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Why All Eyes Are on STAAR Surgical

A little-known maker of ophthalmic products for cataract and glaucoma surgery, STAAR Surgical (STAA), didn't blink as it zoomed from 2 last August to 8.55 on Apr. 30. It has developed an implantable contact lens (ICL) for correction of nearsightedness, farsightedness, and astigmatism. The new lens will be submitted within days to the Food & Drug Administration.

In recent Phase III clinical trials, ICL complications were "low, and patient satisfaction high, at 99.4%," says Ryan Rauch of investment outfit Adams, Harkness & Hill, who expects the FDA to O.K. it by early 2004. Adams owns 1% of the stock. "The data support our view that ICL could be a blockbuster in a $1 billion market," adds Rauch, who rates the stock a strong buy. The ICL is implanted in the eye through a 3-mm incision, in a 10-minute operation. One big plus: STAAR is in talks with major players for a marketing pact that could lead to a buyout, says Rauch, who figures STAAR is worth 18 to 20. He expects STAAR to lose 2 cents a share in 2003 on sales of $53 million but to earn 14 cents in 2004 on $60 million. But Rauch may up his estimates: A quick FDA O.K. would mean higher results.

CEO David Bailey, credited with turning STAAR around, is exploring all options but won't comment on future partners. Biggies are Johnson & Johnson (JNJ), Bausch & Lomb (BOL), and Ciba-Geigy. Jackson Robinson of Winslow Management, with 600,000 shares, says STAAR has a "dynamic product" that will help the company grow even in a stagnant economy.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them. By Gene G. Marcial

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