VARIAN MEDICAL SYSTEMS

2016 ANNUAL SHAREHOLDER MEETING

Agenda

2015 Financial Overview

Oncology – Focus on Growth

VIC – Challenges & Next Steps

Momentum in Protons

The Future of Radiotherapy

Financial Highlights

Fiscal Year 2015 Results

EPS Non-GAAP

~$4.29

GAAP

~$4.09

Revenue Growth

Constant Currency

6%

As Reported

2%

FY15 Gross Orders Q4’15 FY’15

Oncology Systems

Constant Currency 5% 6%

Reported Flat Flat

Imaging Components* (30%) (16%)

Particle Therapy ~$140M ~$310M

Fiscal Year 2015 Orders Growth

* Primarily transacted in US Dollars.

Total FY2015 Year-Ending Company Backlog -- $3.5B; up 10%

Oncology FY15 SuccessesGo Global

Constant Currency orders/revenue growth

Great cost containment by global team

Innovation

VitalBeam launch

RapidPlan & InSightive Analytics release

Operational Excellence

Transition to GEO structure

Unity Phase 1a Go Live

Global Procurement and I&W productivity

2015 Price/Mix/FX Impact

Panel prices eroding;

FX helping competitors grab share

Losing $50M panel customer to

insourcing

SIP market freezing; tenders

delayed/stopped

Imaging Components

FY15 Challenges

65%

24%

11% OEMs

Varian

Other

X-Ray Tubes: Units 3% Sales (1%)

Source: Market Share Estimates based on Varian analysis

Flat Panels: Units 2% Sales (7%)

42%

30%

28%OEMs

Varian

Other

Imaging Components

FY15 Successes

Added MeVis/Claymount components

Gained share in tube aftermarket;

VIC team winning in China

Grew orders >10% in industrial tubes/panels

Particle Therapy

FY15 Successes 6 orders booked / $317M

New York, London, Manchester, Baltimore,

Denmark, Holland

4 simultaneous installations underway

Baltimore, Cincinnati, Saudi Arabia, Russia

Cut ProBeam Compact costs

The Future of

Radiation Therapy

Deepak Khuntia, MD,

VP of Medical Affairs

Improving RT Precision, Outcomes: 1995-2000

Beam shaping devices:

MLCs

2000-2005

In-room image

guidance

2005-2010

Partially integrated

systems

2010-2015

Hypofractionation,

Adaptive RT

2015-Future

Integration of Better

Beam Shaping

and Aiming

Novelty IMRT IGRT • Dedicated devices

• Multivendor

environment

• SRS

• SBRT/SABR

• ART

Need for increased

integration and/or

interoperability

Clinical Impact • Head/Neck: improve

saliva / swallowing

• Pelvis: Less bowel

toxicity

• Allows safer

chemotherapy

administration

• Prostate Ca:

Enable dose

escalation: improve

cure

• Reduce traditional

set-up errors

• Increased

complexity

• Decrease

throughput

• Increase safety

concerns.

• Lung Ca SBRT:

improve cure

• Frameless CNS

radiosurgery

• Partial breast

accelerated

irradiation

• Faster, better, safer

treatments

• Global RT:

• Simpler set-ups

• Education &

training

Great Progress

Andrews DW, Scott CB, Sperduto PW, et al. Whole brain radiation therapy with or without stereotactic radiosurgery boost for

patients with one to three brain metastases: phase III results of the RTOG 9508 randomised trial. Lancet. 2004 May

22;363(9422):1665-72.

Brain Cancer Study

ADDING

SRS

IMPROVES

SURVIVAL

Source: Chang JY, Senan S, Paul MA, et al. Stereotactic ablative radiotherapy versus lobectomy for operable stage I non-small-cell lung

cancer: a pooled analysis of two randomised trials. Lancet Oncol. 2015 Jun;16(6):630-7.

SBRT vs. Lobectomy for Operable Stage I NSCLC

Lung Cancer

PATIENTS LIVE

LONGER WITH

RADIOSURGERY

VS SURGERY

Zelefsky, IJROBP, 84, 125-129, 2012

Prostate Cancer

Memorial Sloan Kettering Cancer Center

Prostate Cancer RT: Outcome with and without Image Guidance

Cancer Control Rates Toxicity Rates

IMAGE

GUIDANCE:

IMPROVING

CURE &

REDUCING

TOXICITY

Shaping RT Dose

Reduce Bowel Complications

Cancers impacted:

Prostate Ca

Rectal Ca

Anal Ca

Cervical Ca

Reduce Head & Neck Complications

Complications reduced:

Less dryness of the mouth

Less swallowing problems

Less scarring of joints / muscles

Chopra et al. ASTRO Plenary, San Antonio October 2015.

Gupta et al. Radiotherapy and Oncology. 104:3 (343-348), 2012.

Conventional RT IMRT

Lowers Complications

What’s Coming Knowledge-Guided Oncology | Intelligent Treatment Delivery

Advanced Data Analytics

IMAGE – Not Yet Complete

RapidPlan™: Game Changer

Disease Site Models

Prostate

Prostate (+lymph nodes)

Head & Neck

Lung SBRT

Breast

More Models Coming

KNOWLEDGE-GUIDED ONCOLOGY:

University of Michigan: Spine SBRT Study

Manual RapidPlan

Foy J, et al. An analysis of knowledge based planning for stereotactic body radiation

therapy of the spine [abstract]. Poster presentation at: American Association of

Physicists in Medicine (AAPM) 57th Annual Meeting & Exhibition; July 12-16,

2015; Anaheim, CA.

University of Michigan

Equivalent Quality

Manual Rapid Plan

Time 60-90 min 15-20 min

KNOWLEDGE-GUIDED ONCOLOGY:

High Definition Radiotherapy (HDRT):

INTELLIGENT TREATMENT DELIVERY:

Works in Progress

The Next Big Step

High Definition Radiosurgery

Coplanar RapidArc SRS 4π High Definition SRS

Brain Stem Brain Stem

50% Rx Dose50% Rx Dose

INTELLIGENT TREATMENT DELIVERY:

Works in Progress

Radiation Medicine

Cardiac Arrhythmia

(Atrial Fibrillation)

Research opportunities in radiation

medicine:

Cardiac arrhythmias

Emphysema

Post-thoracic surgery neuropathy

Plantar fasciitis

Depression

Arthritis

NEW FRONTIERS IN

RADIATION ONCOLOGY

Works in Progress

Affordable, Accessible, Quality Care

Cost of Cancer Care in US

30% increase from 2010 to 2020

Average cost for one extra year of life:

1995: $54,100

2005: $139,100

2013: $207,000

Sources: Avalere study, 2015 National Bureau of Economic Research

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

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RT Surgery Chemo(1 year)

Average Cost per Patient

RT: MOST AFFORDABLE

FORM OF CANCER CARE

Conclusion

• Advanced technology is increasing cure rates and

lowering toxicity

• Advanced technology will improve affordability,

accessibility, and quality of radiotherapy

• Radiation therapy utilization could dramatically

increase with new opportunities outside of cancer