Varian Q4 release sees shares slump amid new deal with McKesson, CFO retiring

Varian Medical (NYSE:VAR) today saw shares slump after releasing mostly positive Q4 earnings, while also announcing it inked a new deal with McKesson Specialty Health as well as the retirement of its current CFO Elisha Finney.

The Palo Alto, Calif.-based company posted profits of $117.8 million, or $1.25 per share, on sales of $912.5 million for the 3 months ended September 30, for bottom-line growth of 18.9% on sales growth of 11.6% compared with the same quarter last year.

Adjusted to exclude 1-time items, earnings per share were $1.38 per share, 3¢ ahead of the The Street’s consensus, where analysts were looking for sales of $882 million.

For the year, the company reported profits of $402.7 million, or $4.19 per share, on sales of $3.2 billion. That works out to a 2.3% bottom-line slide while sales grew 3.8% compared with last year.

After adjusting to exclude 1-time items, earnings per share were $4.68, a solid 31¢ below what analysts on Wall Street were looking for. The Street expected to see revenue of $3.24 billion, which Varian slightly missed.

VAR shares slipped in trading today, down 4.4% to close at $89.95.

“The company finished the year on a strong note with solid growth in revenues and margins for both of its major businesses. For the 4th quarter, total company gross margin increased by nearly four percentage points over the year-ago quarter.  Weak oncology orders in EMEA, where we had tough year-ago comparisons, offset gross order growth in the Americas and in Asia,” CEO Dow Wilson said in prepared remarks.

For the 1st quarter of 2017, the company expects to see non-GAAP earnings per share between $1.03 and $1.07 per diluted share, with revenues up 1-2%. For the full year, Varian said it expects to see between 3% and 4%.

Varian said it inked a 3-year strategic agreement with McKesson Specialty Health for the deployment and servicing of Varian advanced radiotherapy equipment and software at oncology treatment sites.

The deal will place 7 Varian TrueBeam an 5 VitalBeam medical linear accelerators at McKesson sites, and will position the 2 companies to collaborate to establish interoperability between McKesson’s iKnowMedSM electronic health record system and Varian’s Aria oncology information system.

“McKesson Specialty Health and The US Oncology Network offer robust, comprehensive practice management capabilities, value-based care expertise, and state-of-the-art technology solutions to its affiliated practices, providing support as they navigate today’s challenging healthcare landscape. Combined, Vantage Oncology and The US Oncology Network support more than 1,300 affiliated physicians and approximately 400 affiliated sites of care. Bringing them together earlier this year and now executing this strategic agreement with Varian will help our affiliated practices simultaneously enhance clinical capabilities, workflow for physicians, and the quality of patient care while improving the cost-effectiveness of their operations. The specialized hardware, service offerings and roadmap for interoperability with iKnowMed gives clinicians greater efficiency and increased quality of patient care benefits,” McKesson Specialty Health U.S. oncology network and practice management prez Kirk Kaminsky said in a press release.

“We are honored by the long-term commitment McKesson Specialty Health is making in Varian equipment and technology as part of this agreement. Our companies share a common goal to develop and deliver the highest level of care. Through this strategic agreement, we are increasing the ability of patients to access the most advanced treatments in their fight against cancer,” Varian oncology systems biz prez Kolleen Kennedy said in prepared remarks.

Varian Medical said its CFO Finney will be retiring form her position, though will remain on with the company until a successor is named, which the company is hopeful will occur during the fiscal year 2017. The company said it has begun searching for a replacement.

“For our company and for our investors, Elisha has been an intelligent, trusted and energetic leader that all of us count on to help deliver winning results. With her help and guidance, we have achieved a sustained, decades-long record of growth in revenues and profitability.  Her passion and competitiveness have been driving forces for the entire company.  She leaves a great track record to build upon.   We have been very fortunate to have Elisha on our management team,” CEO Wilson said in a press release.

“I am fortunate and proud to have spent virtually my entire career at a company that has the mission of saving lives. After nearly 29 years at Varian and nearly 18 years as CFO, I am excited about spending more time with my family and about the prospect of serving on boards of other companies.  We have grown tremendously since the last Varian spin in 1999 and the planned spin-off of the Imaging Components business presents a natural time to transition.  It has been a privilege to be part of a dedicated, passionate team whose talent and professionalism have made Varian a global power in the fight against cancer,” Finney said in a prepared statement.

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