Varian To Open Facility In Brazil, Global Growth In Focus

Varian Medical Systems (NYSE:VAR) recently announced plans of opening a new facility in Jundiai, Brazil, reflecting its long-term commitment and partnership with the Brazilian Ministry of Health. The facility has been fully-equipped to provide Varian Trilogy linear accelerator for hands-on training to physicians. Notably, the manufacturing and warehousing areas of the facility are expected to be operational by 2018-end.

The latest development closely follows the receipt of Shonin approval from the Japan Ministry of Health, Labor and Welfare to market the Varian Halcyon system, an exclusive platform for cancer treatment through image-guided volumetric intensity modulated radiotherapy.

Varian has been continuously focusing on boosting its global education and training department. The latest facility is located in the Multivias Industrial Park and has a demonstration room and two training classrooms.

Management at Varian expects to provide training to up to 300 clinicians and therapists on the use of radiotherapy equipment, treatment plans and techniques.

Global Growth in Focus

We believe the facility will provide access to advanced radiotherapy treatment across Latin America, particularly in the Brazilian oncology market. In this regard, a research report by Market Data Forecast shows that the radiotherapy market in Latin America was worth $654 million in 2016 and is estimated to see a CAGR of 6.5% to reach $897.7 million by 2021. Considering the bountiful prospects, Varian is likely to grow manifolds, leveraging on its Oncology segment.

Notably, Varian received regulatory clearances to market Halcyon in the United States and Europe recently.

In Italy, the company recently announced the initiation of treatment using its HyperArc High Definition Radiotherapy (HDRT), a new type of radiosurgery treatment, at Sacro Cuore Don Calabria Cancer Care Center in Negrar-Verona.

In Algeria, Varian conducted a three-day workshop for radiotherapy practitioners in September. Varian has 30 systems operating in Algeria at the moment.

The company’s strong overseas presence is expected to enable it to cash in on this opportunity in emerging markets.

Share Price Moves Up

Over the past six months, Varian has outperformed the broader industry in terms of price. The company has returned 13%, comparing favorably with the sub-industry’s gain of just 7.9%. Also, the current return is higher than the S&P 500’s gain of 8.5%.

Our Take

Varian’s expanding international presence is likely to be the only factor boosting investor sentiments, given the company’s lackluster results in the just-reported fourth quarter of fiscal 2017. In fact, the company’s oncology gross orders declined 9% year over year at constant currency in the APAC region. We believe Varian’s recent initiative to boost its presence in Latin America will lead to growth in the APAC region.

However, Varian competes with large electronic companies as well as smaller and more specialized radiation therapy equipment manufacturers like Accuray Incorporated (NASDAQ:ARAY) and C. R. Bard, Inc. (NYSE:BCR) . Thus, cutthroat competition in the niche space is likely to impede the company’s sales growth.

Zacks Rank and Key Pick

Varian has a Zacks Rank #4 (Sell). A better-ranked stock in the broader medical sector is PetMed Express (NASDAQ:PETS) , with a Zacks Rank #1 (Strong Buy). The company has a long-term expected earnings growth rate of 10%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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