Investor Day
November 15, 2019
Investor Relations [email protected]
FOR INVESTOR USE ONLY Agenda
1. Our Strategy 7. Interventional Solutions Dow Wilson, President & Chief Executive Officer Gary Bischoping, President, Interventional Solutions* Frank Facchini, M.D., Chief Medical Officer, 2. Oncology Systems Interventional Solutions Chris Toth, President, Oncology Systems 8. Financial Update Gary Bischoping, President, Interventional Solutions* 3. CTSI J. Michael Bruff, Chief Financial Officer* Andrew Shogan, SVP, CTSI 9. Q&A 4. Software Solutions Corey Zankowski, Ph.D., SVP, Oncology Software Solutions 10. Closing Remarks Dow Wilson, President & Chief Executive Officer 5. Break
6. Proton Solutions & Emerging Businesses Kolleen T. Kennedy, President, Proton Solutions and Chief Growth Officer Dee Khuntia, M.D., Chief Medical Officer
2 FOR© 2019. INVESTOR Varian Medical USE ONLY Systems, Inc. For immediate recipient only. *Effective December 1, 2019 Overview & Strategy Dow Wilson, President & Chief Executive Officer This presentation is intended exclusively for investors. It is not intended for use in Sales or Marketing.
Forward-Looking Statements Except 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 System, Inc.’s (”Varian” or the “company”) future orders, revenues, backlog earnings or cash flow growth or trends; future financial results; market acceptance of or transition to new products or technology such as our Edge® radiosurgery system, TrueBeam®, HyperArcTM, 360 OncologyTM, HALCYONTM, BRAVOSTM, EthosTM, image-guided radiation therapy, stereotactic radiosurgery, proton therapy, and interventional oncology products, 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; new and potential future tariffs or a global trade war; 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 proton business, challenges associated with the successful commercialization of the company’s proton 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 in our earnings press releases at www.varian.com/investors.
Medical Advice Disclaimer Varian as a medical device manufacturer cannot and does not recommend specific treatment approaches. Individual treatment results may vary.
4 FOR INVESTOR USE ONLY Since our last investor day Confidence in our long-term strategy 2019: Global Leader in Radiation Therapy, AND 2017: Global Leader in Radiation Therapy Building a Multi-Modality Cancer Company
2% 3Y Oncology $2.6B 8% 3Y Oncology $3.2B 23%* Orders CAGR FY17 Revenue Orders CAGR FY19 Revenue
7,800+ 4,500+ 8,500+ 9%* 5,500+ 22%* Linac Installed Base Software Installs Linac Installed Base Software Installs
2.8M 75 4M+ 40%+* 79 Patients Touched NPS Score** Patients Touched NPS Score**
Oncology Systems Proton Therapy Oncology Systems Proton Solutions
Interventional Oncology Software Solutions Solutions
Chief Growth Office
5 FORVARIAN INVESTOR CONFIDENTIAL USE ONLY – INTERNAL USE ONLY Note: Data as of FY2017, excluding Varex. Focus driving strong operational execution * Comparison of FY19 to FY17 ** According to IMV ServiceTrak in U.S. Radiation Oncology Systems Report 70 years of leadership in medical technology Varian Medical Systems Created Introduced TrueBeam system for radiotherapy Spin-off of Varian and radiosurgery Semiconductor Varex spin-off Equipment Associates & Varian, Inc. 2017 Varian Associates Introduced first linac 2010 2016 Founded 1999 Silicon Valley 1.0 company 1960 1948 Strategy Assessment
Where can we make the biggest impact?
Edward Russell Sigurd William How can we generate Ginzton Varian Varian Hansen co-founded above market growth BS, Stanford Pilot with first linear Varian with University Pan American accelerator, the brothers in and long-term value? 1925 Airways circa 1949 1948
6 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Cancer burden is growing = 500,000
of every 24.6 two million 13.6 cases 1males million and cases of every three 1females will have cancer 2010 2030 at some point in their lives*
FOR INVESTOR USE ONLY 7 Source:FOR INVESTOR International USE Agency ONLY for Research on Cancer 2018. *American Cancer Society, Cancer Facts and Figures, 2012. Estimates of worldwide burden of cancer in 2008: GLOBOCAN 2008 Accelerate growth across radiation therapy Expand the market
What keeps us up at night… How Varian can solve this challenge… ~22,000* Exponentially improve access to care Linacs needed by 2035, with greatest need in low and mid-income countries ▪ Simplify, automate, human-centered design
▪ Lower cost of adoption 90% ▪ Combine people, data and technology to of patients don’t have access to RT in low improve treatment quality income countries ▪ Leverage AI to augment clinicians and amplify resources ~150K RT specialists needed globally by 2035
8 FOR INVESTOR USE ONLY *8,700 new machines plus 13,100 replacements = 21,800 additional machines needed Source: Expanding global access to radiotherapy. Lancet Oncol. Vol 16, Sept. 2015 Key trends impacting the future of cancer care Increased survivorship Earlier diagnosis Leverage evidence-based clinical Leading to increased curative therapy data to drive care evolution
Managing costs Genomics Driving value-based care Driving personalized care and treatment
Multi-disciplinary care Immunotherapy Moving towards the “care Enhancing impact through team approach” combination therapy Personalized treatment
9 FORVARIAN INVESTOR CONFIDENTIAL USE ONLY – INTERNAL USE ONLY Delivering guideline driven, multi- modality precision treatments Innovation in cancer driving increase in survival Varian believes a world without fear of cancer is on our horizon
1977 1987 1997 2007 Today >10 Years Driving Trends Prostate 99.9% 570K cases Breast 99% ✓ Earlier Diagnosis 868K cases Colorectal 91% ✓ New Treatments 704K cases Lung 38% 948K cases Liver 29% 403K cases Impact Pancreatic 17% 176K cases ✓ Increased Survivorship 0% 20% 40% 60% 80% 100% 5 year overall survival
*Forecasted survival rate based on increases in treatment efficacy (Phase 2/3 data) and liquid biopsy availability. Artificial lungs, livers, and pancreas are under development but are not expected to be commercialized by 2027.
