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January 2015
© 2015 VARIAN MEDICAL SYSTEMS. ALL RIGHTS RESERVED.
VARIAN MEDICAL SYSTEMS JP Morgan Healthcare Conference -
Dow Wilson, CEO
January 13, 2015
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2 | VARIAN MEDICAL SYSTEMS
Forward-Looking Statements
• Forward-Looking Statements
• Except 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;
the company’s 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™ and
radiographic flat panel detectors, image-guided radiation therapy, stereotactic radiosurgery, filmless X-rays, proton
therapy, and security and inspection, and any statements using the terms “could,” “believe,” “expect,” “outlook,”
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; the impact of 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 in
third-party reimbursement levels; currency exchange rates and tax rates; 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 particle therapy business, challenges
associated with the successful commercialization of the company’s particle therapy business; the effect of adverse
publicity; the company’s reliance on sole or limited-source suppliers; the impact of reduced or limited demand by
purchasers of certain X-ray products; 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.
2
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3 | VARIAN MEDICAL SYSTEMS
Technology Leader in Growing Markets
• Varian Oncology Systems
– Radiotherapy
– Radiosurgery
– Brachytherapy
• Varian Imaging Components
– X-Ray Tubes
– Digital Flat Panels
– Security & Inspection Products
• Varian Particle Therapy
– Proton therapy
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4 | VARIAN MEDICAL SYSTEMS
TO HELP SAVE
MILLIONS OF LIVES
EVERY YEAR, EVERYWHERE.
OUR VISION:
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5 | VARIAN MEDICAL SYSTEMS
FY15 Focus on Our “Big 5” Strategic Priorities
Go Global
Grow Software and Services
Innovate
Commercialize Protons
Drive Operational Excellence
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6 | VARIAN MEDICAL SYSTEMS
Oncology Systems
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7 | VARIAN MEDICAL SYSTEMS
The Global Economic Cancer Burden
Nations investing more to fight growing cancer burden
*Economic losses from disability and premature deaths. Excludes direct medical costs
Sources: American Cancer Society, Livestrong, World Health Organization
27M New cases
annually by 2050
17.5M Deaths
annually
$895B cancer
cost
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8 | VARIAN MEDICAL SYSTEMS
Source: U.S. Census Bureau
Pe
op
le 6
0 Y
ea
rs a
nd
Old
er
( in
Millio
ns)
Cancer Needs Growing with Aging Populations
0
200
400
600
800
1000
1200
1400
2010 2030
>80% Rise in world
population
over 60
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9 | VARIAN MEDICAL SYSTEMS
10,000+ Linacs Needed
Number of radiotherapy
machines per million people
No machines
Less than 1
5 or less
10 or more
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10 | VARIAN MEDICAL SYSTEMS 10
60% of global installed base
2.8M patients treated annually
7,500 Varian Accelerators
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11 | VARIAN MEDICAL SYSTEMS
Americas Market Drivers in 2015
• North America
- Shift to SRS driving replacements
- Reimbursement helping
- Productivity initiatives/software
- Service growth
• Latin America
- Equipment shortage
- Demand for quality care
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12 | VARIAN MEDICAL SYSTEMS
EMEA Market Drivers in 2015
Aging installed base
• Focus on productivity
Emerging markets
• India, Eastern Europe, Africa
SRS adoption – lung, liver
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13 | VARIAN MEDICAL SYSTEMS
APAC Market Drivers in 2015
Increased use of RT
China (20%), Japan (28%)
Software/Service Expansion
Focus on Value
Service Agreements
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14 | VARIAN MEDICAL SYSTEMS
New Products Drive Growth
45% of FY2014 orders came
from products introduced in
the last 5 years
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15 | VARIAN MEDICAL SYSTEMS
Promising SBRT Results in Lung Study
"Technologies have developed in
the last few years that have
yielded game-changing,
paradigm-shifting approaches,
allowing us to reconsider
how radiation is delivered in
combination with surgery,
chemotherapy, and other
systemic therapies.”
