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Aging baby boomers drive mergers in ophthalmic industry
Recent sales and collaborations have put several companies in a position to take advantage of opportunities presented by the aging demographic.
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The baby boomer generation continues to make its mark on all aspects of society, not least the ophthalmic business market. According to industry experts, this group, the generation born after World War II, is one of the motivators behind a recent series of acquisitions, mergers and collaborations in the ophthalmic industry.
“The baby boomer has a huge impact everywhere they go in society. This impact is going to be felt everywhere, in every eye doctor’s office. It’s going to be big,” Shareef Mahdavi, a marketing consultant in the ophthalmic industry, told Ocular Surgery News. An increase in the age of the population is taking place in many countries of the industrialized world as the baby boomer generation ages. Several companies in the ophthalmic industry appear to be preparing for this bolus of older patients through mergers and collaborations.
“The first of 78 million [U.S.] baby boomers will reach 60 years of age soon, and what we see is that as people age, their eye care needs increase, not decrease, and that’s across the spectrum, whether it’s cataract surgery, glaucoma, age-related macular degeneration. Clearly with that as the dynamic, there is a lot of interest both within ophthalmology and from other health care companies … looking in and looking at ophthalmology and eye care as an opportunity for them to either enhance their portfolios or grow,” Mr. Mahdavi said.
Spate of activity
The past year has seen a spate of notable mergers, sales and collaborations in the ophthalmic industry, capped off by the announcement in November of Advanced Medical Optics’ acquisition of Visx Inc. in a stock and cash transaction worth US$1.27 billion. With this acquisition, AMO expanded its portfolio of refractive technologies with the addition of Visx’s Star excimer laser franchise and CustomVue system.
The purchase continued an expansion that AMO began in April when the company added the Healon line of viscoelastic products, the CeeOn and Tecnis IOLs and the Baerveldt glaucoma shunt to its portfolio through the purchase of Pfizer’s surgical ophthalmology business, which had previously been developed by Pharmacia.
Other transactions in the past year have included two expansions by Carl Zeiss Meditec: the company’s purchase of Laser Diagnostic Technologies and its offer to buy a majority of shares of IOLTECH.
IOLTECH had earlier in the year purchased parts of CIBA Vision’s ophthalmic surgical business, notably the company’s phakic presbyopic IOL. CIBA’s epikeratome device for epi-LASIK was sold to Norwood Abbey of Australia.
Also in the news in late 2004 was the approval of Macugen (pegaptanib sodium injection, Eyetech Pharmaceuticals, Pfizer), a product not of a merger but of a collaboration between Eyetech and drug giant Pfizer.
All of this activity suggests that companies are positioning themselves in the market to provide for the needs of older eye care patients by diversifying to target a variety of eye problems.
A logical step
AMO’s purchase of Pfizer’s surgical business gives the company the Tecnis monofocal and multifocal IOLs. The Tecnis multifocal, together with the Array multifocal already in AMO’s portfolio and other presbyopic products the company has in development, gives AMO a number of surgical modalities for addressing presbyopia.
Visx president and chief operating officer Doug Post commented on these opportunities when his company merged with AMO, combining their laser and IOL franchises.
“Presbyopia has been attractive to many companies for a long time. We believe going forward it may be a combination of those two technologies that offers a broad presbyopia solution,” Mr. Post said in an interview last year with Ocular Surgery News.
According to some market analysts, mergers like this one exemplify a trend in market consolidation in which companies are attempting to diversify their operations in a market that is rapidly evolving.
“You’ve seen the whole sector in ophthalmology companies have such great growth opportunities the last 18 to 24 months and still have good secular growth, and you are seeing these companies combine so they more effectively tackle those market opportunities on a global scale,” said Chris Cooley, a market analyst for FTN Midwest Research, in an interview.
Market evolution
The recent activity in the ophthalmic market marks the concurrence of several events: an improvement in the global economy after a period of downturn, a resulting resurgence of interest in refractive surgery and the arrival of the first wave of baby boomers into their 60s. This demographic group is at the beginning of a period when its eye care needs will increase, starting with the onset of presbyopia and continuing with age-related increases in cataract, glaucoma and age-related macular degeneration.
These developments also coincide with an upswing in the business cycle that hits the medical technology market every 4 to 5 years, according to industry analysts.
“Companies that have basically gone from concept to commercialization of their early-stage technology are companies that are reaching the end of an existing growth period needing some new products or new markets to address, and they go out and acquire growth,” Mr. Cooley explained.
“What we are seeing right now is a consolidation in a market, which for the most part is very fragmented, and we are also seeing companies who have either a stock price or cash in their pocket to be able to make the acquisitions that they are doing,” said Joanne Wuensch, an analyst for Harris Nesbitt.
Ms. Wuensch, who has been covering the medical technology market since 1996, explained that the market goes through a recurrent pattern of consolidation and pause.
As she described it, Pharmacia was in ascendance in 2000 when it merged with Monsanto to create a company with a reported market capitalization of more than $50 billion. Then Pfizer bought that merged company in 2003.
Research and development
The industry appears again to be reaching a stage of growth in which developments in pharmaceuticals and technologies are arriving just in time to meet the demands of one of the largest group of consumers the industry has known.
