Varian Medical (VAR) Hits 52-Week High: What's Driving It?
Varian Medical Systems, Inc. VAR reached a new 52-week high of $176.80 on Mar 25, before closing the session marginally lower at $176.59. The stock has moved up 0.7% since its first-quarter earnings announcement on Jan 26.
The company is witnessing upward trend in its stock prompted by lucrative partnerships and strength in AI & Medical Mechatronics. Strong developments in Proton Therapy segment is an added advantage. Recent receipt of 13 Ethos orders (including eight in North America, four in EMEA and one in APAC) and one Proton order in China raises optimism. Oncology gross orders rose in the fiscal first-quarter 2021, especially in EMEA looks encouraging. However, tough competition is a concern.
Let’s delve deeper
Key Growth Catalysts
Lucrative Partnerships and Acquisitions: We are optimistic about Varian Medical focusing on inorganic growth through its acquisition strategy. In November 2020, the company inked a new $10-million investment and partnership agreement with COTA, Inc., a Boston-based curator of clinical data in oncology. The companies will collaborate to equip cancer clinics with data analytics and decision support tools, using real-world evidence to help guide clinical and operational decisions as well as drive cost-efficient patient outcomes.
In December, the company inked a three-year Memorandum of Understanding (MoU) with Yonsei Cancer Center, Yonsei University Health System to partner on research and development projects in the field of radiation therapy and oncology. This deal is likely to strengthen the global reach of Varian Medical’s Oncology segment.
Strength in AI & Medical Mechatronics: Mechatronics, a high-end technology incorporating electronics, machine learning and mechanical engineering, has been in trend for a while. A research by the Business Wire deciphers that the global Mechatronics and Robotics market is projected to witness a CAGR of 15.02% during the 2017-2021 period. In September 2020, the company announced that the first Ethos therapy in Germany is set to be installed and will commence treatment of patients by early 2021.The announcement is anticipated to strengthen Varian Medical’s Oncology Systems segment and enhance its exposure to AI.
Notable Developments in Proton Therapy: In recent times, Varian Medical has seen notable developments in its core Proton therapy unit, which falls under its Particle Therapy business. In November, the company and the Cincinnati Children's/UC Health Proton Therapy Center announced the beginning of the first clinical trial of FLASH therapy as part of the recently-opened FAST-01 study. In February 2021, the company initiated the installation of the cyclotron and gantry for its ProBeam 360° single-room proton therapy system at Penn Medicine Lancaster General Health's Ann B. Barshinger Cancer Institute.
Downsides
Cut Throat Competition: In the emerging proton therapy market, the company faces competition from Hitachi, Ion Beam Applications, Mevion Medical Systems and Sumitomo. Intense competition is expected to increase R&D expenditures in the nascent proton therapy market, which will keep margins under pressure.
Zacks Rank and Key Picks
Currently, Varian Medical carries a Zacks Rank #3 (Hold).
Some other better-ranked stocks from the broader medical space are Cantel Medical Corp. CMD, ConforMIS, Inc. CFMS and Electromed, Inc. ELMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cantel Medical has a projected long-term earnings growth rate of 19%.
ConforMIS has a projected long-term earnings growth rate of 42%.
Electromed has a projected long-term earnings growth rate of 10%.
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