VAR
#And I should say, that none of the stuff is a pipe dream.
A lot of it is already being worked in the developer mode by our research customers worldwide.
Sure.
Yes, I'd say ---+ on the first part of the question, the answer is zero and zero.
So we have (multiple speakers) nothing in our backlog.
And we have nothing in our guidance, because we're not going to put anything into guidance, that is not in our backlog.
We've learned that lesson, as we've discussed already.
Let me tell you about, we do have $350 million of proton backlog.
Yes, I'm sorry, thank you (multiple speakers).
Yes, sorry.
There is no single rooms in our backlog (laughter).
Having said that, we have a very active funnel of single room systems.
And I would be surprised if we didn't see one or a few of those land in 2016.
And as that happens, we'll have some rev rec upside maybe to report.
So we have not put any of those in the backlog.
As to the ---+ what percent of cancer patients are indicated for proton therapy.
I think, since the minute we've been in this business, it was part of the first thing that we did as due diligence.
We thought the number would be somewhere between 10% and 20% of all cancer patients would be indicated for proton therapy.
So that number is consistent, with what our assessment was, in our due diligence getting in a few years ago.
And <UNK>, let me just these, let me just clarify one thing, under this percentage of completion method in protons, it's a little different in that we get to essentially recognize the revenue kind of linearly over the project.
So if we were to get a compact order in the year, as soon as we specify equipment for a particular customer, we buy parts.
We start putting it together and producing it, we start revenue at that point.
So we don't have to wait until it is built and shipped, before we get any revenue.
We did two acquisitions last year, we like them both a lot.
One is pure software play, MeVIs, a computer-aided diagnosis for both breast and lung cancer.
We think there is an opportunity, given our distribution channel to leverage that product globally.
And we're seeing some very good kind of development opportunities in the oncology business there, with some of the imaging processing things that they do there.
So that is encouraging.
Clairmount is a little more hardware, it is largely a cable and connector business, that's very synergistic with our tube business, has the same customer list that we have.
And again, an opportunity there to take that product line globally with our distribution, and drive some growth.
Also very good teams, the MeVis team is a very, very good software development team in Germany.
The Clairmount team, very low manufacturing costs in the Philippines, and I think these are capabilities that we can leverage across the company.
In terms of our broader M&A strategy, I think it is the same.
We're always interested in things that we can do to strengthen our oncology business.
On the hardware side, I don't see a lot there, just because there isn't much that's too close to us.
But on the software side, the infomatic side, maybe there is some things.
And then, we are going to continue to hunt as well, the component space.
We think scale matters there, as the industry consolidates.
It's has been a rough year, but we've had terrific growth in this business.
We've now ---+ we believe that we're the largest manufacturer in the world of tubes and panels, even given some of the insourcing that the big radiology companies do.
So we've got a strong strategic hand to play in that ---+ in that business.
And we like ---+ even despite some of the 2015 rocky road that we've been through, we like the cards that we have, and think we've got a good strategic hand to play, given our scale.
It is going to build, <UNK>.
So we've built in one to two handfuls of Brazil shipments in this second half of the year primarily.
So this is going to be something ---+ it is going to take a number of years for this to all to work through the P&L and the margin.
Yes.
And then relative to our first question, we are looking very hard at our supply chain in oncology.
It's ---+ I mean, the cost in this business, our actual labor content is very, very small.
We do final assembly and test, which testing is very, very important.
We've got to get that right.
We are pointing radiation at patients, and we want to make sure that is done at the highest quality fashion.
So we always want to make sure that, that part of the process is very robust today.
I would say, with the vast majority it's done here in Palo Alto.
We have some capability in China, and we're building some capability in Brazil.
So the China and Brazil, will bring the cost per unit of that down, but we're still very significant here in Palo Alto.
But the real cost opportunity is on the supply chain side, we've made very good progress on that in 2015, and that continues to be a focus area for us.
I am pretty pleased with the variable cost productivity we're getting in oncology.
We're seeing at least mid-single-digit kind of variable cost productivity in oncology.
Sure.
So the earnings contribution would be negative, and it will be pretty similar to what we saw in FY15 and FY16.
We are ---+ I'm assuming that we are going to have roughly $20 million more proton revenue this year versus last year, just given what we are delivering on in the backlog.
But remember, the Maryland deal was pretty profitable, because of the way it was a bolus of revenue, and because it was a very large center.
So it should be about even with the year ago period, in terms of the impact on the P&L.
And, of course, the big wild card being, do we get Emory.
And do we get any compact that we can book, that are currently not in the backlog.
Yes, sure.
So, <UNK>, to my knowledge, these are all separate legal entities, with separate investors, and lenders and equity players.
And so, one is insulated from the other.
So I do not believe that it's going to have a big impact on Emory.
I can tell you that, we're still engaged with banks, helping answer questions, so that APT can, in fact get their financing put together.
And longer-term, for UT Southwest, boy, I do know that UT Southwest has indicated they are very interested in still having a proton center.
And so, hopefully this litigation will get worked out, and we can go to work for them, and get it installed.
But that's a ways off.
Yes, both were very strong in the quarter.
So we ---+ services was hit from a currency point of view, but constant currency basis, it was right where we expected it would be, 9%,10%.
Software equally strong, largely on the backs of RapidPlan.
Thank you.
Thank you all for participating.
A replay of this call can be heard on the Varian investor website at www.Varian.com//investor.
It will be archived there for a year.
To hear a telephone replay, please dial 1-877-660-6853 from inside the US, or 1-201-612-7415 from outside of the US, and enter confirmation code,13619357.
The telephone replay will be available through 5:00 PM this Friday, October 30.
