Varian Medical prepares entry to proton therapy market

January 5, 2007

Varian Medical Systems has agreed to pay $30 million to acquire privately held Accel Instruments, a supplier of proton therapy systems for cancer treatment and scientific research instruments. The acquisition, which calls for Varian to assume Accel's debt of about $10 million, will bring Varian a superconducting cyclotron that accelerates protons that can be siphoned off and channeled into treatment rooms. Varian has the rest of the needed technology, according to Spencer Sias, vice president of corporate communications and investor relations.

Varian Medical Systems has agreed to pay $30 million to acquire privately held Accel Instruments, a supplier of proton therapy systems for cancer treatment and scientific research instruments. The acquisition, which calls for Varian to assume Accel's debt of about $10 million, will bring Varian a superconducting cyclotron that accelerates protons that can be siphoned off and channeled into treatment rooms. Varian has the rest of the needed technology, according to Spencer Sias, vice president of corporate communications and investor relations.

"Varian already sells treatment planning software for proton therapy," he said, noting that the company has product offerings in image guidance and cancer informatics. "What we are adding to our proton therapy capability will allow us to offer a delivery system that works with all of this software and other accessories that we already have."

The time is right for Varian to make this move, he said. Customers have been asking the company for proton therapy capabilities to supplement existing radiotherapy systems.

Accel customized a 250 MeV (million electron volts) proton accelerator for proton therapy at the Paul Scherer Institute outside Zurich, Switzerland. The company has begun another such installation at the Rinecker Proton Therapy Center in Munich. Varian executives hope to complete it in late 2007. The company has also contracted with Michigan State University to build a 250 MeV cyclotron designed by the MSU's National Superconducting Cyclotron Laboratory. The accelerator will be used in cancer treatment.

But Accel has a much broader base than just proton therapy, serving as a supplier of accelerator, magnet, and beam-line systems. With its acquisition, Varian will obtain specialty linear accelerators and other instruments, including superconducting magnets and vacuum and cryogen systems addressing areas outside of proton therapy. Varian plans to integrate them into its portfolio, Sias said.

The deal for Accel, which is based in Bergisch Gladbach, near Cologne, Germany, and which employs 250 workers, is expected to be complete by the end of this month, pending regulatory approvals.

Varian expects to build this technology into an annual revenue stream of several hundred million dollars. Doing so, however, will take some time. In fiscal 2007, Varian estimates the acquisition will add annualized revenues of approximately $30 million. Operations are expected to reduce company-wide earnings in the year ahead, be neutral the next year, and accretive thereafter. The business will report to Varian vice president Lester Boeh, who manages the firm's portfolio of emerging businesses.

Accel has developed a unique scanning beam technology ideal for intensity-modulated proton therapy, he said. This technology is well-suited to the kind of digitally controlled automated beam shaping that Varian has in mind for its proton therapy offering, according to Sias.

Because protons have an electrical charge, they can be focused to a pencil-thin beam that delivers more dose to targeted tissues and causes less collateral damage than standard photon radiotherapy. Whereas conventional high-energy beams pass through the patient's body, the energy built into proton beams can be calculated so most of the beam ends at the tumor. This highly targeted therapy reduces short- and long-term side effects by reducing damage to surrounding healthy tissue. Consequently, proton therapy is particularly appealing in pediatric cases. It has also proved useful in the treatment of very large tumors, ocular tumors, or tumors adjacent to very sensitive healthy tissue, such as critical regions of the brain and major arteries.

Experts in radiation oncology cited by Varian estimate that about 10% of cancer patients could benefit from proton therapy. Access to this technology is limited, however, due to the high cost of systems and treatments, which are many times more expensive than standard photon radiotherapy. Only about 30 proton therapy centers are either operating or under construction worldwide. Varian strategists plan to do something about this.

Accel's cyclotron technology could serve as the foundation for the development of more compact and less costly proton therapy systems, Sias said, ones that could fit in small, even single-room centers, as well as large, multiroom facilities. Typically proton therapy has required sprawling facilities with hundred million dollar price tags. Future generations of the Accel technology could cost much less.

"The solution is to reduce the number of rooms in these centers and take the cost out of the accelerator using Accel's superconducting technology, making it smaller and more affordable," Sias said.