J.P. Morgan Healthcare Conference
Dow Wilson
Chief Executive Officer
Chris Toth
President, Oncology Systems
January 7, 2019
This presentation is intended exclusively for investors.It is not intended for use in Sales or Marketing.
Forward-Looking StatementsExcept for historical information, this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements
concerning industry outlook, including growth drivers, future trends in cancer incidence and trends in cancer treatment needs, demand, innovation and growth opportunities; Varian
Medical System, Inc.’s (”Varian” or the “company”) future orders, revenues, backlog or earnings growth; future financial results; market acceptance of or transition to new products or
technology such as our Edge® radiosurgery system, TrueBeam®, HyperArcTM, 360 OncologyTM, HALCYONTM, image-guided radiation therapy, stereotactic radiosurgery and proton
therapy, and any statements using the terms “could”, “believe”, “expect”, “outlook”, “anticipate”, ”vision”, “estimate”, “future”, “horizon”, “aiming”, “driving”, “target” or similar
statements are forward-looking statements that involve risks and uncertainties that could cause the company’s actual results to differ materially from those anticipated. Such risks
and uncertainties include global economic conditions and changes to trends for cancer treatment regionally; new and potential future tariffs or a global trade war; the impact of
changes to the Affordable Health Care for America Act (including excise taxes on medical devices) and any further healthcare reforms (including changes to Medicare and
Medicaid), and/or changes to third-party reimbursement levels; currency exchange rates and tax rates; the impact of the Tax Cuts and Jobs Act; demand for the company’s products;
the company’s ability to develop, commercialize, and deploy new products; the company’s ability to meet Food and Drug Administration (FDA) and other regulatory requirements for
product clearances or to comply with FDA and other regulatory regulations or procedures, changes in the regulatory environment, including with respect to FDA requirements; the
company’s assessment of the goodwill associated with its proton business, challenges associated with the successful commercialization of the company’s proton business; the risks
associated with providing financing for the construction and start-up operations of proton therapy centers; the effect of adverse publicity; the company’s reliance on sole or limited-
source suppliers; the company’s ability to maintain or increase margins; the impact of competitive products and pricing; the potential loss of key distributors or key personnel;
challenges to public tender awards and the loss of such awards or other orders; and the other risks listed from time to time in the company’s filings with the Securities and Exchange
Commission, which by this reference are incorporated herein. The company assumes no obligation to update or revise the forward-looking statements in this presentation because
of new information, future events, or otherwise. Reconciliations to GAAP financials can be found in our earnings press releases at www.varian.com/investors.
Medical Advice DisclaimerVarian as a medical device manufacturer cannot and does not recommend specific treatment approaches. Individual treatment results may vary.
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VARIAN CONFIDENTIAL/ PROPRIETARY: DISCLOSED SOLELY FOR IMMEDIATE RECIPIENT ONLY
$2 TrillionGlobal Economic Burden in 2010
$$$24.6 MillionNew Cancer Cases by 2030
10%Cancer Patients That Have Access
To RT in Low Income Countries
> 20,000*Linacs Needed by 2035; Greatest
Need in Low + Mid-Income Countries
80%Global Cancer Burden
in Low + Mid-Income Countries
Global cancer burden
Source: Expanding global access to radiotherapy. Lancet Oncol. Vol 16, Sept. 2015
*8,700 new machines plus 13,100 replacements = 21,800 additional machines needed
50 - 60%Cancer Patients Requiring RT
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Varian today – FY 2018 snapshot
Global leader in radiation therapy
>3M patients touched per year
8,000+ linac installed base
5,000+ unique software customers
~7,000 employees worldwide
Headquartered in Palo Alto, CA
Founded in 1948Varian>50%
Rest of Market
CompanyOverview
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Varian today – FY 2018 snapshot
Installed Base and Market Share
1 Varian market share for Oncology Systems orders and revenue is over 50% based on public company filings.
Q4 FY17 Q4 FY18
7,833
8,057
+224
Varian>50%
Rest of Market
Linac Installed Base Market Share1
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Varian today – FY 2018 snapshot
Varian>50%
Rest of Market
1 GAAP to Non-GAAP reconciliation is disclosed in Varian’s fiscal year 2018 fourth quarter earnings press release and furnished to the Securities Exchange Commission (“SEC”) in a Form 8-K
on October 23, 2018.
