Proton therapy market opportunities
The proton therapy market is a highly lucrative opportunity area for Varian Medical Systems (VAR). Proton therapy uses protons for treating cancer instead of X-rays. According to a Medgadget report, the global proton therapy market is expected to double by the year 2022. Though the United States has the biggest proton therapy market, Asian countries present significant growth potential. Between 2016 and 2022, the Asian proton therapy market is expected to triple in size, while the European market is expected to see a double-digit CAGR (compound annual growth rate) between 2017 and 2022. The European proton therapy market tripled in size between 2010 and 2016.
Varian’s proton therapy performance and future growth
In 3Q17, Varian Medical Systems registered revenue of $68 million and orders worth $122 million in its Particle Therapy segment, which represents growth of $31 million and $71 million, respectively.
The above diagram lists centers that are treating or plan to treat patients through Varian’s proton therapy systems. The company booked three orders under its Proton Therapy segment in 3Q17. The order mix comprised a single-room system in the United States and one in Thailand. In early July, the company delivered a multi-room cyclotron system to a proton therapy center in Atlanta, and patient treatment at the site is planned to start in 2018. The order contributed approximately $46 million in revenue in 3Q17.
Currently, there are five proton therapy centers offering treatment using Varian’s proton therapy systems. There are 14 more projects in the pipeline, some of which are expected to start treatment in the next six months. However, the high costs of proton therapy systems remain a risk for the company. The Scripps Proton Therapy Center filed for bankruptcy in March 2017. The company reported $76 million in related impairment charges.
In terms of system mix, the US market largely comprises one- and two-room treatment centers, whereas multi-room system orders are expected in China and Western Europe. IBA is currently the biggest player in the proton therapy market. Other players looking to gain larger market share include Mitsubishi Electric, Hitachi, and Mevion Medical Systems. Larger medical device players Medtronic (MDT), Stryker (SYK), and BD (BDX) have not yet ventured into this space.
Investors could consider the Vanguard Growth ETF (VUG) for diversified exposure to Varian. VUG has a ~0.09% exposure to Varian. In the next part, we’ll take a look at the Varian’s guidance for the rest of 2017.