Varian bids $35.5 million for software oncology firm

Zmed products augment radiation planning

Varian Medical Systems, a leading manufacturer of integrated radiotherapy systems for treating cancer, has agreed in principle to acquire Zmed, a fast-growing supplier of radiation oncology software and accessories. Under the terms of the pending agreement, announced Oct. 13, Varian will pay $35.5 million for the Ashland, MA, company.

"It's a win-win situation for Varian, for Zmed, for our respective customers, and ultimately for cancer patients, who will have the benefit of better technology," said Spencer Sias, director of corporate communications and investor relations for Varian in Palo Alto, CA.

The addition of Zmed would add a leading 3D ultrasound imaging and patient positioning system for radiation oncology. One of Zmed's key products is SonArray, an advanced, high-precision patient positioning platform designed for intensity-modulated radiation therapy. The system has an installed base of about 100, according to Sias.

Zmed also brings to the table its Linac scalpel system for stereotactic radiosurgery and fractionated stereotactic radiation therapy. The system was designed to precisely and safely treat intracranial lesions.

"We haven't had these capabilities, nor did we have an ultrasound imaging product," Sias said. "They move us in the direction of being able to equip radiation oncology clinics to handle a broader case mix."

Varian also acquires Zmed's line of servers and software that are used to store, access, transfer, and review diagnostic images. They are expected to enhance the image management function of Varian's Varis Vision software product. Varian predicts that Zmed products, sales of which have increased about 60% during each of the past three years, will add up to $18 million in annualized revenues during the first year following completion of the acquisition.

"Zmed has been growing rapidly," Sias said. "The acquisition allows Varian to put Zmed's products into a worldwide sales and service network. Through this agreement we can help the Zmed technology penetrate the market more rapidly."

Varian said that once the deal is finalized, probably in December, Zmed would be folded into its oncology systems business. Zmed operations will remain in Massachusetts, however. Marc Buntaine, president and CEO, will continue to head Zmed, though it has not been determined what ultimately will become of the Zmed name. No layoffs are planned for Zmed's 30 employees. Varian, which has 2900 employees, is "thinly staffed," according to Sias.

"Zmed products have typically been sold as accessories," he said. "Now, there's an opportunity to make their products part of new system sales."

Buntaine agreed, calling the deal an exciting opportunity for Zmed to integrate its tumor targeting and stereotactic products into a comprehensive radiation oncology system.

"Through our Z-Scape image server, we'll provide improved access to patient image files for diagnostic viewing, treatment planning, and connectivity in the clinical setting," he said.