Proving the Business Case for the Internet of Things

Philips buys medical devices firm Volcano for $1.2bn

Steve Rogerson
January 7, 2015
 
Dutch electronics giant Philips is buying US medical devices company Volcano for US$1.2bn. Volcano specialises in catheter-based imaging and measurement devices for cardiovascular applications.

Directors at Volcano have approved the transaction, which is expected to be completed early this year.
In the past few years, Philips has created an image-guided therapy business through strategic investments in R&D, partnerships and technology licences. Today, it has a sizeable global customer base, including each of the top 50 US heart surgery and cardiology hospitals.

In image-guided treatments of the heart and blood vessels, there is an increasing trend to use advanced catheters that are capable of producing ultrasound images of the interior of blood vessels (intravascular ultrasound or IVUS) or perform blood flow measurements (fractional flow reserve or FFR). There is a growing body of clinical evidence that the use of such technologies used with interventional x-ray helps improve procedural outcomes.

With 2013 sales of approximately US$400m, California-based Volcano claims to be the only company in the industry with a leading position in both IVUS imaging and FFR measurements. In addition, the company possesses the broadest product portfolio around these two technologies and a nascent peripheral vascular therapeutics business that targets a segment with a double-digit growth rate.

“The agreement to acquire Volcano significantly advances our strategy to become the leading systems integrator in image-guided therapies,” said Frans van Houten, chief executive officer of Royal Philips. ”Volcano’s impressive and unique product portfolio is highly complementary to our strong offering in live image-guidance solutions, creating an opportunity to accelerate the revenue growth for our image-guided therapy business to a high single-digit rate by 2017.”

The combination of the two companies should create new sources of recurring revenue streams and increase sales growth for Philips in the €4bn image-guided therapy market. Sales growth will be accelerated through Volcano’s close customer relationships associated with its disposable products and channel synergies that will create cross-selling opportunities between both companies’ existing customer bases.

Furthermore, the combination of Volcano’s proven clinical development and commercialisation capabilities with Philips’ next generation of imaging and measurement technologies will allow Philips to introduce new products in higher growth segments such as the minimally invasive treatment of heart rhythm disorders and structural heart diseases. These are promising segments growing at double-digit rates.

“I am very excited that Volcano will become part of Philips and join forces with its leading image guided therapy business,” said Scott Huennekens, Volcano president and chief executive officer. “This transaction will be beneficial for our shareholders, customers, partners and employees. There is a large and growing global market opportunity for image-guided therapies and, as part of Philips, we gain the scale and resources needed to accelerate our goals of improving patient outcomes on a global basis, lowering cost and delivering innovative diagnostics and therapies in the coronary and peripheral markets.

“In addition, our shared expertise in the image-guided therapy market will allow us to further globalise our leading IVUS and FFR product offerings and enter new product areas. We look forward to working closely with Philips and ensuring a smooth transition and closing.”

Upon completion of the transaction, the Volcano business and its 1800 employees will be part of a dedicated, new image-guided therapy business group within Philips, which will be led by Philips executive Bert van Meurs.