Competition in the field of refractive correction, both permanent and temporary, has been escalating. Not only are glasses, contact lenses, PRK, LASIK, Intacs, and others competing with each other, but competitive forces within these arenas is becoming fierce as well. LASIK providers, for example, are experiencing vicious price wars which are cutting deeply into profit margins.
NovOculi will rely on the superiority of its technology in order to thrive in this competitive market. NovOculi's is still the only technology in the field of refractive surgery which provides permanent refractive correction without making any complication-ridden incisions into the cornea. This competitive advantage will help NovOculi navigate these competitive waters and capture a large portion of the refractive surgery market.
5.1 Competitive Technology
Competition in the refractive surgery arena is expected from three main sources: external aids, existing laser refractive surgery, and alternative non-laser surgical procedures.
Contact lenses and glasses have been around for decades. The fact that LASIK has become so wildly popular, with demand doubling annually despite its complications, displays the fact that many patients who were once content with external aids now desire permanent refractive correction.
Existing Laser Refractive Surgery
It is expected that the largest source of competition will be from the LASIK industry. Much like LASIK has ousted the previously accepted procedure of PRK, NovOculi hopes to supplant LASIK with NICS. The competition NovOculi's technology faces is significant as many institutions have already purchased the excimer lasers required for LASIK, a hefty investment which will create lock-in to the LASIK procedure. Once the details of the superiority of NovOculi's procedure surface, laser refractive surgery centers will be pressured to invest in NICS by both ophthalmologists performing the procedure and patients desiring refractive surgery.
Another competing technology worth mention is the newly-developed technique employing femtolasers. This technology also hoped to correct refractive errors without an epithelial incision by using multiple lasers focused on a single position at which their destructive effects would be additive. Recent studies have found multiple, unavoidable technical complications, including formation of gas, debris, and cauterized tissue at the site of cellular destruction. It is highly unlikely that this technology will be able to overcome these hurdles and accomplish incisionless refraction without the use of some form of dye or chemical to target the selected tissues, a method which is the currently intellectual property of NovOculi.
Alternative Non-laser Surgical Procedures
In the U.S., the most popular, non-laser surgical technique in the industry is Intacs. Intacs are implanted into the stroma of the cornea where they bend the overall curvature to the desired angle so that the refractive error is corrected indefinitely, but reversibly.This procedure, as well as fully implantable contact lenses, have the added benefit of being reversible, but the disadvantage of still requiring a significant incision in the cornea with disruption of the stroma. Also, the procedure can only be performed on those with mild near-sightedness, approximately 20% of the existing market. Despite these disadvantages, these alternatives are gaining a niche in the market and will be a source of competition.
5.2 Competitive Comparison
Technology-wise, NICS has significant advantages over existing technologies. As was explained previously, current procedures all require destruction of a portion of the epithelium of the cornea. This destruction places the eye in danger of multiple complications, the overall rate of which is approximately 10%. The following are the most common complications associated with the epithelial incision in LASIK.
Common- (greater than 5% of the patient population)
- Pain (possibly chronic)
- Induced Irregular Astigmatism (corneal flap wrinkling)
- Corneal Scarring (associated with continued glare and haloes and permanent loss of night vision
- Epithelial Ingrowth (extension of scarring in cornea)
- Damage to Iris
- Tearing/Excess Mucous- Dry Eye
- Corneal Edema
Less Common- (less than 5% of the patient population)
- Corneal Epithelial Flap Dislocation
- Corneal Rupture
- Complete Blindness
Virtually all of these complications are associated with the corneal epithelial incision and its subsequent post-operative healing. Due to this fact, the bulk of these complications could be effectively avoided through the use of NICS.
5.3 Main Competitors
NovOculi's competitors can be divided into two categories: those competing within the field of laser refractive surgery and those with alternate refractive correction technology.
Laser Refractive Surgery Competitors
Competition will arise from both LASIK laser manufacturers and LASIK providers. Among these competitors, though, lies the possibility for the formation of strong, strategic alliances in both arenas.
LASIK Laser Manufacturers
The largest of the LASIK laser manufacturers is VISX (EYE). Down from its peak valuation of $100/share in July of 1999, VISX now trades at $13, with a market cap of $800 million and a price/earnings (p/e) ratio of 23. VISX is a good candidate for a potential ally in the development of a laser for NICS.
One of the largest commercial chains providing LASIK is TLC Laser Eye Centers (TLCV). Since its peak of $50 a share in July 1999, TLC has also experienced large devaluations associated with the increasingly competitive price wars in the LASIK industry. Due to these price cuts, TLC has experienced a negative 100% income growth. The fact that TLC has rapidly eroding margins associated with massive devaluations makes TLC an ideal target for a strategic alliance as well so that they may once again reap the rewards of a large sustainable profit margin. Currently, the stock trades at approximately $4, with a market cap of $129 million.
Non-Laser Refractive Correction Competitors
The greatest competition in this field is expected to arise from Intacs, the reversible corneal implants for refractive correction from KeraVision, Inc (KERA). Founded in 1986, KeraVision received 510K approval for its instruments in mid-1999. After meeting this milestone, KeraVision's stock peaked at nearly $30 in July of 1999. Subsequently, as demand for laser refractive correction rose, KeraVision's stock plummeted despite positive research results in human trials.
Currently with a stock price of $0.47, KeraVision's most recent return on equity of -97.50% is below its five-year average of -60.90%, which is also below the five-year industry average of 11.50%. Also, NASDAQ has threatened to delist the company and proceedings are underway. It is the opinion of experts in the biotechnology industry that KeraVision will not be able to weather its current financial hardships and will soon file for bankruptcy.
5.4 Impact of Competition
NovOculi's competition will have both a negative and a positive impact on the company's success.
The competing technologies outlined in section 5.1 all hold a significant portion of the current refractive correction market. Furthermore, especially with LASIK, the institutions performing these procedures have invested large sums in order to acquire the technology in order to perform these procedures. This is expected to create an element of lock-in in which many institutions performing LASIK will be reluctant to switch to NICS. For this reason, it is imperative that NovOculi accelerate its bench research and market entry of NICS as much as possible.
Also, competitors in this field have been engaging in a vicious price war. While NovOculi expects to be able to charge a premium, this premium is still based on the existing laser surgery price as a foundation. Further erosion of prices will have a negative impact on NovOculi as well.
With the acceptance of each of these technologies, the potential diffusion rate of NICS grows. Competitors have already invested millions of dollars in convincing patients that they need refractive surgery, and further convincing many to have the procedure performed. As with any new technology, the acceptance of the pioneer is always slower than modifications of the pioneering technology. Therefore, market acceptance of NICS will be speeded by existing technology.
5.5 Competitive Edge
As was mentioned previously, NovOculi's system of refractive correction has significant advantages over existing technologies. Current procedures all require destruction of a portion of the epithelium of the cornea which places the eye in danger of multiple complications, the overall rate of which is approximately 10%. NovOculi's technology obviates the need for such an incision and will make the procedure safer and more attractive to patients with refractive errors.
NovOculi's competitive advantage arises from its proprietary position with a patent on the reversible iontophoretic plate for delivery of the dye to the cornea, the method of sculpting the cornea using a targeting chemical and an energy source which will selectively stimulate the chemical, and the varying density polymeric contact lens impregnated with an ionic dye.