An MD&DI January 1997 Department
More than a quarter of all people suffer from some type of eye problem, mostly near-sightedness, far-sightedness, or astigmatism. Tom Loarie hopes to do something about that.
As CEO, president, and chairman of KeraVision (Fremont, CA), Loarie has constructed an intricate web of R&D, patent protection, and venture funding on his way to developing a new product, called the KeraVision corneal ring. When implanted in the eye, this plastic ring flattens the cornea to improve sight.
Over the past nine years, Loarie has raised some $80 million for KeraVision. In November 1996, the corneal ring was approved for sale throughout the European Union. The next step will be navigating FDA, following the completion of ongoing Phase III clinical trials. Loarie is bullish about the prospects of the technology as well as of the company, which he plans to call home for the foreseeable future.
Loarie joined KeraVision in 1987, then, as now, the company's CEO, president, and chairman. "When a company is that small, you get to take on a lot of positions," he says. Now flush with more than $40 million and a staff of 86, the company will soon market its first product. With revenues expected to start flowing into KeraVision from Europe early this year, Loarie wants to build a sales organization that will address a market that is worth, some estimate, up to $180 billion in the United States alone. It was this potential that allowed him to spark the interest of venture capitalists when KeraVision had little more than a concept to offer.
But in the early years, a psychological barrier to investment proved more difficult than developing the technology. Loarie calls this barrier eye hysteria. "There are people who can't put in a contact lens; they can't touch their eyes," Loarie says. "In a venture partnership, you will generally find an eye hysteric. I don't know how many days I spent trying to convince investors that people would want to have this device put in their eyes."
Loarie overcame that barrier through persistence, but then had to leap new hurdles resulting from the chaos at FDA. Under fire from Congress in the late 1980s, FDA began demanding more clinical data from device makers. Obtaining such data was becoming more difficult and costly. Loarie reached out to a Brazilian physician working as a fellow at the National Institutes of Health who, upon returning to Brazil, conducted studies that demonstrated the safety of the KeraVision ring and its ability to flatten the cornea. Clinical trials were launched in Europe and preliminary data supported Loarie's hopes that the device would be effective.
But by then, interest was slipping in radial keratotomy, a procedure that investors viewed as a bellwether of future demand for the corneal ring. They were hesitant to put more money into the company, and financial reserves were melting away. At one point, the company had only $2 million in the bank and a monthly burn rate of $500,000.
The turning point came when FDA approved the excimer laser and the market for eye surgery rebounded. The business community, Loarie says, had caught up with his gut feeling that millions worldwide might one day take advantage of the corneal ring. Additional funding from investors allowed clinical trials to expand. An initial public offering in the summer of 1995 raised $45 million, enough to keep the company going for three or more years. Shares sold initially in the summer of 1995 at $13.50. Then the stock dropped to $9.25, rose to more than $17, and settled at around $15 last November.
Loarie predicts a bright future for the company and its investors, not only because of the qualities of the product and its market potential, but also because during his tenure he has taken great pains to make sure the technology has been patented, thereby limiting competition. Further, he has created a culture at KeraVision that is conducive to success, applying a philosophy that, he says, has guided him through the tough times.
Loarie compares his approach to that of a golfer who, addressing the tee, visualizes the ball landing next to the cup. His strength has been looking past difficulties to the end goal, while recognizing that the route may be changed by unforeseen events.
"Visualization is what you think can happen," he says. "Expectation is really based on the experiences and results you have as you make the journey."