5 Stocks Bouncing Back

• Report this Comment On October 08, 2009, at 5:16 PM, PauvrePapillon wrote:

  When the market (correctly) understood that CyberKnife was a truly unique and revolutionary technology, investors bid Accuray’s post-IPO shares up to an intraday high of $31.09 (9 February 2007). As Varian and others made repeated claims, in numerous press releases, interviews and conference calls, that their gantry-mounted machines could do the same thing as the robotically controlled CyberKnife, Accuray’s market cap shrank even though its economic fundamentals actually improved.

  On 6 December 2008, Accuray, finally, fired back with the release of two animated videos that effectively demonstrate what CyberKnife is and why it is fundamentally different from gantry-mounted radiation sprayers. You can see them for yourself at http://www.accuray.com.

  Since then, Accuray shares have gone up 61.46 percent while Varian’s shares have gone up less than one percent during a period in which the NASDAQ is up 40.76 percent as of close of market to day (8 October 2009).

  Because of the way the revenues are recognized for this type of company, neither the quarterly revenue nor the EPS are really all that important at this stage. What’s important is the fact that the cash flow is positive – to the tune of $2 million in this past quarter – while the installed base, patient demand and recurring revenues all continue to increase.

  With respect to guidance for fiscal 2010, Accuray is managing its way through a transition out of deferred revenues recognized out of the now obsolete (and non-cash producing) Platinum Plan used to incentivize early, post-investigational device (IDE) adopters, to new revenues, which are both cash producing and with respect to most all of the domestic installs include a recurring component as well.

  If guidance is correct, fiscal 2010 will see a substantial increase in net free cash flow as approximately $38 million in Platinum Plan non-cash producing revenues are replaced with approximately $20 to $30 million of new cash producing revenues. There were also $5.8 million in non-recurring charges during fiscal 2009 that, hopefully, will not be repeated in 2010. Bottom line: you have something like $25 to $35 million in additional cash flow cued up for fiscal 2010 that didn’t happen in 2009.

  Cash producing revenues exclusive of Platinum Plan and one-time bulk sale revenues grew at a rate of 14.5 percent from fiscal 2008 to 2009 and are projected to grow at a rate of 15 percent from fiscal 2009 to 2010. A steady 15 percent growth rate in cash producing revenues is impressive given all of the uncertainties that Accuray’s main customers are facing in the current macro economic environment.

  Backlog is no cause for concern. Management has been tightening up its backlog calculations as it gains more experience with the order and install process of this particular product. This is to be expected. The slight drop off in backlog is more the result of a tighter definition of non-contingent contracts than orders actually falling out of the pipeline. New order growth is more than sufficient to maintain the 15 percent growth rate. Accuray added 15 new contracts worth about $75 million during the last quarter. Non-contingent backlog still exceeds $400 million. When the company went public, that number was slightly more than $300 million.

  It’s also very important to note that management has continued to grow cash-producing revenues at a 15 percent clip despite headwinds in the form of difficulties with bank financing, controversies over reimbursements as well as uncertainties with respect to the healthcare system in general. With both Obama and Obamacare now sinking in the polls, there is a good chance of seeing at least some relief from these conditions sometime over the next 12 months. The recent Palmeto and First Coast CyberKnife for prostate Medicare coverage decisions are also signs that Accuray is making headway in the reimbursement area.

  From CyberKnife Treatment for Prostate Cancer Now Covered by Medicare:

  “’This is great news for prostate cancer patients,’ said Dr. Lipani. ‘CyberKnife is rapidly becoming a favored radiation treatment for prostate cancer and this decision will make it available to many more patients.’

  “’Importantly, other health insurers usually take their lead from Medicare in terms of what treatments are covered, so this will potentially give many more men the option of CyberKnife treatment,’ said Dr. Lipani.”

  http://www.capitalhealth.org/news.cfm?action=detail&ref=...