10 FORVARIAN INVESTOR CONFIDENTIAL USE ONLY – INTERNAL USE ONLY Sources: Survival Data: (1) National Cancer Institute’s SEER*Stat 8.3.4 databases, (2) Genomic Health Clinical Validation Trials, (3) Roche IMpassion 130 trial, additional on file Pivoting to a new way to fight cancer
Build Expand Leverage Medical Oncology Radiation Oncology Surgical & Oncology Immuno Innovate Add new Software therapy Software RO Proton Proton radiotherapy to modalities to and cloud to
Equip grow revenue touch more coordinate Interventional Services Oncology Software Equip patients cancer care Services Provider- Integrate artificial Based Tech-Enabled Services Services intelligence and machine learning Diagnosis capabilities ~5 2017 Years Horizon 1 Horizon 2
Global radiation Multimodal cancer therapy leader company
11 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Intelligent Cancer Care™ Approach Investing in innovation
~$1.5B Total organic and inorganic investment over 4 years Building strength in multi- >50% >1000 >200 disciplinary cancer care Headcount R&D Active invested in engineers patents software >120 13 Active clinical Countries collaborations with R&D
12 FOR© 2019. INVESTOR Varian Medical USE ONLY Systems, Inc. For immediate recipient only.. Pioneering and advancing in radiation oncology for even greater provider and patient benefits
with RapidPlan MCO/GPU
8%
7% R&D as a % of revenues % a of asR&D 6% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
13 FORVARIAN INVESTOR CONFIDENTIAL USE ONLY – INTERNAL USE ONLY EthosTM therapy is 510(k) pending and not available for sale in the United States. Acquisitions fuel intelligent cancer care possibilities
Prior to Varex spin-off, acquisitions only focused on Enablers of multi-disciplinary growing core radiation therapy business cancer care platform
Acquisition to expand market humediQ CTSI Patient ID; motion accelerate identification of Acquisition to support core radiotherapy business management software unmet clinical needs to facilitate advances in tech- enabled services COOP Acquisition of Taiwan distributor Endocare & Alicon Entrance into interventional oncology Evinance Clinical decision support software; 360 Boston Scientific oncology beads portfolio Transpire Additional interventional Treatment planning Mobius oncology assets software Quality assurance Cialfarm SARL software CyberHeart Velocity Joint venture to establish Adds technology for cardiac radioablation Treatment software operation in Algeria Noona Calypso Medical Fototronic Fraunhofer ITWM Candela Healthcare Technologies Established direct R-PORT Licensing deal to Acquisition of Poland Mobile service to Cancer care planning Varex spin-off capture patient- Real-time tumor tracking operations in Hungary integrate MCO with distributor tool reported outcomes and motion management Eclipse
2011 2012 2013 2014 2015 2016 2017 2018 2019
14 FOR INVESTOR USE ONLY Varian’s expanding portfolio is at the forefront of key trends Building future of multidisciplinary cancer care solutions
VARIAN PLATFORM
Earlier Diagnosis New Treatments Increased Survivorship
• RT utilization ↑ • FLASH therapy • Noona • Locoregional control • RT + Immunotherapy • Proton Therapy (re-treatment) • Multi-Disciplinary Tumor Board • Adaptive therapy • HyperArc (Brain Mets) • Increased local therapy: • AI driven solutions • Velocity radiotherapy, microwave • Interventional Oncology ablation, cryoablation
Technology Enabled Oncology Training Services & Education
15 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY FLASH therapy is under preclinical research and not available for commercial sale. Future: build a platform for scalable personalization to be the global leader in multi-disciplinary cancer care solutions
Aggregate Data Medical Automate Develop Build & Oncology Radiation Oncology Surgical & Oncology Immuno Commercialize therapy Software RO Proton Proton workflow product portfolio
Key Stake- throughout Build via insights from Cancer Operating holders, AI & incl. Machine cancer HCPs, Equip data & new Learning Interventional System Payors, & Services Capabilities Oncology Patients Software Equip continuum- Services clinical connecting the Provider- Based Tech-Enabled diagnosis: Rx, evidence Services Services care continuum, radiomics, TPS, stimulating Diagnosis patient monitoring, Optimize the Treatment innovation & Pathway for Patients outcomes analysis collaboration ~5 Future Years Horizon 2
Multimodal cancer company
16 16 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Intelligent Cancer Care Approach Horizon 3 Future Cancer Operating Cancer operating system Platform that improves decisions from Aggregate diagnosis to survivorship Data
Goals • $20B+ addressable market Key Stake- Build • 20M+ patients touched holders, AI & incl. Machine HCPs, • New business deployment models Learning Payors, & Capabilities Patients • Continuous innovation cycle
Agile, Transformative, Visionary Optimize the Treatment Pathway for Patients
17 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY 18 FOR© 2019. INVESTOR Varian Medical USE ONLY Systems, Inc. For immediate recipient only. Oncology Systems Chris Toth, President, Oncology Systems
VARIAN CONFIDENTIAL – INTERNAL USE ONLY Oncology Systems
Market Leader Customer Satisfaction Innovation Leader
4M+ patients touched/year 78 NPS #1 IMV Rating >$3B revenues; 47% services
~8,500 largest installed base $1.4B+ #1 rated services business Global market share leader
7,000 diverse, global employees 100K+ software users at 5K+ sites >$2B R&D spend in last decade
20 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Radiation therapy leadership FY19 Revenues Mix
$3.1B FY19 Revenues 20% Double digit hardware and software growth
47% >57% Market Share
Global revenues market share 33%
Americas EMEA* APAC 3 Year Orders CAGR of 8%
Driven by portfolio, globalization and services market share in #1 radiation therapy
21 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY *EMEA includes Europe, Middle East, India, and Africa The gap in care access is widening Demographics driving needs & market growth
22 FOR INVESTOR USE ONLY Current RT market growing mid-single digits * Based on company estimates and data with increasing global demand* Varian’s market outlook Multiple global trends and customer behavior driving adoption across the globe
Russian Western Europe China • Replacement markets Federation • Expanded Cat A/B license plan • Focus on innovation & • Over 200 Cobalt systems North America • County level RT care expansion efficiency • $15B government oncology • Primarily replacement • Expanding private sector market w/market share • 10 consecutive quarters of program (2019-2023) leadership double digit growth • Increasing use of SRS/SBRT • Portfolio well positioned for value based care Japan • Low IMRT utilization with opportunity for increase • Cyclical replacement market w/strong services platform
ANZ South America • Government announced $90M • Accelerating Cobalt and low Africa India cancer care plan energy replacements • Increased focus by WHO on • Primarily private market • Key partnerships with ICON & • Efforts to enhance govt. funding NCD’s (Cancer) GenesisCare for RT • Increasing public • MOH of many countries expansion through increasing focus on cancer (Ayushman Bharat) plans
