Volcano Corp.

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In its latest earnings report, Volcano attributed 70 percent of its second-quarter revenue to the sale of single-procedure disposable catheters and guide wires, which are made in its Rancho Cordova clean rooms with technicians staffing two daily shifts. The company also sells measurement instruments to aid diagnosis and treatment.

Volcano became publicly traded last year (Nasdaq: VOLC), raising $54.5 million in an initial public offering in June 2006. About $30 million of that was used to pay down debt. A follow-up offering in December brought net proceeds of $66.8 million. The company is enjoying a steady rise in revenue, from $91.9 million in fiscal 2005 to $103 million last year, to a projected $125 million this year.

Volcano recorded its third consecutive profitable quarter in the first quarter of this year. But the second quarter, which ended June 30, disappointed some analysts because costs were higher than expected. Volcano announced a loss of $3.9 million, or 10 cents a share, on revenue of $29.6 million, compared with a loss of $4.2 million, or 41 cents a share, on revenue of $25.9 million in the previous second quarter.

The company will probably still meet its year-end revenue projection, analysts say. But profit is missing from the year-end forecast, with an expected loss of 14 cents a share. Volcano’s stock has been trading in the range of $15 to $18 per share. It went public at $8.

In discussing the quarterly results, Huennekens singled out Japan on the income front: “Our IVUS disposable activity in Japan was particularly pronounced, where disposable revenues grew 24 percent over the prior year.” Volcano also announced its Revolution rotational catheter had received approval from Japanese regulators.

VOLCANO'S GENESIS

Volcano was founded in early 2001 by a group headed by S. Ward Casscells, a Houston-based doctor and now an assistant secretary of defense for health affairs. That year his venture got funding from Domain Associates (with a West Coast office in San Diego), headed by Olav Bergheim, who is considered the official founder of the company. It initially opened offices in Laguna Hills in Southern California.

In July 2002, the company hired Huennekens as chief executive. Huennekens, a Harvard M.B.A., had been a sales and marketing executive with the cardiovascular group of Baxter International, then CEO of the San Diego-based Digirad Corp., a nuclear cardiology imaging company.

In July 2003, Volcano bought intravascular ultrasound technology from Jomed, a Amsterdam-based company in bankruptcy. Huennekens had asked Dahldorf to oversee the transaction and later hired him as CFO. Jomed earlier had purchased EndoSonics, which helped pioneer the catheters and operated from the same Rancho Cordova site now used by Volcano.

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