The Advanced Oncotherapy PLC (LON:AVO) goal is to deliver an affordable and novel proton beam therapy (PBT) system, based on state-of-the-art technology developed originally at the world-renowned CERN. In the past 18 months, the project has been de-risked through important technical milestones. AVO is working on the verification and validation phase, prior to CE marking and LIGHT being used on the first patients. The company has made two important commercial announcements regarding the installation of LIGHT systems, which highlights the increasing confidence that is building in AVO’s ability to deliver LIGHT in the near future.
- Strategy: AVO is developing a compact and modular PBT system, which is affordable for the payor, financially attractive to the operator, and generating superior patient outcomes. AVO benefits from technology know-how developed by ADAM (CERN spin-off) and relies on a world-class supplier base.
- Harley Street: Last week, AVO announced a new partnership with The London Clinic (TLC), which will run the day-to-day operational activities for the LIGHT machine at its Harley Street site. Although financial terms were not disclosed, it will have a profit share arrangement that highlights AVO’s innovative business and financing strategy.
- Mediterranean Hospital of Cyprus: Today, AVO has also announced a purchase order, valued at €50m/£41.7m, for the installation of a LIGHT accelerator system, which will support three treatment rooms. AVO will also receive a share of the profit generated from this PBT service.
- Risks: Since 2018, the more complex technical challenges have been overcome, and progress towards a fully functional accelerator is under way in readiness for CE marking. Focus is now moving towards commercial execution and management’s ability to have its innovative financing strategy adopted.
- Investment summary: Advanced Oncotherapy’s market capitalisation of £88m equates only to the amount invested into LIGHT to date, which does not reflect either the enormous technical challenges that have been overcome, or the market potential. DCF analysis of LIGHT’s prospects gives an NPV of at least 229p a share (fully-diluted). The disconnect between fundamental and market valuations offers an interesting investment opportunity at a time when commercial execution is showing through.
