Visx
Focusing on Laser Eye Surgery's New Wave
Los Angeles Times,
January 29, 2003
Vision-correction laser maker hopes doctors and consumers will find its
latest technology worth looking into.
More than 5 million Americans have had their eyesight
fixed using laser surgery, but millions more still think their glasses and
contact lenses will do just fine, thank you.
Demand for the laser procedures, which soared in the 1990s, has been sliding
since the peak in 2000. Vanity has been trampled by consumers' thriftiness in
the face of the poor economy, along with lingering fears about the surgery's
safety.
That has caused big problems for medical chains doing the
procedures and laser manufacturers building the equipment. Their profits and
stock prices have tumbled. Some have been forced to merge.
But now they have their eye on a new prize -- one they hope will convince more
consumers to take another look at laser surgery.
Called wavefront-guided surgery, the system is just being
rolled out. It's expected to allow doctors to treat eye disorders that
previously couldn't be detected, make eyesight even better and reduce many of
the side effects of laser operations such as poor night vision. It also will
cost more than conventional laser surgery.
"It's the biggest breakthrough in laser vision correction since the
invention of the laser technique," said Dr. Thomas Tooma, California
medical director for TLC Vision Corp., whose TLC Laser Eye Centers is the
largest chain performing the procedures.
Consumers' anticipation about the new system is another reason why they're
delaying surgery, leaving the firms to muddle through until the wavefront
system is more widespread.
Visx Inc. of Santa Clara, Calif., the dominant maker of laser-vision machines,
Tuesday reported another decline in profit, saying its fourth-quarter earnings
fell 7%, to $3.9 million from $4.2 million a year earlier.
Visx makes money two ways: selling its machines and
charging doctors a $100 fee for each procedure using Visx's equipment. The fees
represent the majority of Visx's revenue and are the key to its long-term
success.
But in the fourth quarter, those licensing royalties and service fees were flat
compared with a year earlier.
"They fairly well represent what's happening in the whole industry,"
said David Harmon, president of Market Scope, a Manchester, Mo.-based firm that
tracks the laser-vision business.
Visx's stock, which traded above $100 a share during the industry's heady days
of 1999, closed Tuesday at $8.63, up a nickel, on the New York Stock Exchange
before the financial results were announced.
Still, Visx is starting to sell its wavefront system to international customers
and to American surgeons with the expectation that the Food and Drug Administration
will approve the procedure this spring. As a result, Visx's fourth-quarter
sales of equipment jumped to $15.7 million from $7.8 million a year earlier.
TLC Vision this month began using the new method with equipment from the Swiss
company Alcon Inc., which already has FDA approval.
Even though Visx is the largest maker of laser-vision machines with nearly 60%
of the U.S. market, Alcon and several other rivals have entered the business in
recent years and contributed to the slowdown in Visx's growth.
The number of U.S. procedures peaked at 1.42 million in 2000, then dropped to
1.31 million the next year and 1.15 million in 2002, according to Market Scope.
The most popular form of the surgery is dubbed Lasik, short for laser-assisted
in-situ keratomileusis, which takes only a few minutes. It's used to correct
nearsightedness, farsightedness and other maladies.
Harmon estimates that the number of operations will bounce back to 1.3 million
this year, but he acknowledged that his prediction carries optimistic
assumptions, such as the economy picking up steam in the latter half of the
year.
Indeed, industry executives and doctors blame the laser-vision slowdown in
large part on the poor economy.
The surgery generally is an elective procedure that's often not covered by
insurance and typically costs $1,500 to $2,000 for each eye.
When the economy falters and households cut spending, "this is a very easy
decision to delay," said Ted Huber, an analyst at Banc of America
Securities. "You just keep wearing your contacts and glasses."
Consumer fear is another factor. Although studies show that more than 98% of
patients are satisfied, negative publicity about the minority who complain of
side effects or damaged eyes leaves many prospective patients skittish, Tooma
said.
"If I was to rate" the industry's troubles, he said, "fear is
No. 1."
But he added that the fear factor probably "will be addressed" by the
new wavefront technology, which often is referred to as "custom
Lasik" because it effectively takes a "fingerprint" of each
patient's eyes.
After Visx gets FDA approval and launches its wavefront method, it plans a
"substantial" hike of its $100-per-procedure fee, said Visx Chief
Executive Elizabeth Davila. "As these custom procedures are blended into
our mix," she said, Visx's income should grow even if the number of users
remains flat. Surgeons are expected to pass on that higher fee to patients.
If the economy stays weak, will the new technology be enough to convince more
consumers to go under the laser?
"That's the $64,000 question," analyst Huber said.