Be warned: this is a long-term pick and not a quick pump-and-dump job.
For those with enough patience Advanced Oncotherapy, otherwise known as Avo, could be an interesting proposition.
The company was spun out of CERN, the European nuclear research organisation, in 2013 and is making super-powerful machines which can treat cancer tumours using proton-beam therapy.
Proton-beam therapy is nothing new but Avo says its new machines will cost a fraction of the price that rivals like Varian, IBA and Mevion offer.
It reckons it can sell its technology for £20 million-£45 million rather than the current £200 million asking price and has sales lined up from hospital groups in the UK, Italy, France, Switzerland and China.
Avo is also building a clinic in Harley Street, which is due to start treating patients by 2020. This will be the first time the technology will be used.
After 2020 the company plans to sell eight machines per year which would potentially generate £160 million in revenue.
According to analysts, Avo is exploiting a gap in the cancer market. At the moment there are fewer than 160 proton beam facilities worldwide, compared with 18,000 x-ray-based treatment centres. X-ray treatment is not as precise and damages the surrounding tissue but is far cheaper.
Unlike x-ray radiotherapies, proton therapy uses a particle accelerator to direct a much narrower beam of radiation at the cancer.
Martin Hall, analyst at Hardman & Co, says: “Demand for proton therapy is increasing worldwide, and the need for a small, flexible, affordable and close-to-patient system is desirable.
“Avo has attracted strong partners, and discussions with potential customers are advancing. Progress at the flagship Harley Street site has been substantial.”
Avo also has enough cash to see out its developments after the completion of a £40 million financing round this month. The raising saw Yantai CIPU, its partner company in China, become Avo’s largest shareholder, with 26.6% of the share capital.
So confident are Goetz Partner analysts that Avo can deliver that they’ve whacked a massive 155p target price on the stock, a 300% increase on what it is trading at.
Investors must wait a while before this stock gets anywhere near 155p but if it does it’ll have been worth it.
