HAIMOVITCH MEDICAL

TECHNOLOGY CONSULTANTS

 
 

Private ophthalmic companies make their pitches to receptive audience


By Larry Haimovitch

Medical Device Daily Contributing Writer

January 16, 2013

SAN FRANCISCO — Private companies continued to be of great interest at this conference and one of the most keenly anticipated presentations was from Bausch + Lomb (B + L; Rochester, New York). B + L, which was founded in 1853, is one of the oldest continuous operating companies in the U.S. and has one of the best-known health care brands in the world.

B +L was a public company for many years until it was acquired and taken private by private equity firm Warburg Pincus (New York) in October 2007 for $4.5 billion (Medical Device Daily, Oct. 29, 2007).

Prior to its acquisition by Warburg, B + L had suffered myriad setbacks and was floundering. It had fallen behind its competitors in many of its key markets. Since Warburg took control in late 2007, numerous changes have been made and the company has regained its momentum. Brent Saunders, who became CEO nearly three years ago, characterized the company’s performance at last year’s conference as a “profound transformation” from its beleaguered past. This year, he made a compelling case that the company is now thriving.

Bausch + Lomb is a “160 year old iconic brand that is the only global company solely focused on caring for the world’s eyes,” Saunders said. His company participates in a global eye care market estimated by McKinsey & Co. (San Francisco) at approximately $36 billion in 2011. McKinsey forecasts steady growth in this market to $48 billion by 2017. The largest sector is pharmaceuticals, which currently accounts for roughly 58% of the total, while vision care (includes contact lenses and lens care) and surgical products account for roughly 24% and 18% respectively.

Having turned B + L around, Saunders said that his company is now in the “accelerate phase” of it life cycle and in his opinion has become an “exciting, sustainable growth story.” Estimated financial results for the company, which were provided here and at last year’s JP Morgan conference, are presented below.

Bausch + Lomb Operating Results 2007-2012

($s in millions)

                                            Revenue                        Gross Margin                  EBITDA

                    2012                 $3050                                  63%                            $640

                    2011                 $2850                                  62%                            $548

                    2010                 $2570                                  60%                            $472

                    2009                 $2510                                  59%                            $410

                    2008                 $2480                                  58%                            $389

                    2007*               $2449                                   58%                            $375

                    *Estimated by Medical Device Daily

Its highly profitable and “double digit growth” pharmaceutical business, which accounts for about 42% of its worldwide sales, was bolstered by the mid-2012 acquisition of ISTA Pharmaceuticals for $500 million in cash. Saunders described the pharmaceuticals business as the “locomotive for growth” and added that “the combination of our two companies has been an excellent strategic fit. It has been accretive from day one.” The acquisition also immediately added several strong brands to the B + L pharmaceutical portfolio.

Bausch’s Vision Care unit, accounting for 41% of sales, is “back in the game, and growing nicely” according to Saunders. A key addition to its product line is Biotrue ONEday, a premium daily disposable contact lens, which was approved in the U.S. in mid-2012. Biotrue ONEday is made from HyperGel, an innovative, next generation of daily disposable material that Saunders termed a “biomimetic material.”

“It has the best features of conventional hydrogels and silicone hydrogels,” he said.

The Surgical Division, which accounts for only 17% of global sales, has been hampered in the past with a mediocre product portfolio and management turnover, made major strides in 2012. He cited the new enVista intraocular lenses (IOLs), which are “the only FDA approved glistening-free IOLs,” as an example of innovation in that unit.

Saunders is also very ebullient about the prospects for its VICTUS laser, which will be  acquired with the purchase of Technolas Perfect Vision (Munich), a leading ophthalmology laser company. This deal is expected to close in the next few weeks.

This acquisition brings femtosecond (FS) laser technology to B +L, allowing it to enter the burgeoning FS laser-assisted cataract surgery (FLACS) market. Saunders described this product as “best in class” and said that FS lasers represent a “huge advancement” in the field in cataract surgery. Indeed, in October 2012, the Cleveland Clinic cited FLACS as one of the “Top 10 Medical Innovations for 2013.”

B +L has been in the news of late, with several rumors that Warburg has put the company up for sale. Following his presentation here, Saunders told reporters that his company is "aspiring to return to public markets." Additionally, he declined to comment on reports that Warburg is looking for buyers willing to pay more than $10 billion for the eye care company.

