Accuray (ARAY)

Accuray has developed the first and only commercially available intelligent robotic radiosurgery system, the CyberKnife System, designed to treat solid tumors anywhere in the body as an alternative to traditional surgery. The CyberKnife System combines continuous image-guidance technology with a compact linear accelerator that has the ability to move in three dimensions according to the treatment plan. The image-guidance technology continuously acquires images to track a tumor's location and transmits any position corrections to the robotic arm prior to delivery of each dose of radiation. The compact linear accelerator, or linac, is a compact radiation treatment device that uses microwaves to accelerate electrons to create high-energy X-ray beams to destroy the tumor. This combination, which Accuray refers to as intelligent robotics, extends the benefits of radiosurgery to the treatment of tumors anywhere in the body. The CyberKnife System autonomously tracks, detects, and corrects for tumor and patient movement in real-time during the procedure, enabling delivery of precise, high dose radiation typically with sub-millimeter accuracy. The CyberKnife procedure requires no anesthesia, can be performed on an outpatient basis, and allows for the treatment of patients that otherwise would not have been treated with radiation or who may not have been good candidates for surgery. In addition, the CyberKnife procedure avoids many of the potential risks and complications that are associated with other treatment options and is more cost effective than traditional surgery. Accuray completed its initial public offering of common stock in February 2007.

After initially receiving marketing approval in the U.S., the company received additional marketing clearance in the international markets for the CyberKnife System. In July 1999, Accuray obtained 510(k) clearance from the FDA to market the CyberKnife System for the treatment of tumors and certain other conditions in the head, neck, and upper spine. In August 2001, Accuray received FDA clearance for the treatment of tumors anywhere in the body where radiation treatment is indicated. In September 2002, Accuray received a CE mark for the sale of the CyberKnife System in Europe. The CyberKnife System has also been approved for various indications in Japan, Korea, Taiwan, China, and other countries. In fiscal 2008, the U.S. (including Puerto Rico), Europe, Asia (except Japan), and Japan contributed 68%, 5%, 19%, and 8%, respectively to net revenue.

The company generates revenue by selling the CyberKnife System, placing the CyberKnife System with customers, and providing ongoing services and upgrades to customers following installation of the CyberKnife System. The current list price for the CyberKnife System ranges from approximately $4.2 million to $5.75 million depending upon system configuration and options purchased and typically includes installation, initial training, and a one-year warranty. Product revenue also includes sales of linacs for other uses. The company also offers optional hardware and software, technical enhancements, and upgrades to the CyberKnife System, as part of its multiyear service plans. Accuray's previous legacy service plans resulted in deferred revenue from payments received for system sales and service plans that are eventually recognized as revenue after delivering the upgrades. Under its revenue recognition policy, the company generally does not recognize revenue attributable to a CyberKnife System purchase until after installation has occurred. For international sales through distributors, the company typically recognizes revenue upon shipment of the product to the end user's site. Under its shared ownership program that is offered in the U.S., Accuray retains title to the CyberKnife System while the customer has use of the system. The shared ownership contracts generally require a minimum monthly payment from the customer, and Accuray may earn additional revenue through increased use of the system at the site. The shared ownership programs typically have a term of five years, during which the customer has the option to purchase the system at pre-determined prices. In fiscal 2008, products, shared ownership programs, services, and other contributed 72%, 5%, 19%, and 4%, respectively to net revenue. Other is revenue from upgrade services in Japan.

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