VARIAN MEDICAL SYSTEMS 2012 ANNUAL REPORT VARIAN MEDICAL SYSTEMS, INC. SYSTEMS, MEDICAL VARIAN Our mission hasn’t changed. 2012 ANNUAL REPORT 2012 ANNUAL FOCUSING ENERGY ON SAVING LIVES VARIAN MEDICAL SYSTEMS, INC. We are just finding better ways to share it … TWO THOUSAND & TWELVE ANNUAL REPORT We are just finding better ways to share it … 1 VARIAN MEDICAL SYSTEMS, INC. and even more lives to share it with. 2 TWO THOUSAND & TWELVE ANNUAL REPORT and even more lives to share it with. At Varian Medical Systems, we are focusing energy on saving lives. We are continuing to develop and deliver a diverse range of products to help save millions of lives every year, around the world. Built on a more than 60-year history of innovation and expertise, Varian harnesses the power of X-ray energy to deliver state-of-the-art solutions that improve the quality of life for people. We partner with customers, clinicians, and research institutions to ensure that we can continually provide the critical technology, exceptional products, and outstanding services needed to revolutionize treatments for cancer, enhance the science of imaging, and secure ports and borders. 3 VARIAN MEDICAL SYSTEMS, INC. “Varian looks to the future with excitement and confidence.” $3.1B 2012 TOTAL NET ORDERS To Our Stockholders, business, which generated some $750 million—more than 30 percent Varian Medical Systems finished fiscal year 2012 on a strong note of the company’s total orders for the year. Service has become after a challenging start that helped to bring out the best in the increasingly important to Varian for recurring revenues, and we company. We achieved solid growth in orders, revenue, and net expect to develop it across all of our businesses. earnings, and another record setting backlog that positions Varian Our Oncology software services and products generated revenues of for continued growth in fiscal 2013. $550 million in 2012, making Varian the world’s largest oncology In keeping with the company’s long-standing culture, we continued software provider. Today, Varian has more than 3,300 EclipseTM to focus on innovation. At the 2012 ASTRO meeting, we showcased sites and over 3,000 ARIA® sites around the globe. We set the stage the new EdgeTM radiosurgery suite*—a fully integrated dedicated for further growth with the year-end introduction of our FullScaleTM system for advanced radiosurgery using new real-time tumor tracking oncology IT solutions that enable the virtual deployment of our and motion management capabilities. This show-stopping system software tools within healthcare systems of any size, from a one- represents the first really disruptive technology dedicated to radio- room clinic to a multi-site hospital. We expect these IT solutions to surgery in close to two decades. It combines our most advanced help grow the market by facilitating more rapid adoption of accelerator technology with Calypso® real-time tumor tracking and advanced treatment techniques. TM our new PerfectPitch couch for fast, accurate delivery of stereo- In fiscal 2012, following Siemens Healthcare’s decision to exit the tactic radiosurgery. We hope to see it become a game-changer, medical linear accelerator market, we announced the formation of a particularly in the fight against lung and liver cancer. strategic partnership with Siemens. Siemens will provide software Varian’s versatile TrueBeamTM platform continued to gather momen- connectivity for linking its installed base of 2,000 linear accelera- tum as the most successful product launch in the company’s history. tors and imaging systems to Varian’s ARIA information system, We ended the year with some 645 orders and about 330 installations giving current Siemens customers an easier path to making a Varian complete or in progress since its introduction in 2010. TrueBeam accelerator their next purchase. Varian and Siemens will also repre- represented about half of our high-energy linear accelerator orders sent one another’s products in selected markets, helping to extend during 2012. Combined with Varian’s software and RapidArc® Varian’s reach into underserved international regions. R&D teams technology for very fast, ultra-precise and cost-efficient dose deliv- from both companies will collaborate on new imaging and treatment ery, TrueBeam is helping to redefine performance standards in solutions. We are excited about the potential that this strategic part- cancer care. nership adds for long-term growth in the oncology market. Varian’s installed base of medical linear accelerators reached nearly Our X-Ray Products segment produced another year of growth 7,000 by the end of 2012. This, together with our software and service thanks to the successful introduction of new tubes and digital contracts, helped to produce double-digit growth in our service image detectors for medical diagnostics, dentistry, veterinary care, 4 TWO THOUSAND & TWELVE ANNUAL REPORT Dow Wilson TIM GUERTIN Chief Executive Officer Chief Executive