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By Nigel Somerville, the Deputy Sheriff of AIM | Wednesday 10 October 2018
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.
Shares in AIM-listed Advanced Oncotherapy are up by 30% today on the back of yet another technological update and a Flash Note from its paid-for research ramper-in-chief GPSL, the second in less than a week. Of course, yesterday the shares were down by around the same amount which all leaves me wondering when’s the placing?
Interims to June 2018, which were released on deadline day of 28 September show that Advanced’s cash was sitting at £3.3 million. With tax credits of £2.9 million to claim and trade and other receivables of £1.3 million (I am ignoring the Inventories of £9.7 million because that continues to go up yet Advanced has no sales) one would have thought the company was is fairly good health. Bbut if we knock off trade and other payables of £3.4 million then we are looking at net current assets (ignoring inventories) of just £4.1 million.
If we then look at the cashflow statement we see that cash flows from operations before working capital movements show that the company burned through £8.7 million is just six months, and cash used in operations came in at £13.3 million. Ouch, and double ouch – that is cashburn of abour £2.2 million per month. I suggest that the company must be pretty much out of cash by now!
So despite having brought in £16.5 million in deferred sales (the China distribution deal) and raising £14.4 million from equity fund raisings, they only had around £4 million of net current assets (ex-inventories) left as at the end of June. The company raised £6.4 million from a placing at the start of September – shall we call that £6 million after costs? But with cashburn of around £2 million per month from the end of June that surely will mean the coffers are completely dry by the end of November. And then we approach the full year, with accompanying audits and needing to be signed off as a going concern (ie enough cash for the next 12 months). It is clear that Advanced needs to raise a stack more money in the next 6 or 7 weeks.
As for those two ramptastic notes from paid-for research group GPSL, last week’s note was hilarious in the light of the above:
Advanced Oncotherapy (AVO-GB): On Track - H1 recovery - solid H2 outlook
….well, if you ignore the cash position!
The company has managed a major turnaround of its dire financial situation from last year.
Erm….not so sure about that…
The project is now well financed…
This morning’s note is filled with promise: the LIGHT system will erode cyclotron growth and render them obsolete by 2023 we are told. Well, maybe, but that still requires someone to buy the new system - evidence from the USA suggests that the market for proton therapy may not be there to the extent promised. And, of course, we know that someone else is building proton therapy machines in the UK already! It is all very well having a superior product, but if the competition has already become established, you’ve got a problem. Just ask people involved with Betamax!
And then there is the small matter of delivery on time, which has already cost Advanced the Sinophi deal. Will we have a repeat of history, or will the new, revised timetable actually work out?
I don’t know the answer to that, but I do know that Advanced needs a placing. Is that why the shares fell so sharply yesterday?
I still say this is a Bargepole stock.
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