Varian unifies medical lines, targets for growth

Despite a buffeting by the winds of recession and cost-control,the medical equipment business sails in the right general direction.The business remains profitable for the most part, and as theU.S. population ages, it faces an upbeat future. Varian Associates,a supplier of x-ray tubes and x-ray linear accelerators for cancertherapy, has tested the wind and set its ship on this course.

Varian has unified its radiation oncology and x-ray tube business(formerly Eimac) into a single Health Care Systems group. The$1.4 billion Palo Alto, CA, conglomerate seeks ways to build itsmedical equipment business through acquisition, technical partnershipsand internal development.

Although Varian remains in the defense and semiconductor businesses,the firm hopes to become less identified with these areas andrecognized more as a high-technology medical equipment supplier.

"Being identified as a health-care company will help usmore than a billing as a defense company with (that industry's)declining sales, or a semiconductor company with its incrediblyvolatile market situation," said Bill Bucy, senior publicrelations representative. "We look at demographics and atwhat we do well. That (health care) is where our growth will be."

Varian's medical sales last year earned 26% of the company'stotal sales and 50% of its profit. Defense products, on the otherhand, formed 11% of sales revenue and 8% of profits; semiconductorproducts took in 25% of sales but only 14% of company profits(see graphs).

The x-ray tube business adds about $100 million in annual salesto Varian's oncology products, raising the total for Health CareSystems to approximately $350 million, Bucy said.

Varian will use three major criteria in choosing partners ordeveloping new technology in Health Care Systems:

• Other companies must have leading-edge technology;

• Varian must add value to the product; and

• Varian will keep its focus on medical equipment.

"We are not going to be out looking at disposables, forinstance. But a company that can sterilize those disposables aftertheir use would fit with us," Bucy said.

Varian is the leading supplier of oncology systems, ahead ofthe major medical equipment vendors such as Siemens, Philips,GE and Mitsubishi, the company said. While not providing specificmarket share statistics in oncology, Varian indicated that thebusiness of its next largest competitor, Siemens, was less thanhalf of its position in that market.

Oncology combines sales of linear accelerators and therapysimulators.

Varian introduced a stereotactic-guided cancer treatment systemlast month using linear-accelerator-generated, high-energy x-raysfor both fractionated therapy and radiosurgery. The Clinac 600SRwill compete against the nuclear-based Gamma Knife radiosurgerysystem manufactured by Elekta of Sweden.

Varian is also the leading independent supplier of x-ray tubes,Bucy said. Over half the installed mammography systems and a quarterof CT scanners worldwide use Varian tubes, the company claims.Varian's most recent tube developments include two high-heat-capacityCT tube series for use in helical scanning: GS 5000 (5 millionheat units) and GS 3000 (3 million heat units).

X-ray tubes are supplied to medical imaging OEMs, includingToshiba, Hitachi, Shimadzu, Elscint, Fischer and Lorad. Varian'sOEM supply business makes up 60% of its tube sales, with the restgoing to replacement tube distributors.

Varian Canada Microwave Products, which manufactures an upgradekit for CGR (now GE) mammography systems, will not be combinedinto the new Health Care Systems unit because most of its businesslies outside of medical, Bucy said. Health Care Systems will likelyprovide sales and marketing support for Varian Canada's medicalproducts, he said.