Accuray's CEO Hosts Annual Analyst/Investor Meeting at ASTRO 2012 Conference (Transcript)

Oct.29.12 | About: Accuray Incorporated (ARAY)

Accuray Incorporated (NASDAQ:ARAY)

Annual Analyst/Investor Meeting at ASTRO 2012 Conference Call

October 29, 2012, 08:00 am ET


Tom Rathjen - VP, Investor Relations

Josh Levine - President & CEO

Kelly Londy - SVP, Chief Commercial Officer

Chris Raanes - EVP, COO

Derek Bertocci - SVP, CFO

Omar Dawood - SVP, Global Medical Affairs


Tycho Peterson - JPMorgan

Tom Rathjen

Well, good morning everyone. I think I know almost everybody out here. I am Tom Rathjen, Vice President, investor relations here at Accuray and we want to thank all of you for braving the weather and swimming here to the presentation today. We also would like to welcome our online audience who would be attending through the webcast.

Today, we are going to have a good presentation for you. We are going to have our new CEO, Josh Levine make some opening comments. We are going to have Kelly Londy, who is our Senior Vice President and Chief Commercial Officer review the new products. Chris Raanes, who is our Chief Operating Officer, will go into some detail about just the work that went into creating these two exciting new products. And then afterwards, we are going to have a Q&A session and upfront we have Derek Bertocci, our CFO, we've got Omar Dawood, who is our Senior Vice President of Global Medical Affairs and we have other executives in-house who would be happy to help answer your questions.

Also, I would like to remind you that we are announcing our fiscal Q1 next Wednesday that would be November 7th. So just as a comment here, we will not be entertaining any questions regarding the quarter for obvious reasons.

Okay, so before we begin, I need to remind you that the statements made during this meeting that are not statements of historical facts are forward-looking statements that are subject to the Safe Harbor provisions of Private Securities Litigation Reform Act of 1995.

Forward-looking statements made during this meeting relates, but are not limited to significance of products launches, product capabilities, the company next-stage of growth including revenue growth, market growth and profitability and the company's leadership position in radiation oncology, innovation.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations including risks detailed from time-to-time under the heading Risk Factors in the company's report filed on Form 10K, filed on September 10, 2012. We would also like to note that CyberKnife M6 system is currently pending 510(k) clearance.

And with that, I would like to introduce Accuray’s President and Chief Executive Officer, Josh Levine. Josh?

Josh Levine

Thanks Tom. Good morning everyone. I would like to also extend a welcome to not just the folks here in the room who braved Hurricane Sandy to be here, but the folks online on the webcast version of this presentation as well. For those of you that are here, I am going to guess like most of us you probably had flights canceled or somewhat of your travel disrupted hopefully just from an efficiency standpoint or an opportunity standpoint, if it gives you an extra chance or extra time to spend some more dedicated time or hands on time on the floor of the Exhibit Hall, hopefully that would be useful for you, especially if you had a chance, if you didn't get a chance yesterday to see the launch of our new products, I would encourage you to make your way over to the Exhibit Hall at some point today or if you are around tomorrow as well. I think you will find it worthwhile.

I wanted to just make some introductory comments. I have a piece of this, but I would like to talk a little bit about my background very briefly and probably spend a little bit more time talking about why I thought Accuray was the opportunity that was going to get me back to work, and why I chose this opportunity to get back to work.

For those of you that have looked at into background or seen some of my past, you’ll know that I am a commercial manager. I have a background in strategic marketing, commercialization, business development. I am new to clearly the linear accelerator space and the radiosurgery space, but have a lot of background in new product launches, new technology commercialization and quite frankly a very good track record of competing in markets that are highly competitive against larger competitors and also of driving shareholder value for the companies that I’ve been with.

When I think about the opportunity, or when I have the opportunity to understand Accuray and what was here a little bit in greater detail, I got very, very excited. And the reason I got excited was that for someone with my background, when you look at where this company is at, when you look at the legacy of the company’s technical prowess and technical product differentiation, I look at this is an opportunity where someone with a strong commercial band could capitalize or optimize on the technical capabilities that the company had and really get more aggressive from a strategic marketing standpoint and a commercialization standpoint. So these are the primary reasons why I thought that this was a great opportunity. I am excited to be here and I think that there is great things will happen with this business going forward.

One of things if you listened in on the first morning, I guess Friday, the 12th of October in the conference call that we had, I indicated that in the very near-term, at that point, all of my energy and focus and all of the focus of the team was really going to be applied to the launch of our two new platforms at the upcoming ASTRO Show. And that has certainly been the case; again if you didn’t get by yesterday on the show floor to see the products, I highly encourage you to do that; I think you will be impressed.

But the products really are what this is about, at least at this point. The focus here is on product differentiation on what these products will do to expand the patient universe that our customers can treat and to provide them with better efficiency and better economics in terms of value creation in their business models. So it’s really about the products and the commercial focus.

And with that, I really think that the primary part of the presentation you are going to see this morning is really going to be driven around those concepts, commercial, product capabilities, product differentiation. I am pleased and excited to have a chance to introduce Kelly Londy, who is our Chief Commercial Officer. Kelly has a very, very strong background in long cycle, high end capital equipment. She has worked for a number of world-class companies, GE Healthcare and Philips in running very large businesses overtime and actually started out on the customer side of the world as a radiographer at the University of Michigan, so she has both her hands on practical set of experiences with products in this space and technologies in space as well as the commercial leadership experience with some of the world-class companies that I have just mentioned. So I am looking forward to working with Kelly and her team going forward.

And with that as a background and a little bit of an introduction, I am going to turn it over to Kelly Londy, our Chief Commercial Officer.

Kelly Londy

Thank you, Josh. So today we are here to talk about unmet possibilities. I am pleased to be here as this is my first ASTRO with Accuray and it’s the first time that I have been able to plan and execute Accuray’s ASTRO. However, I hate to admit how many ASTRO’s not made that I have been able to plan and execute before, but this is really exciting and different because this time we get to actually launch two products at the same time which in a very long carrier of doing that, and very unusual to be able to have two brand new products launched at the same time, so it really is a once and clear opportunity and a big deal.

Not only are we launching two new products, two new revolutionary products, we’ll once again be changing the field of radiation oncology and radiosurgery for our customers and patients moving forward. With unsurpassed clinical capabilities, superior technology innovation and the new compelling economic value proposition.

Our two new product lines are built around Accuray’s three pillars of excellence, the clinical excellence, patient focus and economic impact. They are very significant advances in both products for each of these sections and we will be highlighting this as we move into more specifics in the following slides and Chris Raanes is also going to captured several of the important topics about this.

So these three pillars of excellence, focus on expanding clinical applications and capabilities, increasing throughput with ease of use and improve patient experience, we really are changing the way that our clinicians and customers are going to treat patients in the future. The best thing about this new innovation is not the new covers, although I like those a lot. It’s also about the specific technology enhancements, but the most important thing is really about the treatment options that these new solutions provides the patients now and in the future.

The CyberKnife system is the premier solution for full body robotic radiosurgery and it now extends its accuracy and precision to radiation therapy, allowing customers the freedom to choose the best treatment for each of their patients. While the TomoTherapy system is the premier solution for the entire spectrum of radiation therapy. It delivers dose only where you needed and not where you don't; now has outstanding speed, performance and simplicity allowing clinicians the freedom to choose the very best treatment for each of their patients. Both new product lines are built around the three key pillars providing value to customers that allow them to treat every cancer patient with confidence and without compromise. So we are going to talk a moment about the new M6 CyberKnife series. The new gold standard for Accuray is the CyberKnife M6 series. We have a long history of driving for excellence in radio surgery and this continues with the new M6 CyberKnife.

