent NED, and we are now looking forward to giving an update on our strategy and roadmap to commercialisation during our investor days on the 6th and 7th March.
Pierre Vannineuse – On my end, I intend to participate in several roadshow events together with AVO’s management. That’s important because we stand together with Advanced Oncotherapy in this story, which we find to be truly remarkable. Amongst the various deals I have been involved with, I can also say without hesitation that the team at AVO is one of the most talented and experienced I have ever come across and I look forward to strengthening our relationship with AVO.
Q5: Pierre, how do you see the involvement of Bracknor, going forward?
A5: Pierre Vannineuse – We want to be a long-term investor. To capture long-term upside, in which we believe, we intend to achieve investment return through the option agreement. The conditions and covenant we have given to the company are the testimony of our belief in the future of the enterprise. In addition, and as a family office, we can always adjust conditions to best serve our portfolio companies’ interest. We think this flexibility is really important and that is what is lacking in today’s world. Bracknor considers this investment as an opportunity to participate in the most relevant company in the revolutionary field of proton beam therapy for cancer, with a solution that answers all current impediments. Based on the success of, now relatively outdated, X-ray treatments, we are convinced that the company has untamed potential in a world with an aging population and rising prevalence rate of cancers.
