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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Percival 917 who wrote (8960)	10/27/1999 1:00:00 AM
From: StockHawk	Read Replies (3) \| Respond to of 54805

Update on VISX - Hope you don't mind if I jump in here. VISX is by far the dominant company producing lasers for eye surgery, shipping perhaps three times as many lasers as their nearest competitor, Summit Technologies (Summit combined with another competitor Autonomous earlier this year). VISX has patents on laser eye surgery. That's why they are paid $250 per eye no matter who's machine is used to perform the surgery. Nidek, a Japanese company, has refused to pay the royalty - they boast about it in their marketing - and VISX is suing them. VISX has a string of wins in lawsuits and they are expected to prevail over Nidek, but in the courts the outcome is never certain. Some believe that Nidek will be out of the US market for Lasik surgery if they lose the suit. One of the reasons VISX has shown some weakness lately is that Summit just received FDA approval for their lasers. Prior to this they only had approval for relatively mild cases of nearsightedness. Now they have approval for severe nearsightedness (as does VISX) and they also received approval for farsightedness (VISX received such approval about one year ago and is still approved to treat a wider range of patients). While it may just be symantics, Summit was also the first to receive approval for Lasik. That may sound odd, because 95% of eye surgeries in the US are Lasik procedures, but it has been the lasers, not the Lasik procedure, that have received FDA approval. Doctors are able to perform Lasik as "a practice of medicine" VISX is expected to receive Lasik approval soon. VISX reported earnings 10/14. EPS grew from .22 to .36 beating expectations by 2 cents while revenues increased by more than 100% from $36 mil to $80 mil. Margins improved, with gross margins now over 78%. The stock sold off after earnings were announced, but jumped when an upgrade to strong buy was issued by R. Stephens on 10/19. The analysts called the sell-off after strong earnings a buying opportunity. Bausch & Lomb is expected to introduce their own laser soon, and their is some speculation that they may use their clout to try and get a reduction of the $250 royalty fee. There is even the remote possibility that they may try a Nidek-like move of simply not paying the royalty but that seems unlikely. Moreover the market for Lasik in the US was around 200,000 people in 1997. The market doubled in 1998 and will double again for 1999. Some analysts believe that perhaps 3% of the target market will have been reached by the end of 1999 - that target being defined as people with the need for vision correction and the money to afford the procedure (around $2000 or so per eye). Other define the market more broadly. StockHawk