23 FOR INVESTOR USE ONLY Changing clinical practice addressing growing cancer burden Increasing demand for Varian technology
By 2030:
SRS/SBRT utilization growing Patients treated with radiotherapy Fractions demanded growing faster worldwide and driving demand for expected to more than double outside the U.S. and driving demand SRS/SBRT equipment outside the U.S., driven by cancer for high-quality radiotherapy burden and increased utilization*
SRS/SBRT Utilization (%) Patients Treated with RT (M) Fractions Demanded (M) 60% 2030 10 2030 150 2030 2016 8 2016 2016 100 40% 6 4 20% 50 2 0% 0 0 U.S. International U.S. International U.S. International 100%+ Increase in WW Fraction Demand by 2030
24 FORVARIAN INVESTOR CONFIDENTIAL USE ONLY – INTERNAL USE ONLY Source: Internal estimates *Estimated radiotherapy utilization of ~60% in the U.S. in 2016 and 2030; outside the U.S., growing from 25% to 35% Varian leadership in China & India
China India 2nd Largest 4th Largest Market Market
Revenue CAGR (2014 → 2019) 17% 25%
Installed Base (2014 → 2019) 434 → 738 109 → 273 RT Utilization < 25% < 20% Market Share (Orders) in FY19 ~ 55% ~ 75% Customer NPS 84 73
Key Growth Drivers • Aging population drives more cancer cases • Ayushman Bharat (“Modicare”) • More government category A/B licenses • Growing private RT market • Remote clinical support (AI/SW) • PPP initiatives with various State Gov’ts • Increased private sector growth • Tata Trusts deployment 25 FOR INVESTOR USE ONLY • County level RT expansion • Partnerships with large corporate & PE firms
Source: Internal data; Chinese market share is based on public tender wins per the Ministry of Commerce of the People’s Republic of China China International Import Expo (November 2019)
40+ MoU signings, 70+ linacs
26 FOR INVESTOR USE ONLY Varian portfolio Integrated & comprehensive
Information Systems Radiation Therapy ARIA® EthosTM HalcyonTM Oncology Information System AI powered adaptive Efficient Platform therapy system
Care Coordination Radiation Therapy Multi-Disciplinary Tumor Board TrueBeam®, VitalBeamTM Care Management Versatile Platform
Partnering Radiation Therapy Connectivity EdgeTM Calypso System® Epic, Cerner, ARIA Connect Radiosurgery Real-Time Tracking System Technology Analytics Brachytherapy InSightiveTM Bravos Analytics Product Suite for Planning and Delivery
Image Management Treatment Planning VelocityTM EclipseTM OncologyFOR Image INVESTOR Informatics USE ONLY Treatment Planning System EthosTM therapy is 510(k) pending and not 27 FOR INVESTOR USE ONLY Hardware & Software Services available for sale in the United States. Strengthening the core through acquisitions
Quality Assurance: Mobius QA Surface Guidance: humediQ IDENTIFY
Announced Feb 2018 Announced Aug 2018 • DoseLab and • IDENTIFY CT, RT, Mobius 3D SGRS portfolio • Surface image-guided • Total QA Market patient setup and Opportunity: monitoring FY23: $125M • Total SGRT Market Opportunity: FY23: $120M
28 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Brachytherapy Adding HDR brachy to external beam increases survival by 12-13% BRAVOS™ - fueling new growth in Cervical and Prostate cancers
Cervical Cancer, 4 Year New afterloader & applicators fueling market Cause Specific Survival 64% 58% 52% • Streamlined workflow efficiency/patient 46% experience • 3D printed applicators/expanded portfolio
Cause Specific Overall • Recurring revenue stream from applicators Survival Survival Period 1988-2009
Han K, Milosevic M, et al, Trends in the utilization of brachytherapy in cervical cancer in the Untied States, Int J Radiat Oncol Biol Phys 2013; 87:111-119. Regulatory Clearances • CE marked; 510k cleared
25% growth to a $100M+ business by 2022
Brachytherapy boost for prostate cancer: Trends in care and survival outcomes, Glaser S.M., Brachytherapy Volume 16:2 330-341
29 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY TrueBeam® Family Versatile delivery system with strong market leadership position
$11B+ C-series replacement 3,000+ ~5,500 potential systems C-Series IB shipped thru replacement FY19 opportunities
FY19 Leader Over 1M Record in image SRS/SBRT Revenues guidance cases treated
30 FOR INVESTOR USE ONLY HyperArc™ (TrueBeam® platform) Removing boundaries in brain radiosurgery
1,500+ IB upgrade opportunities ~100 $400M+ systems TB upgrade installed market thru FY19 ~12% potential penetration of installed base ~15 John Fiveash, MD 173 Vice Chair, Academic Programs FY19 orders minute University of Alabama Birmingham treatment NCI Designated Cancer Center times
31 FORVARIAN INVESTOR CONFIDENTIAL USE ONLY – INTERNAL USE ONLY Halcyon™ radiotherapy system High-quality, high-throughput radiation therapy
“After delivering 3782 fractions, the average time a patient is in the Halcyon 116 bunker is 6:51 minutes” -Dr. Matthias Kretschmer, MSc. Radiologische clinical Allianz, Hamburg ~400 systems total 99% orders uptime thru FY19 50% “As of 16th October 2018, we are treating emerging 131 patients in Halcyon Linac installed at markets Sterling Hospital, Rajkot in just about 15 Fits in hours comfortably. The workflow is 34 easy to follow in a busy department and Cobalt we still perform 100% CBCT in all countries fractions.” bunker – Girish Patel, Chairman, Sterling Hospitals
32 FOR INVESTOR USE ONLY World’s 1st AI powered adaptive therapy system
CE Mark
510(k) Pending
1st Patients treated
17 Q4 Orders!
33 FOR INVESTOR USE ONLY EthosTM therapy is 510(k) pending and not available for sale in the United States. Realizing personalized adaptive radiation therapy The culmination of a multi-decade pursuit of innovation
1995-2000 IMRT: dose conformity & fidelity
BUT, patients’ anatomy & tumors change
2005-2010 IGRT: target precision positioning
34 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY GOAL: Maximize dose to tumor, minimize to healthy tissue EthosTM therapy is 510(k) pending and not available for sale in the United States. Realizing personalized adaptive radiation therapy The culmination of a multi-decade pursuit of innovation
1995-2000 Today and beyond IMRT: dose • Personalizing treatment daily conformity & • Adapting to anatomy & tumor changes fidelity • Powered by Artificial Intelligence (AI) • Standard 15 min treatments
2005-2010 ETHOS: Characteristic spirit IGRT: target precision of a culture, era, or community positioning
35 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY GOAL: Maximize dose to tumor, minimize to healthy tissue EthosTM therapy is 510(k) pending and not available for sale in the United States. Ethos Therapy™ World’s 1st AI powered adaptive therapy solution
1 2 3
AI-powered, Access to Patient Centric, streamlined CT, MR, PET 100cm bore/ quiet workflows images delivery
Enabling adaptive treatment delivery in the typical 15-minute timeslot!
36 FOR INVESTOR USE ONLY EthosTM therapy is 510(k) pending and not available for sale in the United States. AI driven multimodality adaptive therapy All modalities – every patient – without compromise
PDA GPS Cell phone iPhone
MR PET CT ETHOS Therapy
37 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY EthosTM therapy is 510(k) pending and not available for sale in the United States. First patients treated!
