Seldom do we come upon a stock that merits such a degree of special consideration for extraordinary reward potential. Varian Medical Systems fits that bill. This company exudes an unusual propensity for not only improving the lives of millions of people, but also for returning uncommon profits for those willing to invest in their technology.

VAR is the world's leading manufacturer of integrated cancer therapy systems, and their mission is to equip the medical community with the latest technology for curing cancer. They have partnered with physicians, scientists, researchers, and others around the world to offer patients the most advanced radiotherapy available. This highly innovative firm has developed and deployed a sophisticated system that is making a real difference in the fight against cancer. For many of the 1.3 million people diagnosed with breast, prostate and other cancers in the U.S. each year, there is encouraging news today.

Better Technology, Better Outcomes

Clinicians at leading institutions are using a new Varian Medical technique that is improving cure rates while reducing harmful side effects. Recent reports on prostate cancer patients show a near 70 percent improvement in treatment response using this method over traditional radiation therapy.

This cutting edge technology has the potential to improve the treatment and cure rates for head and neck, pancreatic, lung and prostate cancers. In breast cancer cases, the technique makes it easier to deliver more consistent radiation doses and avoid the "hot spots" that can occur with conventional therapy. This effective process joins other Varian Medical products and procedures already in service around the world, treating an estimated 100,000 cancer patients each day.

Targeting Cancer

The situation reads like the scenario for a science fiction movie. The enemy is an alien intruder that invades the human body, often with deadly consequences. This enemy comes in many different forms and assumes a bewildering assortment of odd shapes, which can change when it is under attack. In their search for weapons with which to fight back, humans have developed an amazing technology - one that can seek out and identify the enemy as it hides within its intended victim; track and target its location, adjusting to any changes of shape or position; and destroy the invader with an intense beam of radiation that does minimal harm to the host body.

The bad news about this scenario is that the enemy described is an all too real disease - cancer - the second-leading cause of death in the United States after heart disease, and the slayer of millions worldwide every year. The good news is that the weapon described is real, too. It is a new technology called SmartBeam IMRT - Intensity Modulated Radiation Therapy - and it is offering many cancer patients perhaps their best hope ever for successful treatment.

"A Woman Named Sarah"

Take a look at what happens in the hypothetical case of a woman whose name, let's say, is Sarah. She is 42 years old, is married, and has two daughters, ages 12 and 10. She has gone to her primary care physician complaining of a nagging cough and occasional shortness of breath. She appears to be in good health otherwise, exercises regularly, watches her weight, and has never smoked. Nonetheless, chest X rays and follow-up tests confirm that she has lung cancer, the leading cause of death among the known forms of cancer, claiming more victims in the U.S. than breast, prostate, ovarian, and colon cancer combined. She is among the nearly one out of every five victims of lung cancer who neither smoke nor live with a smoker. What's worse, the tumor has been classified as a type that, because of its size and general location, is inoperable using conventional pulmonary surgery.

Other medical conditions make chemotherapy problematic. Like more than half of all the other cancer patients who are treated in the United States, Sarah is advised to undergo radiation therapy, also known as radiotherapy. As recently as five years ago, Sarah's lung cancer would probably have been untreatable with radiotherapy because large doses of high-energy X rays, much like the chemicals used in chemotherapy, inflicted extensive collateral damage to surrounding healthy tissue. To minimize the effects of collateral damage, oncologists often had to limit the treatment dosages, which in turn cut down on the effectiveness of the therapy. This drawback would have been particularly acute in Sarah's case, because lung tissue is especially sensitive to radiation damage and lung tumors are highly resistant to radiation treatment.

Fortunately, Sarah has a new treatment option that has only recently become available. She can be treated at one of the many radiation oncology clinics around the world now using new SmartBeam™ IMRT technology, developed by Varian Medical Systems. SmartBeam IMRT has been compared to shooting at a target with the precision of a high- powered laser. With IMRT, the target area covered by the X-ray beam is narrowed and matched to the shape of the tumor. This enables the oncology team to direct and narrowly concentrate potent doses of high- energy X rays at Sarah's tumor while minimizing complications from hitting surrounding healthy tissue. With SmartBeam IMRT, Sarah's oncology team will put her tumor in a crossfire, targeting it with precisely shaped beams delivered from several directions or angles. This will envelop the tumor in a finely sculpted radiation cloud within the area where the beams intersect.

The Preparation

Before beginning Sarah's treatment, doctors will need digital high- resolution 3D images of her tumor and the surrounding anatomy. With sophisticated diagnostic imaging, the oncology team can establish the exact location and shape of Sarah's tumor. This will make it possible to develop the treatment plan needed to deliver a high enough dose to eradicate the tumor without harming the surrounding tissue.

To obtain the needed images, Sarah's doctors may choose to use Computed Tomography (CT) in combination with Positron-Emission Tomography (PET). With CT scans, thin, low-energy X-ray beams are swept across a tumor-harboring area to generate a number of detailed cross-sectional images, or "slices." For PET scans, patients are injected with glucose marked with a radiotracer such as fluorine-18, which emits positively charged electrons, or "positrons." These positrons interact with surrounding tissues, producing photons that can be detected by the PET scanner. Since rapidly growing cancer cells metabolize glucose up to 20 times faster than healthy cells, the glucose concentrates at tumor sites. Cancer cells that have taken up the marked glucose appear on a PET image as a clearly visible bright spot.

Dealing with Motion

Before imaging commences, Sarah's team has to deal with the problem of tumor motion during imaging. This is especially critical in cases of lung cancer, where oncologists have tumors moving 1.5 to 2 centimeters (nearly an inch) during respiration.

To cope with this, Sarah's oncology team will use Varian's RPM™ Respiratory Gating System to synchronize the CT and PET images with Sarah's breathing cycle. While setting Sarah up for imaging, the team will place a small plastic cube with reflective markers on Sarah's chest. A video camera will track the up-and-down movement of the cube. The X-ray beam from the scanner will be synchronized with Sarah's breathing, so that images are taken only when the lung is in the proper position. Varian's respiratory gating system will come into play again when Sarah is treated so that treatment can also be synchronized with her respiratory cycle.

