January
31,
2011 -- 9:45pm EST
OCT Wars: St. Jude Versus the Volcano
Optical
Coherence Tomography (OCT) is an exciting new imaging technique that
is being used to assess the interior anatomy
of coronary arteries during and after angioplasty and stent placement.
(Read our
exclusive interview with Dr. Giulio Guagliumi for more information
about how OCT can aid in measuring the healing of stents.)
This technology is just now beginning to bridge the divide
between research tool and clinical aide -- for example, OCT can show
high resolution
pictures of stent struts and show whether they are covered or not.
So the future for OCT imaging is definitely of major interest.
The OCT market currently is divided between two companies:
Volcano Corporation (Nasdaq: VOLC) and St. Jude Medical (NYSE:STJ).
And, as in any duopoly, one front of competition is the courtroom.
So today, the results
of a legal decision by the Massachusetts Superior Court were announced
by both companies. And to read their press releases, you'd think
that both companies had
won!
Quick
(I hope!) back-story: in 2007, Volcano, a company that has led in
the field of intravascular imaging, acquired
Texas-based CardioSpectra,
a company that had developed an OCT imaging
catheter,
for $25 million.
And then, in January 2009, Volcano
acquired Axsun Technologies,
a maker of laser modules that are central to OCT imaging. That acquisition
was for $21.5 million.
Then, a year-plus later, St. Jude Medical, a company
known mainly for its pacemakers, ICDs and Angio-Seal (a vascular
closure device) purchased
Lightlab Imaging, a company that had pioneered OCT. They paid $90 million.
To further complicate matters, Axsun Technologies was
the sole supplier of Lightlab Imaging's laser modules
and they had a contract to do
so until 2016. So suddenly you had the newly acquired subsidiary
of one company supplying the central piece of its competitor's newly
acquired subsidiary's
main product.
No problem, right? Lawsuits? You bet.
In any case, last week the Massachusetts Superior Court
issued a ruling, and today the results of that ruling were reported
quite differently by each company involved.
St. Jude was first out
of the gate. They claimed in their
press release ("Volcano Corporation and Axsun Technologies
misappropriated LightLab trade secrets") that the Court had validated
their claim of Volcano and Axsun colluding to impede "the growth
of a major competitor," and that there was a "scheme orchestrated
by Volcano and implemented with Axsun's assistance" to seek to supply LightLab
with a less effective laser, and that this would "adversely affect the
marketability" of LightLab's imaging system. The bottom line was that the
Court found Volcano and Axsun in violation of a Massachusetts State
Law 93A, and assessed Volcano a judgment of $400,000 plus reasonable
legal fees to be paid to St. Jude, and to be determined by the Court
within the next couple weeks.
Sounds like a win for St. Jude.
Except later in the day, Volcano
issued their own statement ("Massachusetts Court Rules
in Favor of Volcano and Against St. Jude Medical") in which they applauded the
Court's decision. Huh?
Well,
it seems that the Superior Court's decision was 11 pages long, and
that, while the Court did find Volcano in violation of
the Massachusetts State law, it also dismissed
St. Jude's claims of trade secrets being used illegally, potentially
a much more important finding. As Volcano CEO Scott Huennekens,
stated:
"We are pleased with this ruling.
Along with prior court decisions issued in October 2010 and
in December 2009, it confirms that that Volcano/Axsun are not
using LightLab's purported trade secrets in our OCT development
efforts. We intend to continue developing our OCT system, and
can now do so with the reassurance that the Court concurs with
our position. Volcano will continue to execute on our growth
strategy of providing industry leading diagnostic and therapeutic
imaging devices to improve patient outcomes."
|
Presumably as a result of the initial negative news
from the court decision, Volcano's stock price, as of the
market's close today, dropped almost 5% since Thursday's high. It
would seem
reasonable that this might be corrected once the complete impact
of the Court's
decision becomes known. In any case, even with the severe two-day
drop, Volcano's
stock price is up 33% from a year ago, not exactly a poor return.
More on these OCT Wars as they continue....
|