FLASH benefits from new US reimbursement

AVO’s 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. Proposed changes to the US reimbursement framework are beneficial to PBT as a whole, and the trend towards hypo-fractionation of ultra-high doses in a single patient visit (FLASH), for which LIGHT is uniquely positioned to deliver.

• 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.
• US reimbursement: The CMS is proposing to move from an unwieldy fee-for-service model to a radiation oncology model based on value of care for patients. This will encourage greater use of hypo-fractionation, which is beneficial for the PBT equipment providers who have a technology suited to hypo-fractionation and FLASH.
• FLASH technology: Oncologists are excited about the potential of FLASH technology, which can treat cancer patients in a single visit with potentially fewer side effects. Linear PBT systems have major advantages over conventional cyclotrons, leaving LIGHT uniquely positioned for FLASH.
• 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. Execution risk remains, but management’s ability to raise funding and meet its milestones for the past 30 months has lowered this risk.
• Investment summary: AVO’s market capitalisation of £102m 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 the LIGHT prospects generates an NPV of at least 229p a share (fully-diluted). The disconnect between fundamental and market valuations offers an interesting investment opportunity.