|A Big Premier, Now
by Louis Corrigan
On May 7, the Food and Drug Administration (FDA) awarded PREMIER LASER
SYSTEMS (Nasdaq: PLSIA) clearance to market Premier's new Centauri Erbium
YAG laser, a tool which can be used in such hard tissue procedures for removing
tooth decay. Many reported that this opened the door on a "new era" in dentistry,
at least according to Premier, the dentists who performed the 1,400 procedures
in the clinical studies, an assortment of dental laser enthusiasts, and
investors, who sent the shares of Premier soaring from $6 3/4 before the
announcement to a high of $16 1/8 just a few trading sessions later.
The initial euphoria created by the FDA's decision has gradually been tempered
by more circumspection regarding how quickly dentists, a notoriously conservative
bunch, will adopt an expensive $39,000 technology approved for a limited
number of procedures. For example, the FDA did not clear the laser for use
on children, though the company, convinced the agency will eventually do
so, plans to sit down with the agency in 6 to 8 weeks to discuss the matter.
Also, the agency has not cleared the laser for use in replacing old fillings,
and the bulk of the 170 million restorative procedures performed each year
involve such replacements.
Moreover, because the laser would likely vaporize the mercury in old silver
amalgam fillings, it's likely the laser will be limited to working on the
newer composite fillings in any case. Others question whether the laser will
ever be useful in crown preparations, a significant part of many dental
practices. A tepid response from the American Dental Association (ADA), caught
off-guard by the FDA's decision; confusion about Premier's sales goals and
production capacity; and the threat of patent infringement suits from competitors
have also contributed to Premier's recent slide to $10 5/8, as the bulls
and the bears battle it out in the Fool folder and on Wall Street.
Getting a good handle on the YAG laser's prospects is difficult primarily
because neither the ADA nor the 120,000 dentists who generally rely on the
organization for information know any more about the laser than investors
do. The five dentists involved in the clinical trials are the only ones in
the country to have actually used it. And while their findings are expected
to be published soon in peer-reviewed journals, they aren't out yet. Dr.
James Pelagalli, the trials' chief investigator and the director of the Oral
Clinic in Cleveland, is expected to offer the first extended technical discussion
of the YAG laser in the June issue of Dentistry Today, accompanying
a cover news story on the FDA clearance.
So far, however, articles in the ADA News Daily have mainly presented
information offered in Premier's press releases along with a sampling of
the organization's initial questions. The questions addressed such issues
as the safety of hard tissue at the site where the laser heats up the tooth;
the possibility of teeth cracking due to shock waves; and the performance
of the laser compared to conventional high speed handpieces (since the trials
were not controlled, patient comfort could owe something to a placebo effect).
Dr. Kenneth Burrell, senior director of the ADA's council on scientific affairs,
said on Tuesday that the organization plans to issue a more complete statement
in the near future, but that so far, the organization has not received the
clinical and technical data it has requested.
As one dentist put it, Premier has done all its talking in the newspapers.
The dentists don't know one thing about the laser. Another said he
knew little about the product, but that one of his patients had strongly
recommended he buy one -- because the patient owned Premier stock. Indeed,
it was difficult to find dentists willing to comment for the record since
none have seen any of the clinical data. Dr. Steven Duke, a researcher in
the department of restorative dentistry at the University of Texas, San Antonio,
has worked with lasers in the past but admitted he wasn't very familiar with
the Premier laser. Still, he said he was skeptical of some of the claims
the company has made regarding the speed of market acceptance. The sales
predictions, he said, "sound like marketing hype" designed to encourage sales
by making dentists fearful they "may get left behind" if they don't purchase
the laser. Dr. Justin Jones, a dentist in private practice in Atlanta, is
equally skeptical, saying he thought, "A number of dentists will jump on
the bandwagon" and feature the laser in their advertising, but from what
he could tell, it's "A very expensive tool for very limited and questionable
benefits aside from publicity."
What's clear is that an initial report from Dow Jones News that formed
the basis for part of Randy Befumo's "Fool on the Hill"
column was erroneous.
On May 7, Dow Jones had reported that Premier CEO Dr. Colette Cozean was
projecting 77% market penetration by the second year. But Premier spokesperson
Owen Daley, said last Thursday that that figure was based on a survey done
by a dental products publication which found that 77% of dentists polled
said they would seriously consider buying the laser in its second year on
the market "if everything went well and the [dentists] who were using it
were already satisfied."
Daley reiterated what recent company press releases have said: that the company
initially expected to sell lasers to 1% to 2% of America's 120,000 dentists
during the first 12 to 18 months on the market, and 10,000 to 15,000 over
the first decade, figures he characterized as "terribly conservative." Still,
those projections seem to be rising, given the fact that the company's telephone
lines have been clogged with phone calls. On May 20, Cozean said, "It is
now apparent that the level of enthusiasm among dentists and patients may
be much higher than that. As of last week, we had logged more than 1,200
expressions of interest." About 10% of callers have ordered a YAG laser,
while 20% have signed up for training courses, and 50% have requested additional
At the same time, however, Cozean's other comments raised questions about
the company's ability to ramp up production to meet even the demand initially
projected. "At this point," she said, "we believe we can manufacture up to
400 systems or so before the end of our fiscal year on March 31, 1998; we
are examining ways in which to increase that build schedule to accommodate
demand." Daley said the company considers September the beginning of its
true selling season, so the capacity to ship 400 systems pertains to a September
to March time frame, which would give the company until the end of FY99 to
meet its initial 18-month sales projections. Daley insisted, however, that
"they can ramp up to meet the 1,200 or whatever [number of systems] if it's
in the next 12 months."
