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The New Varian: A Leaner, Meaner Medical Machine Company

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Part 3
The New Varian: A Leaner, Meaner Medical Machine Company PART 3 OF 9

A Look at Varian Medical Systems’ Long-Term Goals

Varian Medical Systems’ long-term goals

Varian Medical Systems (VAR) hopes to improve the lives of around 6 million cancer patients each year, which would double what the company has achieved to date. Varian is aiming for 5%–6% annual revenue growth, whereas its current 12-month trailing revenue growth is 3%.

A Look at Varian Medical Systems&#8217; Long-Term Goals

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Varian aims to achieve a 22% return on sales over the next three years, driven by the company’s strong operational execution and increasing sales mix. Competitive US companies in the cancer management market include Accuray (ARAY) and C. R. Bard (BCR), which is being acquired by BD (BDX). The acquisition is expected to be completed in 4Q17.

A Look at Varian Medical Systems&#8217; Long-Term Goals

Business growth drivers

Varian Medical Systems is now focused on strengthening its core capabilities. Varian successfully spun off its Imaging Components business in January 2017, and is now positioned as a standalone cancer management company. The move enables the company to focus on its core business strength and expand as a leader in cancer management.

Varian’s growth is expected to be driven by its strong product portfolio, with the Halcyon opportunity and software business expected to grow to ~$900 million over the next five years. The company cites reimbursement risks in the United States and currency risk as some of its challenges.

We’ll discuss these growth drivers in detail later in this series. In the next article, we’ll analyze Varian’s product portfolio strength. To participate in the growth potential of the company, investors could consider the Vanguard S&P 500 ETF (VOO) which has a ~0.04% exposure to Varian. In the next article, we’ll look at the company’s profitability drivers.

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