Morningstar | Healthy Uptake of Halcyon Drives Varian Performance
Buoyed by growing demand for radiotherapy, or RT, Varian and main competitor Elekta should enjoy sales momentum for the next decade, particularly in the emerging markets. The RT industry has consolidated substantially over the past decade, and the two companies are in prime position to benefit from what we believe is a mid-single-digit growth marketplace.Investors seeking to capitalise on the future of cancer treatments typically focus on drug therapies, which tend to be high-risk/high-reward opportunities. The radiotherapy market doesn't have the pizzazz of the cancer drug market, but its growth prospects are rather attractive. We're in the early stages of RT adoption; the latest advances in technology that allow for higher dosage and a more precise delivery of radiation address many of the concerns surrounding RT and significantly expand the potential marketplace.The RT opportunity is particularly attractive in emerging markets, where utilisation rates significantly trail those of the developed world. With demographics and "westernisation" of emerging markets driving cancer incidence higher, demand for RT has 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 can support twice as many platforms without approaching the developed world's standard of care. 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. Varian's exposure to the mature U.S. market limits its growth prospects, but the company's scale and a strong suite of products should allow it to capture the majority of global linac installations.Varian's focus on proton therapy, particularly single room proton, is a good defensive strategy. While it is likely to be a drag on results in the near future, this alternative to traditional RT has strong long-term potential.Varian Medical Systems is a manufacturer of medical devices and software for treating cancer and other medical conditions. The company's segments are: Oncology Systems, which designs, manufactures, sells and services hardware and software products for treating cancer with radiotherapy, and treatments such as fixed field intensity-modulated radiation therapy, image-guided radiation therapy, volumetric modulated arc therapy, stereotactic radiosurgery, stereotactic body radiotherapy and brachytherapy, as well as associated equipment; and Proton Solutions, which develops, designs, manufactures, sells and services products and systems for delivering proton therapy, for the treatment of cancer.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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