Quarterly Report • May 23, 2012
Quarterly Report
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"The year has taken off well with several key orders for our proprietary RayStation® treatment planning system during the first quarter. The order from the Princess Margaret Hospital (PMH) in Canada was a major breakthrough. PMH has achieved an international reputation as a global leader in the fight against cancer", says Johan Löf CEO of RaySearch.
"Thanks to the strong increase in sales of RayStation®, the revenues rose a full 67 percent to SEK 38.4 M (23.0). This is RaySearch's second highest quarterly sales ever and by far the highest sales level ever recorded for the first quarter", says Johan Löf, CEO of RaySearch.
| AMOUNTS IN SEK 000S | JAN–MAR | FULL-YEAR | |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| Net sales | 38,449 | 23,047 | 126,103 |
| Operating profit | 6,718 | 2,083 | 27,624 |
| Operating margin, % | 17.5 | 9.0 | 21.9 |
| Profit for the period | 4,617 | 1,597 | 17,007 |
| Earnings per share, SEK | 0.13 | 0.05 | 0.50 |
| Share price at period end, SEK | 23.80 | 35.40 | 14.45 |
The information in the interim report is such that RaySearch must disclose publicly in accordance with the Swedish Securities and Clearing Operations Act and/or the Swedish Financial Instruments Trading Act. The information was submitted for publication on May 23, 2012 at 7.45 a.m.
The year has taken off well with several key orders for our proprietary RayStation® treatment planning system during the first quarter. The order from Princess Margaret Hospital (PMH) in Canada was a major breakthrough. PMH has achieved an international reputation as a global leader in the fight against cancer. The order value from such a large hospital is significant but even more important is the fact that PMH is widely recognized as the pioneering research institution in the field of image-guided and adaptive radiation therapy. PMH's selection of RayStation® as its primary tool for the next step in radiation therapy confirms that we are the leading supplier of treatment planning software. We also received important orders in Europe; for example, we received an order from the German Cancer Research Center (DKFZ), which is the largest biomedical research institute in Germany. We were also successful in an important tender process in Switzerland and our distributor in Italy sold the first systems to two clinics in Italy. In May we signed a distribution agreement with a renowned Spanish distributor, and last week we returned from the annual European radiation therapy convention ESTRO where we participated as an exhibitor. RayStation® generated a lot of excitement at the conference, which should help us grow the order volumes in Europe. In April, we experienced another very positive development when we secured our first two orders from Asia, the most important growth region for radiation therapy. One of the orders was for was for treatment planning of proton therapy from Samsung Medical Center and the other was for treatment planning of conventional radiation therapy from the Hallym University Medical Center. Both clinics are located in Seoul, South Korea. Sales of RayStation® are thus under way in all major regions.
Sales of partner products were stable during the first quarter. Sales via Philips, RaySearch's largest partner, were in line with sales in the year-earlier period. Sales via Varian and Accuray were also largely unchanged, while revenues from Nucletron and IBA Dosimetry were slightly higher than in the corresponding period in 2011. The partnership with Siemens is being terminated since Siemens has decided to exit the radiation therapy field. It is currently difficult to say what this will entail, but regardless of Siemens' decisions, RaySearch is guaranteed revenues from this cooperation for several more years.
Combined with the strongly increasing sales of RayStation®, this means that revenues rose a full 67 percent to SEK 38.4 M (23.0). This is RaySearch's second highest quarterly sales ever and by far the highest sales level ever for the first quarter. Profit for the period reached SEK 4.6 M, which was also significantly higher than in the year-earlier period, when SEK 1.6 M was reported. The profit increase was less than the sales increase because costs for development, marketing and expansion of sales and service of RayStation® are now higher.
In May 2011 we were sued by the US company Prowess, which claims that we have infringed on a US patent that they license. We believe there is no infringement and in addition, that the patent should be invalidated since there is prior art in numerous older publications describing the same methods. We have a strong defense and hope to win the case. In January 2012, an arbitration conference was arranged by the court to see if the parties could settle without a protracted process. Since Prowess maintained demands that were wholly unacceptable to RaySearch, these proceedings came to no avail. Consequently, the process continues and it is still difficult to predict how long it will take to resolve the dispute and the cost this will entail for RaySearch. However, it is clear that we will have to bear relatively substantial legal costs in 2012 to be able to mount a proper defense.
