j.p. morgan 2018 healthcare...
TRANSCRIPT
Dow Wilson
President and Chief Executive Officer
January 2018
J.P. Morgan2018 HealthcareConference
This presentation is intended exclusively for investors.It is not intended for use in Sales or Marketing.
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Forward-Looking StatementsExcept for historical information, this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements
concerning industry outlook, including growth drivers, future trends in cancer incidence and trends in cancer treatment needs, demand, innovation and growth opportunities; Varian
Medical Systems, Inc.’s (”Varian” or the “company”) future orders, revenues, backlog or earnings growth; future financial results; market acceptance of or transition to new products
or technology such as our Edge® radiosurgery system, TrueBeam®, HyperArcTM, 360 OncologyTM, HALCYONTM, image-guided radiation therapy, stereotactic radiosurgery and
proton therapy, and any statements using the terms “could”, “believe”, “expect”, “outlook”, “anticipate”, ”vision”, “estimate”, “future”, “horizon”, “aiming”, “driving”, “target” or similar
statements are forward-looking statements that involve risks and uncertainties that could cause the company’s actual results to differ materially from those anticipated. Such risks
and uncertainties include global economic conditions and changes to trends for cancer treatment regionally; the impact of changes to the Affordable Health Care for America Act
(including excise taxes on medical devices) and any further healthcare reforms (including changes to Medicare and Medicaid), and/or changes to third-party reimbursement levels;
currency exchange rates and tax rates; the impact of the Tax Cuts and Jobs Act; demand for the company’s products; the company’s ability to develop, commercialize, and deploy
new products; the company’s ability to meet Food and Drug Administration (FDA) and other regulatory requirements for product clearances or to comply with FDA and other
regulatory regulations or procedures, changes in the regulatory environment, including with respect to FDA requirements; the company’s assessment of the goodwill associated with
its particle therapy business, challenges associated with the successful commercialization of the company’s particle therapy business; the risks associated with providing financing
for the construction and start-up operations of proton therapy centers; the effect of adverse publicity; the company’s reliance on sole or limited-source suppliers; the company’s ability
to maintain or increase margins; the impact of competitive products and pricing; the potential loss of key distributors or key personnel; challenges to public tender awards and the
loss of such awards or other orders; and the other risks listed from time to time in the company’s filings with the Securities and Exchange Commission, which by this reference are
incorporated herein. The company assumes no obligation to update or revise the forward-looking statements in this presentation because of new information, future events, or
otherwise. Reconciliations to GAAP financials can be found at http://investors.varian.com/financialstatements and the appendix to this presentation.
Medical Advice DisclaimerVarian as a medical device manufacturer cannot and does not recommend specific treatment approaches. Individual treatment results may vary.
Varian today* – a snapshot
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Global Leaderin radiation
therapy
$399MFY17 cash flow from
operations
$2.7BFY17
revenues
7,833medical linear
accelerators
4,600+software
installs
52%international gross
order mix
65+proton therapy
rooms
~6,500employees
focused
* As of FY17 year-end results
A focused cancer company
Varian Eclipse
users generate
highest scoring
plans in
international
treatment plan
competition
Varian Eclipse
users generate
highest scoring
plans in
international
treatment plan
competition
Spin-off of VarexSpin-off of Varex Varian ranks first in
overall manufacturer,
system, and service
performance in 2017
Survey of Radiation
Oncology Professionals
Varian ranks first in
overall manufacturer,
system, and service
performance in 2017
Survey of Radiation
Oncology Professionals
José Baselga
and Jean-Luc
Butel appointed
to Board of
Directors of
Varian
José Baselga
and Jean-Luc
Butel appointed
to Board of
Directors of
Varian
Halcyon
introduced
FY17 year in review
