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Varian's New Subsidiary in Korea

Zacks Equity Research

Varian Medical Systems (VAR) recently revealed that it was setting up a subsidiary company in South Korea, Varian Medical Systems, Korea. The new entity will gradually don the role of a domestic base for Varian’s strategic business units.

The Korean subsidiary will provide localized assistance for HDX Corporation, which has sold Varian products in that country for over two decades. Varian believes that the subsidiary will further cement its ties with HDX.

Varian installed its first TrueBeam system in Korea last February. It forecasts a few more TrueBeam setups in the near future. The country is host to over 100 linear accelerators provided by Varian.     

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).

Varian 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.

Moreover, Varian enjoys a strong balance sheet marked by low debt and sizeable cash. The company uses a part of its healthy cash flow 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 are currently ‘Neutral’ on Varian. The stock retains a Zacks #4 Rank, which translates into a short-term Sell rating.

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