Aug. 2--TomoTherapy shares plummeted Friday, losing nearly half their value in very heavy trading, after the Madison company reported a second-quarter loss, slashed full-year projections, and, for the first time, admitted losing orders to competitors.

At least four investment firm analysts downgraded the stock and some are starting to wonder if TomoTherapy's ride is about to end.

"We believe the situation could be more severe than just a few quarters of weak sales and could persist well into 2009," Morningstar analyst Bill Buhr wrote in a research note Friday.

"We still love the company's technology and maintain that TomoTherapy will remain a player in radiation, but we are extremely concerned about the forces currently moving against the firm," he wrote.

Shares fell to a record low of $4.94, before closing for the day at $5.00. That's a drop of $4.75, or 48.7 percent, from Thursday's close at $9.75 a share and a drop of more than 80 percent from the stock's 52-week high of $26.80.

Nearly 10.5 million shares changed hands, compared to the average day's volume of 504,000, according to Yahoo Finance.

On Thursday, after the markets closed, TomoTherapy reported a net loss of $6.9 million, or 14 cents a share, on revenue of $52.0 million for the 2008 second quarter. The company, at 1240 Deming Way, makes specialized radiation machines to treat cancer.

Blaming the soft U.S. economy and the loss of two customers to competitors, TomoTherapy also said it now anticipates a net loss of 28 cents to 43 cents a share for the full fiscal year, down from estimates in February of 34 cents to 39 cents a share in earnings. The backlog of expected orders was slashed $53 million, to $234 million.

"Is this a pause ... for TomoTherapy, given these headwinds of the economy and two new product launches from competitors that appear somewhat compelling? Or is this truly a closing of the door on TomoTherapy? I don't know what the answer to that is," analyst Jeff Johnson of Robert W. Baird & Co., Milwaukee, said in an interview.

Varian Medical Systems, the Palo Alto, Calif., giant in radiation treatment, recently released its RapidArc device and Sweden's Elekta is about to introduce a new product.

TomoTherapy's machine has advantages in treating complicated cases but Varian's and Elekta's models are faster, Johnson said.

"What I'm beginning to wonder is: Will those clinical advantages be enough to allow TomoTherapy to successfully take on a Varian or Elekta over time?" he said.

TomoTherapy plans new features, including faster systems, over the next year, Thomas Gunderson, PiperJaffray analyst in Minneapolis, wrote to investors. But he noted "a sudden reversal in management's tone" and lower projections that will likely keep the stock "in the penalty box for the foreseeable future."

The state Investment Board owned 1.8 million shares of TomoTherapy stock among three public portfolios and one private one, as of June 30. John Nelson, investment director of small company stocks, called the quarterly earnings report "a shocker."

The reduced backlog raises a lot of questions, Nelson said, as well as the flurry of problems that reportedly came late in the second quarter.

"I want to assess management's competence in delivering future results," Nelson said.

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Story Source: The Wisconsin State Journal