Transcript Varian Medical Systems By KJ Neish History Originally incorporated

Varian Medical Systems
By KJ Neish
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
The Company
› Oncology Systems (78% 2012 revenues)
› X-ray (18%)
› Other (4%)
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
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
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
Other
› Ginzton Technology Center (GTC)
› Security and Inspection (SIP)
› Varian Particle Therapy (VPT)
Growth
› Emerging markets
› Strategic global partnership with Siemens Medical
Systems
› Commercialization of proton therapy
› Product innovation
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
Strategic Partnership
› Mutually market each other's products
› Co-develop opportunities
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
-National Association for Proton Therapy
Product Innovation
› EDGE
– 510(k) clearance
– Integrates technology with tools for real-time imaging and
tracking
– Launched in Nov
– Lung, liver, and pancreatic cancer
Comparable Analysis (0%)
Discounted Cash Flow (100%)
› Revenue
› Smaller margins
› SG&A increase as a % revenue
› 4% intermediate growth rate
› Cost of debt calculated based on last issuance
› 9.35% undervalued
Beta
Beta
SD
Weighting
1 Year Daily
0.98
0.12
35.00%
3 Year Daily
1.02
0.04
40.00%
5 Year Weekly
1.04
0.03
25.00%
3 Year Daily Hamada
1.31
Analysis Company Beta
1.01
0.00%
Questions
BUY
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