Varian Medical Systems’ (VAR) oncology business reaches around the globe. With a market share of ~60%, It is a leading player in the space. Other major medical device companies in the oncology technology space include Accuray (ARAY), Boston Scientific (BSX), and GE Healthcare, a subsidiary of General Electric (GE). While~50% of the company’s oncology revenue comes from North America, the company is growing at a fast pace in emerging markets. The company’s emerging market mix has been expanding by 300 basis points year-over-year. In 3Q17, India and China were among the fastest-growing markets for the company’s oncology business. According to Varian, in China, less than 20% of cancer patients are treated with radiation, which presents a key growth opportunity in the market.
Investors can participate in the growth potential of the company by investing in the iShares Russell 1000 Growth ETF (IWF), which has a 0.08% exposure to Varian.
Emerging markets mix
The growing emerging market mix in the company’s backlog impacted oncology sales in 3Q17, as emerging market orders tend to take more time for delivery and installation. With the launch of Halcyon, conversion cycles are expected to improve. According to Varian, the duration of the installation cycle will shorten by around two to three weeks on average. Moreover, as emerging market governments seek high throughput cancer centers, Halcyon’s faster treatment time makes it an attractive product. Therefore, the company is expected to witness oncology sales growth in emerging markets. Next, let’s look at how the Halcyon treatment system has performed since its launch.