Research and development activities are high priorities for the newly merged ophthalmic entities as they take their early post-merger steps, according to Mr. Mahdavi.
“Chronic diseases such as glaucoma and macular degeneration are going to have huge incidences in the [aging] population, so you are going to see a lot of dollars being spent on trying to come up with solutions in those areas, whether they are pharmacological, surgical or what I call consumable,” he said.
“I think you are looking at a 20- to 30-year tailwind,” he said.
Presbyopia developments
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Dan McWard is vice president of the relatively new company Visiogen, but he has been in the ophthalmic industry for many years and has seen it from a number of perspectives. In his current position, he is keeping watch on the market from the perspective of developments in the anterior segment of the eye. Visiogen is developing the Synchrony dual-optic accommodating IOL, potentially to serve the growing population of presbyopes. Presbyopia is becoming a major force for direction and change in the market, Mr. McWard said.
“People will go into this whole presbyopic category, and that will go on for a good 20-some years. It has become another very large market,” Mr. McWard said in an interview with Ocular Surgery News.
Many have noted that ophthalmology is experiencing a melding of cataract and refractive surgery, and the development of multifocal and accommodative IOLs to address presbyopia is one element of this trend, he said.
In addition to his own company’s Synchrony IOL, Mr. McWard said, there are several other new IOL products available or in development that would be appropriate for correction of presbyopia through refractive lens exchange. The Crystalens accommodative IOL is available from eyeonics. AMO has the Tecnis and ReZoom multifocal IOLs in the pipeline, in addition to its existing Array lens. Alcon has the ReStor apodized diffractive pseudoaccommodative IOL in development.
These and other products help to expand the surgical possibilities of the IOL beyond the correction of cataract, Mr. McWard said.
AMD developments
Dan Myers, president of the recently formed Alimera Sciences, is another veteran of the ophthalmic industry who has worked in a number of companies, including IOLAB, Allergan and CIBA Vision. His current company developed Soothe over-the-counter eye drops, aimed at the increasing numbers of dry eye patients.
Mr. Myers said he sees tremendous potential for growth in the ophthalmic pharmaceutical market.
“Drug delivery and the ability to get drugs to the back of the eye has attracted a new group of investors,” Mr. Myers said.
Pfizer went in this direction last year when it sold its ophthalmic surgical operations, which mostly pertained to anterior segment disease, to AMO, and shifted its ophthalmic focus to pharmaceutical developments for the back of the eye.
In an interview with Ocular Surgery News last year regarding the sale, Pfizer’s chairman and chief executive officer, Hank McKinnel, said, “This agreement is an ideal strategic fit for AMO and allows Pfizer to enhance its focus in other areas of ophthalmology, such as … macular degeneration.”
Dr. Meyers said, “Drug delivery is going to continue to be a key issue. I think we are going to see more and more research and work in the back of the eye as the population ages. “I think we still have a lot of exciting things to look forward to.”
Other drugs in the pipeline for the treatment of AMD include Photrex (rostaporfin, Miravant Medical Technologies) for photodynamic therapy, Lucentis (ranibizumab) from Genentech, Retaane (anecortave acetate) from Alcon and squalamine from Genaera.
The changes in the ophthalmic industry do not stop with mergers and acquisitions. The variety of opportunities for research and development, coupled with the consolidations of larger companies and an improving economy, present room for small startup companies, such as Alimera Sciences, Mr. Myers said.
“While big pharma may have huge opportunities in the back of the eye, … there are still a lot of opportunities to bring better drugs to patients in the anterior segment, better ways to bring delivery of compounds to the eye,” Mr. Myers said.
For Your Information:
- Chris Cooley can be reached at FTN Midwest Research Securities, 1301 East 9th St., Suite 3232, Cleveland, OH 44114-1824 U.S.A.; +1-216-592-1965; e-mail: chris.cooley@ftnmidwest.com.
- Joanne Wuensch can be reached at Harris Nesbitt , 3 Times Square, 28th Floor, New York, NY 10036 U.S.A.; +1-212-883-5115; e-mail: Joanne.Wuensch@harrisnesbitt.com.
- Dan Myers can be reached at Alimera Sciences Inc., 6120 Windward Parkway, Suite 290, Alpharetta, GA 30005 U.S.A.; +1-678-527-1321; e-mail: dmyers@alimerasciences.com.
- Shareef Mahdavi can be reached at SM2 Consulting, P.O. Box 5505, Pleasanton, CA 94566 U.S.A.; +1-925-425-9963; fax: +1-925-425-9900; e-mail: shareef@sm2consulting.com.
- Dan McWard can be reached at Visiogen Inc., 4 Jenner St., Suite 180, Irvine, CA 92618 U.S.A.; +1-949-341-0700; e-mail: dmcward@visiogeninc.com.
- Doug Post can be reached at 3400 Central Expressway, Santa Clara, CA 95051 U.S.A.; fax: +1-408-773-7278.
- Jared Schultz is an OSN Staff Writer who covers all aspects of ophthalmology. He focuses geographically on Europe and the Asia-Pacific region.