Monday, June 28, 1999

KeraVision Inc.
(Nasdaq: KERA)
Phone: 510-353-3000
Website: www.keravision.com
Price (6/25/99): $13


The eyes have it. Things are looking up for KeraVision. Since the company received FDA approval back in April for its Intacs nearsightedness fix, investors too seem to be cured of blurred fiscal vision.

It's been a long road for KeraVision. Two of the three founding ophthalmologists have passed away since the company's 1986 founding. While the earliest version of Intacs began human clinical testing in 1991, it took five more years for the polymer cornea reshaper to begin selling in Europe and eight years before the rings began selling stateside.

But, like 82% of Intacs recipients, everything is looking 20/20 right now. In its first two months on the market, the company has trained close to 200 ophthalmic surgeons on the simple procedure to help their myopic patients. That was the mark the company had initially expected to hit by year's end.

With the surgeon training sessions booked solid for the rest of the summer, the company is charging ahead in its effort to make the patented Intacs the next evolutionary step up from contact lenses and eyeglasses.

The media is buzzing; the stock is hopping; and someplace, somewhere Johnny Nash's "I Can See Clearly Now" is blaring away.


California-based KeraVision's sole product is Intacs. During a 15-20 minute procedure, Intacs are placed over the cornea. The cornea is then reshaped to restore clear vision to mild cases of nearsightedness.

The original KeraVision Ring was a full circle, while the modified Intacs consists of two 150-degree connected arches.


Income Statement
12-month sales: $1.15 million
12-month income: ($29.5 million)
12-month EPS: ($2.32)
Profit Margin: N/A
Market Cap: $166.4 million

Balance Sheet
Cash: $5.3 million
Current Assets: $8.7 million
Current Liabilities: $10.2 million
Long-term Debt: $17.9 million

Price-to-earnings: N/A
Price-to-sales: 144.7


You didn't hear about KeraVision? Shame. From Good Morning America to The Wall Street Journal, it has been written up in more than 3200 articles and featured in almost 300 televised segments, according to the company.

Eyecare is a hot niche. In the computer age, with users squinting at nearby screens, the cases of mild myopia are soaring. That is just the segment that KeraVision is catering to -- a market consisting of 20 million Americans (or 40 million eyes, for those keeping score at home).

Contact lenses are still around, but there are some alternatives. Now laser vision correction has revolutionized the industry and excimer laser system leader VISX (Nasdaq: VISX) commands a $5 billion market cap, with competitors like Summit Tech (Nasdaq: BEAM) still garnering close to a billion dollars in market value.

Like the laser procedure, Intacs are quick, simple, and mostly effective. To its benefit, Intacs are removable (the laser process is not reversible). With the KeraVision patented device, it was easy to see how big things could happen for the company once the FDA came on board.


Last week the company announced that sales for the quarter would come in 50% above analyst estimates. That's just a million-dollar hike. Yet, even that million is more than the company had in sales all of last year. KeraVision is just now moving away from being a developmental stage entity into one with a marketable product domestically.

The clincher here is that if KeraVision's Intacs become as popular as laser surgery, the payoff will be huge. KeraVision's stock would have to grow 30-fold before it approached a VISX-like market capitalization.

With more and more surgeons being trained in the procedure, its popularity is almost sure to continue. According to KeraVision, Intacs are more effective than the excimer laser procedure -- with 82% of the candidates returning to 20/20 vision versus just 68% for the laser. The one stumbling block might be if the consumer continues to opt for the laser over dealing with a foreign object in the eye socket. Then again, the market continues to grow. The eyes do indeed have it.

--Rick Aristotle Munarriz (tmfedible@aol.com)

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