Treatment Planning

Once Sarah's oncology team has the images needed to begin planning her treatment, they will use Varian's SomaVision™ image processing software to generate three-dimensional views of Sarah's tumor and the surrounding anatomy. The medical team will use the software to mark, or "contour," the 3D images, indicating the area to be treated as well as the organs to be protected.

The next step for Sarah's team will be to prepare her treatment plan. At this point, the radiation oncologist will prescribe the ideal radiation dose for the tumor, as well as maximum dose limits for the surrounding healthy tissue. To determine how the dose will be delivered, Sarah's oncology team uses Varian's Helios™ inverse treatment planning software. Once the dose levels have been entered, Helios goes to work, using its unique algorithms to calculate and devise a detailed treatment plan just as a computer mapping program determines the best route to a destination. The plan includes beam shapes and exposure times as well as electronic instructions that will automate and control the delivery system through 30 to 40 treatment sessions. The next destination for Sarah will be post-planning simulation.

Simulation

Prior to actually treating Sarah, her oncology team will first conduct a dry run using Varian's new Acuity™ imaging system. This enables the oncology team to properly position Sarah on the table and run through a simulated treatment session. Proper patient positioning is critical to ensure that the tightly focused X-ray beams are targeted accurately. Sarah, like most radiotherapy patients, will be tattooed with small marks that will be aligned with lasers in the treatment room, to ensure that she is in precisely the right spot in relationship to the radiotherapy machine. The Acuity system, which mimics the treatment machine, will enable the medical team to take X-ray images of Sarah in her treatment position, and compare them with reference images from the treatment plan. This will enable the team to fine-tune the plan and verify that it will work as intended.

The Treatment Room

Before Sarah begins the next phase of the IMRT process, let's look at the room in which she will receive her treatment. It measures about 19 feet by 16 feet. In this room is an imposing machine hovering over a futuristic treatment table or couch that might have come from the set of a science fiction film. The machine is a Clinac® medical linear accelerator - linac - manufactured by Varian.

Linacs are critical to the success of IMRT and all other radiotherapy treatments based on X rays. Reaching tumors deep within the body requires intense penetration power with X rays at energies ranging from 4 to 25 million volts (MV). X-ray tubes, such as those in an X-ray machine being used for diagnostic purposes, typically generate X rays at energies between 60 thousand and 150 thousand volts, far short of what is needed. Linacs, on the other hand, originally developed as a tool for smashing atoms and first adapted to medical applications by Varian in 1960, have no problem meeting the energy requirement.

When the power and intensity of linac X-ray beams are applied to tumors over a number of treatment sessions, the accumulated radiation dosage is enough to fatally damage cancerous cells.

To concentrate a dose of radiation on the tumor, Varian outfits its Clinac with a beam-shaping device called a Millennium™ multi-leaf collimator (MLC). An MLC consists of a computer-controlled array of up to 120 parallel and individually adjustable tungsten bars, or "leaves," that move to shape the aperture through which the radiation passes. It will enable Sarah's doctors to precisely and automatically conform their beams to the shape of the tumor in her lung.

Controlling the Dose

With IMRT, Sarah's doctors can divide the area being treated into thousands of tiny segments and give each one a specified dose. The adjustable leaves of the MLC are used to control not only the shape of the beam, but also the exposure duration for each segment of the tumor, effectively "modulating" the dose within the treatment area. This way, higher doses can be concentrated in some parts of the tumor while lower doses can be used in other areas where sensitive tissue may need protection.

Now it is time for Sarah's first treatment session. She enters the treatment room, which is softly lit and quiet. Her radiation therapist positions her on the treatment table. A small plastic cube is again placed on her chest so the respiratory gating system can again compensate for breathing motion. During treatment, the system will turn the Clinac's X-ray beam on and off as the tumor on her lung moves in and out of position. If Sarah coughs or moves, the beam switches off, further protecting her healthy tissues.

Sarah is ready. The therapist leaves the room, closes the door, and moves to a computer workstation to administer the treatment. Inside the room, the Clinac rotates and locks into a fixed position at the first of the planned beam angles. The beam goes on and the leaves of the MLC begin moving the aperture across the treatment field, changing its size and shape in order to deliver the prescribed dose. This "sliding window" approach to IMRT puts the leaves of the MLC in continuous motion while the beam is on and yet maintains a pattern that conforms to the 3D shape and size of the tumor.

Sarah hears a low humming noise but feels nothing. The Clinac rotates and delivers beams from several angles until the treatment is completed. During treatment, Sarah's medical team uses Varian's PortalVision™ device on the linac to instantly capture X-ray images of Sarah's anatomy as viewed through the beam aperture. By using Varian's image-processing software to compare the PortalVision views on a computer monitor with diagnostic images and the treatment plan, the team is able to verify treatment accuracy and make any adjustments that might be needed in her position or the plan for future sessions.

It is 10:00 a.m. when Sarah enters the IMRT treatment room. Ten minutes later, her placement and immobilization on the positioning couch are completed and her treatment begins. Five minutes later, the session is complete. Sarah is free to return home to her family and resume her daily activities.

The Outcome

Sarah will have to undergo multiple treatment sessions, on a Monday through Friday schedule, over a period of weeks. Other than the short amount of time it takes for the treatments, her life should not be disrupted. What is the outcome of her IMRT treatment? Hopefully, follow-up tests will show that Sarah's tumor has been functionally eliminated. She will have to be re-scanned, perhaps six months after treatment has been completed, for the possible appearance of new lesions and to be sure that all of the original tumor was destroyed. If either situation should prove to be the case, she will have to undergo another round of treatment and the process will continue until all the lesions are gone. In the end, however, the likelihood is good that she will be cured of her lung cancer.

Is this too rosy a scenario to project for Sarah? No, nor would it have been had our patient been George, 57, diagnosed with prostate cancer, or Robin, 54, diagnosed with breast cancer, or Bill, 63, who had cancer of the head and neck. IMRT is being used to treat all of these major cancers, and according to the early clinical results and the testimony of oncologists who are at the forefront in the fight against cancer, it can be highly effective.