The M6 is revolutionary with mostly all new components designed from the control systems to the sub systems. This new system allows for a large volume of extended applications and the infrastructure required to enable robotics, free pass therapy of the future. As we’ve enhanced the room layout with the new robotic orientation to the new CyberKnife M6 series, the changes allow us to enable clinicians to deliver unrivaled dose distribution and treat complex tumors with higher doses that are extending the limits of what is possible for our customers and their patients.

Additionally the M6 is the only solution available within MLC that can move in three dimensions while being shaping. As a result, we expect that large and regular tumors, those that were previously thought unsuited for radio surgery or SBRT can now be treated with speed and accuracy. Now as we look to the price and clinical capabilities that appear to meet customer needs and their future growth opportunities, this really allows us the access to able to think about becoming more and more patient focused, driving advanced clinical applications and providing our customers with the ability to have a wider range of patients that they can bring in to referring physicians and patient direct demand for these new technologies.

As we move into this I'm going to go ahead now and show you our customers that we are looking forward to having you see with (inaudible) from the UPMC, can you please play the customer video.

[Commercial Video]

So we're pretty excited about our new product. We are looking forward to receiving (inaudible) and with this, we believe that we’ll be able to provide our customers with the clinical excellence, patient focused capabilities and the economic impact that have a significant change in how they are addressing their clinical needs both for today and for tomorrow.

As we look to the new CyberKnife M6 theories, note that we're calling it a theory. There are three products that are going to be available within this, to provide a price and clinical capability tearing to make sure that we're meeting all of the customer needs and allowing for future growth as their clinic and capabilities need to expand, so that they’re able to have the CyberKnife M6 F1 series, which is the replacement for our current VSI product line, which is the gold standard for SRS and SBRT capabilities. They can upgrade them to the FM which gives them a fix and MLC collimator to address additional capabilities within this.

Finally, then is our top tier product which give our M6 FIM system, which allows us to access even a broader market and ensure the CyberKnife is no longer just a niche product. We move from a niche product to mainstream with the new MLC capabilities.

Now I am going to introduce Chris Raanes to come up and give us some technical insight in to what the new multileaf collimator is able to do.

Chris Raanes

Thanks Kelly good morning everyone. I am Chris Raanes the Executive Vice President and Chief Operating Officer, and one of the things I do is oversee the technical development, and given how much new technical development is in this year’s products, so I thought it would be appropriate to take a few minutes of your time.

Starting with one of the front end pieces here the InCise Multileaf Collimator that’s the new front end of the CyberKnife M6. This is a unit like everything on the CyberKnife M6 that was redesigned from the bottom up. This is not something we took off the shelf. This is a unit that is designed to be optimized for CyberKnife types of treatments. What does that mean, CyberKnife is all about absolute accuracy, and so these new leaves here that you are looking at 2.5 millimeters that’s the projected size for the (inaudible) found on the patient.

So you can get very, very fine and accurate contouring to the tumor. These leaves are also a lot thicker than you will find on a normal MLC, so the height of the leaves when going into this picture that you see here is significantly more than on any other system you will see out there and the reason for that is we take it so serious we put those where you want it and not where you don’t. We don’t want anything leaking through the leaves themselves. So much thicker to prevent any kind of leakage, much finer so that you can get really good shade control and ours is much finer across the entire field.

And then thirdly the combination of the height and the very fine [sick] assures that there is almost no leakage whatsoever between the leaf. So in total this is a way of sculpting the dose, delivering it to the tumor and preventing dose from going anywhere that you don’t want it. A ground up design for the best-in-class radio surgery system. Now the good news and I think there is a video that comes with this, the good news is that everything I just said that makes the perfect tool for CyberKnife radio surgery also applies itself willingly to the IMRT side. You can use this to deliver IMRT treatments just like you can with any other and mostly it just happens to be more accurate and better and maybe the dose hits exactly where it wants to go.

The converse is not true, but if you take the standard IMRT MLC and use it to try and deliver radiosurgery, it doesn't have all of these advantages. So you need this technology to have the best-in-class. Could we roll the video, that shows this unit in use. So there you see the MLC on the front the one with the accelerator, and I’ll take this opportunity to point out that almost everything you see there is new, its not just the MLC, the (inaudible) that’s behind it is new, the robot that is holding it is new and here you see the fundamental advantage, right instead of and still having deliver from smaller views, you shape this to the tumor and you can deliver larger doses that's one of the way that this speeds things up. You are able to deliver to the whole tumor in a single birds eye view.

The other part you may not have noticed it, but if you look at where the robot is sitting relative to the patient and in this CyberKnife M6 it is sitting directly at the head of the table. And that’s significant from the physics point of view because now the CyberKnife has perfect symmetrical access to the patient, you can reach equally well to the right to the left and we use that to make the opportunity to get those CyberKnife a little bit further under the table. So it has better angels from below, and we didn't just do that from one or two, we took advantage of the capabilities to really give it some clinically significant lateral notes. This makes a big difference and it makes a big difference in the math of how you treat, how you get good treatments, it is pure math, it is complicated math, but it is pure math which shows that if you treat from a wider set of angels, you can get the same or better from fewer nodes. So you speed it up because you are delivering larger bits of dose, you speed it up because you don't have to stop at as many places, all of that goes to throughput while getting better plans, its an amazing you get both, you don't have to trade one for the other and as you are known to some of the competitors they have managed to take a nice tradeoff between quality, plan and speed.

We've introduced something where there is no trade off. You get a better plan and you get the speed. So that's the bullet on the left, it’s the MLC, it’s the new robot, it is the new control system, it’s the new modulator, it is a new everything, it’s a big, big set of technology. What does that add up to? The second bullet SRS in a 30 minute time slot and I'll remind you again we don't have a 510-K clearance yet but based on the whole lot of engineering studies and simulations, we feel very comfortable that SRS in a 30 minute time slot including time to get the patient in and out of that room set up on the table is a thing that this M6 will be able to deliver.

And that's a big deal and you can reliably to set your patients on those 30 minute time slots and again you get it through the combination of the technologies I have talked about so far. Now take that. Take everything I said about the gold standard in SRS, you've made it better, you've made it faster, you can apply it to IMRT.

Now, this is a device, it’s now got radiation delivered through an MLC on the front end. You can use it to deliver standard IMRT plans, but better than that you bring all the advantages of CyberKnife’s technology to those IMRT plans, right.

We’ve talked about why the MLC is better. We put those where we wanted. We don't have any dose in the other places, being a scientist I can't say none. You minimize it, right, you do everything you can. You have all these leakage stoppages much better than anyone else plus you are on a robot, since that is being constrained to delivery on IMRT plans in a circle, you can bring that robot out of [plan], you can deliver the dose from multiple angles and that will give you better IMRT plans, just based on first physics principles and then you know again a clinical plan, I'm making a physics plan.

If you deliver in a circle, you will not do as well if you deliver in a sphere. On top of that, all the accuracies, specifications, all the dynamic tracking etcetera that comes with standard CyberKnife applies to the new unit, its still sub-millimetric and that applies both to the radiosurgery and to the IMRT treatments and given the speed of the system, the IMRT treatments fit in the standard slot.