SEPT 9-12 TODAY
“We have already delivered the first Patients Patients Ethos therapy treatment and our clinical treated per day staff were impressed by the capabilities 5 ~25 and the ability to deliver this advanced Prostate, rectum, anus, treatment in a typical timeslot.” 14 Fractions bladder, palliative “Ethos therapy will enable our physicians to better visualize the changes in a patient’s anatomy and quickly adapt the Bladder Adaptive for therapy accordingly to help provide 3 better treatments to patients.” all bladder Sarcoma cancer patients Dr Poul Geertsen, MD, PhD 1 Head of Radiotherapy, Department of Oncology, Rectum Herlev and Gentofte Hospital 1
38 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY EthosTM therapy is 510(k) pending and not available for sale in the United States. Adaptive Intelligence Consortium
Goal: Accelerate adoption and provide evidence of clinical/outcome benefits
AIC 2020 Focus Publish: • 15-20 abstracts between ESTRO, AAPM, and ASTRO • 8-10 manuscripts • 4 whitepapers
KINDAI Initiate clinical studies on UNIVERSITY the following disease sites: • Bladder • Pancreas SBRT Committed and potential consortium sites • Prostate SBRT
39 FOR INVESTOR USE ONLY Oncology systems – winning in a growing market Key takeaways
1 Patient, clinician & payor driven portfolio has never been stronger
2 Globalization & bending the access to care curve driving growth
3 Installed base fueling growth through replacement & expansion
40 FOR INVESTOR USE ONLY CTSI Andrew Shogan, SVP, CTSI CTSI
>50% revenue CAGR* >9,000 treatment plans delivered Acquired and integrated into annually Founded in 2008 by a group of Varian’s Oncology Systems oncologists from UPMC business to provide unique ~30,000 cancer patients treated operational and clinical insights annually 35,000 historical complex treatment plans and data sets 42 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY
*Compares Varian’s quarter vs CTSI prior year’s business CTSI oncology platform Diagnostic, therapeutic and clinical support delivery capabilities in any global market
• Facilitate improved CTSI Oncology Platform accessibility to and affordability Oncology Clinical Diagnostic of high-quality cancer care Services Delivery Services
• Differentiated clinical services to • Medical physics • Medical oncology • Histopathology local patients by local clinicians • Clinical dosimetry • Radiation oncology • Molecular Pathology within a financially viable model • Oncology IT • Surgical oncology • Cytogenetics • Clinical pathways • Multidisciplinary • Flow Cytometry and decision- surgery • Immunoassay support tools • BMT programs (cancer markers) • Training and • OP procedures • NextGen • CTSI OS extends core education • IP oncology care Sequencing (NGS) capabilities to other providers • Clinical workflow
43 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY CTSI addresses unmet needs for providers and patients Engagement model adapts to customer needs but is grounded in clinical quality
Developed markets demand: Developing markets demand: Workflow productivity Improved access and accelerated adoption
CTSI solutions CTSI solutions Generating operational efficiencies and cost Training and knowledge transfer, clinical support savings while maintaining clinical quality services and advisory services
CTSI addresses challenges within multi-disciplinary operations across delivery models Technology-enabled Provider professional services services
Distinct Bundled Oncology Cancer center services services as a Service operations
44 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Cloud-based platform (Saas)
Remote Treatment Planning
Remote Planning CTSI strategyCloud based Dashboard accelerating asglobal a Service access to quality care Precision Medicine | Personalized Care On Demand Compliance and billing Treatment Integrated Workflow Planning insights (SaaS) and Early global examples Resource Oncology Collaboration Optimization Clinical Accreditation Evaluation & Treatment Equipment & Electronic Portal Analytics Review Reporting Plan Score Resource Whiteboard Management Distributed Physics and Dosimetry Resources Long-term oncology Clinical Decision Support & Insights Metrics and Key Plan network partnership Performance Review Indicators Oncology Data Sets Clinical services support Interfaces (ADT, SIU, DFT, MDM) Treatment Plan Score Private Cloud Infrastructure OIS, EHR, TPS, Physics QA
Beijing Union Clinical services Hospital support
PNG
Technology and clinical partnership Technology implementation
4545 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Illustrative opportunity: UMC Health System Clinical services engagement
• Large public health system and primary teaching hospital for Texas Tech University • Increasing levels of support over the past two years • Numerous achievements that support expansion of UMC’s oncology program
Achievements to date $2.0 CentralizedCentralized StrategicStrategic supportsupport for Physics physics TechnologyTechnology RORO andand MOMO programprogram • Programmatic improvements Support $1.65m support managementmanagement • Improved staff morale $1.5 andand softwaresoftware supportsupport • Increased volume by 30% and revenue by 35% $1.0 SafetyNet ExpandedExpanded RORO Assessmentassessment programmaticprogrammatic
• ACR compliance supportsupport (in (in millions
• Increased HDR and $0.5
Revenue Revenue millions) (in Annualized Recurring Annualized Recurring
SRS workload Annualized Annualized RecurringRevenue • Commissioned several $0.0 new technologies 2017 2017 2018 1H 2019 2H 2019
46 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Illustrative opportunity: AC Health Medical technology + clinical expertise + operational support = OaaS
OaaS assures long-term success Clinical Operational Capital services clinical across multiple factors: development support
• Patient care delivery Project Clinical management pathways • Access and affordability Medical Facility physics + design • High-quality clinical operations dosimetry OaaS • Medical technology utilization Medical Oncology Quality technology as a Service systems • World-class IT systems maintenance
• Financial viability Medical Business technology process procurement integration $12m to $15m total engagement IT through first five years of operations IT support assessment Oncology IT hardware + integration software 47 FORVARIAN INVESTOR CONFIDENTIAL USE ONLY – INTERNAL USE ONLY Technology enabled services (TES) Expand RO, extend modalities and accelerate AI
Unmet market need Varian solution
• Few skilled dosimetrists • AI-driven automated in emerging markets TES Data Varian Cloud TES multi-modality treatment plans • Limited experience for personalized cancer care + + Cloud with new image-guided Oncologist cancer treatments AI & ML
Expand RO Extend to New Modalities Accelerate AI
• Emerging markets • Multi-modal image-guided • Capture patient data when • Large integrated oncology networks cancer treatment planning delivering TES to accelerate • Interventional oncology & AI development theranostics (US, EU, Australia)
48 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Oncology Software Solutions Corey Zankowski, Ph.D., SVP, Oncology Software Solutions Intelligent Cancer Care TES Data
Cloud
AI & ML Create the world’s first platform for evidence-based Disrupt oncology with software, data and value-driven cancer care technology
• Move to cloud solutions • Use data to create customer value • Use AI for automation • Offer technology enabled services • Expand into new cancer care modalities
50 FOR INVESTOR USE ONLY Intelligent Cancer Care Improve with each iteration
Leverage our install base of 5,500+ Increase Attract to learn exponentially Value Customers • Solve unmet clinical needs 푸 + 푶 푽 = 푪 • Human centered design for stickiness • Cloud native to capture data • AI-powered automation and decision support • Monitor, learn and improve
Improve Collect AI/ML Data
51 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY $1.8B upgrade opportunity for current software portfolio 5,500+ unique software install base
