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Varian's New Placement in the U.K.

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Oncology and X-Ray products company Varian Medical Systems (VAR) recently revealed that those suffering from cancer in north eastern England may soon avail of the latest radiosurgery therapy closer to home. The Northern Centre for Cancer Care located at the Freeman Hospital of Newcastle-upon-Tyne will start providing modern stereotactic radiosurgery therapy following its acquisition of two TrueBeam STx medical linear accelerators. Varian is scheduled to install the equipment in 2013.      

The Northern Centre for Cancer Care shifted to a new oncology facility in 2008. The center caters to 1.7 million inhabitants of Northumberland and nearby areas. It targets between 38 and 42 separate treatments each day on every one of its eight linear accelerators. The Northern Centre for Cancer Care has eight Siemens linear accelerators at present. It is in the process of replacing its older equipment.

Varian is a leading manufacturer of integrated radiotherapy systems for cancer treatment 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 (ARAY).

The company is poised to increase its market share in radiation oncology. It currently enjoys a healthy demand for its coveted TrueBeam technology, which has meaningfully contributed to its net order oncology growth. Varian’s TrueBeam was designed to treat tumors with beams of high speed and precision. It incorporates several technological innovations such as patient positioning and managing his/her motion. Given its high intensity nature, TrueBeam can dispense strong dosage over two times faster than that possible with earlier equipment.

Moreover, Varian enjoys a strong balance sheet marked by low debt and moderate cash. The company from time to time uses a part of its healthy cash flow for share repurchases.

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 are currently Neutral on Varian. The stock retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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