So, it brings us all the way to the right. You can do both. You've got the world class SRS with this new front end with new set of technologies the way its positioned, new [column] meter on the front, the new control system around it and you can take that and you can deliver the best-in-class radiosurgery plans better than the previous unit again without the 510-K I don't know how it behaves out in the field but I'm telling you what the engineers will share from the simulations and their expenses and that allows even also to go over to the IMRT side, the conventional radiotherapy infrastructure for featured dynamic free path delivery, the control system is new, this is a broad, broad spectrum device and I’m really, really excited. I'll be around to answer any specific technology questions you have later.

But let me turn it back to Kelly at this point.

Kelly Londy

Thanks Chris. So again, as we look it what business we will do. The enhanced patient experience potential for better outcomes with fewer side effects and larger volumes for expanded applications that is the summary for the new CyberKnife M6 series.

Now we're going to talk for few minutes about the new TomoTherapy series. The TomoTherapy HDA System provides flexibility unmatched in the industry. Helical delivery and daily imaging are integrated into a standard time slots, giving a degree of clinical performance not available in any other system. This is significant implications for being able to now treat more patients with even greater efficiency.

The new TomoTherapy HDA System builds upon the TomoTherapy’s legacy for clinical excellence offering an ideal solution for a single vault location as well as sites that which broaden their practice. Quite simply, the TomoTherapy system has been providing what our customers need and now they're able to treat more patients and establish a foundation for addressing clinical challenges of tomorrow.

The new TomoTherapy System has unrivalled clinical capabilities and unmatched flexibility. As we look at what we're going to do for moving forward for patient experience, the precise and efficient patient specific capabilities now with a daily 3D imaging really will make a difference in how our clinicians are able to improve their speed, whether it's in using the VoLO system to decrease the amount of time that it takes to do the treatment and planning or for running through the patients in the new algorithm, this really will provide what they need to do more patients with a higher degree of accuracy. This allows our customers to have more patients coming into their practice with a wider variety of referring physicians.

Now we're going to hear from another customer that’s going to tell you about the TomoTherapy System in their own words.

[Commercial Video]

So this is just not, just the same TomoTherapy System with new covers. It has an all new engine under the hood to make sure that we are able to deliver on all of these commitments that the customer just made. In the few minutes, Chris will expand on the new engineering, but for right now, let’s just say that TomoTherapy has redesigned hardware and software required for routine to complex treatments plans.

So the new TomoH theories come in three versions as well, so this is a platform for customers to build on for today and into the future. As we look at the new systems, it’s streamlined for a work flow and efficiency throughput, allowing customers the ability to treat patients under wide variety of treatment plans.

The TomoH [replaces] are higher in system that was previously there, it’s a gold standard for helical IGRT treatments. Then customers can choose to do the TomoHD. With the TomoHD adding the VoLO as the standard option for enabling higher throughput, then on the TomoHDA, the dynamic job in 3D imaging guidance capabilities allow for unlimited radiation therapy treatment options with all of the standard available options on the previous two systems, so a customer can buy any one of these now and be able to upgrade as their clinical needs upgrade in the future.

Chris, do you want to give us some insight on to the new technology?

Chris Raanes

All right, thanks again, Kelly. So once again on the new Tomo side, and Kelly made this point, it is not just a new set of covers, underneath those covers is a whole new set of components I will talk about those in just a minute, but we are going to lead with the new technology that has one of the most profound effects which is TomoEDGE and what we are looking at here is we are looking into the system where it delivers it’s dose. But I think we've got a video again, if we could play the video that will walk us through how this works. So looking into the board here of the TomoEDGE.

The issue, let's see if it shows, so here you see dose being delivered to the tumor. While the patient is moving through the bore, right, the dose has to come out in an aperture. That's just the way it is. It comes out in a cone shape. The trick is and the advantage of TomoEDGE is that there is no point in opening it until you get to the beginning of that tumor. So as the patient is coming through the leading edge of that aperture starts opening up; opens to its full width while you are treating the tumor and then as you get to the other end, once again the trailing edge then just tracks the tumor.

So the aperture is dynamic. It opens and closes and it happens to do it just as an area that you want to the treatment comes through, while its fully opened you modulate the dose of the MLC, but at the beginning and at the end of the tumor those doors open and close to modulate the size of the beam and what that does for you is it gives you the super sharp fall off at the beginning and at the end. You get better plans again and that's you see a theme here. Every one of the technologies we are delivering enables the clinician to do a better job. You get sharper fall off at the beginning and at the end.

And generally there is this rule that nothing comes for free and in this particular case just like with the MLC it’s not true, you get this not only do you get better plans, you now will also get faster treatments. Why do you get faster treatments? Well, if I can control it at the beginning and the end to get the super sharp dose falloff on in the middle I can have the aperture open to a significantly larger size; so I can deliver more dose at a given time and on average we are going to probably see and again it depends what kind of tumors we are treating, 50% plus type of time reduction. We are going to be delivering dose through the fully opened aperture, much faster than we were before and yet getting sculpted edges at both ends by tracking the edges of those tumors and opening and closing the aperture.

Let me go ahead here to the next slide. So that's the box on the left. That's the leading clinical application that we are just starting with here TomoEDGE, better plans, faster throughput, right and you heard the doctor from Heidelberg talk about how many more patients a day he thinks in his particular practice he would be able to get through to significant time savings, so that’s go the patient throughput and quality of care.

The second one up there is VoLO. VoLO is our new planning system and I think revolutionary is the right word for this because it literally is taking something that used to take an overnight kind of batch process down to virtually real-time, minutes or seconds to get your answer back. So that goes now to throughput on the doctors or the physicists time, the amount of time they need to spend sitting at the console and getting their plan data is much, much reduced, and again, the type of numbers I am talking about is overnight to minutes, virtually real-time, sometimes seconds.

So that goes the throughput, but there's a second story. The story below that is that you get this real-time feedback on your plans, so while you are sitting there, it comes up, we look at it and you go, you know for this particular patient, I want to make a small adjustment and you are not afraid to do that because its only another 30 or 40 seconds before you get the next sort of feedback. So the doctor will use some of that throughput time for delivering better care to the patients. You get throughput and you get better care for the patients. It's a really fantastic combination.

The third board up there, Imaging. TomoTherapy already has the best-in-class daily imaging. It's a true, helical CT image that you get every single day; very different from what you get from a fan beam, something kind of quality you will never be able to get from a fan beam, already through today. What the engineers have introduced here is a very, very clever way of reconstructing the image, using some of the new processing power we've got, where you can reconstruct it in finer slices than you're actually taking the helical spiral away.

What does that mean? That means for your alignment scans, you can run the patient through at the highest rate that you would like and then simply reconstruct it into its finer slices you would give up a little bit of image quality, but it's virtually the same and for alignment it's more than the same and starting with the best images in the industry, all you’ve really got is a big help from throughput. So the new imaging algorithm allows the setup to be faster. The new VoLO allows the planning to be faster and gives you better care. TomoEDGE allows you to deliver the plans better and faster, so three really key technologies under the hood here for delivering better care faster.

Please move over to the right, the 3DCRT. So I’ve been talking about the high-end IMRT complicated kind of plans that everyone knows Tomo is best at. The 3DCRT is for the simpler cases. Let’s take standard parallel opposed to breast treatment. With the package we’re releasing this year, we've taken the planning for a simple parallel opposed breast and made it trivial. It's something I’ve seen done a number of times; always under five minutes, some times under three minutes, so we’ve made it really, really simple to use, possibly simpler than on a conventional linac; we’ve got the users to decide, but even better than that; we have optimized it; we have put some great algorithms in there, so that the hot spots have completely disappeared. Again, better than they we will deliver on any standard C-arm gantry.

