Varian Medical Systems Inc.: Orders Up As Products Evolve

Nov. 15, 2006
Maker of cancer therapy devices realizes double-digit growth for most product orders while continuing its R&D efforts.

If the outlook for cancer treatments is indeed improving, Varian Medical Systems Inc. should at least receive some of the credit. The Palo Alto, Calif., maker of radiation therapy, X-ray, and security and inspection equipment continues to strive for more-effective products.

Most recently, the company, one of IndustryWeek's IW 50 Best Manufacturers for 2006, added new motion management capabilities to its Eclipse radiotherapy treatment planning system, which is designed to allow for more precise treatment of tumors in mobile areas of the body, such as the lung. And in October the company said it had received an R&D 100 Award from R&D Magazine for its On-Board Imager device for image-guided radiotherapy and image-guided radiosurgery as one of the 100 most-technologically significant products of the past year.

Shortly after announcing the honor, the company released its fourth-quarter report, which showed a strong year-end and quarterly performance driven by increased orders for its radiotherapy, radiosurgery and X-ray products.

Profit increased 35% over the year-earlier period to $82 million, or 62 cents per share.

Varian Medical Systems Inc.
At A Glance
Varian Medical Systems Inc.Palo Alto, Calif.Primary Industry: MachineryNumber of employees: 3,6002005 In ReviewRevenue: $1.4 billionProfit Margin: 14.94%Sales Turnover: 1.05Inventory Turnover: 5.40Revenue Growth: 11.90%Return On Assets: 17.65%Return On Equity: 33.66%

Excluding stock option expenses and gains from tax items and discontinued operations, net earnings for the quarter were $79 million, or 59 cents per share. Revenue increased 18% to $454 million. Orders for the quarter rose 12% to $545 million.

For the year, earnings were $245 million, or $1.81 per share, compared with $206.6 million, or $1.56 per share in 2005. Excluding expenses and gains, profit increased 23% to $251 million, or $1.85 per share. Year-end revenue grew 16% to $1.6 billion. Orders for the year increased 14% to $1.8 billion.

The company expects revenues and earnings for first-quarter 2007 will increase upwards of the mid-teens.

Judging by its recent honor from R&D Magazine, continued innovation appears to be a key driver of such gains. For instance, the award-winning On-Board Imager combines X-ray software and X-ray imaging technologies to generate high-resolution computerized tomography (CT) images for locating tumors and tracking their movements.

In addition, the enhanced Eclipse radiotherapy treatment planning system should be attractive to clinicians who want to treat moving tumors more efficiently. Previously, clinicians at Holy Name Hospital in Teaneck, N.J., needed to manually import and co-register positron emission tomography (PET) and CT images, noted Allan Caggiano, chief physicist at Holy Name Hospital, in a Nov. 7 statement released by Varian Medical Systems.

"This new tool in Eclipse reduces that timeframe down to something quite manageable by allowing the PET and CT images to be easily imported and automatically co-registered," says Caggiano in the statement. "And the process is more versatile, giving us more time to try different treatment planning approaches to make sure that we're finding the optimal respiratory cycle phase for delivering the treatment."

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