by Lisa Chamoff
, Contributing Reporter | September 07, 2016
From the September 2016 issue of HealthCare Business News magazine
Just as the technology has remained fairly consistent over the decades since Wilhelm Röntgen discovered X-rays in 1895, the market for X-ray tubes, the key component for CT scanners and X-ray systems, has remained relatively quiet.
However, the past year has seen some shifts among the major players, Varian and Dunlee, and the next year will see the introduction of a new one, Richardson Electronics, a longtime tube distributor that is planning to start manufacturing. This is all leading to a shakeup in the market and the possibility of lower prices for replacement tubes.
In May, Varian Medical Systems announced that the company was separating its imaging components business from its oncology business, in order to increase focus on this business and its core oncology business. The new company, which will be called Varex Imaging Corporation, is anticipated to launch by Jan. 1, 2017. “The businesses have continued to develop in their own right,” says Clarence Verhoef, corporate controller, Varian Medical Systems, who is slated to become chief financial officer of Varex. “The board determined this was a good time to separate those, to allow them to make their own decisions about capital deployment and strategic direction.”
While the split will allow Varian to direct its energies toward the development of cancer treatment solutions, it should also help the imaging components business. “The imaging components business is a very customer-centric kind of business,” Verhoef says. “There will be even more dedicated focus on those customers to make sure we’re working closely with them.”
The new company will likely explore expanding its portfolio to include additional components for X-ray imaging, Verhoef says, and will also explore opportunities in industrial imaging, using X-ray to inspect large cargo and products during the manufacturing process, a segment that is growing at a faster rate than medical imaging. Varian sells the vast majority of its products to OEMs, and while a subset of its business includes selling replacement tubes for use on other manufacturers’ systems, Verhoef does not see that side of the business growing substantially.
“The person who wants to hang onto the business is the OEM,” Verhoef says. “That’s their ideal model. I don’t see that changing dramatically. There are good margins in the service contracts.” There has been a perception in the market that Varian has had an advantage over its competitors in the oncology business, because the company made its own X-ray tubes and flat panel detectors. Verhoef says the split will not impact the relationship between the two companies. “Varian will become another OEM customer for us that fits in that category,” Verhoef says. “We will continue to work closely with them on improving product performance.”