SYRACUSE — Syracuse is poised to become the U.S. center of the new generation of proton-therapy technology.

On Sept. 18, 2013, Advanced Oncotherapy, Plc. (AVO) and the State University of New York Upstate Medical University (SUNY Upstate) signed a letter of intent to establish a relationship, which includes building a three-room, proton-treatment facility; a specialist training center; and a research program in collaboration with CERN (European Organization for Nuclear Research). The clinical facility will include the next generation of proton-beam equipment, a medical application of high-energy, particle-physics research. 

AVO’s proprietary technology is a spin-off of the 27-kilometer linear-accelerator technology located at CERN on the Franco–Swiss border that boosts beams of particles to nearly the speed of light before forcing them to collide. The medical application focuses precise, localized doses of external-beam radiation on cancerous tumors without the risk of damage to surrounding tissue found in conventional x-ray radiotherapy.

In addition to collaborating with SUNY Upstate, AVO plans to set up a comprehensive customer operation in Syracuse to manufacture, assemble, test, market, and distribute this new generation of proton-therapy machines for sale in North America and South America. The company projection calls for 300 employees within two to three years operating in 50,000 square feet of space to manufacture systems that sell for $40 million each. A unit includes the imaging equipment, treatment-planning and patient-positioning software, robotic patient couch, and facility-workflow-management software. With nearly $400 million in advance orders already in the pipeline and another $200 million scheduled to be announced in the third quarter, the company forecasts significant growth of its annual sales. Manufacturing is slated to begin in 12 months, assuming a timely site selection and construction start. 

“AVO is a publicly traded company headquartered in London,” says the CEO, Dr. Michael Jeffrey Sinclair. The company is listed on the Alternative Investment Market of the London Stock Exchange as AIM: AVO. 

“We are a specialist developer and provider of innovative medical technology. AVO aims to deliver market-changing, cost-effective, and clinically superior cancer treatments giving patients more choice, more convenience, and a greater quality of life. We are a provider of internationally endorsed technology for advanced radiotherapy systems to treat both common and rare cancers,” says Sinclair. “Our new machines are more compact and lightweight, unlike the current cyclotrons (invented in 1930) and synchrotrons which can weigh 200 tons, and our machines cost one-quarter to one-fifth that of the current generation of machines. In addition, AVO’s machines are projected to consume only 25 percent of the energy of a cyclotron and require much less shielding as part of the construction process.”

The selection of SUNY Upstate as AVO’s entry into the U.S. market was serendipitous. “Last August, the daughter (Karen Knope Bullivant) of an alumnus of the medical school told me that she was working for a company in London developing the next generation of proton-beam machines,” says Dr. David B. Duggan, a professor of medicine and the dean of the College of Medicine at SUNY Upstate in Syracuse. “From this casual conversation, Karen made contact with Mike [Sinclair] for a preliminary meeting in New York. This, in turn, led to an invitation over Labor Day to visit the company’s facility in Geneva, where we toured the Hadron Collider facility. It was very exciting. AVO’s technology is unique and a simple idea that works. To date, the only barriers to utilizing proton-beam treatments have been the cost and operability. Mike and a small team from AVO then visited Upstate, which led to signing the letter of intent and submitting a plan for a Start-Up NY project. We are expecting approval soon. There are still a lot of pieces to assemble, but I’m optimistic that the project will be underway within a year. … I have reached out to other medical centers across Upstate to join us in making SUNY Upstate’s proton-beam center a site that serves the entire region.”

Dr Jeffrey A. Bogart, a professor and chair of radiation oncology at SUNY Upstate and the medical director of University Radiation Oncology, echoes Dr. Duggan’s excitement. “Proton therapy is an evolving technology that offers better therapy, because it protects healthy tissue and reduces secondary cancers [caused by excessive radiation.] For us, the … [AVO partnership] offers an exciting opportunity both for clinical care and for research,” Bogart says. “The medical university is in the process of hiring two physicists or physicians who will focus on the best way to deliver proton radiation and coordinate with the researchers at CERN. This also gives us an opportunity to provide a unique educational experience for medical students and residents [in several different specialties].”

AVO is planning to launch its collaboration with SUNY Upstate through Start-Up NY, an initiative from Gov. Andrew Cuomo that provides incentives for businesses to relocate, start up, or significantly expand in New York state. Businesses must be affiliated with public and private universities or colleges and site their operations on or near academic campuses. The businesses and their employees qualify for exemptions for up to 10 years from state income-tax; business, corporate, state, or local taxes; property taxes; and fees. A business may also qualify for additional incentives. In order to participate, businesses need to support the academic mission of the institution and not locate in an area in which they would compete with existing local businesses. The program began Jan. 1.

