Precision guided therapy tools provider for diagnosis and
treatment of coronary and peripheral vascular disease,
) has actively pursued acquisitions to drive growth. Following
its declaration of signing a definitive agreement to acquire
Israeli Sync-Rx Ltd. 2 weeks back, Volcano again came up with
another acquisition agreement to purchase California based
privately held Crux Biomedical, Inc. that develops advanced
therapies for the human vasculature. The deal is expected to
close by next week.
Per the deal, Volcano will pay $36.0 million in cash and an
additional $3.1 million as transaction expenses. Besides, on
submission of the FDA clearance of a 510(k) application within
June 30, 2013, for a retrieval device of Crux, currently in
process of development, there will be another payment of $3.0
million as potential post-closing cash milestone. Further,
additional payment can also be made by Volcano based on the
products' performances of Crux, post commercialization. According
to the company, the commercial sales of Crux products will begin
at the end of 2013, once full-scale manufacturing is implemented
at Volcano's Rancho Cordova facility.
Volcano believes that the acquisition of Crux will expand the
company's portfolio with several advanced cardiovascular
products. The acquisition will enable the company to access the
Crux VCF System, an inferior vena cava (IVC) filter to treat the
life threatening pulmonary embolisms (PE). Pulmonary
embolismsoccur when large blood clots, travelling from other
parts of the body, block lung arteries.
However, this problem is far worse than most
know. Currently, there is an
number of people
suffering from this disease in the U.S., affecting 600,000
patients with an estimated 200,000 deaths a year. Therefore,
Volcano is optimistic about the prospects of the IVC filter in
reducing PE risk for patients. According to the company, the IVC
filter market in the U.S. is estimated at approximately $300
million. The company also expects to seek regulatory approval for
the commercialization of the Crux VCF System in combination with
its IVUS (Intravascular Imaging) technology.
Volcano's acquisition-driven growth strategy has served it
well in the high-growth markets of the US. The company is also
making its presence felt when it comes to clients in the emerging
economies. These acquisitions have also helped Volcano diversify
On November 23, 2012, Volcano signed an agreement to acquire
Israeli medical imaging solutions company Sync-Rx Ltd. that
develops advanced software for transcatheter cardiovascular
interventions using automated online image processing and is
currently focused on coronary catheterizations. Volcano believes
that apart from establishing its footprint in Israel, the
successful completion of this acquisition will also enable the
company to progress further with its multi-modality platform.
Volcano continues to believe that the IVUS market remains
under-penetrated. In the next few years, the penetration rate of
integrated consoles in cath labs is expected to reach 80% or more
from the current level of just over 30%. Banking on its ability
to expand its product offering and continuously upgrade
technology, the company is confident of reaping maximum advantage
from this lucrative market. In addition, Volcano has high
expectations from the next-generation IVUS technology called FACT
(Focused Acoustic Computed Tomography), the commercial launch of
which is slated in mid-2013 in the U.S. and Europe, and a year
later in Japan.
However, Volcano continues to face a tough macroeconomic
environment, especially in Europe. Moreover, unfavorable currency
movement continues to play as a major headwind for the company.
For the IVUS range of products, the company faces tough
Boston Scientific Corporation
). We have a Neutral recommendation on Volcano Corporation. The
stock retains a Zacks #3 Rank (Hold) in the short term.
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