A Review of Our Growth Strategies Investor Meeting June 21, 2016

Transcription

1 1 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY A Review of Our Growth Strategies Investor Meeting June 21, 2016

2 Forward-Looking Statements Forward-Looking Statements Except for historical information, this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Statements concerning industry and market outlook, including growth drivers and future market estimates; the company s future orders, revenues, backlog, earnings growth and other financial results; market acceptance of or transition to new products or technology; the ability of the company s technology and products to treat cancer; and any statements using the terms will, could, believe, expect, outlook, 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; currency exchange rates and tax rates; the impact of 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 in third-party reimbursement levels; demand for and delays in delivery of 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; challenges associated with the successful commercialization of the company s particle therapy business; challenges to public tender awards and the loss of such awards or other orders; the effect of adverse publicity; the company s reliance on sole or limitedsource suppliers; the impact of reduced or limited demand by purchasers of certain X-ray products; 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; 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. 2 2 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

3 3 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY Welcome & Opening Remarks Dow Wilson

4 AGENDA 8:00-8:30 am 8:30-9:30 am 9:30-9:45 am SPIN OVERVIEW IMAGING COMPONENTS INTERMISSION 9:45-12:15 pm ONCOLOGY SYSTEMS 12:15 1:00 pm 1:00 1:45 pm 1:45 2:30 pm LUNCH INTERMISSION PARTICLE THERAPY ONCOLOGY FACTORY TOUR 4 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

5 Our Recent News Varian Plans To Separate Into Two Great Companies Varian Medical Systems New Imaging Components Company 5 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

6 Why? And Why Now? Imaging / oncology business objectives & growth strategies are moving in different directions Global cancer fighter Global leader in imaging components 6 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

7 Fundamentally Different Businesses Varian Medical Equipment, Software & Service Customers: 1000s of Healthcare Providers Sales and Service in ~200 Countries Cancer Varian Imaging Components Customers: 100s of Imaging Equipment Makers Sales/Service in ~20 Countries Medical, Industrial & Security Low-Volume Manufacturing High-Volume Manufacturing 7 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

8 Spin Benefits. A Win for Everyone Businesses Sharper focus of investments in core markets & growth strategies Customers Undivided attention on product development & service Investors Better understanding of each company Employees Creates new growth opportunities through closer alignment of goals to business performance Unlocking potential 8 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

9 Guiding Principles of Spin Execute and deliver on 2016 financial commitments Build two great companies Achieve profit margin neutrality within two years Make decisions quickly and efficiently Operate as one Varian until closing 9 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

10 Transaction Overview & Timeline Tax-free spin to Varian investors Varian investors receive dividend of shares in the new company Ratio to be determined Subject to: Effectiveness of Form 10 filing with the SEC Favorable opinion on validity of tax-free spin Final approval by Varian Board 2016 MAY 23 JULY 27 OCT 26 ~END OF DEC Spin Announcement Q3 Earnings Update Q4 Earnings Update Target Close for Spin ~END OF JULY Form 10 Target SEC Filing 10 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

11 Estimated Spin Costs $35M in one-time transaction advisory services $20M of dis-synergies in Varian Aiming to return to targeted non-gaap operating margins in FY19 Spin expected to be neutral to Varian Imaging segment profitability 11 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

12 We Did It Before; We Can Do It Again VMS is the product of a successful spin in 1999 that delivered: New products & technologies for customers New opportunities for employees Great results for each business and for investors 12 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

13 VARIAN IMAGING COMPONENTS

14 Imaging Investment Summary Global leader I X-Ray imaging components Broadest product portfolio Highest volume, lowest cost position Strong customer relationships World-class X-Ray engineering talent Growth opportunity in large markets Large player in $3B medical X-Ray market Emerging player in $750M industrial and security inspection market Positive market trends driving growth Scale and track record of operational excellence Seasoned management team 14 VARIAN PROPRIETARY: INTENDED 14 VARIAN FOR PROPRIETARY: INVESTORS ONLY INTENDED FOR INVESTORS ONLY

15 Our Vision To create the most innovative and cost effective X-ray imaging solutions for equipment manufacturers Market segments Medical imaging Industrial imaging Security & inspection Customers Equipment manufacturers Distributors Systems integrators 15 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY V A R I A N I M A G I N G C O M P O N E N T S

16 Salt Lake City, UT HEADQUARTERS Our Mission To be the world s leader in imaging components through the delivery of high quality products that enable our customers success 1300 EMPLOYEES $611M FY15 SALES 70 Years OF INNOVATION 200+ PATENTS 16 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY V A R I A N I M A G I N G C O M P O N E N T S

