COVER STORY

In its first full year as a publicly held company, Accuray Inc. (Sunnyvale, CA) has maintained a strong balance sheet and solid revenue growth. The company was profitable in all four quarters, and ended its fiscal year in June 2008 with $159 million in cash and investments, and no debt. Accuray reported a backlog of $647 million, with approximately $359 million in sales contracts for the CyberKnife robotic radiosurgery system and another $288 million associated with services and other recurring revenue. Additionally, Accuray's revenue for fiscal 2008 reflected an annual growth rate of 50%, increasing to $210.4 million from $140.5 million the previous year.

As clinical studies have demonstrated the CyberKnife system's benefits in treating a wide variety of tumors—including those in the lung, prostate, pancreas, and spine—Accuray has seen increasing interest from both the medical community and patients in whole body radiosurgery. However, like many other capital equipment manufacturers, Accuray has encountered challenges in sales and installation during fiscal 2008. Specifically, entrepreneurial free-standing radiation treatment centers were affected by regulatory changes, as well as the general economic slowdown and flagging credit environment. These factors combined to place pressure on customers' business plans, resulting in Accuray's reevaluation of installation timing and, in some cases, removal of contracts from its backlog. To address such difficult circumstances, the company has refocused sales on more-established healthcare providers, such as hospitals, and now more carefully examines its backlog each quarter to remove contracts that no longer meet its criteria for inclusion.

Accuray estimates that the worldwide market opportunity for CyberKnife systems is approximately 7500 units. Currently, there are more than 140 CyberKnife systems installed around the world, with 90 in the Americas, 20 in Japan, 18 in the rest of Asia, and 12 in Europe. In June, Accuray received regulatory approval in Japan to market the CyberKnife system for extracranial radiosurgery. As a result, the company sees great potential for growth in this key market. Previously, the CyberKnife system was only approved for intracranial treatments, and despite that limitation, Japan was the largest market for the system outside of the United States.

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