The wider use of proton therapy ("PT") has been limited by price, installation hurdles, and a lack of robust clinical data in the past. AVO is on the cusp of disrupting the radiotherapy market as a whole supported by proven dosimetric superiority of PT over radiotherapy ("RT"), combined with the implied economic advantages associated with linear accelerators. The £14 million investment from Cancer Research UK into radiotherapy research announced last week is testimony to the increasing momentum of PT that we believe will form a strong foundation for the adoption of LIGHT. In addition, the c.£31.6m total funds raised by AVO in 2019 provide a strong endorsement for the potential of the LIGHT system, in our view. The proceeds are expected to support ongoing operational activities and to progress the verification and validation of the LIGHT system towards regulatory approval. We maintain and reiterate both our OUTPERFORM recommendation and 155 GBp target price ("TP").
It is widely recognised that there is a large need for well-designed randomised clinical trials that assess whether the added therapeutic value of PT justifies the potential budget impact. Data available today is scarce and limited to single arm studies, nonrandomised comparative studies and / or studies with small sample sizes. Furthermore, existing clinical evidence is largely based on first generation PT systems that are not equipped with new technologies such as pencil beam scanning, which are therefore nonrepresentative when evaluating the full therapeutic potential and cost-effectiveness of modern PT systems such as LIGHT. Despite this lack of data, patients - a majority of them being self-referred - are putting increasing pressure on payers and insurance groups to further broaden the coverage of PT despite its current cost.
The 136 active clinical trials currently assessing the efficacy and safety of PT in oncology are testimony to PT's increasing momentum. As such, the body of clinical evidence is set to expand quickly, especially in areas with a higher unmet clinical need, such as lung, hepatic and pancreatic cancer. Most trials are assessing the application of PT in various cancers to identify which indications beyond the currently reimbursed cancers PT should initially be used for, before witnessing broader adoption across the wider field of oncology, which, in our view, is only a matter of time.
The body of evidence and clinical data supporting the use of PT over conventional RT is continuously expanding. This growing momentum de-risks the clinical utility of PT, in our view, and will likely translate into increased reimbursement coverage and adoption in the future. We anticipate existing clinical data supporting PT to be increasingly complemented by robust cost-effectiveness analyses, triggering a wave of reimbursement decisions that will benefit both patient and payer.
AVO's LIGHT is ideally positioned to further support the technological development of PT as it has been designed to reduce the treatment cost per patient. We anticipate price declines from new solutions including LIGHT to further open up the market and contribute to the generation of supporting clinical evidence that will pave the way for widespread adoption beyond the currently reimbursed indications.
We assume a RT to PT conversion rate of 15% by 2030E, which would make it a c.$8.0bn market ($4.5bn for 380 machines sold in that year and $3.5bn for the servicing of all machines installed up to 2030E). PT is among the most attractive sub-sectors in medtech, in our view. With the development timeline on schedule and first patients due to be treated in H2/2020E, we believe that AVO offers strong upside potential.