Varian Lands in Saudi Arabia

Leading integrated radiotherapy systems maker Varian Medical Systems (VAR - Analyst Report) revealed that it has inked an order worth $77 million with Saudi Particle Therapy Center LLC. The order is intended to create a new proton therapy center at the King Fahd Medical Center, located in Riyadh. Varian will furnish the upcoming facility with a couple of TrueBeam medical linear accelerators and a ProBeam system for five treatment rooms.

The delivery and installation of equipment at the site is forecast to start in early 2013. The first patients will receive treatment in late 2014. The deal includes a service contract for several years.

With proton therapy, it is possible to treat certain cancers with greater accuracy and with fewer side effects than with conventional radiation therapy. In other words, the risk of damage to healthy cells is reduced with proton therapy. This methodology is useful for treating tumors adjacent to radio-sensitive tissues. Furthermore, for pediatric patients, this approach curtails the risk of developing radiation-induced cancer later in life.  

At present, Varian is setting up its ProBeam system at the Scripps Proton Center located close to San Diego. The company has been chosen to furnish equipment for new proton therapy centers in Mestre, Italy and at the University of Maryland. It has been selected as the preferred supplier for a new center at Emory University, Atlanta.

Varian is a leading manufacturer of integrated radiotherapy systems for treating cancer and a premier supplier of X-Ray tubes for diagnostic imaging applications. The company operates in a technology-driven environment where success depends on the use of new technology, product development and upgrades. In the radiation oncology market, Varian competes with Accuray (ARAY - Analyst Report).

Varian is poised to increase its market share in radiation oncology. It is currently enjoying a healthy demand for its coveted TrueBeam technology, which is meaningfully contributing to its net order oncology growth.

Moreover, Varian enjoys a strong balance sheet marked by minimal debt and sizeable cash. The company uses a part of its healthy cash flows for share repurchases.

However, Varian competes with larger players in a technology-intensive industry. Further, uncertainties stemming from health care reform and a still weak hospital capital spending environment across many developed countries, especially in Europe, are significant challenges. We currently have a long-term Neutral rating on Varian supported by a short-term Zacks #3 Rank (Hold).

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