Key Financial Metrics
FY 2018 $M Y/Y Y/Y CC
Revenues 2,919 +11% +10%
R&D% Revenue
2348.0%
+11%
Non-GAAP Operating Earnings1
% Revenue517
17.7%+31%
Cash Flow from Operations 455 +14%
Oncology Gross Orders 3,114 +9% +8%
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Varian today – FY 2018 snapshot
1 Software product type includes software services. Total combined hardware and software services revenues of ~$1.35B make up ~45% of total revenues.
$2.9BRevenue Mix+11% (+10% cc) in FY18
Hardware~45%
+13% in FY18
Services~35%
+12% in FY18
Software~20%
+8% in FY18
EMEA~30%
+24% (+18% cc)in FY18
Americas~50%
+7% (+7% cc)in FY18
APAC~20%
+5% (+4% cc)in FY18
Revenues by Product Type1 Revenues by Geography
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Innovation leader in radiation therapyIntegrated hardware and software solutions
Treatment
Delivery &
Imaging
Hardware
makes up
~45% Varian’s
business
BRACHYTHERAPY HALCYON PROTONSTRUEBEAM FAMILY ADAPTIVE THERAPYWorks in progress;
not available for sale
Services
Services make
up ~35%
Varian’s
business
HARDWARE & SOFTWARE SERVICES
Digital
Health
Solutions
Software
makes up
~20% Varian’s
business
TREATMENT PLANNING &
CANCER CARE MANAGEMENT
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Long-term growth and value creation strategy
Global Leaderin Radiation Therapy
Radiation
oncology OISRadiosurgery
Brachytherapy
Radiation
oncology
treatment
planning
Proton therapy
Radiation
therapy
Global Leaderin Multi-Disciplinary,
Integrated Cancer Care Solutions
Interventional
oncology
Surgical
oncology
Diagnostic
imaging
Radiation
oncology
Precision
medicine
Medical
oncology
Generate
insights
Call on all
oncologists
Aggregate
data
Disseminated
insights
Build AI/ML
capabilities
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How we plan to achieve our strategy
Long-Term Growth and Value Creation Strategy
Strengthen
Leadershipin Radiation Therapy
ExtendGlobal Footprint
ExpandAddressable Market
Growth Priorities
High Quality
Care Through
Innovation
Build Software
Services &
Big Data
Expertise
Operational
Efficiency
Optimize Cash
Conversion &
Capital
Structure
Strategic Enablers
We Are Here
Global Leader
in Radiation
Therapy
Global Leader in
Multi-Disciplinary,
Integrated Cancer
Care Solutions
Where We Are Headed
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Executing on long-term growth strategy
• TrueBeam, ARIA, and Eclipse
named 2018 Best in KLAS category
leaders
• Launched Halcyon 2.0 with kV
CBCT imaging
• Acquired Mobius Medical Systems
and humediQ
Recent accomplishments, FY 2018+
Strengthen Leadership in Radiation Therapy
• Nov ’18 - Secured China NMPA
approval for Halcyon
• Acquired leading local distributor in
Taiwan
• Opened new facility in Brazil
• Developed ARIA CCIP (localized)
software to leverage growth in China
• Channel investments fueling growth
via portfolio and geography
ExtendGlobal Footprint
• Acquired Evinance Innovation and
Noona Healthcare to enhance 360
Oncology capabilities
• Launched 360 Oncology multi-
disciplinary tumor board
• Launched Velocity 4.0 with
RapidSphere for the interventional
oncology market
ExpandAddressable Market
11
Cooperative CL Enterprises (COOP)
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Organizing for future growth and successExpanded roles for Varian business leaders
• Focus on driving further growth
• Expand Proton Solutions offering
• FlashForward
• Acquisition
Integration Office
• Strategic Program
Management
Kolleen KennedyChief Growth OfficerPresident, Proton Solutions
• Build SaaS & cloud solutions
• Use informatics to create customer value
• Automation-based services
Corey ZankowskiSVP, Oncology Software Solutions
Chris TothPresident, Oncology Systems
• Build on the strong foundation of our core business
• Continue to aggressivelydrive global growth
• Enhance customer satisfaction
• Expand into new cancer care modalities
• Customer
Experience
initiatives
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Varian Innovation
Winning in the Market
VARIAN CONFIDENTIAL – INTERNAL USE ONLY
Varian radiotherapy systems
TrueBeam® Family
>30% revenue growth in FY18
