Iridex sees future in ophthalmology

06 Mar 2012

Having sold its aesthetic laser business, the focus is now on growth and efficiency.

Iridex, the California-based supplier of medical laser systems, reported sequential rises in both revenues and profit for the fourth quarter of 2011, although it also indicated that the first quarter of 2012 would probably be closer to break-even.

Fourth quarter revenues totaled $8.6 million, up sequentially from $8.3 million for the third quarter of 2011, although down from $9.0 million in the equivalent period of 2010. Income for the quarter was $0.8 million, compared to the $0.3 million posted for the previous three months.

Full-year figures for 2011 showed a net income of $2.1 million on sales of $33.2 million, compared to the previous year's profit of $1.7 million from $32.3 million in sales.

Dominik Beck, CEO since October 2011, told analysts that two recent deals by Iridex have set the course for the next stage in the company's development and would have a significant effect on its future performance: the sale of its aesthetics business to Cutera in early 2012, and the signing of a distribution deal with Alcon in November 2011.

"The contribution from our aesthetics business was diminishing over time, and we were keeping investment in that business to a minimum," he said. "To maximize its revenue potential would have needed significant investment in the market and in product development. Strategically this would have taken our company in the wrong direction, and a potentially flat or declining aesthetic business would have masked growth in our core ophthalmology business."

The Alcon agreement covers the licensing and distribution of Iridex's GreenTip cannula products, used to allow surgeons better views of the retina during vitrectomy procedures when some of the eye's vitreous humor is removed.

"By entering a distribution agreement with Alcon we have taken the next big step in making consumable products an important part of our growth plan," commented Beck. "The aim is to grow the contribution of consumable products to our top line to 60 percent from its current 50 percent. So consumables will participate a little faster in our top line growth than capital equipment."

Faster rates of growth
The CEO also said that he expects the company's MicroPulse laser platform, used for the selective coagulation of blood vessels in the retina as a treatment for diabetic retinopathy, to play an equally significant part in Iridex's future growth.

"We now have ten-year data supporting the safety and effectiveness of this technology," he told analysts. "We see a growing global sentiment that practitioners need to find a cost-effective way to treat an ever increasing population of patients suffering from diabetic retinopathy. As the benefits of laser become more widely accepted, we see this trend growing."

Taken together, Beck said that he expected the re-aligned Iridex to deliver revenues of more than $50 million by 2014, along with pre-tax margins of above 50 percent. That would mean the company effectively being 50 percent larger by 2014 compared to 2011, and growing by some 14 percent per year for the next three years - a significantly faster rate of growth than Iridex has previously shown.

The CEO commented that, with the aesthetics business now out of the way, Iridex saw its remaining business areas as being quite capable of 10 percent organic growth annually, with future acquisitions expected to make up the remainder.