Medical devices maker Varian Medical Systems,Inc ( VAR ) has forged a three-year agreement with Toshiba Medical Systems to supply medical imaging components to the latter. The value of the deal is estimated at $515 million.
Varian supplies X-ray tubes and digital detectors for X-ray imaging in medical, dental, veterinary, scientific and industrial applications. These products are part of the supply agreement for integration into Toshiba's imaging equipment for the global market. Per the contract, Toshiba will book orders with Varian across the period of the agreement.
The medical imaging market comprises various imaging modalities such as X-ray, SPECT (single-photon emission computed tomography), magnetic resonance imaging (MRI), computed tomography (CT) and others. Particularly, CT and nuclear imaging reflect highest growth potential in the near term.
The global medical imaging equipment market is poised for significant growth, driven by factors like aging population and introduction of various technologically advanced products.
Deals such as the one with Toshiba reflect Varian's focus on gaining foothold in high-potential markets, particularly in the emerging markets of the Asia-Pacific. This falls in line with the company's expectation of the greater part of its growth coming from outside the saturated markets of North America and Europe.
The collaboration with Toshiba is expected to boost Varian's portfolio through combined expertise in developing new product technologies for the imaging market. Such ventures also promise reduction of costs while simultaneously improving the quality of imaging equipments.
Varian anticipates more such deals in the near term as and when the market begins to consolidate. It recently announced an agreement with the Algerian Ministry of Health (MOH) to provide each of the latter's six cancer treatment centers with $51 million worth of advanced technology for radiotherapy and radiosurgery. Further, Varian has also agreed to establish a parts depot in Algeria that will help access its system components and tools as and when needed by the treatment centers.
Currently, Varian carries a Zacks Rank #3 (Hold).
Investors interested in the medical instruments industry can look at better-ranked stocks like Cepheid ( CPHD ) and Natus Medical Inc . ( BABY ), both carrying a Zacks Rank #1 (Strong Buy), and Echo Therapeutics, Inc. ( ECTE ) carrying a Zacks Rank #2 (Buy).