Varian’s Growth – The Last 5 Years
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Net OrdersRevenuesOps Earnings
Varian’s Growth Opportunity– The Next 5 Years
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SIPVPTXRPOS
Fiscal 2012 Outlook (As of end of Fourth Quarter, Fiscal 2011)
Fiscal Year 2012
Revenues growth estimated at ~ 9% to 11%
EPS estimated at ~ $3.92 to $4.02
First Quarter, FY2012
Revenues growth estimated at ~ 8% to 9%
EPS estimated at ~ $0.74 to $0.75
Varian updates its outlook once per quarter when it reports financial results. The outlook is for Continuing Operations.
Agenda
FY2011 Financial Review Elisha Finney- SrVP and CFO
X-Ray Products Robert Kluge- SrVP/President X-ray Products
Emerging Businesses Lester Boeh – VP, Emerging Businesses
Oncology Systems Dow Wilson – Executive VP/COO
Q&A
VMS FY11 Profile
Orders: $2.9 B
Sales: $2.6 B
EPS: $3.44
Operating Earnings % 23%
Employees: 5,707
NYSE Symbol: VAR
Note: The results exclude discontinued operations.
Business Segments – Net Orders
FY11 %
Oncology Systems $2,250 M 77% Radiation Therapy Brachytherapy Radiosurgery
X-Ray Products $ 483 M 16% Tubes Flat Panel Imagers Other $201 M 7% VMS Particle Therapy Security and Inspection Products Ginzton Technology Center TOTAL $2,934 M 100%
Oncology Systems
Q4 FY11 Q4 FY11 YTD
Net Orders 717 9% 2,249 8%
Revenues 549 7% 2,022 9%
Gross Margin 45% 2 pts 45% Flat
R&D 29 113
SG&A 78 297
Op Earnings 139 10% 507 10%
ROS 25% 1 pt 25% Flat
Headcount 4,088
Note: Dollars in millions.
X-Ray Products
Q4 FY11 Q4 FY11 YTD
Net Orders 126 13% 483 15%
Revenues 119 11% 469 16%
Gross Margin 41% Flat 41% 1 pt
R&D 8 26
SG&A 11 49
Op Earnings 30 7% 118 18%
ROS 25% (1 pt) 25% Flat
Headcount 776
Note: Dollars in millions.
Fourth Quarter 2011 Results
VMS OS XRP Other
Net Orders
968 25% 717 9% 126 13% 124 1534%
Revenues 719 10% 549 7% 119 11% 51 53%
Gross Margin 42% 45% 41% 10%
R&D 44
SG&A 97
Op Earnings 160 22% ROS (+ 7%)
Interest Income 0.1
EPS $0.95 (116M diluted shares) Note: (1) Dollars in millions, except per share amounts. (2) The operating results for the Other segment and Total VMS exclude discontinued operations.
FY11 Results
VMS OS XRP Other
Net Orders (1)
2,934 15% 2,249 8% 483 15% 201 227%
Revenues 2,597 10% 2,022 9% 469 16% 106 16%
Gross Margin 44% 45% 41% 24%
R&D 171
SG&A 377
Op Earnings 588 23% ROS (+ 10%)
Interest Income 0.3
EPS $3.44 (119M diluted shares) Note: (1) Q4 FY10 YTD net orders for Total VMS and the Other segment excludes $62M for the cancellation of a proton therapy order. (2) Including the proton order cancellation in the year ago period,Q4 FY11 YTD net orders would be up 18% for Total VMS and up $202M for the Other segment. (3) Dollars in millions, except per share amounts. (4) The operating results for the Other segment and Total VMS exclude discontinued operations.
Backlog $2,530M (As of 09/30/11)
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Q4 FY11 Balance Sheet / Cash Flow
Conservative balance sheet $564M cash and cash equivalents $19M short-term investment $198M total debt $1,244M stockholders’ equity
*DSO 80 days - down 2 days from year ago quarter - down 1 days from prior quarter
Cash Flow $146M cash flow from operations $181M from short-term borrowings Spent $267M to repurchase 4.8M shares in Q411 including an accelerated buyback of 3.8M shares
*Days Sales Outstanding
Tube and Panel Sales Growth by Year m
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X-Ray Product Growth Drivers
Industry Conversion Transition to Digital Imaging DR and CR Imaging is replacing Film
Varian is well positioned from a Technology and Product
Cost Perspective New X-ray Tube Opportunities to Support Digital Imaging
Varian is by far the STRONGEST Independent Supplier
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Marketplace / Customers / Competitors
Varian is the largest and most capable independent producer of high technology imaging components
Stand Alone Competitors Thales Imaging Panels and Workstations Samsung Imaging Panels IAE Low Tier X-ray Tubes
Integrated Companies (Sometimes Customers, Sometimes Competitors) GE Siemens Philips Toshiba Canon Fuji Agfa Konica Minolta
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XRP FY 11 Highlights
Sales Growth High Tier CT X-ray Tubes continued to grow
Mammo tubes grew (added a major OEM customer)
Radiographic Imaging Panels grew rapidly
Varian - largest and most capable supplier of high tier imaging components
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XRP FY 11 Highlights
New Products … FY11 was a year of Product Development New High Tier CT tubes
New Mammography tubes to support advanced applications
New Generation Radiographic Panel (including wireless)
Next Generation Cone Beam Imaging Panel
Mammography Imaging Panel
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New X-Ray Tube Solutions -
PaxPower™ - M 1500 Mammography Tube Designed for advanced mammographic applications Space efficient Ultra high performance
PaxPower™ - FP 1000 CT Tube More Uniform Image Over Entire Field Beam Optimized for Flat Panel Detectors High Heat Dissipation/Lighter Weight
PaxPower™ - FP 2250/5300 Special Procedures Tube Space efficient for interventional angiography in OR, ambulatory
surgery or EP Lab
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Flat Panel Detectors
Dynamic Panels Cardiology Angiography, DSA Cone Beam CT Surgical C-Arms Oncology
IGRT / Patient Positioning
Dynamic Panels 2020+
1313 4030E 4030CB
3030+
2520E / 2520V
2520D
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New Mammography Detector
High resolution 83 µm pixel matrix
Environmentally stable amorphous silicon (aSi)
Variable frame rate for advanced applications
Panel to edge proximity for chest wall visualization
3024M
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New 4336 Wireless Panel
“CR” cassette-size FPD
Designed for Portable DR
Light weight: 3.8kgs.