For example, in a study conducted by researchers at Memorial Sloan- Kettering Cancer Center in New York between April 1996 and January 2001, 772 patients with prostate cancer were treated with IMRT at fairly high doses made possible by IMRT's precision. The 3-year relapse-free survival rates for favorable, intermediate, and unfavorable risk group patients were 92 percent, 86 percent, and 81 percent, respectively. Compare that success rate with comparable rates of only 75 percent, 55 percent, and 35 percent in an earlier study in which prostate cancer patients were given a more conventional treatment at a lower dose.

A Treatment That is Quickly Becoming The Standard

Sloan-Kettering's chief of radiation oncology, Steven Leibel, MD, has said, "IMRT is revolutionary in its ability to modulate the radiation beam. It can do what standard conformal therapy can't. IMRT has become the standard mode of conformal treatment delivery for localized prostate cancer treatment at our institution."

Leibel says the Sloan-Kettering Cancer Center, which treated its first patient with IMRT in 1995, now treats roughly a quarter of their patients with the technology, approximately 1,000 patients a year. George T.Y. Chen, Ph.D., head of radiation physics, Department of Radiation Oncology at Massachusetts General Hospital, and professor at Harvard Medical School, says his department, which began using IMRT a couple of years ago, is now using IMRT to treat between 10 and 15 percent of their patients.

"IMRT is in its infancy and so we don't know, for example, what the 10-year success rate will be," Chen has said. "In some cases, such as cancer of the head and neck, the impact is obvious. It provides the opportunity to spare critical structures such as the parotid gland and this enables us to reduce the side effects of radiation. It's a technological revolution that's really changing radiotherapy. The oncology community is very excited about it."

The opinions of Leibel and Chen have been echoed by other leading oncologists across the nation. Although less than ten percent of the world's nearly 5,500 radiotherapy centers for cancer treatment are currently offering IMRT to their patients, the numbers using Varian's SmartBeam IMRT climbed from one in 1995, to 40 in 2000, to 98 in 2001, to over 200 in 2002. Currently 472 centers offer SmartBeam IMRT to patients, and expectations are for continued expansion around the world.

The technology keeps getting better . . .

The IMRT procedures currently used at radiotherapy centers now are a first-generation technology. Already in the works as a next evolutionary step is an X-ray-based on-board imaging system. The goal is to provide oncology teams with images and motion tracking capabilities that can help them guide the beam during a treatment session. Varian unveiled a research prototype of this in Dynamic Targeting in 2002, and on October 21, 2003 announced it is adding 3D imaging capabilities to its Acuity™ x-ray system for Dynamic Targeting™ image-guided radiation therapy (IGRT).

On October 28, 2003, Richard M. Levy, chairman and CEO of Varian Medical Systems recently said, "We are moving ahead now with Dynamic Targeting(TM) image-guided radiation therapy (IGRT), a new more precise technique that we believe will be the next big advance in cancer treatment." Dynamic Targeting IGRT adjusts for movements of tumors, making it possible to treat them with higher, more effective doses while protecting more of the surrounding healthy tissue. "This technique may make it possible to eradicate tumors using fewer treatments," Levy said. "It also opens the door to eradicating tumors that were previously untreatable with radiation."

"We believe that IMRT and IGRT are ushering in a new era of radiation therapy," said Levy. "Varian is developing new products to make these promising techniques simpler, faster, and more cost-effective by utilizing computer automation and integration."

More Good News . . .

While IMRT and IGRT technologies are having a tremendous positive impact on the lives of millions of people, Varian Medical Systems is also providing other effective treatment devices and tools in the effort to cure cancer.

BrachyTherapy

Varian also owns and operates BrachyTherapy Group to supply products for treating cancer patients by placing tiny radiation sources within tumors. The word brachytherapy comes from the ancient Greek word brachy, for short distance or close, and therapy, for treatment. A market leader, this business develops, manufactures, supplies, and services devices and software for planning and delivering all forms of brachytherapy.

Varian's brachytherapy uses a computer-driven device called an afterloader to send high-energy radioactive sources into or near the tumor to stay for short amounts of time before it is pulled back into the device. One or more tiny radioactive sources about the size of a grain of rice are inserted in or around the cancer. The seeds are left in place for about ten minutes, and then removed.

The radioactive seeds are delivered through thin catheters that have been inserted into the area to be treated. The catheters are easily removed after treatment. The process delivers a large dose directly to the tumor site and minimizes the impact on the surrounding healthy tissue and organs, making it the ultimate in conformal dose radiation therapy.

This therapy has proven its value in the treatment of lung, breast, and gynecological cancers. In addition, hundreds of thousands of American men have been treated for early-stage prostate cancer, with excellent results. The market is expected to continue growing, as clinicians research the use of brachytherapy for treating cancer in an increasingly diverse range of disease sites.

Varian's BrachyTherapy headquarters is located in Mountain View, California, with additional facilities in Charlottesville Virginia, Crawley England, and Haan, Germany.

From Science Fiction To Science

As we move further into the new millennium, humans for the first time ever have the technology at hand with which they can confront their ancient enemy and bring it under manageable control. The idea of cancer being transformed from a life-threatening condition to a manageable disease is no longer wildly speculative science fiction but is tantalizingly close to becoming scientific fact.

More Than Just Medical

Although Varian Medical Systems is the world's largest supplier of radiotherapy systems for treating cancer, the company's technologies aren't limited to only medical applications such as cancer treatment. In reality, VAR's interest extends beyond their Oncology (Tumor) Treatment expertise and includes three other very significant areas.

X-Rays, Security, and Research The X-Ray Products Division of Varian Medical Systems is the world's premier independent supplier of X-ray generating tubes. It serves major original equipment manufacturers in the diagnostic imaging industry and replacement tube distributors.

The business provides the industry's broadest selection of X-ray tubes expressly designed for the most advanced CT scanning, radiographic, mammograms, and other diagnostic applications. These products are continuously evolving to meet more and more stringent requirements for high-resolution imaging, rapid examination, patient throughput, long tube life, and cost efficiency.

And that's not all . . .

X-Ray Products also manages an emerging business in flat panel x-ray image detectors, with an enormous potential market for security applications in the USA and around the globe.

