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Varian
Medical Systems IMRT treatment for cancer is driving the marketplace today
![wpe3F.gif (3518 bytes)](Varian1.gif)
Healthcare
Medical Equipment &
Supplies
(NYSE: VAR)
Varian Medical Systems, Inc.
![wpe48.gif (18891 bytes)](Varian2.gif)
Elisha W. Finney
Chief Financial Officer
Vice
President
Interview Conducted By:
Diane Reynolds, Co Publisher
CEOCFOinterviews.com
December 2002
Varian Medical Systems, Inc. (NYSE:
VAR) is a leading manufacturer of integrated cancer therapy systems. Some 3700 Varian
ClinacŪ medical linear accelerators are in service around the world, treating more than
one million cancer patients each day. Prestigious cancer care institutions worldwide rely
on Varian Medical Systems integrated radiotherapy solutions. The company is also a premier
supplier of X-ray tubes and flat-panel digital subsystems for imaging in medical,
scientific, and industrial applications. Varian Medical Systems Chief
Financial Officer, Vice President, Ms. Elisha W. Finney says, Varian
Medical Systems emerged as the worlds largest medical device company almost
exclusively dedicated to the treatment of cancer. This
is confirmed by Analyst, Bruce N. Jacobs, CFA, Deutsche Bank
Securities who says that, Varian remains the technology leader and the only one that can
provide a broad base solution to customers, which includes everything from the treatment
planning software at the beginning through to the quality control and the therapy delivery
at the back end.
Varians growth is being driven by SmartBeam Intensity
Modulated Radiation Therapy (IMRT), a new cancer treatment technique that builds on
the prior state-of-the-art, which was 3-D conformal radiotherapy.
IMRT uses precise 3-D computer imaging to plan and then deliver even more tightly focused
radiation beams to cancerous tumors than is possible with conventional conformal therapy.
With this capability, clinicians can exquisitely "paint" a precise radiation
dose so that it conforms to the three-dimensional shape of the tumor, while avoiding the
adjacent organs, structures, and tissues. This significantly reduces adverse side effects
while allowing radiation oncologists to increase the cancer-killing doses directed at
tumors. The key components for SmartBeam IMRT are Varian ClinacŪ medical linear
accelerators, multi-leaf collimators (MLCs) and other accessories, and the software used
to process diagnostic image data and to shape radiation beams. Commenting on their IMRT
treatment and its affect on the market place Ms. Finney
states, In a nutshell, this allows you to precisely put the
beam on the tumor and spare the healthy tissueand that is the name of the game when
treating cancer. You want to put as much
radiation as possible right where it needs to go to kill the cancer, but not hit any
healthy structures. IMRT is what is driving
our market place today.
An MLC is a computer-controlled device that has between 52 and 120 metal leaves or
fingers, which is affixed to the head of a Clinac, in the path of the radiation beam.
Under computer control, the MLC leaves precisely shape the beam to the actual tumor
profile, while minimizing radiation exposure to the surrounding tissue. The device has
been welcomed by the market, and hundreds are now in use worldwide. The latest 120-leaf
MLC offers the most precise beam control available today.
When asked if their IMRT treatment economical for the hospitals? Ms.
Finney responded, Yes, it is. With the reimbursement
rates in place today for IMRT treatment, you get about two times as much for IMRT
treatments than you would for a course of traditional radiation treatments. Consequently,
the payback for the hospital for a machine that can cost almost $2 million dollars is now
as low as 18 months on average. It used to be
24 to 36 months. Hence, we have great outcome data coupled with a healthy reimbursement
environment. A hospital can recoup its
investment in a very short period of time.
Varian Medical Systems is today organized around several distinct operations:
Oncology Systems is the world's largest supplier of
integrated cancer therapy systems, including the market-leading ClinacŪ medical linear
accelerator. In addition, Varian manufactures
and markets an increasing array of ancillary radiotherapy
products such as radiotherapy imaging and simulation systems,
the VARiSŪ information management system, and highly
sophisticated treatment accessories. An important new addition to the Oncology Systems
product family is Eclipse, a computer software program
that allows medical professionals to visualize the three-dimensional extent of a tumor in
the human body and automatically generate plans for treating the tumor with high-intensity
X-ray beams. The companys linear
accelerator technology is also used for industrial inspection, cargo screening, and
sterilization.
The X-ray Products business is the leading independent
supplier of X-ray tubes for the worldwide diagnostic imaging industry, including tubes
expressly designed for the most advanced mammography and computed tomography (CT) scanning
applications. Varian is active in four primary X-ray imaging
market segments: CT scanner; diagnostic radiographic/fluoroscopic; special procedures; and
mammography. The company also supplies
a line of tubes for baggage screening systems at airports.
Varians X-ray Products
business has also developed an all-digital flat-panel image detector capable of producing
real-time fluoroscopic and radiographic images. Systems incorporating these amorphous
silicon panels are expected to improve the efficiency of diagnostic x-ray imaging.
The companys Ginzton Technology Center acts as
Varian Medical Systems research and development organization. The Centers mandate is to create market
growth opportunities for Varian Medical Systems by developing technologies that eclipse
current capabilities in radiation therapy and X-ray imaging and/or lead to entirely new
businesses. An important repository of
scientific and engineering expertise, the Center also conducts research in support of
product development for each of the companys business units.
Varian Medical Systems also operates
a BrachyTherapy business, which develops, manufactures, supplies, and services devices and
software for treating cancer through radiation sources that are placed within the patient. The business financial results are
incorporated within results for the Ginzton Technology Center.
To find out more about: Varian Medical
Systems, Inc.
You may order the complete text of our
interview. To
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Interview Highlights:
- How long has Varian Medical Systems been around and where did it get its start?
- Have they emerged as the worlds largest device company that has almost been
exclusively been dedicated to the treatment of cancer?
- What percentage of cancer patients has been treated with their products?
- What is the name of the cancer treatment that they pioneered 45 years ago and how does
it work?
- What is their estimated market penetration?
- What is the name of one of their major partners?
- Is their IMRT treatment economical for the hospital?
- What is their marketing strategy?
- What are they doing to address the global marketplace?
- Where will the majority of their growth come from? Will it be through expanded exposure,
partnerships or acquisitions?
- What is their eight to ten year goal?
- Is the IMRT treatment standalone or does it need to be combined with surgery or
chemotherapy?
- Are they competing with chemotherapy and other drugs, or are they being used in
combination with them?
- What would a hospital or clinic receive in an IMRT treatment package?
- What gives them a competitive edge?
- Do they have an upgrade system that is offered customers?
- Does Varian offer leasing and financing to their customers?
- What should an investor be looking at when considering Varian for the first time?
- What is their cash and credit position?
- Where are their machines made and do they have enough facilities to store your backlog.
- What are their historical and current operating margins?
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