Volcano rises on jury's ruling in patent lawsuit

Volcano jumps after company says jury ruled in its favor in patent lawsuit brought by St. Jude

Associated Press

NEW YORK (AP) -- Shares of Volcano Corp. jumped Monday after the company said a jury ruled in its favor in a patent dispute with St. Jude Medical Inc.

THE SPARK: The San Diego company said that the jury on Friday denied St. Jude's claims that Volcano had infringed on four of its patents. Volcano said the jury found that two of the patents were not valid. The dispute relates to Volcano's PrimeWire guide wire, which is used to gauge the effects of arterial plaque on blood flow and blood pressure.

THE BIG PICTURE: St. Jude filed its lawsuit against Volcano in July 2010. Volcano denied the claims and filed a countersuit in September of that year, saying two of St. Jude's products infringed on three patents belonging to Volcano.

Over the first six months of 2012, Volcano said revenue from sales of disposable products used in blood pressure measurement procedures rose 38 percent to $43.1 million. The company's total revenue rose 13 percent to $185.7 million.

THE ANALYSIS: Jefferies & Co. analyst Raj Denhoy said the lawsuit was a major concern to Volcano shareholders, because the products are the largest driver of its sales growth and bring in about a quarter of the company's revenue. That makes the verdict "a huge positive" for Volcano, he said.

Denhoy added that Volcano's lawsuit against St. Jude is being heard Monday, and additional findings in Volcano's favor could boost the shares. He kept a "Buy" rating on the stock with a price target of $32 per share.

SHARE ACTION: Volcano shares rose $1.64, or 6.1 percent, to $28.49 in afternoon trading. As of Friday's close, the stock had gained nearly 13 percent in 2012, trading between $21.98 and $30.59.

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