Palo Alto, CA-based Varian Medical Systems, Inc. (VAR) has been recently chosen for equipping and servicing a new national proton therapy center in Aarhus, Denmark, with its ProBeam proton therapy system. Selected through a public tender, Varian Medical will provide equipment, software and service to operate a four-room center for an estimated $70 million.
In addition to the ProBeam system, Varian Medical will provide the center with its ARIA information management software. The company expects to sign the contract and book the equipment and software portion of the order in March. Equipment installation is expected to take place in mid-2017, with patient treatments likely to begin in the second half of 2018.
Proton therapy is used to treat the most common types of cancer. With proton therapy, the risk of damage to healthy tissues and potential side effects is reduced because the beam stops and deposits dose within the tumor site rather than passing all the way through the patient. Notably, in pediatric patients, the risk of developing a new, radiation-induced cancer later in life may be reduced with the help of proton therapy.
Varian Medical’s ProBeam technology is being used to treat patients at the Scripps Proton Therapy Center in San Diego, the Rinecker Proton Therapy Center in Munich, and at the Paul Scherrer Institute in Switzerland.
Additionally, Varian Medical has contracts to install its ProBeam systems at seven centers around the world, which include the University of Maryland in Baltimore; Emory University in Atlanta, GA; Cincinnati Children's Hospital in Ohio; University of Texas Southwestern in Dallas; KFMC-King Fahd Medical City in Saudi Arabia; PTC St. Petersburg in Russia; and National Taiwan University in Taipei.
During the recently concluded first quarter of fiscal 2015 (ended Jan 2, 2015), Varian Medical submitted five out of these seven new proton tenders. We note that the company is making significant progress with its active proton projects, which generated roughly $9 million, or 1.2% of total revenues in the first quarter.
For fiscal 2015, Varian Medical expects revenues to increase approximately 5% from the year-ago quarter (down from earlier guidance of 5% to 6%). However, this guidance excludes contracted proton projects that are not yet financed or booked into backlog. Management believes that if these projects are booked during the year, the potential upside in revenues and profits could be significant.
We believe that Varian Medical is well positioned to benefit from higher demand for its products in the BRIC countries. The growing private markets in China and Brazil are expected to present strong growth opportunity to the company in 2015. However, the recent foreign exchange volatility is expected to be a major headwind.
Currently, Varian Medical carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the medical instruments industry include Abiomed (ABMD), Inogen (INGN) and Luminex Corp. (LMNX). All the three stocks sport a Zacks Rank #1 (Strong Buy).
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