For the remainder of 2012 we will continue to strengthen our global organization, primarily in sales, marketing and support of RayStation®. However, we are proceeding cautiously and will build the infrastructure step by step with the goal of a positive profit contribution from the direct sales effort also in the short-term.
The first version of RayStation® for general use was released in January and it is already a fantastic product. There is still much we wish to add and we will also address the proposals for improvements from our customers that use the system clinically. In parallel, we continue the development programs together with our partners. For example, jointly with IBA Dosimetry, we are in the process of completing an adaptation of the quality assurance system COMPASS® for a new detector. The new version will be launched in 2012.
The year has begun favorably and, in view of the positive reception for RayStation® and the number of exciting ongoing business discussions with clinics, I am very positive regarding the remainder of the year.
Stockholm, May 23, 2012
Johan Löf President and CEO of RaySearch Laboratories AB (publ)
In January, RaySearch announced that version 2.5 of the RayStation® treatment planning system had been released for clinical use in Europe and the US and that regulatory approval was pending in Canada. The new version includes a wide range of new features and improvements. RayStation® 2.5 includes all of RaySearch's market-leading optimization algorithms for VMAT, IMRT and 3D-CRT alongside a comprehensive set of tools for traditional 3D-CRT planning. This means that the system can be used clinically for treatment planning of all various treatment modalities of photon therapy. Using advanced deformable registration algorithms, RayStation® 2.5 also allows the users to perform dose tracking. This offers the possibility to perform accurate dose accumulation of any delivered or planned dose to any patient geometry using any combination of image data sets. RayStation® is the first treatment planning system that lets the clinicians monitor the impact of a changing patient geometry as the treatment progresses, and seamlessly adjust the treatment in the same system. The dose tracking functionality is available for installation in Europe and the US but regulatory approval is pending in Canada.
In March, an order was received from Princess Margaret Hospital (PMH) in Toronto, Canada. PMH is internationally renowned as one of the leading institutions in the battle against cancer and is ranked as one of the best hospitals in the world for both care and research in the field of cancer. PMH is widely recognized as a pioneer in image controlled and adaptive radiation therapy and the agreement entails that RaySearch will deliver its RayStation® treatment planning system to PMH, where it will be used as the principal treatment planning tool for adaptive radiation therapy. During the quarter, RaySearch also received orders from James E. Cary Cancer Center in Hannibal, Missouri; DKFZ (German Cancer Research Center) in Heidelberg, Germany; Hôpital Riviera in Vevey, Switzerland; and two clinics in Italy.
In April, RaySearch announced that it had received two orders for RayStation® from Samsung Medical Center and Hallym University Medical Center in Seoul, South Korea. Samsung Medical Center (SMC) has a large cancer center that offers a number of advanced treatment solutions based on radiation therapy and the center is also building a new unit for proton therapy. Proton therapy is the most refined form of radiation therapy and facilitates even higher precision than IMRT with photons. SMC has ordered RaySearch's RayStation® treatment planning system for planning of all proton treatments. Hallym University Medical Center is one of the largest medical institutions in South Korea. It has ordered RayStation® for both conventional 3D-CRT treatments and for more advanced treatments such as IMRT and VMAT.
In May, RaySearch signed an exclusive distribution agreement with the Spanish distributor Bioterra, based in Madrid. The agreement entails that Bioterra will be responsible for marketing, sales and service of RayStation® in the Spanish market. Spain is one of the largest markets for radiation therapy in Europe, with more than 120 clinics. Bioterra is a leading distributor of radiation therapy equipment in Spain and represents a spectrum of international radiation therapy companies in various areas.
