Laser Vision Correction firm (VISX) keeps a close eye on consumer confidence
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Visx keeps a close eye on consumer confidence
Investor's Business Daily
February 9, 2004
by Marilyn Alva
Laser vision correction firms keep a close eye on consumer confidence. When it goes down, the number of procedures drops.
Since the procedures are discretionary and not usually reimbursed by insurance plans, customers need to feel in good financial shape before getting one. The procedures can cost $2,000 or more per eye, depending on the local market.
"It's something they have to pay out of pocket most of the time," said Liz Davila, Visx's chief executive. "That's why it's sensitive to the economy."
She knows what can happen when the economy turns south. Visx, which develops technologies and systems for laser vision correction, suffered three straight years of annual sales and profit declines from 2000 to 2002.
When the economy started picking up last year - and consumer confidence rose with it - Visx's financials followed suit. Officials expect future growth to come in part from a new custom laser system Visx launched in June.
The system, called CustomVue, uses WaveFront technology. With a new measuring tool that sends a beam of light through the optical system, doctors can custom-tailor procedures to address unique characteristics - and problems - in each individual eye.
Doctors say it's like taking a fingerprint of the eye.
"This is a major breakthrough for better visual performance," said Terrence O'Brien, director of refractive eye surgery at the Wilmer Eye Institute at Johns Hopkins University.
He was one of the clinical investigators who studied the procedure before it was approved by the Food and Drug Administration.
By the end of 2003, at least 30% of laser corrections done with Visx gear were done using CustomVue, analysts estimate.
Those numbers matter. Visx charges doctors $100 for each standard procedure. For CustomVue, the cost is around $235.
Visx tracks the number of procedures performed on its gear through "smart cards" it sells to surgeons. The cards are programmed for a certain number of procedures - generally 10 per card.
"Once doctors learn how to correctly operate the system, the results are definitely superior to traditional results," said Cory Lessner, a refractive surgeon and medical director of Millennium Laser Eye Centers in Sunrise, Fla.
THE FINANCIALS
Visx earned 49 cents a share in 2003, up from 39 cents the prior year. Revenue increased 3% to $144 million.
The company's stock fell sharply on Jan. 28, however, when it reported fourth-quarter revenue of $38.2 million - up only 6% from the previous year and lower than what some analysts had expected.
Wachovia Securities downgraded its rating on Visx, noting the firm's licensing revenue rose only 3% vs. expectations of 8% to 12%.
LOOKING AHEAD
CustomVue is approved by the FDA to treat about 70% of the population that could benefit from laser eye corrections. Visx expects approval for additional indications by the end of the year.
A couple of factors still prevent many patients from choosing the new procedure, however. One is fear that something will go wrong. Another is cost: roughly $500 more per eye than traditional procedures.
"We're not at the point in this country where (custom laser) is considered standard care," Lessner said. "But I think we are going to get there."
Analysts estimate Visx has more than a 60% share of the overall laser vision market. Its two main rivals, Alcon Inc. and Bausch & Lomb Inc., also have come out with their own approved versions of custom laser technology.
While these firms look for ways to raise awareness of improved technologies, analyst Michael Lachman of ThinkEquity Partners warns that the laser vision correction market is volatile.
"Keep in mind a discretionary purchase is dependent on consumer confidence," he said. "The fact is, nobody knows what consumer confidence is going to look like in the second half of 2004."
