AVO’s goal is to deliver an affordable and novel proton therapy (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 certification. A recent equity issue, new loan facilities and some commercial announcements earlier in 2020 highlight the increasing confidence that is building in AVO’s ability to achieve its goal to deliver LIGHT in the near future.
- 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.
- 2019 results: EBIT was in line with expectations, higher operating costs being offset by lower share-based payments. Introduction of IFRS 16 for lease liabilities does affect the net cash/(debt) calculation, but recent capital increases via an equity issue and new loan facilities have strengthened AVO’s finances.
- Commercial update: AVO has seen significant commercial traction, with three collaborations announced in early 2020. Its flexible, customer-focused, business model can generate four potential revenue streams: sale of LIGHT systems, maintenance contracts, software licence fees and project management fees.
- Risks: The more complex technical challenges have been overcome, and progress towards assembling a fully functional accelerator is under way. The annual report highlights the upcoming challenges and how they are being mitigated, with new funding giving financial flexibility to reach the finishing line, despite COVID-19.
- Investment summary: The EV of £123m 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. The market will wake up to this opportunity, as assembly of the first LIGHT system reaches its conclusion and AVO applies for CE certification. Commercial deals indicate that buyers are comfortable about the timing of LIGHT delivery.