During the first quarter of 2012, sales rose 66.8 percent year-on-year to SEK 38.4 M (23.0). Sales consist of license revenues via partners and direct sales, as well as support revenues. The total number of licenses sold via partners and direct sales amounted to 355 (207) and license revenues during the first quarter of 2012 amounted to SEK 33.9 M (18.4). The increase in license revenues derived from a substantial rise in revenues from direct sales of RayStation®. Support revenues in the first quarter of 2012 decreased marginally to SEK 4.5 M (4.7), since declining support revenues for old products were not fully offset by support revenues from new products.
The company is dependent on exchange-rate trends in USD and EUR against the SEK, because invoicing is denominated in USD and EUR while most costs are in SEK. During the first quarter of 2012, revenues in USD were recognized at an average exchange rate of SEK 6.67, compared with SEK 6.32 in the year-earlier period. During the first quarter of 2012, revenues in EUR were recognized at an average exchange rate of SEK 8.85, compared with SEK 8.78 in the year-earlier period. Accordingly, currency effects had a positive impact on sales. At unchanged exchange rates, sales would have increased by 59.7 percent compared year-on-year. A sensitivity analysis of currency exposure indicates that the impact of a change in the average USD exchange rate of ± 10 percent on the operating profit in the first quarter of 2012 was ± SEK 2.6 M and that the corresponding effect of a change in the average EUR exchange rate of ± 10 percent was ± SEK 0.9 M. The company pursues the currency policy established by the Board of Directors.
Operating profit in the first quarter of 2012 amounted to SEK 6.7 M (2.1), corresponding to an operating margin of 17.5 percent (9.0). Operating expenses, excluding exchange-rate gains and losses, increased SEK 9.9 M compared with the year-earlier period to SEK 29.9 M. Other operating revenues and other operating expenses refer to exchange-rate gains and losses, with the net of these amounting to an expense of SEK 1.8 M (expense: 0.7) for the first quarter of 2012. The increase in operating expenses was mainly due to higher marketing and personnel costs for sales and service due to activities related to direct sales of RayStation®.
As of March 31, 2012, 67 (59) employees were engaged in research and development. Research and development costs include payroll costs, consulting fees, computer equipment and premises. Before capitalization and amortization of development costs, research and development costs totaled SEK 19.7 M (20.1). During the first quarter of 2012, capitalized development costs amounted to SEK 13.2 M (14.2). Amortization of capitalized development costs in the first quarter of 2012 totaled SEK 10.8 M (7.6). After adjustments for capitalization and amortization of development costs, research and development costs amounted to SEK 17.3 M (13.5).
Amortization of intangible fixed assets in the first quarter of 2012 amounted to SEK 10.8 M (7.6) and depreciation of tangible fixed assets totaled SEK 0.3 M (0.1). Overall, amortization and depreciation during the first quarter of 2012 totaled SEK 11.1 M (7.7). Amortization and depreciation primarily related to capitalized development costs.
Profit after tax in the first quarter of 2012 amounted to SEK 4.6 M (1.6), corresponding to earnings per share of SEK 0.13 (0.05).
Most of RaySearch's existing customers are in the US. It should be noted that the proportion of license revenues derived from North America rose during the period. License revenues in the first quarter of 2012 were distributed as follows: North America 56 percent (32), Asia 20 percent (38) and Europe and the rest of the world 24 percent (30).
Cash flow from operating activities during the first quarter of 2012 increased to SEK 24.5 M (10.8), which was primarily attributable to improved revenues, adjusted for amortization and depreciation. Cash flow from investing activities improved to a negative SEK 13.6 M (neg: 14.1).
Cash flow for the period amounted to SEK 10.9 M (neg: 3.3). At March 31, 2012, cash and cash equivalents amounted to SEK 39.6 M, compared with SEK 71.7 M on March 31, 2011. At March 31, 2012, current receivables totaled SEK 57.6 M, compared with SEK 38.6 M on March 31, 2011. These receivables primarily comprised accounts receivables. The increase in accounts receivables resulted primarily from higher invoicing in the first quarter. RaySearch has no interest-bearing liabilities.
Fixed assets primarily comprise capitalized development costs. Investments in intangible fixed assets in the first quarter of 2012 amounted to SEK 13.2 M (14.2) and investments in tangible fixed assets to SEK 0.6 M (0.1).
