On Oct 10, we issued an updated research report on leading precision guided therapy tools provider, Volcano Corporation (VOLC). The company retains its position as a leader in the intravascular ultrasound (IVUS) markets of U.S., Japan and Europe and holds 50% of the global market share.However, the current market environment remains challenging for Volcano.
The final reimbursement reduction in Japan led to an approximate 5% cut in Imaging Disposables and an about 2% cut in fractional flow reserve (FFR) disposables of Volcano Corporation. These reimbursement cuts will be in effect for the next two years. In addition, the Japanese government has mandated a 3% consumption tax increase. According to the company, this has led to a 7.5% reimbursement decline beginning Apr 2014, in line with its expectation.
Volcano Corporation derives a major chunk of its revenues from the IVUS product portfolio which continues to demonstrate strong growth. In the last reported quarter, the improvement was primarily owing to market share gains in IVUS in all of Volcano Corporation’s key geographic locations barring Japan and more than 20% growth in the U.S. peripheral IVUS business. The company reflected solid 10% and 22% IVUS growth in Europe and in Rest of the World.
Currently, more than 3.1 million procedures are performed globally in this market which has an imaging penetration of less than 3%.Given the low penetration rate, Volcano Corporation expects the U.S. peripheral IVUS business to grow in the high teens in the coming period. In addition, FFR disposable revenues managed to show healthy growth.Furthermore, we are optimistic about the favorable industry trends which should lend positive momentum to Volcano Corporation.
The stock currently has a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked stocks in the medical instrument sector that look promising at the moment include Edwards Lifesciences Corp. (EW), Hansen Medical, Inc. (HNSN) and Bacterin International Holdings, Inc. (BONE). All the three stocks carry a Zacks Rank #2 (Buy).
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