CooperVision announced on Dec. 1 the acquisition of Paragon Vision Sciences, a company specializing in premium orthokeratology (ortho-k), specialty contact lenses and oxygen permeable rigid contact lens materials. Paragon, which is headquartered near Phoenix, Arizona, will continue to operate as an independent business, retaining its brands and offices.
Rich Jeffries, president of Paragon, will remain with the company, and will be responsible for its day-to-day operations. Joe Sicari, the former chief executive of Paragon and an industry veteran, will become a consultant to CVI.
CVI is paying about $80 million in the transaction. Among other properties, it covers Paragon's CRT contact lenses, worn while sleeping to treat myopia. The acquisition also expands CVI's access to the Chinese myopia management market, in which Paragon is present.
The move follows CVI's takeover in August of another specialty firm, Procornea. Combined with CVI's own MiSight product line, the two companies will help CVI to develop an interesting new specialty lens platform, which is starting with an annual turnover of around $30 million. It's a business that should grow organically by nearly 10 percent a year.
Acquisitions helped CVI to book a 7 percent increase in total sales to $439.0 million in the fourth quarter of its last financial year, ended on Oct. 31. Excluding them, pro forma sales went up by 5 percent, with increases of 4 percent in multifocal lenses, 7 percent in toric lenses and 8 percent in single-use spheres. The gross margin improved to 67.7 percent in the quarter from 64.8 percent one year earlier, driven mainly by currency gains and a better product mix. The operating margin doubled to 31.1 percent from 14.7 percent.
For the full financial year through last October, CVI's revenues rose by 6 percent to $1,674.1 million, up by 7 percent pro forma. With the introduction of MyDay toric lenses soon in the U.S., the management expects the momentum to continue into the new financial year, allowing CVI to build up to revenues of between $1,830 million and $1,865 million.
The management is confident that CVI will continue to outperform a market that is expected to grow at an annual rate of 4 to 6 percent, thanks in part to an expanding base of contact lens wearers and the build-up by consumers to daily and specialty lenses.
However, CVI's management told investors that the single-use market may have reached “the flip point.” Stimulated by incentives given to consumers for upgrading to one-day lenses, the turnover generated by these lenses is now estimated to have reached a level that is one-third larger than the rest of the market.
CVI grew roughly in line with the global soft contact lens market in the three months ended Sept. 30, based on its own estimates, combined with those of the Contact Lens Institute. The market went up by 7 percent to $1,980 million in the quarter, according to these estimates, rising by 7 percent in the Americas, by 4 percent in Europe, the Middle East and Africa (EMEA) and by 9 percent in Asia-Pacific.
In these regions, CVI grew by 4 percent, 6 percent and 14 percent, respectively. In the three months of its fourth quarter, its growth was a little lower in all the three regions, on a pro forma basis. In the Americas, its sales rose by only 2 percent due to a tough comparison with the year-ago period and the disruption caused by hurricanes in September and October.
As before, CVI's global growth was driven by its broad portfolio of Clariti, MyDay and Biofinity silicon hydrogel lenses, whose sales went up by 37 percent in the quarter. The company is also being aided by the growth of the toric contact lenses market, which is rising faster than the total market.
CVI did not perform so well in the multifocal category, where the other major contact lens manufacturers are playing “catch-up,” according to the company. CVI still claims market shares of around 30 percent in multifocals, which are estimated to represent only 8 percent of the total contact lens market. It also claims to own one-third of the market for torics, which have a higher share of 22 percent in the total market.
In the trailing 12 months through September, the global market went up by an estimated 5 percent to $7,515 million with growth of 4 percent in the Americas, 6 percent in EMEA and 8 percent in Asia-Pacific. CVI grew by 8 percent during the period. Its sales went up by 6 percent, by 8 percent and by 14 percent in the three regions, respectively. CVI's sales of one-day silicon hydrogel lenses jumped by 50 percent in a market that increased at an estimated rate of 28 percent.
CVI is making big strides in Japan and China, contributing to its strong growth in the Asia-Pacific region, where it still has an estimated market share of only 19 percent. It claims a market share of 20 percent in the U.S. With a market share of 31 percent in Europe, it says it is apparently approaching the leadership position.
Adding the results of CooperSurgical, which has also been in an acquisition mode lately, CVI's parent, Cooper Companies, raised its sales by 8 percent in the latest quarter. The gross margin improved to 63 percent from 57 percent in the year-ago period. The operating margin grew to 19 percent from 14 percent.
For the full financial year, the group's revenues were up by 9 percent to $2,139.0 million, rising by 7 percent on a pro forma basis. The gross margin increased to 64 percent from 60 percent. The operating margin reached a level of 20 percent, up from 16 percent. Net earnings rose to $372.9 million from $273.0 million. Strong cash flow helped to reduce net debt.
The group's operating margin is projected to grow further to a level of 28 percent for the current financial year. Sales are expected to grow by between 9 and 11 percent in reported terms and by 6 to 8 percent on a pro forma basis.