Varian Medical Systems’ Oncology Systems Segment in 2018


Apr. 4 2018, Updated 6:33 a.m. ET

Oncology systems segment performance

In 1Q18, Varian Medical Systems (VAR) reported new orders worth $620 million for its oncology systems business. That’s a YoY (year-over-year) rise of 7%. It had a total order backlog worth $2.7 billion at the end of 1Q18, which is a YoY rise of 7%.

The oncology systems segment reported revenues of $649 million, a YoY growth of 12% on a constant currency basis in 1Q18, driven by increasing shipments of linac (linear accelerator) devices in developed markets. In North America, the segment reported YoY revenue growth of 16% on a constant currency basis in 1Q18.

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Varian Medical Systems witnessed revenues of $338 million in 1Q18 from the sale of products in the oncology systems segment. That’s a YoY rise of 20%. The company also reported services revenues of $311 million, which is a YoY rise of 8%. That’s attributable to the rising performance obligations the company provided, including installation, training, and warranty services, subsequent to the increase in its installed base in 1Q18.

At the end of 1Q18, Varian Medical Systems had a total net installed base of 7,876 linac units, which was a YoY rise of 3%. At its 2017 ASTRO Investor Relations meeting, the company announced that its aspirational goals would increase its installed base to more than 10,000 by 2022. An increase in its installed base is a strong growth driver for the company’s service business, software business, and treatment planning business. That would enable the company to pose strong competition to other medical device players such as Abbott Laboratories (ABT), Medtronic (MDT), and Boston Scientific (BSX).

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Margin performance in 1Q18

In 1Q18, Varian Medical Systems’ oncology systems segment reported gross earnings of $301 million, which is a YoY rise of 15%. The segment also reported operating earnings of $138 million in 1Q18, which is a YoY growth of 19%.

Geographic market order mix

Approximately 45% of the new oncology business orders reported by Varian Medical Systems in 1Q18 were from the North American markets. The remaining 55% were from international markets. The total value of the new oncology business orders received from North America in 1Q18 was $300 million, which is a 2% YoY growth on a constant currency basis. That performance was mainly attributable to certain major account wins such as Norton Healthcare, in which the company managed to sell three of its TrueBeam systems and software solutions ARIA, Eclipse, and InSightive.

In the next part, we’ll look at Varian Medical Systems’ Halcyon.


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