And then the third part of that story, you think about it, once again this is a unit where the patient has just gone through and gotten a daily 3D scan, best in class 3D scan, you don’t have to do anything fancy as a therapist or doctor to go in there, to align his parallel opposed beams; it happens automatically. We know exactly where everything is. The thermal gantry simply rotates everything into position to the treatment from one side, rotate it to the other; do the treatment from the other. The entire process one end to the other including the planning as you see up; planned and delivered in five minutes.

This really opens up a best in class 3DCRT for Tomo patients; that makes us device capable from the simplest, to the most complex. Already established is the best and the most complex. Now easiest to use an automatic on the simplest; broad spectrum, unlimited RT treatment options without compromise; that’s what technologies we introduced this year are all about.

I am going to take just 30 more seconds to talk about what else is new under the hood, because I have certainly heard people say that else same thing, we just put fancy new covers on it and nothing could be farther from the truth. So in addition to these enhancements that I am talking about, underneath that set of covers is a whole new set of components and I’ll take you all back to pretty much a year ago today, I was standing in front of you talking about the expertise that the Accuray team will be able bring to this device and looking at some of the issues with it. This has under hood now a brand new linac, a brand new dose control system, an updated modulator, a new MLC, a new cooling system from one end to the other, all of the parts of this that deliver dose high performance to the patient have been redesigned with Accuray’s technology. We have been working together on this for over a year and we are very proud to show it to you this year at ASTRO.

Again, I will be around at the end to take any more technical questions. Thank you.

Kelly Londy

So again, its good described. All these new components lend for superior patient experience, better and faster treatments and a full spectrum, whole body applications now available on the Tomo series. Now I am going to talk for a minute about the changing landscape. This is a snapshot of the current radiation therapy market and let me explain.

The X axis is actually going to be for the vertical and the potential procedures that are available. The horizontal is the spectrum of current treatments and they go from the easiest most routine cases to the very complex and there is a lot of technologies that map to this landscape. So the basic conventional linac, this is the conventional linac valve with conventional fractions used for very simple routine cases and the amount of patients that had been available to see into this practice.

With the evolution, we have now moved into having a linac with some SRS capabilities. This is where we now have been some of our competitors playing in this landscape. Our legacy TomoTherapy systems right in this segment, really doing the best IMRT and IGRT treatment capability.

This is our new system and where it fits now, so you can see that we have gone into being able to use all the new technology to expand into the most routine cases and expand our high end capabilities into the SRS capabilities and tempting out further as we go into the more and more complex cases. This is what it looks like for our traditional CyberKnife systems and we were clearly in the high-end SBRT the premier product in that space. With our new treatments however and our new technologies, we have now bridged the gap so that we are doing not only the complex cases but also into IDRT and IMRT spaces as we move forward with this.

Our new two products really map to be that we are no longer a niche product, but we've moved to main street. The new platforms have top engineering capabilities with efficiency and cost effectiveness, making them very reliable for a single vault solution. As we move forward with the CyberKnife M6, we’ll have the premier price position and it’s the optimum system for accuracy and precision for the best and most complicated treatment. But it also has capabilities to provide us clinicians with the availability to take some of their patients and be able to do the more routine cases on it as well.

However the new thermal therapy systems are clearly main street price with a wide range of clinical capabilities. It’s a new dawn at Accuray with our technologies and we have addressed the reasons that customers previously would choose to compromise even under the spectrum. We now have two premier products in their individual spaces that have the advanced capability and crossover technologies to make sure that we are providing the best solutions for our customers in either range that they choose.

With that I'm going to turn it back over to Josh to finish with his comments. Thank you very much.

Josh Levine

Thanks Kelly. Hopefully you start to get some sense about why we are so excited about the future. I want to relate a little bit of first week on the job story. On day three in that first week Kelly and Omar Dawood, our Chief Medical Officer invited me to make a customer visit after hearing the (inaudible). I won't get specific about which customer it is, but I will tell you that this was a really, really eye opener for me. It was the first time obviously I had actually seen and heard direct customer dialogue around our technologies, and the one thing that really struck me was that especially in the area of prostate cancer, we were talking about with the M6 series capabilities that would allow treatment protocols to go from nine weeks and be compressed down it to one week or maybe even less than that.

And so we start to think about the context of not just the economic impact for the facility from customer standpoint, but the quality of the patient experience or the differential in the patient experience and the opportunities to communicate directly with patients at some point downstream about how big that could be and how impactful that could be for them.

You start to get very, very excited, and again from a commercialization standpoint from a strategic marketing standpoint one of the boxes for me that was very important for me to check in my due diligence process was do we have a portfolio that we can do battle with and win. Is there a pathway to building a winning strategic growth agenda for this business? We've had best-in-class capabilities I think over-time and great technology, but I'm not sure that we've always been able to translate those technical feature sets into why is that important for customers or how does it benefit customers or how does it create value for customers. And in that regard, I think the benefits of what we've just introduced here really are fairly simple. We're going to take what we've done technically from best-in-class precision standpoint where we were already and enhance it even more and make the patient experience around some of these treatment applications very different than what they’ve experienced in the past.

Second, you get a chance to expand what had been perhaps niche positioning for some of these products and broaden them so you have a broader footprint in terms of competitive strategic positioning in the space, and lastly and definitely not least, change the economic equation for customers. When I started to do due diligence on a very general level coming in to this job; I was talking to people about radiation oncologist about not Accuray specifically but about the space. But as you started to get feedback from customers and [radiant] you heard very clearly that there were differences and there were strong perceptions about speed, operating efficiency and how the throughput and how those things impacted the economics of this business for them.

So when you start to think about those elements, and you start to think about the significant changes that we’ve made in terms of technical advancements with these two platforms, you really can get excited about the energy around successful commercialization of these products. This will be quite frankly, foundationally critical for us in terms of building a bigger company, driving future revenue growth, both on the product side and on the service side.

So let me just from a preliminary thoughts standpoint, let me just share a couple of things. I shared early on that we probably are 90 or 100 days out on having a more defined view about the business, the strategy, what you can expect, and I am not going to come off that timeline at this point. But I thought it might be valuable to share some preliminary thoughts about the business at this point at least from my view, and I am again I am going to qualify this by saying this is with 14 days on the job under my belt.

This is a company that will benefit from a more disciplined aggressive focus on the market and on customer reaction and on meeting customer needs, and I am very strongly feeling that that is what will happen overtime and basically commercial success will be the next realized outcome if we can get that focused. Again taking the technologies what we are launching right now and making sure that we take technical feature sets and are affective at translating those into real customer value. What is the benefit to customers of the new Multileaf Collimator on the M6. What are the advantages for the customer of having the dynamic jaws of the TomoH series. Those are things that we need to get very crisp about in terms of customer benefit and communication.

If you spoke to anyone of my executive leadership group at this point; one of the things I think you would hear from them that they have heard from me very early on is, this for us is about growth. It is about building more critical mass, it’s about building a more scalable business enterprise. We will not be able to save our way to a bigger company. With that said and I need to be clear about this, we absolutely recognize that there is a sense of there need to be a sense of urgency about what a pathway to profitability looks like for this business model, and so we don’t get a chance in my view to be able to focus on one or the other. Focus on one being let’s say a top line only at the expense of profitability. We are going to doing these things concurrently, and I think we can do them concurrently, but I believe that ultimately we have to grow because we can't say of a bigger bottom line without more critical mass in terms revenue growth.

