Varian Medical Systems, Inc. (VAR)

October 04, 2011 7:30 am ET


Lester D. Boeh - Vice President of Emerging Businesses and Vice President of Oncology Systems Security & Inspection Business

Unknown Executive -

Dow R. Wilson - Chief Operating Officer

Spencer R. Sias - Vice President of Corporate Communications & Investor Relations

Kolleen T. Kennedy - Senior Vice President and President of Oncology Systems

Timothy E. Guertin - Chief Executive Officer, President and Executive Director


Amit Bhalla - Citigroup Inc, Research Division

Vivian Cervantes - Kaufman Bros., L.P., Research Division

Anthony Petrone - Jefferies & Company, Inc., Research Division

Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division

Unknown Analyst -


Timothy E. Guertin

Good morning, everybody. I guess the mics are working. Sorry about my voice. I've had about 10,000 hours of conversations with people in the last 2 days, so it's slowly going away. So let me do some introductions. As you've probably read from the press release, we've made some organizational changes. We promoted Dow Wilson to be -- and that is Dow right there, to be Chief Operating Officer for the company. So the business units will be reporting to Dow and -- the corporate operations and Dow will, of course, continue to report to me. Kolleen Kennedy, who is the Head of our Customer Support Operations, it's about a $600 million business. Kolleen is sitting right here, will be Head of the Oncology Business Unit. Lester Boeh, who is right here, is present, and he is the Head of our Merchant Businesses. And these folks will all be talking to you today. In addition, we have Pat Joda with us. Pat, say hi. Pat will be replacing Kolleen in the Services business. We didn't talk a lot about Pat, but Pat came to us from GE a few years ago and he ran our operations for our Oncology Systems for a number of years and lately has been the Head of the Engineering Operations so he is well positioned and highly experienced executive.

So we're glad we have a much deeper bench I think than we've ever had before as a company and this is very nice to see. So now I'm going to let all of this deep-bench talk to you directly. And so with that, we'll begin with Dow.

Dow R. Wilson

Good morning, everybody, and welcome to Miami and ASTRO. Maybe just anecdotally before getting started, we are going to be going over to the booth a little bit later this morning. I think that it has been a very good ASTRO. Customer response has been terrific. The booth has been packed as you'll see this morning. We've been very, very busy, so at least good news from the show is coming out of ASTRO. Our sales team is bullish. I haven't seen attendance figures yet, but gut feel is that they're probably up a little bit. I think Miami is very easy for a number of our Latin American and European customers to get to, so I expect that population in particular will grow this year at ASTRO.

Just to take you through the radiation oncology story here a little bit, we're going to review some of the big trends. We see go through a number of the product initiatives that we're announcing here at the show and talk about some of the trade momentum we have with our product line. And then Kolleen will wrap up by giving you a view of some of the things that are happening in our service business.

We've been talking over the last several years about the trends in stereotactic radiosurgery and stereotactic body radiotherapy. This is a survey from some time ago, SD2 predicting 108% increase in SRS utilization for brain cancer treatment and a 255% increase in extracranial treatment over the next decade. This was actually published a couple of years ago and sure enough, when you kind of go back and look at least what we're seeing through the end of 2010, the percent of physicians that are doing SBRT in the United States is rising steadily. So just a few years ago, we were kind of in that 10% to 20% of our physician customers who are using SBRT as an application in their clinic and we're seeing that change dramatically. And today, over 2/3 of our customers are using SBRT in their clinic in a variety of applications. You can see here that lung is the big one. We've been talking about this for some time. I think it's still very new, I think we're in the first or second inning of lung cancer, but more and more people are starting to do lung SBRTs as a clinical initiative in their programs. But you can see as well that SBRT is getting play in spine, liver, pancreas, prostate and beyond.

So I think we're going to continue to see this trend. This trend is very much what is behind everything that we have put in TrueBeam. So at least as we have conceptualized that product, we are really developing it with these trends in mind, take advantage of the technology that we need to really execute on the highest quality SRS and SBRT.

Now clearly we're taking a look at disease site back. You're going to hear this throughout the morning, both here and over at the show. I think for the first time, we actually have part of our booth dedicated to kind of the disease site view, whether it be lung, liver, breast, prostate in the booth. And we're really trying to look across our product line, be it treatment delivery, treatment planning or information systems software and how we can do a better job at solving the clinical problems at a disease-site focus.

There's a number of innovations that you'll hear about. One that we're very excited about is we're being the high-intensity mode, sometimes referred to as flattening filter free, to our install base product. So this is an upgrade that we’ll sell to the Trilogy and Clinac iX install base, very excited about that. As well, we continue to have upgrade offers for regulatory recapability for all the motion management, Gated RapidArc, and the new Calypso system that we have acquired as of yesterday to the Clinac. So innovation continues on that install base. It continues to be a very important product for us in the U.S. and especially outside the U.S. And we're going to keep focusing on innovation for that product line as means of communicating to our customers, our commitment to that product.

And then on the software and systems side, we continue to invest very heavily in workflow and especially from the point of view of patient safety and making sure that we can deliver the highest reliable system across all of the accessories and components and a good radiation therapy clinic for our customers, and help them achieve that while being as productive as possible. And I think really without argument, we're seeing this in a big way in our install base. We're getting a lot of comments at the booth said, “Okay you had integrated your technology and your products before, but what we're seeing from you today is very -- you've integrated the workflow across these product lines.” And I think what we're really seeing is kind of that next extension of what integration means that's been in terms of our sales strategy, a hallmark for the last couple of years. And I think we're even putting one more lap on the competition in terms of our ability to differentiate on this integration attribute the way we've integrated the workflow.

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