Advertisement

Accountants’ Remarks About Viability Send Staar Surgical Stock Into Tailspin

Share via
Times Staff Writer

Shares of Staar Surgical Co. plummeted 22% on Thursday after the Monrovia maker of an implantable contact lens said its outside accountants were doubtful about the company’s ability to stay in business.

Staar reported a larger-than-expected loss for the fourth quarter late Wednesday and warned that planned cost-cutting moves wouldn’t be enough to return the company to profitability. Because of those ongoing losses, “the company believes it is likely to receive an opinion from its independent public accountants ... stating there is substantial doubt about the company’s ability to continue as a going concern,” Staar said in a statement.

In a conference call with Wall Street analysts Wednesday, Staar executives said the warning related to how much cash the company would have through the first quarter of 2006. Company executives didn’t project what their cash position would be a year from now. Staar said it had about $9.3 million in cash and short-term investments at the end of the fourth quarter and total debt of $13.5 million.

Advertisement

Staar executives also told analysts that they were planning to raise $8 million to $10 million through a private stock placement. That took many on Wall Street by surprise, said Amit Hazan, an analyst with Suntrust Robinson Humphrey.

Just last week, Staar said it had hired investment banking firm Morgan Stanley & Co. to help it evaluate various alternatives including acquisitions, mergers, licensing agreements and divestitures.

Hazan said he thought Staar was much closer to being acquired. “The fact that they are now trying a private placement means they are further away from some kind of deal,” he said. “It’s worrisome.”

Advertisement

Staar’s efforts to make a surgically implanted contact lens to correct severe nearsightedness have been troubled.

In 2003, the Food and Drug Administration found quality-control problems at Staar’s Monrovia manufacturing plant. Last month, the FDA again warned Staar of problems.

“While we remain focused on resolving the issue with the FDA to pave the way for an [implantable contact lens] approval in the U.S. as well as rejuvenating sales of our cataract products, we feel it is prudent to also consider strategic and financial alternatives available to us,” Chief Executive David Bailey said in a statement.

Advertisement

A spokeswoman for Staar didn’t return phone calls.

For the three months ended Dec. 31, Staar reported a loss of $4.4 million, or 21 cents a share, wider than the $3.5-million deficit, or 19 cents a share, the company reported in the fourth quarter of 2003. Analysts were expecting a loss of about 15 cents a share, according to Thomson First Call.

Sales rose 4% to $13.4 million.

For the year, Staar reported a loss of $11.3 million, or 58 cents a share, compared with a loss of $8.6 million or 47 cents a share the year before. Sales rose 2.6% to $51.7 million.

The results were released after U.S. markets closed for the day. Staar shares fell $1.31 to $4.62 in Nasdaq trading.

Advertisement