Star Surgical Shines as U.S. Outlook Improves for 2024

Key Points

• STAAR Surgical is the leading maker of implantable ocular lenses (IOL) used for cataract surgery.
• Its EVO ICL sales hit the highest levels in the United States in Q1 2024 since its FDA approval in March 2022.
• With over 90% of people over 65 years of age developing cataracts, STAAR Surgical has a long runway for growth from the aging population.

STAAR Surgical Co. NASDAQ: STAA develops and manufactures intraocular lenses (IOL) used to replace a person's natural lenses during cataract surgery. Its portfolio includes the EVO line of Implantable Collamer Lenses (ICL) used for the treatment of nearsightedness (myopia), refractive error (astigmatism) and farsightedness (presbyopia). The company competes directly with Alcon Inc. NYSE: ALC and Johnson & Johnson NYSE: JNJ in the IOL segment.

What are Cataracts?

Cataracts are the clouding of the lens that happens with aging and are the most common cause of vision loss. Over 21 million people in America over 40 years old have cataracts, and more than 90% of people over 65 years of age develop cataracts. The medical sector company is a leader and pioneer in the field of cataract treatment and delivery systems. The company is a natural benefactor from the aging population and recently raised its 2024 outlook.

LASIK Versus IOL Replacement

The topic of LASIK surgery versus IOL replacement surgery often comes up as to which is superior. While they both address vision problems, they differ in procedure and what symptoms they seek to treat.

IOL replacement is an outpatient surgical procedure where the surgeon makes a small incision in the cornea to remove a patient's cloudy lens to implant the synthetic IOL. The IOL is foldable, which allows for an even tinier incision and faster healing. A LASIK procedure creates a flap in the cornea and reshapes the underlying corneal tissue, often to correct a refractive error. The flap is repositioned to heal naturally.

More or Less Invasive Surgery

IOL replacement is more invasive and can be prone to infections in rare cases. It can also be reversed and is suitable for adults with cataracts. IOL is said to be faster in terms of vision improvement and healing.

LASIK is less invasive as it uses two precision lasers. However, ideal patients are expected to have stable vision, good eye health, and plenty of corneal tissue since LASIK removes some of it. LASIK is permanent.

Daily Cup Pattern

The STAA candlestick chart illustrates a cup pattern. The cup lip line formed at $58.40 on July 25, 2023, as shares fell to a low of $26.66 on February 5, 2024. STAA rebounded back up to $40.45 as the daily relative strength index (RSI) surged through the 70-band. The Q1 2024 guidance raise peaked out the RSI at the 83-band before peaking and falling back to the 70-band. Pullback support levels are at $43.09, $40.45, $35.12, and $31.33.

Double-Digit Growth

STAAR reported Q4 2023 EPS of 16 cents, missing consensus estimates by a penny. Revenues grew double-digits at 19.1% to $76.27 million versus $75.94 million. ICL sales rose 22% to $74.6 million, and ICL units grew 19% YoY. Gross margin improved to 79.6% versus 77.7% last year. Net income rose to $7.8 million versus $6.8 million last year. The company closed the year with $232.4 million in cash and cash equivalents.

Lowered Guidance

On February 26, 2024, STAAR Surgical issued lowered guidance for the full year 2024 with EPS of 70 cents versus 91 cents consensus estimates. Revenues were forecast between $335 million to $340 million versus $348.96 million.

CEO Insights

STAAR Surgical CEO Tom Frinzi stated that every large market delivered positive sales growth. Its ICL unit growth outpaced the refractive industry rate by 25 points for three consecutive years. EVO ICL sales growth was expected to grow 10% in the Americas, 7% in APAC and 10% in China. Global ICL sales rose 22% YoY, which includes 18% YoY growth in EMEA and 30% in China.

Frinzi concluded, "With healthy margins, no debt and a record $232 million of cash, cash equivalents and investments on the balance sheet, we will continue to invest in our growth opportunities strategically. We are also enhancing the surgeon experience, both in the clinical environment and in driving practice efficiency. EVO ICL is the next logical step in refractive innovation with clear differentiators in patient outcomes and patient satisfaction."

Stifel Upgrades to a Buy

On March 11, 2024, Stifel upgraded its rating from Hold to Buy on STAA shares. It raised the price target to $50 from $30. STAAR Surgical analyst ratings and price targets are at MarketBeat.

Head fake: Raised Guidance

Ironically, on April 4, 2024, STAAR Surgical issued upside guidance for Q1 2024. Revenues are expected to exceed $77 million in the first quarter versus $72.08 million consensus estimates. ICL sales in the United States were $5 million, hitting the highest quarterly levels since receiving EVO ICL FDA approval in March 2022.

Head fake: Upside Guidance

Fast forward to April 4, 2024, STAAR Surgical raised its Q1 2024 guidance to $77 million versus $72.08 million consensus estimates. ICL sales in the U.S. are expected to be around $5 million for the quarter, which represents the highest ICL sales in the U.S. since FDA approval in March 2022. Cash and cash equivalents rose to $248 million.