A group of former LCA-Vision (LCAV; Cincinnati) executives wants to save the company from its "current path to self-destruction," according to recent letters the group sent the board. The board responded last week with a letter to the group, saying it is concerned about the company's recent operating results, but that it disagrees with the group's description of the company's condition as "dire" or its prognosis as "poor."

The stockholder group includes Stephen Joffe, MD, Craig Joffe and Alan Buckey, who recently filed a Schedule 13D – commonly referred to as a "beneficial ownership report" – with the Securities and Exchange Commission, disclosing ownership of 11.4% of LCAV. The company operates 77 LasikPlus fixed-site laser vision correction centers in 33 states in the U.S.

Stephen Joffe is the founder and former CEO/chairman of LCAV. His son Craig is the former COO/general counsel, and Buckey is the former executive VP of finance/CFO of the company.

According to the group, the three of them worked together as the executive management team of LCAV to grow the market capitalization of the company well in excess of 1,000% from 2003-2006.

"Our history with the company is, of course, very deep and has both financial as well as emotional components to it," Craig Joffe told Medical Device Daily.

Craig said that he, his father and Buckey decided to take action after they were approached by "a bunch of physicians in total despair in the current management of the company." He noted that the company's physician compensation model is variable such that their compensation increases as their business does well.

"[The physicians are] on the frontlines ... they're in the trenches, they're seeing the effects of what's been happening," Craig said. "This isn't just some kind of a disgruntled external party rattling the cage ... the key employees at the company, including the ophthalmologists, have been saying ... the same thing."

In its recent letters, the group appears to be placing a large amount of blame on the board's appointment of CEO Steve Straus in November 2006. The group noted that the company's stock price has dropped roughly 90% since Straus was appointed CEO.

Other signs of the company's "dire" conditions outlined in the letter include the elimination of the quarterly dividend to shareholders, the suspension of the share repurchase program, and dramatic losses in national market share and revenues plummeting 50%. "The status of the company today from its recent successes tells a sad tale. So, too, do the company's financial and operating results," the group wrote, noting also that LCAV is burning about $2 million of cash a month.

In a Dec. 4 letter to the company's board, the group said it was "perplexed" by the board's failure to solicit its help in saving the company from its "current path of self-destruction." The men went on to request board representation and reappointment to executive management positions in the company.

The board responded in its letter last week by reminding the group that each of them voluntarily resigned from their previous positions at the company to pursue "alternative personal or business objectives."

"It seems to the board for you to request such appointments is disingenuous after previously abandoning the company," the board said.

This disagreement between LCAV's board and this particular group of stockholders comes at a time when the ophthalmic surgery community has been hit hard by the current economic environment. Practices that do a lot of consumer-paid refractive surgery procedures, such as LASIK, have been particularly impacted. Some areas of the U.S., especially the east and west coasts, have been reporting that LASIK volume is down 40% to 50% compared to last year (Medical Device Daily, Nov. 11, 2008).

"As in prior economic downturns, a decline in consumer confidence and discretionary spending has adversely affected the company's performance. The company has adopted and is implementing a business plan, including the actions described in its recent SEC filings, which the board believes are appropriate during the current difficult economic situation," the board's letter stated.

That plan includes a stockholders' rights plan, which LCAV reported late last month.

"The rights plan does not prevent a takeover, but is intended to ensure that LCA-Vision's stockholders receive equal treatment in the event of any proposed takeover, and to guard against tactics that could impair the board's ability to represent stockholders' interests fully," CEO Steve Straus said in a company statement. The plan is similar to rights plans adopted by many other publicly traded companies, LCAV noted.

While the stockholder group acknowledges that macroeconomic, industry and consumer challenges have "created a headwind for the company" it argues that "much of that dramatic loss in shareholder value is self-inflicted – as a result of, and attributable to, lack of strategic direction, poor decision-making, and even poorer execution," by LCAV's board and management.

"We're not going to tell you that the economy and consumer issues don't affect the business – they do. But we think a very objective place to look is market share," Craig told MDD.

The board also told the group that its "recent letter-writing campaign has become a distraction to executing our strategic plan. Thus, we do not intend to respond to your letters individually, as they tend to repeat certain themes with which we don't agree."