Oncology and X-Ray products company, Varian Medical Systems (VAR) recently revealed that it has inked a definitive agreement to acquire Calypso Medical Technologies, a privately held, Seattle-based producer and supplier of offerings for timely tracking and motion management of tumors during radiotherapy and radiosurgery.
As per the terms of the deal, which is expected to close in early October 2011 dependent upon fulfillment of closing clauses, Varian will pay about $10 million to acquire Calypso. In addition, it may incur possible earn-outs dependent on the level of sales of Calypso offerings during the upcoming 2.5 years.
Calypso has sales of about $15 million per annum. It has an installed base of over 110 systems in Europe and North America. Its tracking mechanism has been utilized to treat over 10,000 prostate cancer victims. Varian is expected to integrate the Calypso operations into its Oncology Systems strategic business unit.
The company expects the acquisition to be slightly dilutive to earnings per share in fiscal 2012. The takeover includes Calypso’s intellectual property consisting of about 90 up-to-date or pending patents.
As per a Varian spokesperson, the company will be able to provide oncology centers with timely, non-ionizing tumor tracking mechanisms for improving the accuracy of treatment. The newly acquired products complement Varian’s know-how in the realm of motion management, including its TrueBeam system. A representative of Calypso added that motion management is a vital element in fighting cancer so that victims can benefit from radiation therapy without damaging adjoining healthy cells.
The Calypso know-how integrates Global Positioning System (“GPS”) for the Beacon electromagnetic transponders and Body know-how that accurately and continuously monitors target location to enhance accuracy of prostate cancer therapy. The transponders are embedded in the prostate and then tracked using 4-D localization so that beams may be accurately delivered to tumors during cancer treatment using Varian’s TrueBeam system.
In addition, the Food and Drug Administration (“FDA”) has given investigational device exemption (“IDE”) approval to Calypso for its clinical study on timely monitoring of lung cancer tumors during oncology therapy.
Calypso Medical has its own tumor localization know-how intended for body-wide cancers frequently treated with radiation. The system uses tiny, non-ionizing implanted devices known as Beacon electromagnetic transponders. Calypso’s system monitors non-stop and with precision the location of cancerous tumors. This permits safe management of radiation for oncology therapy without damaging adjoining healthy tissue.
Varian is a leading manufacturer of integrated radiotherapy systems for treating cancer and a premier supplier of X-ray tubes for diagnostic imaging applications. The company operates in a technology-driven environment where success depends on the use of new technology, product development and upgrades. In the radiation oncology market, Varian competes with Accuray (ARAY).
Varian is poised to increase its market share in radiation oncology. It is currently enjoying a healthy demand for its coveted RapidArc and TrueBeam radiotherapy technology, which is meaningfully contributing to its oncology net order growth.
However, Varian aggressively competes with well-funded competitors for a limited pool of sales volume. Further, uncertainties stemming from health care reform and a still weak hospital capital spending environment across many developed countries, especially in Europe, provide headwinds. We currently have a Neutral long-term rating on Varian supported by a short-term Zacks #3 Rank.
