Morningstar | Elekta's Unity Platform to Drive Growth in the Next Few Years
Buoyed by growing demand for radiotherapy, or RT, Elekta--as well as its main competitor, Varian--should enjoy strong sales momentum for the next decade. The RT industry has consolidated substantially over the past decade, and the two companies are in a prime position to benefit from a market we believe will be growing in the midsingle digits.Despite the well-understood mechanism of action, RT adoption still has room to increase. Even though RT is highly effective in treating certain cancers at a relatively low cost, its penetration rates have long been hindered by its side effects and sizable upfront costs. The latest advances in technology, allowing for higher dosage and more precise delivery of radiation, and growing awareness of the benefits of radiotherapy could significantly expand the marketplace. The RT opportunity is particularly attractive in emerging markets, where its utilization rates significantly trail those in the developed world. With demographics and Westernization of emerging markets driving increased cancer incidence, demand for RT has already accelerated significantly. Yet there is still a massive gap between the current RT installed base and what is needed to meet growing demand. We estimate that this market, which is currently roughly 5,000 linear accelerators large, can support twice as many platforms without approaching the developed world's standard of care. We believe that both Varian and Elekta stand to benefit from these trends. Our forecast calls for close to 95% of the world's RT equipment installations to be provided by these two companies over the next decade. Much of our thesis on Elekta rests upon its ongoing recovery from self-inflicted wounds. We also are cautiously optimistic on its Unity platform, which could materially improve precision of RT, thus increasing its effectiveness and reducing healthy tissue exposure. So far, with still-limited data, Unity is delivering on its promises and we expect Elekta to deliver high-single-digit top-line growth and double-digit earnings growth over the next decade--above the device industry averages--on the strength of this platform.Elekta AB is a human care company providing clinical solutions for treating cancer and brain disorders. Co. develops tools and treatment planning systems for radiation therapy including brachytherapy and radiosurgery, as well as workflow improving software systems across the field of cancer care. Co. has four product areas: Elekta Neuroscience, which develops solutions for the diagnosis and treatment of neurological diseases; Elekta Oncology, which develops clinical solutions for radiation therapy, imaging systems and clinical solutions for patient positioning and immobilization; Elekta Brachytherapy, which is engaged in cancer treatment based on internal radiation; and Elekta Software.
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