Accuray to Buy Morphormics

Leading radiosurgery systems maker Accuray Incorporated (ARAY - Analyst Report) has announced that it has inked a definitive agreement to acquire privately held Morphormics, Inc., founded by University of North Carolina. Per the agreement, Accuray will pay approximately $5.7 million for the buyout.

The agreement reflects Accuray’s focus on its growth strategy to maintain product leadership via technological innovation. The latest acquisition will enable the company to offer more effective and efficient treatment by improving standards of care.

Morphormics is well known for its research in autosegmentation of medical images. It develops software systems for medical imaging that can identify and extract anatomical structures from medical images. According to Morphormics, the agreement will enhance patient access to its technology. The acquisition underlines the superiority of its technology in delivery of efficient and accurate image-guided medical treatment.

The acquisition of Morphormics will enable Accuray to enhance the autocontouring capabilities for its CyberKnife Robotic Radiosurgery System and TomoTherapy System. Accuray first began licensing Morphormics’ autocontouring technology in 2008. The technology improves cancer treatment planning by reducing radiation exposure to the surrounding critical structures.

Management at Accuray asserted the ability of Morphormics technology to improve clinical efficiency as well as patient outcomes, especially in the treatment of prostate cancer. Morphormics acquisition will extend Accuray’s intellectual property implying a reduction in licensing expenses. The company also expects a strengthened engineering team which will include experts from University of North Carolina at Chapel Hill.

This newest acquisition is expected to yield positive results. Accuray earlier achieved integration milestones with the acquisition of TomoTherapy in June 2011. The combined entity is now offering state-of-the-art therapies, ranging from high-precision radiosurgery to image-guided intensity-modulated radiation therapy to treat cancer and other critical diseases.

However, Accuray remains susceptible to reimbursement uncertainties and faces stiff challenges from competitive product offerings of Varian Medical (VAR - Analyst Report). We currently have a long-term Neutral recommendation on Accuray. The stock retains a Zacks #2 Rank, which translates into a short-term Buy rating.