The crowded $1.6 billion-a-year market for contact lens solution and drops looks to become even tighter.
Analysts and competitors believe that Johnson & Johnson, the healthcare and consumer products maker out of New Jersey, could jump into the market in the next two years.
That stands to affect some local players, including Santa Ana-based Advanced Med-ical Optics Inc. and Alcon Inc., the Nestl & #233; SA unit with more than 600 workers in Irvine.
Talk of J & J;’s possible entry into the market came to a head earlier this month when Peter Bye, a Citigroup analyst, said in a research note that there was a 60% chance that J & J; would enter the contact lens care market in 2007.
Bye predicted J & J; could take a 10% to 15% share by 2008.
J & J; declined comment in the past about its lens care ambitions.
Bye predicted that Advanced Medical would take the biggest hit of any company if J & J; jumped in the market. The analyst downgraded Advanced Medical to “sell” and reduced his 12-month price target on the stock to $39 from $43. Shares of Advanced Medical were trading at about $39 last week.
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Advanced Medical’s all-purpose cleaner: 15% of sales from contact lens care products |
Advanced Medical, however, is remaining cool and collected on the issue.
Sheree Aronson, the company’s director of investor relations, said the company had no reason to believe that it would be more affected than any other company from a J & J; move into contact lens care.
She also said that Advanced Medical’s two sizable deals to buy Pfizer Inc.’s cataract surgery business and Visx Inc., the eye laser maker, eventually would lower the share of the company’s revenue from contact lens care.
Advanced Medical derived some 15% of its $742 million in revenue last year from domestic contact lens care product sales, said Steve Chesterman, another company spokesman.
The company’s contact lens products include one-bottle, multipurpose solutions that industry watchers say is the most likely product that would come from J & J.;
Advanced Medical also makes hydrogen peroxide solutions, which are used to clean hard contact lenses and are particularly popular in Asia.
As for Alcon, a spokesman said that if J & J; came into the market, any effects would be modest because contact lens solutions only account for 7% of the company’s $3.9 billion annual revenue.
The Alcon spokesman also said that it takes some time for a company to develop and make a technologically advanced contact lens solution.
Tackling Medi-Cal Funding
Some California legislators are considering a proposal that could yield big changes in how medical bills are paid for poor residents in Orange County and across the state.
Gov. Arnold Schwarzenegger worked out an $18.4 billion hospital financing deal with the federal Medicaid system at the start of the summer. Medicaid is the federal plan that covers low-income earners. Medi-Cal is the name of the state system that operates the federally funded Medicaid plan.
Schwarzenegger’s deal, which has drawn heat from some hospital and county officials, would require local hospitals to spend money first before they ask and qualify for federal dollars.
The rules would call for state governments to put up matching dollars in order to get federal dollars.
That’s a change from the current rules. California now can count money not directly spent on Medi-Cal-related services toward the state government’s share of the program’s matching funds.
The proposed change has irritated many of the state’s so-called “safety net hospitals,” which count on Medi-Cal dollars to help cover their cost for treating uninsured and underinsured patients.
In an earlier interview, Susan Rayburn, vice president of contracting and network development at the University of California, Irvine, expressed some concerns about what potentially could happen at UCI Medical Center and other hospitals.
“I think because the University of California is so dependent upon disproportionate share funding as a result of the huge amount of unfunded and underfunded care we provide, we’re really at risk for future funding of that program,” Rayburn said. “Right now, with there being such uncertainty about how the federal funding will be distributed among the disproportionate share hospitals, I guess we can’t really count on what we received in the past.”
UCI Medical Center received about $146.5 million from 2002 to 2004 related to “disproportionate share” payments. The funds helped the hospital offset costs of taking care of patients who are on Medi-Cal, Rayburn said.
Although UCI Medical is primarily an academic medical center, it also acts as the county’s de facto “safety net” hospital. OC is one of three California counties that doesn’t have a public hospital.
UCI is at financial risk for some 20,000 Medi-Cal patients.
Bits and Pieces:
The Department of Agriculture’s Rural Utilities Service gave $10 million to Doctors Telehealth Network, Newport Beach, as part of a bid to introduce telephone and Internet-based healthcare technology to patients living in rural areas … A pair of OC life sciences companies recently visited New York to make presentations at healthcare conferences. I-Flow Corp., Lake Forest, appeared at a conference sponsored by Roth Capital Partners LLC, Newport Beach, while Ista Pharmaceuticals Inc., Irvine, participated in the Thomas Weisel Partners’ healthcare conference … Anaheim Memorial Medical Center and Mission Hospital Regional Medical Center, Mission Viejo, each are set to receive $90,000 from the Blue Shield of California Foundation to participate in a program aimed at preventing hospital-borne infections.