Privately-owned, venture capital-backed OptiMedica (Sunnyvale, California), presenting for the first time at this conference, is a pure play in the FLACS market and is showing robust growth since shipping its first Catalys system in late-February 2012. CEO Mark Forchette said that this was an “incredibly exciting time” for his company, now that it is fully commercialized. He proudly pointed to the installation of more than 40 systems, which MDD estimates were sold for about $0.5 million each. In, addition, this installed base performed over 10,000 procedures, which are priced to the cataract surgeon at about $375 per procedure.

Based in Silicon Valley, OptiMedica’s system features several unique and “high tech” features that enable its FLACS procedure to be “an order of magnitude” more precise than conventional, manual cataract surgery. He cited clinical data showing that OptiMedica’s device performs a capsulotomy (removal of the natural lens) far more precisely than a manual procedure and even better than its FLACS competitors. These include the LenSx laser from the Alcon (Fort Worth, Texas) division of Novartis AG (Basel. Switzerland) and the LensAR system from privately-owned LENSAR (Orlando, Florida), who are also FDA-approved for sale.

Forchette, an ophthalmic industry veteran, noted that there were nearly 20 million cataract procedures performed worldwide in 2012 and that this creates a FLACS market opportunity that he believes will ultimately exceed $1 billion. In addition to the opportunity to replace manual cataract procedures with FLACS, Forchette noted several other allied areas where his company might prosper. These include:

  1. As a centerpiece of a new ultrasound-free “no phaco” procedure

  2. New IOL designs synergistic with precisely machined capsulotomies

  3. Viscoeleastics optimized for no ultrasound use

  4. New irrigating solutions and concepts

  5. Disposable, packs and handpieces optimized for lens nuclear removal

Closing his upbeat presentation, Forchette said “we plan to challenge the status quo of the ophthalmic landscape.”

Another privately-owned, venture capital backed company appearing at the conference was Glaukos (Laguna Hills, California). The company, which has raised $126 million in venture financing since its founding in 2001, was the first to achieve FDA clearance (June 2012) for a new category of glaucoma devices called MIGS (minimally invasive glaucoma surgery.)

Glaucoma afflicts three million Americans and is the second leading cause of blindness in the U.S., trailing only diabetic retinopathies. It affects an estimated 70 million persons worldwide. Glaucoma, particular the mild to moderate varieties, is typically managed with eye drops but their efficacy is modest and many patients require multiple regimens. Non-compliance is well documented and is “rampant” according to CEO Tom Burns.

Conversely, the iStent , a snorkel-like device, is implanted in a straightforward surgical procedure in a combined cataract-IOL exchange procedure. It is easy to implant and takes just a few minutes of the surgeon’s time. According to Burns, the device, which is selling for $1000 ambulatory surgical centers during the introductory launch phase, is the smallest implanted product ever placed in the human body. It creates a channel to allow the aqueous fluid to pass through the clogged trabecular meshwork in the front of the eye, thus lowering intraocular pressure (IOP).  Myriad clinical trials have shown that the iStent consistently lowers IOP and either reduces or eliminates the need for glaucoma medications.

Glaukos is now fully commercial in the U.S., with a 12 person direct sales force in the U.S. selling its iStent to both cataract and glaucoma surgeons. Burns indicated that he plans to expand this direct sales force to 24 during 2013. The initial target market is the 650,000 patients in the U.S. who are having a cataract removed and also have concomitant glaucoma. It is specifically targeting 500 glaucoma specialists and 2500 cataract surgeons. The company has attained excellent surgeon and device reimbursement, indeed Burns noted that “it occurred faster than we had hoped for.”

In addition to its efforts to sell the iStent, Glaukos has a robust pipeline of second and third generations products that are in advanced stages of clinical trials. It has 18 clinical pivotal and post-market trials underway globally, gathering data on the iStent injectable device as well as the iStent Supra, which will be implanted in a different location in the eye.

Burns noted that Glaukos has significant regulatory leads over several privately-owned, venture-financed companies, which he believes may be four-to six years away from FDA approval.

“We have a wide berth over our competition,” he stated. 

J.P. Morgan Healthcare 2013 Conference

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