A Look at Varian Medical Systems’ Long-Term Objectives

Varian Medical Systems (VAR) spun off its imaging components business into Varex Imaging in January 2017. With the spin-off, the company strengthened its positioning in the oncology market and established itself as the leading cancer management company in the United States. The company launched its new brand at the 59th ASTRO (American Society for Radiation Oncology) meeting. The company aims to leverage its financial strength and scale to enhance its capabilities in the area of cancer management.

The company aims to establish itself as the leader in radiation therapy around the world. It further aims to maximize long-term shareholder returns through various internal strategic initiatives. Investors can consider investing in the Vanguard S&P 500 ETF (VOO) for diversified exposure to Varian Medical Systems. VOO has ~0.05% of its total portfolio holdings in VAR.

Varian Medical Systems has established a three-pronged growth strategy to achieve the company’s long-term growth objectives. These strategies are expanding the company’s global footprint, strengthening its leadership position in the radiation therapy market, and expanding into other addressable markets.

According to Varian Medical Systems, the global radiation oncology market is worth $5.3 billion. Varian comprises 54% of the total market size. Over the next five years, the company expects the market to grow at a CAGR (compound annual growth rate) of 4% to $6.3 billion. The addressable markets such as cancer care coordination and operating information systems are estimated to be worth $2 billion currently and are expected to grow at a double-digit rate, reaching about $6 billion over the next five years. Thus, over the next five years, Varian Medical Systems could be looking at a market size of $12 billion, which includes these addressable markets and the core radiation oncology market.

Some of the major medical device players that are expected to pose competition to Varian Medical Systems in these markets include Accuray (ARAY), Becton Dickinson (BDX), and Boston Scientific (BSX) which are expected to generate sales growth of 2.9%, 4.6%, and 7.5%, respectively, in their next quarters.