  Also impressive are the recurring revenues, which are fast approaching $20 million per quarter and now account for nearly one-third of total revenue. As Accuray continues to add to its installed base, these recurring revenues will begin to overtake their SG&A expense and the company’s operating margins and EPS will benefit greatly.

  If you look at Intuitive Surgical as a model for how a disruptive technology rolls out in the medical space, you would have to conclude that it’s a rocky road. Intuitive Surgical languished beneath its IPO price for more than four years and dropped into the $3s twice before taking off to $200 per share and beyond.

  As clinical data emerges and public awareness increases, CyberKnife will become the treatment of choice for early stage prostate and lung cancer (two huge markets) as well as many other cancers. There are not nearly enough CyberKnife Centers, either in the United States or abroad, to accommodate all of the patients that will soon be seeking this treatment. We’re still in the early stages of the adoption curve but, clearly, this technology is coming mainstream. Not only is Accuray a special company with a special mission, it’s also a multi-bagger in the making.

• Report this Comment On October 09, 2009, at 3:57 AM, johnnytwodog wrote:

  AOB -"Maybe business is done a certain way in China, but since it has sought out Western dollars to finance its growth -- growth that's been falling a little flat lately -- it needs to do more than just pay lip service to continue to attract capital."

  The Chinese perhaps think the opposite is true. If the West wants to do business in China, the West needs to understand and adapt to Chinese business culture.

  I am AOB bullish due to the growth potential. I have had a few business relationships with Chinese investors in the US. I found the communication confounding. I could leave a business meeting thinking we had clearly commited to responsibilities and goals, and put them in writing. But the next day was a clean slate, and the commitments had to be renegotiated.

  Really nice folks to work with, having warm hospitality, impeccable manners, and an interesting culture, but still confounding and sometimes frustrating. In the end, it was financially rewarding. And that end is all that matters.

  Flat growth, and not taking advantage of market opportunity are my only concerns. I'd like to see AOB get moving in China and also start to market traditional remedies to the US, in health food stores, and with holistic practitioners.

  My wife is an RN working as a surgical assistant, and is a strong believer in traditional medicines. She has had good personal experiences with accupuncture, and herbal remedies. My Asian friends swear by accupuncture. I am certain there is a growing market for Chinese traditional remedies here in the US.

  It's a market practically begging to be filled and dominated.

• Report this Comment On October 10, 2009, at 1:28 PM, foolmeonce84 wrote:

  Very bullish article, which deserves some counterpoints

  Intuitive Surgical reaped explosive growth on the back of reimbursement - as soon as urologists could make money with the device, demand exploded and they no longer had to refer their patients away to radiation oncologists. ISRG has also built an enviable and highly profitable recurring revenue stream linked to patients treated, not just service contracts.

  ARAY cannot be compared to ISRG. In fact, exponential growth in prostate patients treated will require the ISRG using urologists to surrender patients to Cyberknife using radiation oncologists. Basically a marketing battle, which is a main driver for Cyberknife sales - high tech pixie dust. However, the clinical results do not show ANY improvement using Cyberknife than any other radiation therapy machine or surgery with ISRG - so it is only a marketing phenomenon used to attract patients.

  In the end, hoping that health care reforms fail in order to keep reimbursements high is a questionable investment strategy. Announced Medicare cuts in reimbursement for all forms of radiation oncology are keeping the Varian stock price down, while the mentioned appreciation in ARAY stock is based more on speculation.

  Those looking to make a home-run speculative bet on ARAY shares should likely wait until January as then it will be clear whether the announced reimbursement cuts and uncertainty over health care reforms being debated by the congress affect orders for big-ticket medical devices. It is likely that health care providers will prefer to delay significant investments in radiation oncology (Varian, Elekta, Accuray) until the dust settles which could lead to significant order declines until early next calendar year.

  Good luck Fools!

• Report this Comment On October 10, 2009, at 2:16 PM, PauvrePapillon wrote:

  “However, the clinical results do not show ANY improvement using Cyberknife than any other radiation therapy machine or surgery with ISRG - so it is only a marketing phenomenon used to attract patients.”

