Staar Looking at Alternatives

Staar Surgical Co. said Friday that it had hired investment banking firm Morgan Stanley & Co. to “explore a range of strategic and financial alternatives,” raising the prospect that the Monrovia-based maker of vision surgery devices may be up for sale.

The company declined to comment beyond a terse news release. But industry analysts said the move was not a surprise and predicted Staar either would be sold outright or would form an alliance with one of its larger rivals in the ophthalmology industry, such as Rochester, N.Y.-based Bausch & Lomb Inc. or Ciba Vision Corp., a unit of Swiss drug maker Novartis.

“Someone could see a lot of value here,” said Amit Hazan, an analyst with Suntrust Robinson Humphrey in New York. “We know that when you look at Staar, with the stock price where it is, someone will eventually acquire it.”

Staar, which had sales of $50.5 million in 2003, is trying to launch the first surgically implanted contact lens to correct severe nearsightedness but has stumbled in recent years. 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.

Hazan said he believed that the company’s implantable contact lens could eventually be a “blockbuster product” but that the company needed a cash infusion to continue operations.

Staar’s lens received an endorsement from an FDA advisory panel in 2003, but the agency told the company it couldn’t sell the lens until it fixed problems at its factory.

“With all these FDA warning letters, if they sell now, it could be at fire-sale prices,” Hazan said. “I don’t think they want to do that.”

The company’s shares are down nearly 20% in the last year. Staar’s stock rose 25 cents, or 4%, to $6.55 in Nasdaq trading Friday. The company is scheduled to release its 2004 earnings Wednesday.