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BLOG: Acquisitions bring new investment, enthusiasm
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The announcement that Johnson & Johnson acquired Abbott Medical Optics for just more than $4 billion was the latest in a series of acquisitions and sales of surgical device companies in the past couple of years.
Many of us remember when AMO was spun off from Allergan nearly 20 years ago. More recently, Alcon was purchased by Novartis, and its surgical business has just recently been segregated as a separate business unit.
So why do large pharma companies take interest in eye care? Market growth is the No. 1 reason. The aging population coupled with high payments for eye technologies, both pharmaceutical and surgical, is appealing to any public company. Look at the profit margins obtained from injected retinal drugs and premium lens implants, and it’s easy to understand this.
As technologies evolve, lines are blurred between surgical and pharmaceutical products. The next wave of retinal drugs may be implanted instead of injected. We will soon have approval of Dextenza, a punctal delivery depot of dexamethasone (Ocular Therapeutix). Is that a drug or a device or both? Even the FDA has trouble deciding. Certainly any pharma company wanting to embark on advanced drug delivery needs to obtain some expertise in surgical devices.
So then why did Abbott sell AMO? Why did Novartis spin off Alcon’s surgical division? It turns out running a surgical device company under the umbrella of a pharma outfit presents some operational and regulatory challenges. The pharmaceutical industry is far more regulated than surgical devices, and the cultures of the sales organizations differ significantly. A giant drug company that sells cancer treatments has a hard time selling premium lens implants. When to buy and when to sell ends up being simply a matter of how enthusiastic the buyer is, how eager the seller is and what price they can both agree on.
For us practitioners, it can be disconcerting to see the tumult of changing ownerships in companies whose equipment we own, products we use and people we trust. But with changing ownership comes new investment and enthusiasm. For our careers, it’s encouraging to see a company as respected as Johnson & Johnson, the world’s most trusted brand in health care, jump with both feet into the specialty that we hold so dear.
Disclosure: Hovanesian reports he is a consultant for Abbott Medical Optics, Alcon and Allergan.