>2,000systems installed
Halcyon™ ProBeam®
182orders since launch
~40%greenfield sites
70rooms
>25%lower vault cost
with ProBeam® 360FOR INVESTOR USE ONLY14
VARIAN CONFIDENTIAL – INTERNAL USE ONLY
Adaptive Radiotherapy
• Artificial Intelligence (AI) driven
• Multimodality imaging at the console− MR, PET, CT
• 4D prescriptions
• Designed to image and treat fast− Patient comfort
− High image quality
• Uncompromised delivery hardware
Note: Adaptive is works-in-progress and not available for sale in any market
Adaptive solution forevery patient
Voice of the Customer
✓Standard treatment slot
✓Multimodality imaging at the console
✓No compromise on treatment delivery
✓ Justifiable ROI (Affordability)
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VARIAN CONFIDENTIAL – INTERNAL USE ONLY
AI-driven multimodality adaptive therapyAll modalities – every patient – without compromise
MR Linac PET Linac CT Linac
Multimodality views exist today from same dataset outside of healthcare
Varian is bringing this to the treatment room
Varian AI-driven multimodality adaptivetherapy system
Note: Adaptive is works-in-progress and not available for sale in any market
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Needs growing fastest outside U.S. and EU
17
People 60 years and older (in millions)
BRIC + 97%
20202010 20302015 2025
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Source: Expanding global access to radiotherapy. Lancet Oncol. Vol 16, Sept. 2015
ROW + 81%
NA + 58%
EU DEVELOPED + 37%
319 517
313 618
65 103
75 103
VARIAN CONFIDENTIAL – INTERNAL USE ONLY
Varian leadership in China & India
~ 10%
375 720
< 25%
~ 56%
73
RT License expansion (Cat A/B)
Growing private RT market
Oncology software localization
China2nd Largest
Market
~ 20%
109 220
< 20%
~ 60%
73
Ayushman Bharat (“Modicare”)
Growing private RT market
India4th Largest
Market
Source: Internal data; Chinese market share is based on public tender wins per the Ministry of Commerce of the People’s Republic of China
Revenue CAGR (2013 2018)
Installed Base (2013 2018)
RT Utilization
Market Share (Orders) in FY18
Customer NPS
Key Growth Drivers
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VARIAN CONFIDENTIAL – INTERNAL USE ONLY
Changing clinical practice addressing growing cancer burdenIncreasing demand for Varian technology
Source: Internal estimates
*Estimated radiotherapy utilization of ~60% in the U.S. in 2016 and 2030; outside the U.S., growing from 25% to 35%
SRS/SBRT utilization growing worldwide and driving demand for SRS/SBRT equipment
Patients treated with radiotherapy expected to more than double outside the U.S., driven by cancer burden and increased utilization*
Fractions demanded growing faster outside the U.S. and driving demand for high-quality radiotherapy
By 2030:
0
2
4
6
8
10
U.S. International
2030
2016
Patients Treated with RT (M) Fractions Demanded (M)
0
50
100
150
U.S. International
2030
2016
0%
20%
40%
60%
U.S. International
2030
2016
SRS/SBRT Utilization (%)
100%+ Increase in WW Fraction Demand by 2030
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MEDICAL AFFAIRS | VARIAN CONFIDENTIAL – INTERNAL USE ONLY
Innovative solutions addressing market demandClinical realization to market impact
~$9B
Installed base
replacement opportunity*
TrueBeam® Halcyon™
~$3B
Software portfolio opportunity*
Eclipse™
Tx PlanningVelocity®
Image MgmtARIA®
Oncology EMR360 Oncology™
Care Coordination
New techniques / standards of
care driving replacement cycle
with TrueBeam® & Halcyon™
Disrupting our market with
data, software, services and
technology
Learning curve reduced and
quality increased with machine
learning RapidPlan™ software
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*Based on company estimates
VARIAN CONFIDENTIAL/ PROPRIETARY: DISCLOSED SOLELY FOR IMMEDIATE RECIPIENT ONLY
Varian competitive replacements – FY13 to FY18Winning in both hardware and software
~30%
~30%
~40%
HardwareDeliverySystems
SoftwareInformation
Systems
SoftwarePlanningSystems
Replacements
of competitive
units
CompetitiveReplacements
>$1Borders
Hardware Delivery SystemsCompetitive replacements of