17 Worldwide Manufacturing & Presence North America Salt Lake City, UT (HQ, R&D, Mfg) Palo Alto, CA (R&D) Las Vegas, NV (R&D, Mfg) Downers Grove, IL (R&D, Mfg) Rochester & Liverpool, NY (R&D) Charleston, SC (Service Center) Producing 24% of medical tubes & flat panels globally Europe Dinxperlo NL (R&D and Mfg) Sursee CH (R&D) Bremen DE (R&D) Willich DE (Service Center) Asia Beijing CHN (Service Center) Wuxi CHN (Service Center) Calamba City PHL (Manufacturing) 17 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

18 Product Platforms and Integration Strategy X-Ray Sources Medical X-Ray tubes Industrial X-Ray Tubes Linear Accelerators X-Ray Detectors Radiographic detectors Dynamic flat panel detectors Industrial detectors X-Ray Accessories High-voltage connectors Collimators AECs Software & Services Image processing & diagnostic workstations 3D visualization Image analysis 18 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

19 History of Strong Growth but Perfect Storm in FY15 VIC revenue history Factors impacting 2015 revenue $660 $71 (60) Exchange rates (40) Oil prices (20) Customer insourcing Volume gain, acquisition $ Revenues in millions. These revenues do not include inter-segment revenues. 19 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

20 Business Normalizing FX impact diminishing We have absorbed price cuts and maintained share Panel business recovering Unit volume healthy, improved mix Absorbed customer loss Oil prices rising Security market re-engaging Toshiba/Canon headed for normalization Strong engineering/innovation partnership continuing 20 VARIAN PROPRIETARY: INTENDED 20 VARIAN FOR PROPRIETARY: INVESTORS ONLY INTENDED FOR INVESTORS ONLY

21 Long-Term Estimated Market Growth X-Ray imaging components market ~ 4% CAGR $3.75B Addressable market Industrial & Security Medical $750M $3B $950M $3.3B Subject to various risks and assumptions relating to forward looking statements VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

22 Our Strengths Industry-leading technology and innovation Long-term deep customer relationships Top 10 customers # Years of relationship Toshiba Medical Systems 40 Hitachi Medical Corporation 40 Manufacturing scale and cost structure Shimadzu Corporation 40 GE Medical Systems 40 Philips Medical 40 Hologic 25 L3 17 Broadest imaging component portfolio Ziehm 15 Smiths Detection 15 Medtronic VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY V A R I A N I M A G I N G C O M P O N E N T S

23 A Leader in Two Growing Global Markets Medical X-Ray Imaging Medical Flat Panels (all modalities) Medical Tubes (all modalities) 12% 21% 33% Varian Varian 26% Thales All other competitors OEMs 64% 7% 8% Toshiba All other competitors 29% Varian estimates: All other competitors include PerkinElmer, Toshiba, Vieworks, iray, Hamamatsu, Fuji, Canon,Rayence, iray Detection Tech, Analogic, Dalsa, Dexela, CareRay, Samsung Varian estimates: All other competitors include Dunlee, IAE, Wandong, Kailong 23 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

24 A Leader in Two Growing Global Markets Industrial & Security Industrial and Security Inspection Tubes & Flat Panels Industrial and Security Inspection Linear Accelerators 15% 51% 11% Comet Varian All other competitors 33% 38% Nuctech Varian Film and CR All other competitors 23% 29% Varian estimates: All other competitors include GE, PerkinElmer, Thales, Toshiba, Siemens, iray, Panalytical Varian estimates: All other competitors include Foton, HITEC, Siemens, Accuray, RIAMB, PMB, ETM 24 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

25 Broadest Imaging Components Portfolio Competitor Portfolios X-Ray Tubes Linear Accelerators X-Ray Detectors Varian Imaging Components High Energy Detectors Software and Workstations Connectors and Other Components Inspection 25 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY V A R I A N I M A G I N G C O M P O N E N T S

26 Enabling Fast, Cost-Efficient Equipment Development Medical Imaging (82% of sales) X-Ray tube Collimator Interconnect X-Ray tubes Flat panel detectors AECs, collimators HV cables, interconnects Imaging software and workstations Bucky system Console Product breadth and development expertise positions us as the partner of choice. Automatic Exposure Control (AEC) Generator Flat panel detector 26 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

27 Enabling Customers to Develop Products Faster Security & Industrial Imaging (18% of sales) X-Ray tubes Flat panel detectors Linear accelerators Specialized software Services X-Ray tube Flat panel detector Product breadth and development expertise positions us as the partner of choice. High voltage connector 27 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

28 Growing Software Expertise Diagnostic workstations 3D visualization Modality acquisition workstation Image processing Image analysis and CAD Measurements Acquisition Industrial NDT $34M software business - 7% CAGR 28 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

29 Global Medical Imaging Trends are Positive Market Drivers ~ $6B ~$6.8B Aging population Safety Innovation in image quality, cost, speed Reducing X-Ray dose Emerging markets Push for affordability ~ $3.5B ~ $3B Other Imaging Modalities ~ $3B ~ $3.3B Two Major Areas for Growth Analog to digital conversion: ~500K analog units to be upgraded $7-8B Components spend Reimbursement cut for Film/CR in the US starting 2018 X-Ray Imaging 29 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY Source: VIC analysis of industry and companies, OEM discussions, and VIC estimates Subject to various risks and assumptions relating to forward looking statements. China s focus on healthcare: 25K+ CTs needed over next 10 Years $1B+ Components spend V A R I A N I M A G I N G C O M P O N E N T S

