01 Aug TomoTherapy stock takes major hit after poor second quarter
Madison, Wis. — TomoTherapy‘s stock took a beating and fell more than 44 percent in pre-market trading Friday, following a second-quarter loss that left CEO Fred Robertson “disappointed” in the company’s performance.
The medical-device maker’s quarterly report noted reduced gross margins, increased expenses, and a net loss of $0.14 per share, or $6.9 million, on $52 million in revenue. While revenue was actually up compared to last year’s second quarter, by 19 percent, new orders were down. “The company experienced some softness in the U.S. order flow, which was partially offset by stronger performance in Europe,” the report said. “For the first time, management is seeing indications that weakness in the U.S. economy may be impacting new orders.”
TOMO stock opened at $5.15 Friday. This the lowest the maker of radiation treatment devices has traded, after a more or less steady decline since September 2007, when it reached a peak over $26. That peak followed the IPO on May 9 after which the closing price was $22.67.
The firm is also lowering expectations for the year. “Based on what we are currently seeing in the marketplace and after further analyzing the expected timing of customer deliveries, we are lowering our annual guidance to reflect softer conditions,” said Robertson in a press release. For fiscal 2008, TomoTherapy projects $190 million to $210 million in revenue and a net loss of $0.28 to $0.43 per share.
Increased operating expenses of $23.7 included $1.9 million associated with the new subsidiary Compact Proton Acceleration Corporation, and $2.7 million of bad debt expense. Even without those expenses, however, the company said its operating expenses increased 14 percent over last year’s second quarter.
All in all, it is a blow to a company whose story has been celebrated in Wisconsin — a story of entrepreneurship and success, fueled by the 2007 IPO. TomoTherapy executives have been invited to tell their story at events such as the recent Wisconsin Science and Technology Symposium. The firm employs over 500 people worldwide, many of them in Madison.
TomoTherapy also recently celebrated the five-year anniversary of the first clinical patient treatment using its system — on July 1, 2003, at Thompson Cancer Survival Center in Knoxville, Tenn.
Analysts, however, are having a harder time feeling the celebration. Piper Jaffray downgraded the stock from “buy” to “neutral” on Friday, and lowered its price target from $14 to $7.
“The slowdown was, in our opinion, exacerbated by Varian, the 800lb gorilla in the radiation therapy space,” Piper Jaffray analysts wrote. “Varian’s new Rapid Arc is being aggressively marketed, and TOMO is losing potential and real customers.”
At the beginning of this July, TomoTherapy claimed a marketing boost against Varian when no cancer centers had taken it up on a challenge for a direct head-to-head comparison between the companies’ systems.
Robert W. Baird announced on Friday a reduction from “outperform” to “neutral.”