Irvine’s IntraLase Corp. set out in 1997 to cut the knife from laser vision correction surgery.
Now, nearly 10 years later and two years after raising $86 million in an initial public offering, IntraLase can claim headway in replacing blades with a laser as the first step of vision correction surgery.
The maker of lasers and software for eye surgery has seen its sales go from $25 million in 2003 to a projected $130 million this year.
IntraLase, which had a market value of nearly $600 million last week, has posted six straight profitable quarters and placed nearly 500 lasers in 32 countries.
“We’re on a big ramp,” Chief Executive Robert Palmisano said. “I see that continuing.”
IntraLase makes lasers and software to create a flap on a patient’s cornea, the first step in fixing vision through surgery known as Lasik. The laser is designed to replace a microkeratome, a metal blade still commonly used to create corneal flaps.
Using a metal blade is cheaper for eye surgeons. But IntraLase is benefiting from cachet marketing,surgeons who use “all-laser Lasik” as their selling point.
“We are replacing the antiquated way of doing Lasik surgery,” Palmisano said. “Even if the market is flat or even down slightly, as long as we keep on replacing antiquated machines, we will continue to be able to grow.”
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IntraLase laser: sells for about $375,000 |
Meanwhile, IntraLase is looking to go after another part of the eye surgery market.
Next month, the company is set to come out with an upgrade to its mainstay IntraLase FS laser for corneal transplant surgery. That’s where a surgeon replaces the damaged or diseased outer layer of the eye with a donor’s cornea.
Palmisano was in London last week showing the corneal surgery laser at the European Society of Cataract and Refractive Surgeons meeting in London.
Offering a corneal surgery laser could boost sales to hospitals “that could not justify buying a laser on grounds of creating flaps for LASIK surgeries,” Palmisano said.
“Now they have a real reason to purchase a laser because it can do these transplants, which are very, very tricky,” he said.
IntraLase’s lasers sell for about $375,000.
The device maker spent three years developing the corneal surgery version. IntraLase worked with the University of California, Irvine’s department of ophthalmology, including with professor Roger Steinert, Palmisano said.
IntraLase received Food and Drug Administration clearance for the corneal version last year and has been doing trials before coming out with the device, Palmisano said.
Sales of lasers for corneal surgery are expected to be moderate, Palmisano said.
“Most of the revenues will continue to come from refractive” surgery to correct vision, he said. “The therapeutic uses are much smaller markets by comparison.”
About 1.5 million refractive surgeries are done each year in the U.S., compared to about 60,000 corneal transplants.
Corneal surgeries could grow if doctors have a better way of transplanting corneas, Palmisano said.
Analysts see corneal surgeries helping to spur growth.
“We view (corneal expansion) as a major catalyst and a significant opportunity for the company that should develop in the 2007-2008 period,” said David Maris, an analyst with Banc of America Securities LLC, after IntraLase’s second-quarter results came out in July.
Lasers for corneal transplants should bring higher profits, Maris said.
Global Push
IntraLase’s other push: global sales.
“While domestic procedures appear soft, (IntraLase) has exported its model into the international market, thus more than doubling the market opportunity,” Peter Bye, medical technology analyst with Wachovia Securities, said in a report.
Procedures using IntraLase’s laser command a big premium overseas, Banc of America’s Maris said. Citing research from an industry consultant, doctors in six countries who use IntraLase devices for vision surgery charged 27% more on average, he said. Swiss doctors charged 40% more.
IntraLase is the “new gold standard” for corneal flaps, Maris wrote.
Before going public in 2004, IntraLase caught the eye of William Link, a seminal figure in Orange County’s medical device industry who serves as IntraLase’s chairman.
Link, a managing director of Versant Ventures, a firm with offices in Newport Beach and Menlo Park, first invested in IntraLase through Brentwood Venture Capital back in 1998.
“When I invested at IntraLase, it didn’t have a management team and it was still based in Ann Arbor, Mich.,” Link said.
IntraLase started as a research project at the University of Michigan in Ann Arbor under Dr. Ronald Kurtz, the company’s vice president and medical director.
“We helped formalize the business, relocated here to Irvine, to Southern California, and began to build the team,” Link said.
Randy Alexander, now chief executive of ReVision Optics Inc. of Lake Forest, was IntraLase’s first chief executive. Palmisano came on board in 2003.
IntraLase doesn’t have many rivals, according to Link and analysts. The company’s primary competition is makers of metal blades, which include Santa Ana-based Advanced Medical Optics Inc. and Rochester, N.Y.-based Bausch & Lomb Inc.
A pair of European companies,Ziemer Ophthalmic Systems AG and 20/10 Perfect Vision GmbH,have laser vision correction products.
“We continue to believe these two entities will struggle to capture meaningful market share,” Bye of Wachovia Securities wrote.
(Visx Inc., an Advanced Medical unit, makes lasers for the second stage of vision correction surgery.)
IntraLase is on its fourth-generation laser in four years and holds key patents, Palmisano said, making entry into the market tough.
The company has looked at a few others that are developing lasers, Palmisano said. IntraLase is more likely to keep upgrading its products than buy other companies, he said.
Could IntraLase be acquired by a big eye surgery products company?
“Anything’s possible,” Palmisano said. But “we’re building what we think is a strong stand-alone company.”
IntraLase, which has about 330 workers now, plans to add people, according to Palmisano. It should end the year with 350, he said. Hiring’s expected in several areas, including research and development, manufacturing and service technicians for the lasers.
