How Is Varian Positioned in the Particle Therapy Business?
Varian Medical Systems (VAR) had a gross orders value of $310 million in 2015. The company has witnessed tremendous growth potential in the business segment. Particle therapy is the treatment of cancer using protons instead of X-rays. The company has established a leadership position in this segment and provides end-to-end integrated solutions to its customers. Investors can invest in the Vanguard Growth ETF (VUG) for exposure to Varian Medical Systems, which accounts for ~0.09% of VUG’s total holdings.
Varian Medical Systems is a leading provider of proton therapy treatment in the market. The proton therapy market is growing tremendously and Varian Medical Systems’ market share has also grown at a healthy pace. The company gained 40% of the treatment room sales between 2012 and 2015. In 2015, its market share rose to 47%.
The company has made some major R&D (research and development) investments in the particle therapy business and expects to witness profitability in the segment by 2018. As shown in the diagram above, Varian Medical Systems’ major competitors in this segment include Hitachi, Ion Beam Applications, and Mitsubishi. Major companies in the US medical device industry such as Johnson & Johnson (JNJ), C.R. Bard (BCR), and Boston Scientific (BSX), however, haven’t ventured into the proton therapy market segment.
Opportunities and growth
The particle therapy market witnessed a growth of around 22% between 2012 and 2015, which was more than the forecasted growth. Thus, the market has been growing at a faster pace than anticipated. Plus, Varian Medical Systems expects to witness a growth of 15% in the number of operational treatment rooms going forward. The company also generates revenues through service contracts after the sale of its proton system. The service business generates around 8% to 10% of the equipment’s selling cost per year.