Silicon hydrogel contact lenses were the big missing piece in the production apparatus of CooperVision (CVI), on which the company is spending $400 million to upgrade and expand while doubling its distribution facilities. With the right equipment now in place, the company has decided to bring forward to next month the launch of Avaira, its new two-week disposable silicone hydrogel spheric contact lens.
The new line is being manufactured at the company's facilities in Puerto Rico on the basis of CVI's new more efficient Generation II technology. The company's management also promises that there will be no more shortages or allotments of its more generic Biofinity silicone hydrogel lenses, first launched in the USA last June, as its facilities have been tuned to generate annual sales of €200 million for this product line.
The company managed to produce 3.8 million Biofinity lenses in the month of February alone. The line generated sales of $9.1 million in the first quarter ended last Jan. 31, compared with $9.7 million for the entire past fiscal year, and it should bring in total sales of $50-70 million in the current financial year. Together with the launch of Avaira, this should lead CVI this year to post $20 million higher revenues than previously expected, resulting in a 15 percent increase in total turnover to $895-930 million for CVI. Its parent, Cooper Companies, should achieve a better operating margin of 15.5-16.5 percent and net income of $94.8-106 million on higher total revenues of $1,060-1,100 million on a non-GAAP accounting basis.
In contrast with the gloom that surrounded the previous quarterly income statements, Cooper's management heralded CVI's return to historic patterns for sales and market share growth, in line with a corporate goal to become the world's second-largest supplier of contact lenses. It said earnings should improve in the next few years as two-thirds of its extraordinary capital investment program have already been implemented.
In the past financial year, CVI and Bausch & Lomb, which has gone private, both had 16 percent of the global soft contact lens market, which was led by Johnson & Johnson with 39 percent and by CIBA Vision, with a share of 25 percent. CVI was the No. 2 supplier in the USA and Europe, but came out as No. 4 in the big Asia-Pacific market.
CVI has invested heavily in the expansion of its sales operations in the Asia-Pacific region lately, culminating in the establishment of an office in Shanghai last July and another one in Hong Kong this month. It sees a big potential in the Japanese market for its one-day Proclear line of contact lenses, but it will attack that market only at the beginning of 2009 with this product, which was introduced earlier this year in the USA and Europe.
The company's sales of Proclear products grew by 34 percent to $51.6 million in the first quarter ended last Jan. 31, representing 25 percent of its total soft lens revenues. Its sales of single-use products jumped by 41 percent to $36.2 million during the same period. Sales of toric lenses went up by 11 percent to $70.5 million, and a silicon hydrogel product is in the pipeline in the category for a launch next year. Multifocal lenses were up by 24 percent to $12.7 million.
Sales increases were boosted by the relative weakness of the dollar. While CVI's total revenues rose by 12 percent to $205.5 million for the quarter, on a constant-currency basis they were up by only 6 percent. In terms of local currencies, sales were up by 5 percent in the Americas, by 6 percent in Europe and by 16 percent in the Asia-Pacific territory. The Americas and Europe represented 42 percent and 40 percent of CVI's total revenues, respectively.
As single-use lenses come with lower profit margins, CVI's overall gross margin declined to 58 percent in the latest quarter from 59 percent in the same period a year ago. However, excluding costs that were not related to its core operating performance, the margin actually increased to 63 percent from 62 percent. The operating margin declined to 11 percent, or 18 percent excluding those costs, and here the drop was mainly attributed to higher marketing expenses to support new product launches.
Combined with the results of Cooper Surgical, the other operating unit of Cooper Companies, the group reported a rise in net income to $6,877,000 for the quarter from $5,348,000 a year ago on 12 percent higher net sales of $245.0 million.