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Varian (VAR) Showcases Edge Radiosurgey at 2015 ChinaMed - Analyst Blog

Varian Medical Systems Inc (VAR) operates in a technology-driven environment where success largely depends on innovation. Over the years, the company has been developing products that aim at providing minimally invasive treatment to cancer patients.

One of such product is the Edge Radiosurgery procedure, which features in the company’s presentation at the International Medical Instruments & Equipment Exhibition (ChinaMed), currently (Mar 26 to 28, 2015) being held in Beijing, China.

The Edge Radiosurgery platform is a non-invasive system that oncologists in the U.S., Portugal, Italy and Switzerland use to precisely locate cancerous tumors in lung, brain, intestine, spine and other areas where surgery is difficult to perform. As compared to other radiosurgery systems, Edge is much superior in destroying tumors, without damaging surrounding tissues. The system, unveiled in 2012, has already treated more than 1000 patients.

During the first quarter of 2015, Varian won an approval to supply Edge Radiosurgery systems to customers in China. The country presents great growth opportunity for Varian, as it tackles soaring cancer rates. China has approximately 20% of the world's population, but accounts for 22% of new cancer cases and 27% of the total cancer deaths.

In fact, not only China but most of the low- and middle-income countries are too under-equipped to address the growing incidence of cancer. It has been estimated by the World Health Organization (WHO) that annual cancer rates around the world are projected to increase 70% (approximately 22 million) over the next two decades from 14 million in 2012. The majority of this growth will occur in these developing regions.

We believe growing adoption of Varian’s products in international markets, particularly the emerging markets, is encouraging. Order growth in Europe, Africa and particularly Asia, is growing at a faster pace than North America.

Gross orders soared 17% (23% at cc) in APAC and 12% (18% at cc) in EMEA but declined 2% in the Americas (3% in North America). Varian witnessed 30% order growth in the BRICA (Brazil, Russia, India, China and Africa) countries. The region accounted for more than 15% of the total oncology orders in the quarter.

For 2015, management forecasts double-digit growth in the emerging markets. The company expects to benefit from pent up demand in China, robust performance in Africa, while India is expected to have a good year. We believe that continuing order wins will drive Varian’s top line in fiscal 2015 and beyond.

Stocks to Consider

Currently, Varian has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space are Abiomed ABMD, Inogen INGN and Edward Lifesciences EW. While Abiomed and Inogen sport a Zacks Rank #1 (Strong Buy), Edward Lifesciences carries a Zacks Rank #2 (Buy).


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