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Varian Gets Software Clearance

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Leading integrated radiotherapy systems maker Varian Medical Systems (NYSE:VAR - News) recently stated that it has obtained the 510 (k) clearance from the U.S. Food and Drug Administration (“FDA”) for its latest radiotherapy treatment planning tool to be used with the company’s premier Eclipse treatment planning software. These offerings cut down on time required to plan advanced treatment.

According to the company, a customized treatment plan requires the clinician to take pictures of the patient’s anatomy and recognize and delineate the tumor and adjacent organs in a process termed contouring. This is an important step designed to specify areas that are to be protected or irradiated during radiotherapy. Contouring was a time consuming effort in the past.

Varian has amalgamated two methodologies in its Smart Segmentation Knowledge Based Contouring (“KBC”). This enables clinicians to complete the contouring process as rapidly as possible.      

Smart Segmentation KBC may be utilized in association with the company’s prominent Eclipse treatment planning system to generate therapy options for external beam or for brachytherapy treatment.  Varian's own KBC tool maintains an anatomical map covering the most frequently treated parts (such as breast, and lung) with radiotherapy when cancer is detected. Eclipse has been employed for radiotherapy treatment planning at more than 3,000 radiation oncology clinics across the globe.

Varian is a leading manufacturer of integrated radiotherapy systems for treating cancer and a premier supplier of X-ray tubes for diagnostic imaging applications. The company operates in a technology-driven environment, where success depends on the use of new technology, product development and upgrades. In the radiation oncology market, Varian competes with Accuray (NasdaqGS:ARAY - News).

Varian is poised to increase its market share in radiation oncology. It is currently enjoying a healthy demand for TrueBeam, which is meaningfully contributing to net order oncology growth.

Moreover, Varian enjoys a strong balance sheet marked by minimal debt and sizeable cash. The company uses a part of its healthy cash flows for share repurchases.

However, Varian competes with larger players in a technology-intensive industry. Further, uncertainties stemming from health care reform and a still weak hospital capital spending environment across many developed countries, especially in Europe, are significant challenges. We currently have a Neutral recommendation on Varian. The stock currently retains a Zacks #3 Rank, which translates into a short-term “Hold” recommendation.

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