Long-struggling company sees it ‘Staar’ on the rise

By Larry Haimovitch

Medical Device Daily Contributing Writer

April 22, 2010

The word beleaguered can be defined in several ways but "under severe pressure" is one that is commonly accepted. Unfortunately, for intraocular lens manufacturer STAAR Surgical (Monrovia, California), this term would be appropriate since its founding in the early 1980s.

Although a pioneer in the early years of its existence with its minimally invasive, soft foldable intraocular lens (IOL) technology, a developer of innovative IOL materials like collamer and a market leader in IOLs for very high myopes and astigmats with its Visian ICL family of phakic lenses, STAAR has still struggled mightily throughout its checkered history. It has endured many years of operating losses and has consistently consumed cash, forcing it to sell stock and dilute its existing shareholders.

Over the past few weeks however, STAAR is finally showing signs that its trying times may be over and that it may begin to become a consistently profitable, high margin, cash flow positive company. Management discussed its initiatives and progress at an analysts' briefing, which took place here during the recent annual meeting of the American Society of Cataract and Refractive Surgery (ASCRS; Reston, Virginia).

The company pre-announced its 1Q10 revenue results and they were solid. Visian ICL revenues increased about 20% during the quarter with continued very strong growth in Korea, China and France. STAAR believes that the Visian ICL has captured more than 10% of the refractive surgery market in Korea during 2009.

CEO Barry Caldwell attributed this stellar performance to a superb selling and marketing effort by its Korean distributor, which has been aggressively promoting the Visian on television, radio and billboard ads.

There have been several positive developments in the past couple of months. First, STAAR has settled its costly and distracting litigation with its former IOL distributors. There had been some concern that failure to resolve this situation might have forced the company to file for bankruptcy.

With this settlement, there were positive adjustments to its final results for the fiscal year that ended Jan. 1. Even more importantly, STAAR has received an unqualified opinion from its auditors on its audited financial statements.

Another recent positive event was the divestiture of its German distribution subsidiary, Domilens, for about $14.3 million in cash. Although generating approximately one-third of STAAR's annual revenue, Domilens had poor profit margins and did not fit strategically with STAAR's focus on high margin, value added IOLs.

Historically, STAAR has been cash poor, the result of its chronic operating losses. With this cash injection and after final payment for the litigation settlement and various other obligations, Staar will have about $10 million cash in the bank.

The regulatory approval from the Japan Ministry of Health, Labor and Welfare to market its Visian ICL is another major positive for the company. This clearance marks the first phakic lens approval for the Japanese market and offers the company a significant opportunity in a market which is believed to suffer one of the highest rates of myopia in the world. Specifically, Market Scope (St. Louis) the industry leading ophthalmic research firm, reports that the prevalence of myopia in Japan is 45%, about double the worldwide average prevalence of 23%.

STAAR recently began the process to gain approval for the Visian Toric ICL in Japan. This product, which is sold in 45 countries around the world, is highly complementary to the Visian ICL, which only addresses myopia.

One of the most encouraging factors in STAAR's current situation is its Collamer Accommodative Study Team (CAST) trial, which was started about one year ago when it was noted that its collamer single piece aspheric IOL was providing significantly better intermediate and near vision for patients than has been seen with standard IOLs.

At a session here at ASCRS, James Lewis, MD, from the Wills Eye Surgical Network (Philadelphia), reported that about 1,000 nanoFLEX lenses have been implanted in this study in the past year. Lewis has personally implanted a total of 631 lenses, with 257 bilateral patients. Of the latter group, 126 bilateral patients have now been followed for at least three months.

His early results have been excellent, with the average patient seeing 20/25 binocular intermediate (computer distance) reading, while their near (close reading) vision is 20/40. 47% of patients had 20/32 or better binocular intermediate vision, while 40% of patients had 20/50 or better near vision.

According to Lewis "this will mean that half the patients will not need glasses for reading a laptop screen with a 12 point font and 100% will be spectacle free with an 18 point font."

Lewis also noted that the CAST 20/25 binocular intermediate distance results are actually better than those reported for the premium IOLs like the Crystalens, which is sold by Bausch & Lomb (Rochester, New York) or the ReSTOR, sold by Alcon (Fort Worth, Texas). It is interesting to note that the average selling price for premium lenses is in the $1000 range, compared to only $130 for nanoFLEX.

Lewis noted that while there is no single explanation for why this lens performs so well, he noted that its asphericity, the collamer material itself, its anterior curvature changes and the lens movement itself may all be contributing factors.

He concluded his talk saying that this lens provides "premium laptop vision without cost to the patient."

STAAR is currently negotiating with the FDA for the protocol for its CAST-ll trial, which it hopes will lead to a labeling upgrade that mirrors its superb intermediate vision. According to the company, this protocol could be approved in the very near future and then the trial will commence. If the clinical data is similar to that presented by Lewis, STAAR would plan to apply to the Centers for Medicare & Medicaid Services for a new technology IOL (NTIOL) designation, which will allow for an additional $50 reimbursement.

The company is making very minor design changes on this lens, which will then be implanted for patients in the next study, appropriately called CAST-lll. The ultimate goal of CAST-lll is to gain an FDA label for "less spectacle dependence." A draft of this protocol is underway for FDA review, with a potential Q2-10 approval.

If CAST-lll results are favorable, the company will then apply to CMS with the new label to allow this new lens to qualify for premium IOL status or pass through billing. This would increase the selling price from its current $130 to about $1000 per lens, providing a huge positive impact on revenue and profitability.

The excellent initial results of CAST are clearly buoying STAAR, its domestic nanoFLEX Collamer IOL sales increased by about 17% during the first quarter over last year's first quarter.

ASCRS Symposium

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