Varian Medical Systems (NYSE: VAR) grabbed the stock market microphone to announce that it will be bought out by the German technology behemoth Siemens Healthineers. Some investors might view the transaction as one company swallowing another. However, the acquisition marks a quantum leap in the cancer fight. Considering cancer treatments are the crown jewels of biotechnology, it is not surprising that the news is spreading fast. Today’s article will provide our readers with a simple overview of the buyout, why it is significant, and everything you need to know before investing.
Table of contents 1. Overview of the acquisition 2. Why the new company is significant for the cancer industry 3. Everything you need to know before investing
Siemens Healthineers acquires Varian Medical Systems for $16.4 billion
Siemens Healthineers has agreed to acquire Varian in an all-cash transaction valued at $16.4 billion. Under the agreement, Siemens will purchase all outstanding shares of Varian for $177.50 per share. To put the share price payment into perspective, VAR currently trades at $142.72 (Friday’s close). Thus, Siemens price represents a 24% premium to the VAR’s closing price on Friday. To say that Varian investors are on cloud nine right now would be an understatement. However, it is important to note that at the moment, the acquisition is just an announcement. Siemens Healthineers and VAR expect the acquisition to finish around mid-2021.
Why is this new cancer-fighting giant so special?
Creating an antidote to cancer requires solutions to a range of areas. These include screening (identifying cancer in people who are not showing any signs yet), diagnostic equipment (detecting diseases), post-treatment care, radiotherapy (using forms of radiation to kill cancer cells), and AI capabilities, and many more. Varian brings to the table excellent knowledge in radiotherapy and high-quality cancer patient care. While Siemens adds innovative diagnostic tools and compelling Artificial Intelligence. Combine the strengths of both, and you create a company that can put forward many solutions to the areas mentioned above. CEO of Varian, Dow Wilson, drove home the significance as he said, “the combination with Siemens brings us even closer to realising our transformative vision of a world without fear of cancer.”
Everything you need to know before investing in Varian Medical Systems
Before I begin, I am obliged to remind our viewers that this is not financial advice but rather investment commentary from extensive research.
Short term approach to Varian Medical Systems
Varian Medical Systems does not target a specific cancer. Instead, the biotech focuses on creating the software and developing innovative machines to fight cancer. Thus, Siemens Healthcare, through Varian, has access to most of the cancer market. Allowing investors to ride the future hype on other biotechs using Varian’s machinery and software to treat cancer.
Long term investing
AI is undoubtably part of the future medical world and Varian is at the forefront of the industry shift. However, Varian is combining AI and Adaptive Therapy to create Adaptive Intelligence or Varian Ethos as they call it. Providing them a unique edge in the AI-biotech niche. Thus, investing in Varian Medical Systems from an AI megatrend perspective could be viable (opinion not advice).
The “dark side of the cancer industry”
If you are an investor or not, you probably have heard something along the lines ‘this could be the next cure for cancer’. It might seem like biotechs are re-enacting the boy who cried wolf. Society remains divided on whether the government and Big Pharma are keep the key to the cancer-free world hidden.
Thus, YIG stresses to investors to always do your own research, especially in the cancer field. Because no matter how attractive the company sounds, it is all about the perception. One moment investors might believe the company holds an effective treatment and that the stock could rocket to the moon. Then before you know it, the perception changes to pessimism as the cancer hopes fade. Overall, it is best to invest in times of stability and sell on cancer-related news such as today’s announcement (opinion not advice).
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick McLoughlin, Senior Manager of YIG.