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INTRALASE® FS laser uses proprietary, computer-guided
technology for greater precision and safety compared to the use of traditional methods
Healthcare
Medical Appliances and Equipment
(ILSE-NASDAQ)
IntraLase Corp.
9701 Jeronimo Road
Irvine, CA 92618
Phone: 949-859-5230
Robert J. Palmisano
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
August 11, 2005
BIO:
Bob Palmisano is President, CEO and a Director of IntraLase Corp., which designs, develops
and manufactures an ultra-fast laser, related software and disposable devices used to
create a corneal flap, the first step in LASIK surgery for the correction of vision.
IntraLase’s products improve the safety, precision and visual results of LASIK
procedures by providing a computer-controlled laser solution in place of the hand-held
mechanical, metal-bladed microkeratome traditionally used to create corneal flaps.
IntraLase lasers are also used in surgical approaches to the treatment of diseased
corneas. The company's lasers and disposable per procedure patient interfaces are
presently marketed throughout the United States and 19 other countries. Bob brings more
than 30 years of highly successful senior management experience with major corporations
and in the ophthalmic industry, particularly in the areas of market share and revenue
growth, profitability, product development, and marketing. Prior to joining IntraLase, in
April 2003, Bob was President, CEO and a Director of MacroChem Corporation, from 2001 to
2003, a development stage pharmaceutical corporation. Before that, from 1997 to 2001, he
was President, CEO and a Director of Summit Autonomous, Inc., a global medical products
company that was acquired by Alcon, Inc. in October 2000. Prior to 1997, Bob held various
executive positions with Bausch & Lomb Incorporated, a global eye care company. Bob
earned his BA degree in Political Science from Providence College.
Company Profile:
IntraLase Corp. is the leading laser technology for the first step of LASIK surgery. We
have developed and market an ultra-fast laser, related software and disposable devices for
use in creating the corneal flap, the first step of LASIK surgery, the most common
surgical technique used to correct vision. Our patent-protected product offering consists
of our INTRALASE® FS laser combined with our IntraLase Corp. is the leading laser
technology for the first step of LASIK surgery. We have developed and market an ultra-fast
laser, related software and disposable devices for use in creating the corneal flap, the
first step of LASIK surgery, the most common surgical technique used to correct vision.
Our patent-protected product offering consists of our INTRALASE® FS laser combined with
our proprietary IntraLASIK® software, and our per procedure disposable patient interface
required for each eye treated in the LASIK procedure. Our computer-controlled laser
solution replaces the hand-held mechanical, metal-bladed microkeratome traditionally used
to create the corneal flap. Our advanced laser technology improves safety, precision and
visual acuity of LASIK surgery, and we believe our product offering will become the new
standard of care for corneal flap creation in LASIK surgery.
CEOCFO: Mr. Palmisano, what attracted you to IntraLase, and
how has it changed under your leadership?Mr. Palmisano:
“I joined the company in the early part of 2003. I had previously been the CEO of
Summit Technology, which was sold in late 2000 to Alcon, Inc. I had a non-compete for two
years, so I was out of the industry but I was very familiar with the technology. I
believed that it could make a difference in getting better clinical outcomes, if this
technology was used as part of the LASIK procedure. I was happy to join and since that
time, we have ramped up our commercial expansion. At the time I joined the company, we had
44 lasers installed. At the end of Q-2 this year, we had 293 lasers installed in
twenty-two countries. We have done nearly 500,000 procedures using our technology.”
CEOCFO: Will you tell us
about the industry, and how IntraLase is unique within the industry?
Mr. Palmisano: “The laser vision correction business is
a big business in terms of its potential. In the United States, 55 million people are
eligible to have laser vision correction. Each person has two eyes, so there are 110
billion potential procedures. Currently, about 7% of those eligible have had laser vision
correction. There is a lot of opportunity there. The annual number of procedures has gone
up nicely over the last few years. It was up to about 1.1 million in 2003 and up to about
1.4 million procedures in the United States in 2004. The numbers should increase between
seven and ten percent this year. If you look at the market outside the United States, it
is somewhat larger in terms of the number of procedures done but the United States is the
single largest market. We are a global company with about half of our placements now
coming from markets outside the United States. Laser vision correction is a two-step
process. The second step is when the excimer laser is used to reshape the cornea so that
it will reflect light properly off the retina. It is removing tissue and reshaping the
cornea so that light reflects properly. That is not what we do; that is what the company I
used to run did. We do the first step of the procedure, which is creating a thin flap of
tissue in the cornea. The flap is lifted by the surgeon and then they do the second
step of LASIK. Before our product was cleared by the FDA and commercialized, a blade was
used during this step. This blade would transverse across the cornea to create the LASIK
flap. We do this with a laser that is precise and gentle on the cornea and this generally
leads to better outcomes to the patient.”
CEOCFO: Do you have a
new laser that you are launching?
Mr. Palmisano: “We just launched our third reiteration
of the technology, which we call FS30™. By thirty, we mean 30 kHz. That means there
are 30,000 pulses of light per second that are emitted from this laser, so it is very
fast. That is compared to an excimer laser that does the second part of the procedure,
which are about 50 pulses of light per second. It is a very sophisticated piece of
technology. We went from 15 kilohertz to 30 kilohertz and just started releasing that
product in late June. The benefits, in addition to it being twice as fast for a surgeon to
do the surgery, are that it makes the flaps easier to lift by a substantial amount because
we are able to put these gas bubbles closer together. We also use lower energy, which
diminishes the potential for any post-operative inflammatory response for patients. This
is a major step forward and part of the company quest to keep improving its products.”
CEOCFO: Are there other
companies that you are competing against or do you compete only with traditional methods
like the surgical blade?
