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TIPS AND NEWS YOU CAN USE

KeraVision Is Fighting an Uphill Battle
Only 800 Intacs Procedures Were Performed in 3 Months.

The good news for KeraVision is that approximately 600 ophthalmologists have now completed training to perform the procedure that corrects mild myopia with the company's Intacs prescription inserts.

The bad news is that only about 800 Intacs procedures were performed in a recent 3-month reporting period. That amounts to little more than one Intacs procedure per physician.

With those kinds of numbers, it should come as no surprise that KeraVision has drastically reduced its workforce recently to conserve cash and support key clinical programs that could expand the use of the inserts. The company reported a loss of more than $30 million in the first 9 months of 2000.

KeraVision announced a second round of layoffs in January which reduced the company's total workforce to what it called a "core group" of 12 employees. The company said it was committed to continuing to supply and support its surgeon customer base, though it had been unable to obtain additional financing or find a strategic partner.

Intacs was named one of 1999's top 10 medical advances by both CNN and Health magazine, but the patented, reversible procedure has yet to capture the interest of the general public. With huge amounts of money spent in the past year to market laser vision correction, KeraVision's limited resources restricted Intacs advertising to short-lived campaigns last year in three test markets -- San Diego, Kansas City, Mo. and Green Bay, Wis.

In Kansas City, where KeraVision partnered with Hunkeler Eye Centers, low myopes could choose Intacs for $1,995 an eye, or a LASIK procedure for about the same price.

KeraVision chairman and CEO Thomas M. Loarie said he was "pleased with the results of the test market program launched last September. In both San Diego and Green Bay, we have seen consumer interest and revenues build for Intacs inserts. Unfortunately, KeraVision hasn't been able to raise the additional cash needed to continue or expand the test market program."

KeraVision will continue to fund clinical programs whose goal is to evaluate potential new applications for Intacs inserts. One study will assess Intacs' effectiveness as a treatment for keratoconus.

The company's stock price, which had reached a high of almost $12 a share in March of last year, sank to under a dollar in late November after the first round of layoffs was announced.

New Focus on "Eye Attacks"
Prompt Treatment Is Vital.

Everyone knows about the causes and treatment of heart attacks, but until now little research has been done on the catastrophic and often untreated vision loss from so-called "eye attacks."

These attacks, ischematic optic neuropathy (ION), stem from a sudden lack of blood flow to the eye. Eye attacks, which are usually painless, can develop rapidly and leave an individual with a sudden and permanent loss of peripheral or central vision in one eye.

ION is the leading cause of acute optical nerve disease in people over 50 and often strikes individuals with diabetes, hypertension and/or small, crowded optic nerves. Studies indicate that irreversible damage can occur in the first 90 seconds of an attack, but attacks often go unreported because sufferers believe them to be temporary, or even a problem with their glasses.

"Prompt acknowledgement and treatment of the problem are essential if there is to be any chance of minimizing present and future damage," says Nicholas J. Volpe, M.D., associate professor of Ophthalmology & Neurology at the University of Pennsylvania's Scheie Eye Institute.

Scheie Eye Institute is one of 50 research sites around the United States participating in a new study funded by Allergan. The goal is to determine whether a new topical agent developed by the company can minimize collateral losses to the eye by saving some of the optic nerve fibers.

ION has traditionally been treated with steroids and surgical intervention, but with very limited success.

Ophthalmology Wins Stark II Exemptions
Self-Referrals Are OK for Post-Cataract Eyewear.

Ophthalmologists can refer cataract patients to their own optical shops for post-cataract eyeglasses or contact lenses without violating Stark II prohibitions on self-referrals.

They can also refer patients to ambulatory surgical centers in which they have a financial interest. Intraocular lenses (IOLs) or other prosthetic devices implanted in an ASC are also exempt from Stark II regulations.

These exemptions were part of the long-awaited final Stark II regulations relating to Medicare and Medicaid patients that were released in early January by the U.S. Department of Health and Human Services.

"I would say that ophthalmologists have virtually nothing to worry about from Stark II," says Mark Kropiewnicki, a healthcare attorney and consultant with The Healthcare Group in Plymouth Meeting, Pa. "There was really no potential for abuse in these services anyway, and HCFA has recognized that to be the case. Ophthalmologists who have avoided providing these services within their own practice can now offer them without fear."

Both the American Academy of Ophthalmology (AAO) and the American Society of Cataract and Refractive Surgery (ASCRS) also saw the release of the final Stark II regulations as a victory for ophthalmology.

"We're pleased that the government has taken the reasonable and right course of exempting post-cataract eyewear from Stark II," said Douglas D. Koch, M.D., ASCRS president.

The AAO noted that a provision requiring ophthalmologists to directly supervise opticians during the dispensing of post-cataract eyewear in physician-owned optical shops was also dropped from Stark II. The Academy had called this provision "onerous."

"Ophthalmologists can almost forget about Stark II as it pertains to them," concludes Kropiewnicki.

