Investors have turned a laser on Orange County medical device maker BioLase Technology Inc., which has beaten back several challenges during the past year.
Shares of BioLase, which recently moved to Irvine from San Clemente, have shot up more than 50% since early February. The maker of dental lasers has a market value of $240 million at recent check.
“It was a pretty challenging 2005, but what doesn’t kill you makes you stronger,” said Chief Executive Robert Grant.
Investors are “seeing stability in the company and the beginnings of a turnaround in operating performance,” Grant said.
BioLase has been one of OC’s fastest-growing public companies by sales, going from $27 million in 2002 to $62 million in 2005.
But it’s also had to sidestep some roadblocks, including revising financial statements primarily due to sales tax issues, taking heat after delaying filing financial reports with the Securities and Exchange Commis-sion and staving off a potential delisting of its stock.
BioLase isn’t out of the woods yet. It faces a class-action lawsuit going back to 2004. Shareholders allege BioLase failed to disclose material information, made false statements and took actions to artificially inflate and maintain the company’s stock price from late 2003 to summer 2004.
The company said in a release that it plans to fight the suit “vigorously.”
BioLase got a positive jolt in January after it reported fourth-quarter sales would come in higher than expectations.
Last month it reported improved fourth-quarter profit. BioLase’s operating loss narrowed sharply to $1 million from $9.5 million a year ago. Its revenue of $19 million was unchanged from a year earlier.
BioLase’s first-quarter results are due next week. Sales are expected to be $17.3 million, up 3% from a year ago.
Design changes for the company’s latest laser, Waterlase MD, negatively impacted profit during the past year.
“These design changes, though costly, are important in order to properly serve our customers,” Grant said in a past release.
The company beat back a potential delisting by the Nasdaq stock exchange in October when it filed past-due financial statements with the SEC.
Grant had called the restatement and delay in refiling reports a “substantial disruption to our business activities.”
BioLase falls under the radar of most Wall Street analysts. Just two have a rating on the company’s shares.
“The stock has been beaten down due to numerous operational and accounting issues that we believe have now been resolved and we think this quarter’s strong performance is the first evidence of this,” said Dalton Chandler of New York-based Needham & Co.
Chandler, who has a “buy” rating on BioLase, said Needham’s former outlook on the company was “admittedly highly pessimistic because the company had not been timely in its regulatory filings and had not been holding regular update calls.”
While BioLase still was not comfortable offering guidance, the company’s fourth-quarter results “(give) us confidence to raise our estimates substantially,” Chandler wrote.
The company’s Waterlase laser is used by dentists to treat patients without anesthesia.
“The product remained popular (with dentists) completely independent of the problems,” said Alexander Arrow, who follows BioLase for Lazard Capital Markets LLC in New York.
BioLase also makes lasers for teeth whitening and other cosmetic procedures.
The company’s products “never declined” in spite of sales force turnover and challenges to its reputation brought on by the accounting problems, Arrow said.
Grant is OK with the little amount of attention it gets on Wall Street.
“BioLase, for its size, is a company that’s already had quite a lot of exposure,” Grant said.
He claims short sellers have taken aim at BioLase in the past. Short sellers buy large amounts of stock in a company hoping that the price will fall down.
A couple of weeks ago, BioLase moved into its new building at 4 Cromwell in the Irvine Spectrum.
The company has about 135 workers locally and 200 companywide.
BioLase recently launched operations in Australia and New Zealand. It also has facilities in Germany and Spain.
Beyond Dentistry
The company is developing a laser for treating presbyopia, an eye condition that affects people over 40 years of age and makes reading difficult without glasses.
BioLase plans to commercialize the eye laser device overseas by the end of the year. It plans to file a pre-market approval application with the Food and Drug Administration in 2007.
Grant said BioLase’s laser differs from other types of presbyopia treatments, such as replacement lenses or “monovision,” where a hot needle is stuck in a patient’s cornea to reshape it.
BioLase faces plenty of competitors for its eye treatment, including Santa Ana-based Advanced Medical Optics Inc., Irvine-based Refractec Inc., Aliso Viejo-based Eyeonics Inc. and Alcon Inc., which has some 500 workers in Irvine.
