cl update

A Wall-Street Perspective

Although CL sales cooled slightly in 2011, premium areas of the market experienced growth.

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

Regardless of slowing CL sales in 2011, sales of premium CL products saw growth. This reveals that consumers, despite economic uncertainty, place a great deal of value on these products.

Specifically, data from the Contact Lens Institute (CLI), an independent market research firm, suggests the global CL market grew just more than 7% to roughly $6.9 billion in 2011. However, if we exclude the impact of currency fluctuations (primarily a weaker U.S. dollar against most major currencies during 2011), CL revenue on a worldwide basis would have grown closer to 4%, slightly below what CLI estimated was 5% constant currency growth for the worldwide market in 2010.

In the United States, CL market growth similarly slowed in 2011 by two percentage points to +5% vs. approximately 7% growth for the domestic market in 2010, with domestic sales for the year reaching approximately $2.2 billion, according to publicly available data and industry surveys we, at Robert W. Baird & Co. gather and analyze. With U.S. GDP growth slowing to 1.7% in 2011 vs. +3.0% in 2010 and consumer spending slowing a bit last year (+4.0% in 2011 vs. +4.2% in 2010), it’s not surprising that domestic CL sales also slowed last year. Yet, sales for silicone hydrogel (SiHy) products grew.

Here, I discuss the data on these products as well as the outlook for 2012.

SiHy CLs grew

Robert W. Baird & Co. sources suggest SiHy CLs, including spherical, toric and multifocal, daily, two-week and monthly disposable modalities, accounted for more than two-thirds of U.S. CL revenue in 2011. This number is above the 60% of domestic revenue we estimated for SiHy CLs in 2010.

Specifically, sales of spherical SiHy CLs comprised 70% of all spherical soft lens sales, vs. just more than 65% in 2010. Toric SiHy lenses made up 65% of all toric soft lens sales and multifocal SiHy lenses made up approximately 50% of all multifocal soft lens sales in 2011, each roughly five percentage points higher than the previous year.

In terms of replacement schedule, daily disposable accounted for 15% of the market — two-week and monthly replacement lenses accounted for a little more than 50% and 30%, respectively, with quarterly and annual wear falling at about 2% to 3%.

Of note: CLI data suggest revenue in the multifocal SiHy CL category grew 10% on a world-wide basis in 2011, and we at Robert W. Baird & Co. believe revenue in this category likely grew at a similar, if not slightly higher rate in the United States last year. In addition, SiHy CLs accounted for five of the top seven multifocal lens options prescribed by eyecare practitioners, according to a December 2011 practitioner survey. Further, sales of daily disposable CLs in the United States grew 10% in 2011.

An itch to switch

The biggest driver of higher SiHy CL penetration in the United States in 2011: the ongoing conversion of patients out of standard hydrogel spherical and toric two-week/monthly designs into SiHy two-week/monthly products, according to our data.

This is not surprising, given SiHy CLs are preferred by more than 70% of practitioners for both sphere and toric lens fittings, according to the same aforementioned December 2011 practitioner survey.

Incidentally, this survey also suggests that monthly replacement schedule lenses are preferred by nearly two-to-one practitioners for spherical lenses and more than two-to-one for toric lenses.

2012 outlook

As job gains in the United States have finally begun to accelerate in recent months, and with U.S. CL market growth bouncing back to 7% in the fourth quarter of 2011 (vs. +3% in 3Q-11 and +5% for the year), we’re optimistic that the market can continue to grow solidly in the mid-to-single digits in 2012. That said, rising oil prices, a still uncertain economic climate in Europe and the tentative nature of recent domestic macro improvements, such as an improving jobs market, are all factors we must monitor this year. But, assuming relative stability in these factors, we wouldn’t rule out the potential that domestic CL market growth can return to the +6% to 7% range seen in 2010, especially as penetration rates for premium CL products continue to grow. And it seems we’re not alone in our positive attitude.

We found that while CL sales grew in only low-single digits in the final six months of the year (+2.0% per our survey), eyecare practitioners are expecting sales growth to improve by nearly three percentage points through the first half of 2012, to +4.6%, according to our December 2011 practitioner survey.

In 2012, we believe the four largest soft CL manufacturers will continue to focus on the SiHy and/or daily disposable CL categories. Specifically, we think Vistakon will zero its efforts on its recently launched 1-Day Acuvue Moist for Astigmatism and 1-Day Acuvue TruEye SiHy lenses. We expect CIBA Vision to set its sights on its monthly Air Optix SiHy and its Dailies Aqua- Comfort Plus family of products, with the launch of Dailies Total1 (which had a limited launch in several European markets late in the year) in the United States at some point this year. We believe CooperVision will focus on its Biofinity family of lenses, re-launching the Avaira Toric and introducing a daily disposable SiHy option this year. Finally, for Bausch & Lomb, we believe an entirely new SiHy platform is likely in the works for 2012.

The bottom line: Despite the slowed growth of contact lens sales in 2011, highlighted by a period in mid-summer when consumer spending seemed to hit a wall (given market-wide fear caused by U.S. debt ceiling discussions and European austerity uncertainties), CL sales still grew nicely throughout the year as penetration rates for premium products continued to move higher throughout the year. OM