Why ViewRay Is Soaring Today

By Brian FeroldiMarketsFool.com

What happened

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After the company announced 510(k) approval of its next-generation radiation therapy system and provided investors with a few financial highlights, shares of ViewRay, Inc. (NASDAQ: VRAY) rose by 24% as of 3:15 p.m. EST on Monday.

So what

ViewRay announced that it has received 510(k) clearance from the U.S. Food and Drug Administration to market its next-generation MRIdian Linac system. The company believes that this new product will enable oncologists to watch how the body reacts to radiation therapy in real time, allowing them to make therapy adjustments on the fly.

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In addition to the great regulatory news, ViewRay also provided investors with an early look at highlights from its fourth quarter and full year:

  • ViewRay received four new orders for MRIdian systems in the fourth quarter, totaling $24.3 million. For the full year, it received 13 orders totaling $77.0 million.
  • The backlog at year-end stood at $133.2 million, which represents 23 signed sales contracts.
  • Fourth-quarter revenue is expected to be $16.1 million. By contrast, Wall Street was only expecting $9.3 million.
  • Net loss for the quarter is expected to be $11.0 million.
  • The company's cash balance at year-end will be $14.2 million.

Given the good news and positive financial updates, it is easy to understand why shares are skyrocketing today.

Now what

While there's no doubt that this approval will make ViewRay far more competitive in the marketplace, investors should remember that this company still faces some steep competition from the likes of Varian Medical Systems and Accuray. Both of these competitors are much bigger than ViewRay and have access to far greater resources, which might make it hard for the company to compete successfully. After all, these machines cost millions of dollars to install, so ViewRay might have a hard time convincing hospitals to bypass the more established players and buy from it instead.

Still, the MRIdian system's ability to allow oncologists to make therapy adjustments in real time could prove to be enough of a game-changing innovation to convince even reluctant customers to sign up in droves. That makes ViewRay a stock that risk-loving investors might want to keep an eye on.

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Brian Feroldi has no position in any stocks mentioned. The Motley Fool owns shares of Varian Medical Systems. The Motley Fool has a disclosure policy.