Elekta bows out of mammoth Brazil tender as price plunges

Tue Oct 22, 2013 7:11am EDT

* Says price in Brazil tender became "unsustainable"

* Elekta, Varian and Best Theratronics were bidding for contract

* Elekta shares fall 2.8 percent

STOCKHOLM, Oct 22 (Reuters) - Swedish medical technology firm Elekta has bowed out of a tender to supply Brazil with 80 linear accelerators used to treat cancer as the price in the reverse auction became too low, the company said on Tuesday.

The tender, the biggest of its kind ever, has been a recurring theme at report presentations of both Elekta and its larger U.S. competitor Varian, which was also bidding in the auction, for more than a year.

Elekta shares were down 2.8 percent at 1054 GMT.

Brazil's Ministry of Health said last week Elekta, Varian and Canada's Best Theratronics were participating in the tender.

The price for the machines, including customer service and support as well as software, had gone below 120 million Brazilian reais, or around $55 million, including 5 percent in tax, Elekta said. A linear accelerator usually costs well above $1 million.

"We decided we had to decline participation in this tender when the price went to unsustainable levels," Elekta chief executive Tomas Puusepp said in a statement.

Though a prestigious contract win in an emerging market where both Elekta and Varian are seeking to expand their footprint, a deal with Brazil's Ministry of Health was never seen as highly profitable.

"Let's just say you're not going to like the gross margin in Brazil," Varian Chief Financial Officer Elisha Finney said at a conference call earlier this year. "You're not going to be happy if we lose, and you might not be happy if we win."

Around 1,000 linear accelerators, which emit high energy beams of radiation to kill off cancer tumours, are sold globally every year.

The purchase of the 80 machines is part of a Ministry of Health programme to boost prevention, diagnosis and treatment of cancer in the country worth around 500 million reais in total.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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