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Explosive email leak - Advanced Oncotherapy and Sinophi: the real timeline emerges

By Tom Winnifrith, The Sheriff of AIM | Monday 5 December 2016


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


AIM promote Advanced Oncotherapy (AVO) and Sinophi have already publicly disagreed as to whether the $120 million order by the Chinese has been "terminated" or not and and on when it was "terminated". Advanced announced the bad news on November 24 suggesting no termination, Sinophi used the T word and said it told Advanced in "early November". A source out East has ensured that I have now obtained access to confidential emails from Sinophi to Advanced which show that Advanced was aware of problems far earlier and at a time when it was soliciting funds from investors. It did not tell those investors. Heads must roll.

The directly contradictory statements made by Advanced and Sinophi from 24 November indicate a relationship in deep trouble and so more such emails are likely to emerge. This is just the start.
The timeline is now critical.On 30 September 2016 Advanced carried out a £10 million placing at 100p. Those shares were admitted to AIM on 7 October. On 14 October the company announced an up to £4.02 open offer at 100p which closed at 11 AM on 31 October four hours after Advanced announced a maufacturing tie up with Thales.

The emails sent by Sinophi are dated either side of the announcement of the open offer on 14 October and refer to the Thales tie up which makes it clear that Advanced was holding back what it deemed to be good news to support an open offer which, in the end, attracted little support. AIM Rules dictate that you announce major news to the market not just selected individuals and in a timely fashion. But that is a minor breach compared to the rest of the email content which is horrific..

The emails were sent to senior management at Advanced including CEO Nicholas Serandour.

They relate to meetings that Sinophi held with the two end user Chinese customers. The first email concerns the Changchun customer and includes the choice phrases "they are now strongly questionning whether AVO will be able to produce a working machine", "They are shocked that the first machine will now be delivered in February 2019 ...and a date in 2021 for securing final CFDA approvals" "Lengthy discussion followed on the delays compared to what they said Mike Sinclair told them when he and the architects/engineers met Changchun team in September 2015, the Changchun guys telling us that Mike promised the machine would be delivered in 2017 and they would be doing patient clinical trials by the end of 2018" "They were very unhappy about the delivery date in 2019 and the end of CFDA process in 2020/21 date."

The killer phrase: "Changchun told us several times and in different ways that they cannot wait that long. Very difficult meeting. We now have a serious problem." A formal statement by Changchun on what it wished to do was promised for the following week, i.e. when the open offer was still open.

The second email concerns a meeting with Huai'an (HA)."Our assessment is that the Huai'an team is even more sceptical than Changchun." Hmmm that sounds bad.

HA asked when Advanced would have a working prototype and " They asked us directly whether we thought the chances of AVO producing a working prototype are any better than 50:50. The previous lack of communication and schedule delays have eroded a lot of trust."

"HA knows that Changchun will get the first machine for China so they focussed on may 2019 as the date for the second machine availlable for China.and HA. HA expressed repeated disappointment with the lengthy delay over previous schedules"

Now here is the killer line in this email: "The conclusion of the meeting was HA telling us they cannot wait until May 2019 or later for a machine adding they do not have confidence this schedule will be met anyway." HA stated it would have to "go away and review the project and funding plans."

Advanced has to date announced just two commercial orders: these two Chinese orders which it claimed were worth $120 million. Whoever the actual customer is the failure of Advanced to deliver anywhere near on the promised schedule must mean that it has not got a cat in hell's chance of getting paid.

Advanced's management team were aware that these orders were, at best, in serious jeopardy when announcing the open offer and as it remained open and it should surely have alerted its shareholders to the fact as they considered whether to back the offer or not. Indeed the wider market had every right to know under AIM rules. This is clearly price sensitive information.

What we do not know at this stage is whether either of the end customers had intimated that they were seriously unhappy prior to the announcement of the placing. That will no doubt emerge in due course. But these emails indicate strongly that the Sinophi timeline of formal "termination" not that of Advanced looks far more plausible. And what we also know is that Advanced sat on what was clearly very bad news as it endeavoured to raise cash.

At the time of my initial Sinophi expose I urged the Nomad to review all email correspondence before allowing the company to post a response. It is clear that Nomad Stockdale cannot have done that and simply took Advanced at its word. It must now be feeling rather foolish and should surely consider its position. At the very least a full forensic is needed at once.

Meanwhile, it goes without saying that Advanced shares are completely uninvestable.

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