Glaucoma Detection Law Is Signed
Legislation Had AAO's Support.

The American Academy of Ophthalmology (AAO) won a 3-year battle on Dec. 21 when President Clinton signed legislation calling for the first blindness prevention benefit under Medicare.

The new law provides a glaucoma detection examination for asymptomatic individuals at highest risk for developing the disease, including African Americans and those with a family history of glaucoma.

The AAO-backed legislation, which becomes effective next Jan. 1, includes coverage of a dilated eye examination with an intraocular pressure measurement, and direct ophthalmoscopy or a slit-lamp biomicroscopic exam. Under the law, at-risk individuals can be examined every 2 years.

"We believe this type of examination is the minimum, most cost-effective way to determine if a person is glaucoma-suspect," says Carrie Kovar, manager of Public Health and Manpower Policy for the AAO.

About 18% of Medicare-eligible seniors are expected to qualify for the examinations. There is no information yet on reimbursement codes.

STAAR Wars
Investors Raise Questions.

An investor group led by the former chairman of STAAR Surgical Company has charged the maker of ophthalmic devices with holding back information about the company's financial health. The group, NovaStaar Investments, wants the information so it can decide whether to seek a more active role in STAAR.

LaMar F. Laster

"We're concerned about STAAR," says LaMar F. Laster, chairman of NovaStaar Investments. "Key employees have been terminated and major arbitration proceedings have been initiated against the company by Canon. We're seeking financial information we have every right to inspect."

Laster, who served as STAAR's chairman from 1989 to 1994, also led a group that made an unsuccessful takeover offer for the company in 1999.

He says NovaStaar fears that a "power struggle" has hindered STAAR's growth. NovaStaar is seeking a special shareholders' meeting to air its issues.

Complicating the situation is the recent death of Andrew F. Pollet, who was STAAR's chairman and a central figure in NovaStaar's complaints.

David Bailey, STAAR's new CEO, may resolve the impasse. Bailey, formerly president of CIBA Vision's surgical business, has a solid reputation as an executive. Bailey has been unavailable for interviews.

"Bringing in David Bailey was a step in the right direction," says Laster. "But let's see what happens next."

VISX Sees Slump in Laser Vision Correction
$18 Million Set Aside for Customer Debt.

Citing several factors that are negatively affecting the laser vision correction marketplace, VISX, a leading maker of lasers used in refractive surgery, said it expects that "one or more" of the company's customers will be unable to meet their financial obligations.

In anticipation of such an event, VISX has added $18 million to its reserve for uncollectible debts.

VISX also said its own earnings are suffering due to current weakness in the economy. The company said economic uncertainty is causing some people to postpone the relatively costly elective procedure, while others are confused because of the wide range of laser vision correction prices being offered in the marketplace.

Though VISX didn't name any customers that might be suffering financial problems, speculation centered on chains that offer laser vision correction at a steep discount. One major player, Laser Vision Centers, Inc., issued a press release saying that its accounts are current with all of its vendors and that its finances are strong.

"Although we are disappointed at this quarter's performance versus our expectations and believe it's prudent to increase reserves at this time, we remain positive about the future of laser vision correction," said Mark Logan, VISX chairman and CEO. "While more than 3 million commercial laser vision correction procedures have been performed in the United States, this represents only a fraction of the potential market."

In addition to the slump in business, VISX is also being besieged by financier and corporate raider Carl Icahn, who has acquired almost 10% of VISX stock in recent months. Icahn is seeking to unseat company management and force a sale of VISX to a larger company with a broader product line.

REFRACTIVE SURGERY UPDATE

LTK effects. The FDA has approved a change in the labeling for the Sunrise LTK procedure for hyperopia, and now says that some of the beneficial effects of this "temporary" treatment can last for 10 years or more. The label was changed after Sunrise presented new data that followed a large number of patients for up to 30 months post-treatment.

Settlement. VISX and Bausch & Lomb have agreed to cross-license their patents relating to refractive excimer lasers. In addition, Bausch & Lomb will pay a royalty to VISX for each procedure performed in the United States using a B&L laser. The agreement resolves the patent infringement action filed by VISX against Bausch & Lomb in September.

Suit filed. Nidek has filed a complaint against VISX in U.S. District Court alleging that VISX's Star excimer laser systems infringe the Nidek patents that cover fundamental and advanced technologies required to perform laser vision correction.

New CEO. Lasik Vision Corp., a provider of laser vision correction services, has named Neville Fridge, formerly an executive with a management consulting firm, as its next CEO and president. Lasik Vision is also in the process of arranging additional financing to reduce debt and fund future expansion.

VSP adds CIGNA. Vision Service Plan has added more than 14 million CIGNA HealthCare participants to its laser vision correction network. Plan members now qualify for discounts on the procedure averaging 20 to 25%.

New center. Prime Medical Services Inc. has opened a refractive surgery center in Stanford, Conn., bringing the number of centers the company operates to 15.