linacs, CyberKnife,TomoTherapy, & GammaKnife
>350units
Oncology Software SystemsCompetitive replacements of
information systems, treatment planning systems,
& stand-alone software
>650units
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Demographic shift driving increasing cancer burden & care needs
Varian innovation winning in a growing marketKey takeaways
1 Patient & clinician driven portfolio has never been stronger
2
3 Installed base fueling growth through replacement & expansion opportunity
4 Varian competitive replacement wins complementing market growth
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Varian Leading
FlashForward
720,000
400 cGy
2,400 cGyTrueBeam
Clinac
ProBeam
Flash
720,000 cGy
0 cGy 100,000 200,000 300,000 400,000 500,000
Per min
10,000 cGy
Flash therapy delivers ultra high dose rates
Flash Range
40 Gy/sec – 120 Gy/sec
Note: Flash therapy is under preclinical research. It is not available for clinical use and there is no guarantee of future commercialization
Source: Varian internal data on machine performance
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Note: Flash therapy is under
preclinical research. It is not available
for clinical use and there is no
guarantee of future commercialization
Flash spares normal tissue while maintaining tumor control
Source: Varian proprietary data
1Findings from published pre-clinical research suggest Flash increases normal tissue sparing compared to conventional dose rate and that tissue sparing was improved with increasing dose rates.
Published pre-clinical research re: tissue sparing includes Brain (Montay-Gruel et al Radiotherapy and Oncology 2017; Montay-Gruel et al Radiotherapy and Oncology 2018); Lung (Vozenin et al Science
Translation Medicine 2014), Gastrointestinal (Schuler et al IJROBP 2016), and Skin (Vozenin et al Science Translation Medicine 2014; Vozenin et al Clinical Cancer Research 2018).
Findings from published pre-clinical research suggest tissue sparing was improved with increasing dose rates. Published pre-clinical research re: tumor control includes Breast, Head & Neck and Lung
(Vozenin et al Science Translation Medicine 2014), Glioblastoma (Montay-Gruel et al Radiotherapy and Oncology 2015), and Squamous Cell (Vozenin et al Clinical Cancer Research 2018).
Normal tissue and tumor control studies underway in 800 mice and 200 rats (Lung, Brain, Head & Neck cancers)
Varian studies building on published pre-clinical research1
Flash reduces differential gene expression normally observed with radiation therapy
Tumor control was the same or better with Flash compared to conventional dose rate
Appro
xim
ate
tum
or
volu
me (
mm
^3)
Control (Untreated)(n=12)
20
40
60
0Proton Flash
(n=24)ConventionalProton (n=24)
50
30
10
70
Lung Cancer Tumor ControlCincinnati Proton Therapy Center
Normal Lung Tissue (24 hr)
Conventional Protons
Flash Protons
1,294
Up-regulatedgenes
37
639
40
Down-regulatedgenes
25
FlashForward™ Consortium
Sylvester Comprehensive Cancer Center
New YorkProton Center
Paul Scherrer Institute
Holland PTCParticle Therapy Centre
University College London
CincinnatiProton Therapy Center
Universityof MarylandDept of Radiation Oncology
EmoryProton Therapy Center
Proton International at UAB
The ChristieProton Therapy Centre
Penn Medicine
Danish CentreFor Particle Therapy
VU Medical CenterAmsterdam
FlashForward™ Consortium
Note: Flash therapy is under preclinical research. It is not available for clinical use and there is no guarantee of future commercialization
James M. Metz, MDProfessor and Chair
Radiation Oncology
Executive Director, OncoLink
Penn Medicine
There are very few
technologies that come
along that offer a
potential for
paradigm shift –Flash offers that
potential.
“
”
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In summary, we are…
…Driving toward our vision of a world without fear of cancer
Delivering on our long-term growth and value creation strategy
Growing our net installed base
Extending our market-leading, best-in-class product portfolio
Becoming a global leader in multi-disciplinary, integrated cancer care solutions
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