Revenue engines Cloud & analytics growth drivers
Eclipse™ ARIA® FullScale Velocity InSightive Treatment Planning Oncology Information Managed Services Image Management Analytics System $750M $250M $100M $550M $150M
52 FOR INVESTOR USE ONLY
Source: Internal estimates $8B TAM for Cloud, Data, AI/ML products & services Expanding from radiotherapy to multi-disciplinary cancer care
Cloud, Data and AI portfolio
Varian Cloud TES + +
Oncologist
RapidPlan Tech enabled services MDTB Noona™ RapidSphere AI planning solution Treatment Multi-disciplinary Symptom management IO planning Planning-as-a-Service care Real world evidence $250M $3B $550M $4B $180M
53 FOR INVESTOR USE ONLY Source: Internal estimates | Patient reported outcomes
Improved Quality of Life Personalized Care Intelligent Cancer Care Symptom reporting Clinical decision support Outcomes analysis: Treatment education Patient messaging • Clinical Care team messaging Survey automation • Financial Automated interventions Telephone triage • Operational
54 FORVarian INVESTOR confidential. USE For ONLY internal use only. 32 community practices 19 cancer centers 25,000 patients per year 2,500 patients per year 22,000 patients per year OCM program participant breast, lung, colorectal 1st patient July 19
Go-live Sept 2019 Go-live early 2020 Go-live Aug 2019
Clinic network Hospital State Pharma-led Provider-led Payor-led
VARIAN CONFIDENTIAL/ PROPRIETARY: DISCLOSED SOLELY 55 FORFORVarian INVESTOR IMMEDIATE confidential. USE RECIPIENT For ONLY internal ONLY use only. “Free the data” Varian cloud strategy
22 Academic cancer centers Data Already using Varian’s privacy TES preserving distributed learning Cloud
AI & ML
Move all software to the cloud
• Partner with world leading cloud providers
• Extend leading data privacy and security
• Standardize global configurations
• Access data to improve products and services
• Fuel AI and machine learning engine
56 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Varian AI and machine learning platform Design-thinking for data science and machine learning
• Makes data discoverable • Automates AI model creation • Makes AI models globally accessible • Creates more opportunity for Varian to monetize AI 57 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY OSS and CTSI synergies
Working together to accelerate global reach Expand the core Contour-as-a-service Plan-as-a-service Peer review service MDTB 1 – Solution for market gap 2 – Auto upsell • Focus on large oncology network • CTSI act as future Accelerate AI value sellers • Technology enabled Data access services • Platform anchors Continuous AI learning $3B+ new software upsell Iterate with users TES TAM
3 – Iterative Development • CTSI evaluates SW before release to market Extend new modalities Multi-disciplinary plans • Development team iterates with CTSI Interventional oncology Theranostics Medical oncology
58 FOR INVESTOR USE ONLY Break
FOR INVESTOR USE ONLY Proton Solutions & Emerging Businesses Kolleen T. Kennedy, President, Proton Solutions and Chief Growth Officer Dee Khuntia, M.D., Chief Medical Officer Proton Solutions
Leverage expertise in conventional radiotherapy and apply to proton therapy to improve clinical utility and reduce cost of Opportunity for growth to achieve Benefits over traditional radiation treatment per patient market share similar to our therapy in targeting and reducing Oncology Systems business toxicity Develop unique integrated proton solution with optimized workflows for RT failure disease sites: Liver, GBM, CNS, Oligometastases, and 61 FOR INVESTOR USE ONLY 61 FOR INVESTOR USE ONLY recurrent disease Leader in proton therapy Pediatric patients $540M 2019 Market Size* Brain tumors Equally distributed between product and services revenues Eye Melanoma
$144M FY19 Revenues Head & Neck tumors
Driven by strong pipeline. Four proton orders booked in fiscal year 2019 (One USA, Two Europe, One China) Liver cancer
3 to 5 Orders per Year** Tumors affecting the spine
Drivers: clinical evidence, reimbursement changes and FLASH Tumors in base of skull
62 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY * Market size defined as serviceable market in 2019; based on company estimates ** Average over longer-term ≥15% Could Benefit From Proton Therapy
63 FOR INVESTOR USE ONLY ≥15% Could Benefit <1% Treated From Proton Therapy
64 FOR INVESTOR USE ONLY Varian Proton Solutions portfolio
Proton Therapy Proton Therapy ProBeam® ProBeam® 360º Proven Proton Solution Next-generation System Single Room and Multi-room Configurations
OIS Proton Planning ARIA® RapidPlan™ PT Oncology Information System Machine Learning for Proton Planning
Proton Planning Eclipse™ Proton Treatment Planning System
65 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Reimbursement is the biggest growth driver for PT market Expansion of clinical evidence and coverage can have a strong influence on growth
20%
Breast Lung Pancreas 15% Bladder
130,000 Prostate patients Advanced H&N per year Esophageal 10%
AVM Liver CNS 5% Re-irradiation
Pediatric
Percentage of Patients Treated with proton Therapyproton with Treated ofPatientsPercentage 0% Ocular 2010 2015 2020 2025 2030 Skull based
Flat +5 rooms/year - 23k pts 10% CAGR - 45k pts 15% CAGR - 77k pts 20% CAGR - 130k pts
66 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Growth opportunities Critical elements for future growth of proton business
Services Excellence Unique Integrated FLASH* Leadership • Onsite and Remote Solution • Pre-clinical Studies • Predictive and proactive • Innovation in Hardware, • Goal: First in human deep- seated tumor treatment • Tech Enabled Services Software and Workflow • IP Protection
67 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY FLASH therapy is under preclinical research and not available for commercial sale. Unique integrated solution: hardware innovation
ProBeam 360° Single Room & Multi-room • ProBeam 360° – a system designed for next-generation proton therapy – Multiroom configuration introduced ASTRO 2019 – Occupies 30% smaller footprint and 50% less volume, leading to 25% lower vault construction cost
• 360 degree gantry ProBeam 360° System Configurations – Important for adaptive therapy, proton SBRT, and next-generation therapies such as proton arc and ultra-high dose rate treatments
• USA and EMEIA – primary growth for single room
• China – primary growth for multi-room Single-Room Single-Room Expandable Multi-Room
68 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Unique integrated solution: software innovation
RapidScan™ RapidPlanTM PT • Minimizes impact of patient • Higher quality plans in a fraction of the time motion on treatment accuracy – Clinical centers reported that it took them – Allows delivery of each field 1 to 8 hours to generate the original plans, within a single breath-hold while RapidPlan PT took less than 10 minutes (under 5 seconds)* for most patients – Empowers proton SBRT and improves Plan quality treatment accuracy 60 improvement
50
– Simplifies conventional procedures ) required to treat moving tumors Gy 40
30 – Increases the number of patients who 20
can comply with breath-hold treatments ( dose Mean 10
– Reduces treatment time without 0
Larynx
C. Parotid C. Sub. OralCavity Pharynx Esophagus Glottis sacrificing quality I. Parotid
Benchmark plans Knowledge-based plans
69 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY *for targets <5cm in diameter, with standard fractionated dose and beam arrangement. RapidPlan PT Rapidly expanding model-building proton community
Brain Model by NRG Craniopharyngioma Model by CCHMC
H&N Model by VUMC Liver Model by Varian
70 Base of Skull Model by PSI Gynecologic Model by Glasgow FOR INVESTOR USE ONLY Services excellence Platform & operational performance Technical Training Field Service Engineers & In-House BioMedical
Efficient Maintenance Service Software Tools 15% & Remote Services
Optimal Spare Parts Revenue Global Supply Chain Integration CAGR & Economizing Inventories FY20-FY24 Installation >> Services New Sites Service Transition
Services Marketing One Varian Service Value Proposition
