Volcano Corporation Enters $11M Supply Agreement with Santec for Swept Source Lasers
Volcano Corporation recent Form 8K filing indicates that it has entered an $11.3M supply agreement with Santec Corporation to supply tunable lasers for its intravascular swept source optical coherence tomography (SS-OCT) product. The text at the bottom of this article shows a page from Volcano’s recent 8k filing (see Link).
Volcano has been through a long and tortuous path to get a swept source laser for its OCT product since it announced the acquisition of Axsun Technology in December 2008. One of the reasons that Volcano acquired Axsun was Volcano thought that Axsun had swept source laser technology that would dominate OCT based imaging in medicine. Unfortunately Axsun was in a supply agreement with Lightlab Imaging/St. Jude Medical and the acquisition set off a long and expensive legal battle between the three organizations. It seems that currently the Axsun OCT effort is walled off from supplying Volcano swept source lasers and perhaps other OCT technology. If accurate, it is unclear how long this separation will remain in place, perhaps as long as the original contract which has many years left. It appears that instead of accelerating Volcano’s product to market, the Axsun acquisition significantly delayed Volcano’s entry into the intravascular OCT market. Volcano will be the third to release an intravascular OCT product behind St. Jude and Terumo.
The result has clearly been good news for Santec which has received a substantial order from a Tier 1 customer with a clear market need. It is also good news for Volcano which can further its product release plans, and good news for patient care as presumably in the not too distant future there will be a third intravascular OCT product on the market.
Excerpt from Volcano Form 8k filling:
On December 19, 2012, Volcano Corporation (“Volcano”) and Santec Corporation, a corporation organized under the laws of Japan (“Santec”), entered into a Supply Agreement (the “Agreement”), pursuant to which Santec will supply Volcano with scanning lasers for use in Volcano's optical coherence tomography, or OCT, systems. Under the terms of the Agreement, Santec will be responsible for manufacturing the lasers in accordance with Santec's specifications and agreed-upon quality standards. Volcano will initially purchase approximately $1.9 million worth of lasers, which Volcano will pre-pay within 30 days of the date of the Agreement. Volcano has agreed to purchase annual and/or life-of-contract minimum quantities of the lasers, which depending upon the timing and quantity of the purchases, will range from approximately $7.3 million to approximately $9.4 million over a three-year period. The Agreement provides that Volcano will purchase scanning lasers for use, upon regulatory approval, in its commercial intracoronary imaging OCT products solely from Santec until the earlier of 1) expiration of the agreement or 2) such time as a specified cumulative order amount is reached.
Unless earlier terminated, the Agreement will be effective through March 31, 2016. The Agreement may be terminated by Volcano in the event Santec fails to supply products in agreed-upon amounts that conform to the terms of the Agreement and in certain other circumstances. The Agreement may be terminated by either party in the event of a breach by the other party that is not cured within a specific time frame, or in the event the other party becomes insolvent or ceases to do business