Officer 2005–2012 Vice Chairman of the Board security, and industrial inspection. New products have helped Leadership Transition Varian to grow its share of the X-ray components market. The end of fiscal year 2012 marked the end of Tim Guertin’s seven- We extended our PaxScan® panel offerings to improve workflow year tenure as president and CEO. With Tim’s retirement, Dow and cost efficiency with wireless capability, faster processing, greater Wilson, who spent the past year as chief operating officer, commenced sensitivity and dose efficiency, larger imaging areas, and more rugged serving as the company’s president and CEO at the beginning of design. We also expanded our line of compact, PaxPowerTM X-ray fiscal 2013. tubes for high-throughput digital imaging on portable surgical CT During Tim’s tenure as president and CEO, Varian’s revenues and and interventional systems, and incorporated our patented anode- earnings grew by more than 100 percent. More importantly, the end-grounded technology into new replacement tubes that offer company successfully developed significant new products in radia- lower life-cycle costs on certain GE CT scanners. tion oncology and X-ray imaging. Tim is continuing to serve the Varian acquired InfiMed of Syracuse, NY, enabling us to begin company as vice chairman of the Board. offering image processing software and workstations. The addition of Dow joined Varian in 2005 as president of the Oncology Systems this business should make it faster and easier for X-ray equipment man- business. Under his leadership, this business doubled its earnings by ufacturers to incorporate our technology into their next-generation expanding services, introducing game changing new products, imaging products. It also sets the stage for the development and pushing into radiosurgery, and entering into important new strate- growth of a service business within our X-Ray Products segment. gic partnerships. As chief operating officer, he became immersed in Varian’s Particle Therapy business booked two orders totalling the growth of all of Varian’s businesses. Now, as CEO, he is focusing some $120 million during fiscal 2012 to equip new proton therapy our company on five major strategic initiatives: innovation, global centers in Saudi Arabia and Russia. We also announced an $83 mil- growth, building software and service, commercializing protons, lion contract to equip a facility at Emory University in Atlanta, and and operational excellence. have been contracted to provision another center at the University of With the successful continuation of strong management, leading Maryland. We will book these contracts as orders once the projects technologies in all its businesses, and 6,000 people globally sharing are financed. Our first installation at the Scripps Proton Therapy a vision to help save millions of lives every year around the world, Center in San Diego is nearing completion with patient treatments Varian looks to the future with excitement and confidence. We thank scheduled to begin in fiscal 2013. you for your ongoing support. Our Security and Inspection Products business achieved roughly $90 million in orders and made a profitable contribution to the Dow Wilson tim guertin company’s performance in 2012. The business also continued to Chief Executive Officer Chief Executive Officer 2005–2012, advance Varian’s technology for high speed materials discrimination. Vice Chairman of the Board *The Edge radiosurgery suite is pending 510(k) clearance from the U.S. Food and Drug Administration (FDA) and not yet available for sale in all markets. 5 VARIAN MEDICAL SYSTEMS, INC. Focusing energy on saving lives. Treating lung cancer XIUFEN REN / Lung Cancer Survivor When she was diagnosed with non-small cell lung cancer in 2008, Xiufen Ren, 65, decided against surgery in favor of other treat- “I am so pleased ments. After suffering severe side effects from chemotherapy, she turned to Dr. Guangying Zhu who treated her with radiotherapy and I just want to using Varian technology at the Beijing Cancer Hospital. “Dr. Zhu said I would have seven weeks of radiotherapy. I didn’t feel any unpleasant side effects during my treatments—just the express my thanks opposite, I felt better and better after each course.” During a checkup at the end of 2012, Xiufen Ren was told she is still cancer-free. “I am very lucky. I have great family members who to Dr. Zhu and love me and supported me during this diagnosis, one of the most difficult periods in my life. Now, I can enjoy family gatherings, playing Taiji, and singing songs with a group in my leisure time. Varian for helping Life is really beautiful.” To learn more about Xiufen Ren and other patients who were to save my life.” touched by Varian technology, please visit our expanded online annual report at: www.varian.com/OAR2012 6 TWO THOUSAND & TWELVE ANNUAL REPORT RADIOTHERAPY $ TOTAL2.2B ONCOLOGY ANNUAL REVENUES 7,000 LINEAR ACCELERATORS INSTALLED 7 VARIAN MEDICAL SYSTEMS, INC.