71 FORVARIANFOR INVESTOR INVESTOR CONFIDENTIAL USE USE ONLY ONLY – INTERNAL USE ONLY FLASH Leadership: Ultra-high dose delivered in less than 1 second, in 1 to 3 treatments FLASH Range 40 Gy/sec – 120 Gy/sec ProBeam Research Mode
Per min 720,000 cGy FLASH
ProBeam 10,000 cGy
TrueBeam 2,400 cGy
Clinac 400 cGy
0 cGy 100000 200000 300000 400000 500000 720000
72 FOR INVESTOR USE ONLY FLASH therapy is under preclinical research and not available for commercial sale. FLASH Therapy Dee Khuntia, M.D., Chief Medical Officer FLASH Therapy – Hottest topic in cancer treatment
74 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY FLASH therapy is under preclinical research and not available for commercial sale. FLASHFORWARDTM CONSORTIUM Manchester, UK June 11, 2019
75 FORFOR INVESTORINVESTOR USEUSE ONLYONLY FLASH therapy is under preclinical research and not available for commercial sale. Varian FLASHFORWARD™ Program
First Investigations into Ultra-high Dose Stanford University University of Maryland Cincinnati Proton Rates Medical Center Dept of Radiation Oncology Therapy Center
Electron FLASH Toxicity First Proton FLASH First Proton FLASH and Tumor Control Studies Toxicity Study Tumor Control Study
2014 2015 2016 2017 2018 2019
Varian modified a non-clinical Clinac to study ultra-high dose rates using electrons IP IP IP
Favaudon et al., Varian filed First Patent Varian filed an Varian granted 5 Sci. Transl. Med., for FLASH - Radiation additional 14 patents U.S. patents for 16 Jul 2014 therapy systems and in the U.S. and 9 FLASH innovations methods for delivering counterpart filings 20+ patents pending doses to a target internationally volume > 4 Gy/sec U.S. No. 9,855,445
76 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY FLASH therapy is under preclinical research and not available for commercial sale. Therapeutic window Increasing the effective ionizing radiation dose by 10% 1 could increase tumour control rates by 5-30% FLASH therapy potential:
• Improving Normal Tissue Complication Probability (NTCP) TCP NTCP • While maintaining Tumor Control Probability
Therapeutic (TCP) window
• Thereby widening the therapeutic window Probability
Dose
(1) Sharma, R. A., Plummer, R., Stock, J. K., Greenhalgh, T. A., Ataman, O., Kelly, S., Wedge, S. R. (2016). NATURE REVIEWS CLINICAL ONCOLOGY, 13 (10), 627-642. doi:10.1038 nrclinonc.2016.79 VARIAN CONFIDENTIAL/ PROPRIETARY: DISCLOSED SOLELY ©2019. VARIAN MEDICAL SYSTEMS, INC. For immediate recipient’s use only. 77 FORFORFOR INVESTOR INVESTORIMMEDIATEINVESTOR USE USEUSE RECIPIENT ONLY ONLYONLY ONLY FLASH therapy is under preclinical research and not available for commercial sale. FLASH resulted in improvement in survival along with reduction in skin toxicity Normal tissue toxicity studies 52% 20% reduction in dermatitis* improvement in survival with FLASH vs. with Flash vs CONV at Conventional (20 Gy) ,
17.5Gy p value=0.02 Surviving Surviving Fraction *Average dermatitis scores
Survival (After whole-thoracic irradiation, hazard ratio of 2.23 and DERMATITIS p value of 0.023)
78 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Source: Varian proprietary data FLASH therapy is under preclinical research and not available for commercial sale. FLASH reduces differential gene expression normally observed with radiation Normal Lung Tissue therapy Conventional FLASH Different genes are up or down Protons Protons regulated when comparing treatment groups versus the (untreated) control group. 1,294 15 37 UP 639 13 40 DOWN FLASH Protons have a gene expression profile closer to the (untreated) control group. 24 hr
Up-regulated genes
7979 FOR INVESTOR USE ONLY Down-regulated genes FLASH therapy is under preclinical research and not available for commercial sale. Cincinnati FLASH induces infiltration of CD3+ cells immune cells in mice Proton Therapy Center
ControlControl FLASHFLASH Proton ConventionalConventional Proton
Dark spots represent Tumor Core CD3+ cells
Control FLASH Conventional
Green spots Tumor Core represent CD3+ cells
80 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY FLASH therapy is under preclinical research and not available for commercial sale. Multifaceted FLASH Strategy
Mechanism of Action Safe & Effective Treatments Advocacy & Reimbursement
81 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY FLASH therapy is under preclinical research and not available for commercial sale. Varian FLASH Treatment Delivery Delivered 18 Gy at 100 Gy/s in 180ms – film target for mice irradiations
82 FORFORFOR INVESTORINVESTOR INVESTOR USEUSE USE ONLYONLY ONLY FLASH therapy is under preclinical research and not available for commercial sale. Varian Unique Integrated FLASH Solution
Longitudinal patient Intimate knowledge and FLASH data of system and ARIA biology parameters to build effective FLASH Treatment Planning Eclipse
Powerful Clinical Accelerator to ensure healthy tissue FLASH dose rates SC250
Accurate treatments Image Guidance UHDR Scanning & Beamline Iterative CBCT FLASH Dosimetry
83 FORFORVARIAN INVESTORINVESTOR CONFIDENTIAL/ USEUSE ONLYONLY PROPRIETARY: DISCLOSED SOLELY FOR IMMEDIATE RECIPIENT ONLY FLASH therapy is under preclinical research and not available for commercial sale. Varian FLASH intellectual property Global leader in FLASH innovation
Patents Issued patents in 25+ applications technologies to 5 support particle FLASH therapy Innovation Leader 41 Driving industry trends for 5+ Operational Proton Therapy decades Rooms
84 84 FORFOR INVESTORINVESTOR USEUSE ONLYONLY FLASH therapy is under preclinical research and not available for commercial sale. Publications 2019 (FLASH) – National & International Meetings
• Girdhani, Parry et al – FLASH: a novel paradigm • Katsis, Parry et al – Treatment planning AACR changing tumor irradiation platform that enhances AAPM and dose monitoring for small animal proton March 29 – therapeutic ratio by reducing normal tissue toxicity July 24-29, FLASH irradiations and activating immune pathways April 3, 2019 2019
• Abel, Parry et al – Planning and Delivery of • Abel et al – Characterization of radiation induced PTCOG FLASH in a clinical ProBeam: A preclinical study ASTRO lung fibrosis and mode of cell death using single and multi-pulsed proton FLASH irradiation June 10-15, • Busold, Heese et al – Proton beam diagnostics September 2019 for ultra-high dose rate irradiations 15-18, 2019 • Rama et al – Improved tumor control through T-cell infiltration modulated by ultra-high dose • Magliari, Perez et al – Ultra-high dose rate rate proton FLASH using a clinical pencil beam proton treatment planning scanning proton system
• Ku, Parry et al – Oral Presentation: Molecular • Proton FLASH: A novel paradigm changing tumor ISRS profiling of high dose irradiated tissues identifies Publications irradiation platform that enhances therapeutic ratio June 9-13, differential gene expression profiles between by reducing normal tissue toxicity and reducing conventional and high dose “FLASH” protons. inflammatory pathways, Girdhani , et al – Publication 2019 finalized and prepared for submission • A Review of FLASH Radiotherapy: The Past, Present, and the Future, Khuntia et al – In preparation
85 FORFOR INVESTORINVESTOR USEUSE ONLYONLY FLASH therapy is under preclinical research and not available for commercial sale. ProBeam global footprint expansion
27 82 ProBeam Total Sites Rooms 11 41 Operational Operational Operational Centers Centers Under Development Sites Rooms1 86 FOR INVESTOR USE ONLY (1) Number of Operational Rooms may not sum up to the total number on the map due to some sites having rooms which are under development. Proton Solutions priorities
Strong Orders Pipeline Leverage global Varian commercial footprint. Build on strong market response to product launches. Magnify FLASH consortium influence.
Scaling the Business Supply Chain, Manufacturing, Installation, Training, Services
Path to Margin Expansion Robust productivity roadmap Profitability Services revenue growth Operational Excellence Total lifecycle world class execution. Initiate MES manufacturing infrastructure. Launch remote services tool.
