The global market for soft contact lenses expanded by an estimated 10-12 percent in the first nine months of 2005, but CooperVision's sales of these products rose by only 8 percent on an organic during the 12 months ended Oct. 31, including those made by Ocular Sciences prior to its acquisition by CVI at the beginning of 2005. The growth rate declined to 4 percent at CVI during its 4th quarter, ended Oct. 31.
As indicated in the previous issue of EWI, the management of CVI has admitted that the company performed poorly in the U.S. market for two-week spherical lenses because of strong competition from suppliers of silicon hydrogel products which it is only now beginning to market, starting off in Europe. On the other hand, CVI's Proclear spheres continued to perform well against the competitors' silicon hydrogel offerings.
This time, while detailing its own results for the 4th quarter, CVI went further in admitting partial defeat. Using information collected by independent market researchers, the company outlined the growth of various segments of the global contact lens market in the first nine months of 2005, and compared that with Cooper's own performance on an organic basis during its full fiscal year. The comparison showed that CVI gained market share in certain areas and lost it in others.
Based on market research, the spherical lens market expanded by 9 percent for the first nine months of 2005, but CVI's sales in this important product segment fell by 2 percent, with a drop of 7 percent in the USA and an increase of 1 percent elsewhere. Spherical lenses represent 50 percent of the company's contact lens business and 46 percent of the global soft lens market.
In the area of toric lenses, global sales went up by 16 percent, but Cooper had a sales gain of only 14 percent, representing 34 percent of the CVI's business. CVI's sales of toric lenses grew by only 8 percent in the USA but went up by 23 percent in other markets, helped only in part by the weak dollar. On the other hand, in the narrower field of disposable toric lenses, where the market grew by an estimated 23 percent, CVI gained market share in spite of the challenge from silicon hydrogel as its own sales rose by 26 percent.
CVI performed better in the area of single-use contact lenses, where the global market apparently grew by 15 percent in the first nine months. Cooper's sales grew by 38 percent for the full financial year in this product category, which represented 10 percent of CVI's business and 30 percent of the market. Sales of multi-focal contact lenses increased by 19 percent worldwide, representing still only 3 percent of the global market, but Cooper's sales expanded by 50 percent and comprised 4 percent of CVI's own business. Cosmetic contact lenses saw their sales decline by 1 percent globally, but the company's sales in this segment went up by 2 percent. Cosmetic lenses represented 6 percent of the world market and 2 percent of CVI's business.
Furthermore, CVI says its total sales of disposable lenses grew by 13 percent on an organic basis in the past financial year, comprising 87 percent of its total revenues. They were up by 7 percent in the USA and by 17 percent in the rest of the world. Its rather unique Proclear lenses generated 39 percent higher revenues, with increases of 46 percent in the USA and 34 percent in other parts of the world.
Geographically, CVI's sales of all types of contact lenses rose by only 1 percent during the past financial year on an organic basis in the Americas, but they went up by 10 percent in the European region and by 29 percent in the Asia-Pacific region. The Americas accounted for 49 percent of CVI's total business, Europe 34 percent and Asia-Pacific 17 percent.
Thanks to the acquisition of Ocular Sciences at the beginning of 2005, CVI's sales climbed by 86 percent to $192.9 million in the 4th quarter, as compared to the same period a year ago, with an 85 percent increase based on constant dollars. However, its operating income (EBIT) declined as a percentage of revenues to 26 percent from 28 percent, before non-recurring acquisition costs of $4.1 million.
For the full financial year, CVI's sales were up by 80 percent, or 77 percent on a currency-neutral basis, reaching $698.6 million. The gross margin declined from 67 to 64 percent. While the EBIT margin remained flat at 27 percent, the management still hopes to achieve a better gross margin and annual operational savings of $50 million once the integration of Ocular Sciences is completed.
Adding its surgical operations, CVI's parent, Cooper Companies, posted a 69 percent increase in total revenues in the 4th quarter to $221.4 million, with a 62 percent increase in local currencies. For the full year, sales were up by 65 percent to $807.2 million, generating a slightly lower EBIT margin of 23 percent before non-recurring acquisition and restructuring expenses of $53.3 million. The net profit fell to $10.8 million for the quarter from $29.2 million in the year-ago period, but for the full year it was off only slightly to $93.8 million. Net debt declined to $679.2 million.
The group's R&D expenses more than tripled to $22.9 million for the year in view of new product launches by CVI. The gross margin remained flat, but Cooper expects annual improvements in gross profit of $14-16 million from the conversion of CVI's manufacturing platform to second-generation technologies by 2007. Capital expenditures reached $117.1 million in 2004-05, with 70 percent of the amount spent to expand capacity, 10 percent for information technology and 20 percent for conversion to these manufacturing technologies, inherited from Ocular Sciences.
As previously reported, in 2005 the company didn't introduce any important new products for the first time in years, but Cooper hopes to make up for the lost ground during the present financial year with a plethora of new items. Among other things, it will introduce in January Biomedics XC, a two-week aspheric lens with Proclear technology positioned as a superior product against first-generation silicon hydrogel products. An improved single-use spherical Biomedics lens will be launched worldwide during the 1st half of 2006, and other products will follow, including a Biomedics Multifocal EP model specifically targeted at patients who start developing presbyopia.
While still reeling from losing market share in the two-week spherical lens market in the USA, CVI views Europe as a market that has vast potential for its new monthly silicone hydrogel spherical lens. It has just launched its new Biofinity silicon hydrogel contact lens in Europe and it has just obtained the U.S. Food and Drug Administration's permission to introduce it in the USA in the 2nd half of 2006.
According to market research reported by CVI, silicon hydrogel now accounts for about 14 percent of worldwide contact lens revenues, or about 25 percent of the market in the USA and 7 percent of the market elsewhere. In the USA, it was chosen by 30 percent of new patients who decided to wear contact lenses for the first time during the 3rd quarter of the 2005 calendar year.
Citing clinical trials, Cooper says its new silicon hydrogel lens has been extremely well accepted by many lens wearers who have expressed a preference for Biofinity over other currently available silicon hydrogel materials and designs. Its patented molded rounded lens edge contributes to wearing comfort and enhances ocular health. Its aspheric front surface design improves visual acuity. The back surface is designed to distribute pressure forces evenly, providing additional comfort.
CVI plans to introduce a single-use toric lens shortly in Japan, where more than 60 percent of the clients use single-use products, as part of a policy to increase it presence in Asia. In a separate announcement, CVI said earlier this month that it has established an office in Singapore to coordinate marketing, distribution and administration in Singapore as well as in Malaysia. CVI already has offices in Australia, Japan and Korea and it plans to acquire a direct presence in China in the course of 2006.