Varian and Homeland Security

Since the tragic events of September 11, 2001, anyone who has been to an airport is aware that security efforts in the U.S. have been greatly intensified. However, according to many experts, terrorist threats to homeland security are equally likely to come by way of the sea. The U.S. Customs Service reports that some 6 million cargo containers arrive through U.S. seaports every year. Ninety percent of the trade goods brought into the U.S. each year - some 2 billion metric tons worth - enter through the country's 361 seaports. Presently, less than 2 percent of these containers are ever opened and inspected by Customs Service officials.

These trailer-sized, steel-walled cargo containers are typically sealed in foreign ports and not opened again until delivered by trucks to points all across the United States. It's not hard to imagine these containers being used for smuggling contraband - even a weapon of mass destruction. To physically open each container and extract and inspect the contents by hand would be too time-consuming and unrealistic. Clearly, what's needed is some means of searching the containers quickly and thoroughly without disrupting the flow of goods. An X-ray imaging system like Varian Medical Systems' Linatron® linear accelerator is an excellent candidate for the job. It can generate steel-piercing X rays that "see" through container walls and allow contraband nowhere to hide.

"The challenge is to provide customs officials with a solution that lets them look inside these containers quickly and efficiently. You need to generate enough energy to penetrate up to 440 mm (17 inches) of solid steel and produce high-quality images that show even small objects in fine detail," says Lester Boeh, vice president for Varian's Security and Inspection Group. "The Linatron meets those specifications. It has already been incorporated into cargo screening systems all over the world, but there are comparatively few in the U.S. The impact of September 11 could change all that for the U.S. and many nations engaged in international trade."

Varian's Linatron, which generates high-energy X-ray beams, has already been incorporated into cargo inspection systems in countries like Australia, Belgium, China, France, Germany, Ghana, Indonesia, Israel, Japan, Korea, Mexico, Saudi Arabia, Taiwan, Turkey, and the U.K. Japan operates multiple units at its six busiest ports; the U.K. at more than a dozen. Eurotunnel uses the technology to scan freight cars that pass between France and the U.K. Imaging the Contents of a Cargo Container

The Linatron has been incorporated into fixed-site and mobile cargo scanning systems built by companies like ARACOR, Heimann Systems, L3, and RapiScan. These systems work like a giant airport baggage screening system. They use the high-energy X rays generated by the Linatron to send a beam of photons through a cargo container. The photons are absorbed and scattered in varying amounts by the materials in their path, depending on their densities.

On the far side of the cargo container, a detector array collects and records the photons that make it through unabsorbed, generating an electronic signal that is translated into an image. The image, which shows the container's contents, can be viewed on a monitor. A Linatron- based cargo screening system can scan a full container in less than three minutes. Fixed-site systems are built into garage-like facilities, and trucks carrying cargo containers are moved through these facilities the way cars are moved through a carwash. The truck passes between the Linatron X-ray beam and the photon detector. Electronic images are captured and transmitted to a computer monitor at an operator's station.

For customers who need to move a cargo inspection system from site to site, mobile systems can be mounted on trucks. Similarly, it is also necessary to scan air cargo. Each year, more than 30,000 tons of air freight are transported in cargo and commercial aircraft in the U.S. and virtually none of it is ever inspected. The Linatron M is an ideal solution to this problem and is already working in airports outside the U.S.

Penetration, Contrast, Resolution

Three basic physics criteria are used to measure the effectiveness of any imaging system: penetration, contrast, and resolution. All three are related to the level of energy - and hence the number of photons - sent through whatever is being scanned. A Linatron-based screening system generates higher energy X rays than competing gamma-based systems.

Penetration is probably foremost of the three criteria for cargo screening. The inspection obviously fails if the imaging photons lack the energy to punch through a container's thick steel walls. The key to penetration is photon energy - the more energetic, the deeper the photons penetrate into a material. Steel is the bar by which the penetration capabilities of an imaging technique are measured.

Varian's Linatron can generate X with enough power to pass through 17 inches of solid steel and still provide enough energy to produce a high-contrast image - a critical issue for scanning big trucks and containers. Says Boeh, "Without full penetration of a cargo container and its contents, too much can be missed."

The second important criterion for cargo screening is Contrast Sensitivity, which is extremely important for distinguishing between items inside a container. Imaging experts say that the higher the contrast sensitivity, the greater the chances for detecting contraband. Linatron-based systems have proven to be ten times more contrast sensitive than other systems.

The third criterion, Resolution, is a measurement of the ability to see details in an image. If you are looking for hundreds of pounds of drugs, just knowing there's something large and unexpected inside the container is enough. However, if you're looking for nuclear weapons components, which can be surprisingly small, you want the best resolution you can get. While resolution depends to a large degree on the quality of the detector that is collecting the imaging photons, the more photons that penetrate the cargo's interior, the better your chances are of obtaining high resolution. Again, the advantage falls squarely to linac-generated X rays.

A Distinct Technological Advance

In addition to the three main criteria, several other factors involved in imaging give linac-generated high-energy X rays a distinct technological advantage for use in cargo screening. Varian's Linatrons can also provide dual views by sending in two perpendicular beams to help overcome the problem of a lighter material being shadowed behind a denser material. And thanks to the high energy and photon output of the Linatron, images can be obtained very quickly - an important consideration for a busy port.

"Before September 11, the U.S. Customs Service was mostly interested in screening cargo containers to find illegal drugs. Now their primary concern is finding weapons of mass destruction," Boeh explains. "For this task, there does not seem to be any competitive technology on the horizon better than high-energy X rays."

Numerous customs services, both in Europe and Asia, have installed cargo-screening systems that use Varian Linatrons to generate X rays. They are successfully finding illegal drugs, weapons, and other contraband. According to Boeh, many of these governments have found that the ability to verify manifests, find deliberate falsifications, and levy taxes on the undeclared contents generates enough revenue to pay for the inspection systems.

Non-Destructive Testing

Varian's Linatron technology is also useful in other forms of nondestructive testing. Highway engineers use a portable version called the Linatron MP to test the structural integrity of large steel and concrete structures like bridges and overpasses. A major manufacturer of jet engines is using the Linatron M with a Varian flat-panel image detector to inspect turbine blades.

Varian's Linatron has also been used to inspect large castings, rocket motors, and pressure vessels - large metal containers that carry pressurized contents. The technology enables engineers to find tiny cracks and flaws. "These are not things that you want to see fail," says Johnson.

