VARIAN MEDICAL SYSTEMSfilecache.investorroom.com/mr5ir_varian/544/download...economic conditions;...

January 2015

© 2015 VARIAN MEDICAL SYSTEMS. ALL RIGHTS RESERVED.

VARIAN MEDICAL SYSTEMS JP Morgan Healthcare Conference -

Dow Wilson, CEO

January 13, 2015

2 | VARIAN MEDICAL SYSTEMS

Forward-Looking Statements

• Forward-Looking Statements

• Except for historical information, this presentation contains forward-looking statements within the meaning of the

Private Securities Litigation Reform Act of 1995. Statements concerning industry outlook, including growth drivers;

the company’s future orders, revenues, backlog, or earnings growth; future financial results; market acceptance of

or transition to new products or technology such as our Edge™ radiosurgery system, TrueBeam™ and

radiographic flat panel detectors, image-guided radiation therapy, stereotactic radiosurgery, filmless X-rays, proton

therapy, and security and inspection, and any statements using the terms “could,” “believe,” “expect,” “outlook,”

or similar statements are forward-looking statements that involve risks and uncertainties that could cause the

company’s actual results to differ materially from those anticipated. Such risks and uncertainties include global

economic conditions; the impact of the Affordable Health Care for America Act (including excise taxes on medical

devices) and any further healthcare reforms (including changes to Medicare and Medicaid), and/or changes in

third-party reimbursement levels; currency exchange rates and tax rates; demand for the company’s products; the

company’s ability to develop, commercialize, and deploy new products; the company’s ability to meet Food and

Drug Administration (FDA) and other regulatory requirements for product clearances or to comply with FDA and

other regulatory regulations or procedures; changes in the regulatory environment, including with respect to FDA

requirements; the company’s assessment of the goodwill associated with its particle therapy business, challenges

associated with the successful commercialization of the company’s particle therapy business; the effect of adverse

publicity; the company’s reliance on sole or limited-source suppliers; the impact of reduced or limited demand by

purchasers of certain X-ray products; the company’s ability to maintain or increase margins; the impact of

competitive products and pricing; the potential loss of key distributors or key personnel; challenges to public tender

awards and the loss of such awards or other orders; and the other risks listed from time to time in the company’s

filings with the Securities and Exchange Commission, which by this reference are incorporated herein. The

company assumes no obligation to update or revise the forward-looking statements in this presentation because of

new information, future events, or otherwise.

2


Technology Leader in Growing Markets

• Varian Oncology Systems

– Radiotherapy

– Radiosurgery

– Brachytherapy

• Varian Imaging Components

– X-Ray Tubes

– Digital Flat Panels

– Security & Inspection Products

• Varian Particle Therapy

– Proton therapy


TO HELP SAVE

MILLIONS OF LIVES

EVERY YEAR, EVERYWHERE.

OUR VISION:


FY15 Focus on Our “Big 5” Strategic Priorities

Go Global

Grow Software and Services

Innovate

Commercialize Protons

Drive Operational Excellence


Oncology Systems


The Global Economic Cancer Burden

Nations investing more to fight growing cancer burden

*Economic losses from disability and premature deaths. Excludes direct medical costs

Sources: American Cancer Society, Livestrong, World Health Organization

27M New cases

annually by 2050

17.5M Deaths

annually

$895B cancer

cost


Source: U.S. Census Bureau

Pe

op

le 6

0 Y

ea

rs a

nd

Old

er

( in

Millio

ns)

Cancer Needs Growing with Aging Populations

0

200

400

600

800

1000

1200

1400

2010 2030

>80% Rise in world

population

over 60


10,000+ Linacs Needed

Number of radiotherapy

machines per million people

No machines

Less than 1

5 or less

10 or more

10 | VARIAN MEDICAL SYSTEMS 10

60% of global installed base

2.8M patients treated annually

7,500 Varian Accelerators


Americas Market Drivers in 2015

• North America

- Shift to SRS driving replacements

- Reimbursement helping

- Productivity initiatives/software

- Service growth

• Latin America

- Equipment shortage

- Demand for quality care


EMEA Market Drivers in 2015

Aging installed base

• Focus on productivity

Emerging markets

• India, Eastern Europe, Africa

SRS adoption – lung, liver


APAC Market Drivers in 2015

Increased use of RT

China (20%), Japan (28%)

Software/Service Expansion

Focus on Value

Service Agreements


New Products Drive Growth

45% of FY2014 orders came

from products introduced in

the last 5 years


Promising SBRT Results in Lung Study

"Technologies have developed in

the last few years that have

yielded game-changing,

paradigm-shifting approaches,

allowing us to reconsider

how radiation is delivered in

combination with surgery,

chemotherapy, and other

systemic therapies.”

