Analyst Q&A with Dr Martin Hall: Advanced Oncotherapy (LON:AVO)

Advanced Oncotherapy (LON:AVO) is the topic of conversation when Hardman and Co’s Head of Life Sciences Dr Martin Hall caught up with DirectorsTalk for an exclusive interview.

Q1: You recently released a report on Advanced Oncotherapy highlighting some interesting developments for the company. Can you tell us what has been going on?

A1: First, at its AGM in July, the company set out a schedule of module deliveries at its UK assembly and testing facility in Daresbury, Cheshire. With its interim results at the end of September the company updated the market on progress.

Secondly, the Centers for Medicare and Medicaid Services in the US is looking to introduce a new reimbursement model for radiotherapy services, which would be beneficial for proton beam therapy, and AVO in particular.

Thirdly, oncologists around the world are getting excited about a new method of delivering radiotherapy, called FLASH, which is more damaging to cancerous tissue and far less damaging to normal tissue. Again, the company’s offering is well suited to this new approach.

Q2: So, taking each of these points in turn, what is happening at Daresbury?

A2: The LIGHT machine has four major components and a modular construction, which offers many advantages. AVO is assembling a complete machine that will be able to generate a full power proton beam, which will be used to obtain CE marking.

As far as these modules are concerned, most have now been delivered to Daresbury and the complete set will be there by the end of the year. These will be assembled together and, over coming months, the machine will be validated and verified to very high standards as required by the regulators. Each step of this process is further de-risking the whole project.  

Q3: Moving on to the second point, what is happening to reimbursement in the US?

A3: At present, the process of reimbursement, especially for radiotherapy is a rather unwieldy fee-for-service approach, whereby the clinic, system operators, and physicians all submit separate claims for reimbursement. It is in all their interests for the patient to go as many times as possible for treatments, often up to 35 visits, and has become very expensive. What is more, is does not give much consideration to the patient.

There is a proposal, expected to be ratified and introduced early in 2020, to reverse this and use a reimbursement model driven by patient outcomes. For example, there is a trend to divide the total dose of radiation delivered to patients into several smaller doses, called hypo-fractionation, which results in fewer patient visits. It also maximizes the effect of radiation on cancer and minimises the negative side effects. This new model will encourage greater use of hypo-fractionation which is extremely positive for proton therapy equipment providers, such as AVO.

Q4: And what exactly is FLASH radiotherapy?

A4: In very simple terms, this technique allows the use of ultra-high doses of radiation, at least an order of magnitude higher than currently used, divided into multiple small fractions delivered over a very short period of time, milliseconds, in a single visit. This has been shown to have a more damaging effect on cancerous tissue, whilst limiting the impact on healthy tissue. Until now, this has all been done in animal models, but last month the first, excellent, patient outcome was published for a superficial tumour.

Unsurprisingly, all the equipment manufacturers are looking at how to incorporate FLASH radiotherapy into their systems. However, in this respect, the company is uniquely, and I use that word very rarely, positioned. This is because FLASH needs very precise pencil thin proton beams of very high energy, which the LIGHT system generates and controls electronically.

In contrast, most of their competitors use cyclotrons to generate proton beams with higher energy than required for treatment and then use degraders to bring the energy level down to the required level, with much of the radiation wasted, and requiring extensive protective shielding. FLASH requires significantly more protons than conventional therapy, exacerbating this situation.

So FLASH is essentially a super-efficient hypo-fractionation method.

Q5: Does this impact Advanced Oncotherapy’s valuation?

A5: These developments do not alter our 229p valuation for the company, which is derived from a DCF model but they all position them well for the future. The validation and verification process reduces the overall risk of the project. When LIGHT does reach the market, it will be extremely well positioned with respect to hypo-fractionation of dose, coupled with the use of FLASH. This, in turn, fits well with the new reimbursement model about to be introduced in the US which is focused more on patient outcomes.

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