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Signify Premium Insight: Varex Banking on the Micro-X-Factor

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Last month, Varex and Micro-X announced that they had signed a long-term strategic collaboration agreement, centred around Micro-X’s multi-beam X-ray tubes.

For a non-refundable fee of $7.5m, the deal will grant Varex an exclusive license to use Micro-X’s NEX Technology for cold-cathode multi-beam X-ray tubes, along with an equity subscription to achieve a 9.9 percent holding in Micro-X.

As one of the world’s largest producers of X-ray tubes and flat panel detectors, Varex’s interest will also help commercialise multi-beam emitter technology, and help Micro-X better monetise its core technology.

The Signify View

Many technological innovations are developed by smaller specialist vendors, with very particular expertise and experience serving niche markets. These smaller vendors, however, frequently lack the size to scale their innovations and turn them into a commercial success. In these cases, forging ties with larger companies, through, for example, partnerships, licensing agreements or even acquisitions can help turn a smaller specialist vendor’s innovations into a broader commercial success.

Micro-X will hold such hopes in its agreement with Varex. Micro-X has worked to develop its NEX cold cathode multi-beam X-ray tubes, but by licensing its use to Varex, the vendor’s X-ray tubes could be sold to a far greater customer base in far greater numbers than would be possible otherwise. Varex is, after all, among the market leaders in the X-ray tube and flat panel detector markets, claiming 19 percent market share in the latter.

Despite its strength in these markets, however, the company does face challenges. It does, like many of its peers, face being undercut by cheaper Chinese vendors, which have, over recent years, driven down the prices of flat panel detectors and caused large FPD manufacturers like Varex to review their supply chains and manufacturing facilities as a result. More sophisticated technology, such as Micro-X’s multibeam emitter technology is less likely to face such affordable competition given the technical hurdles it presents, and therefore represents a sensible area in which Varex can diversify.

Optimisation Opportunity

The deal also makes sense for other reasons. By offering both the multi-beam emitter and the flat panel detectors, Varex can optimise the package as a complete system, rather than X-ray system manufacturers having to undertake such optimisation. This will give Varex an advantage, allowing it to leverage its strong sales of flat panel detectors to strengthen its position in the X-ray tube market, while also enhancing its technical prowess, making it a stronger competitor in more advanced imaging use cases.

Such a plan would not be new for Varex, which adopted a similar strategy in 2019, when it acquired photon counting specialist Direct Conversion. While the move was focused on the detector rather than emitter component of an X-ray imaging system, the principle was the same. It allowed Varex to access sophisticated, specialist technology developed by Direct Conversion, and utilising its global reach, its strong sales network, its reputation and its connections to many of the world’s leading medical imaging X-ray manufactures, offer its customers an improved X-ray detector.

The rationale with Varex’s agreement with Micro-X is very similar. However, the execution is somewhat different, with Varex opting to enter into a licensing agreement with an equity subscription, rather than an outright acquisition as it did with Direct Conversion. Such a decision may present some obstacles, with the vendor foregoing the ability to have complete control over the X-ray tube producer. However, given that the agreement between Varex and Micro-X is exclusive, the difficulty this causes will be minimal. What’s more, such an agreement will also be advantageous for Micro-X, which as well as offering systems for the medical imaging market, also offers X-ray tubes for specialist industrial and security uses.

Beam Convergence

Aside from the direct impacts on Varex and Micro-X themselves, the move furthers developing trends in the medical imaging market including the convergence of X-ray and CT imaging. The use of multi-beam X-ray emitter technology, particularly if used in conjunction with photon counting detectors, could offer higher resolution and better tissue characterisation. What’s more, such advantages could be gained while systems also become smaller, lighter and more portable than traditional X-ray devices, allowing X-ray and tomography to be taken out of the more traditional settings.

Largely these advantages stem from the fundamental differences in Micro-X’s NEX nanotube X-ray emission technology. This innovation uses a cold cathode electron source rather than the traditional heated filament. Such an approach makes the electron source smaller, lighter and more robust, allowing it to be utilised in more sophisticated ways in medical imaging systems.

At present, there are very view vendors commercially offering cold-cathode nanotube X-ray source technology, giving Micro-x and now Varex an advantage when it comes to commercialising their product. Perhaps the most high-profile competitor is Nanox, which places a cold-cathode carbon nanotube X-ray source at the centre of its Arc scanning system. Nanox has, however struggled to get its commercial, multi-source X-ray source approved by the FDA, rendering it, as yet an untenable option for many providers.

This does nothing to improve the Israeli vendor’s reputation, which was severely tarnished by a number of short-sellers, and a general lack of clarity around its product when it first listed publicly in 2020. Micro-X and Varex, on the other hand are both well-established vendors, with well-proven products, and hard-earned reputations from satisfying significant customer bases for many years. This should give systems developed using Micro-X’s X-ray source a significant advantage over lesser established vendors such as Nanox, although if Micro-X systems demonstrate sizable improvements, other vendors, including Nanox, which are developing comparable systems, could also find their credibility improved.

Brand Loyalty

This is particularly true given that Varex provides solutions to some of the biggest names in medical imaging, including Canon Medical, GE HealthCare, Elekta, United Imaging and Varian among others. This commercial reach will expedite the uptake of Micro-X’s technology and continue the advancement of X-ray technology. Varex’s scale will allow the X-ray sources to be produced more affordably, while the technology offered will allow both Varex and the customers it serves to differentiate themselves from the milieu of other, potentially cheaper vendors, which lack the top-end capability.

Ultimately, as with almost any technological advancement, adoption is gradual, with customers taking their time to appreciate, and more importantly, invest in a product’s touted benefits. The same is likely to be true of Micro-X’s NEX technology. However, alongside photon counting CT and dual-energy CT, the adoption of cold cathode emission technology by a market leader in the X-ray space means another opportunity has come to the fore, ready to be leveraged by modality manufacturers looking to distinguish themselves from the competition.

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This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify ResearchTo view other recent Premium Insights that are part of the service please click here