30 Medical OEMs Outsourcing Market Factors/Trends Good enough technology Component commoditization Conversion to digital Cost containment/reduction Increasing product life Regulatory hurdles Regionalized decision making Drivers of Increased Outsourcing: Market fragmenting; scale matters Component cost reduction imperative Emerging market OEMs lack component technologies Mature OEMs have high product development costs 30 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY V A R I A N I M A G I N G C O M P O N E N T S

31 Industrial Imaging Applications Growing Rapidly Market Drivers New safety and quality standards Inline manufacturing inspections Disruptive technologies (eg. 3D printing) ~$750M ~6% CAGR Market Growth Areas Film to digital detectors Inspection of castings, complex machined parts NDT for 3D printed products Airport/ship cargo scanning $3-5B+ Vehicles scanning at borders Package scanning Packaged food safety scanning Material and surface treatment Source: VIC analysis of industry and companies, OEM discussions, and VIC estimates 2025 Subject to various risks and assumptions relating to forward looking statements VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

32 VIC Strategy Grow Targeted Segments Sell More to Current Customers Drive Operational Excellence Continuous Innovation 32 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

33 By End of 2020 We Aspire to: Thrive as a standalone business by growing ~5% per year Expand operating margin from 17% 20% Subject to various risks and assumptions relating to forward looking statements. 33 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

34 Imaging Investment Summary Global leader I X-Ray imaging components Broadest product portfolio Highest-volume, lowest-cost position Strong customer relationships World-class X-Ray engineering talent Growth opportunity in large markets Large player in $3B medical X-Ray market Emerging player in $750M industrial and security inspection market Positive market trends driving growth Scale and track record of operational excellence Seasoned management team 34 VARIAN PROPRIETARY: INTENDED 34 VARIAN FOR PROPRIETARY: INVESTORS ONLY INTENDED FOR INVESTORS ONLY

35 Varian Investor Meeting / Webcast INTERMISSION 9:30 9:45 AM PT 35 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

36 ONCOLOGY SYSTEMS OVERVIEW KOLLEEN T. KENNEDY JUNE 21, VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

37 ONCOLOGY AGENDA ONCOLOGY OVERVIEW GOVERNMENT AFFAIRS OVERVIEW OF MARKETS PRODUCT PORTFOLIO CLINICAL PROGRESS SERVICE SUMMARY 37 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

38 DRIVING FOR MID-SINGLE-DIGIT GROWTH Expanding globally Getting return on innovation Building software & services Driving profitable growth 38 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

39 VARIAN ONCOLOGY SYSTEMS ~5,000 EMPLOYEES 3,700 6 SOFTWARE INSTALLS EDUCATION CENTERS 7,400 MEDICAL LINEAR ACCELERATORS $2.7B TOTAL ORDERS $1B RECURRING SERVICES 39 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

40 GLOBAL CANCER BURDEN RISING 24.6 million people next 15 years The global cancer burden nearly doubles by 2030; expected to grow to 24.6 million new cancer cases with 13.5 million deaths.* *Lancet Commission Report, VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

41 WORLDWIDE CANCER BURDEN Expanding global access to radiotherapy Lancet Oncology Vol 16 Sept new cancer cases per year by 2030 $2T global economic burden in % of patients with cancer need RT 56% of cancers diagnosed in high income countries 10% of patients have access to RT in low income countries 20,000+ Linacs needed by 2035, with greatest need in low and mid-income countries 41 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

42 CLOSING THE GAP: NEEDED BY 2035 Radiotherapy Machines per Million People Over 64 Years Over 75 Between 41 and 75 Between 31 and 40 Between 21 and 30 Between 1 and 20 No Machines Old graphic Automation, Simplification, Productivity 20,000+ linacs Expanded software, service infrastructure Need 150,000 trained health practitioners Greatest need in lower- and middleincome countries (LMIC) 42 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

43 LANCET 2015 RECOMMENDATIONS POPULATION BASED CANCER CONTROL PLANS EXPANSION OF ACCESS TO RADIOTHERAPY SUSTAINABLE FINANCING TO EXPAND ACCESS TO RADIOTHERAPY ALIGN RADIOTHERAPY ACCESS WITH UNIVERSAL HEALTH COVERAGE By % of countries should have cancer plans that include radiotherapy. 25% increase in RT capacity from 2015 to $46B of investment by 2025 to establish radiotherapy infrastructure and training in LMIC. 80% of LMIC to include RT services as part of universal health coverage by VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