Sterilization

The Linatron technology has additional applications in sterilization. It is being used in medical settings to irradiate and sterilize medical products. A system in Hawaii is used to treat papayas, which are subject to a federal fruit-fly quarantine and cannot be distributed on the U.S. mainland without treatment. Unlike other solutions that Hawaiian growers had tried, including the use of chemicals and heat, the Linatron solution does not adversely impact the appearance or nutritional value of the fruit, or damage the environment. According to the grower, Hawaii Pride LLC. Food irradiation can be used to instantly eliminate the threat of harmful food-borne pathogens such as E. coli, listeria, and salmonella in meat and poultry, as well as fruits and vegetables, without changing their texture or taste. "The Linatron enables us to harness and focus energy, and put it to work in a number of different ways," says Boeh. "High energy X rays are very useful for inspection and for sterilization. There are a lot of as-yet-untapped potential applications for this technology."

The Lights Are On . . .

So where do all the ideas and research behind these applications come from? You need look no further than Varian Medical Systems' third business segment - the Ginzton Technology Center.

The Ginzton Technology Center (GTC) is the company's research and development facility for breakthrough technologies. Current Ginzton efforts are focused on imaging as well as emerging technologies that shrink tumors by triggering therapeutic gene activity with radiation beams. This unit also conducts externally funded contract research related to medical technology, which may lead to long-term partnerships and new business opportunities.

An important repository of scientific and engineering expertise, the Center conducts research in support of product development for the company's business units, as well as contract research for other medical institutions.

This group passed several milestones in key research projects. It demonstrated the feasibility of acquiring 3D images using cone beam CT scanning on the Clinac linear accelerators and Acuity systems. It also advanced dynamic tracking and image-guided motion management technologies and algorithms that enhance the accuracy and precision of radiotherapy. Another project validated the use of implanted, radio- opaque marker seeds for targeting prostate tumors. Researchers also devised a means for achieving respiration-synchronized 4D CT & PET image acquisition and supported the development of radiation-activated drug delivery systems.

The Center's mandate is "to create market growth opportunities for Varian Medical Systems by developing technologies that eclipse current capabilities in radiation therapy and X-ray imaging and/or lead to entirely new businesses."

The Ginzton Technology Center, which is headquartered in Mountain View, California, also acts as one of the company's financial segments, where results for contract research and for the BrachyTherapy business are reported. Combined fiscal year 2003 sales for this segment were $33.1 million, up by $7.3 million from fiscal year 2002 levels.

From Here Into The Future . . .

Varian Medical Systems is already a proven winner in today's business and investment community, but what about tomorrow? Moving forward, breakthrough and incremental innovations will prove critical for fueling the growth of this highly successful firm. The company has a stated objective of doubling the size of the business in four to six years. This is certainly an ambitious goal, so let's take a look at the Varian's growth strategies.

Growth Through Innovation ~

Varian Medical Systems continues substantial investments in promising technologies with significant high-growth potential. A focal point for these research and development activities is the Ginzton Technology Center, which is a key strength for Varian's Biosynergy, Brachytherapy, and Imaging Products operations.

Growth Through Acquisition ~

Varian Medical Systems continually evaluates potential acquisitions as a means of expanding its product lines. Here the focus is on opportunities that would complement the company's expertise in cancer care and diagnostic imaging subsystems.

Recent acquisitions include GE Medical Systems' radiotherapy service and support organization. With this purchase, Varian Medical Systems assumed service and support activities for GE's installed base of more than 400 medical linear accelerators and 340 treatment planning products at hospitals and clinics worldwide.

In October 2003, Varian successfully completed the acquisition of Zmed, Inc., a privately held supplier of radiation oncology software and accessories for ultrasound-based, image-guided radiotherapy (IGRT), stereotactic radiation treatments, and image management. Varian Medical Systems paid approximately $35.5 million in cash for the business, which is expected to add annualized revenues of $16 million to $18 million and be neutral to slightly accretive to earnings for the company in fiscal year 2004.

Varian Medical CEO and Chairman Richard Levy is "pleased to add this growing business to our company. We expect it will contribute to our growth by adding several products that will enhance the versatility and capability of Varian's integrated radiation oncology networks."

Growth Through Ancillary Product ~

Considerable attention is focused on complementary products - hardware and software that help Varian Medical Systems' customers improve treatment efficacy, increase productivity, and save costs. Such products account for more than half of Oncology Systems product revenues.

Growth Through International Expansion ~

Varian Medical Systems is engaged in a multi-year program to broaden international distribution and support to capitalize on burgeoning demand outside the U.S. International sales of Oncology Systems' products and services have grown dramatically over the last several years.

Special Report Summary

In Our Opinion . . .

Doctors the world over have already recognized the potential and positive effects of VAR's methods, doubling treatment facilities in each of the past five years. More so, hundreds of other facilities currently work to equip themselves this very day; growth by many measures, sits in its infancy.

Cancer and the pursuit of a cure is a highly charged emotional issue. Though would all like to see this disease eradicated from the face of this planet, prudent investors should still carefully analyze the various corporate figures sitting behind the technology before placing a buy order in any security. Acting on emotions alone can quickly lead investors down a path of disappointment.

Fortunately Varian Medical Systems's performance from a numbers perspective is exceptionally strong, and based on recent forward looking statements from the company's executives, performance should remain so well into the future.

Not only have corporate execs squeezed phenomenal growth out of earnings and revenue figures, but they've also landed the company at #20 on Business Week's "Top 100 Hot Growth Stocks" list. To make that grade, VAR out-ranked those below it in 3-year earnings and sales growth, and also checked in higher for the over-weighted category of return on capital investment. Perhaps even more significantly, the company has virtually no competition and just raised outlooks for 2004 after reporting record-breaking net profits in the most recent quarter.

Varian's Fiscal Year ends annually on the Friday nearest September 30th. Results for 2003 including the fourth quarter were reported October 28, 2003.Varian's fourth-quarter sales were a record $303.3 million, up 16 percent from the year-ago quarter, bringing sales for the fiscal year to $1.0 billion, up $168.5 million or 19 percent higher than totals for fiscal year 2002.

The company also reported another quarter and year of record setting earnings - $43.6 million for the fourth quarter of fiscal year 2003, versus net earnings of $33.8 million in the year-ago quarter. Net earnings for fiscal year 2003 were $130.9 million versus net earnings of $93.6 million for fiscal year 2002.

