We maintain our Neutral recommendation on
), a renowned radiosurgery systems maker, following its fourth
quarter fiscal 2012 results.
Accuray's adjusted loss per share of 20 cents was wider than the
Zacks Consensus Estimate of a loss of 13 cents in the fourth
quarter. Consolidated revenues of $100.5 million trailed the Zacks
Consensus Estimate of $108 million. Sales dropped 8.5% when
compared with the year-ago combined (including TomoTherapy) pro
forma revenues of $109.8 million.
However, reported net loss attributable to shareholders in the
quarter was $20.3 million (or 28 cents a share) versus a loss of
$25 million (or 40 cents a share) in the prior-year quarter.
Controlled operating expenses along with higher service margins
contributed to improved fourth quarter results.
Accuray, a global leader in the field of radiosurgery, provides
non-surgical treatment options to patients diagnosed with cancer.
The CyberKnife system, its leading product, boasts of a technology
that differentiates it from traditional treatment. More than
200,000 people have been treated with this company's technology
globally. Worldwide installation base for its therapy systems
comprises more than 600 units.
Moreover, the acquisition of TomoTherapy has bolstered Accuray's
foothold in the radiation oncology space. The merger marked the
union of TomoTherapy's best-in-class radiation therapies and
Accuray's popular radiosurgery systems to create a leading player
in this market. 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 diseases.
The market size for the global radiation therapy market is expected
to reach $3.6 billion by 2018, based on which Accuray is focusing
on investing in emerging markets to expand its business. The
CyberKnife system has also been deployed in Mexico and has been
recently introduced in the Instituto Neurologico de Colombia
(INDEC) of South America, for the first time.
However, Accuray has been incurring losses for quite some time now
and the total accumulated deficit as of June 30, 2012 stands at
$216.4 million. The company is totally dependent on sales of
CyberKnife and TomoTherapy systems for its long-term profitability.
Apart from shipment delays outside the U.S., we also remain
concerned about double-digit decline (27% year over year in fiscal
2012) in CyberKnife sales due to end-market headwinds and
difficulties in sales force integration in the U.S. Moreover, the
company expects future sales to be down due to potential delay in
shipments and challenging end-market demand in the U.S.
Additionally, although the TomoTherapy acquisition has strengthened
Accuray's position in radiation oncology and has provided
opportunities for attractive synergies, the company faces
associated integration risks. The company needs to achieve the
anticipated synergies from the acquisition so that it does not turn
out to be a mere wastage of resources.
Accuray is exposed to significant competition in the radiation
oncology market, which is characterized by rapid technological
changes. The company competes head-to-head with
). The company also faces reimbursement uncertainties for its
products. We currently have a Neutral recommendation on the stock,
which carries a short-term Zacks #3 Rank (Hold rating).
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