Cooper Sees Fuzzy-Sighted Teens Driving Growth
By VITA REED
The Cooper Cos., a Lake Forest-based contact lens maker, is looking to a generation of children and teens who watch tons of TV, surf the Internet and play video games to fuel its growth.
“Demographics are very important because about 99% of all initial wearers are kids,they’re teenagers,” said A. Thomas Bender, Cooper’s chief executive. “This is not an impulse item.”
Vanity leads teens with vision trouble to switch from eyeglasses to contacts, Bender said. And he’s got his eyes on a big crop of them. The “baby boomlet” of kids born in the early 1990s are moving into adolescence this decade.
So forgive Bender for getting excited about kids with blurry vision, spurred in part by computers, TV and reading.
“I’m going to have more of these favorable demographics with more myopia,” he said. “I’m a myopic business! I’m myopia,I live and die by it. I hate to have people have this horrible disorder in their eye, but it helps me sell contact lenses.”
But don’t expect to see Cooper’s contact lenses pitched on MTV or other teen-oriented media. Instead, the company markets its products to eye doctors who prescribe corrective lenses, in a style similar to that of drug company sales representatives.
Cooper’s CooperVision unit is one of the top five makers of contact lenses, along with Johnson & Johnson and Bausch & Lomb Inc. Cooper, which employs around 3,000 people worldwide and 200 in Orange County, also makes diagnostic products, surgical devices and accessories for women’s healthcare, which make up about a quarter of sales.
Cooper’s shares traded as high as 55 in late August and have settled since to trade in the high 40s at recent check. As of last week, the company counted a market value of more than $700 million.
“My story to the healthcare conferences or to the Street is that smart people understand demographics and how they play out in all of our markets,” Bender said, pointing to a chart breaking down birth rates during recent years.
In the three months ended Oct. 31, Cooper saw sales jump 17% to $66 million vs. a year ago, while net income rose 28% to $11.8 million. For the company’s fiscal first quarter ended last week, Cooper said it expects sales to come in up to 20% higher than the year-ago period.
Cooper’s growth is notable because some of its bigger rivals are wrestling with slowing sales. Rochester, N.Y.-based Bausch & Lomb saw sales slip 3% to $452 million in the fourth quarter, while profits before charges and other items slumped 25% to $20.5 million.
Analysts have taken note of how Cooper has fared, both in its core contact lens and its women’s surgical markets. A good part of the company’s growth stems from its focus on specialty lenses, such as so-called toric lenses to correct astigmatism.
“Cooper remains well positioned in the steadily expanding toric lens category, is continuously expanding its product offering and broadening its geographic reach,” wrote Charles Olsziewski, an analyst for UBS Warburg, in a research note. “Moreover, the increasing number of teenagers entering the U.S. market, which account for more than 90% of new contact lens fits, can’t help but be beneficial to market dynamics through the decade.”
Although CooperVision is known for toric lenses, it also sells disposable contact lenses and cosmetic offerings, such as color-changing contacts and its Crazy Lens line, which includes lenses featuring National Football League team logos.
“Importantly, its success in this (toric) market segment is being leveraged to sell other lenses in its product portfolio, such as disposable spheres and cosmetic lenses,” wrote Sheryl Zimmer, an analyst who follows Cooper for Deutsche Banc Alex. Brown in New York.
Cooper also has sought to grow via acquisitions. It just anted up around $100 million for the eye care and contact lens unit of Britain’s Biocompatibles International PLC.
“This was a major acquisition for us,” Bender said. “We have taken out the last of the sizable contact lens businesses.”
Bender said the Biocompatibles deal, set to conclude this month, would bolster Cooper’s business in Europe, Hong Kong, South Africa and Australia.
CooperVision accounted for about $176.1 million of Cooper’s $234.6 million in sales for its fiscal year ended Oct. 31. Overall, the global soft contact lens market is estimated at roughly $2.9 billion.
Cooper and its four main rivals make up some 95% of the soft contact lens market. Cooper added another 3% with the Biocompatibles deal, according to Bender.
Along with Bausch & Lomb and J & J; with its roughly $1 billion in 2001 contact lens sales, Cooper’s competitors include Novartis AG’s Ciba Vision, with about $800 million in yearly sales, and South San Francisco-based Ocular Sciences Inc., which counts about $200 million in annual revenue.
Cooper, because of its demographics, also doesn’t seem overly concerned about the emergence of laser eye surgery as a way to correct certain vision problems.
“Early in the game,two, three years ago, when LASIK became popular,a lot of our stocks got hit because there was a perception that LASIK surgery was going to have an impact on the contact lens market,” Bender said.
“We kept saying ‘(bull),you guys just don’t understand who wears contacts, the profile of a contact lens wearer and you don’t understand the profile of the LASIK patient,” said Bender, who came to Cooper in 1991 after 25 years at Irvine-based Allergan Inc.
Most people who undergo laser eye surgery are in their 40s, according to Bender, who noted that the procedure is not urged for people under 30 because their myopia hasn’t stabilized.
Cooper’s factories, including ones in Rochester, N.Y. and Britain, produce some 75 million contact lenses a year, according to company officials. Of those, between 600,000 and 700,000 are produced at its Huntington Beach plant, which makes custom toric and other lenses.
CooperSurgical, the company’s Shelton, Conn.-based gynecological health unit, accounted for $58.5 million of Cooper’s revenue in fiscal 2001.
“We set out in 1994 to surround the procedures that the gynecologist does in his office with proprietary products,” Bender said, noting that the women’s healthcare market has about 50 companies and is “very fragmented.”
CooperSurgical’s devices are used for procedures such as loop electrosurgical excision, which is used to treat abnormal cervical tissue, or dysplasia, a pre-cancerous condition of the cervix. They’re also used for Pap smears and fertility treatments. The company has pursued a strategy of buying smaller companies that support its existing products, according to Bender.
“Favorable demographic trends, specifically the aging of the baby boomers, should drive organic growth of 6% to 7% for the CooperSurgical women’s healthcare business, although management has stated they will continue to acquire product lines,” wrote David Therkelsen, an analyst with RBC Capital Markets in Minneapolis.
