BioTuesdays

BTIG cuts ViewRay PT to $6 from $10

BTIG lowered its price target for ViewRay (NASDAQ:VRAY) to $6 from $10 after the company reported second quarter results. The stock closed at $6.74 on Aug. 8 but was down to $3.35 in after hours trading.

ViewRay, which is mainly focused on its MRIdian radiation therapy system, had a much weaker report than expected, writes analyst Dr. Sean Lavin.

While total second quarter revenue was slightly about consensus, the company surprised the Street with gross MRIdian orders of only $18.1-million, well below consensus of $42-million. ViewRay also cut 2019 revenue guidance to between $80-million and $95-million from $111-million to $124-million, even after meeting second quarter expectations.

Dr. Lavin said order weakness in the second quarter was chalked up to “lumpiness, the new U.S. sales team still early in their tenure (first full quarter in their territories), and potentially some minor delays as customers assess the recently proposed Radiation Oncology Alternative Payment Model.”

While the lowered expectation for system installations in the back half of the year is due to issues out of ViewRay’s control, he said “uncontrollable” delays seem to happen repeatedly to small radiation oncology players who are entering a difficult product launch and coordination that involves capital expenditures, construction, approvals, and permits, etc., often from different governments and committees.

“Inconsistency in both revenue and orders seems to have unnerved investors,” Dr. Lavin said. “At the same time, anticipated cash usage is up, meaning a capital raise could be needed sooner.”

However, he said his overall thesis on ViewRay has not changed. “We like the MRIdian technology, see it as best-in-class, believe it has clinical benefits and view ViewRay as an attractive potential acquisition target,” he added.

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