Renowned radiosurgery systems maker Accuray Incorporated (ARAY) recently rolled out its Emerald Service Program for TomoTherapy System customers in Japan. This service program provides reliable equipment support and product updates to ensure that the system is in perfect condition for patient care.
Earlier, Hitachi Medical Corporation used to provide the service support to TomoTherapy customers but Accuray’s move to take over this business shows its commitment to deliver top-class service to its Japanese clients. Accuray further forecasts the transfer to be accretive to its revenues and expects to earn about $5 ——- $5.5 million from the business over the span of a year.
Accuray will continue to collaborate with Hitachi Medical for sales and distribution and further exploit the Japanese radiation oncology market. The partnership is expected to be beneficial for the company’s goal to expand the growth prospects of the TomoTherapy System.
Moreover, Japan is an important buyer of Accuray’s radiation oncology products especially the CyberKnife and TomoTherapy. Hence the company believes that the strategic move to manage the service program directly will reaffirm customer confidence in their products as well as attract more clients throughout the nation.
Accuray, on March 7, 2011, announced its acquisition of Wisconsin-based radiation system maker TomoTherapy in a cash and stock deal worth $277 million. TomoTherapy marketed advanced radiation therapies for treating multiple cancer types. The acquisition was completed in June 2011 following the approval of the transaction by TomoTherapy’s shareholders.
The TomoTherapy Systems are fully integrated and advanced radiation therapy systems for all types of cancer treatments. It provides precise and safe radiation therapy by combining CT imaging and radiation treatment delivery in a single device, thereby lowering side effects. The Japanese Ministry of Health, Labor and Welfare (“MHLW”) provided the Shonin approval for the system in December 2004 and the first device was installed in 2005.
Currently, in Japan alone, there are a total of 25 CyberKnife Robotic Radiosurgery Systems and 26 TomoTherapy Systems in use. In addition, the company installed 22 new CyberKnife and TomoTherapy systems during the most recent quarter, taking the aggregate global installed base to 635 units. The company added $64.2 million of new system orders in the quarter, leading to a total system backlog of $279.6 million.
However, Accuray remains susceptible to reimbursement uncertainties and faces stiff challenges from competitive product offerings of Varian Medical (VAR). We currently have a Neutral recommendation on Accuray. The stock currently retains a short-term Zacks #3 Rank (Hold).
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