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Advanced Oncotherapy

Progress towards commissioning of first LIGHT

07 Oct 2020 / Corporate research

AVO’s goal is to deliver an affordable and novel PT system, called LIGHT, based on state-of-the-art technology developed originally at the world-renowned CERN. Over the past two years, the project has been significantly de-risked through important technical milestones. AVO is working on the verification and validation phase, prior to LIGHT being used on the first patients to support CE marking. Interim results highlighted the operational and commercial progress that has been made, despite the challenges caused by COVID-19. AVO is holding an investor day on 19 October, where senior management will be available to answer questions.

  • Strategy: AVO is developing a compact and modular PT 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.
  • Interims: AVO reduced operating losses in 1H’20 by 11% compared with 1H’19, slightly better than forecast. Drawdown of debt facilities resulted in higher finance charges. At the period-end, AVO had gross cash of £5.8m and net debt of -£40.4m, much of which was finance leases.
  • PT investment: The attractions of investing in PT companies have been emphasised by the proposed acquisition of Varian for $16.4bn (5.0x 2019 sales, 32.2x EBITDA, 40% premium to previous close) by Siemens Healthineers to gain access to its innovative solutions in radiation oncology.
  • Risks: The technology itself is de-risked already, and LIGHT is simply accelerating the proton beam in a different way from conventional PT systems. Upcoming challenges and how they are being mitigated were highlighted in the annual report, and new funding is providing financial flexibility to reach the finishing line.
  • Investment summary: AVO’s £140m EV equates only to the amount invested into LIGHT to date, which reflects neither the enormous technical challenges that have been overcome, nor the market potential – our DCF valuation is 229p. As assembly of the first LIGHT system reaches its conclusion, the market’s confidence in AVO is expected to improve considerably. Commercial deals indicate that buyers are comfortable about the timing of LIGHT delivery.
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