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Volcano Corporation Grows Portfolio

BSX VOLC

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Volcano Corporation (VOLC - Analyst Report) has expanded its portfolio with the clearance to market of its Visions PV .035 digital IVUS (intravascular ultrasound imaging) catheter in both the US and Europe. This is significant as the use of this device will better place physicians to study vessel morphology and accordingly take proper treatment decisions which, in turn, would benefit patients.  

The Visions PV .035 digital IVUS catheter is capable of imaging large vessels. Management is confident that the IVUS technology would help in guiding endovascular and other peripheral therapies.

Volcano Corporation derives a major part of its revenues from its IVUS product portfolio. During the last reported quarter, the company witnessed mid single-digit growth in IVUS disposable revenues in the US and Japan, as well as in Northern Europe though trends in Southern Europe, particularly Spain, were disappointing. We appreciate the company’s strategy of driving growth based on market penetration, share gain and pricing benefits with the introduction of more advanced IVUS catheters and related technology. With softness in PCI procedures in the US and price cuts in Japan, the company is looking at mid-single digit growth in IVUS disposables going ahead.

However, as these challenges subside, we expect IVUS growth to improve. IVUS technology is widely used to determine the placement of stents in patients with coronary disease. Moreover, the low IVUS penetration rate in the US and Europe provides better scope to increase its market share.  

Volcano Corporation has been working on expanding its portfolio with the recent launch of many products. This is expected to boost its revenues in the long term. During the first quarter of 2012, the company initiated a limited market release of its Valet Micro catheter in the US that received 510(k) clearance in early January. This was followed by CE Mark approval for the device, and a limited market release was initiated in Europe in the second quarter. The company is looking at an early 2013 approval of Valet in Japan. While revenue contribution from the device will be nominal in the current fiscal, it will improve gradually.

In addition, Volcano Corporation has high expectations from the next-generation IVUS technology called FACT (Focused Acoustic Computed Tomography), the commercial launch of which is slated for mid-2013 in the US and Europe, and a year later in Japan. The company is also progressing with respect to its Forward-Looking IVUS and Forward-Looking Intra-Cardiac Echo programs. However, in the IVUS range of products, the company faces tough competition from Boston Scientific Corporation (BSX - Analyst Report).

We have a Neutral recommendation on Volcano Corporation. The stock retains a Zacks #3 Rank (Hold) in the short term.

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