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Radiosurgery systems maker Accuray Incorporated (ARAY - Analyst Report) announced that U.S.-based Tulsa Cancer Institute is the first to use its latest TomoHDA System to treat cancer patients. Earlier this month, the company expanded its footprint in France by using this device for the treatment of the first European patient.
The advanced fully-integrated radiation TomoHDA therapy system combines TomoTherapy Hi-Art and Tomo HD technologies to treat all types of cancer patients. Features such as the VoLO Technology and the TomoEDGE Dynamics Jaws technology are available with the TomoHDA system, which makes it the gold standard for image-guided IMRT.
Accuray had acquired Wis.-based radiation system maker TomoTherapy in Jun 2011. TomoTherapy markets advanced radiation therapies for treating multiple cancer types. The TomoTherapy Systems are advanced radiation therapy systems, which provide precise and safe radiation therapy by combining CT imaging and radiation treatment delivery in a single device, thereby lowering side-effects.
Accuray achieved a major milestone with the launch of the new TomoTherapy H Series, featuring the TomoHDA System, at the ASTRO meeting in Oct 2012. This unique series is considered to be the near-term growth driver for the company.
Prior to the ASTRO meeting, the TomoTherapy System occupied a niche position in the market, as it was considered as a specialty device used to deliver IMRT (intensity-modulated radiation therapy) for complex cases. The launch of the TomoTherapy H Series, which provides treatment covering the entire spectrum of radiation therapy patients, positions the product line in the mainstream market.
Adoption of new products by medical centers should boost the company’s declining top line. Adjusted revenues were down 30.5% year-over-year at $70.6 million in the last reported quarter. Accuray had shipped 7 and installed 14 new CyberKnife and TomoTherapy systems during the third fiscal 2013 quarter, taking the aggregate global installed base to 693 units. Additionally, net new product orders jumped more than twofold sequentially, which led to backlogs increasing 7% over the prior quarter.
Although Accuray’s product order momentum, reflecting healthy product adoption of new products encourages us, we remain concerned over Accuray’s declining top and bottom line along with reduced full-year guidance. We are of the opinion that a lot needs to be done to bring the company back on track. Management needs to improve its higher-margin product revenues and aggressively remediate its structural issues for new offerings to fully contribute to total sales.
The stock currently carries a Zacks Rank #4 (Sell). While we remain on the sidelines regarding Accuray, medical instrument companies such as Cryolife (CRY - Snapshot Report), Natus Medical (BABY - Snapshot Report) and Heartware International (HTWR - Snapshot Report) are worth considering. While CRY and BABY carry a Zacks Rank #1 (Strong Buy), HTWR carries a Zacks Rank #2 (Buy).