Here's the 2004 outlook from Richard M. Levy, chairman and CEO of Varian Medical System: "For fiscal year 2004, we expect that with a healthy backlog and the successful completion of our recently announced acquisitions coupled with a return to more normal modest growth rates for our X-Ray Products business, total company sales should increase in the low teens over the fiscal year 2003 total."

"Earnings per diluted share for fiscal year 2004 should rise in the high teens over the fiscal year 2003 total. For the first quarter of fiscal year 2004, sales should increase in the mid-teens, and earnings- per-share should increase by about 23 percent over corresponding levels in the year-ago quarter."

Varian strengthened their balance sheet during the quarter, ending the year with $407.4 million in cash and marketable securities after buying back $37.2 million in company stock during the quarter. Operating cash flow for the quarter was $68.3 million - a record for any quarter in the company's history. Accounts receivable days sales outstanding also improved to 73 days at year's end, down 7 days from the end of 2002.

The Numbers Are Great, So . . .

Our profit-potential analysis on this stock doesn't stop with its technology and earnings history. Rather, we've considered such additional forces as powerful market dynamics associated with the fact that institutions already own 95% of the stock's float. This creates a relatively low number of shares available for other investors who want ownership in this company.

Additionally, Varian Medical has been buying up its own shares on the open market, effectively limiting the number of shares available on the open market even further. Since a stock's price is always a reflection of supply and demand, any substantial increase in demand could send prices on a rapid and steep upward climb due to severe lack of supply.

A look at Varian Medical's monthly chart shows the stock in a steady upward climb during the past four years. Most of this powerful advance took place during a bear market cycle, indicating just how strong investor support is for VAR despite the negative sentiment in the broader market during that same time frame. Also notice that VAR has recently moved above its July 2003 highs. This is a positive indication and should attract even more buyers as technical analysts become aware of VAR's performance.

Best of all for investors, most folks have yet to find out about Varian Medical. Remember the soaring rallies of the tech high-fliers in 1999 and early 2000? One major difference in a similar climb by Varian, however, would lie with the fact that shares have valid financial influences fueling the performance. And despite the worst Bear market in decades, Varian Medical Systems shares have spent the past five years in a steady uptrend, and in the past few weeks the stock has set a series of new highs.

The word is starting to get out about this quiet winner's life-changing technological advances. As the powerful earnings and revenue fundamentals combine with extraordinary market pressures, you can expect even more people to realize the tremendous investment potential at hand.

In our opinion, Varian Medical Systems is certainly worth considering as you contemplate adding new positions to your portfolio of stocks.

Pro RightLine Corp
Round Rock, Texas
PH: 800-737-4518

Company Information

Varian Medical Systems (NYSE:VAR) recently announced that it will host an investor relations meeting to discuss fiscal year-end 2003 on Wednesday, November 12, 2003. The meeting will be held at the Omni Berkshire Place, 21 East 52nd St., New York City at 4:00pm eastern time. If you would like to attend the meeting in New York, please RSVP to Anne Rambo, at 650-424-5834, or anne.rambo@varian.com.

The meeting will be webcast by CCBN and can be accessed at Varian Medical Systems' web site at http://www.varian.com.

For a closer look at Varian Medical Systems' fundamentals, please reference Varian's Financial Reports and Ratios included at the end of this document. Also included are short biographies of Varian's two top executives, President and CEO Richard Levy, and Chief Financial Officer Elisha Finney.

Varian Medical Systems Contact Info:

Contact Information

Spencer Sias
Director of Corporate Communications and Investor Relations
Phone: (650) 424-5782
Email: spencer.sias@varian.com

Corporate Address

Varian Medical Systems
3100 Hansen Way
Palo Alto, CA 94304
Phone: (650) 493-4000 Fax: (650) 842-5196
Home Page: http://www.varian.com

*Institutional Holdings

Shares Held by Institutions - 64,863,000

Percent of Shares Outstanding Held by Institutions - 95.0%

Institutions Holding Shares - 857

Largest Institutional Owners Barclays Global Investors INVESCO Funds Group, OppenheimerFunds, Inc Merrill Lynch Investment Managers Franklin Templeton Investments Fidelity Investments Putnam Investments Morgan Stanley Investment Mgmt American Century Investment Mgmt State Street Global Advisors

Source: 09/30/03 Citigate Dewe Rogerson Report.

*Definitions for items in the "Institutional Holdings" section

Shares Held by Institutions - The actual number of common stock shares held by all reporting institutions.. This figure is the sum of all the shares held by institutions filing 13-Fs and all non-13-F reporting funds.

Percent of Shares Outstanding Held by Institutions - The percentage of common stock held by all reporting institutions on the corresponding Institutional Holdings Date.

Institutions Holding Shares - The number of all reporting institutions that are holding shares of this stock.

Financials

Financial Snapshot
Varian Medical Systems
Year End 2003

Revenue & Earnings 
 
Revenue (LTM) (millions)                            $1,042
Income from Continuing Operations (LTM) (millions)    $131
Income from Total Operations (LTM) (millions)         $131
Diluted EPS from Continuing Operations (LTM)         $1.84
Diluted EPS from Total Operations (LTM)              $1.84
 
Dividends 

Dividend Rate            $0.00
Yield - 5 Year Average    0.1%

Ratios 
 
Price to Earnings          35.9
5 Fiscal Year High P/E    162.4
5 Fiscal Year Low P/E      18.6
Price to Revenue           4.52
Price to Book              8.00
Debt to Equity Ratio       0.10
Current Ratio              2.00
 
Growth Rates 
 
5-Year Annual Earnings Growth Rate    38.01%
5-Year Annual Revenue Growth Rate     13.98%

A Summary Of Earnings And Other Financial Information

Varian Medical Systems, Inc. and Subsidiary Companies Consolidated Statements of Earnings
(Dollars and shares in millions, except per share amounts)
(Unaudited)

                                          Q4 QTR Q4 QTR  Q4 YTD Q4 YTD
                                           2003   2002    2003   2002
                                          ------ ------ ------- ------
Net orders                               $322.3  293.4  1151.7  973.6
  Oncology Systems                        282.5  249.4   977.0  824.8
  X-Ray Products                           30.4   33.5   142.0  122.9
  Ginzton Technology Center                 9.4   10.5    32.7   25.9