Delivering Innovation Roadmap ProBeam 360, Enable first in human FLASH treatment, Proton planning competitive 87 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY superiority, RapidPlan PT Emerging Businesses Kolleen T. Kennedy, President, Proton Solutions and Chief Growth Officer
FOR INVESTOR USE ONLY Cardiac Radioablation
Innovating in the space of cardiac radioablation is an extension of our core business in radiation medicine Non-invasive targeting and single- Opportunity to play in a $420M dose SBRT for patients with VT ablation market refractory Ventricular IP acquisition from CyberHeart Tachycardia (VT) puts Varian in strong market position to advance cardiac radiation therapy care
89 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Ventricular tachycardia (VT) Most common cause of death in USA
Abnormal electrical signals in the • Ventricular Tachycardia is characterized ventricles drive VT by frequent bursts of rapid heartbeats, which can end in sudden death
• 3 Treatment Options − Implantable Cardiac Defibrillator − Antiarrhythmic Drugs − Catheter ablation
• Physically and Socially disabling
90 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Top global causes of death Cardiac #1 and Cancer #2
war pregnancy & birth medical complications murder heart & undetermined events circulatory disorders mental health disorders transport accidents Radiation cancer suicide musculoskeletal disorders Medicine diabetes respiratory disorders non-transport accidents Growth infections kidney disorders Opportunity digestive disorders nervous system disorders
91 FORFORVARIAN INVESTORINVESTOR CONFIDENTIAL/ USEUSE ONLYONLY PROPRIETARY: DISCLOSED SOLELY FOR IMMEDIATE RECIPIENT ONLY Cardiac radioablation by the numbers
VT incidence 1M in US1
VT deaths/year 300K in US2
VT catheter ablations 60K per year1
Current ablation procedures reduction in procedure last 4-9 hours… the most burdensome time on Varian for electrophysiologists 90% TrueBeam and EDGE
92 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY 1Based on company estimates 2Tang, PT, Card Electrophysiol Clin, 2017; 9(4):693-708 Varian cardiac radioablation solution strategy
Targeting Platform EclipseTM Treatment Planning TrueBeam® / EDGE® Linac
Identify ablation volume Create highly-conformal SBRT plan Deliver fast, accurate treatment
• Establish clinical consortium to inform product development • Develop end-to-end solution for non-invasive cardiac radioablation • Conduct clinical trial to demonstrate safety and effectiveness
93 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Cardiac radioablation efficacy early results Washington University, St. Louis, MO
Initial 5 patients followed by 19 patient trial >>> 89% survival at 6 months
94 FORVARIAN INVESTOR CONFIDENTIAL USE ONLY – INTERNAL USE ONLY Cuculich PS et al, NEJM 2017 Dec 14;377(24):2325-2336 Cardiac radioablation program priorities
Establish Program Team Business model definition. Bridge two specialties to improve standard of care.
Deliver Innovation Roadmap Unique, integrated, workflow optimized hardware & software platform solution Path to Design Global Clinical Trials Leverage Medical Affairs resources Product and Key Opinion Leaders expertise Launch Regulatory Clearances Achieve IDE and PMA approvals from FDA
Reimbursement & Market Access Ensure clinical trial endpoints meet evidentiary needs for coverage 95 FORVARIANFOR INVESTOR INVESTOR CONFIDENTIAL USE USE ONLY ONLY – INTERNAL USE ONLY Interventional Solutions Gary Bischoping, President, Interventional Solutions* Frank Facchini, M.D., Chief Medical Officer, Interventional Solutions
FOR INVESTOR USE ONLY *Effective December 1, 2019 Interventional Oncology
Right-to-win, building a global Opportunity to become the first commercial footprint & strong core and only provider with an end-to- competencies Opportunity to win in $1.1 billion end suite of integrated hardware interventional oncology market* and software solutions for Enables us to expand Varian’s interventional oncology footprint across the cancer care continuum
97 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY
*Based on primary and secondary research conducted by Varian Building an interventional Ablation and Embolization oncology solutions business Worldwide Market Value ($M)** In millions $1.1B 2022 Market Size* $1,200 $1,050 Based on worldwide market for ablation and embolization products $1,000 $868 369 ROW $800 334 $19M FY19 Revenue Contribution** $600 140 China
Combined calendar year 2018 revenues of $51M for 86 Endocare, Alicon and Boston Scientific beads portfolio $400
541 US $200 448
Outperformed Plan in FY19 $0 2019 2022 On track to be accretive to GAAP and Non-GAAP EPS in FY20 US China ROW
*Based on primary and secondary research conducted by Varian 98 FOR INVESTOR USE ONLY **Endocare, Alicon and Boston Scientific beads portfolio were acquired in FY19; represents revenue contribution since closing of transactions Interventional oncology is rapidly becoming the fourth pillar of oncology treatments Oncology Treatment Ecosystem
Medical Oncology Surgical Oncology Radiation Onc. Interventional Onc.
- Chemotherapy - Resection - Radiation - Embolization - Immunotherapy Therapy - Ablation
SYSTEMIC LOCALIZED LOCALIZED LOCALIZED
INVASIVE MINIMALLY MINIMALLY INVASIVE INVASIVE
99 FOR INVESTOR USE ONLY Overview of interventional oncology treatment modalities
Thermal Ablation Embolization
Use of concentrated thermal energy to either Tiny particles block tumor’s access to blood, heat/burn or freeze tumor causing tumor to “starve”
Low Temperature High Temperature Embolization Only Embolization + Loco-regional RT/Chemo Drug Eluting Microwave (MWA) Radio- ✓ ✓Bland Beads ✓ Chemo Cryotherapy Embolization ✓ Embolization Embolization (“TARE”) Radiofrequency (RFA) (“DEB-TACE”)*
Tumor burned; spherical heat zone forms
Beads block blood “Iceball” forms
✓ Varian assets
100 FOR INVESTOR USE ONLY *Not approved for sale in all countries Tumor types addressed by Varian’s interventional oncology portfolio
Ablation Embolization
Modality Description Tumor Types Addressed Modality Description Tumor Types Addressed
Extreme cold kill Embo bead + controlled Cryo Drug-eluting beads* via liquid N2 or argon release of chemo Kidney Bone Breast Liver
Microwave EM waves Chemoembo Embo bead with (300MHz-300GHz); catheter-based (MWA) thermal kill Liver Lung Bone Thyroid (cTACE) delivery of chemo Liver
Radiofrequency Electrical current via radio wave; Bland Embolics Embolics (RFA) Liver Uterus Prostate Emergent thermal kill Liver Lung Bone Thyroid Hemorrhage
Embo bead with Radioembo (TARE) radioisotope inside Liver Tumor types addressed by Varian’s portfolio
101 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY *Not approved for sale in all countries Varian’s vision for interventional oncology solutions business
Ablation • Cryoablation • Microwave ablation
Software Sales & Growth & • Ecosystem of Distribution Expansion interventional • Scale up of sales • Global market Embolization oncology planning and distribution opportunity • Bland beads and decision capabilities support software • Significant growth • Chemo-embolization opportunity in emerging markets like China
102 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Next steps in building Varian’s interventional oncology solutions business
global commercial team including Build direct sales and distribution network
cryotherapy and microwave product Expand sales into new markets worldwide
in R&D and extend Varian innovation Invest legacy into interventional oncology market segment
Varian software expertise to build Leverage differentiated solution suite offerings
103 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Financial Update Gary Bischoping, President, Interventional Oncology Solutions* J. Michael Bruff, Chief Financial Officer*
FOR INVESTOR USE ONLY *Effective December 1, 2019 Historical P&L financial trends Key financial metrics • Company’s long-term strategy and innovation cycles driving growth VARIAN NON-GAAP1 acceleration in Oncology Orders and total $M FY152 FY16 FY17 FY18 FY19 company Revenues and Gross Margin dollars Revenues $2,491 $2,594 $2,619 $2,919 $3,225
Y/Y % 4% 1% 11% 10% • Oncology orders trending upwards; from 1% Gross Margin $1,032 $1,109 $1,119 $1,280 $1,391 year-on-year in FY16 to 9% year-on-year in % of Revenues 41.4% 42.8% 42.7% 43.9% 43.1% FY19 Y/Y% 7% 1% 10% 9% SG&A $414 $442 $514 $534 $601 • Gross margin as % of revenues expanding FY15 to FY18; investments in software % of Revenues 16.6% 17.0% 19.6% 18.3% 18.6% capabilities, tariffs and certain proton project R&D $195 $200 $210 $234 $248 cost over runs impacting FY19 % of Revenues 7.8% 7.6% 8.0% 8.0% 7.7% Operating Earnings3 $422 $467 $395 $513 $542 • Investing in dedicated software, emerging % of Revenues 16.9% 18.0% 15.1% 17.6% 16.8% market and upgrades sales teams Y/Y% 11% (15%) 30% 6%
1 • Continued investment in R&D to drive future Diluted EPS ($) $3.30 $3.67 $3.26 $4.42 $4.63 growth Note: Unless noted otherwise, all ‘Orders’ reflect Gross Orders, all growth rates are in dollars and year on year; year on year comparisons are on numbers presented as-is (1) Reflects ‘from continuing operations attributable to Varian’ • Operating earnings dollars growing in each of (2) P&L does not reflect the net impact of the change in service order policy and ASC 606 (3) Excl. $38M proton AR reserve charge in FY17 the FY17 operating earnings growth was -7% and 16.5% as % of revenues the last 2 years
105 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Balance sheet and cash flow Deploying capital to support growth
Cash & Cash Equivalents ($M) Total Debt ($M) • Balance between organic and inorganic
$900 $750 initiatives and returning capital to shareholders
$800 $600 − $1.8B allocated since 2017, evenly between R&D, acquisitions and buybacks $700 $450
$600 $300 • Cash flow from operations being deployed to $500 $150 support product transition and business momentum $400 $0 FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19
Cash Flow from Operations ($M) Acquisitions ($M) • Strong liquidity profile to support growth and investment in the business $500 $750 − ~$530M of cash, and ~$800M available under $450 $600 $1.2B facility $400 $450
$350 $300
$300 $150
$250 $0 FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19
106 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Why did Varian adopt an Economic Profit measure?