High Resolution: 3.6 lp/mm
PaxScan 4336 Wireless Panel
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New Flat Panel Detectors
Designed for large field of view Cardiology, Angiography, DSA Cone Beam CT High resolution: 3.6 lp/mm
PaxScan 4343 Dynamic Panel
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XRP Outlook
FY12 looks strong … New Products should support growth Family of Diagnostic X-ray Tube to enhance Flat Panel Imager
Performance
First entry into Mammo Panel Market
New High Tier Fluoro Panel
New Wireless RAD Imager
New High Tier RAD imager (Tomo & Dual Energy Capability)
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Security & Inspection Products
Market leading provider of high-energy security imaging Components: Linear accelerators, detectors, software, service
Systems: IntellX
Customers include all major systems integrators Components: Rapiscan, Smiths, AS&E, several regional players
Systems: US Customs & Border Protection, Rapiscan
End-users include customs and defense departments
~$100M annual business Market Drivers: Terrorism, Global Instability, Tax Revenue
80% of VAR’s security business is ex-US
Varian Strengths
Fast, automated materials discrimination Identify the most material classes within containers quickly and
reliably – organic, inorganic, metals, and high-density materials Recent expansion into mobile platforms
Lower priced, compact and reliable x-ray sources to enable low-cost, high performance, mobile platforms
Varian’s R&D and infrastructure investments IP: more than 50 active imaging and security patents
Global support and distribution network
Security & Inspection Products FY-11 Highlights
$21M award from US Customs for IntellX3 Cargo screening systems
Successfully completed all vendor testing on next
generation system
Demonstrated expanded material discrimination
capability by identifying material type in thin materials
Deployed dual-view imaging systems in the Middle
East for a high-throughput car scanner (100 cars/hour)
Leverage Growth in Adjacent Markets
X-ray Gamma Chem/Bio Rad/Nuc Metal Detection
X-ray-kV & MV Whole Body Backscatter
MV X-ray
SIP Market Focus
SIP represents ~20% of total
segment B B B
Detection NII HE NIISeries1 6 1.3 0.6
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GROWTH PATHS
Acquisition & Development Platforms
0.4 B
*NII – Non Intrusive Inspection
Going Smaller and Portable
Mi6 Cx1
First Generation MX1 Next Gen. in Development 20 Units Shipped Highest Volume
Expanding Market Opportunity Through Lower Price Point and Smaller Package
Cx1: $250K Mi6: $675K
Smaller Is What’s Big
Smaller, lower cost, mobile, “source in a box” ($250K vs. $400K)
Lower cost platform, good throughput, high energy performance: Higher unit potential at borders, temporary checkpoints, and defense
Rapiscan Portal
Improved Material Discrimination Performance
Identify Material Types behind objects
Identify Material
Types as a function
of density
Market Potential: 3-4 new center launches/year
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CE
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Source: PTCOG website
FY-11 Highlights
Accomplishments Scripps PT Center
$88M Equipment Order Booked
Finalized ~$60M, 10 year Operations and Maintenance Agreement
Installation underway
Treatments scheduled to begin in 2013
Signed purchase agreement for University of MD PT Center
Signed concession agreement for Mestre PT Center near Venice, Italy
FY-11 Highlights
Accomplishments First cyclotron completed, tested & shipped
Second cyclotron in the assembly phase
FDA 510(k) in Jan. ‘11, CE since FY-09
Gantry test facility constructed
Making progress on implementing RT workflow capabilities into PT In-room imaging
Patient motion management
Clinical workflow
New industrial design Consistent with TrueBeam family
Common User Interface
Addressing Market Needs
Solutions Provider Survey and focus group results indicate:
A strong desire for an integrated solution from a single provider
Advanced treatment delivery is required for success now and in the future Beyond Intensity Modulated Proton Therapy
(IMPT)
Image Guidance
Motion management
Ability to adopt and integrate future capabilities is critical
Varian has tremendous experience in advanced technology development and delivery in cancer therapy
R&D activities targeted at two objectives Superior Quality of Care
Reducing integral dose and treatment margins
Advanced imaging and motion management capabilities
Improved user environment
Making Proton Therapy economically viable $50M, 2-Room System
Improved Clinical Worlkfow, Higher throughput
