This company could change the way we treat cancer
With its revolutionary new equipment, this company could bring proton beam therapy to many more patients and boost cancer survival rates says Matthew Partridge.
The recent controversy over the Ashya King case where a young boy's parents were arrested after they took him out of the UK to receive an alternative form of treatment for cancer has drawn attention to proton beam therapy'.
Typically, doctors use radiation therapy to treat cancer. X-rays are used to burn away cancer cells by damaging their DNA.
This can be very effective Cancer Research UK thinks that 40% of cancer survivors owe their lives to radiation treatment.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
However, it does have side effects. Regardless of how hard you try to target the x-rays, they are almost certain to hit nearby organs. It's particularly risky if you are young enough to still be growing, or have cancer close to a vital organ. In some cases, patients have ended up being paralysed, or worse.
This is where proton beam therapy comes in. And some very exciting developments could be about to make its use much more widespread
Proton beam therapy can be much more effective than x-rays
Proton beam therapy (PBT) is similar to treatment with x-rays, in that it involves hitting tumours with radiation. The big difference is that it uses protons rather than x-rays.
The problem with x-rays is that they blast through the cancer cells, then continue going until they exit the body. That's why damage to healthy cells is so hard to prevent.
Protons on the other hand, mostly stop after they hit the cancer. As a result, there is far less collateral damage a reduction of around 60% on average.
This means survivors are likely to have a much better quality of life. It also means that in many cases it's safe to give a bigger dose of radiation, which also improves survival rates.
Obviously, the extent of the additional benefits depends on the type of cancer the patient has, and how far it has spread. If the cancer has spread far enough that the organ needs to be saturated with radiation, the benefits are very small because healthy cells are going to be hit regardless of which treatment you use.
In the Ashya King case, the hospital felt that his aggressive brain cancer would be better treated with x-rays right away, rather than waiting for proton therapy.
However, in cases where the cancer is limited to a small area, the benefits can be huge. Eye, lung and spinal cancers are just some of the types of cancers where studies have found there are significant benefits.
Proton beam therapy is expensive but that could be about to change
The big downside of PBT is the cost. Producing the beams requires special equipment. The American think tank, the Institute for Clinical and Economic Review, puts the cost of a PBT centre as high as $150m. In contrast, an x-ray radiation clinic can cost as little as $1.8m.
While US insurance companies tend to err on the side of spending money (one reason behind their sky-high costs) even they are rethinking their support for PBT. Some have stopped funding it for conditions such as prostate cancer even though the evidence suggests it could be useful.
This is a big issue for the NHS. While it has funded some trips abroad, a course of treatment costs £80,000 per patient. While two new UK centres will bring this cost down to £40,000, the capital costs to set them up will come in at £250m. And they won't be completed until 2018.
A secondary issue is that of space. Because the PBT machines on the market are so large, they take up several rooms-worth of space. This further increases the potential costs and disruption, and means that patients may have to travel long distances to find the nearest clinic.
As a result, not everyone who could benefit from PBT is able to get it.
However, the good news is that this may be about to change. Medical technology group Varian Medical Systems (NYSE: VAR) has developed the ProBeam Compact proton therapy system.
The system has several benefits. Firstly, it is much cheaper than those currently on the market. It is also much smaller it can fit into a single room. Finally, its controls require less human input than existing machines, cutting the time needed for each patient, and so allowing more people to be treated.
In the longer run, Varian is confident that PBT will supplant x-rays. To make sure that the company is able to cash in on this shift, it has decided to invest large sums of money into building cutting-edge machines. As a result, sales are now surging revenue is expected to reach $650m this year, up from $300m in 2010.
The biggest single market is the US. But hospitals around the world are starting to show interest. Varian is in talks with clinics in Russia and the Middle East, so sales should continue to grow.
The other parts of Varian's business are also doing well. While sales of conventional x-ray treatment machines are growing slowly in the US, China is a different story, because it is still a very under-used treatment.
Indeed, sales in the BRIC (Brazil, Russia, India and China) countries are rising so rapidly that global x-ray sales are growing by double digits. Varian trades at a current price/earnings ratioof 21. However, this is set to fall to 16 by 2016.
Our recommended articles for today
Real QE is yet to come in Europe
The ECB's monetary easing policy is nice for the banks, but it won't do anything to help the wider economy, says Merryn Somerset Webb.
The one that got away
High share prices can intimidate investors. That's exactly what happened to David Thornton, and he missed out on making a fortune.
On this day in history
12 September 1683: The siege of Vienna is lifted
On this day in 1683, the Ottomans were forced to lift their siege on Vienna and abandon their designs on Austria following a fierce battle.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
-
Will the Autumn Budget impact investment markets?
Keir Starmer has warned the Autumn Budget will be “painful”. Will it impact investment markets and should you tweak your portfolio before 30 October?
By Katie Williams Published
-
TSB fined £10.9 million over ‘woeful systems and controls’ for struggling customers
News The Financial Conduct Authority issued the fine for historic failings by TSB after mortgage, loan and credit card customers were treated unfairly
By Marc Shoffman Published