Bausch & Lomb predicts that its sales growth will accelerate next year to between 6 and 7 percent in constant currencies, driven among others by a growing presence in the Japanese contact lens market, by the reintroduction of its PureVision line in the USA and the roll-out of its new MoistureLoc lens care solutions. The growth rate for this year is now set at 6 percent, with its business improving especially in the USA during the 4th quarter.

The company's total sales rose by 4 percent in constant currencies during the 3rd quarter ended Sept. 25, leading to a 6 percent increase for the first 9 months of the year. They rose by 8 percent in dollars to $548.9 million. While US revenues increased by 2 percent in the quarter, representing 40 percent of total company sales, those generated in the rest of the world grew by 12 percent in dollars and by 5 percent in local currencies. Gross margins were 57.8 percent of sales in the quarter, down from 58.8 percent, due to an unfavorable sales mix and a write-down for obsolete inventories, but gross margins should be go by 100 basis points for the full year.

Net income increased to $43.3 million in the quarter from $32.3 million a year ago, and it's expected to improve for the year as a whole. Operating margins were 14 percent of sales in the quarter, as compared to 12 percent in the year-ago period, and they are expected to settle at between 12 and 13 percent for the whole year. Aside from better cost controls, some of the profit improvement in the quarter was due to lower R&D spending, reflecting a shift in the timing of certain in-licensing opportunities. The R&D budget for the full year will be a bit lower than projected at around $160 million, but the company is still committed to accelerate R&D investment.

The contact lens business generated a 10 percent overall sales increase in the quarter, with a 5 percent gain on a constant currency basis. Total soft lens sales grew by 12 percent in the quarter, or by 7 percent in local currencies. Sales of multi-focal lenses jumped by about 80 percent, capturing 40 percent of the market in Europe. Total European sales of contact lenses were up by 13 percent in dollars and by 4 percent in local currencies.

The PureVision line garnered a 36 percent sales increase in Europe as doctors began to prescribe it following the settlement of its previous dispute with CIBA Vision and in response to strong demand for silicon hydrogel lenses, which should fuel the company's growth also in the USA next year.

The management still predicts 10-12 percent growth for its contact lenses for the full year in dollars. The company's contact lens sales improved by 20 percent in China and were up sharply in other Asian markets, but some temporary disruptions in Japanese deliveries occurred due to a change in distribution. B&L claims to control more than half of the Chinese market for contact lenses as well as lens care products.

The company predicts a sales increase in the low single digits for its lens care products, which were the only product category that suffered a decline in the 3rd quarter ? down 2 percent in dollars and 4 percent in local currencies. This category suffered a drop especially in the USA, reflecting a shift in the timing of customer orders and the fact that several large customers systematically reduced orders for earlier generation multi-purpose solution products in anticipation of the launch of ReNu with MoistureLoc kits, which began late in September and continued into October.

US sales of lens care products should improve again in the 4th quarter. In Europe, the category recorded a 2 percent drop on a constant-currency basis, which was said to be consistent with local market trends. Lens care sales were up in China and in the rest of Asia

Sales of B&L's pharmaceuticals increased by 10 percent in dollars and by 6 percent in local currencies. Sales of these products in constant currencies increased in the Americas and Asia, but were flat in Europe, due primarily to the market disruption caused in Germany by recent new pricing legislation for various types of pharmaceutical products.

B&L's sales in the refractive surgery sector jumped by 22 percent in dollars and by 16 percent in local currencies. Refractive sales were up 14 percent in Europe on a constant currency basis. They grew by more than 30 percent in the Americas, more than offsetting moderate declines in Asia. However, according to the management, refractive surgery is growing very rapidly in China, where B&L claims to share the leadership of Alcon.

Despite the recent settlement with CIBA Vision, B&L's legal battles are not over. The company has just filed a suit against Ocular Sciences, which is merging into CooperVision, for infringement by OSI's Biomedics toric soft contact lens and its private label equivalent of a patent related B&L's SofLens66 toric lens. Noting that it has been in discussion with B&L about this matter since last January, OSI claims the lawsuit is without merit and says it will defend itself against it vigorously.