Medical Device Daily Contributing Writer
NEW ORLEANS—The annual meeting of the American Academy of Ophthalmology (AAO; San Francisco), the largest gathering of eye physicians in the world, took place here over the past several days.
There was a plethora of meetings held to update and educate the financial community and media concerning the outlook for their companies as they fight for sector position.
Alcon (Fort Worth, Texas) is the largest, most profitable and fastest-growing amongst the large ophthalmic surgical companies and expected to register about $5.5 billion in global revenue for its fiscal year ending Dec. 31.
Carey Rayment, president/CEO and chairman of Alcon and an 18-year veteran of the company, kicked off the analysts’ meeting, saying that he believes that Alcon should be viewed as a “cornerstone investment.”
He cited several factors to support this, including the attractive market dynamics of the ophthalmic industry, its clear market leadership, its broad, high-quality product line, its commitment to innovation and its superior global presence.
The upshot of these attributes is that “it creates a durable franchise that delivers steady financial results and is positioned for continued growth.”
Indeed, Alcon has delivered, exhibiting impressive revenue gains for many years.
For example, in FY01, the year before it was partially spun off by its parent Nestle (Vevey, Switzerland) and became a public company, Alcon’s sales were about $2.7 billion.
Rayment stressed the company’s strong and ongoing commitment to research, saying that the company “will invest about $3 billion in R&D in the next five years.” Historically, Alcon has spent about 10% to 11% of its sales dollar on this category.
Alcon is also very profitable, with gross margins in excess of 75% and pre-tax margins above 25%. The pharmaceutical division has been a key contributor with a 16.7% compound annual growth rate in the past five years. New glaucoma medications such as TravatanZ and DuoTrav, and strong performances from Vigamox (antibiotic), Nevanac (anti-inflammatory) Patanol and Pataday (anti-ocular allergies) are buoying this division.
Alcon is growing faster than its competitors in most categories that it competes in.
It has also been a stellar performer in the ophthalmic surgical market, which has grown at a compounded annual growth rate in excess of 10% over the past five years, handily exceeding the market’s growth.
Kevin Buehler, the company’s senior VP and chief marketing officer, cited the success of its Infiniti line of phacoemulsification systems (cataract removal) used prior to intraocular lens (IOL) implantation and the broad line of Acrysof IOLs. Both of these categories have been garnering market shares in the past couple of years.
Buehler did note that Alcon has been “disappointed” in the premium IOL market, which has recently stalled at about 5% of the overall IOL market. He acknowledged a variety of “technology challenges” in this segment as patients are sometimes not attaining a quality of vision to justify their five-fold price premium to standard IOLs.
Buehler said that the shortcomings of Alcon’s ReSTOR multi-focal IOLs are being addressed with the introduction of two product line extensions: ReSTOR Aspheric and the ReSTOR IQ.
The ReSTOR Aspheric enables the company to serve the market’s recent preference for asphericity, which tends to increase contrast sensitivity and make vision “crisper.” The ReSTOR IQ has a 3.0 diopter add power lens that moves the near image a bit further out, which will improve intermediate vision. The former is currently available in the U.S., while the latter is in the midst of a short clinical trial and should be available soon.
These two improvements could help Alcon regain momentum in the multifocal IOL space.
Privately-owned Eyeonics (Aliso Viejo, California) has been gobbling up market share recently with the success of its Crystalens Five-O accommodating IOL. It recently reported that its revenue for 3Q07 reached $10 million, more than double that of 2Q07.
At the Eyeonics analyst meeting, several physicians discussed its next-generation lens, the Crystalens HD-100. The goal of this new IOL, likely to be introduced in 2H08, is to provide better near vision, reduce glare and halos and improve or maintain contract sensitivity.
The company completed enrollment of 125 patients in May 2007 and preliminary clinical data, reported at the AAO, appear quite favorable.
Alcon’s share in the U.S. laser vision correction (LVC) market has fallen from the 20% to 25% range a few years ago to about half that share today, a decline primarily reflecting technology issues with its LadarVision product line.
To rectify this problem, Alcon recently completed the purchase of 77% of Wavelight (Erlangen, Germany) and will likely acquire the rest of the company over the next few months.
WaveLight is the third largest laser refractive eye surgery company globally and has outstanding LVC technology. However, its market share is modest worldwide, due to its lack of financial resources and ineffective sales and marketing initiatives.
Buehler was enthusiastic about this deal, saying “it fills a gap in our refractive surgery portfolio.”
While Alcon has struggled in LVC, Advanced Medical Optics (AMO; Santa Ana, California) has thrived. Its share has grown in recent years, benefiting from a strong technology platform that features its CustomVue refractive lasers and its IntraLase ultrafast laser microkeratome, which creates a very precise corneal flap prior to an LVC procedure.
AMO acquired IntraLase in April 2007 for $808 million.
Recently, the National Aeronautics and Space Administration (Washington) approved AMO’s LVC technologies for its astronauts. This decision was made following an extensive review of military clinical data using AMO’s advanced technologies. AMO has also been cleared for all branches of the U.S. military, including Navy and Air Force pilots.
Ron Bache, VP of AMO’s Global Corneal Refractive Surgery business discussed the launch at the AAO meeting of the company’s new LVC branding strategy, which is called iLASIK. It will be promoted as a new, consumer-relevant procedure, one that can only be accomplished with AMO’s advanced LVC technologies. It is aimed at driving adoption of the company’s all-laser platform and helping consumers to deal with the confusion of so many LVC technologies, product names and providers.