Volcano guides lower but offers long-term vision, Wall Street trims by as much as 25%

Volcano ($VOLC) didn't get investors to buy into the idea of short-term pain superseded by long-term gain. The intravascular imaging and peripheral device company reduced its guidance for the year and laid out a plan for the company that includes the divestiture of its Axsun business.

Wall Street responded by pushing Volcano down hard 25% when the market opened on Aug. 8; that decline softened a bit to about 22% in early afternoon trading. The company will have another chance to try to convince investors with the details of its long-term vision at an analyst day on Monday, Aug. 11.

Volcano President and CEO Scott Huennekens outlined four elements of the company's core, long-term strategy: expand leadership position in coronary physiology and intravascular imaging; grow peripherals and roll out new products including Pioneer CTO Re-Entry Catheter, Valet Microcatheter, Crux IVC filters and Phoenix Atherectomy catheters; leverage assets to achieve profitability including the Axsun divestiture; and scale up so more than half of revenues come from outside the high-growth regions outside the U.S. Laser and optical company Axsun was acquired by Volcano in 2009 for $21.9 million.

Revenue guidance for 2014 was lower at $401 million to $405 million from $413 million to $421 million. It expects to lose $0.19 to $0.16 per share on a non-GAAP basis. For the third quarter, it expects revenues of $95 million to $97 million with a non-GAAP loss per share of $0.06 to $0.04.

Heunnekens attributed the reduced guidance to a greater-than-expected softness in the coronary imaging market led by declining intravascular ultrasound (IVUS) penetration and utilization in the U.S. resulting from increased pressure on hospitals to reduce costs. IVUS is a catheter system that allows physicians to conduct imaging inside blood vessels; it accounted for a bit less than half of Volcano's revenue for the quarter.

For the second quarter, Volcano missed on all fronts. It reported a non-GAAP per share loss of $0.10, below the loss of $0.05 expected by analysts. It also had revenues of $102.6 million, a bit below the consensus of $103.1 million. At least one analyst downgraded on the news; Oppenheimer lowered Volcano to "market perform" from "outperform" and reduced the share price target to $15 from $22.

Volcano also said it has reached a settlement with St. Jude Medical ($STJ) in which the parties have dismissed their lawsuits without admission of liability or any payment. Heunnekens said this means all the outstanding legal matters against the company are settled, which will result in reduced litigation expenses. The company had attributed some of the $3.6 million year-over-year gain for the quarter in SG&A expenses to litigation.

- here is the release
- and the transcript

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