44 VARIAN MARKET DEVELOPMENT Expanding global team Partnering to build access to cancer care Governments Financiers Clinicians Patient advocacy groups Promoting awareness Lancet Oncology Commission Non-governmental organizations 44 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

45 VARIAN MARKET DEVELOPMENT Emerging markets: Training is key in market development programs Skills training enables safe radiation therapy implementation 45 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

46 NUMBER 1 CANCER INCIDENCE PER 100K CANCER IN WOMEN CANCER IN MEN Breast Uteri Lung Liver Prostate Stomach Lung Liver Sources: American Cancer Society, Globocan data 46 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

47 VARIAN S ONCOLOGY ECOSYSTEM VitalBeam High throughput and Scalable System 47 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

48 VARIAN ONCOLOGY SOLUTIONS 2.8M patients treated annually 7,400 global accelerators 100k+ software users A majority of the top 50 US cancer centers use Varian hardware, software, and/or services ~7%: percentage of revenue spent on R&D 48 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

49 INNOVATION CREATES UPGRADE OPPORTUNITY Upgrade PerfectPerfect Couch RapidArc MLC / PV TrueBeam Apps OBI $400M 5-Year Opportunity SRS Package 49 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

50 ACCELERATING SOFTWARE GROWTH New Offerings RapidPlan InSightive Analytics Velocity Qumulate QA SRS Planning $300M 5-Year Opportunity 50 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

51 SUMMARY OVERVIEW Varian is the global radiotherapy leader Long-term demand for radiotherapy is increasing Healthcare megatrends drive our strategy for continued leadership and market expansion Organizational structure evolution driving customer satisfaction and business growth 51 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

52 Andrew Whitman, VP Government Affairs GOVERNMENT AFFAIRS & ONCOLOGY REIMBURSEMENT 52 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

53 VARIAN GOVERNMENT AFFAIRS Addressing Issues that Impact Radiotherapy Globally Legislative & Regulatory Matters US Congress & Federal Administration EMEIA, APAC, AMS institutions & governments Reimbursement & regulatory issues Public Affairs Advocacy Promote value of radiotherapy Reimbursement & value assessment Build awareness of value of radiotherapy to support access, health systems & growth 53 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

54 2017 GENERAL REIMBURSEMENT EXPECTATIONS Freestanding Centers Freezes IMRT and 3D rates until 2019 S Patient Access and Medicare Protection Act Hospital Outpatient Department Historically, seen slight increase Do not expect any major changes for VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

55 MACRA: BIG OPPORTUNITY FOR VARIAN More software tools needed to qualify for reimbursement Merit Based Incentive Payment System Advanced Alternative Payment Models Weighted Performance Categories Advancing Care Information 25% Clinical Practice Improvement Activities 15% Cost 10% Quality Measures 50% 55 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

56 Chris Toth, President, Americas ONCOLOGY MARKET OVERVIEW 56 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

57 GEOGRAPHIC OPERATING MODEL AMERICAS Chris Toth APAC Kevin O Reilly EMEIA Jean-Luc Devleeschauwer 57 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

58 DEMOGRAPHICS DRIVE DEMAND 1,600 1,400 1,200 1, People 60 Years and Older in Millions TOTAL +82% BRIC +97% Other BRIC NA EU Developed Source: U.S. Census Bureau 58 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

59 VARIAN MARKET SHARE GROWTH TTM Revenues Varian Elekta Accuray Other Varian cost per patient driving share through: Integrated solutions High throughput Pricing stability Socket expansion (SW & Services) fostering growth through industry leading installed base Constant currency TTM revenue share based upon publicly reported financials 59 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

60 AMERICAS TALE OF TWO MARKETS Trends Driving Varian Growth Opportunities North America US consolidation Healthcare reform (ACA, MACRA) Care coordination High RT utilization Latin America Low access to care driving demand Economic, political headwinds Brazil MOH tender proceeding 60 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

61 US MARKET OUTLOOK 2015 to to and beyond VOLUME-BASED ONCOLOGY DELIVERY VOLUME TO VALUE TRANSITION INCREASES VALUE-BASED ONCOLOGY DELIVERY SRS/SBRT Driven HW replacement cycle (> year old systems)* HW & Software growth supporting MACRA, ACA and increased efficiencies VAR Accelerators in U.S. will yield a long-term sustainable HW + Services business to complement SW growth Market Mix *Estimated Varian + Siemens + Elekta + Accuray installed base 61 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

62 EMEIA GROWTH IN EMERGING MARKETS AFRICA EUROPE WEST EUROPE EAST DACHS INDIA SUBCONTINENT Market leader & fastest-growing RT company TTM Pricing stable in premium segment Service contract capture rate strengthening SW commercial channel investment yielding growth Emerging market growth opportunities Africa long-term promise 62 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

