Anatomy of a failed Medtech business

In reading about the failure of ViewRay and thought that it was representative of how orthopedics companies have failed in the past and how orthopedic companies will fail in the future.

We can all learn from the mistakes of companies like ViewRay.

Below are 6 errors that we can all learn from.

1/ Raised too much money.

ViewRay got high on their fund raisings, became over-confident and built too large of an expense base before sales came in. ViewRay’s total funding was $877M.

2/ Went public pre-revenue in a 2021 using a SPAC vehicle.

SPACs are not required to do the same level of due diligence as traditional IPOs. This means that investors may not have as much information about the target company before they invest.

3/ Expenses were out of control.

ViewRay was facing financial problems even before it went public in 2021. The company had a history of losses, and it was burning through cash. This made it difficult for the company to invest in marketing and sales, which further slowed the adoption of the MRIdian system.

4/ Leadership was not capable of making big changes early enough.

Specific examples of the failures of ViewRay’s CEOs and leadership:

  • CEO Scott Drake: Drake was the CEO of ViewRay from 2004 to 2015. During his tenure, the company raised over $500 million in funding, but it was unable to achieve profitability. Drake was also criticized for his management style, which was seen as being too aggressive and demanding.
  • CEO Marc Overhage: Overhage was the CEO of ViewRay from 2015 to 2022. During his tenure, the company went public and launched the MRIdian A3i system. However, the company continued to lose money, and Overhage was eventually forced to resign.
  • Troy Tomasetti has been the CEO from 2022 to bankruptcy in 2023.

5/ Under-estimated the competition.

ViewRay faced stiff competition from other companies that were developing similar radiation therapy systems. For example, Elekta’s Superior Unity system is a direct competitor to ViewRay’s MRIdian system.

6/ High COGS.

High cost of the system: The MRIdian system is a very expensive piece of equipment. This made it difficult for hospitals to justify the cost of the system, especially when there were other, less expensive options available.

7/ Slow sales ramp.

Slow adoption by hospitals: The MRIdian system was slow to be adopted by hospitals. This was due to a number of factors, including the high cost of the system, the lack of clinical data on the system, and the complexity of the system.

ViewRay files for Chapter 11 bankruptcy (Medtech Dive)

The company, which makes an MRI-guided radiation therapy system, intends to sell all or some of its assets.

Dive Brief:

  • ViewRay, a Denver-based company that makes an MRI-guided radiation therapy system to treat cancer patients, filed for Chapter 11 bankruptcy on Monday. 
  • Inflation and supply chain disruptions pushed back installations of the company’s MRIdian systems and payment schedules, CEO Paul Ziegler said in a sworn declaration filed Sunday in U.S. Bankruptcy Court for the District of Delaware. 
  • The firm intends to sell all or a portion of its assets while supporting current customers, it said in a Monday statement

Dive Insight:

ViewRay received $6 million of debtor-in-possession financing from MidCap Financial Services to support operations during the Chapter 11 process. The company is managing inventory to be able to maintain its systems at customer sites, as it undergoes layoffs and looks to sell its assets.

“Despite the operating challenges, MRIdian has facilitated real societal value and remains critically important for a broad population of cancer patients, including those who were previously considered untreatable,” Ziegler said in a company statement. 

Ziegler, ViewRay’s former chief commercial officer, was promoted after former CEO Scott Drake resigned on Saturday. Drake will continue to be a director with the company. Two other directors resigned, shrinking the company’s board from nine to seven members. 

ViewRay is planning to cut 71 employees, after laying off 36 people earlier this year. In total, it expects to have 232 employees, including 162 people in the U.S, after the cuts, according to Ziegler’s declaration filed in the bankruptcy court. 

The company has had negative cash flows since its inception, according to the declaration. As of April, it had $86 million in cash for the remaining three quarters of 2023, more than double its forecasted cash burn. 

ViewRay had about $226 million in assets and $178 million in liabilities as of April 30, according to the court documents