Share buyback. LCA-Vision, a provider of laser vision correction services, says it will buy back a total of 10 million of its own shares because the company believes the shares are undervalued. About 3.8 million of the shares have already been repurchased.

IN THE NEWS

Optex purchased. Bausch & Lomb has purchased the assets of Optex Ophthalmologics, developer of the Catarex device for cataract removal, for $3 million plus royalty payments that are contingent on the commercialization of the Catarex procedure. Catarex allows the removal of the lens nucleus and cortex in a single step through a small incision in the eye, while leaving the lens capsule intact during cataract extraction.

Optex Ophthalmologics was previously a subsubsidiary of Atlantic Technology Ventures, Inc.

Keratoconus study. An FDA-approved study is planned to determine the effectiveness of KeraVision's Intacs technology in treating keratoconus. Intacs prescription inserts are designed to normalize the curvature of the cornea without removing tissue or causing further weakness to the corneal structure. The study will begin with 20 keratoconus patients at four centers in the United States.

Merger off. Pro-Laser and Premier Laser Systems have ended negotiations to merge the two companies. Premier, which filed for Chapter 11 bankruptcy in March of last year, said the two companies could not reach agreement on the proposed terms of the transaction. Premier says it may now sell its EyeSys corneal topography business through a sealed bid auction process with a minimum opening bid of $1 million.

Ophthalmic camera. Escalon Medical Corp. has received FDA approval to market its CFA Digital Imaging System, a high-resolution, instant digital camera designed for use in diagnosing retinal problems. The product will be marketed through a joint venture with Mega Vision Inc.

Acquisition. Ocular Sciences Inc. has agreed to purchase the entire contact lens business of Essilor International in an all-cash transaction valued at approximately $50 million. The acquisition expands Ocular's distribution network and manufacturing capabilities.

Diagnostic workstation. Paradigm Medical Industries has received FDA approval to market its UBM Plus comprehensive imaging workstation. The device enables an ophthalmologist to view the anatomy and pathology of the cornea, iris, sclera and ciliary body. It also has "B-Scan capabilities" that capture images in 40 and 60 degrees to ensure thorough examination of the globe and orbit.

Approval. STAAR Surgical has received approval to market its AquaFlow collagen glaucoma drainage device throughout Canada. The company, which says AquaFlow is a breakthrough in glaucoma therapy, says the Canadian action bodes well for FDA approval early next year.

B&L layoffs. Bausch & Lomb will cut an additional 350 jobs as part of a restructuring move, bringing the total number of layoffs announced in the past few months to 800. The company has also reduced its estimate of 2001 earnings to the $2.35-2.40 a share range, mainly due to weakness in its refractive surgery business.

Betimol. Santen Pharmaceutical Co., Ltd. has begun U.S. marketing of topical beta blocker Betimol (timolol ophthalmic solutions 0.25% and 0.5%).The marketing and sales rights to Betimol had been licensed by CIBA but reverted to Santen in January.

Surgery on campus. Pacific Laser Eye Center and the Southern California College of Optometry have reached an agreement for a laser center and outpatient surgery suite to be built on the college campus in Fullerton. Local eye doctors will be involved in operating the center and have a minority ownership stake.

Inspire trials. A large-scale Phase III trial of Inspire Pharmaceutical's new INS365 topical eye drop for dry eye disease, involving 1,000 patients at 60 sites, is set to begin the first quarter of this year. The P2Y(2) receptor agonist acts to stimulate natural tear production.

New at Nidek. Sam Larson has joined Nidek, Inc. as director of marketing. Larson, who was previously with Spacelabs Medical, Inc., will oversee the company's U.S. marketing operations.

Award winner. Visudyne treatment for wet AMD has received Popular Science magazine's "Best of What's New" award for 2000. Visudyne was one of 100 new products, scientific achievements and technological developments judged to be among the year's top advances.

New facility. Wills Eye Hospital has begun construction of an eight-story eye hospital in center-city Philadelphia. The state-of-the-art facility is expected to be completed late next year. Wills will continue to operate at its present downtown location until the new building is completed.

Partnership. Southern BioSystems, Inc., an Alabama company that develops controlled drug-delivery technologies, is now collaborating with Alcon to develop controlled-release products for back-of-the-eye diseases. The initial focus will be on developing a microencapsulated formulation of a proprietary Alcon compound.

Training begins. Laser Corp has begun a nationwide program to train ophthalmologists to use its Dodick Laser PhotoLysis System for cataract surgery.

Sells unit. CooperVision Inc. has sold its Gordon Contact Lenses division to Frontier Contact Lens Laboratories of Buffalo, N.Y. The Gordon division produces rigid gas permeable (RGP) contact lenses.

Wins approval. The FDA has cleared Bausch & Lomb's ReNu MultiPlus Multi-Purpose Solution as a multipurpose disinfectant for soft contact lenses.