According to the most recent company financial report (six months ending June 30, 2013), AVO, which was incorporated in 2006, generated an operating loss of about $1.25 million. Net assets totaled about $750,000. Year-end 2013 figures are not available until June 2014. The report indicates that during the first half of 2013 AVO raised $2.25 million through issuing new equity. Delivery of the first compact linear accelerators (linacs) is scheduled for the fourth quarter of 2016 or first quarter of 2017. AVO’s contracts call for customer payments beginning in 2017. Major shareholders include Brahma, A.G., Michael Bradfield, and Michael Sinclair.

AVO deals
In April of this year, AVO completed an equity subscription of just over $10 million before expenses. The subscription will fund the development of the first system to be installed at SUNY Upstate as the FDA demonstrator site. Development is projected for completion by the end of 2015, with the first machine delivered in 2016. 

The existing shareholders, directors, and management contributed 35 percent of the total funds raised.

On Sept. 25, 2013, AVO completed its acquisition of ADAM, S.A. (Applications of Detectors and Accelerators to Medicine), a spin-off of CERN. Today, the R&D offices remain in Geneva, Switzerland at CERN. According to Sinclair, this deal positions AVO as a major player in providing three-room, proton-beam, therapy-treatment centers. Brahma, A.G., a private Swiss holding and investment company, founded ADAM in Sept. 2007 to promote scientific know-how and innovations in medical technology for cancer therapy. With offices in Geneva, at the CERN facility, ADAM is a center of excellence for research, engineering, and industrialization of compact linacs and detectors for medical applications, including small accelerators for intra-operative radiotherapy (IORT) and dosimeters for real-time monitoring of the exact dosage delivered to the patient during a radiotherapy treatment. AVO purchased ADAM, which had already invested $30 million in research and development on proton-beam technology, from Brahma, A.G. in an all-stock deal in which the seller received 25.1 percent of AVO shares.

“The proton-therapy world market is expected to triple by 2018,” says Sinclair, citing a 2013 research report by MEDraysintell. “From 1950 until 1990, radiotherapy with protons had been used only in research applications, entering clinical practice in the U.S. in 1990. By 2001, there were three centers operating with another three added in 2006. In 2011, the U.S. had 10 centers. By the end of 2013, there were 45 facilities in 15 countries with 126 treatment rooms. Globally, patients receiving proton-beam treatments represent [a scant] 0.9 percent of all radiotherapy systems used around the world. There is clearly room for substantial growth, and the race is on to develop smaller and cheaper proton systems.” 

The MEDraysintell report goes on to say that the success of smaller and cheaper proton therapy for more cancers provides a positive stance on the future of the proton-therapy market. The report predicts conservatively that the global market will grow 10 percent annually to produce 1,000 proton-therapy treatment rooms and reach $2.5 billion in annual sales by 2030. A more optimistic scenario of 14 percent growth would generate $5 billion in annual global sales.

“Syracuse is an excellent choice”
Manufacturing linear accelerators is a complicated process. “The LIGHT linacs have somewhere between 65,000 and 90,000 SKUs [stock-keeping units, i.e., distinct items],” asserts Robert Rose, AVO’s director of global manufacturing and supply-chain management. “Each machine requires $5 million worth of copper (99.7 percent pure) and machining of the copper … These units have to be manufactured, assembled, and tested before their installation. While 25 to 30 employees are focused on assembly, the rest serve as researchers, trainers, field engineers, the warranty team, those creating and updating the catalogs, and … [personnel] dealing with compliance … Syracuse is an excellent choice for our [manufacturing] center. We have identified a number of suppliers within a 50-mile radius with extensive experience in the auto, aerospace, and defense industries. My timetable calls for having our partners (the major suppliers) in place by this September and delivering the first machine here in Syracuse in 24 months. The company plans to lease 50,000 square feet of space, but the level of interest in the LIGHT linacs is forcing me to consider expanding the facility. AVO is also considering a site in Belfast to manufacture and assemble these compact accelerators and train the operators, but Syracuse is the focus in our development plans. Our site in [Northern] Ireland would manufacture for the European and Middle-Eastern markets, but we plan to ship worldwide from Syracuse. It’s also important to remember that AVO does more than build machines. Our customers are looking for a turn-key operation that includes everything from the machines to the software, patient couches, and even the waiting rooms.”

