Extracts from Barron's Weekday Trader. Whole story may be read by subscribers at:
interactive.wsj.com
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OCTOBER 17, 2000
Keeping an Eye on the Back of the Eye
Weekday Trader
By Evelyn Ellison Twitchell
The cutting edge in vision care today involves a part of the eye we can't
even see -- the back.
The retina, a thin membrane that lines the back of the eyeball, is crucial to
sight since it connects the eye to the brain by way of the optic nerve.
Diseases that affect the macula, the part of the retina
responsible for seeing detail, can be particularly
debilitating.
Age-related macular degeneration (AMD) is the leading cause of vision loss
in people over 55 years of age in the developed world. One form of the
disease, which affects more than a million people in the United States, often
causes blindness.
As Baby Boomers age, these problems should get more attention -- and
companies that develop treatments should benefit. That's one reason
back-of-the-eye diseases will be discussed later this week in Dallas at the
annual meeting of the American Academy of Ophthalmology.
"It's an untapped market; there is no question," says Dr. Emily Chew, a retinal
specialist at the federal government's National Eye Institute.
In fact, Rebecca Irwin, an analyst at UBS Warburg who published a report
on the field in August, estimates the market will balloon from $50-$100
million today to $2-$3 billion annually over the next few years.
That potentially rapid growth comes as the contact lens products business has
matured and as price wars have plagued the market for laser surgery.
"Companies that develop successful
products for the treatment of retinal
conditions will enjoy a large and
receptive market opportunity," argues
Dave Therkelsen, an analyst at Dain
Rauscher Wessels.
Patients currently spend between
$2,000 and $9,000 annually to treat
some back-of-eye ailments, according
to Bausch & Lomb.
For years, diseases of the back of the eye (which also include posterior
uveitis, in which tissue just outside the retina becomes inflamed, and diabetic
macular edema, or DME, in which blood vessels leak within the retinas of
diabetic patients) have vexed ophthalmologists because it's so difficult to get
inside to administer treatment.
But some companies are finding new ways to get around that.
QLT, based in Vancouver, British Columbia, is among the first to market with
a back-of-the-eye product, which slows the progression of some types of
AMD. The company received Food and Drug Administration approval this
spring for Visudyne, a drug that is injected into the arm and then activated in
the eye by a non-burning laser.
"It treats a disease where patients otherwise go blind," notes Joseph
Dougherty, an analyst at Lehman Brothers.
The therapy generated sales of $31 million in the third quarter, and some
analysts believe it could eventually take in several hundred million dollars in
annual revenue, which would be split with marketing partner CIBA Vision,
the eye care unit of Novartis.
...
But the company just turned profitable (it reported third-quarter earnings of
four cents a share on Tuesday), and it is likely to more than double its
earnings between 2001 and 2002, according to First Call. Meanwhile, the
stock is still a third off its 52-week high of 85.75, reached in January.
Dougherty believes that as QLT's earnings grow, it could become a large-cap
biotechnology firm like, say, IDEC Pharmaceuticals, which trades at a
P/E-to-growth ratio of 3.0x.
...
And the stocks of those
companies that got in early might never look back. |
