TOMO Tomotherapy Incorporated (MM)

Leading radiosurgery systems maker Accuray Inc.’s (ARAY) impending acquisition of its rival TomoTherapy (TOMO) has been approved by the latter’s shareholders. The California-based company landed a cash and stock deal (worth $277 million), in March 2011, to buy Wisconsin-based radiation system maker TomoTherapy. The transaction was cleared by the Boards of both companies. 

Shareholders holding 79% of TomoTherapy’s outstanding shares voted in favor of the deal. The companies now expect the transaction to consummate within 1-2 business days, assuming the attainment of the customary closing conditions.

Per the deal terms, Accuray is acquiring TomoTherapy for $4.80 a share in cash and stock. Shareholders of TomoTherapy will receive $3.15 in cash and 0.1648 shares of Accuray for each share they hold.  

TomoTherapy, with annual sales of $195 million, markets advanced radiation therapies for treating multiple cancer types. Its solutions include the Hi-Art system, which is designed for continuous delivery of radiation from all angles around a patient. It targets tumors more precisely than conventional radiation therapies while leaving surrounding healthy tissues unharmed.

The deal marks the union of TomoTherapy’s best-in-class radiation therapies with Accuray’s popular radiosurgery systems to create a leading player in the radiation oncology space. The combined entity will offer state-of-the-art therapies, ranging from high-precision radiosurgery to image-guided intensity-modulated radiation therapy, for treating cancer and other diseases. The integrated company with combined sales of more than $400 million will have a significant global presence. 

The acquisition will offer a major boost to Accuray’s sales and will reinforce its foothold in the radiation oncology space. The company expects the transaction to be accretive to its earnings in the fiscal year beginning July 1, 2012 and will offer opportunities for cost synergies through increased operating efficiencies, complementary patient base and overhead reductions.

Accuray is a global leader in the field of radiosurgery and provides a non-surgical treatment option for patients diagnosed with cancer. Its CyberKnife robotic radiosurgery systems continue to gain significant traction in the global medical communities, thereby boosting sales. To date, more than 100,000 people have been treated with CyberKnife globally.

Accuray is expected to benefit from the gradual recovery in hospital capital equipment spending. However, the company remains susceptible to reimbursement uncertainties surrounding its products and its CyberKnife system faces stiff challenges from competitive product offerings of Varian Medical (VAR). Currently, we are Neutral on Accuray.

 
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