Varian (VAR) ProBeam Proton Therapy System Now In Thailand

Leading manufacturer of medical devices and software, Varian Medical Systems, Inc. (NYSE:VAR) has sealed another international deal for its Proton therapy platform. The company recently announced that Bangkok-based King Chulalongkorn Memorial Hospital has selected its flagship ProBeam Compact single-room proton therapy system, a fully rotational intensity modulated proton therapy platform for cancer treatment in Thailand.

The company plans to initiate treatments using the system by the second half of 2019.

Proton therapy is an advanced form of radiation for cancer patients. A significant addition to Varian’s Particle Therapy business, the latest ProBeam platform features Dynamic Peak scanning technology, robotic patient positioning tools and a suite of motion management tools.

In addition to the equipment, Varian announced plans to provide its Eclipse treatment planning system and ARIA information management system at the hospital. The company is expected to book orders for the equipment by the third quarter of fiscal 2017.

In this regard, second-quarter revenues at the particle therapy segment were up just 1% on a year-over-year basis. We expect this latest development to help Varian improve revenues at this segment.

Of the recent developments at the Proton therapy platform, Varian announced Shonin approval from the Japanese Ministry of Health, Labor and Welfare (MHLW) earlier this month. The approval is expected to help Varian fortify its hold in Japan (read more: Varian ProBeam Proton System Gets Okayed by Shonin in Japan).

Share Price & Estimate Revision Trend

Share price of Varian inched up 0.5% to close at $96.75 following the news release.

In fact, the stock has had an impressive run on the bourse over the last three months. The stock has gained 20.1%, much higher than the Zacks classified Medical - Instruments sub-industry’s gain of 5.9%. In fact, the stock’s price level outshined the S&P 500’s addition of 3.6% over the same time frame.

Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one analyst move north in the past two months, compared to three moving south. Meanwhile, full-year estimates have seen two upward revisions, compared to no movement in the opposite direction. This has had a significant impact on the consensus estimate, as the current quarter estimates fell roughly 3% over the last three months, while full-year estimates increased 3.9%.

This somewhat mixed trend justifies the company’s Zacks Rank #3 (Hold).

Bottom Line

Varian has been gaining prominence on its strategic initiatives to bolster its foothold in the niche markets in Asia, courtesy of the Shonin approval in Japan and the latest development in Thailand.

Meanwhile, the Asia proton therapy market is expected to multiply at a CAGR of 18% (Research & Markets). Taking the bountiful prospects into consideration, the latest development should boost investor confidence in the stock.

On the flipside, despite being a leading player in the proton therapy space, cutthroat competition from bigwigs likes Hitachi, Ion Beam Applications and others are expected to increase R&D expenditures for the company, which will keep margins under pressure.

Key Picks

Better-ranked stocks in the broader medical sector include Luminex Corporation (NASDAQ:LMNX) , Edwards Lifesciences Corp. (NYSE:EW) and Inogen Inc (NASDAQ:INGN) . Notably, Inogen and Luminex sport a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen projects a long-term adjusted earnings growth of almost 17.5%. The stock returned 81.7% over the last one year.

Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock added roughly 8% over the last three months.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.6%. The stock has a solid one-year return of roughly 14.8%.

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