street sense
Refractive Stocks Show Volatility
The shares of companies tied to refractive surgery have had huge ups and downs in the past.

An investor seeking to participate in the anticipated growth of refractive surgery currently has a small number of choices. Though major eyecare companies such as Alcon and Bausch & Lomb are major players in refractive surgery with their LADARVision and Zyoptix excimer laser platforms, the refractive segment comprises only a small portion of these companies' overall business.

In this article, I'll look at the few companies that are most heavily tied to refractive surgery, explain how their stocks have performed in the past, and discuss what they might offer to investors willing to accept a high degree of risk.

Choices Are Limited

In searching for so-called "pure plays" in refractive surgery, stock market investors are pretty much currently limited to VISX, Inc., the U.S. market share leader in excimer laser systems for vision correction, and LCA-Vision and TLC Vision, two companies that operate vision correction centers.

These three companies will soon be joined by IntraLase Corp., of Irvine, Calif., which has announced plans to raise $91 million in new capital by "going public" in the near future. IntraLase develops and manufactures the IntraLase FS femtosecond laser, which many surgeons consider to be better and safer than a microkeratome in creating the corneal flap in LASIK surgery.

As of this writing, it's impossible to predict how investors will respond to the IntraLase public offering, though it's clear that the product has a viable place in the eyecare market.

Stocks Move on Perceptions

If the history of companies involved in refractive surgery is any guide, IntraLase shares will likely display a fair amount of volatility.

Both TLC Vision and LCA-Vision shares have made huge percentage moves in the past, based on investor perceptions of the future of refractive surgery.

VISX shares have been somewhat less volatile, especially in the more recent past, but VISX also has a highly interesting history as an investment, including an attempt by corporate raider Carl Icahn to engineer a takeover of the company.

Overall, shares of companies involved in refractive surgery were stock market darlings in the late 1990s as the procedure first achieved popular acceptance. These shares then fell sharply in 2000 and 2001 as a round of news reports highlighted stories of patients who had experienced serious complications from LASIK surgery.

The advent of wavefront-guided LASIK in the past 2 years has rejuvenated the shares of companies involved in refractive surgery. In the case of LCA-Vision, the company's shares have recovered from about $2 a share to nearly $30. TLC Vision and VISX shares have also achieved impressive percentage gains.

Cautious Investors: Stay Away

For investors, refractive surgery companies have proved one thing over the years. Their shares are not suitable investments for those who are faint of heart.

Ophthalmology Management Senior Editor Jerry Helzner has written more than 50 articles on stock investing for Barron's. He has been a regular stock market columnist for other business publications and was a member of the equity research department of a major regional brokerage firm. E-mail your stock market questions to him at helznergi@boucher1.com