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Varian Medical Buys Endocare & Alicon to Boost Cancer Care

Zacks Equity Research

Varian Medical Systems, Inc. VAR recently announced the acquisition of Texas-based Endocare and Hangzhou, and China-based Alicon. Notably, the goal is to add cryoablation and microwave ablation therapies and embolic beads to the company’s cancer care solutions portfolio.

This latest move will fortify the MedTech giant’s foothold in the global cancer care space.

More on the Acquisitions

Varian Medical’s latest buyouts come for a deal value of $185 million and are expected to prove accretive to adjusted earnings per share in fiscal 2020. Notably, the acquisitions are likely to provide Varian Medical with a leading position in the high-value interventional oncology segment, which is expected to grow from approximately $860 million in 2019 to more than $1 billion in 2022.

Further, Endocare's lead product Cryocare CS System and Alicon's Caligel are expected to complement Varian Medical’s broad spectrum of products.

For investors’ notice, Endocare is a leading provider of hardware and software solutions supporting cryoablation and microwave ablation, while Alicon is a leader in embolic therapy for treating liver cancer in China.

Other Buyouts

Of late, Varian Medical has been focusing on inorganic expansion through buyouts.

Last month, the company entered into a definitive agreement to acquire Cancer Treatment Services International for $283 million. The takeover is expected to boost Varian Medical’s core Oncology Systems business. (Read More: Varian Medical's CTSI Buyout to Boost Oncology Services Unit)

Moreover, Varian Medical extended its Oncology portfolio with the acquisition of humediQ, the manufacturer of IDENTIFY, a surface-guided radiation therapy positioning and motion management system. By 2023, management at Varian Medical sees a $120-million market opportunity from the buyout.

Market Prospects

Allied Market Research suggests that the global cancer therapeutics market is estimated to reach $178.9 billion by 2023, at a CAGR of 11.9%.  Increase in cancer prevalence and rise in cancer research are the key factors driving the market.

Hence, Varian Medical’s latest development has been a well-timed one.

Price Performance

Over the past year, the Zacks Rank #3 (Hold) stock has rallied 15.9% compared with the industry’s 13% rally. The current level also compares favorably with the S&P 500 index’s 4% rally.

Key Picks

A few better-ranked stocks in the broader medical space are DENTSPLY SIRONA XRAY, Masimo Corporation MASI nd CONMED Corporation CNMD. While DENTSPLY and Masimo each carry a Zacks Rank #2 (Buy), CONMED sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DENTSPLY’s long-term earnings growth rate is expected at 11.5%.

Masimo’s long-term earnings growth rate is projected at 16.1%.

CONMED’s long-term earnings growth rate is estimated at 13.3%.

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Varian Medical Systems, Inc. (VAR) : Free Stock Analysis Report
Masimo Corporation (MASI) : Free Stock Analysis Report
DENTSPLY SIRONA Inc. (XRAY) : Free Stock Analysis Report
CONMED Corporation (CNMD) : Free Stock Analysis Report
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