Radiation therapy player ViewRay plans to collaborate with Medtronic and Swedish medtech Elekta, the company said Monday, moves it hopes will bolster clinical understanding of its image-guided radiation technology and significantly strengthen its cash position. News of the partnerships sent shares in ViewRay up 37% in after-hours trading.
Proposed investments by Medtronic and Elekta are contingent upon ViewRay raising $75 million in equity capital, the company said. Elekta committed to investing enough for up to a 9.9% stake in ViewRay, capped at $36 million. ViewRay said its largest shareholder, Fosun, "committed capital up to an amount that would enable it to maintain its current beneficial ownership percentage."
"The immediate cash infusion will allay concerns regarding near-term liquidity constraints while the pair of strategic investments are strong indicators of MRIdian's demand in the RT space," analysts at Jefferies wrote Tuesday. "This in combo with sky-high short interest should see shares double in short order."
ViewRay’s efforts to carve out a niche as a provider of equipment for adaptive radiotherapy guided by magnetic resonance have stumbled at points this year, leading it to slash its full year sales goal in August. However, ViewRay subsequently shrugged off fears that changes to reimbursement would kill off the MR-linac category and has now shown big companies are bullish on its technology.
Elekta and Medtronic have both entered into a non-binding memorandum of understanding with ViewRay that sets the stage for their collaboration.
Working with Elekta, ViewRay expects to run clinical studies to assess MR-guided radiation therapy in oncology and evaluate the potential role of the technology "in other areas."
Publicly available details of the agreement of Medtronic are limited at this stage, with ViewRay only stating the partners will "enter into a clinical collaboration in an area of mutual interest that includes exploring the clinical benefits of the MRIdian MR-guided radiation therapy system."
Medtronic will take a stake of undisclosed size in ViewRay in conjunction with the agreement. Jefferies analysts called Medtronic's partnership "strong signs" of its interest in the radiation therapy space. "Minority investments have led to take-outs in the past," the analysts wrote.
The deals come shortly after CMS placed the reimbursement changes analysts feared would kill the MR-linac category on its long-term agenda, suggesting ViewRay and its peers may be spared their impact in the near term.