Dr. Robert Timmerman,

UT SW Medical Center


Upgrades Create Growth Opportunity

Upgrade

6DOF Couch

RapidArc

MLC / PV

TrueBeam 2.0

OBI

SRS Package

$440M 5-Year Opportunity


New Products Accelerating Software Growth

Oncology Software

RapidPlan

InSightive

Analytics

Qumulate QA

Velocity

RapidPlan

$200M 5-Year Opportunity


Growing Oncology Services to $1B

• 36% of FY14 OS Orders / 40% of FY14 OS Revenues

• Delivers strong profitability


Long Term Oncology Growth Drivers

• Demographics

• Multi-Year Agreements

• Emerging Markets

• Service &

Software

• System

Upgrades

• Aging

Installations

5-7% Annual Growth

Opportunity


Imaging Components


• X-ray Tubes

• Linear Accelerators

• Workstations

• Flat Panel Detectors

Designs & Manufactures

• Equipment Manufacturers

• Aftermarket Distributors

Sells to

Imaging Components


$2.3B Addressable Market

Source: Varian 2014 Market Analysis

Market Product

Medical Imaging

• X-ray Tubes

• Flat Panels

• Software

Industrial Inspection • X-ray Sources

• Detectors

Cargo and Security • X-ray Sources

• Detectors

Imaging Components Market


Varian Share in Imaging Components Market

Flat Panel Detector Diagnostic and CT

Tubes

65%

24%

11%

Modality OEMs

Varian

Other

42%

35%

23% Modality OEMs

Varian

Other


Imaging Growth Initiatives in 2015

• Grow with current OEMS

• Add new customers in Asia, Brazil

• Extend leadership in tubes, panels with new capabilities

• Expand software offerings

• Focus on industrial market

• Develop/acquire new product lines

$400M Potential incremental

revenues in 5 Years


Moving to Expand Imaging Portfolio

• Add image analysis software to

imaging product portfolio

• Offer more complete subsystems

with panels/workstations/software

• Leverage OEM relationships to

accelerate market penetration

26 | VARIAN MEDICAL SYSTEMS 26

Long Term Growth Drivers - Imaging

• Digital Imaging Transition

• Expanding Product Portfolio

• Service & Software

• Emerging Markets/

New Players

5-7% Annual Market

Growth Opp’ty

7-9% Annual Growth

Opportunity


Particle Therapy


10 Varian Proton Projects

KFMC-King Fahd

Medical Center

PTC St. Petersburg,

Russia

Cincinnati Children’s

Hospital

Paul Scherrer

Institute

National Taiwan

University (Taipei)

Scripps Proton

Therapy Center

Rinecker Proton

Therapy Center

Georgia PT Center

(Emory)

UT Southwestern

Medical Center

University of

Maryland

Treating patients

Booked orders

Contracted, but not

financed, and not

booked


Value of protons - lower complications, costs?

Head & neck cancer study suggests protons could have lower costs through lower complications Dr. Steven J. Frank, M D Anderson


Proton rationale – cost efficiency

Proton cancer therapy

may cost the same or

less than other cancer

therapies. MD Anderson breast study using

Medicare reimbursement codes


Proton Project Potential

1000 treatment rooms

by 2030

$2.5B by 2030

Source: MEDraysintell


Proton Market

0

50

100

150

200

250

300Cumulative Number of

PT Treatment Rooms


Long Term Growth Drivers - Protons

• Demand for Optimal

Dose Distribution

• Evolving Technology

– Clinical capability

– Cost efficiency

$1.3B 5 Year

Market Opp’ty


Long-Term Growth Opportunities


Long-Term Growth Targets

Revenue • OS aiming for mid single digit growth

• IC aiming for mid-to-high single digit growth

• PT aiming for > $250M 6-8%

Gross

Margins

• Maintain at current levels – Service v. Geo

• Pricing pressures mitigated by cost

reductions 6-8%

Operating

Margins

• Proton becomes profitable – more Service

• R&D and SG&A grow slower than Revenue

8-10%

Goal: Drive Operating Earnings Faster Than Revenue

Double Digit EPS Growth

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