The announcement that Volcano will be acquired by the imaging giant Philips Healthcare made waves in the medical device industry at the end of last year. Volcano had been an attractive acquisition target for several years because of its innovation in the intravascular imaging and pressure measurement market and its small size compared to its direct competitors, which include Boston Scientific and St. Jude Medical. Furthermore, despite its small size, Volcano is one of the global leaders in this market, including a definitive lead in the US market. However, the last couple years have seen turbulent waters for the company because revenue growth has been down. It was a bit of a surprise, then, when the announcement of the Philips acquisition was made, especially at share prices higher than the market price at the time and because Philips does not participate in the interventional space at the disposable device level.

According to Philips, the acquisition fits well with their goals for their image-guided therapy business. And it makes sense - as a highly recognized and respected leader in medical imaging on a global scale, Philips can add Volcano's technology to the mix. It's also clear that Philips values Volcano's connections with hospitals the company plans to utilize Volcano's sales force to promote Philips offerings. But what about the actual technology that Volcano was acquired for. The business has been struggling. How will Philips remedy this and compete more efficiently

Both Boston Scientific and St. Jude Medical have a range disposable interventional product offering that they can bundle with their IVUS catheters and FFR guidewires. This allows both companies to compete on price, which is becoming an increasing important factor for hospitals when making purchasing decisions. Philips doesn't have this edge. Rather, the benefits of the acquisition will likely come from how Philips and Volcano's technologies can be combined or complemented in order to expand imaging capabilities for added indications. This will open doors to new treatment areas and has the potential to create different bundling opportunities for Philips that focuses on imaging alone. The combined creative forces of these two companies have an edge over their competitors in the image-guided therapy market and it will be interesting to see what this relationship will comes up with.

The one question that remains is the fate of Volcano's peripheral vascular devices, which includes a newly acquired atherectomy device. There is not an obvious place for these technologies so it would not be surprising if their development was halted or the products divested.

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