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VRAY: CRG LP Provides $15 Million Term Loan Expansion to ViewRay Inc.

By Anita Dushyanth, PhD


On April 13, 2017 ViewRay (NASDAQ:VRAY) announced the closing of a $15 million loan expansion to its existing $50 million term loan agreement with CRG LP.  Modifications to the CRG loan agreement include addition of the $15 million available through September 30, 2017, availability of the existing $5 million through June 30, 2017 and extension of the interest-only and PIK period until March 31, 2020.  Other changes include lowering the combined 2016 and 2017 revenue covenant to $60 million (previously $80 million) and increasing the back-end facility fee between 1.5% to 1.75%.  As VRAY embarks on this next phase of growth, CRG LP continues to support their growth initiatives by providing the additional working capital through the non-dilutive financing alternative. 
The firm raised close to $48 million in cash in Q1 2017; approximately $26 million from a private placement (closed on January 18, 2017) of 8.6 million shares of common stock and warrants (exercise price of $3.17/share and are exercisable after six months and expire seven years from the date of issuance) and from the sale of approximately 4 million shares of common stock (in February and March 2017) to FBR Capital Markets & Co at an average market price of $5.64 per share, resulting in aggregate gross proceeds of approximately $22 million. 
ViewRay received two new orders for MRIdian Linac systems in Q1 2017 totaling $12.3 million.  ViewRay also received three orders totaling $5.8 million to upgrade the currently installed Cobalt systems to Linac systems.  VRAY’s backlog of 25 signed orders as of Q1 2017 translates to a total value of ~$145 million that provides a significant lead to its competitors.  

In the first half of 2017, the firm anticipates selling MRIdian Cobalt systems in markets where Linac system is yet to be approved (primarily in China).  Management hopes to install seven to eight MRIdian Linac systems in the U.S. and international markets in the second half of 2017 from which the firm anticipates recognizing potential revenue of around $50 million in 2017.  Management is relentlessly working on improving their productivity.  Assuming a stable economic environment with no changes to currency levels, the firm anticipates widening gross margins to 40% in 2017.  The stock price has more than doubled (133% increase) since the beginning of this year from $3.13/share (January 3, 2017) to $7.30/share (April 17, 2017).  We think that an expansion in gross margin, primarily driven by higher sales and operating leverage could drive the stock price even further.  

As per their previous guidance, ViewRay did not recognize revenue from the sale of any new MRIdian installations or shipments during Q1 2017.  Currently, it takes roughly 100 days to complete installation and testing a single system per site.  The firm plans to bring this down to 45-60 days shortly.  If the sales continue with favorable momentum and the firm is able to sell close to five systems per quarter, it could potentially achieve operating profitability by 2019.  

Starting the new year (2017) with a strong cash position, VRAY is well poised to carry on its business strategy.  We like the firm's strong balance sheet, with an estimated cash position of over $45 million.  We think 2017 could serve as a transformational year for VRAY assuming their financial guidance is met.  Our fundamentals remain strong and we continue to believe in VRAY’s story. 


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