The sale of Abbott Medical Optics puts the Santa Ana-based device maker under the umbrella of a new parent with a complementary line of eye care offerings.
Abbott Laboratories Inc. in Abbott Park, Ill., said last month it would sell AMO to Johnson & Johnson in New Brunswick, N.J., for $4.3 billion in a transaction expected to close early next year.
Executives on both sides of the deal declined any specific comment on what the acquisition means for AMO’s operations here. The unit, which had $1.1 billion in sales last year, employs 525 in Orange County and 4,300 companywide.
A medical device executive with knowledge of the cluster of eye-care companies in Orange County said the deal should bolster the local landscape.
“There’s no net negative impact,” the executive said. “In eye care, this is where the action is.”
A general comment from Ashley McEvoy, group chairman for consumer medical devices for Johnson & Johnson, focused on the broader opportunities of the segment.
“We’re bullish on eye health,” she said.
Synergies
There are several areas where AMO can complement its new owner’s offerings.
Johnson & Johnson sells $2.6 billion a year in contact lenses but doesn’t sell lens-cleaning solution; AMO does.
AMO makes devices used in intraocular lens (IOL) replacement surgery—which include cataract surgery and laser-assisted in situ keratomileusis (LASIK)—but Johnson & Johnson doesn’t.
“About 75% of their business is in cataracts surgery,” McEvoy said. “That’s very attractive to us.”
A third potential complement could come from the optometrists who deal with Johnson & Johnson products and ophthalmologists who are customers of AMO.
Optometrists are “gatekeepers” for selling contact lenses, the local executive said, while the latter are involved in the surgical procedures.
“Contact lenses are sold to people into their mid-40s but (it) starts dropping off because the eye’s natural lens has become stiff and rigid and can’t flex anymore,” he said.
That’s when people start looking at intraocular lens surgery to improve their sight—which means that AMO’s strengths in that area chronologically follow the aging of the Johnson & Johnson contact lens buyer.
A fourth opportunity is overseas, where Johnson & Johnson gets 25% of its vision care sales, McEvoy said. Abbott Medical derives only 12% of its sales from offshore markets.
McEvoy said Johnson & Johnson already has made connections with ophthalmologists in Brazil, France and Japan, where they are a business channel for its contact lenses. The company said South Korea and China are possible new areas of expansion, calling them “sophisticated markets for eye health, appearance and beauty.”
LASIK is a traditional strength of AMO and is well-known in the U.S., but still relatively new overseas.
AMO products were used in half of the 1.4 million annual procedures at LASIK’s 2007 peak. Concerns at the time about LASIK’s safety and efficacy—and the 2008 recession that slashed traffic in elective medical work—cut LASIK’s numbers to 600,000 last year, McEvoy said.
AMO already had shifted its focus to cataracts—“moving with the market,” she said.
When Abbott Laboratories bought AMO in 2009, the unit had $1.2 billion in sales—about 40% from cataracts, 40% from refractive or LASIK surgeries, and 20% from sales of hydrogen peroxide, eye-care solutions and drops.
Now cataract surgery devices make up about 75% of AMO’s sales, which came to $1.1 billion last year.
Part of AMO’s bid to get back to growth is Tecnis Symfony, a new intraocular lens for cataract treatment, which also is helpful in “mitigating the effects of presbyopia”—the condition that commonly requires people to use reading glasses. The company received Food and Drug Administration approval for Tecnis Symfony in July.
J&J
Johnson & Johnson also has ongoing internal work to make devices for eye surgery.
McEvoy said the company is in Phase 2B clinical trials for a device to treat geographic atrophy—an advanced form of a kind of age-related macular degeneration in which protein deposits form on the retina.
The AMO buy touches two of Johnson & Johnson’s three divisions—medical devices and consumer goods—which together provided more than half of its $70 billion in revenue last year. It also sells pharmaceuticals.
Johnson & Johnson’s Advanced Sterilization Products division in Irvine makes infection-prevention products for healthcare facilities and employs about 450.
Abbot Labs
Abbott Laboratories had $20 billion in revenue last year and is in the midst of a multiyear refocus. It divested pharmaceutical maker AbbVie Inc. in Lake Bluff, Ill., in 2013. AbbVie last year had $23 billion in sales.
Abbott this year said it would buy medical diagnostics firm Alere Inc. in Waltham, Mass., for about $6 billion and cardiovascular device maker St. Jude Medical Inc. in St. Paul, Minn., for about $25 billion.
St. Jude Medical has a facility in Irvine that employs about 500.
Abbott bought AMO—then called Advanced Medical Optics—for $2.8 billion in cash and debt.
Advanced Medical Optics had spun out of Allergan Inc. in 2002 and been a stand-alone company until 2009.
Allergan Inc. later became Allergan Plc, which keeps an eye-care unit in Irvine.
In a Name
AMO was founded in 1976 as Heyer-Schulte Medical Optics Center, a research unit of Chicago-based American Hospital Supply Corp., which later renamed it American Medical Optics.
It became Allergan Medical Optics in 1986 when Allergan bought it after American Hospital’s $3.8 billion acquisition by Baxter Travenol Laboratories, also in Chicago.
Its name changed again to Advanced Medical Optics when Allergan spun it off in 2002.
It changed a fourth time in 2009 to its current name.
Is another name change in the works?
Looks as though the AMO run is over.
“‘Abbott Medical Optics’ stays with Abbott (Labs),” McEvoy said. “The nomenclature is under construction.”