Order backlog                            $808.4  698.2   808.4  698.2

Sales                                    $303.3  261.4  1041.6  873.1
  Oncology Systems                        256.8  218.4   855.6  724.9
  X-Ray Products                           37.2   36.3   152.9  122.4
  Ginzton Technology Center                 9.3    6.7    33.1   25.8

Gross profit                              130.7  107.7   421.9  339.3
  As a percent of sales                    43.1%  41.2%   40.5%  38.9%

Operating expenses
  Research and development                 16.7   13.1    59.2   48.4
  Selling, general and administrative      47.4   42.6   164.3  146.1
Operating earnings before reorganization
 expenses                                  66.6   52.0   198.4  144.8

Reorganization  (income)/expense              -   (0.2)      -   (0.2)

Operating earnings                         66.6   52.2   198.4  145.0
  As a percent of sales                    22.0%  20.0%   19.0%  16.6%

Interest income, net                       (0.4)  (0.7)   (3.0)  (1.3)

Earnings before taxes                      67.0   52.9   201.4  146.3

Taxes on earnings                          23.4   19.1    70.5   52.7

Net earnings  (1)                        $ 43.6   33.8   130.9   93.6
----------------------------------------------------------------------

    Net earnings per share - basic:  (1) $ 0.64   0.50    1.92   1.38
    Net earnings per share - diluted:(1) $ 0.61   0.48    1.84   1.33

Shares used in the calculation of net 
earnings per share:
Average shares outstanding - basic         68.1   68.0    68.1   67.7
Average shares outstanding - diluted       71.1   70.7    71.1   70.2

(1) Note: If the Company had elected to recognize stock compensation 
costs based on the fair value (calculated using the Black-Scholes 
model) of options granted on their grant dates as prescribed by SFAS 
No. 123, net earnings for the fourth quarter of fiscal years 2003 and 
2002 would have been reduced by $5.1M and $4.3M, respectively, and net 
earnings for the twelve months of fiscal years 2003 and 2002 would have 
been reduced by $20.3M and $16.9M, respectively. Net earnings per basic 
share for the fourth quarter of fiscal years 2003 and 2002 would have 
been $0.56 and $0.43, respectively, and net earnings per diluted share 
would have been $0.54 and $0.42, respectively. Net earnings per basic 
share for the twelve months of fiscal years 2003 and 2002 would have 
been $1.63 and $1.13, respectively, and net earnings per diluted share 
would have been $1.56 and $1.09, respectively.



        Varian Medical Systems, Inc. and Subsidiary Companies
                     Consolidated Balance Sheets

----------------------------------------------------------------------
(Dollars in thousands)                            Sept. 26,   Sept. 27,
                                                    2003       2002
                                                 (Unaudited)
----------------------------------------------------------------------
Assets
Current assets
    Cash and cash equivalents                   $   210,448 $ 160,285
    Short-term marketable securities                112,128    41,035
    Accounts receivable, net                        252,265   237,345
    Inventories                                     116,815   123,815
    Other current assets                            113,868    88,879
                                                 ----------- ---------
     Total current assets                           805,524   651,359
                                                 ----------- ---------

Property, plant and equipment                       236,077   226,324
    Accumulated depreciation and amortization      (154,905) (144,184)
                                                 ----------- ---------
     Net property, plant and equipment               81,172    82,140
                                                 ----------- ---------

Long-term marketable securities                      84,820    97,529
Goodwill                                             59,979    59,996
Other  non-current assets                            21,992    19,253
                                                 ----------- ---------
Total assets                                    $ 1,053,487 $ 910,277
                                                 =========== =========

Liabilities and Stockholders' Equity
Current liabilities
    Notes payable                               $         - $      58
    Accounts payable - trade                         47,169    45,776
    Accrued expenses                                240,406   199,836
    Product warranty                                 36,040    30,725
    Advance payments from customers                  85,801    81,688
                                                 ----------- ---------
     Total current liabilities                      409,416   358,083
Long-term accrued expenses and other                 21,895    20,891
Long-term debt                                       58,500    58,500
                                                 ----------- ---------
     Total liabilities                              489,811   437,474
                                                 ----------- ---------

Stockholders' Equity
Common stock                                         67,971    67,790
Capital in excess of par value                      157,258   115,088
Retained earnings and accumulated other
 comprehensive loss                                 338,447   289,925
                                                 ----------- ---------
     Total stockholders' equity                     563,676   472,803
                                                 ----------- ---------
Total liabilities and stockholders' equity      $ 1,053,487 $ 910,277
                                                 =========== =========
SOURCE: Varian Medical Systems 

Important Ratios
                            FY End
                            Sep-03
Valuation   
Price to Earnings           35.90
Price to Revenue             4.52
Price to Book                8.00
Book Value per Share        $8.28 
   
Efficiency   
Return on Equity            25.30%
Return on Invested Capital  21.90%
Return on Assets            13.30%
Asset Turnover               1.1
Receivable Turnover          4.3
Inventory Turnover           5.2
   
Profitability   
Gross Profit Margin         40.50%
Net Profit Margin           12.60%
   
Liquidity   
Current Ratio                2.0
Quick Ratio                  1.4
Debt to Equity Ratio         0.1
Leverage Ratio               1.9
   
Comparison to Industry   
Sales (Revenue)              1.40%
Earnings                   137.80%
Price to Book Ratio         11.20%

Income Statement Summary
                                FY End  FY End  FY End  FY End  FY End
                                Sep-03  Sep-02  Sep-01  Sep-00  Oct-99
Revenue                         $1,042    $873    $774    $690    $590
Cost of Sales                     $620    $534    $487    $433    $380

Gross Profit                      $422    $339    $287    $257    $210

Operating Expenses
Selling, General & Administrative $224    $194    $177    $169    $186

Operating Profit Before 
  Depreciation & Amortization     $198    $145    $110     $88     $24