At the end of the first quarter, the number of employees in RaySearch was 87 (71). The average number of employees during the January – March 2012 period was 87 (71).
Since the financial reporting of the Parent Company corresponds in all material respects to the financial reporting of the Group, the comments for the Group are also relevant to a great extent for the Parent Company. Capitalization of development costs is recognized in the Group, but not in the Parent Company.
| AMOUNTS IN SEK 000S | JAN–MAR | FULL-YEAR | |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| Net sales | 38,449 | 23,047 | 126,103 |
| Cost of goods sold | -36 | -290 | -442 |
| Gross profit | 38,413 | 22,757 | 125,661 |
| Other operating income | 534 | - | 1,067 |
| Selling expenses | -5,740 | -1,917 | -19,215 |
| Administrative expenses | -6,880 | -4,525 | -21,369 |
| Research and development costs | -17,303 | -13,538 | -57,575 |
| Other operating expenses | -2,306 | -694 | -945 |
| Operating profit | 6,718 | 2,083 | 27,624 |
| Result from financial items | 125 | 249 | 1,078 |
| Profit before tax | 6,843 | 2,332 | 28,702 |
| Tax | -2,226 | -735 | -11,695 |
| Profit for the period1) | 4,617 | 1,597 | 17,007 |
| Earnings per share before dilution (SEK) | 0.13 | 0.05 | 0.50 |
| Earnings per share after dilution (SEK) | 0.13 | 0.05 | 0.50 |
| AMOUNTS IN SEK 000S | JAN–MAR | FULL-YEAR | |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| Profit for the period | 4,617 | 1,597 | 17,007 |
| Translation difference for the period | 257 | -94 | -81 |
| Comprehensive income for the period1) | 4,874 | 1,503 | 16,926 |
1) 100 % attributable to shareholders in the Parent Company.
| AMOUNTS IN SEK 000S | MAR 31, 2012 | MAR 31, 2011 | DEC 31, 2011 |
|---|---|---|---|
| ASSETS | |||
| Intangible fixed assets | 163,454 | 140,464 | 161,096 |
| Tangible fixed assets | 4,076 | 2,895 | 3,978 |
| Deferred tax assets | - | 3,842 | - |
| Total fixed assets | 167,530 | 147,201 | 165,074 |
| Current receivables | 57,607 | 38,581 | 67,220 |
| Cash and cash equivalents | 39,572 | 71,664 | 28,704 |
| Total current assets | 97,179 | 110,245 | 95,924 |
| TOTAL ASSETS | 264,709 | 257,446 | 260,998 |
| EQUITY AND LIABILITIES | |||
| Equity | 201,571 | 198,265 | 196,697 |
| Deferred tax liabilities | 46,998 | 43,492 | 46,372 |
| Other long-term liabilities | 642 | 642 | 642 |
| Accounts payable | 3,131 | 3,913 | 6,582 |
| Other current liabilities | 12,367 | 11,134 | 10,705 |
| TOTAL EQUITY AND LIABILITIES | 264,709 | 257,446 | 260,998 |
| Pledged assets | 5,000 | 5,000 | 5,000 |
| Contingent liabilities | none | none | none |
| AMOUNTS IN SEK 000S | JAN–MAR | FULL-YEAR | |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| Profit before tax | 6,843 | 2,332 | 28,702 |
| Adjusted for non-cash items1) | 11,984 | 7,874 | 35,153 |
| Taxes paid | 2,838 | -514 | -3,639 |
| Cash flow from operating activities before changes | |||
| in working capital | 21,665 | 9,692 | 60,216 |
| Cash flow from changes in working capital | 2,846 | 1,145 | -26,364 |
| Cash flow from operating activities | 24,511 | 10,837 | 33,852 |
| Cash flow from investing activities2) | -13,569 | -14,095 | -63,092 |
| Cash flow from financing activities | - | - | -16,991 |
| Cash flow for the period | 10,942 | -3,258 | -46,231 |
| Cash and cash equivalents at the beginning of the period Exchange-rate difference in cash and cash |
28,704 | 75,016 | 75,016 |
| equivalents | -74 | -94 | -81 |
| Cash and cash equivalents at the end of the period | 39,572 | 71,664 | 28,704 |
1) These amounts include amortization of capitalized development costs. 2) These amounts include capitalized development costs.