63 APAC HIGH GROWTH EMERGING MARKETS China Market leader Strong growth in China 12% orders growth YTD >4,000 new linacs needed Emerging rural (Tier 2) demand CHINA South Korea Japan Southeast Asia Population growth Government cancer program focus Access to Care programs create opportunity in frontier markets Myanmar Laos Thailand Vietnam Cambodia Malaysia Taiwan INDONESIA Philippines AUSTRALIA 63 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

64 APAC MATURE MARKET OPPORTUNITIES CHINA South Korea Japan Myanmar Taiwan Laos Thailand Vietnam Philippines Cambodia Malaysia INDONESIA AUSTRALIA Japan Slow replacement-oriented market Strong service business ~25% RT utilization Reimbursement policies constrain IMRT growth Opportunity to expand market, benefit patients Australia Public sector market with strong replacement cycle Private market stimulating new IB growth Excellent customer relationships Strong service business 64 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

65 Corey Zankowski, VP Products & Solutions ONCOLOGY PRODUCT STRATEGY 65 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

66 ONCOLOGY MEGATRENDS MINIMALLY INVASIVE RADIOSURGERY ROBOTIC SURGERY EMERGING ECONOMIES EDUCATION GAPS POOR INFRASTRUCTURE RISING COSTS OF CARE EVIDENCE-BASED MEDICINE VALUE-BASED HEALTHCARE BIG DATA PERSONALIZED MEDICINE DIGITAL FRONTIER Compact 3D Dose Simpler Solutions Coordinated Care Teams Global Communities Accessible Technology Patient Safety Cost-effective Solutions Inspire Confidence Onco-Informatics Cloud Computing 66 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

67 PORTFOLIO SOLUTIONS STRATEGY COST-EFFECTIVE HIGH-QUALITY SIMPLIFIED & AUTOMATED GLOBALLY ACCESSIBLE 67 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

68 Knowledge- Guided Oncology Intelligent Treatment Delivery Advanced Data Analytics 68 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

69 69 VARIAN FOR VARIAN PROPRIETARY: INVESTOR INTENDED MEETING FOR JUNE INVESTORS 21, 2016 ONLY

70 PRODUCT INNOVATION ARIA Oncology Information System Clinac 4: First fully rotational RT linac Clinac 18: High energy medical linac with gridded electron gun Dynamic Wedge For shaping an X-Ray beam Millennium MLC The standard in conformance Smartbeam IMRT Higher dose delivery with greater protection for healthy tissue Eclipse Treatment Planning software with inverse treatment planning for IMRT VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

71 PRODUCT INNOVATION RapidPlan Knowledge-based planning software VitalBeam Affordable Advanced Radiotherapy HD-RT* Automated 4π SRS intracranial treatments RapidArc Radiotherapy TrueBeam Integrated imaging and delivery Calypso Real-time tracking technology Edge RadioSurgery IGRT enabled by the On-Board Imager *HD-RT is a Works in Progress Not Available for Sale 71 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

72 HIGH-DEFINITION RT/SRS/SBRT SIMPLE HIGH-QUALITY EFFICIENT 72 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

73 HIGH DEFINITION RT/SRS/SBRT 64 Gy LUNG PATIENT 1 LUNG PATIENT 2 15 Gy IMRT VMAT HD SBRT Courtesy of Ke Sheng, UCLA 73 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY Works in Progress Not Available for Sale

74 HIGH DEFINITION RADIOSURGERY Brain Stem Brain Stem 50% Rx Dose 50% Rx Dose Coplanar RapidArc SRS High Definition SRS Works in Progress Not Available for Sale 74 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

75 PROGRESS MADE SO FAR & WHAT S NEXT The Conformality Continuum TOMORROW TODAY HEALTHY TISSUE SPARED 3D CONFORMAL IMRT IGRT SBRT HDRT 75 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

76 VARIAN HD SRS DEVELOPMENT GOAL: SPARE MORE HEALTHY TISSUE Varian HD SRS = blue CyberKnife = pink Varian HD SRS = blue GammaKnife = pink Simultaneous treatment of multiple brain metastasis Works in Progress Not Available for Sale 76 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

77 MULTI-MODAL IMAGING Multi-modal Knowledge-guided contouring Real-time quality control Works in Progress Not Available for Sale 77 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

78 ADVANCED IMAGE ANALYTICS Improve CBCT so that therapists can align the tumor every day. Iterative CBCT Acuros TM scatter correction High resolution Works in Progress Not Available for Sale 78 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

79 ADVANCED IMAGE ANALYTICS Improve CBCT so that therapists can align the tumor every day. Even when it is moving. Iterative CBCT Acuros TM scatter correction High resolution Dynamic Works in Progress Not Available for Sale 79 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

80 RAPIDPLAN KNOWLEDGE-GUIDED PLANNING Beginner Increase plan quality Experienced Improve consistency Busy Increase efficiency Networked Standardize Quality. Consistency. Efficiency. 80 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

