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Varian Medical Systems’ Oncology Devices Are Key to Sales Growth

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Overview

Varian Medical Systems commands the majority share of the oncology device market in the United States. The company registered revenues of $0.8 billion in 3Q16, of which 77% came from the company’s oncology segment. Also, the segment reported YoY revenue growth of approximately 8.3% in the quarter. The company generates most of its oncology segment revenues from the United States. However, it’s focusing on expanding its emerging market base, which has tremendous growth potential.

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Key growth drivers

Oncology sales underwent faster growth from Asia-Pacific sales, which came in at around 17% on a constant-currency basis. Sales from the EMEA region fell 4% due to weakness in Western Europe. Notably, EMEA sales witnessed a constant-currency rise of ~23% in 2Q16.

Unit orders volume increased approximately 6.4% in 3Q16. This growth was led by continued momentum in North American sales and the increase in the international demand as the company focuses on both premium and mid-tier markets. Varian Medical Systems’ products, including Truebeam, Edge, and VitalBeam, continue to undergo strong momentum around the world.

Gross margins in the oncology business have witnessed growth due to productivity benefits and higher demand for Truebeam and the company’s software offerings. Gross margins improved by 400 basis points and came in at about 46% of the company’s total sales in 3Q16.

Investors can invest in the iShares U.S. Medical Devices ETF (IHI) for exposure to Varian Medical Systems (VAR) and its competitors C.R. Bard (BCR), Intuitive Surgical (ISRG), and Thermo Fisher Scientific (TMO).

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