  This statement is a lie.

  The biological failure rate for CyberKnife for early stage prostate cancer is about one tenth of one percent with some studies reporting no biological failures at all. That’s better than any other form of treatment the best of which run about a one to two percent biological failure rate.

  The ED rate for CyberKnife is less than 20 percent in the worst performing studies and less than 10 percent in most. The incontinence rate for CyberKnife is less than one percent.

  All prostatectomy patients emerge from surgery both impotent and incontinent. After one year, on average, 58 percent remain impotent and 35 percent remain incontinent. With DaVinci, the surgical recovery times are less but the ED and incontinence rates do not improve. There is also a learning curve for surgeons with many reporting that 200 procedures are necessary for a surgeon to become proficient with DaVinci and yes some patients fail to survive the surgery. The morbidity rate for prostatectomy is about one percent.

  For conventional radiation the ED rate is about 43 percent and the incontinence rate is about 12 percent.

  (Note: DaVinci is the name of the robotic surgical device made by Intuitive Surgical. ISRG is the stock symbol for Intuitive Surgical. There is no such thing as “surgery with ISRG”. Anyone with even a cursory background in this subject area would never make such a misstatement as “surgery with ISRG”.)

  A few data sources just to get you started:

  http://www.ncbi.nlm.nih.gov/pubmed/18252677?ordinalpos=1&...

  http://www.ncbi.nlm.nih.gov/pubmed/9749478?ordinalpos=1&...

  http://www.ncbi.nlm.nih.gov/pubmed/7530118

  http://www.ncbi.nlm.nih.gov/pubmed/18755555

• Report this Comment On October 10, 2009, at 2:43 PM, foolmeonce84 wrote:

  Some quotes from the citations listed above for those too lazy to read them:

  Wilt, et. al. "No randomized trial evaluated brachytherapy, cryotherapy, robotic radical prostatectomy, or photon-beam or intensity-modulated radiation therapy."

  In fact, no randomized study between Cyberknife and any other radiation therapy machine has been conducted. The Radiation Therapy Oncology Group (RTOG) www.rtog.org is unlikely to ever sponsor one as radiation is radiation

  For those without a cursory background, Cyberknife is an external beam (photon beam) radiotherapy treatment device. The treatment is a radiation dose to the prostate. This is identical to the treatment using conventional radiation therapy machines manufactured by Varian (Clinac, Trilogy, Novalis) or Elekta, Siemens or Tomotherapy. The only difference of the Cyberknife is HOW the radiation delivery occurs. It is not possible for any external beam device to deliver more dose to the prostate than any other device. All advances in technology (including Cyberknife) have been directed at reducing the dose to the rectum and bladder to avoid complications-not survival rates.

  As Cyberknife radiation delivery is slower than conventional machines and treatment times are longer, treatment is often delivered in 5 sessions instead of 30. One citation above states:

  King, et. al (Stanford) "The radiobiology of prostate cancer favors a hypofractionated dose regimen."

  Hypofractionated means with fewer treatment sessions.

  Note however, if the radiation oncology community ultimately agrees with this preliminary study, ALL existing radiation therapy devices can be used to deliver the radiation in fewer sessions. There is no advantage of the Cyberknife here.

  As to the comparison with radical prostatectomy (using DaVinci or not), the argued benefit of radiation therapy is fewer morbidities (less side effects). I for one would always choose radiation therapy over surgery, but I do not feel compelled to seek out a Cyberknife center to do so.

• Report this Comment On October 10, 2009, at 9:08 PM, PauvrePapillon wrote:

  Here is another pertinent stat for you.

  CAPS Player Rating for PauvrePapillon: 99.49

  (and has been 99+ for over two years)

  CAPS Player Rating for foolmeonce84: <20

• Report this Comment On October 11, 2009, at 9:41 AM, abcdreit wrote:

  Stay away from anything recommended by Motley Fools. They are a fraud and their track record is atrocious. They recommended AOB and raved about its prospects after allegedly having met with management. Then management turn out to be crooks. This is one of many examples. These Motley guys are fraudsters. STAY AWAY !!!!!!!!!!!!!!!!!!!!!

