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VRAY: Q2 2017 Financial Results. Anticipating More Than $40 Million In Revenues In 2017

By Anita Dushyanth, PhD


On August 7, 2017 VRAY (NASDAQ:VRAY) announced earnings results for the second quarter of 2017.
ViewRay did not recognize revenue from the sale of any MRIdian systems during Q2 2017, although we continue to model very strong revenue growth in the second half of the year.  Total operating expenses for the quarter were $12.6 million.  Excluding $6.2M in non-cash income related to changes in the fair value of warrants, net loss for Q2 2017 was $14.5 million, or $(0.25) per share.

The company received FDA clearance for the MRIdian Linac in February 2017.  On the earnings call held on August 7th, management announced that they had received marketing clearance in Canada for the MRIdian Linac system on August 4th.  The massive demand for the much-anticipated MRIdian Linac system has translated into close to thirty signed orders on backlog.  Of VRAY’s entire backlog as of Q2 2017, most of the clients have placed an order for the MRIdian Linac system.  Those who require the Cobalt are in territories that do not have the authorization to market the Linac systems.  There is a possibility that the few Cobalt systems on the backlog could be replaced with a Linac if marketing approvals come through by then.  

A significant portion (two-thirds) of the backlog is composed of international sales in Taiwan, China, Korea, Italy, Germany, Belgium, the Netherlands, the U.K., France and the U.A.E.  The backlog now translates to a total value of ~$180 million.  Optimism in the MRIdian Linac has definitely helped drive order flow and the line is not getting any shorter.  However, there is still a supply constraint since it currently takes about three months to complete the installation and testing of a single system - management is working towards completing this in roughly 60 days.

Clearly, a change such as the MRIdian Linac that offers several additional competitive advantages over its peers including compact design, easy installation, improved imaging and patient alignment, on-table adaptive treatment planning, motion management and an accurate recording of the delivered radiation dose, is very promising in terms of market uptake.  The systems are currently installed at five of the nation's top cancer centers: Washington University in St. Louis, University of Wisconsin-Madison, UCLA, University of Miami and Henry Ford Cancer Institute.  Physicians have already used MRIdian to treat a broad spectrum of radiation therapy patients with more than 45 different types of cancer, as well as patients for whom radiation therapy was previously not an option.  Management still anticipates installing 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 close to $50 million.  The company did not disclose the specific regions where they will be installing these systems. 

Physicians at the Henry Ford Cancer Institute presented talks at the American Association of Physicists in Medicine (AAPM) on early experience with the new MRIdian Linac, reporting delivery times of just over 6 minutes for a stereotactic body radiation therapy treatment and 5 minutes for a prostate-intensity modulated radiation therapy treatment.  In addition, they presented a movie of the prostate treatment, which showed how the system's real-time imaging automatically detected and paused the treatment when the patient's prostate moved suddenly and unexpectedly. 
In June 2017, the National Cancer Center (NCC) in Tokyo, Japan treated its first patients having lung, liver and pancreatic cancers using the MRIdian System.  Management has applied for a Shonin approval to the Japanese Ministry of Health, Labor and Welfare (MHLW) for the MRIdian Linac. 

The compelling clinical data was reported by MRIdian users at ESTRO 36, the annual meeting of the European Society for Radiotherapy and Oncology, in gastrointestinal, prostate and particularly pancreatic cancer.  The study compared SBRT treatments with and without on-table adaptive dose reshaping.  The study revealed that delivering a higher biological dose, using MRI-guided on-table adaptive radiotherapy, may lead to improved survival in locally advanced pancreatic cancer.  Early results illustrated MRIdian's ability to deliver high doses with low toxicity, using real-time tracking. Based on the early retrospective data from ESTRO, ViewRay plans to support a multi-institutional single-arm prospective clinical trial in unresectable pancreatic cancer to demonstrate the benefits of MRIdian's daily on-table adaptive SBRT and real-time tissue tracking capabilities, with a focus on toxicity, local cancer control and overall survival outcomes.

VRAY exited the quarter with close to $54 million in cash.  Management reiterated their 2017 guidance on the Q2 earnings call including revenue between $45M and $50M (implying 100%+ growth from 2016) and the expected sale of 7 to 8 MRIdian Linac systems in 2H.    


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