The projected growth of proton-beam therapy has attracted a number of competitors. According to the 2013 annual report of Ion Beam Applications, S.A. (iba), it is the leader in the field in large, 5-room, cyclotron-based equipment. The publicly held company, with annual sales of $212.5 million and headquarters located in Belgium, holds 51 percent of the global market in clinical proton therapy, 45 percent of the integrated radiopharmacies market, and 35 percent of the dosimetry market. MEDraysintell projects iba will hold only a 29 percent share by 2018. Varian, a company that posted sales of $712 million in Q1 of the company’s 2014 fiscal year, generated $25 million from its particle-therapy business (and from the Ginzton Technology Center). The company just received FDA clearance for its new generation of compact machines — the “ProBeam” — and already has orders for several centers around the world, including four in the U.S. By 2018, Varian is projected to hold 14 percent of the global market. Mitsubishi and Hitachi are two more major competitors, which by 2018 will each hold an 8 to 9 percent market share. In addition to the four companies listed above and adding AVO, MEDraysintell has identified nine other current competitors.

“Despite a very competitive field, we still expect to become an important participant,” asserts the AVO CEO. “The key is the team of experts we have assembled and our cutting-edge technology from CERN.” Trained as a medical doctor, Sinclair brings to AVO over four decades of serial entrepreneurship in the health-care field. He started in England by founding nursing homes, then expanded into psychiatric-hospital development and management, the distribution of medical equipment, and outsourced services for general-practitioners. In 1980, he founded a new company — Hospital Capital Corp. — to develop and operate hospitals and nursing homes. Six years later, Sinclair moved to Boston and started Lifetime Corp., which became the U.S. market leader in home-health care. Listed on the New York Stock Exchange, Lifetime Corp., which employed 70,000 and generated sales of more than $1 billion, was sold in 1993. Sinclair’s next move was to set up a health-care venture fund, specializing in the intersection of health-care services, telecommunications, and information technology. In 2006, he created CareCapital, Plc., a joint-venture to offer expertise in health-care property, develop new facilities in the primary-care sector, and provide facilities management and clinical-support services. CareCapital was AVO’s predecessor company.

AVO’s leadership team also includes Prof. Ugo Amaldi, senior scientist at CERN since the 1970s; Jacopo Nardulli, a physicist who designs and tests accelerators and detectors and is the technical director of ADAM; Rose, the director of global manufacturing and supply-chain management who has 25 years of experience in delivering complex, trans-border engineering projects; Donatello Ungaro, the group managing director of ADAM; Karen Bullivant, director of marketing and new-business development who brings marketing experience garnered at Pfizer, Unilever, and Bristol–Myers Squibb; Sanjeev Pandya, AVO’s COO and an orthopedic surgeon with an MBA who formerly consulted with McKinsey & Co., Pfizer, and Lehman Bros.; Graham Pughe, the CFO; Eric Ferret, an architectural programmer, planner, and project executive with 20 years of experience in proton-therapy facilities in the U.S. and Europe; and Jay Sinclair, manager of U.S. operations and former project manager of four companies under the CareCapital Group.

AVO has also assembled a team of advisers which includes Dr. Anil Desai, a specialist in intra-operative radiation therapy; Dr. Jay S, Loeffler, a world authority on the use of proton therapy and professor of radiation oncology at Harvard Medical School and chair of the Department of Radiology at Massachusetts General Hospital; Stephen Jacobs, who worked with the initial strategic team at Loma Linda University & Medical Center, the first proton-beam therapy installation in the U.S.; Dr. Hanne Kooy, an associate professor at Massachusetts General Hospital’s Department of Radiation Oncology and the director of product development at AVO; and Enrico Vanni, who managed the Geneva office of McKinsey & Co. and McKinsey’s European pharmaceutical practice until his retirement in 2007.

AVO also has a wholly owned subsidiary called Oncotherapy Resources Ltd. (ORL). ORL offers a mobile managed service to hospitals for single-dose intra-operative therapy (SD-IORT).The service is used to treat a variety of cancers, notably early-stage breast, endometrial, and colo-rectal cancers, and utilizes some of ADAM’s non-proton technology. ORL’s clinical/technical team drives the equipment in a van to a subscribing hospital and wheels it into the operating room. The single-dose therapy, administered immediately after a lumpectomy, precludes weeks of daily radiotherapy. The company has exclusive rights in England, Ireland, and Wales to a single-dose radiotherapy technology produced by iCAD Co. (NASDAQ: ICAD), located in New Hampshire. iCAD provides advanced-image analysis and workflow solutions that identify pathologies and pinpoint cancers at an early stage. According to Bullivant, “ORL has rolled out this system to two private hospital groups in England: Spire Healthcare, which has 36 hospitals, and BMI, which has 65 hospitals.”        

Contact Poltenson at npoltenson@cnybj.com