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Varian (VAR): Calypso Tumor Tracking System Now in Brazil

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Palo Alto, CA-based leading manufacturer of medical devices and software, Varian Medical Systems, Inc. , recently announced that Moinhos de Vento Hospital has become the first cancer treatment center in Brazil with the Varian’s flagship product Calypso, a tumor tracking system for cancer treatment. Notably, the Calypso system leverages on Varian TrueBeam medical linear accelerator to treat prostate cancer.

Per management, the latest development is likely to fortify the company’s market position in the advanced radiotherapy care markets in Brazil and across Latin America.

Brazil has been an important contributor in the company’s growth trajectory. In this regard, Varian – in partnership with the Brazil Ministry of Health – had opened a facility in Brazil that houses a radiotherapy training center, demonstration rooms and manufacturing and warehousing earlier in Mar 2016.

Getting back to this new development, the Calypso system is a unified solution providing radiotherapy, chemotherapy, biological and surgery associations related to prostate cancer. In fact, Calypso provides a ‘concentrated dose of radiotherapy’ which effectively treats the problem with minimal side effects.

Stock Performance

Meanwhile, over the last three months, the price performance of Varian has been disappointing. The stock has lost 5.4%, comparing unfavorably with the Zacks classified Medical Instruments sub-industry’s stellar gain of 11.8%. Also, the current level is way lower than the S&P 500’s return of 7.6% over the same time frame. As a result of the dismal stock performance, Varian lost almost 0.2%, to close at $83.89, following the news.

The estimate revision trend for the stock has been tepid as well. The full year has seen three analysts move south over the last two months, with no movement in the opposite direction. As a result, the Zacks Consensus Estimate for the full year plunged 22.3% to $3.83, over the same time frame. Notably, the stock has Zacks Rank #5 (Strong Sell).

Our Take

Of late, Varian has been gaining prominence on the back of its solid oncology business prospects. We note that the company addresses both tier 1 and mid-tier markets through its Edge, Truebeam and VitalBeam products.

Of the recent developments, Varian has won a competitive bid in Shanghai. Per the bid, the company would provide advanced radiotherapy technology and its Eclipse treatment planning system to six major hospitals in Shanghai (read more: Varian Wins Competitive Bid for Six Shanghai Hospitals).

We are particularly upbeat about Varian’s recent takeover of the Medical Imaging business of PerkinElmer. Considering the bountiful opportunities for diagnostic imaging in the global space, this development is a significant positive for long-term growth.

On the flipside, increasing local competition is a primary headwind. Moreover, the Imaging Components’ business spin-off will remain an overhang on the stock, at least in the near term.

Stocks to Consider

Better-ranked stocks in the broader medical sector include Glaukos Corporation (GKOS - Free Report) , Avinger, Inc. (AVGR - Free Report) and Fluidigm Corporation . Notably, Glaukos sports a Zacks Rank #1 (Strong Buy), while Avinger and Fluidigm carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Glaukos Corporation has a long-term expected earnings growth rate of approximately 25%. Notably, the stock represents an impressive one-year return of 184.6%.

Avinger projects sales growth of 30.7% for the current year. Additionally, the company posted a positive earnings surprise of 27% in the last quarter.

Fluidigm Corporation has a long-term expected earnings growth rate of 25%. The stock added 1.23% over the last three months.

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