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Medical Lasers Successful, but Profits Ailing

September 29, 1985|CARLA LAZZARESCHI | Times Staff Writer

The horror began just a few days after Justine Balanos was born four years ago. Suddenly, the small red mark on the infant's right cheek began spreading until it became a bulbous, red splotch that stretched across her cheekbone to the edge of her nose.

The mark, called a strawberry hemangioma, was more than an ugly cosmetic problem. It interfered with Justine's eyesight and, left untreated, might have partially blinded her.

Considering traditional treatments inadequate, Justine's doctor at UC Irvine's Medical Center turned to the newest weapon in the plastic surgeon's arsenal: the laser.

In just two treatments under the laser beam's intense heat, the enlarged blood vessels feeding the growth were severed and welded. And, with its blood supply gone, Justine's birthmark immediately began shrinking.

'Best Possible Treatment'

"Until the laser, there was no good way of treating the hemangioma," explains Bruce Achauer, Justine's doctor. "Now it's the best possible treatment."

Stories like Justine's abound. Over the last two decades no fewer than 12 medical specialties have gradually discovered more than 100 applications for the laser's varied abilities.

As a "light scalpel," the laser removes tumors in previously inaccessible recesses of the brain. As a welder, it repairs an eye's detached retina. And as an on-the-spot vaporizer, it erases warts, tattoos and birthmarks.

However, while lasers long ago justified their billing as medical marvels, they have yet to produce the long-predicted and long-awaited financial rewards for their manufacturers, investors and researchers.

"The technology is wondrous, but the bottom line is that the industry is not successful financially," says Larry Haimovitch, a medical technology analyst in San Francisco for Swergold, Chefitz & Sinsabaugh Inc. "The industry is glamorous, interesting and sexy and I think some investors and businessmen get blinded by that."

The problem isn't sales. Those are expected to hit at least $200 million worldwide this year and jump to $750 million by 1990. The trouble, analysts explain, is that profits have been squeezed by fierce competition, a watchful Food and Drug Administration and ever-changing technology.

"First you have the cost of developing the product," complains John Moore, vice president and general manager of the medical division of Coherent Inc. in Palo Alto, the nation's largest manufacturer of all types of lasers.

"Then you spend four or five years testing the product and getting it approved by the FDA. And in the end, the product's life cycle ranges from one to five years."

Targeting Same Customer

Still other executives moan that there are too many companies targeting the same customer.

Consider the plight of Lasermed Inc. By the time this tiny, 3-year-old Costa Mesa company produced its first opthalmic laser system last year, President Jack Baldridge recalled, at least a half dozen companies were already selling comparable products. Unable to distinguish itself from the pack, Lasermed was forced into filing for a Chapter 11 reorganization earlier this month.

Although bankruptcies aren't common among laser companies, neither are big operating profits. In fact, the profits earned last year by Coherent and Israel-based Laser Industries, two of the giants in the market, are considered the rare exceptions in a sea of otherwise red ink.

Despite the meager profits, stiff competition and potential for bankruptcy, dozens of laser companies are still betting that big bucks await those able to survive the laser's slow-arriving surge.

Several reasons are cited for this persistent optimism.

One is the still-huge potential market for medical lasers. Currently analysts estimate that about 65% of the laser sales are for eye treatments, leaving a vast, untapped source of future sales in other medical specialties.

According to a research report from Swergold, Chefitz, lasers could be used in 40% of the 11.5 million hospital surgeries in the United States. Currently, it is estimated to be used in less than 10% of hospital surgeries.

Furthermore, the report projects that one-third of the nation's 60,000 physician offices should be considered prime candidates for a laser system. Analysts estimate that substantially fewer than 10% of the country's doctors have lasers in their offices now.

Wide-Open Market

Another source of optimism is the highly fragmented and openly competitive market among laser manufacturers.

Although the companies range from subsidiaries of such well-heeled drug companies as Johnson & Johnson, Squibb, Bausch & Lomb and American Hospital Supply, to clusters of starry-eyed engineers such as those who formed Directed Energy Inc. in Irvine and Laserscope in Santa Clara, the market is still considered wide-open to both the current players and future entrants.

Still another reason stems from government and insurance company efforts to clamp down on soaring health-care costs by imposing reimbursement ceilings for most medical procedures.

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