• Report this Comment On October 11, 2009, at 11:17 AM, foolmeonce84 wrote:

  Everyone is entitled to form their own opinion. Politicians have known for years that the most effective strategy is to attack the messenger and not the message.

• Report this Comment On October 12, 2009, at 12:30 PM, PauvrePapillon wrote:

  Everyone is entitled to form their own opinion. They are not entitled to form their own "facts". Virtually every “point” foolmeonce84 alleges is based on misinformation, misrepresentations or outright lies.

  The form of radiation delivery is extremely important. The more accurate the delivery, the less damage to surrounding tissue and thus the higher the dose that can be safely delivered onto the target. Only CyberKnife has the six degrees of freedom necessary to create complex, three-dimensional treatment patterns as well as track, detect and correct for tumor movement in real time. Gantry-mounted devices can only move in a single plane and therefore are physically incapable of either of these accuracy-enhancing techniques. Yes, you could deliver radiation in a hypofractioned course with the less-accurate radiation sprayers but your complication rate would go through the roof.

  The most advanced CyberKnife facilities are now delivering radiation in a pattern that duplicates (non-invasively) the delivery pattern of high dose rate brachytherapy (HDR). There is no way that conventional, gantry-mounted devices can even come close to that.

  Finally, we are discussing an investment. Pointing out that one poster’s track record ranks in the top one percent of over 68,000 prognosticators and comparing that to the record of an antagonist who is ranked in the bottom one percent is not “attacking the messenger”. On the contrary, this is quite valuable information and should be considered by anyone evaluating competing claims.

• Report this Comment On October 12, 2009, at 12:42 PM, PauvrePapillon wrote:

  As to Motley Fools being a fraud, this is a lie. The predictions of all CAPS players are tracked on a daily basis. You can see exactly who is outperforming the market and who is not. There is no more transparent source of investment information anywhere.

  As to all Motley Fools having an atrocious track record, this is also a lie. Motley Fool tracks the performance of all major brokerage house recommendations. There are currently 429 CAPS players who are outperforming every single so-called Wall Street Player. I am one of them.

  http://caps.fool.com/Stats.aspx?source=ifltnvsnv0000001

  http://caps.fool.com/player/pauvrepapillon.aspx

• Report this Comment On October 12, 2009, at 2:38 PM, foolmeonce84 wrote:

  Has CMS (Medicare) announced cuts in reimbursement starting January?

  To quote the WSJ: "And this change is applied to all expensive equipment, not just MRIs and CTs, so payments for antitumor radiation therapy will fall by up to 44%. The American Society for Radiation Oncology says it "will have a devastating effect on cancer patients' access to care." "

  http://online.wsj.com/article/SB1000142405274870447150457444...

  Is the US Congress debating new health care laws? Does this result in uncertainty for health care providers on future revenue streams? I will not bother providing citations for this question. Figure it out yourself.

  Whether this impacts ARAY order bookings (and thus future earnings) will become clear in the October and January earnings calls. Particularly as the reimbursement cuts may be reversed by CMS before they come into effect, and outcome of legislation is hard to predict.

• Report this Comment On October 12, 2009, at 3:55 PM, PauvrePapillon wrote:

  With his bogus claims about the technology thoroughly discredited, foolmeonce84 now repeats what I have already discussed with respect to the uncertainty overhanging the entire healthcare industry thanks to His Holiness, Our Most Beloved and Exalted Dear Leader Barry-Barrack Soetoro-Obamadinejad.

  Yes, centrally planned economies always achieve the object of income homogeneity (everyone goes broke) and socialized medicine rewards the politically connected while destroying innovation and progress… all of which is already priced in the market. What do you think the $11 trillion dollar sell off in U.S. equities was all about?

