Article Date: 4/1/2011

A Wall Street Perspective

A Wall Street Perspective

Despite a sluggish economy in 2010, CLs show continued growth.

Jeffrey D. Johnson, O.D., C.F.A., MILWAUKEE

While the economy struggled to improve significantly in 2010, publicly available data and industry surveys we, at Robert W. Baird & Co., performed through the past 12 to18 months suggest CL market growth accelerated in both the U.S. and worldwide in 2010. Specifically: rates largely in line with long-term historical norms.

In our opinion, this improved market growth was a function of the continued uptake of premium SiHy and daily disposable products, as well as the overall importance consumers continue to place on their vision.

For example, the Contact Lens Institute (CLI), an independent market research firm, estimates the global CL market was valued at roughly $6.4 billion in 2010, with the Americas representing the largest geographic segment at roughly $2.5 billion, followed by Europe and the Asia Pacific at just shy of $2 billion each. In addition, CLI estimates CL revenues in the Americas grew by 7%—an improvement over 5% market growth in 2009 and also above the 6% and 2% growth seen in Europe and the Asia Pacific in 2010.

In our opinion, better growth in the Americas during 2010 vs. Europe and the Asia Pacific was likely due to a host of factors, including faster uptake of SiHy products in the U.S. (where SiHy CLs account for nearly 60% of soft CL revenues vs. ~25% to 30% for the rest of the world), as well as greater macroeconomic pressures in Europe and visioncare reimbursement changes that occurred in 2009 in the Japanese CL market (Japan accounts for nearly 2/3 of the Asia Pacific CL market).

Here, I discuss the growth-drivers for the U.S. market and my predictions for 2011.

SiHy CLs increased

Our research suggests SiHy product sales grew nearly 15% in 2010, or just more than twice the overall market rate, and for the year accounted for roughly 58% of all domestic soft CL sales vs. a bit above 55% of domestic CL sales in 2009. These gains for SiHy products came largely at the expense of standard hydrogel products, according to our research, with standard hydrogels declining to ~41% of the U.S. market in 2010 and RGPs continuing to account for roughly 1% of the overall market.

Specifically, this growth was the result of rising demand for SiHy daily disposable CLs as well as a growing demand for SiHy multifocal, toric and spherical CL products. To that end, our research indicates daily disposable SiHy products now account for more than 10% of the U.S. daily disposable market, up from less than 1% entering 2010, while SiHy multifocals now account for nearly 50% of the U.S. multifocal market vs. closer to 30% in 2009. At the same time, spherical and toric SiHy penetration rates each moved approximately five percentage points higher in 2010, to approximately 70% and 65%, respectively, according to our checks.

Daily disposable CLs show continued growth

A rapid growth in daily disposable CLs has been occurring for the last several years, our research reveals, and we believe these products—in aggregate—accounted for more than 13% of the U.S. soft CL market in 2010 vs. 11% in 2009 and 9% in 2008.

In addition, use of monthly replacement CLs grew 20%, while use of two-week replacement CLs declined 2% in 2010. The monthly replacement CL category—similar to daily disposable CLs noted above—also gained approximately four percentage points of domestic market share through the last two years, accounting for ~25% of the U.S. market in 2008 and just less than 30% of the market in 2010. Further, this higher growth in monthly replacement vs. two-week replacement CLs appeared consistent in 2010 across all three major CL categories, including spherical (mid-teens growth in monthly spherical CLs vs. a low single-digit decline in two-week spherical sales in 2010), toric (+20% vs. +2%) and multifocal (+40% vs. flat) CLs.

A total of 70% to 80% of our practitioner survey respondents have indicated they are fitting more daily disposable or monthly replacement CLs (or both) in lieu of two-week replacement CLs to instill better compliance (e.g. they contend that patients find them more convenient to use, and therefore, “easier” with which to comply). And while never scoring as strongly in our surveys relative to these patient-focused factors, we believe improved practice profitability also represents an important driver of growing daily disposable and monthly replacement product use in recent years.

The future

With consumer spending trends rebounding a bit in late 2010 (and thus far in 2011) and as U.S. employment slowly (very slowly …) improves, we believe the outlook for the domestic CL market remains fairly solid, assuming of course that the recent spike in oil prices and troubles in Japan don't create significant near-term headwinds to consumer spending trends in the U.S. More specifically, we believe U.S. market growth could remain in the mid-single-digit range this year (likely +5% to 6% per our current market model), and if consumer-led spending trends continue to improve throughout the year, we wouldn't be surprised to see market growth return to the 7% range seen in 2010.

In terms of specific products, as has been the case in recent years we suspect all CL manufacturers will focus the vast majority of their efforts on the rapidly growing SiHy segment of the market. Along those lines, we foresee broader, nationwide launches for Avaira toric (CooperVision) and Biofinity multifocal (CooperVision) this year. Further, we believe both CooperVision and Ciba Vision may launch daily disposable SiHy CLs over forthcoming quarters. We expect Vistakon will likely continue focusing most of its energies on its TruEye daily disposable SiHy product, while Bausch + Lomb will likely continue promoting its PureVision 2 product.

The ideal lens

Barry Eiden, O.D., F.A.A.O., president and medical director of North Suburban Vision Consultants in Deerfield and Park Ridge, Ill. says he'd like to see a “truly safe continuous wear lens” enter the marketplace. “People do not want to put lenses on and off each day—they want the true convenience of 24/7 clear vision without the risks of surgery, with the ability to change vision correction, should prescriptions change,” he says. He adds that patients also want such a lens without the current risks of ocular infection and inflammation. “Unfortunately, these risks have not been significantly altered in continuous wear with the introduction of high Dk SiHy lenses,” he says.

His “dream” lens: Safe, continuous wear for six months (with minimal risk of ocular infection or inflammation); optimal optics options (including correction of sphere, cylinder, presbyopia and high order aberrations); optimal comfort (virtually no adaptation when properly fit and continued comfort throughout the wearing time); the option for optics that would control myopic progression (so that certain forms of the lens could be fit for young children at risk of progressive myopia development); and a lens design customized to the individual patient's requirements (both in terms of physical fitting characteristics and unique individual optical characteristics of the patient).

“The management of this lens would require professional expertise, thus minimizing the commoditization element that is growing in the disposable soft lens market,” Dr. Eiden says. “This concept provides a win-win scenario. The patient wins by having the optimal vision, comfort and convenience of six months of continuous wear, and the contact lens practitioner retains the professional service of lens design/fitting, ocular health monitoring and continued care.”

Are CL manufacturers working on creating such a lens? Only time will tell. OM

Dr. Johnson is a senior medical technology research analyst covering orthopedic, ophthalmic, dental and radiation oncology stocks at Robert W. Baird & Co., in Milwaukee. Send comments to optometricmanagement@gmail.com.


Optometric Management, Issue: April 2011