| AMOUNTS IN SEK 000S | JAN–MAR | FULL-YEAR |
|---|---|---|
| 2012 | 2011 | |
| Opening balance | 196,697 | 196,762 |
| Profit for the period | 4,617 | 17,007 |
| Translation difference for the period | 257 | -81 |
| Dividend paid | - | -16,991 |
| Closing balance | 201,571 | 196,697 |
Dividend of SEK 0.50/share was paid out with a record day of May 30.
| JAN–MAR | FULL-YEAR | |
|---|---|---|
| 2012 | 2011 | |
| Total number of shares (opening and closing balance) | 34,282,773 | 34,282,773 |
| Holding of treasury shares, opening balance | 299,628 | 299,628 |
| Holding of treasury shares, closing balance | 299,628 | 299,628 |
| Average number of treasury shares | 299,628 | 299,628 |
| AMOUNTS IN SEK 000S | JAN-MAR | FULL-YEAR | ||
|---|---|---|---|---|
| 2012 | 2011 | 2010 | 2011 | |
| Net sales | 38,449 | 23,047 | 28,062 | 126,103 |
| Operating profit | 6,718 | 2,083 | 11,241 | 27,624 |
| Operating margin, % | 17.5 | 9.0 | 40.0 | 21.9 |
| Profit margin, % | 17.8 | 10.1 | 40.1 | 22.8 |
| Profit for the period | 4,617 | 1,597 | 8,234 | 17,007 |
| Earnings per share, SEK | 0.13 | 0.05 | 0.24 | 0.50 |
| Return on capital employed, % | 16.6 | 16.0 | 24.2 | |
| Return on equity, % | 10.0 | 11.4 | 17.7 | |
| Equity/assets ratio, % | 76.2 | 77.0 | 80.1 | |
| Adjusted equity per share at the end of the period, SEK | 5.88 | 5.78 | 5.63 | |
| Share price at the end of the period, SEK | 23.80 | 35.40 | 44.60 |
| AMOUNTS IN SEK 000S | JAN–MAR | ||
|---|---|---|---|
| 2012 | 2011 | FULL-YEAR 2011 |
|
| Net sales | 36,726 | 23,047 | 131,827 |
| Cost of goods sold | -36 | -290 | -442 |
| Gross profit | 36,690 | 22,757 | 131,385 |
| Other operating income | 534 | - | 1,067 |
| Selling expenses | -2,677 | -748 | -10,564 |
| Administrative expenses | -6,877 | -4,522 | -21,346 |
| Research and development costs | -19,681 | -20,098 | -84,886 |
| Other operating expenses | -2,306 | -694 | -945 |
| Operating profit/loss | 5,683 | -3,305 | 14,711 |
| Result from financial items | 118 | 317 | 940 |
| Profit/loss after financial items | 5,801 | -2,988 | 15,651 |
| Appropriations | - | - | 9,800 |
| Profit/loss before tax | 5,801 | -2,988 | 25,451 |
| Tax | -1,576 | 997 | -7,077 |
| Profit/loss for the period | 4,225 | -1,991 | 18,374 |
| AMOUNTS IN SEK 000S | JAN–MAR | FULL-YEAR | |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| Profit/loss for the period | 4,225 | -1,991 | 18,374 |
| Translation differences for the period | - | - | - |
| Comprehensive income/expense for the period | 4,225 | -1,991 | 18,374 |
| AMOUNTS IN SEK 000S | MAR 31, 2012 | MAR 31, 2011 | DEC 31, 2011 |
|---|---|---|---|
| ASSETS | |||
| Intangible fixed assets | 96 | 236 | 117 |
| Tangible fixed assets | 3,900 | 2,895 | 3,978 |
| Financial fixed assets | 12,744 | 5,409 | 11,420 |
| Deferred tax assets | - | 3,842 | - |
| Total fixed assets | 16,740 | 12,382 | 15,515 |
| Current receivables | 62,938 | 43,456 | 72,753 |
| Cash and cash equivalents | 35,308 | 62,260 | 25,399 |
| Total current assets | 98,246 | 105,716 | 98,152 |
| TOTAL ASSETS | 114,986 | 118,098 | 113,667 |
| EQUITY AND LIABILITIES | |||
| Equity | 85,418 | 77,969 | 81,193 |
| Untaxed reserves | 15,341 | 25,140 | 15,341 |
| Accounts payable | 3,131 | 3,913 | 6,497 |
| Other current liabilities | 11,095 | 11,076 | 10,636 |
| TOTAL EQUITY AND LIABILITIES | 114,986 | 118,098 | 113,667 |
| Pledged assets | 5,000 | 5,000 | 5,000 |
| Contingent liabilities | none | none | none |