  The one trump card that free marketers always have over the Marxists is that freedom works and Marxism doesn’t. Sooner or later, even our dimwitted under-30 generation will figure it out. After a few years of living the reality that they all their six-figure College indoctrination has bought them is a job pouring coffee at Starbucks, at least a few will realize that redistribution of the small business and investor profits that could have fueled entrepreneurship and economic growth is what cost them the opportunities that their parents enjoyed in the 80’s.

  The pendulum will swing back. Obamadinejad, Reid and Pelosi are now well along in the process of discrediting themselves.

• Report this Comment On October 21, 2009, at 4:01 AM, foolmeonce84 wrote:

  Earnings call planned for Oct 29th, 2009. What will they say about the quarter just ended? Strong orders? Press release yesteday announced departure of Chief Sales Officer. Possibly a nosedive in orders in the face of announced reimbursement cuts and pending healthcare legislation?

  Management continuity record:

  • On Oct 15, 2009 Chief Sales Officer Hampton Wade resigns with severance pay (negotiated resignaton?)

  • On Jul 19,2009 board member and co-founder John Adler resigns from board of directors

  • On Oct 22, 2008 CFO Robert McNamara and General Counsel Christopher Mitchell leave company

  Note that a class action investor lawsuit for misrepresentation of backlog data is ongoing.

  Regardless of what you believe about the long term prospects of Accuray, the short term is shaping up for a major underperform

• Report this Comment On November 01, 2009, at 12:50 PM, PauvrePapillon wrote:

  Now you can see why Varian has been so hell-bent to confuse the investment community as to the capabilities of gantry-mounted, co-planer machines versus the robotically controlled, multi-planer CyberKnife.

  From Accuray Introduces the CyberKnife(R) VSI(TM) System:

  "'There is a tremendous need for the capabilities built into the new CyberKnife VSI,' said Dwight Heron, M.D., chairman of the Department of Radiation Oncology at UPMC Shadyside. 'Depending on each individual patient's case, we will now be able to better tailor care so that the right amount of radiation is delivered to the right place in the right time frame for each patient, all with the same accuracy for which the CyberKnife is known.'"

  Translation: Now that CyberKnife’s motion tracking real-time continual image guidance and robotic mobility can be applied to both conventionally fractionated IMRT as well as radiosurgery, every gantry-mounted radiation sprayer is obsolete.

  And since the new smaller footprint CyberKnife can fit in the same existing radiation vaults that now house obsolete Varian radiation sprayers, it’s time to move those antique, aged, obsolete, gantry-bound, deaf-dumb-and-blind Varian radiation sprayers into some museum somewhere.

  Accuray is Mercedes. Varian is Oldsmobile.

• Report this Comment On November 13, 2009, at 9:58 PM, chopchop0 wrote:

  It's amazing that PauvrePapillon pumps Cyberknife and ARAY so much, and trashes Varian at the same time, considering he knows so little of how the technology even works.

  The fact is, Gantry-mounted LINACS do (and have always been able to) deliver non-coplanar therapy. Each company (varian, elekta, seimens, etc.) has produced their own radiosurgical solution which, unlike the cyberknife, has the capability for on-board 3D/CT imaging. In addition, these machines can be used for standard radiation therapy delivered over several weeks, unlike the cyberknife.

  The standard of care for prostate cancer continues to be standard radiotherapy, surgery, or prostate seed implants, as all 3 of these techniques have >10 years of follow-up data in large series of patients, unlike the data for cyberknife or proton therapy.

  As any oncologist will tell you, 5-10 year data at a minimum is necessary to truly determine efficacy as well as any toxicity from treatment.

  With capital budgets being slashed, hospitals and cancer centers are going to go with machines that can do it all (radiosurgery and standard radiation therapy).

  The Varian Trilogy, Novalis TX, Elekta Synergy S, and the Seimens Artiste all have the ability to do non-coplanar radiosurgery with onboard 3D imaging and respiratory gating, along with the delivery of stanrdard radiotherapy.

  Why buy one tool, when you can own a swiss army knife?

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