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NOVEMBER
2016
DEC JAN
2017
FEB MAR APR MAY JUN JUL AUG SEP OCTOBER
2017
Varian named Top Healthcare
Equipment and Services Company
on inaugural “JUST 100” list from
JUST Capital and Forbes
Varian Board of Directors authorizes
repurchase of additional 8 million
shares of stock
Varian honored as one
of the top 100 most
sustainable companies
Varian names
new CFO
Halcyon
introduced
First patient
treated with
Varian HyperArc
high-definition
radiotherapy
Varian installs
Cyclotron at
Georgia Proton
Treatment
Center
Varian publishes
2017 Sustainability
Report
Varian announces Penn
Medicine treats world’s first
patient on Halcyon system
Eclipse™
Treatment planning system
RapidPlan™
Knowledge-based planning software
Calypso®
Real-time tracking technology
Edge™ SystemFull-body radiosurgery platform
Halycon™
Image-guided IMRT treatment platform
TrueBeam®/VitalBeam™
Trilogy®/Clinac®/UNIQUE™
Treatment procedures with ease, speed and accuracy
Varian BrachytherapyProduct suite for planning and delivery
ProBeam®
Proton therapy systems
Radiation
oncology OISRadiosurgery
Brachytherapy
Radiation
oncology
treatment
planning
Proton therapy
Radiation
therapy
Strengthening leadership in radiation therapy
ARIA®
Oncology information system
InSightive™
Oncology analytics
Radiation Therapy Market*:
~$5B in 2017 growing ~4% CAGR to ~$6B in 2022* Based on company estimates
* and industry reports and data
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HyperArc™
High-definition radiotherapyMulti-Criteria Optimization (MCO)Enhanced control of plan optimization
Graphics Processing Unit (GPU) SupportFaster dose calculation and plan optimization
Radiation therapy global need and market opportunity
The world has ~11,700 linear accelerators and ~2,100 cobalt teletherapy units*
The greatest need is in low- and mid-income countries, where
ONLY 10% OF PATIENTS have access to radiation therapy
But the world needs 20,000+ additional linear accelerators by 2035**
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HALCYON ENABLES DELIVERY OF WORLD-CLASS CARE
in both mature markets and resource-constrained environments
There is a shortfall of human resources to MEET THE DEMAND
* IAEA database (retrieved Dec 2017)
** Expanding global access to radiotherapy. Lancet Oncol. Vol 16, Sept. 2015; includes new machines and replacements
Cleared
In-process
No clearance
required
Halcyon gaining traction globally
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• Clearance in
120 countries
• New regulatory
approvals in
Japan, Brazil and
Taiwan
• 50 orders in 16
countries*
• 64% mature vs.
36% emerging
• >40% new sites
* As of FY17 year-end results
** Countries are defined as mature or emerging based on the IMF World Economic Outlook Database
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Early adopters exploring multiple areas of clinical development
• Treating more patients per day without additional resources
• Improving plan dosimetry with Varian’s latest beam shaping technology
• Utilizing Halcyon in a single vault clinic
Halcyon continuing to ramp in the market
Regulatory pathways opening up additional markets
• Japan, Brazil, India, and Taiwan import clearances achieved in Q1
• Clinical data accrual underway in China for regulatory approval process
Robust product evolution to be showcased in 2018
• More advanced: kV CBCT imaging and adaptive radiotherapy
• More accessible: Lower price configurations with simplified feature sets
21ProBeam
Sites*Treatment Rooms*
Operational Centers Centers Under Development
68
ProBeam proton therapy extending global footprint
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* As of FY17 year-end results
ARIA Qin: software localization to leverage growth in China
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ARIA Qin
• Built-in collaboration with key
opinion leaders in China
(Beijing Cancer, Shandong
Tumor)
• New UI optimized for local
workflow and patient
throughput
• Dedicated Engineering team
based in Beijing
Varian signs MoU with Ping An China to expand cost-effective and high-quality cancer care
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Ping An Insurance
• World's largest insurer, worth approximately
US$200B as of December 2017
• Business scope includes developing
software and network information
technology and providing services to
healthcare providers
• Significant investment in cloud technology,
artificial intelligence, etc.