This interim report in summary for the Group was prepared in accordance with IAS 34 Interim Financial Reporting and the applicable provisions of the Swedish Annual Accounts Act. The Parent Company's financial statements were prepared pursuant to Chapter 9 of the Swedish Annual Accounts Act, Interim Financial Reporting. The same accounting policies and bases of computation that were applied in the most recent Annual Report were used to prepare the consolidated and Parent Company accounts. New or revised IFRS standards during 2012 did not affect RaySearch during the period and no known changes are expected to affect RaySearch in 2012.
Since RaySearch has only one segment, no segment reporting was prepared.
RaySearch's financial policy governing the management of financial risks was established by the Board of Directors and represents a framework of guidelines and rules in the form of risk mandates and limits for financial activities. RaySearch is affected primarily by exchange-rate risk. All of RaySearch's net sales are denominated in USD and EUR. In accordance with the established financial policy, no currency hedging is employed. The financial policy is updated at least once annually.
As a result of its activities, RaySearch is exposed to various operational risks, including the following: dependence on key persons, competition and strategic partnerships. RaySearch currently has partnerships with Philips, Nucletron, IBA Dosimetry, Varian, Accuray and Siemens. RaySearch also has several research partnerships. If RaySearch were to lose one or more of these partners, this could have a major impact on the company's sales, profit and financial position. This risk decreases as the percentage of direct sales increases.
For more detailed information about RaySearch's risks and risk management, refer to page 78 of the 2011 Annual Report.
No transactions between RaySearch and related parties had a material impact on the company's position and earnings.
Preparation of the interim report requires that company management makes estimates that affect the reported amounts of assets, liabilities, revenues and expenses. The actual outcome may deviate from these estimates. The critical sources of uncertainty in the estimates are the same as those in the most recent Annual Report.
This interim report has not been reviewed by the Auditor of the Company.
Stockholm, May 23, 2012
Johan Löf President and Board member
Johan Löf, President Tel: +46 (0)8-545 061 30 [email protected]
RaySearch Laboratories AB (publ) Corporate Registration Number 556322-6157 Sveavägen 25 SE-111 34 Stockholm Sweden
Six-month report August 28, 2012 Interim report for the third quarter November 16, 2012
Annual General Meeting May 30, 2012, at 6:00 p.m. Annual General Meeting will be held at Spårvagnshallarna, Birger Jarlsgatan 57 A, Stockholm, Sweden
RaySearch Laboratories is a medical technology company that develops advanced software solutions for improved radiation therapy of cancer. RaySearch's products are mainly sold through license agreements with leading partners such as Philips, Nucletron, IBA Dosimetry, Varian, Accuray and Siemens. To date, 15 products have been launched through partners and RaySearch's software is used at over 2,000 clinics in more than 30 countries. In addition, RaySearch offers the proprietary treatment planning system RayStation® directly to clinics. RaySearch was founded in 2000 as a spin-off from Karolinska Institutet in Stockholm and the company is listed in the Small Cap segment on NASDAQ OMX Stockholm.
More information about RaySearch is available at www.raysearchlabs.com.
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