Operating Income after D & A      $198    $145    $110     $88     $24
Other Income (net)                  $3      $0     ($5)     $0      $0
Interest Expense                    $0      $1      $2     ($3)    ($6)
Pre-Tax Income (EBT)              $201    $146    $107     $85     $18
Net Income from Continuing Ops    $131     $94     $68     $53      $8
Net Income from Discontinued Ops   N/A     N/A     N/A     N/A    ($32)
Net Income from Total Operations  $131     $94     $68     $53    ($24)
Normalized Income                 $131     $93     $68     $54     $22

Total Net Income                  $131     $94     $54     $53    ($24)

Net Income available for Common
  Shareholders                    $131     $94     $54     $53    ($24)

Earnings per Share (in Dollars)
  Basic EPS from Continuing Ops  $1.92   $1.38   $0.82   $0.85   $0.14
  Basic EPS from Discontinued Ops  N/A     N/A     N/A     N/A  ($0.54)
  Basic EPS from Total Ops       $1.92   $1.38   $1.03   $0.85   $0.14
  Basic EPS from Total Net Inc   $1.92   $1.38   $0.82   $0.85  ($0.40)
  Basic Normalized Net Inc/Share $1.92   $1.38   $1.03   $0.87   $0.36

  Diluted EPS from Cont. Ops     $1.84   $1.33   $0.79   $0.82   $0.13
  Diluted EPS from Discont. Ops    N/A     N/A     N/A     N/A  ($0.53)
  Diluted EPS from Total Ops     $1.84   $1.33   $0.99   $0.82   $0.13
  Diluted EPS from Total Net Inc $1.84   $1.33   $0.79   $0.82  ($0.40)
  Diluted Normalized Net Inc/Sh  $1.84   $1.33   $0.99   $0.84   $0.35

  Dividends Paid/Share           $0.00   $0.00   $0.00   $0.00   $0.05


Assets
                                FY End  FY End  FY End  FY End  FY End
                                Sep-03  Sep-02  Sep-01  Sep-00  Oct-99
Current Assets
   Cash & Equivalents             $323    $201    $219     $83     $25
   Accounts Receivable            $252    $237    $228    $226    $234
   Inventories                    $117    $124    $112     $92     $78

      Total Current Assets        $806    $651    $620    $451    $382
Gross Fixed Assets (PP&E)         $236    $226    $209    $207    $200
Intangibles                        $60     $60     $50      $0      $0

      Total Assets              $1,053    $910    $759    $603    $539


Liabilities & Stockholders' Equity
                                FY End  FY End  FY End  FY End  FY End
                                Sep-03  Sep-02  Sep-01  Sep-00  Oct-99
Liabilities
   Accounts Payable                $47     $46     $45     $41     $40
   Short-Term Debt                  $0      $0      $0      $1     $36
   Other Current Liabilities      $362    $312    $240    $208    $194

      Total Current Liabilities   $409    $358    $285    $250    $270
Long-Term Debt                     $59     $59     $59     $59     $59

      Total Liabilities           $490    $437    $365    $332    $354

Stockholders' Equity
   Preferred Stock Equity           $0      $0      $0      $0      $0
   Common Stock Equity            $564    $473    $394    $270    $185

      Total Stockholders' Equity  $564    $473    $394    $270    $185

        Total Liabilities & 
        Stockholders' Equity    $1,053    $910    $759    $603    $539

Earnings Estimates

First Call Earnings Estimates Summary
Varian Medical Systems, Inc. (ticker symbol: VAR)

Fiscal Year Ending Sep                        Last Changed: 10/29/2003


Year      Q1      Q2      Q3      Q4     Fisc Yr  # of   Cal Yr  # of
Ending    Dec     Mar     Jun     Sep    Annual  Broker  Annual Broker
  2005                                    2.59     3               0
  2004   0.37    0.57    0.54    0.71     2.19     5      2.29     3
  2003   0.30A   0.48A   0.45A   0.61A    1.84     5      1.91     5
  2002   0.19A   0.34A   0.32A   0.48A    1.33     5      1.44     3
  2001   0.14A   0.26A   0.26A   0.38A    1.04     4      1.10     4

A = Actual

Key Executives

RICHARD M. LEVY, PH.D.
Chairman of the Board,
President, CEO

Richard Levy was named president and CEO of Varian Medical Systems in 1998, when Varian Associates, Inc. separated into three independent businesses. Prior to the "spin," Levy served as executive vice president of Varian Associates, where he was part of the senior management team leading one of America's pioneer high-technology companies.

Levy was appointed a senior vice president of the corporation in 1989, and during the 1989-1992 period oversaw a number of business areas, including Semiconductor Equipment and Vacuum Products. He became executive vice president of the corporation in 1992 and, until the time of the spin, oversaw the medical businesses and the Ginzton Technology Center, the company's research and development center.

Levy holds a bachelor's degree from Dartmouth College and a doctorate in nuclear chemistry from the University of California at Berkeley. He began his business career at the Monsanto Company, where he served as a research specialist and project manager in both basic and applied research. Within Varian, prior to assuming General Management and CEO duties, he oversaw Sales, Marketing, Service, R&D, and various corporate functions as well as managing the corporate Quality Program.

Levy is a member of the Board of Trustees of the Palo Alto Medical Foundation and the Board of Directors of Pharmacyclics, Inc. and AdvaMed (Advanced Medical Technology Association). He is a past Chairman of the Board of Directors of the American Electronics Association, America's largest high-technology trade organization, and he served on the Board of Directors of the Diagnostic Imaging and Therapy Systems Division of the National Electrical Manufacturers Association.

ELISHA W. FINNEY
Corporate Vice President, Finance
Chief Financial Officer

Elisha W. Finney was named vice president, finance and CFO of Varian Medical Systems in August 1998, after serving as corporate treasurer of Varian Associates, Inc. At Varian Associates, she managed a staff responsible for domestic and international banking, foreign exchange, corporate finance, credit, and stock administration activities. In addition, she oversaw the company's risk management function.

Finney joined Varian Associates as a risk manager in 1986 after serving in a similar role with the Fox Group in Foster City, Calif. and Beatrice Foods in Chicago, Illinois. She was named corporate treasurer in March, 1998. She holds a BA degree in risk management and insurance, from the University of Georgia's Terry College of Business. Finney also holds an MBA degree from Golden Gate University in San Francisco.

A Word On Forward Looking Statements

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