Accuray: Leading the Field Of Radiosurgery

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Jul 24, 2014

In today’s rapidly changing health care environment, companies are constantly innovating new and improved solutions for the patients as well as for doctors. There are several diseases for which complete cure is not possible but, proper treatment may help to overcome that. Cancer is being one of them.

Accuray Incorporated (

ARAY, Financial) a California based medical equipment maker, is a global leader in the field of radiosurgery. With a market cap of $670.15 million, the company develops, manufactures and sells precise, innovative treatment solutions that set the standard of care with the aim of helping patients live longer, better lives. The Company's leading-edge technologies deliver the full range of radiation therapy and radiosurgery treatments. Its core products are the CyberKnife Stereotactic Radiosurgery and the TomoTherapy Systems. CyberKnife autonomously tracks, detects, and corrects for tumor and patient movement in real-time during the procedure, enabling delivery of precise, high-dose radiation with sub-millimeter accuracy. The CyberKnife procedure requires no anesthesia. On the other hand, the TomoTherapy system delivers dose only where it is needed.

Accuray’s most of the revenue is generated from CyberKnife and TomoTherapy. Further, it also offers optional hardware and software, technical enhancements and upgrades to the CyberKnife system, as well as service contracts and training to assist customers in realizing the benefits of the CyberKnife system.

Tracking the Numbers

On April 30, 2014, this medical equipment maker reported financial results for the third fiscal quarter and nine months ended March 31, 2014. The company reported revenues of $97.1 million, representing an increase of 38% from the prior fiscal year third quarter. Product revenues surged 88.0% to $47.0 million, mainly driven by enhanced commercial effort and improvement in the company’s order to revenue conversion process. The product backlog at the end of the reported quarter was $354 million, approximately 19% higher than the backlog at the end of the prior-year quarter. Service revenues totalled to $50.1 million and represented an increase of 10% over the prior fiscal year third quarter.

Total gross profit of $39.7 million, represents an increase of 98% from the prior fiscal year third quarter. Total gross profit margin improved to 40.9%, comprised of product gross margin of 46.3% and service gross margin of 35.8%. This compares to total gross margin of 28.4%, product gross margin of 26.5% and service gross margins of 29.5% for the prior fiscal year third quarter. Product gross margin improved on higher volume and stronger average product revenues. The significantly higher service gross margin represents continued improvement in TomoTherapy Systems reliability, which continues to drive demand for lower as well as higher-margin service contracts. Cash, cash equivalents, investments and restricted cash were $177.0 million as of March 31, 2014, an increase of $14.4 million from December 31, 2013. Further, a chart has been provided below to show company’s adjusted EBITDA and operating expenses.


Positive Outlook

Accuray updated its financial guidance of total revenue for fiscal 2014 to a range of $355 million to $365 million. This compares to the previous financial guidance of total revenue in the range of $340 million to $350 million, which was provided on January 30, 2014.

On July 17, 2014, according to the Q2 2014 MD Buyline Market Intelligence Briefing, Accuray’s CyberKnife and TomoTherapy Systems have received the highest composite overall user satisfaction rating among radiation treatment delivery systems in the U.S.


Accuray’s principal regions of operations are the Americas, EIMEA, APAC, and Japan. A chart has been provided below to show the company’s global market for radiation therapy (currently stable and is expected to grow).


Charts from company website

To strengthen its foothold, On May 6, 2014, Accuray partnered with Amerinet- a leading national healthcare solutions organization, on the CyberKnife M6 and TomoTherapy H product portfolio. Under this agreement, Accuray’s precise, leading-edge technologies, delivering the full range of radiation therapy and radiosurgery treatments, are immediately available to the hospitals that Amerinet serves. Further, on April 30, 2014, Accuray partnered with Novation, the largest health care supply chain expertise, analytics and contracting company that supports the more than 100,000 hospital members and affiliates of VHA, UHC, Children's Hospital Association and Provista LLC. This partnership will help Accuray to deliver its solutions to the hospital members that Novation serves.

On a Concluding Note

Radiation therapy is integral to cancer treatment, and according to estimates, worldwide incidences of cancer will reach 17 million by 2017. This is mainly driven by growth of the aging population. It has been estimated that 90% of all cancers are projected to be solid tumors, which is potentially eligible for radiation therapy. This has strengthened the position of Accuray as it is the global leader in the field of radiosurgery. Further, the company has improved customer focus, improved competitive positioning, and enhanced field sales effectiveness. I am therefore pretty bullish that this medical equipment maker won’t let its investors as well as valued customers down in the near future.

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