Varian Medical Systems

2004 and BeyondContinuing the Growth

Giving Fighters a New Edge

Q3 FY2005 Overview

ForwardForward--Looking StatementsLooking Statements

Except for historical information, the information that follows contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include the matters described in the risk factors section of our information statement and other risks detailed from time to time in the company’s filings with the Securities and Exchange Commission.

VMS FY04 ProfileVMS FY04 Profile

Orders: $1.4 B

Revenues: $1.2 B

EPS: $1.18

Operating Earnings % 21%

Employees: 3,283

NYSE Symbol: VAR

Business Segments & RevenuesBusiness Segments & RevenuesFY04 %

Oncology Systems $1,031M 84%Radiation TherapyIndustrial Accelerators

X-Ray Products $ 165M 13%TubesFlat Panel Imagers

Other $ 40M 3%BrachytherapyGinzton Technology Center

TOTAL $ 1.2B 100%

The Growth Track The Growth Track

1999-2004• Revenue rose >15% per year to $1.2 billion• Net earnings grew >30% per year

2005 and beyond• Targeting $2 billion in revenues• More targeted cancer treatments• Emerging businesses• Acquisitions and new markets

Oncology Growth DriversOncology Growth Drivers

• Rising Cancer Incidence• Under-Equipped International Market• New Technology/Products/Upgrades

- IMRT- IGRT - Stereotactic Treatments

• Cost Effectiveness

The Radiotherapy ContinuumThe Radiotherapy Continuum

2D 3D Conformal IMRT IGRT Stereotactic Treatments

T R E N D – I M P R O V I N G P R E C I S I O N

1960s1960s 1980s1980s Late 1990sLate 1990s 2000s2000s FutureFuture

$1.9 million$1.9 million $2.4 million$2.4 million $3 million$3 millionAverage sales price:Average sales price:

22--D/3D/3--D Conformal Therapy ProductsD Conformal Therapy ProductsCORE• Clinac® linear accelerator

ACCESSORIES - Hardware• Ximatron simulator

ACCESSORIES - Software• VARiS Vision information and

image management software• CadPlan forward treatment

planning software

IMRT System ProductsIMRT System ProductsCORE• Clinac® linear accelerator

ACCESSORIES – Hardware• Acuity simulator• MLC multileaf collimator• PortalVision device

• Eclipse/Helios inverse treatment planning software

ACCESSORIES - Software• VARiS Vision information and

image management software

Dynamic Targeting IGRTDynamic Targeting IGRT

The Goal:

Tumor

Healthy tissue

Eradicating more tumors and sparing even more healthy tissue by eliminating the effects of tumor motion

IGRT AccessoriesIGRT Accessories

On-Board Imager

Respiratory Gating

SonArrayUltrasound Imager

Stereotactic TreatmentsStereotactic Treatments

The Goal:

Make cancer manageable!

Control metastaticlesions with one to five ultra-precise treatments using small powerful beams

Stereotactic ProductsStereotactic Products

• First linear accelerator for complete case mix from radiotherapy to radiosurgery

Accessories• Zmed Stereotactic

Treatment Planning

Trilogy

The Total SolutionThe Total SolutionAn integrated system for all processes –

2-D/3-D, IMRT, IGRT, StereotacticAutomated management of:• Imaging• Planning• Simulation• Quality Assurance• Patient positioning• Treatment delivery• Verification• Record keeping

Service

Oncology Net Order Growth RatesOncology Net Order Growth RatesNorth America and International Markets North America and International Markets

Trailing 12 Months as of April 1, 2005Comparisons prior to 1999 based on non-published internal data

0200,000400,000600,000800,000

1,000,0001,200,0001,400,000

Mar

-93

Mar

-94

Mar

-95

Mar

-96

Mar

-97

Mar

-98

Mar

-99

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Int'l

Dom

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

DomInt'l

Oncology Global Net Order Growth RateOncology Global Net Order Growth Rate

Trailing 12 Months as of April 1, 2005Comparisons prior to 1999 based on non-published internal data

