AMO accelerates changes to improve positioning, increase efficiency

The company had already planned to discontinue “non-core” products and increase its investment in its refractive surgical line. Now these changes will happen faster.

Issue: December 15, 2005

ByJared Schultz

Advanced Medical Optics is accelerating its plans to discontinue some surgical and eye care products and increase its emphasis on its refractive surgical product line, the company announced.

The timeline for this rationalization and repositioning, originally laid out 3 years ago when the company spun off from Allergan, has been accelerated “in order to maximize AMO’s competitive advantage as the global refractive leader” and to better leverage its cataract, refractive and eye care brands, the company said in a press release.

The completion target for the changes, originally proposed for the latter half of 2006, has been moved up to the end of 2005, the press release said. The company is “discontinuing all non-core cataract and eye care products and eliminating non-core assets related to these products” by year end, according to the press release.

James V. Mazzo [photo]
James V. Mazzo

“This isn’t anything new that we haven’t already been doing. We’ve just decided to accelerate it,” said James V. Mazzo, AMO’s president and chief executive officer, in a telephone interview with Ocular Surgery News. “I think if anything ophthalmologists will be pleased with the acceleration because ophthalmologists want to deal with the latest and greatest of technologies.”

As part of the changes, older IOL models such as the SI30, SI55 and CeeOn will be discontinued, as will a number of hydrogen-peroxide-based contact lens products; manufacturing facilities acquired in the company’s purchases of Pfizer ophthalmic products and the laser manufacturer Visx will be brought in line with AMO’s lean manufacturing strategies to maximize efficiency; and the company’s investment in its refractive surgery line will be increased, company officials said.

With the new timeline, Mr. Mazzo said the company hopes to take better advantage of recent developments such as the ruling from the Centers for Medicare and Medicaid Services that allows Medicare patients to pay privately for presbyopia-correcting IOLs. One of the three IOLs currently covered by the ruling is AMO’s ReZoom multifocal.

Mr. Mazzo also said that the completion of the Visx acquisition and the expiration of noncompete agreements with Allergan have opened up opportunities in the laser vision correction and dry-eye markets.

“To seize these key opportunities, we have decided to put the distraction of the rationalization and repositioning be- hind us and focus our global resources on the big growth drivers, our R&D investment on the truly innovative products and our operations on maximum efficiency,” Mr. Mazzo said.

“We are a far stronger company than we were 3 years ago, with the technology, the brand, the cash flow and the balance sheet to take advantage of the multiple growth opportunities now before us,” he said during a telephone conference call discussing the company’s plans.

Also during the conference call, Randy Meier, AMO’s chief financial officer, said the company is targeted to grow about 11% in 2006, but the acceleration of the rationalization will lead to a reduction in revenue.

According to Mr. Meier, the acceleration of the rationalization and repositioning will mean an overall loss of $10 to $15 million in revenue. This, in addition to an original loss estimate of $25 to $30 million from annualizing Visx and AMO revenue in 2005, will increase the expected revenue loss to $30 to $40 million. However, this will be compensated through additional sales from key products, he said.

“We are comfortable doing this because we have confidence in the sales potential of our new product and the continued strength in our promoted product,” Mr. Meier said in the conference call.

Focus on refractive surgery

Mr. Mazzo called AMO’s increased focus on refractive surgical products the linchpin of the company’s strategy. In particular, he said, the CMS ruling will increase U.S. demand for refractive IOLs.

“We see 2006 sales for our refractive implants, including ReZoom, Tecnis multifocal and our phakic IOL, the Verisyse, to be in the range of $45 to $55 million,” he said during the conference call.

With this growth in mind, the company is devoting more resources to the marketing of these products in 2005 and 2006, Mr. Mazzo said. This will include devoting more money to research and development and increasing the number of refractive IOL specialist product representatives calling on physicians.

“Informed by our years of experience with multifocals, we focus our ReZoom selling efforts specifically at doctors who perform both cataract and LASIK procedures,” Mr. Mazzo said.

In addition to the ReZoom, which was launched in the United States in July, the company is also targeting the U.S. introduction of the Tecnis multifocal, which is already in use in Europe and the Asia-Pacific region, for late 2007.

The company is also anticipating that half of the active U.S. Visx Star S4 laser systems will be upgraded to include iris registration by the end of the year, with the rest to be upgraded by the spring of 2006.

Mr. Mazzo said global placement of new laser machines in the third quarter of 2005 was up 56% compared with the placement of the machines by Visx during the same period in 2004.

He said the company is switching from use of distributors to direct sales in countries including Canada, Germany, Austria, Spain, Taiwan and Korea.

“This progress underscores our conviction that we can replicate a procedure-based model in targeted international markets and strengthens our confidence in the fundamental role laser vision correction plays in AMO’s strategy to be the surgeon’s complete refractive choice,” Mr. Mazzo said during the conference call.

For Your Information:

James V. Mazzo, president and chief executive officer of Advanced Medical Optics, and Randy Meier, chief financial officer of Advanced Medical Optics, can be reached at 1700 E. St. Andrew Place, Santa Ana, CA 92705; 714-247-8200; fax: 714-247-8402.

Jared Schultz is an OSN Staff Writer who covers all aspects of ophthalmology. He focuses geographically on Europe and the Asia-Pacific region.