Accuray Incorporated ’s ARAY subsidiary, Accuray Asia, recently formed a joint venture ("JV") with CNNC High Energy Equipment Co., a subsidiary of China Isotope and Radiation Corporation (“CIRC”). The JV is aimed at manufacturing and selling radiation oncology systems in China. This collaboration fortifies Accuray’s hold in China.
However, following the announcement, shares of Accuray dropped 5.1% to close at $4.25. We believe positive developments such as these are likely to boost the stock, which has slipped 23.5% against the industry’s 2.6% rally in a year’s time. The current level is also lower than the S&P 500 index’s 6.5% decline.
More on the Venture
Located in Tianjin, the JV is expected to provide advanced technologies and deliver a full range of radiation therapy and radiosurgery treatments to Chinese medical professionals and their patients.
Sales operations are expected to begin toward the end of 2019. This is likely to boost the demand for Accuray’s coveted radiotherapy platforms, which are seeing higher demand in China of late.
Going by a report of China Med Device, four people die of cancer in the country every minute. This is sure to drive demand for radiotherapy devices.
Hence, the venture is a strategic one for Accuray.
Strong Foothold in China
Accuray’s flagship radiation platforms — Radixact and CyberKnife — have seen solid adoption in China in the recently-reported fiscal second quarter.
Notably, CyberKnife orders from China drove the company’s gross order, which rose 28.6% on a year-over-year basis. Additionally, Accuray’s CyberKnife and TomoTherapy radiotherapy systems have a strong presence in tier-1 academic and research-based hospitals in China.
Moreover, management expects the recent China Ministry of Health quota announcement to drive Accuray’s APAC revenues in fiscal 2020.
Other MedTech Giants in China
Apart from Accuray, U.S. MedTech giants like Varian Medical Systems VAR and Align Technology ALGN enjoy a significant presence in China.
Varian's coveted Halcyon cancer treatment platform recently secured approval from the China National Medical Product Administration. Meanwhile, Align Technology has been gaining from manufacturing the iTero Element intraoral scanner in China post-receipt of Certificate of Medical Device Registration and Certificate of Production from the China Food and Drug Administration.
Zacks Rank & Another Key Pick
Accuray carries a Zacks Rank #2 (Buy).
Another top-ranked stock in the broader medical space is Intuitive Surgical ISRG.
Intuitive Surgical’s long-term earnings growth is projected at 14.5%. The stock carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
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