Portfolio News
Vision-Correction Rivals to Unite
AMO, IntraLase Together Will Focus On 'All-Laser Lasik'
By Rhonda L. Rundle
January 8, 2007; Page A4
Advanced Medical Optics Inc. announced today a definitive agreement to acquire IntraLase Corp. for about $808 million, or $25 a share, in a deal that marries two leading laser companies in the vision-correction industry.
Advanced Medical Optics, Santa Ana, Calif., is a global ophthalmology company with nearly a 60% share of the Lasik market. IntraLase, Irvine, Calif., sells lasers that replace the hand-held blade traditionally used by eye surgeons in the first step of laser-assisted in situ keratomileusis, or Lasik. Many surgeons advertise such procedures as "all-laser Lasik."
Setting Sights
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The News: Advanced Medical Optics plans to announce an agreement to acquire IntraLase for about $808 million.
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The Background: The union of two leading laser companies in the vision correction industry is in line with Advanced Medical's goal to become a complete solution for eye surgeons.
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The Bottom Line: Advanced Medical hopes to use its marketing muscle to help surgeons spread awareness of bladeless Lasik in vision correction surgery.
The IntraLase acquisition is in line with AMO's goal to become a "complete refractive solution" for eye surgeons, said Jim Mazzo, chairman, president and chief executive officer. "One area that has been gaining a lot of momentum is the 'all laser all Lasik' concept and we felt that was a key area missing from our portfolio."
AMO made an offer at "a very fair price" that will benefit shareholders, patients and customers, said Robert J. Palmisano, IntraLase president and chief executive officer. "With these two technologies working in coordination, we can make the procedure better."
Mr. Palmisano and Mr. Mazzo said their respective boards approved the agreement Friday. AMO will pay cash and has arranged bank financing. The price represents a 12.5% premium over IntraLase's closing price Friday of $22.23. The stock reached a 52-week high of $23.81 last April 26 and a low of $15.36 on June 28. AMO shares closed Friday at $33.99, off 31 cents.
The men said they started talking last year about how to spur growth in the U.S. laser-vision-correction industry, which stalled last year. At a medical meeting in London last fall, they began talking about combining their companies, a move they agreed would "give the market a jolt," Mr. Mazzo recalled.
Of an estimated 1.4 million Lasik procedures in the U.S. last year, more than a quarter were performed using an IntraLase laser in the first step, the creation of a flap before reshaping the underlying tissue with laser pulses. While Lasik has a good safety record, complications most often arise during this first step. Use of the IntraLase laser adds several hundred dollars to a patient's bill, which averages about $2,000 per eye.
IntraLase in recent years has gotten a boost from the U.S. Defense Department, whose independent research showed that patients had faster visual recovery and better clarity of vision when the laser was used with Lasik. Last month, IntraLase announced that it received a federal contract for use of its lasers across all branches of the U.S. armed services.
AMO has long been an IntraLase rival because it sells the hand-held blade, called a microkeratome, used in traditional Lasik. AMO and other companies that sell the devices have promoted them as safe tools in the hands of skilled surgeons.
Mr. Mazzo said that AMO plans to stop such promotion and over the next 18 months will phase out a contract it has to sell the devices.
AMO hopes to use its marketing muscle to help surgeons spread public awareness of bladeless Lasik and other technological advances in vision-correction surgery.
Advertising and promotion are critical to the refractive-surgery industry. One reason for the slump last year is that many chains and individual surgeons cut back their marketing budgets, AMO said.
AMO was spun off from Allergan Inc. in 2002. It has been gradually transforming itself from a purveyor of contact-lens solutions and cataract-surgery products into a technology-driven enterprise focused on a broad spectrum of innovative ophthalmology products.