Volcano Corporation Cancels its Intravascular OCT Development Program?
Volcano corporation recently reported on its third quarter results and announced a strategic reprioritization initiative which among other things stated that it was discontinuation development of its Optical Coherence Tomography intravascular imaging product. The report can be seen HERE. It is unclear why Volcano took this position on OCT specially since it saved a small amount of near term R&D dollars and there is a big potential market that threatens the IVUS market (a Volcano strength). But lots of potential factors could be at play including a recent big drop it is stock value (see Link) due to investor concerns over earnings and maybe even corporate direction (see Article), being fourth to the market place behind St. Jude and Terumo and Avinger, IVUS technology continuing to advance in capability, large remaining development and product launch technical and financial hurdles, continuing after effects of the litigation between St. Jude and Volcano related to the Axsun acquisition, and perceived relative merits of opportunities for other revenue generating products and markets. The italic text below is a snippet from the Volcano report.
The strategic reprioritization program announced today is designed to enhance the allocation of resources and improve operating predictability and results. Key elements of the initiative include the discontinuation of development programs for the company's Forward-Looking IVUS, Forward-Looking Intra-Cardiac Echo and Optical Coherence Tomography intravascular imaging products. The operating expenses associated with these three discontinued programs were approximately $12.0 million annually. In addition to the restructuring charge recorded in the third quarter of 2013, the company expects to record a restructuring charge of up to $15.0 million, including up to $7.0-$7.5 million in cash charges, in the fourth quarter of 2013. "We will be reinvesting the savings from this reprioritization of resources in higher growth, lower risk revenue generating product and market development opportunities. These include peripheral, FFR and expanded distribution. We believe this reprioritization initiative better focuses and positions Volcano to compete more effectively in our growth markets," Huennekens said.
Perhaps there is more information to come from Volcano on this subject but it would seem this is a net negative for the field of intravascular OCT as more competitors in the market place usually helps the market develop faster, brings innovation and price reductions, and ultimately benefits patient care.
It also seems this would put Axsun in an awkward position given that Axsun is a subsidiary of Volcano and was purchased for its OCT source technology, OCT seems no longer to be strategic to Volcano in the near term, and Axsun still sells some telecommunication products which are not of strategic value to Volcano in the long term. However there is a clear statement in the press release from Volcano Chief Executive Officer Scott Huennekens where he indicated the higher growth focus areas include Fractional Flow Reserve (FFR), Intravascular Ultrasound (IVUS), Peripheral, and Axsun Medical.