Ownership Culture Decision Making Balance Value Driver
Encourages Aligns planning and Balances pursuit of Shows a strong management to decision-making with growth, profitability relationship to think and make the continuous and cash flow with changes in share decisions like pursuit of value the required return price and total share owners creation on new investment return (TSR)
107 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Two consecutive years of VVA expansion Changes since joining Varian in 2017
1 Focus on driving long-term growth and value creation (VVA)
2 Reset capital allocation prioritization 3 Enabled strategic planning process
Strengthened and evolved CFO organization 4
108 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Revenue trends Strong revenue momentum globally
Revenue and Revenue Growth Long-Range Target Assumptions
8% to 11% CAGR • Continuing to invest in innovation 9% to 12% Y/Y* • Varian will grow faster than the global market (7% to 9% 10% Organic) • Software and service revenue as a % of total 11% Y/Y 4% 1% Y/Y company revenue to grow 3pts to 5pts Y/Y Y/Y • Recent acquisitions mix as % of revenue to increase to mid to high single digits
FY16 FY17 FY18 FY19 FY20E FY24E
*FY20 revenues guidance is 9% to 12% including FX and FY19 acquisitions Bars indicate revenue dollars
109 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Disclaimer: Forecasted CAGR’s and financials are current estimates of management’s targets and should not be construed as formal guidance Operating margin trends Operating earnings to grow faster than revenue
Operating Earnings Margin Long-Range Target Assumptions
20% to Operating margin expansion driven by combination of gross 22% 1.5x to 1.7x margin improvements and G&A scaling: Revenues CAGR • Higher margin product, software, and services mix • Recently acquired businesses revenue mix increasing 17.5% to with gross margins accretive to company average 18.5% 17.6% 16.8% • Proton profitability improving; services mix increasing 18.0 % 16.4% • Scaling G&A while investing in infrastructure to support sustained company growth • Continuing to invest in R&D, estimating 8% to 9% as a % of revenues FY16 FY17 FY18 FY19 FY20E FY24E
Bars indicate operating earnings dollars
110 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Disclaimer: Forecasted CAGR’s and financials are current estimates of management’s targets and should not be construed as formal guidance Cash flow from operations trends Working capital management to drive cash flow conversion
Cash Flow from Operations Long-Range Target Assumptions 65% to 70% of EBITDA • Continuous improvements in cash flow through effective working capital management: − Increase 'speed to pay' to offset revenue growth impact on receivables $450M to − Maintain inventory levels necessary to support product mix $455M $500M and order growth momentum $399M $371M $356M • Assumes a tax rate of 22.5% to 23.5% • Assumes scaled growth in capital investment
FY16 FY17 FY18 FY19 FY20E FY24E
Bars indicate cash flow from operations dollars
111 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Disclaimer: Forecasted CAGR’s and financials are current estimates of management’s targets and should not be construed as formal guidance *Cash conversion defined as cash flow from operations divided by Non-GAAP earnings before interest taxes depreciation and amortization (EBITDA) Varian consolidated Guidance for fiscal year 2020
VARIAN $M FY18 Actual FY19 Actual FY20 Guidance • Guidance considers projected market growth and continued momentum of Varian’s portfolio Revenues $2,919 $3,225 $3,515 to $3,612
Y/Y % 11% 10% 9% to 12% • Guidance Assumptions
Organic Y/Y %1 7% to 9% − Non-GAAP effective tax rate of 22.5% to 23.5% − Weighted average diluted share count of 92 million Non-GAAP Operating Earnings as a 17.6% 16.8% 17.5% to 18.5% percentage of Revenues − Currency rates as of the beginning of fiscal year 2020 − Includes expected net impact of all tariffs currently in Non-GAAP net earnings per share- $4.42 $4.63 $5.30 to $5.45 effect diluted ($)2 − Includes acquisitions announced to date
Cash Flow From Operations $455 $372 $450 to $500
(1) Organic growth excludes the year over year impact of FX and growth from the acquisitions of CTSI, Endocare, Alicon and the Boston Scientific bead portfolio. (2) These values are presented on a non-GAAP basis. We have not provided a reconciliation of non-GAAP guidance measures to the corresponding GAAP measures on a forward-looking basis due to potential significant variability and limited visibility of the excluded items.
112 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY Q&A
FOR INVESTOR USE ONLY Closing Remarks Dow Wilson, President & Chief Executive Officer 70 years of leadership in medical technology Varian Medical Systems Created Introduced TrueBeam system for radiotherapy Spin-off of Varian and radiosurgery Semiconductor Varex spin-off Equipment Associates & Varian, Inc. 2017 Varian Associates Introduced first linac 2010 2016 Founded 1999 Silicon Valley 1.0 company 1960 1948 Strategy Assessment
Where can we make the biggest impact?
Edward Russell Sigurd William How can we generate Ginzton Varian Varian Hansen co-founded above market growth BS, Stanford Pilot with first linear Varian with University Pan American accelerator, the brothers in and long-term value? 1925 Airways circa 1949 1948
115 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY In summary, we are…
a
a Varian Medical Systems Created Spin-off of Varian Innovating in radiation therapy Semiconductor Equipment Associates & Varian, Inc. 1999 b Leveraging artificial intelligence, machine learning and cloud solutions Growing emerging businesses and Varian Associates Founded technologies Silicon Valley 1.0 company 1948 Improving operational, financial, and capital 116 FORFOR INVESTOR INVESTOR USE USE ONLY ONLY efficiency VISION A world without fear of cancer
MISSION To combine the ingenuity of people with the power of data and technology to achieve new victories against cancer
CULTURAL BELIEFS
FOR INVESTOR USE ONLY