Disclaimer: This scenario is partially fiction and the details have been simplified for purposes of this caseOptiMedica IntroductionIt was 7:15 pm on Tuesday evening, and Mark Forchette, President and Chief Executive Officer of OptiMedica Corporation, sat at his desk at home, deep in thought. Pop-ups from his Outlook account kept appearing on his computer screen like pop-corn, as emails flooded his inbox, buzzing with the news. He looked over to the name plate on his mantle reading “Mark Forchette, Vice President of Marketing, Alcon” from his job prior to becoming the CEO of OptiMedica. Then he looked at the word “Alcon” in big bold letters on his laptop screen, where a press release announced Alcon’s recent agreement to acquire OptiMedica’s competitor LenSx for $361 million dollars in cash and $368 million in contingent payments. He wondered what the reaction of his employees would be at work the next day and how he was going to manage the questions and concerns of the Board members.History of OptiMedicaOptiMedica Corporation was founded in 2004 by Mark Blumenkranz, MD, and four other innovative Silicon Valley-based entrepreneurs to develop a radically new technology for the treatment ofocular disease. Initially developed at Stanford University, and exclusively licensed to the OptiMedica Corporation, the founders envisioned a company that would bring innovative new technologies to ophthalmologists and improve existing standard of care to provide significant benefits to both physiciansand patients. The OptiMedica team is now composed of seasoned professionals (read bios in the appendix) with wide spread experience in the design, development, production, marketing, and sales of medical laser devices. Additionally, OptiMedica is assisted by a Medical Advisory Board composed of thought leaders and ophthalmology surgeons both in retinal and cataract disease treatment. OptiMedica has received funding from renowned venture capital firms like Kleiner, Perkins, Caufield & Byers, AlloyVentures, DAG Ventures and BlackRock Ventures.PascalOptiMedica was first introduced to the ophthalmology market in 2006 through its first line of products – PASCAL, PASCAL Slim-Line and Streamline, which introduced the application of Photocoagulation techniques to treat a variety of retinal conditions including diabetic retinopathy, age-related macular degeneration, and retinal vascular occlusive disease. OptiMedica has currently sold over750 units across 40 countries globally and holds the exclusive license for the pattern scanning technology. The PASCAL Method is a proprietary, semi-automated pattern generation technique that allows the rapid delivery of 532 nanometer (green) laser pulses in a predetermined sequence. Representing a significant leap forward from single-spot green laser photocoagulation, the PASCAL Method allows physicians to control the precision, safety and efficiency of the photocoagulation procedure by delivering up to 56 spots in 0.6 seconds, while optimizing patient comfort and convenience. CataractCataract surgery is the most common surgical procedure in the US (3.17 million cases annually in 2010).Modern cataract surgery is performed by manually tearing a circular opening in the anterior lens capsuleand then, using a technique termed phacoemulsification, removing the hard nucleus of the crystalline lens with an ultrasonic tip. A synthetic foldable intraocular lens (lOL) is inserted into the eye through a small incision. While successful, manual surgical requirements limit cataract safety and outcomes.OptiMedica has designed a system for laser cataract surgery (LCS) that creates precisely shaped, sized and located incisions in the anterior capsule, lens, and cornea by delivering a focused femtosecond laser beam in a controlled pattern while protecting ocular surfaces such as the iris and posterior capsule. This procedure replaces manual methods with repeatable technique, and increases the surgeon’s architectural and locational control significantly beyond what is possible with manual instruments. This system softens hard cataracts through segmentation where the lens is chopped up into smaller pieces for safer, more efficient removal. Image-guidance mitigates the risk of posterior capsule rupture and reduces the risks of complications (capsule tears, inflammation due to cataract remnants). Combining refractive procedures used in LASIK with premium IOLs, the patients are able to achieve improved visual outcomes. Furthermore, the system will level the playing field for cataract surgeons decreasing the skillsrequired for cataract surgery, potentially enabling a broader group of physicians to provide high quality treatment to treat a growing population of cataract patients. Competition The potential for this technology to revolutionizecataract procedures was realized by three companies –Optimedica, LenSx, and LensAR, all clamoring to shapethe marketplace for laser cataract surgery. LenSx(http://www.lensxlasers.com) is located in SouthernCalifornia and was the first laser cataract surgery system tosecure FDA 510(k) market clearance for sale in the US inLenSx system with physicianlate 2009. The LenSx system uses the same imaging technology (known as OCT, Optical Coherence Tomography) that guides the laser and displays the images in color (unlike its competitors). With strong backing from their panel of cataract surgeons, LenSx successfully showed through their clinical studies treating the most number of patients that lasers significantly improved the outcomes of cataract surgery, made the procedure precise and repeatable, allowing for centering the IOL inserted after the removal of cataract, and reducing complications. Through securing FDA market clearance, LensX’s ability to be thefirst to sell convinced Alcon that this acquisition will be a worthy investment. LensAR (http://www.lensar.com/index.shtml) is situated in Florida and has received FDA 510(k) for onestep of the procedure (cutting the anterior capsulotomy). The LensAR system claims superiority based on the versatility of their system to be used within the Operating Room. LensAR also uses a different imaging system from LenSx and OptiMedica and claims this to be better than the OCT imaging used by their competitors. Despite their FDA clearance, LensAR is considered third in the race due to its focus on presbyopia (where the eye loses its ability to focus), limited features, and an inferior advisory board.