81 RAPIDPLAN KNOWLEDGE-GUIDED PLANNING Spine SBRT Plan Manual RapidPlan Time min min Foy J, et al. An analysis of knowledge based planning for stereotactic body radiation therapy of the spine. Poster presentation at: American Association of Physicists in Medicine 57 th Annual Meeting & Exhibition; July 12-16, 2015; Anaheim, CA. University of Michigan Prostate Plan Manual RapidPlan Time 114±86 min 21±13 min Equivalent or better 40% 90% Better 10% 60% Courtesy, Royal Surrey County Hospital NHS Foundation, Guilford, UK (Data source on file) Manual RapidPlan 81 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

82 LEADER IN ONCOLOGY SOFTWARE > 3700 software sites globally Eclipse Treatment Planning ARIA Oncology Information System Velocity Oncology Imaging Integrated clinical process Security-hardened Optimized workflow Patient care pathways ARRA HiTECH compliant Full-scale cloud-based services 82 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

83 VELOCITY Transforms images into knowledge Multi-vendor and multi-modality Treatment analytics Designed for collaboration Sales doubled from FY14 to FY15 83 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

84 INSIGHTIVE: ONCOLOGY DATA ANALYTICS Analytics to support evidence-based decision making 84 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

85 MAKING ONCOLOGY CARE SIMPLER AND SMARTER Efficiency & Costs Quality of Care Make decisions confidently Engage patients Meaningfully Deliver team based care efficiently Patient Outcomes 85 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

86 Dr. Patrick Kupelian, VP Clinical Affairs PROGRESS IN RADIATION ONCOLOGY 86 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

87 DISEASES TREATED WITH RT Curable Cancers with RT ALONE: Curable Cancers with RT as part of treatment (adjuvant): Prostate Head & Neck Lung Cervical Skin Breast Brain Tumors Testicular Adv. Lung Rectal Sarcomas Adv. Cervical Endometrial Pediatric Adv. Head & Neck Bladder Metastatic disease: Bone / Brain / Other 87 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

88 CLINICAL UPDATE - THEMES Improving delivery of radiation: Smaller targets/ Larger doses / Better aiming HD Radiosurgery Decrease treatment duration Predictive biomarkers: Predicting tumor / Normal tissue sensitivity Combination of RT with drugs: Radio-immunotherapy / Radio-immunomodulation Value of radiation therapy: Cost effectiveness Novel indications for RT: Expanding RT indications for metastatic disease Non-oncologic radiation medicine 88 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

89 Precision Radiotherapy 15 metastases successfully treated with Radiosurgery 89 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

90 Precision Radiotherapy 15 metastases successfully treated with Radiosurgery 90 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

91 BRAIN METASTASES Brain Metastases Multiple brain metastases treated synchronously with radiosurgery 1 Replacing whole brain radiotherapy Better combination with drugs (particularly immunotherapy) 2 Technical delivery increasingly done with linac-based platforms, allowing more efficient delivery and better quality plans Survival of Patients With Multiple Intracranial Metastases Treated With Stereotactic Radiosurgery: Does the Number of Tumors Matter? Knoll et al. Am J Clin Oncol Timing and type of immune checkpoint therapy affect the early radiographic response of melanoma brain metastases to stereotactic radiosurgery. Qian et al. Cancer Plan Quality and Treatment Efficiency for Radiosurgery to Multiple Brain Metastases: Non-Coplanar RapidArc vs. Gamma Knife. Liu et al. Front Oncol Volumetric Radiosurgery for 1 to 10 Brain Metastases: A Multicenter, Single-Arm, Phase 2 Study. Nichol et al. IJROBP Normal Brain Sparing With Increasing Number of Beams and Isocenters in Volumetric-Modulated Arc Beam Radiosurgery of Multiple Brain Metastases. Hossain et al. Technol Cancer Res Treat VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

92 ROLE OF MULTI-MODALITY IMAGING IN RT Increasing role of integrating images in RT planning CT for all cases PET for lung, head & neck cancers MRI for in CNS, GYN, prostate cancers Gradual move to MRI simulation from CT simulation Imaging in treatment room requires higher-quality images Unclear whether MRI, PET have roles in treatment room Unclear if in-room functional imaging is clinically practical or needed 92 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

93 Proportion Receiving Selected SRS Modality LINAC-BASED SRS ACCELERATING National Cancer Data Base Diagnosis Year LINAC + NOS SRS 55.6% 50.0% 50.0% 59.3% 57.7% 58.1% 62.4% 66.6% 68.0% GK SRS 44.4% 50.0% 50.0% 40.7% 42.3% 41.9% 37.6% 33.4% 32.0% Park et al. J Neurosurg Apr;124(4): # EXCLUDING 2012 AS OUTLIER 93 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

94 PRECISION SBRT SBRT vs. Lobectomy for Operable Stage I Lung Cancer Pooled analysis of 3 small trials: RT patients live longer Larger VA study planned: VA Valor study Randomization SBRT vs surgery Early stage lung cancer PI: Drew Moghanaki Planned to start in 2017 Chang et al. Lancet Oncol. 2015;16(6): VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

