Varian Medical Systems

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Varian Medical Systems

• By KJ Neish

2
History

• Originally incorporated in 1948 as Varian
  Associates, Inc.
• Changed name to Varian Medical Systems, Inc. in
  April 1999
• Fiscal Year-end Sept. 28, 2012
• 1Q results Jan. 23, 2013

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The Company

• Oncology Systems (78 2012 revenues)
• X-ray (18)
• Other (4)

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Oncology Systems segment

• Provides medical devices and software for
  treating cancer
• Linear accelerators
• Brachytherapy afterloaders
• Simulation and verification software
• Hospitals, cancer care clinics, government
  institutions, research facilities, doctors
  offices

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Radiation Therapy

• The use of focused energy to kill cancer cells
• Used alone or in combination with surgery or
  chemotherapy
• Different forms of treatment
• The most common form involves delivering x-ray
  beams
• 65 increase in new cases of cancer from 2008 to
  2030

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X-ray Products segment

• Design and manufacturer of x-ray components
• X-ray tubes
• Flat panel detectors
• Toshiba Corp., Hitachi Medical Corp., GE
  healthcare
• InfiMed acquisition
• 20-25 market share

7
Other

• Ginzton Technology Center (GTC)
• Security and Inspection (SIP)
• Varian Particle Therapy (VPT)

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Growth

• Emerging markets
• Strategic global partnership with Siemens Medical
  Systems
• Commercialization of proton therapy
• Product innovation

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Emerging Markets

• 2 linear accelerators/million. US has 13
• China
• India
• Regulatory clearance in India
• Population over 1 bil.
• 1 mil. new cases of cancer each year
• Brazil
• Competing for public tender of more than 80 units
• Reverse auction bidding
• Announced in Jan-Feb

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Strategic Partnership

• Mutually market each other's products
• Co-develop opportunities

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Proton Therapy

• Latest innovation in the radiotherapy field
• Proton particles
• Less invasive, better targeting
• Vital organs less at risk
• 70 reduction in radiation exposure
• Large-scale construction projects
• Emory University and University of Maryland

12

• -National Association for Proton Therapy

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Product Innovation

• EDGE
• 510(k) clearance
• Integrates technology with tools for real-time
  imaging and tracking
• Launched in Nov
• Lung, liver, and pancreatic cancer

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Comparable Analysis (0)
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Discounted Cash Flow (100)

• Revenue
• Smaller margins
• SGA increase as a revenue
• 4 intermediate growth rate
• Cost of debt calculated based on last issuance
• 9.35 undervalued

16
Beta
17
Questions
18

• BUY
• For Tall Firs and Svigals portfolio