WSJ Article: September 20, 2000
(KERA needs to stand above lasik by dropper the cost.)
Jeff Vayda
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Heard In California:
KeraVision's Money-Back Offer
Has Analysts Eyeing Bottom Line
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By Brenda L. Moore
Can a money-back offer persuade more people to focus on KeraVision
when they're thinking about having vision-correction surgery?
The Fremont company, which makes tiny implants to improve eyesight,
hopes the answer is "yes." At the request of the company, one of the
leading physician promoters of the procedure last week launched an
unusual campaign: Purchase KeraVision's Intacs inserts under a "30-day
money-back" trial that promises satisfaction with the results "or your
money and your old vision back."
Industry analysts say the tactic may pique some interest because of its
novelty. But they're skeptical that the move will translate into a big boost in
business for KeraVision, which has had a tough time selling its product
since Intacs were approved by the Food and Drug Administration in April
1999.
The money-back offer is an "indication of a desperate situation," says
David Harmon, publisher of the Market Scope industry newsletter based
in St. Louis, Mo. "I was kind of shocked when I saw it."
The big selling point for Intacs, which cost about $2,000 per eye, is their
removability. KeraVision maintains that people who are fearful about the
permanency of laser procedures, the most common surgical approach to
vision correction, might be more comfortable with a procedure that has an
"out."
But the message hasn't taken hold. While laser surgeries have been
booming, the number of Intacs procedures has fallen. In the second quarter
ended June 30, the company reported the number of Intacs procedures
declined to 945 from 1,100 in the previous quarter. That news sent
KeraVision stock to a 52-week low of $2.19; it has since pulled back up
to about $3.40.
Medical-ethics experts say the money-back offer is uncomfortably close to
guaranteeing results. The American Medical Association frowns on linking
fees to treatment outcomes. In its code of ethics, the group says "such
arrangements are unethical because they imply that successful outcomes
from treatment are guaranteed, thus creating unrealistic expectations of
medicine and false promises to consumers." Herbert Rakatansky, a Rhode
Island physician who heads the AMA's council on ethical and judicial
affairs, says the group considers the KeraVision offer to be in conflict with
its ethics policy.
Stanley Korenman, associate dean for ethics and medical science training
at the University of California-Los Angeles school of medicine, says the
standard medical belief system is based "on the fact that you can't make
promises" about results. While he doesn't call KeraVision's offer unethical,
he warns that "by putting this kind of performance standard out there, more
and more of that will be expected and there will be even higher levels of
dissatisfaction" among patients.
But John Galantic, KeraVision's president, says he doesn't consider the
offer a "guarantee," nor does he see it as unethical. "It's that we're simply
giving the patient an out, and the technique is unique in being able to offer
that option," he says.
David Schanzlin, president of the International Society of Refractive
Surgery and the chief medical investigator for Intacs, says the development
of removable surgical devices may necessitate a review of AMA policy.
Daniel Durrie, an Overland Park, Kan., ophthalmologist whose Hunkeler
Eye Centers are the first to advertise the offer, says the campaign is simply
a way to get potential customers to consider the procedure. Dr. Durrie,
who was a lead investigator for Intacs' clinical trials, says the offer doesn't
cross any ethical lines unless doctors who make such an offer "try to abuse
it by taking people from the marketing [effort] to the operating room" and
skip the usual education and evaluation process in between.
"It's important to understand the only thing being offered in this campaign is
if somebody wants to try this procedure and they are not satisfied" that the
doctor will remove the implants, he says.
In promising "your old vision back," the program's press release contains a
footnote saying that in clinical studies, patients who chose to have their
Intacs removed "returned to their preoperative levels of vision by three
months, in most cases."
KeraVision's Mr. Galantic says that while the money-back program may
be odd in medicine, aggressive tactics are the norm in the vision-correction
market. Lasik, the most common surgery in vision correction, "is being
advertised by thousands of surgeons as being safe, painless" and allowing
patients to return to work the day they have it done, he says. "I think what
we're doing is fairly mild compared to some things I've seen in the market."
Marketing campaigns for vision correction have intensified in the past year
as more doctors have started offering the procedures. The growth rate,
while still healthy, has slowed. This year, about 1.5 million
vision-correction procedures are expected to be done in the U.S., up from
950,000 last year, says Market Scope's Mr. Harmon. At the same time,
the number of lasers sold and centers opened has moved "at a break-neck
pace" this year, he says. In 1999, 365 lasers were sold in the U.S.; this
year, 247 had been sold through June.
As a result, more clinics are boosting their advertising and cutting prices. In
some markets, clinics are offering Lasik procedures for as little as $500 an
eye, often during a grand opening. The average price in the U.S. at the end
of the second quarter, Mr. Harmon says, was $1,798, down from about
$2,104 a year earlier.
Into that fray comes KeraVision. At first, the company focused on
doctors, training as many as it could interest. About 600 are now trained in
the U.S., says Mr. Galantic, the company president. But relatively few
surgeries are being done, prompting the company earlier this year to mount
a new approach. It started targeting consumers in the hopes that they'll ask
doctors about the procedure instead of depending on physicians to offer it.
That's where the money-back campaign comes in. Mr. Galantic says he
expects other clinics to follow the Kansas center's lead.
While Wall Street analysts welcomed a move to target consumers, they
said the company needs to do more to ramp up the number of procedures
done each year, which would boost investor confidence. Some analysts
noted that KeraVision will need to raise cash soon: The company had
about $30 million at the end of the second quarter, enough to last into the
first quarter of next year.
Matthew Dodds, an analyst at S.G. Cowen in New York, raised the issue
in a recent report, saying there "is some risk of the company continuing as
a going concern." But he discounted that possibility because of the value of
the company's assets. Mr. Galantic says the company "is investigating
different possibilities and we definitely have some options" for raising
capital, which he wouldn't identify.
Larry Haimovitch, a San Francisco medical consultant for investors, says
Intacs face numerous obstacles, the biggest of which is that most people --
both doctors and patients -- are happy with Lasik. Then there's the fact
that Intacs can treat only a limited range of vision. The company is in
clinical trials to broaden the use for Intacs, but so far they're approved only
for people with minor nearsightedness. That's a large pool, about 20 million
people, but only a small number of those people have concluded that their
eyesight was impaired enough to undergo surgery.
Then there are pricing and demand issues. The procedure costs about
$250 more per eye than Lasik. As Lasik has become more widely
accepted, some insurance companies, such as Rancho Cordova-based
Vision Service Plan, the nation's largest provider of eye-care benefits, are
negotiating discounted prices for the procedure.
Irving Arons of Spectrum Consulting, a Peabody, Mass., firm that follows
the vision industry, says KeraVision's new "approach certainly puts Intacs
up front and center where they haven't been because Lasik is the main
story." But even with the increased awareness it might bring, he says he
expects KeraVision to remain a niche product. |