95 ASCO 2016: EXCITING NEW CLINICAL EVIDENCE RT for metastatic disease historically limited to palliation Multi-institutional randomized study Randomized local therapy (RT) versus no local therapy in patients treated with standard of care therapy Study closed early due to efficacy difference: Patients who received local therapy lived longer by 10 months INCREASING ROLE OF RT IN PATIENTS WITH METASTATIC DISEASE, NOT LIMITED TO PALLIATIVE RT Gomez et al. Clin Oncol 34, 2016 (abstr 9004) 95 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

96 RADIOSURGERY + IMMUNOTHERAPY The Abscopal Effect RT + Ipilimumab 64 y/o man with metastatic lung cancer, progressing on chemotherapy Golden E B et al. Cancer Immunol Res 2013;1: VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

97 EXCITING RESULTS WITH SRS + IMMUNOTHERAPY Metastatic Melanoma Combination RT+ Immune drug Medically effective if given together 30% long-term survivors 97 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

98 NEW FRONTIERS IN RADIATION MEDICINE Research Opportunities Cardiac arrhythmias Emphysema Post-thoracic surgery neuropathy Plantar fasciitis Depression Arthritis These are off-label uses that are currently being investigated. 98 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

99 COST EFFECTIVENESS Radiation therapy, particularly radiosurgery, is a cost-effective treatment compared to surgery, chemotherapy or biologics Comparisons are not possible in all clinical contexts Increasing numbers of published studies demonstrate the cost-effectiveness (and value) of radiation therapy References on file 99 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

100 CONCLUSIONS Radiation therapy indications increasing Precision of modern radiotherapy techniques enables expansion of radiosurgery treatments Combination of RT with drugs (particularly immunotherapy) actively being investigated* Radiation therapy a cost-effective cancer treatment for many clinical entities *These are off-label uses that are currently being investigated. 100 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

101 Patrick Joda, SVP Global Operations ONCOLOGY SYSTEMS SERVICES 101 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

102 ONCOLOGY SERVICES Consulting Services Site Solutions Logistics Training Global Customer Support Services 237 Countries Installation Hardware Support Software Support Help Desk Remote Services 102 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

103 REVENUE GROWTH 5-Year Service Revenue Growth 38% of VOS Revenue 42% of VOS Revenue Growth Drivers New installed base growth TrueBeam conversions Software support agreements Managed and professional services VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY *Subject to various risks and assumptions relating to forward looking statements.

104 ONCOLOGY SYSTEMS SUMMARY 104 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

105 OPERATIONAL EXCELLENCE >> PROFITABLE GROWTH Cost-reduction initiatives Supply chain productivity Installation & warranty Cost of quality leverage Remote software deployments Remote accelerator servicing 105 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

106 SUSTAINABILITY FOCUS Global 100 Sustainability Award Corporate Knights Global 100 >4,600 companies analyzed against global peers Varian is top-ranked healthcare equipment company 2015 Varian Sustainability Report available on varian.com 106 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

107 ONCOLOGY INVESTMENT SUMMARY Long-Term Growth Drivers Rising global cancer burden Need to expand, modernize RT infrastructure Demand for cost-effective solutions Winning product portfolio Strong innovation pipeline Largest installed base Service momentum Operational excellence 107 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

108 Varian Investor Meeting / Webcast LUNCH / INTERMISSION 12:15 1:00 PM 108 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

109 109 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY Moataz Karmalawy JUNE 21, 2016

110 PARTICLE THERAPY INVESTMENT SUMMARY Leadership position in expanding Global PT market Leading Varian RT technology End-to-end integrated systems solutions Leveraging Varian s global service infrastructure Growing body of clinical evidence, indications Building $400M annual business On track for profitability in FY VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

111 GLOBAL PROTON MARKET Cumulative Number of PT Treatment Rooms Operational Number CAGR 15% Proton Therapy World Market Report (Edition 2015), MEDraysintell. 111 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

112 VARIAN GAINING SHARE OF THE PROTON MARKET Share of # Rooms Ordered % 8% 40% 29% 47% 36% 5% 5% 2% 5% Hitachi IBA Mevion Misubishi Pronova Sumitomo Varian 9% Hitachi IBA Pronova Varian 112 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

113 ESTIMATED SERVICE REVENUE RAMP UP OPPORTUNITY $M Estimated Service Revenue Opportunity 113 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

114 VARIAN PARTICLE THERAPY BACKLOG 34 ROOMS UK PROTON THERAPY CENTER UCLH London 3 Gantries NEW YORK PTC 3 Gantries 1 Fixed Beam Room UNIVERSITY OF MARYLAND 4 Gantries and 1 Fixed Beam Room PAUL SCHERRER INSTITUTE (PSI) 1 Gantry Room CINCINNATI CHILDREN S HOSPITAL 3 Gantries PTC ST PETERSBURG, RUSSIA 2 Gantries HOLLAND PTC 2 Gantries 1 Fixed Beam UK Proton Therapy Center The Christie Hospital, Manchester 3 Gantries KFMC-KING FAHD MEDICAL CENTER 3 Rotational and 1 Fixed Beam & 1Eye Tx NATIONAL TAIWAN UNIVERSITY WAN UNIVERSITY 2 Gantries 1 Fixed Beam Room AARHUS PTC - DENMARK 2 Gantries Five additional contracts for 12 rooms not yet booked as orders 114 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