And we got quite frankly; I believe the portfolio at this point strategically to do that. I think even to see a more aggressive Accuray in the market place from a marketing perspective and a commercialization perspective. I think you are going to be able to see a company that is more tuned into customers in terms of their needs both clinically and economically. And I think you are going to see a business that is driving to profitability because we recognize that we got an obligation to do that and the investment community both current investors and our potential investors expect that of us, as well they should and we intend to deliver on that.

So with that shared, I guess I would like to say thank you and thank the team. Just a couple of other introductions here, my bad for not doing it earlier on. Chris Raanes, our Chief Operating Officer, who you heard from already to his left is Derek Bertocci, our Chief Financial Officer, and to Derek’s left is Omar Dawood, our Chief Medical Officer. And we already, I believe now to take some questions.

Question-and-Answer Session


(Operator Instructions)

Unidentified Analyst

(Question Inaudible)

Josh Levine


Chris Raanes


Derek Bertocci

So in answering that as Chris said since we don't have clearance on the M6. We have to provide some caveats and we can't really provide it absolutely in terms of treatment time and anything along those lines. Let me take care of your first question and the second part of your question in terms of treatment size. So as we spoke to several of you yesterday, when we are looking at the MLC on the new M6, we have to think about the MLC and the field size a lot different than I think what's traditionally been presented in terms of MLCs.

MLCs are not all created equal and that's because the MLC here as Chris described, it doesn't rotate a single plan, it’s not in the (inaudible), it’s actually a robot moving in and out of plan. So the field size here like with the original CyberKnife is actually going to be larger than what the MLC size is. What that will translate into in clinical practice is difficult to comment on. What we have seen from the original CyberKnife again is that it will be larger than the stated field size that we have.

So the intention of the design was that it would be able to expand the treatment of larger target as Chris said and that's the current CyberKnife is treating tumors up to eight, nine, 10 centimeters in terms of diameter. And that was with a field size of six in terms of the largest field size that that unit had. So I think its intended that this unit would be able to treat larger and larger field sizes. That opens you up to a variety of different treatments for advanced prostate cancer for example.

You can start looking at treating nodal change and treating extra prosthetic disease for wider pelvis treatments, the potential for multiple targets in the brain, for more advanced lung cancers and more advanced breast cancers. As Chris said, that puts you in a category now where you are not just relegated to a dedicated SRS SBRT machine but you are taking all that accuracy and precision, extending it to larger targets that you may treat either in conventional fractionation, some intermediate hyperfractionation or maybe even SBRT fractionation. Treatment times again it’s difficult to comment on at this point without clearance. What I would point to is when Accuray debuted its probably second most significant upgrade behind this several years ago in terms of VSI System, we saw a decrease of about 30% to 40% in terms of efficiencies and in terms of treatment times.

Unidentified Analyst

(Question Inaudible)

Derek Bertocci

So, I mean sort of put a (inaudible) in terms of lung treatments and lung treatments have really gravitated toward SBRT fractionation. I think the CyberKnife is really dominant in that field. And its dominant for a number of very, very clear reasons that we hear from the fields, from our customers and the reason why lung treatments have escalated in terms of the number of treatments done on the CyberKnife, number one, is the system tracks and corrects and I want to remember that second part of that equation because other competitors in this space will talk a lot about tracking, about seeing tumors but if you can see a tumor you don't have arms to do anything about it, you don't have the ability to react to it, not compensate but actually move the beam with the tumor on as the tumor moves and adapt by patient that's unique to the system and keep in mind it does that non-invasively.

So as Chris described a couple of years ago, it maybe about two years ago now, we delivered a product called lung optimized treatment that allowed you to do all that non-invasively. So, non-invasive ability to deliver radio surgical accuracy anywhere in the lung, it expands the range of tumors you can treat. You can treat tumors close to critical structures not just tumors that are in the periphery like our typically (inaudible) system. Number two, when you look at the Edge System for example. It relies on a crutch which is the Calypso System, and the Calypso System, because the marker is so big, the marker is either put on the skin as Verian debut a year ago or what they've been talking about recently and we describe this last year, we at the Investor Presentation as well is the marker being implanted within the actual airway through an invasive bronchoscopic procedure.

Now the marker and airway is not the same as actually tracking the tumor itself. Number one, it's an invasive procedure. Number two, so you are putting patients that are pulmonary compromised on their advanced respiratory disease at risk and number three, if you can start seeing motion, you are (inaudible). You are still locked in to a historic legacy architecture, doesn’t allow you to correct promotion. So because of all that, I think that the CyberKnife continues to be well positioned with the MLC as Chris described and the M6 potential.

It's intended to remain dominated on an extended sleeve and lung and then capitalize on as you said when the pulmonary codes are released into the mainstream in January, really capitalize on that new referral stream and the ability of thoracic surgeons to participate in treatment.

Tycho Peterson - JPMorgan

You're making a major shift here from having two very focused machines under two different brands targeting different markets. Now there is a very large overlap between the two and yet you’ve talked about you want to keep CyberKnife as a premium offering. Can you just talk about how you manage the infringement of Tomo as a mainstream product overlapping into the domain that obviously you would prefer to sell a CyberKnife unit when the overlap is as largest the diagram shows?

Kelly Londy

Sure. So as we look at what our customers are asking for in the premier segment, they do want to stay. When I am meeting with customers they are it’s pretty easy to figure out what is their main look of what they are going to do, are they going to do mostly SRBT and they need some overlap in IMRT world, are they mostly doing IMRT and they want to search out in for the SRS world. So I think as you place these with the customers, they pretty much have a pretty clear idea of what where they are trying to drive their practice and which end it is, but to have a value proposition and a return on investment right now for the customers that make it work, they really need to make sure that they have some coverage into either section on the other end which is where they have been going to more of a hybrid kind of system that makes compromises on both extremes. So now they will be able to pick whatever their primary target is and do that exceptionally well and have the capability to do a little of the overage in either section. So I do think the customers will be able to self select into what is going to be their primary section that they are going to treat most but have the ability to do some of the other cases in the overflow as well.

Tycho Peterson - JPMorgan

May be as a follow on that with the new introduction you are obviously going after the higher end of the market what are the things you call out Josh in your slide was the international opportunity, can you talk about how you feel about your line up today as you go after international customers and particular within emerging markets?

Josh Levine

Well, I think that the international market is clearly a growth opportunity for us. If you look at the current footprint of our installed base, the installed base is larger outside of the United States. We have very, very solid commercial distribution partnerships in the best and best opportunity on emerging markets, so in places where new construction is taking place in emerging markets are growing. I think we are well positioned with from our product lineup standpoint to compete and also from again from a distribution part of standpoint compete.

I know that again, two weeks like I go into the role. I know that we have from a historical standpoint; we have some distribution partners that have been dedicated to CyberKnife. We have some distribution partners that have been dedicated to Tomo. We have some; I think a smaller number that are actually carrying both lines.

And obviously we will continue to evaluate where we get the best impact in the marketplace in terms of sales capability, service capability, customer engagement, competitive strengths from a distribution perspective and making sure that we want to align those things up with where the best opportunities are for us. So and I think in general international is a terrific growth driver for us, like all business as they mature and as they evolve, we will continue to evolve the support and the infrastructure components of this business to execute on a growth strategy going from a distribution partner standpoint and alike.

Tycho Peterson - JPMorgan

And you guys have done a great job.

