Understanding the significance of 230MeV

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. The complex assembly of the first LIGHT accelerator in Daresbury (UK) has been completed and demonstrated to generate a full-energy proton beam (230MeV) required to treat deep-seated tumours. AVO is now liaising with its clinical partner, University Hospitals Birmingham (UHB) NHS Foundation Trust, to prepare for first-patient treatments in 2H’23. Following this significant project de-risking, our updated LIGHT model shows that AVO could become EBITDA-positive in 2025.

• 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 supported by a world-class supplier base.
• 230MeV: LIGHT is the first linear accelerator capable of generating a high- energy (230MeV) proton beam – a major milestone that greatly de-risked the project. The technical and clinical advantages of LIGHT are increasingly apparent to prospective customers, as AVO approaches first-patient treatments in 2H’23.
• Updated model: Our revised LIGHT model has been simplified by assuming that AVO takes only a minority stake in partnership projects where customers adopt the alternative financing approach; so financials are not consolidated. On this basis, AVO looks set to become EBITDA-positive during fiscal 2025.
• Risks: More capital will be required until first-patient treatments in 2H’23. Having hit the 230MeV milestone, competitors with legacy cyclotrons are likely to take an aggressive commercial stance to protect positions. Many of the high-quality modules use copper, the price of which is sensitive to global economics.
• Investment summary: Despite hitting the revolutionary milestone, the shares have languished probably because of the time needed until first-patient treatments and an incorrect read-across to AVO by the demise of Rutherford Health (Rutherford). The current EV represents a 42% discount to the investment made into the project to date. Our updated model suggests that AVO will become EBITDA-positive in fiscal 2025 and that the NPV of the DCF model is now 156p on a fully-diluted basis.