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Leading integrated radiotherapy systems maker Varian Medical Systems (VAR - Analyst Report) has inked a pact with privately-held Augmenix, under which, Varian will make a $15 million equity investment in the latter. The agreement also provides the California-based company with an option to acquire Augmenix, which makes hydrogels used in radiation therapy.

Hydrogels, which primarily consist of water and polyethylene glycol (“PEG”), are used to improve outcomes in radiation oncology. Augmenix’s flagship product, the SpaceOAR System, is geared for use in patients undergoing radiation treatment for prostate cancer. 

The aim of radiation therapy is to maximize dose delivery to a tumor while sparing the surrounding healthy tissues and organs. SpaceOAR has been designed to reduce injury to the rectum (as its wall borders the prostate) during the course of treatment.

During radiation therapy, SpaceOAR is injected between the prostate and rectum, which safely moves the rectum away from the prostate. This mitigates the amount of radiation to the rectum during treatment. Following the therapy, the hydrogel liquefies and is absorbed in the body.

The SpaceOAR System is approved for marketing in select European countries and Australia and is currently under clinical investigation in the U.S. The product registered its first commercial use in prostate cancer patients in August 2010. The minority stake in Augmenix is in tandem with Varian’s commitment to offer radiation oncologists with advanced technologies that lead to improved therapeutic outcomes.  

Varian is the world’s leading manufacturer of integrated radiotherapy systems for treating cancer and a premier supplier of X-ray tubes for diagnostic imaging applications. In the radiation oncology market, the company competes head-to-head with Accuray Incorporated (ARAY - Analyst Report).

Varian is poised to increase its market share in the radiation oncology market. The company is currently enjoying a healthy demand for its coveted RapidArc radiotherapy technology. However, uncertainties stemming from health care reform and a still-weak hospital capital spending environment provide headwinds. We currently have a Neutral recommendation on Varian.