115 115 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

116 OUR KEY GROWTH INITIATIVES Expand addressable market by making protons more affordable Develop lower-cost systems Drive down manufacturing, service costs Shortening install times Extend market & technology leadership Leverage, integrate Varian RT technology Implement adaptive treatment planning, delivery Build service business Bring current projects on line Improve service margin Offer project consulting, development 116 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

117 PROTON THERAPY Varian Range of Particle Therapy Product Offerings ProBeam Compact ProBeam 2-Gantry ProBeam 3-Gantry + 1 FB ProBeam 4-Gantry + 1 FB 4,500 square feet Optimized for compactness Fully IMPT capable Matched treatment rooms optional St Petersburg, Russia Horizontal fixed beam room for GI and H&N KFMC-King Fahd Medical Center Horizontal fixed beam room for eye and H&N Rinecker PT Center University of Maryland Advanced image guidance *Estimates based on standardized BTE model calculations 117 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

118 VARIAN PROBEAM ADVANTAGE Fully Integrated Workflow Plan Treat Adapt Varian s best-in-class oncology product suite applied to protons: Eclipse treatment planning ARIA OIS Velocity Cone Beam CT imaging Full solution integration 118 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

119 120+ ACTIVE CLINICAL STUDIES % Lymphoma Miscellaneous Gastrointestinal tract Eye Head & Neck Brain and spinal Liver Chondrosarcoma and chordomas Breast Sarcoma Prostate Lung Pancreas Proton Therapy World Market Report (Edition 2014), MEDraysintell. Clinicalstudies.gov 119 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

120 A PROMISING CLINICAL OUTLOOK Breast Bush DA, Do S, Lum S, et al. Partial breast radiation therapy with proton beam: 5- year results with cosmetic outcomes. Int J Radiation Oncol Biol Phys. 2014;90(3): Head & Neck Frank SJ, Cox JD, Gillin M, et al. Multifield optimization intensity modulated proton therapy for head and neck tumors: a translation to practice. Int J Radiat Oncol Biol Phys.2014;89(4) Lung Berman AT, St. James S, Rengan R. Proton beam therapy for non-small cell lung cancer: current clinical evidence and future directions. Cancers. 2015;7: doi: /cancers VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

121 CLINICAL RATIONALE FOR PROTON TREATMENTS Accepted standard Improved local control Reduced side effects Reduced secondary cancer 0.6% of RT patients 3.0% of RT patients 12.1% of RT patients 2.0% of RT patients Eye Pediatric Base of skull Brain Intracranial H&N Urologic Lung Sarcoma Intracranial H&N Urologic Lung Breast Gynecological Breast Lymphoma Testis National Health Ministry Models in the UK, Denmark and The Netherlands recommend proton treatment for ~18% of patients. Today only 1 percent of these patients get proton therapy. Varian is now equipping centers in each of these nations. 121 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

122 WHY WE RE WINNING Varian s best-in-class oncology products fully integrated into protons allow us to be: Adaptive Expanding Indications Adaptive Therapy Accurate IMPT, CBCT and Motion Management Affordable Single Room Solutions Financing Packages 122 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

123 PARTICLE THERAPY INVESTMENT SUMMARY Leadership position in expanding Global PT market Leading Varian RT technology End-to-end integrated systems solutions Leveraging Varian s global service infrastructure Growing body of clinical evidence, indications Building $400M annual business On track for profitability in FY VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

124 124 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY Closing Remarks Dow Wilson

125 Inorganic Growth Priorities Image guidance Therapy planning Automated delivery Radiation expertise Global channel Immunooncology Oncoinformatics Cancer-care coordination Radiation medicine Precision medicine New served markets: $3-4B potential Next-gen radiation therapy Multimodality therapy 125 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

126 Until Close We Remain One Varian Our continued focus: Execution on FY16 objectives Taking care of our customers Hitting our growth targets 126 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

127 Our Growth Strategies are the Same Go Global Build Software & Services Innovate Increase Revenues Commercialize Protons Operational Excellence Strengthen Profitability 127 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY

128 Investment Summary (NYSE: VAR) Two great businesses Radiation Oncology & Particle Therapy Imaging Components Market and technology leaders Attractive addressable growth markets Favorable demographic/economic/technical trends Promising product portfolios and pipelines Healthy balance sheets & positive cash flows 128 VARIAN PROPRIETARY: INTENDED FOR INVESTORS ONLY