Kelly Londy

Did I finish with couple of thing after that, the other thing that we are announcing that we didn't highlight in this is our renew program which is an actual business now that reports up to the commercial organization is tied closely with Chris and the development team. We knew as our refurbish trade in program. And I think as we do this and maybe it becomes a very part of our business, it will provide us with the systems at a price point to really address some of the emerging market need for the capabilities. These systems will be brought back in fully refurbished, sold with a one year warranty and really we will provide some capability at a price point that we need to go really after some emerging markets that we really haven't had the ability to be before.

Tycho Peterson - JPMorgan

And then you guys have done a great job improving the reliability on the Tomo side. It seems like the new dynamic job also helps with reliability, can you just talk to that?

Chris Raanes

So I mentioned all new under the hood or new engine and I think rather than go through point by point what was having any troubles, let's put it this way that the Accuray linear accelerator team has by need overtime developed its own in-house technology; we had to, for the CyberKnife we had to develop our own stuff, because we had to make it smaller and wider to put on the end of the robot. So we've got a team in California that is probably world-class, its probably the team I would pick for looking at any kind of issues with linear accelerator.

And over the last year what we've come out with as I pointed out was a new fundamental linear accelerator at the front end of this thing; that its actually a different architecture from the one that we were sitting in their before. There is all the interconnects between the fundamental power source and the linear accelerator, that's new, there is a circle loop around it to make sure that the dose stays rock steady, there's advancements in modulator that drives the whole system and then the power unit itself, think all the magnetron that puts the power into start the whole series has been fundamentally redesigned. So we are coming at this from a ground up Accuray linear accelerator point of view and feels that it is really rock solid and not anywhere near the edges where its going to have anything but high performance out in the field.

Tycho Peterson - JPMorgan

And then maybe just one quick last one for Josh, you have it as a profitability aspect the targets that have been put out there for ’13, how should we be thinking about those? And then I guess as we think about the metrics that you've been providing, should we think about those changing going forward in terms of maybe getting more granularity?

Josh Levine

So let me take the first half of that; that one Tycho first. Again I'm not going to be communicating today about whether the guidance we have on the street right now is that we are going to reaffirm it or change it in anyway. Again, I want to get deeper into the next 60 to 90 days and as soon as we have a very clear defined view about where we are going and any strategic changes and I am not suggested there will be, I'm just saying that if you are an existing investor, if you are a perspective investor, I would think if I were in those seats, I would want Josh to get deeply submerged in this business and all of the aspects of it before we start talking about where we are going to land on things.

The profitability discussion is one that is in my mind is that we need to have a sense of urgency about quite frankly. I think just again from the outside looking in, it would appear to me that the investment community and investors have been very patient with us about the clarity around when the business crosses over to become sustainably profitable.

And again you can, if you ask the people that are sitting here on the dais with me, one of the very first things we talked about in my first interactions with the team were the themes that I talked about this morning. It starts with growth, it starts with developing the strategic growth agenda that we can execute against and build a better company around.

And concurrently, it comes with the obligation to drive through a cost structure that sustainable profitability is going to be a routine part of our existence going forward and that we can continue to deliver on. And so, and I don't think those things are mutually exclusive in terms of our ability to manage them or to impact them on a concurrent timeline.

Unidentified Analyst

Say on the Tomo side, could you talk a little bit about the pricing changes? What does it mean for the H, HD, HDA and what do those changes mean versus the competition?

Kelly Londy

So we will have a price increase for the HDA, the new Dynamic Jaws technology, there is price a increase for sure. As we look across the competitive landscape, I still think that we are competitively priced for the technology that goes; and I don't think we’ll be a premium price point competitively for the either of the three levels of the series for the TomoH.

Unidentified Analyst

I have a quick question about your sort of becoming more aggressive going forward. How do you balance the installed-base versus profitable services contracts? And just curious how you view this going forward? Do you see the placement of linac as more of a right against service in the future or is it something which in its own right can be far more profitable?

Kelly Londy

So I don't think that we will manage our installed-base very aggressively going forward. Our installed base, we’ve reorganized in the U.S. and in EMEA to have an installed base specific sales team focused on selling specifically into our installed base and managing their service contracts going forward. I do think that we are competitively priced on both the Tomo side and the CyberKnife side for our service contracts with all that are included then.

So it is where you need to, as we look at competitive service contracts and I do review those prices and what's included in them, if you get the all in price and then have the diamond points and the things that allow customers to buy future enhancements with their service contracts, I think that we are at a very good place in the market. We’ve actually had a significant uptake in our service contracts on both products in the last two quarters. So I think that we are doing good job and customers are embracing the fact that they get better reliability, better service performance and that the price point is matched to that.

Unidentified Analyst

And to grow your installed base do you see the hardware as a right to getting more service contracts going forward which are more profitable or would you say that we are actually interested in making our hardware more profitable going forward as well?

Kelly Londy

Well, I think to hit the levels of growth that we are talking about we need to do -- Derek do you have an opinion?

Derek Bertocci

Yes, so if you look at the business, selling the equipment is the start of the relationship for the customer. The service life of the product is usually perhaps 10 years, so the revenue on service is the ongoing recurring revenue stream and it is a very important part of the ongoing revenue and profit part of the business; probably the most stable and important part of the business from an ongoing revenue and profit standpoint.

Josh Levine

Before you get to the next question, let me just, I want to go back, I actually realized that I didn’t answered the second part of Tycho’s question from the floor which was kind of the metrics discussion and I think the specific question Tycho if I am remembering correctly was with regards to what we have been providing in the past, what are the thoughts going forward about that.

If again, if I go back to my mental experience, if I am predisposed in any direction, it’s probably towards more transparency and when I say that, I think that that helps you and helps us longer-term. If there are elements about our business model that are not as clear as they need to be or a black box in anyway or whatever how you want to describe that, I am not sure that that servers us well or you well. We would like to get replace where we you can understand the trends in the business, understand directionally how to measure and how to gauge progress in the business which we certainly believe there will be ample opportunity to do going forward and to provide you with the informational data points to be able to do that.

So while I won't get specific about it, here now, I do think going forward, it wouldn’t be erroneous or incorrect to think that we would be providing a boarder set of metrics to track progress and understand trending in the business.

Unidentified Analyst

One for Kelly, in the graphic where you showed the over lapping curves, to try to get sense for how broadly applicable these new systems would be, there was a meaningful chunk on the M6 that was over IMRT. I wonder if you could spend sometime talking to us about the pathway forward that gets us from thinking about the CyberKnife is an SRS machine and taking that to it being in an IMRT machine and how broad that can be and I would ask the same question Omar, but for Kelly primarily, what do we need from a regulatory and reimbursement pathway to get us to the point where people think about this as an IMRT machine Omar, or what targets would you expect this to be used as an IMRT machine for and then you can speak to ultimately what you think that can get reimburse as an IMRT delivery machine?

Omar Dawood

Okay, so it’s an excellent question. So the reason if you see there are two interesting, can you backup one, just one click. So if you are looking at let me go forward one click. So when you look at the M6, there's two interesting things that we put on this, number one, the bubble in terms of potential patients for SRS SBRT actually the potential is likely to be higher, and number 2 as you pointed out that the curve actually extends into IMRT. And I just want to address both of those and the points that you question there which are excellent points.

Number one is as Chris said the ability to treat the intention with the ability to treat larger targets with SRS and SBRT precision, we are listening to other customers in the field, we know that customers worldwide want to treat certain targets with SRS SBRT whether it be with the CyberKnife or other technologies and have been somewhat constraints with the inability to do that efficiently. So an MLC on a robot provides the ability to potentially start doing that. So expand the actual potential number of an already rapidly expanding field with SRS SBRT.