Material and process development
ProBeam Roadmap
FY2011 Varian Highlights
• Orders grew 8% in FY2011, outgrowing the market by 3% • NA grew 5%, outpaced the NA market by 3% • Int’l grew 11%, outpaced the Int’l market by 4%
• Software sites grew by double digits from 2008 – 2011
• Eclipse Treatment Planning - 12% • ARIA Oncology Informatics - 11%
• Service grew in mid-teens
• Leveraged growing installed base
~380 orders
~145 installs
~70% of USA orders
~ 40% of WW orders
TrueBeam 1.5 launched
TrueBeam… Lots of Big Wins
>2000 orders
>$300M booked Gated RapidArc
launched
Est. >20,000 patients treated
RapidArc… Going Strong
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sGrowth Software Sites
2008 - 2011
TPS
ARIA
WW TPS12% CAGR
WW ARIA 11% CAGR
Int'l
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Varian Software Business Rising
Varian Linac Base Expanding
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Lina
csGrowth Linac Installed Base
2008 - 2011WW Linac Base
5% CAGR
Int'l Int'l Int'l Int'l
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• Int’l markets growing fastest; developed markets replacing, upgrading units • Expanding base is platform for growth in service and software
Clinical Needs Driving Product Portfolio
2005 2011
Clinac LE
Clinac EX Clinac IX
Trilogy
TrueBeam STX
Clinac LE
Clinac CX
Clinac IX
Trilogy
NTX
TrueBeam
Unique
Clinac EX
~$1M
~$3M Needs Radiosurgery capability Faster dose delivery Motion management Image guidance Better workflow Better patient experience Greater access Lower cost/treatment
Includes RapidArc capability
Lung Cancer - #1 Killer
Lung cancer common and still deadly.
Five-year survival stands at ~15%.
Lung Cancer Men Women Diagnosed WW 1 million 500,000 Mortality WW 950,000 400,000
Source: GLOBOCAN 2008, IARC (International Agency for Research on Cancer), World Health Organization
Lung Radiosurgery Encouraging
Two studies show promise of radiosurgery in patients with early stage lung cancer: Study of potentially operable stage I NSCLC demonstrates tumor control comparable to surgery, while SBRT for inoperable centrally-located lung tumors yields promising results
How We Will Treat Lung Cancer
TrueBeam radiosurgery Gated RapidArc
Real time, triggered imaging
High Intensity Mode dose rate
Calypso?
Simulated treatment image with fiducials
Why Calypso?
Accurate, precise, real-time tracking
Implants locate target
Prostate SBRT Dose escalation
Margin Reduction
Reduced Toxicities
Lung – clinical trial under way, (FDA approved IDE)
Improving Prostate Outcomes
New data show favorable outcomes on measures of quality of life and toxicity for prostate radiosurgery using Varian and Calypso technology: Results of a phase II study
Ultrasound Probe
Augmenix – A Step Forward in Prostate Treatment? SpaceOAR
Not available for sale in the US
Pivotal™ Treatment Solution For Breast
Improved heart and lung sparing*
*Journal of Clinical Oncology, Vol 25, No 16 (June 1), 2007: pp. 2236-2242 © 2007 American Society of Clinical Oncology. DOI: 10.1200/JCO.2006.09.1041 Phase I-II Trial of Prone Accelerated Intensity Modulated Radiation Therapy to the Breast to Optimally Spare Normal Tissue
Breast Cancer News
Radiotherapy/lumpectomy study: recurrence risk cut from 35% to 19.3% during first 10 years
risk of death cut from 25.2% to 21.4% in first 15 years
Varian Medical Systems
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Global Availability of Radiation Therapy
Number of Radiotherapy Machines per Million People 65 Yrs & Older
Source: IAEA and World Health Organization
Radiotherapy Machines per Million People
65 Yrs & Older
no machines
between 21 and 30
between 41 and 75
Over 75
between 31 and 40
between 1 and 20
Varian Oncology is Global Today
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North America
International
$ Millions Net Orders
International
54% of FY11 orders
Building On Our Global Footprint
Q4 Orders from 50 countries
Service in 100 countries
Major training facilities US Switzerland China India Japan
Leveraging Customer Support Services
Growth Drivers Expanding installed base Richer product mix ....
premium pricing Extended Warranty Options Software Service Agreements Professional Services Services Sales Team
Productivity Drivers Faster installs SmartConnect Technology Continuous design
enhancements
$552M
FY2010 FY2011
Net Orders
$655M
How We Will Grow Service
* IMV data
• PremierAssurance™ customizable support contracts
• SmartConnect™ remote service technology for faster response
• Broader reach with >2000 services employees worldwide
•Superior reliability