What is one to make of the following release. It seems to me a double-edged sword. How firm is the company's position to cease paying royalties? jes
Tuesday December 16, 6:20 pm Eastern Time
Company Press Release
VISX, Incorporated Changes Outlook for 4th Quarter
1997
SANTA CLARA, Calif.--(BW HealthWire)--Dec. 16, 1997--VISX Incorporated
(NASDAQ/NM:VISX - news) announced today that it has stopped making certain royalty
payments under its License-Back To VISX Agreement (''Agreement'') with Pillar Point Partners
(''Pillar Point''), a partnership between VISX and Summit Technology Inc. (Nasdaq:BEAM -
news; ''Summit'').
Commencing in October 1997 the Company no longer pays royalties to Pillar Point for certain
patented procedures performed using the VISX Excimer Laser System which have not been
approved by the Food and Drug Administration. This is consistent with a provision in the
Agreement which provides that royalties are due only for FDA-approved procedures. As a result
of this change, VISX expects that earnings for the fourth quarter will exceed analysts' current
estimates.
In November 1997 VISX sued for declaratory judgment that its interpretation of the Agreement is
correct because Summit disagreed with the Company's decision to stop making these payments to
the partnership. By the lawsuit, VISX seeks to ensure that the partners report royalties to Pillar
Point on a consistent basis. That lawsuit is pending in Santa Clara County Superior Court in
California.
If VISX's interpretation of the Agreement were found to be incorrect, VISX could be obligated to
remit to Pillar Point all the royalties not paid since October 1997. In that instance, the contribution
to VISX's earnings from non-approved procedures performed on VISX Systems would be
reduced to a percentage consistent with that reported in prior periods. This difference would have
a material adverse effect on the Company's financial condition and results of operations.
If the Company were to continue making royalty payments in a manner consistent with prior
periods, it is anticipated that earnings for the fourth quarter would be below analysts' current
expectations due primarily to lower-than-expected net revenues from Pillar Point, anticipated
lower system sales in Asian markets, and trade-in discounts the Company has offered to owners
of non-VISX lasers.
The Company anticipates that procedures performed in the fourth quarter using VISX Systems will
exceed its earlier expectations. Nevertheless, increased procedures by VISX users would not be
sufficient to offset an expected shortfall in revenues from Pillar Point.
VISX is a worldwide leader in the development of refractive laser technology. VISX Systems are
commercially available in the United States and markets worldwide.
The statements in this release regarding expected future operating results are forward-looking, and
actual results could differ materially. Among the factors that could affect actual results are the
following: the outcome of litigation between VISX and Summit; fluctuations in VISX's and
Summit's contributions to Pillar Point Partners on a going-forward basis; FDA approval of certain
procedures for which the Company is not now paying royalties to Pillar Point; quarterly
fluctuations in customer orders; and fluctuations in the timing and number of sales of VisionKey(R)
cards. Other risks and uncertainties are detailed from time to time in the Company's SEC reports,
including VISX's Form 10-K for the year ended Dec. 31, 1996, and Forms 10-Q for the quarters
ended March 31, June 30, and Sept. 30, 1997. In addition, although the Company expected
Summit to report a higher number of procedures to Pillar Point in the fourth quarter, the Company
has no knowledge of the number of procedures actually performed on Summit systems.
Contact:
Visx Inc.
Lola Wood, 408/733-2020
ir@visx.com
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Summit Technology Inc (Nasdaq:BEAM - news)
VISX Inc (Nasdaq:VISX - news)
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