14 Jun TomoTherapy reports 86% revenue jump, $131M net loss in Q1
Madison, Wis. – TomoTherapy saw its revenues surge by 86 percent and its net loss grow to $131.1 million, according to the first earnings report issued since it officially became a publicly traded company.
The company also announced that it has joined a research collaboration with Lawrence Livermore National Laboratory that might produce a lower-cost proton therapy system for cancer treatment.
First quarter financials
TomoTherapy, which raised a total of $213 million in a recent Initial Public Offering of stock, reported Q1 revenue of $51.2 million, an 86 percent increase over the $27.5 million for the first quarter of 2006.
The company cited higher demand for its Hi·Art image-guided radiation therapy system, which is used in the treatment of cancer, and increased production capacity.
International sales at higher average selling prices accounted for 50 percent of TomoTherapy’s first quarter revenue, according to CEO Fred Robertson.
The net loss of $131.1 million, or $12.13 per diluted share, is much higher than the $10.6 million, or $1.22 per diluted share, for the same quarter of 2006. A major component of the loss was a temporary, non-cash accounting adjustment that the company was required to make under Generally Accepted Accounting Principles. The adjustment raised the value of shares owned in TomoTherapy’s pre-initial public offering to investors.
“The accounting rules tell you that you have to write up those shares to free-market value,” explained Steve Hathaway, chief financial officer for TomoTherapy. “It was a big number this quarter because the value of those shares started to increase so much as we got closer to the IPO.”
Hathaway said that number, which is largely ignored by Wall Street, is the reason why the earnings statement emphasized the company’s pro forma net income of $3.9 million, or nine cents per diluted share, up from a pro forma net loss of $1.5 million, or four cents per diluted share, in Q1 of 2006.
TomoTherapy is increasing its operating expenses to continue to build its sales and service organizations, and invest in research and development and infrastructure. Total operating expenses were $15.8 million in the first quarter, a 112 percent increase from the $7.4 million recorded in the first quarter of 2006.
The financial statements do not include the proceeds of approximately $186 million, after offering expenses, from its issuance of 10.6 million shares in a May 8 IPO.
For fiscal 2007, the company expects revenue in the range of $210 million to $220 million and pro forma net income per share from $0.15 to $0.20 per diluted share.
TomoTherapy trades on the NASDAQ Stock Market under the symbol TTPY.
Collaboration in California
First quarter expenses also included $1.1 million related to a proton therapy research collaboration with Lawrence Livermore National Laboratory. TomoTherapy has agreed to fund continued development of a dielectric wall accelerator technology that it believes will form the basis of a new, low-cost proton therapy system. Company founders Thomas “Rock” Mackie and Paul Reckwerdt have developed a relationship Lawrence Livermore, and Reckwerdt will oversee the project.
According to TomoTherapy, the technology has the potential to “bring proton therapy into the medical mainstream” by lowering its prohibitive cost.
Proton beams are considered superior to x-rays for radiation therapy, but its high cost – $100 million per unit – is the primary reason that few cancer patients are treated with proton therapy. If it is successful in helping to develop this low-cost option, TomoTherapy expects to provide them for less than $20 million and install them in existing radiation therapy facilities.
Lawrence Livermore has worked to develop the accelerator technology, which is the result of defense-related research, with the University of California-Davis Cancer Center. The center helped finance the early development of the technology as a proton accelerator for cancer treatment.
Six of the 25 proton therapy facilities are operational in the United States, including one that treats only ocular malignancies at UC-Davis.
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