03 Jan New product competition drives down TomoTherapy stock
Madison, Wis. – The Hi-Art System has reliability problems?
That and other revelations, real or imagined, were part of a difficult day for one of Madison’s highly touted companies, TomoTherapy, which saw its stock price drop 5.4 percent on Wednesday after a competitor gained regulatory clearance for a radiation therapy system to rival the Hi-Art for cancer treatment, according to a report in the Madison Capital Times.
In contrast, Varian Medical Systems, based in Palo Alto, Calif., saw its stock hit a 52-week high after the Food and Drug Administration approved its RapidArc system, which purportedly delivers faster, more precise cancer treatments. The RapidArc, due to hit the market in the spring of 2008, helped Varian’s stock rise a penny overall during trading, while TomoTherapy’s shares fell $1.06 Wednesday to close at $18.50.
TomoTherapy has thus far declined to comment on Varian gaining regulatory approval, but others were doing plenty of talking, according to the Capital Times.
Dr. Carol Kornmehl, a New Jersey oncologist and author of a book about radiation therapy, said the RapidArc surpasses TomoTherapy’s Hi-Art in terms of versatility and capability. Last summer, she said that she believed that every cancer treatment facility would have a TomoTherapy system if cost were not an issue.
Now, apparently, competition will be an issue.
Junaid Husain, an analyst from Soleil Securities Group, told investors that Varian probably would take market share from competitors once the RapidArc hits the market. He also predicted that “reliability issues” with the Hi-Art would “continue to plague” TomoTherapy in a more competitive landscape, but he did not specify what they are.
Not every analyst quoted by the Capital Times was as optimistic. JP Morgan analyst Tycho Peterson, while acknowledging multiple pre-orders for the RapidArc, said that since the software was still in development in October, it remains to be seen how smooth the initial product launch will be.
TomoTherapy netted roughly $180 million in an initial public offering of stock last year, and posted impressive sales growth in its recent third quarter financial report. The company reported revenue of $59.2 million, a 59 percent increase from the $37.2 million reported in the third quarter of 2006.
Third quarter net income was $2.6 million, or $0.05 per diluted share, compared to pro forma net income of $3.1 million, or $0.08 per diluted share, for the third quarter of 2006.
The company will attempt to sooth investors in two investment conferences on Jan. 8 and 10. CFO Steve Hathaway will present at Needham & Company’s 10th Annual Growth Conference on Tuesday, Jan. 8, at 4 p.m. Eastern Time. The conference will take place Jan. 8-11, 2008, at the New York Palace Hotel in New York City.
On Thursday, Jan. 10, 2008, Hathaway and CEO Fred Robertson will present at the JP Morgan Healthcare Conference at 8:30 a.m. Pacific Time. That conference will be held Jan. 7-10, at the Westin St. Francis in San Francisco.
• TomoTherapy signs distribution agreements in six new markets
• TomoTherapy confirms 59 percent increase in Q3 revenue
• TomoTherapy forecasts 61 percent Q3 revenue surge
• TomoTherapy files to sell 8.5 million additional shares of stock
• TomoTherapy sells first radiation therapy system in China
• TomoTherapy founder says investors should take long view of company performance