Varian's Partners Penn Medicine, Proton Therapy In Focus

Varian Medical (NYSE:VAR) recently announced its partnership with Penn Medicine to develop and launch a comprehensive proton therapy training and education program. Management at Varian confirmed that training and online courses will be available from January 2018.

The latest development is likely to enhance the knowledge and skills of clinicians and therapists in the global proton therapy space. In fact, continued education and training are likely to boost the availability of proton therapy products in the niche markets.

The Proton Therapy Space at a Glance

Proton therapy or proton beam therapy is a type of particle therapy that uses a beam of protons to treat diseased tissue, most often in the cases of cancer. A research report by the CISION PR Newswire suggests that the global proton therapy systems market is expected to reach $2.88 billion by 2025.

Favorable reimbursement policies in the United States and Europe and rising awareness in cancer-related healthcare policies along with expenditures in emerging nations are likely to propel the proton therapy space in the long haul. In fact, various reports suggest that this proton therapy space will be dominated by the United States, thanks to its massive investment in the development of therapy centers.

Now coming to the leading players in the space, Hitachi, Ion Beam Applications, Mevion Medical Systems and Sumitomo also deserve a mention. Meanwhile, proton therapy market is growing in manifolds and expects to witness a stellar demand in the coming days.

Varian’s Strong Foothold

Apart from enjoying a dominant market share in conventional radiotherapy, we believe proton therapy also holds significant promise for Varian. This is because the company’s flagship — ProBeam Compact Proton Therapy System — is superior to other external beam radiotherapies available in the markets.

ProBeam precisely locates cancerous tumors, thereby causing lesser side-effects to surrounding tissues. In this regard, Varian’s proton therapy portfolio has products like ProBeam Proton Therapy System, ProBeam Compact Single-Room Proton Therapy Solution, ProBeam Multi-Room Proton Therapy Solution.

However, the company has seen lackluster performance at the proton therapy segment recently. In the last quarter, revenues at the segment were $52 million, down 23% on a year-over-year basis. In the quarter, Varian booked two orders including the Concord Medical Proton Center in Guangzhou, China for $52 million and HCG in India for $19 million. Yet, proton therapy orders grew 94% in the same period, on a year-over year basis.

We believe such developments might help Varian to gain traction in the niche space.

Shares Shine Bright

Over the past six months, Varian outperformed the broader industry in terms of price performance. The company returned 15.1% comparing favorably with the broader industry’s gain of just 6.7%. Also, the current return is higher than the S&P 500’s gain of 7.2% over the same time frame.

Zacks Rank & Stocks to Consider

Varian has a Zacks Rank #4 (Sell).

A few other top-ranked stocks in the broader medical sector are PetMed Express (NASDAQ:PETS) , Luminex Corporation (NASDAQ:LMNX) and IDEXX Laboratories (NASDAQ:IDXX) .

Notably, PetMed Express sports 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.

Luminex represented a return of 6.2% over the last year. The stock has a Zacks Rank #1.

IDEXX Laboratories has a long-term expected earnings growth rate of 20.4%. The stock has climbed 39.2% over a year’s time and has a Zacks Rank #2.

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