To your question about IMRT, its not that the previous CyberKnife VSI, couldn’t do IMRT, but it couldn’t do IMRT efficiently because the field size was considerably smaller, the system was not as efficient as what it appears the M6 could be, and so those efficiencies, the increased field size and as Chris said all the benefits of finally sculpting MLC provides the ability to start expanding into what we would say potentially bread and butter type applications of SBRT. So advanced prostrate, breast, whole brain, advanced lung, multiple spine tumors for example versus just treating at a single level or two. That can [cerebral] expansion, how big that is, we really need to see how clinical experience dictates that, but again listening to the customers in the field, its not just a dedicated system with an initial purchases as Kelly said that often will swing the needle, but its the ability to also treat or have a path that it would treat IMRT patients.

From a reimbursement perspective this is an MLC. There are clear reimbursement pathways to delivering IMRT fractionations and there are certain technical and clinical requirements to do that for example within the United States and the CyberKnife M6 having the MLC and the work flow that's been designed would be able to meet those, check off all of those points.

Kelly Londy

Omar kind of went into the reimbursement. As I think your question is the US based question, we as everybody I'm sure knows, we are expecting the thoracic code is to kick in, in January and we are waiting for later this week to hear what the reimbursement changes proposed maybe and what that will do. In general what I have heard back from customers are that they are concerned about being able to have flexibility and how they are treating their patients to be able to make sure that they are balancing the optimum patient care with getting the reimbursement they need to keep their practices alive. So we are hoping that they have the flexibility that they need to see how to grow as the reimbursement changes happen both what's announced this week and into the future as we go forward.

Unidentified Analyst

And then one for Chris on the hardware, with the new CyberKnife system, it looks frankly more muscular, are there any new requirements either in terms of the size of the room or shielding or anything else from engineering perspective to prepare a room for the new CyberKnife.

Chris Raanes

The overall room size changes by one foot in length but it gets narrower by three feet. The first order of the answer is no. It fits in all the standard rooms. It certainly fits in - if you look at any of the volts design first standard, (inaudible) it fits beautifully in those. So, yes there is a small, little bit narrow, little bit longer but it’s by one foot or something like that. So the first one I would say no changes at all. In terms of, what was the other part of the question, you told be about it be more muscular.

Unidentified Analyst

I think you adjusted pretty well. It was the size and shielding.

Chris Raanes

Okay, so shielding is a work flow and (inaudible) size. So it's a pretty straight forward calculation and it's not radically different from the previous CyberKnife or from the [C] LINAC.

Tom Rathjen

Question back here.

Unidentified Analyst

Yes, one question I have. My understanding is that both your system now are 510(k) pending and there is clearly a reason that you’ll have no activity for a period. Then how do you manage that risk and from a client perspective and financially, especially as your business properly, largely about new hardware sales to new customers. Is that correct?

Chris Raanes

So, just for clarity, the Tomo H series is fully 510(k) cleared.

Unidentified Analyst

And the other system.

Chris Raanes

And then on the CyberKnife M6, it is 510(k) pending, and I would try to predict what the federal agency will do is, I found in my last experience, not a good thing to do in public but from our point of view, we're through all the essential requirements and it's an the administrative phase and I don’t look forward to it being as significant delay to our business.

Unidentified Analyst

My understanding in terms of the upgrade pathway is that TomoTherapy does have an upgrade pathway but CyberKnife doesn’t. So something that I want to talk about a lot for Accuray is our placing cycle, so how much is not having upgrade pathway so that CyberKnife catalyses that replacement cycle. And then a second question is can you characterize the magnitude of having a dedicated thoracic SBRT [tube] going into effect in January.

Kelly Londy

So for the first part of your question that the CyberKnife does have an upgrade path. So whether they buy the CyberKnife M6 now or they will be able to upgrade either of the two versions in the future for if they had a previously generation CyberKnife installed now we have an upgrade path for them they would trade from system end we would be able to replace it with a new CyberKnife as well. So from the upgrade path I think our new renew business where we are going to be managing that aggressively will solve that problem so that we will be able to have good trading values and a sustainable business models for that process. I am not sure I understood the second part of your question though.

Unidentified Analyst

Second part of my first question was in terms of Accuray replacing cycle. My understanding is the useful life of the CyberKnife or line apps is 7 or 10 years or coming one into that timeline. It seems like a good time potentially to have a new product coming to the market of this magnitude?

Kelly Londy

We agree, we think it’s a great time to that, so we are right in the window of replacement cycles for most of our customers, so we think that this is a very good time to have new product introduction.

Tom Rathjen

And then the last part of your question.

Unidentified Company Representative

The last part of the question was on the thoracic SBRT code any significance of that.

Chris Raanes

So cancer oncology treatment is multi disciplinary. There are multiple physicians involved not just in orchestrating the treatment but getting the patients to a point of treatment and that’s a critical point. So the thoracic surgeons on many levels are gatekeeper, pulmonologist on many levels are gatekeepers and what we have seen successfully in the most successful centers as when you are able to incentivize all the parties involved especially the party just the gatekeeper, and you are able to educate all of them on the benefits of treatment for example CyberKnife to lung it provides a huge pathway for patients that are not able to have surgery but now also we are seeing more alternative the surgery.

And with the M6 potentially for advanced disease as well. So for the thoracic surgeon now to be able to weigh options with more (inaudible), surgical resection versus CyberKnife take the financials almost out of the picture because they are being compensated for the participation in both. As we have seen in neurosurgery with brain tumors, it provides significant support for thoracic surgeons then to be able to look at tribune options such as SBRT CyberKnife more favorably.

Kelly Londy

It is exciting to me to think about the potential in the future, not that I have anything that I can really influence with. But if the thoracic surgery calls come in and really makes this news switch in the clinical practice, you can easily see this extending into pulmonology, urology all of the rest of the difficult customer interactions where they have to manage their patient for the future this would lay the ground work from making that very viable.

Unidentified Analyst

Josh a bit more of a philosophical question. As you approach this company versus a much better resource incumbent competitor where historically there has been misinformation, disinformation counter detailing to content with, I am trying to anticipate if this technology speak for itself to already (inaudible) oncologist to customers to all three such that there is a tender of clarity and truth that does not have right now the ability to be subvertive?

Josh Levine

It’s an interesting question, I think the simple answer is this, just from personal experience I don't believe technology and I’ve seen many, many terrific products over the course of my career in other categories and in other market segments that based on feature sets alone you would think perhaps would speak clearly and definitively to the market but the truth is over time, I think I've come to believe that no technology regardless of the feature sets sells itself.

So by definition, the onus is on us to drive the point of differentiation, to drive clarity around value proposition, to drive clarity around how our products will change the course of a practice both clinically in terms of patient clinical outcomes, economically for the customer that we are dealing with, and then on a more practical level for the patient in terms of their own experience potentially in terms of their treatment and how they view it over time.

Its not lost on me that there has been a history here, at least from what I gathered in fairly short timeline that from a competitive positioning standpoint people, larger companies in the space have been basically saying that they are kind of, they are (inaudible) strategy, they are everywhere you want to be and the onus is on us to quite frankly set the record straight and I'm not sure whether we have not been able to do that because we haven't been willing to be aggressive enough, haven't been willing to speak plainly enough to the market, haven't been willing to back up our capabilities and the points of differentiation around value proposition with the right data.

