Nov 24 2007
At the recent AAO conference in New Orleans, eye care firms Alcon ACL and Advanced Medical Optics EYE showcased their latest implantable lenses and Lasik technologies.
Much of the buzz centered on intraocular lenses, which are most commonly used to treat cataracts. During cataract surgery, doctors replace blurred lenses with artificial ones to help focus light. Patients usually end up with great daytime vision, but poor results at night.
New technologies such as Advanced Medical's Tecnis line of intraocular lenses help the quality of night vision by improving an eye's contrast sensitivity, says Dr. James Salz, clinical professor of ophthalmology at the USC School of Medicine.
"This makes it easier to see freeway signs at night -- white letters against a green background," he said.
As lens technologies improve, surgeries should become more popular. Bear Stearns analyst Rick Wise estimates that refractive intraocular lens surgeries will account for $133 million in U.S. sales this year, up from $109 million last year. He sees revenue climbing to $155 million in 2008, $169 million in 2009 and $183 million in 2010.
This intraocular lens approach will make up 5.2% of the 2.88 million eye procedures done in the U.S. this year, Wise says. That's up from 4.3% in 2006. Wise sees these lenses accounting for 6.7% of all procedures by 2010.
Alcon dominates the U.S. market with more than a 50% share. Advanced Medical holds 25% of the market, followed by privately held Eyeonics with just shy of 25%.
Outside the U.S., Wise sees the intraocular method accounting for 6% of the 2 million eye procedures this year. He expects flat growth through 2010. Alcon controls nearly three-quarters of the non-U.S. market. Advanced Medical has 26% and Eyeonics 1%.
Financially, Alcon consistently turns out double-digit sales and profit growth. Its shares are up more than 25% for the year.
Advanced Medical hasn't fared as well. It has lost money three of the last four quarters and hasn't grown the bottom line since September 2006. Its stock is down about 32% for the year.
At the eye conference, Alcon discussed its newer implants: the ReStor Aspheric and the ReStor IQ 3.0 lenses.
Cataract surgery using old-style artificial lenses corrects for distance vision, but leaves patients still relying on reading glasses or bifocals for reading. Alcon's ReStor IQ helps patients read more easily, while its ReStor Aspheric -- like rival product Tecnis -- increases contrast sensitivity.
Rather than stealing share from each other, the companies are converting doctors and patients familiar with their older technologies.
The lenses are increasingly cannibalizing their own market share, said analyst Peter Bye of Jefferies & Co. "Overall Alcon is gaining share in the market, but they were doing that prior to the (new) aspheric designs."
To the average eye doctor not involved in clinical trials, there's little to differentiate the two product lines.
BMO Capital Markets analyst Joanne Wuensch cites a study that compared Advanced Medical's Tecnis lens and Alcon's ReStor lens. It found no statistical difference between the two when it comes to glares and halos, which are the colored circles that appear around a light.
Meanwhile, on the laser vision correction front, Lasik has become the standard. Top golfers such as Tiger Woods and seven other PGA Tour winners this year have had Lasik surgery to correct their vision and strengthen their game.
This fall, NASA agreed to accept astronauts who've used Lasik. Unlike the old-style radial keratotomy (RF) surgery, Lasik won't lead to dislodged eye flaps while in space, the agency says.
Still, U.S. procedure volumes in the second half of 2007 suggest year-over-year declines.
"Some say reduced volumes are caused by (lack) of consumer confidence. Others say it's (patient) fear," Bye said. "Everyone has a theory but no one knows. We were in healthy economic cycles in '05 and '06, but U.S. volumes didn't really increase then, either."
He says it's hard to predict whether this year's Lasik weakness will extend into 2008. In the past eight years, volumes have never surpassed 1.4 million procedures a year.
"Contact lenses stayed at 18% to 20% (penetration) for 16 years," Bye said. "Maybe this is the level where Lasik will remain. It's a small segment, but highly profitable."
Bye sees Lasik bringing in $825 million in 2007 global revenue for manufacturers. Advanced Medical dominates with 50% share.
Alcon has 15% to 18%. It recently enhanced its market position when it bought 77% of German company Wavelight.