Premier Laser Dispute Sends Stock Tumbling
Premier Laser Systems Inc. said Wednesday that a dispute with a major distributor could force it to lower revenue by $7 million for its last six months. The statement sent the company’s stock price tumbling 20%.
The disagreement with Henry Schein Inc. in Melville, N.Y., centers on dental lasers that Premier said it sold to Schein, but which the distributor says it did not order.
Schein wants to make all sales contingent, meaning that Schein can return any unsold products, said Colette Cozean, Premier Laser’s chief executive. Under the agreement between the two companies, all sales are final, she said.
“We believe that the sales to Schein as a distributor were exactly that--a sell,” she said.
Premier Laser said its previously reported revenue of $7.2 million for its fiscal third quarter ended Dec. 31 would be restated to $4.7 million after subtracting the disputed orders. Its revenue for the fiscal fourth quarter ended March 31, which were expected to total more than $10 million, are now anticipated to be $5.5 million to $6 million, and there will be “a substantial negative effect on net results.”
Premier’s stock fell $1.72 a share to close at $6.97 in Nasdaq trading.
The company rocketed to national attention last year when its dental laser became the first ever to receive federal approval for treating tooth decay in place of painful drilling procedures. Previously, lasers were cleared only for use on soft tissue, such as gums.
In December, Premier entered a marketing and sales agreement with Schein, a direct marketer of health-care products and services with more than $1 billion in annual sales.
Schein had expressed no dissatisfaction with Premier’s products, Cozean said, and had stated a desire for an exclusive arrangement. Last month, the two companies expanded their agreement to include overseas sales. At a recent dental industry meeting, the two companies booked more than $500,000 in orders for the lasers, she said.
“This situation is extremely puzzling and frustrating for us,” she said.
Premier said it might take legal action against Schein if the differences aren’t resolved. After discussions broke apart Tuesday, the two companies said Wednesday that they might meet again to try to break the impasse.
In a prepared statement, Schein Chief Executive Stanley M. Bergman said he was “quite perplexed by these recent events.”
Schein said it did not issue a purchase order for the Premier lasers in question, and Premier did not send an invoice for the products. It said it would vigorously defend itself against any legal actions.
Premier said that if the situation with Schein could not be worked out, it would move quickly to set up other distributors.
Analyst William Relyea at Josephthal & Co. said the delay might bite into Premier’s results for its fiscal first quarter, which ends June 30.
But Relyea believes Premier’s long-term prospects remain bright. In addition to its line of dental lasers, the company also sells ophthalmic lasers and has other products under development, he noted. It also has $25 million in cash, a sizable cushion against short-term setbacks.
“We’re not talking about any problem of survivability,” he said. “They are very well prepared to go forward with very little change in any of their major programs as a result of this.”
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Laser Slide
Premier Laser’s shares fell 20% Wednesday as the company said it may restate fiscal third-quarter revenue because of a dispute over $7 million worth of dental lasers. Weekly closing stock prices and Wednesday’s close:
Wednesday’s close: $6.97
Source: Bloomberg News