Mr. Palmisano: “By far, the majority of our competition
is against the blade. That is like the buggy whip story when you go back to the turn of
the century when automobiles were just coming into vogue and some people said I am just
going to make better buggies whips, not automobiles. Some other companies decided to make
automobiles and they were successful. The blade is a buggy whip kind of technology. We
have this sophisticated, precise laser. Right now, there are no other commercialized
companies making lasers to create flaps, although at some point in the future I am sure
there will be because this is the wave of the future. Our company has a strong
intellectual property portfolio and we keep on raising the bar to make our technology
better. We will continue to improve our system so the bar will be set high so if, and when
competition comes into the market, our technology will be the technology of choice. In
addition to that, we will continue to ensure intellectual property protection for our
product.”
CEOCFO: How do you reach
potential end-users and convince them to use your technology?
Mr. Palmisano: “The story is better medicine and better
business. By a surgeon adopting this technology, we will give them an opportunity to
practice better medicine. It comes in the way of providing the safest procedure. The most
common side effect of laser vision correction is dry eye. Studies have shown that when
doctors use the laser to create the flap, dry eye is reduced by about 73%. About 9% of all
procedures are retreated for one reason or another. The primary reason is that patients do
not get the outcomes that they had probably hoped to get. When doctors use IntraLase
during the first step of LASIK only about 4% of patients, require retreatment, therefore
reducing the retreatment rate to less than half. This reduction is not only in the best
interest of the patient, it is also in the best interest of the physician. This is because
it costs the physician as much to do a retreatment as it does the initial procedure.
Additionally, there have been numerous studies comparing the IntraLase laser to the
leading blade technologies for use in flap creation. In one study, the doctor created the
flap in one eye of the patient using IntraLase, and in the other eye they used a blade.
Everything was equal and the only difference was the method of flap creation. The patients
had better vision in their eye where a laser was used to create a flap compared to their
other eye. Subjectively speaking, when asked which eye these patients felt they saw better
from in terms of crispness and clarity of vision over seventy percent choose the eye in
which IntraLase was used to created the flap. So from a clinical point of view, doctors
can provide patients better medicine. The business part of the story is that when doctors
acquire this technology they typically raise their prices to cover their expenses. There
are several marketing studies conducted by independent third parties to understand
refractive practices. One of them concluded that doctors who use an IntraLase to create
the flap charge about $330 more per procedure than when they do not use an IntraLase.
Another study by a market research firm called Market Scope concluded that doctors were
charging over $500 dollars per eye for an IntraLase initiated LASIK procedure. When
doctors integrate the IntraLase laser into their practices, they charge more but they also
make more money. This is an elective procedure not covered by insurance and the profit
margin is high.”
CEOCFO: Will you tell us
about the business model?
Mr. Palmisano: “Our business model has the laser, and we
sell that directly to surgeons, laser vision providers and teaching institutions. Our
price of our laser is about $375,000. We make modest margins when we sell the equipment.
We also have a disposable product, which allows us to get a fee each time a procedure is
performed. Our price on the disposable is $160. Our objective is to place as many lasers
as we can.”
CEOCFO: Do you make
efforts to reach the patients?
Mr. Palmisano: “We do not market directly to consumers.
That has been tried a few times in this industry without much of an effect. We do help
doctors position this technology within their practices. We have a team of
practice-marketing specialists and we provide templates for practice marketing materials.
If you are in one of the more saturated markets, you will hear doctors advertising
bladeless LASIK, which comes from our influence on how to position the technology to the
consumer. When a practice gets patients in a consultation, they will explain the
difference between the blade and the laser. Many doctors offer patients a choice. However
we have data that suggests that when given a choice 85% of the time or greater, the
patient chooses the IntraLase laser.”
CEOCFO: Will you tell us
about the financial position of the company?
Mr. Palmisano: “We went public and did our IPO last
October. Our IPO price was thirteen dollars, and I just checked the stock price today and
it was at twenty. We have given guidance to investors that we expect to do around 95
million dollars in revenue this year. We expect to have earnings in the area of ten or
twelve million dollars and in addition to that, we have about 90 million dollars of cash
in our balance sheet and no debt.”
CEOCFO: What do you see
ahead for the company?
Mr. Palmisano: “We want to fully develop and improve the
laser flap part of the LASIK procedure. First, 1,400 refractive practices around the world
have the right profile to incorporate the IntraLase technology. Secondly, we want to
increase our indications for use. The technology that we use to perform other treatments
to the eye, other than flaps, is currently going through studies and FDA approvals.
Therefore, we expect to get other therapeutic uses of this laser approved. Thirdly, we
want to continue improving this technology. We just went from fifteen kHz to thirty kHz,
making our laser faster and decreasing the amount of energy we use in the eye, and we have
other advancements that it will allow our laser to perform better than it is performing
today. We continue to look ahead three to five years, and ask ourselves what we can do. We
have a research development team dedicated to evaluating future applications to make sure
we have the latest technology.”
We will be using our healthy balance sheet to
increase the breadth of this company. We would like to add other products to this company,
not just lasers and we would like those products to be technologically advanced. We want
to deal with the same customer that we are dealing with; the refractive surgeon.”
CEOCFO: In closing, what
is it about IntraLase that investors may not understand?
Mr. Palmisano: “The investors are currently valuing the
company around twenty dollars a share. Of course, I think that this is just the beginning
because we are just tapping into this market and we have a long runway in front of us. We
have other products under development. There is a passion in this organization to develop
a refractive company that in the future could service many of the needs of the refractive
surgeon, and have differentiated products that produce high margins and high revenue.
Investors should take a serious look at us.”
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