Varian Medical Systems ($VAR) reported yesterday that revenues during its first fiscal quarter jumped 5% from the same period a year ago to $712 million, and net income rose 3% to $98 million. The company cited particularly strong demand in emerging markets for its oncology products, which include equipment for performing radiosurgery and software that physicians can use in treatment planning.
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| Varian CFO Elisha Finney--Courtesy of Varian |
The company said in its earnings statement that orders for oncology products grew at double-digit rates during the quarter, thanks partly to long-term, multimillion-dollar supply agreements the company signed with two large hospital systems. Varian also noted that 52% of its oncology orders came from markets outside of North America.
Varian spent much of last year restructuring its operations, redistributing employees away from mature markets and into growing markets like Brazil. During a Q&A with analysts after the earnings release, CFO Elisha Finney noted that as a result of those efforts, the company was able to reduce its administrative costs slightly and funnel more toward research and development.
Varian invested about 8% of revenues in R&D during the quarter, up from 7% in the same period a year ago. CEO Dow Wilson--who headed up the company's oncology division for 7 years before replacing retiring CEO Timothy Guertin in the fall of 2012--said he sees increasing opportunities to develop medical informatics software for cancer centers. "That's a global opportunity," he said.
Some investors did express concern over Varian's decision to remove $156 million from its reported backlog of orders. Finney explained during the call that the company suffered a larger-than-average number of order cancellations, particularly from small freestanding facilities. Part of the problem is uncertainty over Medicare reimbursement rates, which, if currently proposed rules are adopted, should encourage the use of more advanced procedures, such as stereotactic radiosurgery, Wilson said during the Q&A. Still, "freestanding clinics have been very quiet," he noted. "I think seeing what happens in the final [reimbursement] proposal is critical."
In after-hours trading, Varian shares edged up 63 cents to $82.49.
- here's the earnings release
- read the earnings call transcript here