"...the flurry of price cuts caught Wall Street off guard and has cooled investor interest..."
Copyright © 2000 F-D-C Reports, Inc.
M-D-D-I Reports.
The Gray Sheet
Vol. 26; No. 9; Pg. 4
February 28, 2000
TITLE: PRICING PRESSURE FOR EYE LASERS BENEFITS LASER CENTERS, ANGERS WALL STREET
Laser centers and their patients are the most likely beneficiaries of last week's declared industry-wide price war for per-procedure laser vision correction fees.
At the same time, however, the flurry of price cuts caught Wall Street off guard and has cooled investor interest in what has until recently been one of the hottest sectors of the eye care market.
During the week of Feb. 21, Visx, Summit and LaserSight all announced fee reductions charged for laser-assisted keratomilieusis (LASIK) procedures. Visx made the first move on Feb. 22, announcing that it was slashing its per-procedure fee by 60%, from $250 to $100. Summit and LaserSight followed suit on Feb. 23....
The decision...is an abrupt about-face for Visx, which as recently as last month assured attendees of a Chase H&Q health care conference that the company had no plans to change its pricing structure.
Acknowledging that cost reduction could increase demand for refractive surgery, VP and Chief Operating Officer Elizabeth Davila maintained that Visx' corporate revenues would be protected from price cutting by laser centers by the flat per-procedure fee. "I can assure you they will be paying the $250 per-procedure fee," Davila emphasized. Visx currently has an estimated 70% of the U.S. LASIK market.
Number two Summit, with an estimated 20-22% market share, was forced into following suit, and matching the $100 price for procedures using the Apex Plus/Infinity broad beam laser system, a reduction of 50%.
Meanwhile, Summit will seek a premium $150 for LASIK procedures with its Autonomous LadarVision small-spot laser. The company earlier had planned to charge $400 per procedure for the system, which will be reviewed by FDA's Ophthalmic Devices Panel on March 17 for treatment of hyperopia with and without astigmatism ("The Gray Sheet" Feb. 7, p. 14).
Summit attributed the Visx price cut to growing worries about Summit's increasing share of the laser vision correction market. Summit downplayed the effect of the price cut on growth, maintaining that its success would be driven by its superior technology, and not by pricing.
"We believe that they don't have the same level of technology as we do so they're not able to compete on a technology basis, so they have to compete on a pricing basis," Summit Technology CEO Robert Palmisano maintained at a Feb. 23 teleconference announcing the company's retaliatory price cut.
"It was clear to us we were gaining market share, we were placing lasers at accounts that were formerly theirs, and I think this had some big effect on their thinking," Palmisano noted....
The price war exacerbated Wall Street's concern about the slowing of growth in the high-flying laser vision correction market. A former Wall Street darling, Visx stock plunged 25% to a 52-week low of 16 5/16 the day after the announcement.
The stock's retreat followed an even bigger hit last month, when the company reported flat fourth-quarter procedure growth and financial results below analysts' expectations. The issue recovered somewhat to close the week at 17 1/2. In an attempt to shore up its stock price, the company announced that it had authorized a buyback of up to 10 mil. shares.
Summit stock also plummeted in the wake of its announcement, declining 35% to 7 13/16. The stock closed the week at 7 1/4. |