I'll tell you one thing for certain that it’s been an extraordinary process of awareness for me as again as I started to do due diligence in this space, it was remarkable to me how little data was present in the context of the size and scale and financial commitments of the equipment that people were being estimate. I mean you've to kind of everything is relative based on your comparative experiences, right. So I came out of PMA based businesses, the breast implant business is a good example. You know arguably the most widely studied and scientifically evaluated surgically implantable Class III devices in history with the FDA.

We ran, it took us 15 years to get silicone gel filled breast implants back on the marketplace. After we did that, we ran the core gel study of 1,000 patients, 10 year follow-up, the agency and their infinite wisdom asked us to do as part of a follow-up, post approval study and enrolling another 49,000 patients and follow them for another 10 years, okay, that's my frame of reference.

I walked into this arena and I see customers procuring $3 million, $4 million, $5 million remarkably technical pieces of equipment and I'm asking about what the purchase decisions are being made around and just to be completely candid about it, its staggering how little data exists around product versus product or justification for this kind of purchasing decisions.

So I think one of the areas quite frankly that we will spend a lot of time on in the next 90 days or 100 days is what do we need to do what you just described. What do we need to ensure that we are not taking a laser approach but a less aggressive approach about hoping that the technical advantages and the technical differentiation of these products will carry the day on their own.

I don't believe that we should be putting our head on the pillow at night comfortably assuming that. I think we are going to need. We should bring more to it than that and that's where some of this in god we trust all of these bring data discussion starts to play into it.

Unidentified Analyst

Can you talk about the throughput of the new machines versus your competition?

Omar Dawood

So again on the CyberKnife side, it's in a limited fashion because it's not cleared and again I would point to from an SRS SBRT capability, the most recent CyberKnife was treating patients in extremely efficient manner that what we saw in the field in terms of, and again it's a smaller number of fractions you are treating patients with. It's typical one to five fractions. So you're not looking at a per day, per hours system in terms of patients but you are looking at per annum that the system was, I would say on leading edge or beyond in terms of capability for us or SRS SBRT throughput.

As Chris said, the value of an MLC on a robot and that intention is that you are bringing significant increased efficiencies both in terms of treatment delivery but also on the planning side and in terms of the overall workflow. What that will mean, we're going to have to see we can’t comment to on this point but again we can point to our most recent significant upgrade of several years ago go to VSI in which again change the collimation system and made some other efficiency type changes and we easily saw 30% to 40% increase in the field.

I think on the TomoTherapy side, it's a lot easier at this point to categorize that. As Kelly nicely described, we had a system that was really the best way to deliver IMRT. It was difficult and challenging to deliver just simple routine cases. It's not that the system couldn't but very simple workflow pieces weren’t optimized and those as Chris described and Kelly described been addressed and so that’s not a barrier to, I should say that’s a significant barrier not something to overlook because to be able to do the bread and butter cases and not be locked in the just IMRT expands a whole slew of patients and potential patients that the system can treat through that bread and butter category and efficient system that is at the highest performance.

Chris Raanes

So starting with the TomoTherapy side, being able to plan and deliver in sort of a sum total of five minutes or six minutes kind of sets the stage, right? So that’s for the simple 3D CRT and we have seen plenty of example of that in the engineers’ data. So I think it’s already established how fast it goes on, the complex image guided IMRT we have sped that up pretty tremendously. We are looking at probably again it depends in all these cases it depends what type of patients you treat in your particular practice, but let’s taken on average number somewhere in the 35% to 50% improvement based on the just on the TomoEDGE and again it will be more for some kind, less for others. You get throughput from the new VoLO planning more for some, less for others then you have the simple 3D again in a total planning and delivery in the five minute to six minute range which I think is pretty remarkable and simpler to do not only equally fast is not faster but simpler to use.

On the CyberKnife M6 again without the 510-K, we can’t talk a lot about it but I will refer you to and I am looking at my Vice President of Research at the moment it’s a paper I believe by Charlie Ma from the Fox Chase Cancer Center. So he wrote a study where he looked at the potential benefits of putting an MLC on the front of a CyberKnife. Here is a case where if I remember correctly and Calvin correct me, If I misspeak here, looked at a case well because of his particular practice was pretty heavily on prostate and he was showing in his study approximately a 70% plus reduction in time, Calvin, do I got those numbers correct? So I would advice you to go read that paper because he can comment on it, well I can't.

Unidentified Analyst

And then one last question. Can you go into any more specifics about the range of prices?

Kelly Londy

So as we don't have FDA clearance yet on the CyberKnife, we can't talk about those at all. Whereas with the TomoTherapy System, we are looking at probably an average selling price increased of about $400,000 for a high end system globally.

Tom Rathjen

Okay, we are just about out of time, so we will have this to be the last question but we do invite all of you who will be attending I ask you to come over a booth, we will be happy to entertain further questions, the floor opens in a half hour but this will be our last question.

Unidentified Analyst

You talked about one of the objectives is to expand further internationally. And you also talked about, and we shouldn't thank you any more of just a niche equipment provider, but the hole in your lineup is a lower and less featured more price competitive for emerging market version. Is that something that needs to be added to the lineup or how do you try and play into that large untapped space with let's call it main street and premium priced product without something that’s got sort of more price competitive scale to it?

Josh Levine

I think in the near to intermediate term, I think that the program that Kelly talked about the renew program is probably that the initial thrust of filling that gap, again from a product portfolio standpoint and what else is needed to drive the kind of strategic growth agenda that we are talking about, you know I'm agnostic and open to any and all thought processes from an internal evaluation standpoint about what else needs to be done from a portfolio perspective.

I think what we need to do is we need to like in any of these R&D investment situations understand what the commercial impact, the potential commercial impact is of the investments we are going to make, make sure that we have got the right product feature sets aligned with customer unmet needs and the overvalue proposition including the price point before we determine whether we push the go button or don't push the go button. But I would not let gaps in portfolio today while we have we think addressed a big, big range of potential opportunities with the tune of platforms that we've launched here at the show.

I don't think you will see us being static going forward about other product portfolio expansion discussions. It’s really just a matter of you know what makes the most sense and where are we going to get our best returns. I think again though on the points specifically you asked about, I think in the near-term to intermediate-term there were new program or the refurbishment program is probably the go-to-market program and activity that would address that.

Tom Rathjen

Okay, I guess that's it, I would like to thank all of you for coming out today. We very much appreciate your interest and your participation. I would like to thank our executives for their time as well and our online audience. Anybody who has further questions, we look forward to seeing you at the booth or of course give me a call and I would be happy to go into more detail. Also Josh has talked about being more engaging with the investment community. So Josh I think we could look forward to…

Josh Levine

Take a look at the experience that you or your firms might have had with me or with the companies that have been involved with, specifically Mentor would be the best benchmark. I was very personally involved from a proactive interaction standpoint with the investment community both interacting with exiting investors, interacting and supporting our sell side analysts covering the company and our mentor expanding coverage, expanding average daily trading volume, these were things that were very clear goals for us and things that we started to manage more aggressively.

I got personally involved and we expanded on both of those fronts at Mentor. You know we went from I think three of four firms covering the company to somewhere in low-double digits 11, 12, 13 firms covering our average daily trading volume jumped substantially. So these are activities that I have seen first hand make a difference in how the company is positioned. We want to be more transparent. We want to be more open. We want more people to understand how excited they should be about Accuray’s future, and I think from a responsibility standpoint that messaging starts with me and the world that I'm in.

So again I need to get my sea legs under me. We need to let the dust settle on the first call of 100 days, but I would imagine on the other side of the New Year we will start to get more externally focused on that front as well, not just on the customer front. So.

Tom Rathjen

Great. Alright, well, thank you very much and we look forward to seeing you.

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