Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Laser Vision Centers, Inc. (NASDAQ: LVCI) -- Ignore unavailable to you. Want to Upgrade?

To: MGV who wrote (318)	10/13/1999 6:28:00 AM
From: Thai Chung	Read Replies (1) \| Respond to of 413

Industry Analysis Oct 12, 1999 Health Care: Visx Eyes Strong Earnings Report on Wednesday Staff Writer: Craig Schneider (10/12/99) Visx Inc. (NASDAQ:VISX - news) , the leading maker of excimer lasers used in laser vision correction (LVC) procedures, is expected to report third quarter results this Wednesday after the close of trading. With shares down 20% from a 52-week high and competition looming on the horizon, the time to have a clear look at Visx is now. The company has beaten the Street?s consensus estimate for the last six consecutive quarters. For this quarter, analysts are expecting $0.32 a share, 49% above year-ago levels, according to the average estimate from I/B/E/S. Will the streak continue? ?I think they?ll come in a penny or two ahead of that,? says Theodore Huber of Advest Inc., who expects Visx?s placement of 80 new lasers worldwide (up from 61 in the June period) and strong volume growth of its largest customers to bode well for the company. Visx receives approximately 65% of its total revenue from a $250 per procedure licensing fee, compared to about 25% of revenue for system sales. The rest comes from parts and servicing. An early indication of the quarter came last week when Visx?s largest procedure volume customer, TLC The Laser Center (NASDAQ:TLCV - news) , beat the Street and reported procedure volume of 33,200, up 14% from the last quarter and 87% from year-ago levels. Laser Vision Centers (NASDAQ:LVCI - news) , Visx?s biggest laser buyer domestically, reported 116% volume growth for the month of August over last year. ?It?s a good benchmark, says Kate Sharadin, a Preferred Capital Markets analyst. ?I think they can have a very good quarter this quarter.? The Outlook After Earnings What investors? eyes should focus on are events that will transpire in the coming months. A preliminary ruling is expected on December 1st for Visx?s case against Nidek, in which it alleges infringement on two of its U.S. patents. A final decision will be made months later, following review by the International Trade Commission. But mark your calendars for December, because if the favorable Visx ruling in May?s Federal Trade Commission patent case is any indication, shares could go soft ahead of the announcement, presenting a potential buying opportunity. If this sounds familiar, it?s because we focused our last Visx update on the case. Analysts are increasingly making references to this event in their reports, given the heavy implications to Visx?s licensing business. With a favorable ruling from the ITC, analysts say that Visx? patent portfolio gets a boost and Nidek would be basically booted from the U.S. market. New competitors would have more incentive to work out a licensing agreement at or near the $250 fee, lest they become targets of Visx?s lawsuits, too. Currently, LaserSight (NASDAQ:LASE - news) and Bausch & Lomb (NYSE:BOL - news) are in the precarious position of negotiating with Visx for domestic licensing agreements. Analysts expect the lasers of the two competitors to be approved by the U.S. Food & Drug Administration in the next three to four months. If Visx doesn?t get a successful ruling,? says Huber, ?I think a set of competitive forces will be unleashed that could put significant downward pressure on the $250 fee.? It would definitely be a bargaining chip for Bausch & Lomb and LaserSight, who like Nidek, would rather avoid paying the fee altogether. And then Visx customers like Laser Vision Centers would likely demand to pay less, Huber says. Preferred Capital?s Sharidan expects Visx will be forced to lower its royalties to a range of $200-$225 per procedure just from negotiating with Bausch & Lomb and LaserSight, regardless of the trial. Unfortunately, it?s really anyone?s guess at this point how it will all play out. What we do know is this: The market hates uncertainty and having 65% of a company?s revenue hanging in the lawsuit?s balance is not a calming thought. But Visx is not losing its 78% market share so quickly, if at all for that matter. The company is already booking business for its first quarter laser shipments. Its systems have the widest range of indications for LVC treatment on the market. In fact, Visx is the only one approved by the FDA for hyperopia (farsighted) patients. The narrow-beam lasers to be introduced by competitors like Bausch & Lomb and LaserSight are a newer technology, but some analysts say the surgical benefits over Visx wide-beam are not yet clear. Bottom Line: We think Visx can beat the Street again this quarter. As for its $250 licensing fee being in jeopardy, unfortunately we can?t be as confident. However, if shares go soft ahead of December 1st, it could potentially be another buying opportunity. In Tuesday morning trading, Visx shares were down $3.13 to $82.88.