As one of the five clinicians who participated in the studies, Dr. Richard
T. Hansen of the UCLA dental school in Los Angeles is enthusiastic about
Premier's laser. He said the FDA clearance is the beginning of a
revolution in dentistry. While the laser may not fit into the practices of
some dentists who do mainly crowns, bridges, or root canals, "it's definitely
going to be something worthwhile" for dentists who do a fair number of fillings.
"And as the development of this technology evolves, we're going to be able
to use it in more and more applications. We are going to be able to use it
for most areas of the mouth at some point in the future." He said the FDA
clearance gives the company incentive to enhance the product, and that Premier
has already developed new handpieces and tips that can reach areas of the
mouth that were inaccessible just a month ago. Plus, having used the laser
on a large number of the 80 children who participated in the studies, he's
convinced that children represent "the absolute best use for the machine"
because it is effective, safe, and most importantly, almost painless. Dentists
will eventually accept the laser, he said, though he conceded "it will be
slow." He said he expects a lot of dentists to take a "wait-and-see attitude"
while the initial purchasers use the product and report their findings. "Then
you'll see another surge of people buying them."
Dr. Eugene Seidner, president of the Academy of Laser Dentistry, is also
enthusiastic. "It was a huge breakthrough for the FDA to allow this to happen,"
he said. Though no one has a list of all the dentists in the U.S. who currently
use some type of laser in their practice, Seidner put the number at 3,000
and said they represent a group likely to show initial interest in the Premier
laser. Still, he said the dentists he's spoken with are "more excited about
the FDA finally allowing hard tissue applications for a laser than [they
are about] this particular laser because nobody knows about this laser; only
five people have used it." With the door now opened by the FDA, however,
"there are going to be a lot of other manufacturers coming out with models
of this particular laser, and I'm sure there will be other lasers available
that will do things even more efficiently than this one."
Dr. Robert Pick, an assistant professor of periodontics at Northwestern
University and the ADA'S expert on the use of lasers on soft tissue like
gums, has been an enthusiastic supporter of the Premier laser, telling the
Chicago Tribune that he believes it will be "very commonplace" in
two to four years. Others at the ADA, however, were completely surprised
by the FDA approval and remain cautious about Premier's laser. Fred Eichmiller,
director of the ADA Health Foundation's Paffenbarger Research Center in
Washington, D.C. recently told Wired magazine he thought it unlikely that
a laser would ever be developed to drill cavities. Last week, he explained
his skepticism grew out of practical considerations: could you make an instrument
that would be cost-effective given that the drilling itself is slower than
using a conventional drill and that it might be useful on only a limited
number of cavity types? He said he would like to see "at least a few studies
showing how it's been used" to see "what the system is capable of."
The ADA's Burrell also told Wired that he didn't expect such a laser
to be available until 2010. "Wow, was I off," he said, laughing. Still, Burrell
said, "it's hard to determine how quickly this is going to take off. I think
there are some questions that dentists would like to know before they consider
buying something like this." He pointed to certain safety issues, like how
the nerve tissue and the pulp in the tooth react to the laser and whether
there's a risk of teeth cracking due to the rapid temperature increase. He
also noted that "there aren't as many fillings being done today, so the use
of the high-speed handpiece that the laser's supposed to replace have gone
down the last few years." Still, he said the ADA has received a "tremendous
number of inquiries both from the public and the profession" since the FDA
cleared the laser for marketing.
UCLA's Dr. Hansen, at least, believes that "the media and the patient demand
will actually drive the change quicker than the dentists would themselves."
But he sees no problem with this given his feeling that the clinical studies
have already addressed some of the safety and utility issues and that more
complete data will only breed further confidence in the laser.
For now, though, dentists who might be put off by the hefty price tag may
find that lingering questions about safety and utility provide good reasons
to hold off on a purchase. And some dentists have expressed doubts about
the cost. Dr. Jones in Atlanta said that once fees for several days of training
seminars, related travel expenses, and other charges were figured in, the
Premier laser could end up costing $65,000 or more. But Daley, Premier's
spokesperson, said that figure was unreasonably high, even if one included
about $800 a month for fiber tips and service on the laser. And Premier has
insisted that the doctor training, which begins in June and will be conducted
by the five clinicians involved in the trials, will only require one day.
"If the dentist is already competent in the procedure," Daley said, "using
the laser does not require rocket science." Yet Hansen, who will be conducting
training sessions, said the five clinicians expect dentists will need three
to four days of training. "One day to me is just bare minimum," he said.
He anticipates dentists coming for one day of basic laser physics combined
with a second day on technique. They can then go back to the practice and
try the laser "on very simple procedures." Then they will come back "and
take another training module to get a little more advanced."
Dr. Stephen J. Markus, a dentist in Haddon Heights, Pennsylvania, expressed
his own doubts about the economics of the laser in a letter last week to
the Philadelphia Inquirer. Based on his assumptions that the laser
available today will be out-of-date in four years and that the average solo
dentist would require two lasers since most work out of two treatment rooms,
Markus determined that "all we've got to do, to break even in a solo practice,
is treat 4,000 fillings a year," or about 16 fillings per day. "I don't know
about your area of the country," he wrote, "but prevention and fluoride are
working here." He said some days he performs no more than four fillings,
"...and I have a busy office."
The allure of near-painless dentistry is certainly powerful enough that dentists
are likely to take a good long look at any product that could potentially
usher in such a new era. Yet aside from a minority of dentists who are likely
to buy the laser for marketing purposes as much as for its benefits to patients,
most dentists seem likely to wait for data from the clinical trials and from
other independent researchers before deciding whether the YAG laser lives
up to its publicity. Whether Premier's sales projections properly account
for such caution remains to be seen.