LCAV is featured in tomorrow's IBD. I copied this from the website.
_________________
EYE OPENER
LCA-Vision's Centers Enjoying Spike In Laser Eye Procedures
Date: 8/4/99
Author: Philip Michaels
Laser surgery has worked miracles for thousands of people with poor eyesight. One 15-minute procedure, and they're through wearing glasses and contact lenses forever.
The benefits have been every bit as eye-opening for the companies that run the laser centers, such as LCA-Vision Inc. The popularity of laser eye surgery has pushed these centers into the limelight, boosting sales and profits as procedure volume rises.
And risen it has. More than 400,000 laser eye surgeries were performed in the U.S. last year, twice that of 1997. Analysts expect the number of procedures to reach 900,000 this year.
That's just a drop in the ocean, when you consider that more than 160 million Americans need glasses or contact lenses to see clearly.
''Fewer than 2% of the people who could have the procedure done have actually had it done,'' said analyst John Ransom of Raymond James & Associates Inc. ''The market's got lots of untapped room to grow.''
That's good news for LCA-Vision, which already has seen a spike in its procedure volume. Doctors did 9,742 surgeries at its centers in the second quarter, up 76% from a year before.
Total volume for the first half of the year reached 19,000. Doctors performed 23,080 procedures at LCA-Vision centers for all of 1998.
The added business is boosting LCA-Vision's bottom line. The Cincinnati-based company earned 5 cents a share in the second quarter, vs. a 32-cent loss a year before. Revenue jumped 63% to $14.7 million.
As long as procedure volumes continue to rise, LCA-Vision should finish the year in the black. Analysts expect the company to earn 21 cents a share, vs. a 36-cent loss in 1998. Earnings could rise 81% to 38 cents in 2000.
''They've been out in this marketplace, developing centers in attractive markets where they hold a leading share,'' said analyst David Therkelsen of Dain Rauscher Wessels. ''That's not easily overcome.''
The company owns 19 laser vision centers in the U.S. and Canada. It holds stakes in three others, including one in Finland. The company targets metro areas overlooked by other providers, such as Cincinnati and Charlotte, N.C.
LCA-Vision offers doctors open access to its lasers. The doctors treat patients at the company's centers and get to keep about $900 of the $2,000 to $2,500 charged per procedure. LCA-Vision keeps the rest. In exchange, it staffs the centers, maintains the lasers and handles support services such as marketing eye surgery to patients.
''We provide the business side, and they do what they do best, which is practice surgery,'' said Chairman and CEO Stephen Joffe.
That's appealing to eye doctors who want to offer laser surgery but don't have the resources. Laser systems cost upward of $300,000, with yearly service costs averaging $60,000.
''Unless a physician is an extremely high-volume physician, the economics of owning your own laser don't make sense,'' analyst Ransom said.
When eye doctors hook up with LCA-Vision, they're profitable from the first procedure. Having access to a wide pool of doctors also helps the company turn a profit faster at each center, which needs to do about 70 procedures a month to break even.
LCA-Vision has built a referral network of 760 physicians and 1,460 optometrists. It has a full-time employee in every market responsible for recruiting more doctors, Joffe says.
The company's approach has helped it grab business in a competitive market that Ransom describes as ''the Wild West.'' Only TLC The Laser Center Inc. and Laser Vision Centers Inc. performed more surgeries last year.
Eye surgery providers have seen their market values soar since late 1998 as more people have turned to laser vision procedures. But the sector has slumped in recent days, hurting LCA-Vision.
''It's more linked to market conditions,'' Therkelsen said. ''I haven't seen any problem with (LCA-Vision). It's a general weakness across the group.''
LCA-Vision plans to expand its share of the market in two ways, Therkelsen says. It can boost laser use at its existing centers while opening new sites in nearby markets.
The centers start to turn a profit after they run at 13% capacity, Joffe says. After that, everything goes to the bottom line. Centers are running at 25% to 35% capacity right now.
Strong word-of-mouth about laser surgery is driving business. But if the popularity falls and the number of procedures drops, so do profits.
LCA-Vision plans a direct-marketing effort to heighten consumer awareness. The company could get a long-term boost from a deal signed with Cole National Corp. in July.
LCA-Vision will provide access to laser surgery to the 50 million members of Cole's managed vision care group.
''This is a way for LCA to really market its success so far on a nationwide basis,'' Therkelsen said.
LCA-Vision believes building new centers in neighboring markets best leverages its marketing and management resources. Starting in October, it plans to open two new centers a quarter.
The company will fund its expansion with the $37 million it raised from a secondary offering in June, says CFO Larry Rapp.
LCA-Vision trades as LCAV near 9.
--------------------------------------------------------------------------------
(C) Copyright 1999 Investors Business Daily, Inc.
|
