EyeWorld is the official news magazine of the American Society of Cataract & Refractive Surgery.
Issue link: https://digital.eyeworld.org/i/111385
66 EW International February 2013 International outlook It���s a small, small eye world by Matt Young EyeWorld Contributing Writer Beyond the anatomy, ���nancial plays in eyecare are increasingly limited W e have known it all along���medicine is a business. While physicians earn their living taking care of patients, there are many others who follow what we do and invest in the companies that supply us. Market forces have driven consolidation of the companies that support ophthalmology. We have now reached a point where there are only a few parent companies that control the majority of products we use. Every so often, it is instructive to step back and take a look at our profession through the eyes of an investor. �� John A. Vukich, M.D., international editor T here���s no doubt about it; the eye is a small organ compared to most. If you���re a surgeon, this small world can be a financial boon. If you���re an investor, it���s a little harder to tell. In April 2011, Stephen Simpson, C.F.A., suggested that from an investor���s point of view, the international eyecare segment is small, and getting smaller. At that time, Mr. Simpson, a freelance financial writer, investor, and consultant who closely follows the eyecare segment, cited the following reasons in a Seeking Alpha article: 1. Merck (Whitehouse Station, N.J.) had recently acquired Inspire Pharmaceuticals (Raleigh, N.C.), meaning that shareholders���likely pleased with the deal���would still have to make an exit from Inspire. 2. The eyecare units of Pfizer (New York), Novartis (Basel, Switzerland), and Johnson & Johnson (New Brunswick, N.J.) were relatively small compared to the whole dealings. That was saying a lot in Novartis��� case, which had recently acquired Alcon (Fort Worth, Texas). 3. Bausch + Lomb (Rochester, N.Y.) was not a viable investment option for most, being part of Warburg Pincus (New York), a private-equity firm. 4. Abbott (Abbott Part, Ill.) acquired Advanced Medical Optics (Santa Ana, Calif.) in 2009, stopping the latter from being publicly traded. 5. In the industry, pharmaceutical companies tended to be the same as medical device companies. Allergan (Irvine, Calif.), Cooper Companies (Pleasanton, Calif.), and Essilor (Dallas), he said, were like needles in the proverbial haystack, because they were all heavily dedicated to eyecare and solid companies that could be invested in. ���For a pure play on the drug side [of eyecare], ISTA Pharmaceuticals [Irvine, Calif.] is about all that���s left,��� Mr. Simpson said. Revisiting this topic nearly two years later, it���s interesting to both fact-check this thesis and see whether eyecare investing options really are in the realm of the small, just like the anatomy. Indeed, not much appears to be changing from the ���shrinking quo.��� That ���pure play��� Mr. Simpson spoke of is out. Bausch + Lomb completed acquisition of ISTA in June 2012. Bausch + Lomb could be next as Merck, Abbott, and Johnson & Johnson all may be vying for it. That���s according to financial news and analysis site Trefis.com, which notes that these companies are ���looking at inorganic routes to fend off losses from patent cliffs or a weak drug pipeline.��� ���It���s something worth thinking about, that���s the most I can say,��� Merck CEO Kenneth Frazier said at a recent health conference in San Francisco. Meanwhile, look no further than company earnings reports to understand the relative (and small) impact of eyecare in the investing marketplace. Eyecare continues to be marginalized at Pfizer. Third quarter 2012 results highlighted the negative impact of Lipitor and positive impact of Lyrica, Celebrex, and Viagra on performance. None of these are ophthalmic drugs. While Johnson & Johnson���s Q3 sales growth was boosted most by medical devices and diagnostics (at 12.5% growth, with sizeable contributions by daily and astigmatism lenses), company earnings decreased 12.6% in the 2012 quarter compared to the 2011 one. Yes, the company lists ���disposable contact lenses��� in its ���#1 or #2 global market share position,��� but that is one of 21 groups in such positions���everything from psychostimulants to oral rinses. That makes investing in Johnson & Johnson for Acuvue���s sake very difficult. Contact lenses up, company performance down. Novartis��� Q3 2012 reported that one of eyecare���s most prominent groups, Alcon, had net sales of USD 2.5 billion, or just 18% of the company���s net revenue for the period. Being an industry leader with quite often the biggest exhibit booths continued on page 68