0200,000400,000600,000800,000

1,000,0001,200,0001,400,000

Mar

-93

Mar

-94

Mar

-95

Mar

-96

Mar

-97

Mar

-98

Mar

-99

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Int'l

Dom

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Total

Oncology Net Order Growth DollarsOncology Net Order Growth Dollars

0200,000400,000600,000800,000

1,000,0001,200,0001,400,000

Mar

-92

Mar

-93

Mar

-94

Mar

-95

Mar

-96

Mar

-97

Mar

-98

Mar

-99

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Int'l

Dom

Trailing 12 Months as of April 1, 2005Comparisons prior to 1999 based on non-published internal data

Global Share of Radiation Oncology Orders

Others

Elekta

Siemens

Varian Medical Systems

Tomo

Estimate as of April 1, 2005

XX--Ray ProductsRay Products

• Leading technology

• Product breadth

• Lowest cost

• Highest quality

Emerging Business OpportunitiesEmerging Business OpportunitiesMedical

Flat panel digital imaging

HDR Brachytherapy

Cargo Screening

Emerging Business OpportunitiesEmerging Business Opportunities

Baggage Screening

Security

Acquisitions/New MarketsAcquisitions/New Markets$50 million in additional annualized revenues$50 million in additional annualized revenues

• OpTx Medical Oncology Software – Opens new market in medical oncology

• Mitsubishi Japan/Asia Joint Venture– Strengthens Varian’s presence in region

• Zmed– UltraSound imaging– Stereotactic treatment planning for neurosurgery– Web-based medical image management

• GammaMed– HDR Brachytherapy afterloaders and applicators– Strengthens Varian’s position in Europe

Third Quarter FY05Third Quarter FY05(ended 07/01/05)(ended 07/01/05)

050

100150200250300350400

Q304 Q305

Orders Revenues

01020304050607080

Q304 Q305

Op Earnings Net Earnings

Orders, Revenues Earnings

FY05 Year to Date FY05 Year to Date (as of July 1, 2005)(as of July 1, 2005)

• Orders increased 12%OSB +12%; XRP +9%

• Revenues increased 12%OSB +10%; XRP +20%0

200

400600

80010001200

Q3FY03YTD

Q3FY04YTD

Q3FY05YTD

Orders Revenues

Q3 FY05 YTDIn millions

• Operating Margin up 1.7 points to 22%

• Operating Earnings up 21% to $215M

• Net Earnings up 26% to $146M

Note: FY03 and FY04 adjusted to reflect the change from the LIFO method to the FIFO method of accounting for inventories.

0

50

100

150

200

250

Q3FY03YTD

Q3FY04YTD

Q3FY05YTD

Op Earnings Net Earnings

FY05 Year to Date FY05 Year to Date (as of July 1, 2005)(as of July 1, 2005)

Q3 FY05 YTD

VMS OS XRP Other

Net Orders 373 14% 318 16% 44 4% 11 (1%)

Revenues 347 14% 286 13% 49 20% 12 20%

Gross Margin 44% 45% 35% 59%

R&D 22

SG&A 55

Op Earnings 75 22% ROS (+15%)

Interest Income 1.1

EPS $0.37 (+23%) (137M diluted shares)

Q3 FY05Q3 FY05

VMS OS XRP Other

Net Orders 1,103 12% 919 12% 148 9% 36 22%

Revenues 996 12% 816 10% 144 20% 36 31%

Gross Margin 43% 44% 34% 54%

R&D 60

SG&A 152

Op Earnings 215 22% ROS (+21%)

Interest Income 2.2

EPS $1.05 (+30%) (138M diluted shares)

Q3 FY05 YTDQ3 FY05 YTD

Q3 FY05 Balance Sheet / Cash FlowQ3 FY05 Balance Sheet / Cash Flow• Conservative balance sheet

- $343M cash and marketable secs.- $ 56M total debt- $632M shareholder equity

• Spent $64M on stock buy-back• *DSO 82 days – up 8 days from year-ago qtr.• Strong cash flow

- $49M cash flow from operations- New 6M share repurchase program underway

through December 31, 2005

*Days Sales Outstanding

BacklogBacklogRecord $1,077MRecord $1,077M

(As of 07/01/05)(As of 07/01/05)

0

200

400

600

800

1000

1200

2002 2003 2004 2005

Q1Q2Q3Q4

Varian Medical Systems

2004 and BeyondContinuing the Growth

Giving Fighters a New Edge