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Summit Technology traded as high as 38 this year, and since they have twice as many shares as Visx, this would be the equivalent of Visx trading at $76/share. I think Visx could easily get to $50/share by the end of this year (and maybe sooner).
The thinking that Visx could go over $100/sh (> 1.5 billion market cap) is that LVC takes off and the PPP royalties of $140/eye for Visx start to really add up. If 1 million/year in the U.S. get LVC then Visx would receive $140 million in PPP royalities. Predictions for LVC are for 100,000 this year, 250,000 next, and 1 million by 2000. Well, if Visx is dominating the market in sales of machines at $525,000 each and if Visx soon gets permission from the FDA for astigmatism correction and eventually hyperobia (their STAR will perform both astigmatic correction as well as treat hyperobia), the market could be enormous. It is estimated that 70 million are nearsighted and candidates for LVC (and almost all have 2 eyes). The hyperobia market should be just as big. So, for Visx to trade at
over $100, the earnings have to start coming in and the expectation of
increasing earnings could allow Visx trade at 30x multiples. It seems conceivable to me that Visx could earn $5/sh (and maybe more) in a couple of years and therefore could rise to over $100/share. I'm not saying it will be at $100/share in the immediate future. However, Visx's stock price has been looking pretty strong lately and in my opinion is about to pop up and above its old high of 40 1/8.
The negatives are that the FTC might try to mess with PPP, which would definitely hurt the stock. Most don't believe this will happen. Also, Summit has filed a lawsuit against Visx claiming the Visx Star laser infringes on Summit's Azema patents. Summit bought the patents a few years back for 7 million. Visx at that time didn't feel they were worth anything and has defended against them in Europe. Visx has something like 102 patents and is considered to have the most fundamental ones covering the technology. This is the reason that when PPP was formed Visx gets 56% of the per procedure royalties whereas Summit gets 44%. Also, Visx gets a 6% royalty on all Summit machine sales that use Visx technology (the Apex currently does). |
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