Joint mission
To improve the digitalization and understanding of the
entire cancer life cycle, covering prevention, detection,
diagnosis, treatment, rehabilitation and palliation
Strategy
To investigate the use of artificial intelligence, cloud
computing and big data technologies to deliver high
quality and cost-effective cancer care to a far greater
number of people in China, close to where they live
Long-term growth and value creation strategy
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Global Leaderin Radiation Therapy
Radiation
oncology OISRadiosurgery
Brachytherapy
Radiation
oncology
treatment
planning
Proton therapy
Radiation
therapy
Global Leaderof Multi-Disciplinary,
Integrated Cancer Care Solutions
Interventional
oncology
Surgical
oncology
Diagnostic
imaging
Radiation
oncology
Precision
medicine
Medical
oncology
Generate
insights
Call on all
oncologists
Aggregate
data
Disseminated
insights
Build AI/ML
capabilities
Long-term growth and value creation strategy
Global Leaderof Multi-Disciplinary,
Integrated Cancer Care Solutions
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Interventional
oncology
Surgical
oncology
Diagnostic
imaging
Radiation
oncology
Precision
medicine
Medical
oncology
Generate
insights
Call on all
oncologists
Aggregate
data
Disseminated
insights
Build AI/ML
capabilities
Expand Addressable Market*to Patient-Centered Care Coordination
$2.0B
$5.3B
$6.0B
$6.3B
20%+ $12.3B
$7.3B
Care Coordination
Radiation Oncology
2017 2022
~4%
* Based on company estimates and industry reports
Longitudinal patient story:
Retrospective to prospective assessment14
360 Oncology: knowledge-guided, patient-centered oncology workflow
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Medical
Oncology
Interventional
Oncology
Surgical
Oncology
Radiation
Oncology
TreatmentStandard of Care
Short-Term
Follow-up
Long-Term
Follow-upDiagnose
Patient Survivorship
Imaging Informatics
Treatment Response Assessment | Longitudinal Follow Up | Radiomics15
Building a cancer care operating system
ClinicalDecision Support
Tumor BoardClinical Insights Guidelines
Precision Medicine
Intelligent Clinical Workflow
Physician CentricAdaptive
Intuitive and Guided
Team-BasedCoordinated Care
CollaborationCare Paths | Navigation
Care Settings
PatientEngagement
Patient OutcomesSurvivorship | Education
Communication
Analytics
Clinical | Operational | Financial | Contextual Insights | Predictive Models | Benchmarking
Learning experience from first customers
Genesis Care UK (UK)
• Integrated with 3rd party record and verify (R&V) system for operational insights on RT care delivery
• Focusing on data interoperability to create an integrated clinical workflow from disparate data sources
Cone Health (US)
• Implemented 360 Oncology multi-disciplinary tumor board (MDTB) application for neurooncology tumor boards
• Neurosurgeons, neurooncologists, radiation oncologists and other team members determining combined modality treatment for their patients
• Prior to 360 MDTB, multiple systems were in use for this type of review
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Positive early customer experience with 360 Oncology
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Positive early customer experience with 360 Oncology
Conference list with summary
info prepared manually
Brief patient summary
prepared manually Brain tumor conferenceOne tumor board worth of
leftover printouts
Before
Comprehensive care management system to prospectively discuss patients and make collaborative, knowledge -guided
decisions via one platform
With 360 Oncology
Building momentum in cancer care coordination
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Continually expand 360 platform capabilities
(Clinical Decision Support, Imaging, Analytics)
Build enterprise and SaaS channel capabilities
Measure and publish real-world evidence for 360
Oncology applications
Pursuing key opinion leader cancer center adoption of 360 Oncology
Evolving the enterprise software sales model
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20%
20%
20%
20%
20%
Identify and
cultivate KOL
opportunities
Demonstrate
solution value
Consult
and design
the solution
Prepare and present
the proposal
Deliver and
manage
customer
success
RO Leader
Cancer Center
Director
C-Suite
IT/C
IO
Enterprise software channel
20% - 30% of
opportunities
$
100% of
opportunities
$$
50% - 60% of
opportunities
$$$
Key elements for success
Growth priorities and strategic enablers
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We are here
Global Leader
in Radiation
Therapy
Global Leader of
Multi-Disciplinary,
Integrated
Cancer Care
Solutions
Long-Term Growth and Strategic Value Creation Strategy
Strengthen
Leadershipin Radiation Therapy
ExtendGlobal Footprint
ExpandAddressable Market
Growth Priorities
High Quality
Care Through
Innovation
Build Software
Services &
Big Data
Expertise
Operational
Efficiency
Optimize Cash
Conversion &
Capital Structure
Strategic Enablers
Where we are headed
Our promise
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People powering victoriesImagine a world without fear of cancer. We do, every day. We innovate new technologies for treating cancer and for connecting clinical teams to advance patient outcomes. Through ingenuity we inspire new victories and empower people in the fight against cancer. We are Varian.