Dr. Robert Timmerman,
UT SW Medical Center
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16 | VARIAN MEDICAL SYSTEMS
Upgrades Create Growth Opportunity
Upgrade
6DOF Couch
RapidArc
MLC / PV
TrueBeam 2.0
OBI
SRS Package
$440M 5-Year Opportunity
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17 | VARIAN MEDICAL SYSTEMS
New Products Accelerating Software Growth
Oncology Software
RapidPlan
InSightive
Analytics
Qumulate QA
Velocity
RapidPlan
$200M 5-Year Opportunity
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18 | VARIAN MEDICAL SYSTEMS
Growing Oncology Services to $1B
• 36% of FY14 OS Orders / 40% of FY14 OS Revenues
• Delivers strong profitability
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19 | VARIAN MEDICAL SYSTEMS
Long Term Oncology Growth Drivers
• Demographics
• Multi-Year Agreements
• Emerging Markets
• Service &
Software
• System
Upgrades
• Aging
Installations
5-7% Annual Growth
Opportunity
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20 | VARIAN MEDICAL SYSTEMS
Imaging Components
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21 | VARIAN MEDICAL SYSTEMS
• X-ray Tubes
• Linear Accelerators
• Workstations
• Flat Panel Detectors
Designs & Manufactures
• Equipment Manufacturers
• Aftermarket Distributors
Sells to
Imaging Components
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22 | VARIAN MEDICAL SYSTEMS
$2.3B Addressable Market
Source: Varian 2014 Market Analysis
Market Product
Medical Imaging
• X-ray Tubes
• Flat Panels
• Software
Industrial Inspection • X-ray Sources
• Detectors
Cargo and Security • X-ray Sources
• Detectors
Imaging Components Market
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23 | VARIAN MEDICAL SYSTEMS
Varian Share in Imaging Components Market
Flat Panel Detector Diagnostic and CT
Tubes
65%
24%
11%
Modality OEMs
Varian
Other
42%
35%
23% Modality OEMs
Varian
Other
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24 | VARIAN MEDICAL SYSTEMS
Imaging Growth Initiatives in 2015
• Grow with current OEMS
• Add new customers in Asia, Brazil
• Extend leadership in tubes, panels with new capabilities
• Expand software offerings
• Focus on industrial market
• Develop/acquire new product lines
$400M Potential incremental
revenues in 5 Years
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25 | VARIAN MEDICAL SYSTEMS
Moving to Expand Imaging Portfolio
• Add image analysis software to
imaging product portfolio
• Offer more complete subsystems
with panels/workstations/software
• Leverage OEM relationships to
accelerate market penetration
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26 | VARIAN MEDICAL SYSTEMS 26
Long Term Growth Drivers - Imaging
• Digital Imaging Transition
• Expanding Product Portfolio
• Service & Software
• Emerging Markets/
New Players
5-7% Annual Market
Growth Opp’ty
7-9% Annual Growth
Opportunity
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27 | VARIAN MEDICAL SYSTEMS
Particle Therapy
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28 | VARIAN MEDICAL SYSTEMS
10 Varian Proton Projects
KFMC-King Fahd
Medical Center
PTC St. Petersburg,
Russia
Cincinnati Children’s
Hospital
Paul Scherrer
Institute
National Taiwan
University (Taipei)
Scripps Proton
Therapy Center
Rinecker Proton
Therapy Center
Georgia PT Center
(Emory)
UT Southwestern
Medical Center
University of
Maryland
Treating patients
Booked orders
Contracted, but not
financed, and not
booked
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29 | VARIAN MEDICAL SYSTEMS
Value of protons - lower complications, costs?
Head & neck cancer study suggests protons could have lower costs through lower complications Dr. Steven J. Frank, M D Anderson
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30 | VARIAN MEDICAL SYSTEMS
Proton rationale – cost efficiency
Proton cancer therapy
may cost the same or
less than other cancer
therapies. MD Anderson breast study using
Medicare reimbursement codes
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31 | VARIAN MEDICAL SYSTEMS
Proton Project Potential
1000 treatment rooms
by 2030
$2.5B by 2030
Source: MEDraysintell
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32 | VARIAN MEDICAL SYSTEMS
Proton Market
0
50
100
150
200
250
300Cumulative Number of
PT Treatment Rooms
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33 | VARIAN MEDICAL SYSTEMS
Long Term Growth Drivers - Protons
• Demand for Optimal
Dose Distribution
• Evolving Technology
– Clinical capability
– Cost efficiency
$1.3B 5 Year
Market Opp’ty
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34 | VARIAN MEDICAL SYSTEMS
Long-Term Growth Opportunities
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35 | VARIAN MEDICAL SYSTEMS
Long-Term Growth Targets
Revenue • OS aiming for mid single digit growth
• IC aiming for mid-to-high single digit growth
• PT aiming for > $250M 6-8%
Gross
Margins
• Maintain at current levels – Service v. Geo
• Pricing pressures mitigated by cost
reductions 6-8%
Operating
Margins
• Proton becomes profitable – more Service
• R&D and SG&A grow slower than Revenue
8-10%
Goal: Drive Operating Earnings Faster Than Revenue
Double Digit EPS Growth