BBI Contributing Editor

BOSTON, Massachusetts – Attendees at the annual meeting of the American Society of Cataract and Refractive Surgeons (ASCRS; Fairfax, Virginia) here in May were overwhelmed with dramatic corporate and technology developments. On the highest level of this booming ophthalmic industry, a massive consolidation of power is taking place as the top three companies pursue mergers and acquisitions to increase their size and market dominance. This process has resulted in a Big Three atop the industry: Alcon (Fort Worth, Texas), Allergan (Irvine, California), and Bausch & Lomb (B&L; Rochester, New York). Each of these companies realize annual ophthalmic revenues far in excess of $1 billion, with Alcon clearly the leader at an estimated $2.5 billion sales of eyecare products this year.

The most active rumor during ASCRS involved the acquisition of Summit Autonomous (Boston, Massachusetts) by Alcon. This was confirmed late in May, when Alcon announced plans to acquire all of the outstanding Summit stock at $19 per share. This translates into nearly $900 million and rates as one of the largest acquisitions in the ophthalmic industry. Alcon had been searching for a strategic acquisition for several years and nearly bought Chiron Vision two years ago. However, B&L outbid Alcon, leaving that company without a refractive surgery product line in the midst of an enormous growth market for vision correction technology. Alcon had previously been the marketing partner for VISX (Santa Clara, California), now the largest refractive laser company in the world, until a legal dispute and shareholder lawsuits split up this tenuous relationship.

Alcon's longtime industry rival Allergan addressed its shortcomings in the refractive area by adding a microkeratome product, which was debuted at the ASCRS meeting. This eye care company also formed a marketing alliance with VISX. Apparently, Allergan will bundle its products and services with Visx excimer lasers to offer customers package deals and financing. Allergan attempted a similar partnership with Summit Technology (now renamed Summit Autonomous) several years ago prior to FDA approval of excimers for vision correction. That venture quickly dissolved for a number of reasons, including a corporate culture clash and Allergan's inherent difficulty with selling surgical equipment vs. soft products and pharmaceuticals.

With these three mega-sized suppliers offering package pricing and other customer incentives, it may be increasingly arduous for small, independent excimer laser and refractive surgery equipment manufacturers to compete. Other companies attempting to sell refractive systems or enter the U.S. refractive laser market in the near term include: Asclepion-Meditec (Jena, Germany), LaserSight (Orlando, Florida), Nidek (Fremont, California), KeraVision (Fremont, California), Sunrise Technologies (Fremont, California), Schwind (Kleinostheim, Germany), and WaveLight Laser Technologie (Erlangen, Germany).

Of these smaller players struggling to gain a foothold in the refractive business, KeraVision, LaserSight and Nidek are the only companies with FDA marketing clearance for their devices. KeraVision sells a $45,000 package for implanting Intacs corneal rings. These devices, which cost about $500 each, are only approved for correcting very low levels of myopia and astigmatism. In the first year following FDA clearance, the company reported that a total of 2,000 Intac procedures were performed. (By comparison, the average refractive surgeon performs 2,000 LASIK procedures each year.)

LaserSight is hampered by limited FDA approval of its excimer, which currently excludes treatment of astigmatism and the use of an eye tracker to position the laserbeam. As a result, U.S. sales in the first few months following approval totaled less than 20 systems. On the other hand, Nidek has full FDA clearance for all treatments with its excimer laser. Unlike its U.S. competitors, this company also waived per-procedure users fees (others charge $100 to $150 per use). Market response to this policy was dramatic, and consequently Nidek will sell more lasers than any other competitor this year.

WaveLight, one of the newest and smallest players, recently forged a strategic alliance with Coherent Medical Group (Santa Clara, California) to strengthen its global position. Initially, Coherent will distribute WaveLight's innovative Allegretto excimer laser system in Europe, Asia, and Latin America. This laser is undergoing clinical studies in the U.S. toward FDA approval, and industry observers expect Coherent to eventually acquire WaveLight and sell these lasers domestically as well. However, the patent issues that have deterred Coherent – the largest ophthalmic laser manufacturer in the world – from participating in the U.S. market remain unresolved.

At this point, Alcon and VISX hold the dominant laser vision correction U.S. patent portfolios but have not been successful with licensing or blocking the entrance of new competitors (including B&L, LaserSight and Nidek). Nevertheless, Coherent management has historically shown a strong aversion to patent battles – even if they are excluded from their greatest potential market. Coherent, which reports more than $100 million in annual ophthalmic laser revenues, estimates worldwide sales of refractive lasers at $300 million this year.

Meanwhile, many small companies which continue to enter the market and push innovative technologies colored the ASCRS show. Relatively low barriers to entry in various ophthalmic market segments, combined with a high level of acquisition activity in the industry, continually encourages entrepreneurs to promote new ventures. Several of these promising startup companies were featured at the Refractive Technology Forum held during the ASCRS convention. Sponsored by Medical Insight (Mission Viejo, California), this forum provided a venue for a dozen companies to discuss their technologies and future products.

One of the hottest (and most controversial) topics discussed at the forum, and at ASCRS, involves the trend toward commercializing new wavefront analysis technology. Numerous ophthalmic equipment manufacturers are promoting these devices, which are designed to measure minute optical aberrations in the eye. Supposedly, this data will then be used by excimer laser systems to perform highly customized corneal ablations for vision correction. Both manufacturers and refractive surgeons are excited about the potential of wavefront technology for improving clinical results. However, full development of an integrated diagnostic and treatment system will take months or years. So the real interest at this point is mostly in marketing. Excimer manufacturers want to show customers their technology leadership, and sell stand-alone wavefront diagnostic systems for a premium price.

Likewise, surgeons hope to gain a competitive advantage with LVC patients by offering the latest refractive diagnostic device that will encourage them to undergo LASIK surgery. As an example, a patient can look into the VISX WaveScan unit and view a perfect image of an eye chart – as they would see it if they had all optical aberration removed from their vision. Obviously, this type of front-end patient screening system could be a powerful sales tool for LVC providers.

Other companies exhibiting their unique versions of wavefront analysis technology at the ASCRS show included Summit Autonomous with the FDA-approved CustomCornea system; Zeiss Humphrey Systems (Dublin, California); Bausch & Lomb's Zyoptix device, which provides 3-D imaging of the eye using wavefront analysis combined with corneal topography; Asclepion's WASCA (wavefront aberration supported corneal ablation); and Nidek's AK-1000 sophisticated auto-refraction system.

According to the ASCRS, which represents the largest number of ophthalmic surgeons in the world, there are some 3,400 active refractive surgeons in the U.S., and over the past five years, some 1.5 million Americans have undergone refractive surgery for vision correction. Some 800,000 of these patients were treated with the LASIK procedure, which involves the surgical creation of a corneal flap, followed by excimer laser tissue ablation. LASIK is now the most popular vision correction surgical technique in the world.

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