New innovations keep medical–laser sales in double digits

NASHUA, NH––Wall Street analysts continue to be bullish about the market for consumer–based medical–laser applications––particularly wrinkle and hair removal.¹ The American Society for Aesthetic Plastic Surgery (ASAPS) reported that the total number of laser skin–resurfacing procedures performed in the United States increased from 116,901 in 2000 to 556,172 in 2006. As a result, companies such as Candela, Cutera, Cynosure, Lumenis, Reliant, and Syneron have experienced strong growth in recent years, particularly with their erbium–laser systems (including the erbium–based fiber lasers from Reliant and IPG Photonics).² According to the LFW/BOW market review, sales of erbium and holmium laser systems for surgical and aesthetic applications topped 3200 units in 2007 (up from 2800 units in 2006), generating $275 million in revenues.

Even more impressive is the laser hair–removal market; according to ASAPS, laser hair–removal procedures in the United States have increased from 487,807 in 2000 to 1,475,296 in 2006. Millenium Research Group (Toronto, Ont., Canada) said 3.1 million laser hair–removal procedures were performed worldwide in 2006 and with a projected annual growth rate of 18%, that number is expected to double by 2010.³ This in turn has fueled healthy increases in sales of diode lasers (notably the hair–removal systems sold by Palomar). Sales of diode laser systems for hair removal topped 3600 units in 2007 (up from 3100 in 2006), generating nearly $400 million in revenues.

In addition to wrinkle and hair removal, laser lipolysis (body sculpting) is another emerging growth market for in the aesthetic sector. Cynosure, for example, reported a 70% increase in revenues for the third quarter of FY2007––$31.5 million compared to $18.6 million for the third quarter of 2006––which, according to Cynosure President and CEO Michael Davin, reflects “rapid market penetration” of the company’s Smartlipo body sculpting product, a 1064–nm Nd:YAG system. This trend is reflected in the LFW/BOW numbers, with sales of surgical Nd:YAG lasers increasing from 2100 units ($179 million) in 2006 to 2370 units ($202 million) in 2007.

But, with consumer confidence taking a nosedive in the latter part of 2007, worldwide sales of medical–laser systems were only 10% year–over–year in 2007, down from 15% year–over–year in 2006.

Vision correction still stalled

A key factor behind the slowdown in medical–laser sales was a nearly flat laser vision–correction market (in terms of both system sales and procedure volumes), which has impacted sales of excimer lasers and per–procedure royalties. Alcon (Hünenberg, Switzerland), for example, saw its laser–based revenues drop quarterly throughout FY2007, from $12 million in Q1 to $8.5 million in Q3. If this trend keeps up, the company will realize less than $40 million in revenues from its laser–vision–correction business for the year, compared to $51.5 million in 2006 and $58 million in 2005.

This trend is reflected in the 2007 financials of vision–correction service providers such as LCA–Vision (Cincinnati, OH). Commenting on LCA–Vision’s third–quarter financials––in which revenues doubled year–over–year but still fell short of expectations, prompting CEO Steve Straus to predict that earnings would decline “significantly” in the fourth quarter, due to disappointing procedure volumes and the weakening U.S. economy’s effect on consumer confidence.

On a more positive note, Alcon is in the process of buying WaveLight Technologies (Erlangen, Germany), which saw its revenues jump from $85 million in 2005 to $104 million in 2006 and is on track to top $100 million again in 2007.⁴ WaveLight develops and markets refractive–laser and diagnostic systems, including the Allegretto laser system for refractive eye surgery. According to WaveLight and Alcon, the WaveLight Allegretto has a global installed base of more than 800 units and offers the fastest ablation speed on the market today.

Alcon made its bid for WaveLight after passing on the purchase of Bausch & Lomb (Rochester, NY), which was instead acquired by Warburg Pincus (New York, NY), a venture–capital firm that subsequently took the company private. Based upon three quarters of financials, however––and despite ongoing issues with product–recall (not in the laser sector) and related financial problems––Bausch & Lomb is on track to realize total revenues of $130 million from its laser vision–correction business, up from $122 million in 2006 and nearly in line with 2005 revenues of $139 million.

Another apparent success story in vision correction is American Medical Optics (Santa Ana, CA), which is now the proud owner of both VISX and IntraLase. In 2006, IntraLase reported $130 million in revenues, and its “all laser” approach (a diode–pumped Nd:YAG laser manufactured in–house using its own lasers) has become the “de facto” standard for LASIK worldwide. In 2007, with the addition of IntraLase, American Medical Optics saw its laser–vision–correction revenues jump from $64 million in the first quarter to $102 million in the second quarter. The company’s U.S. excimer procedure volumes grew 8.6%, while its U.S. femtosecond procedure volumes grew 35.8%.

Diagnostic market growing

There are other positive trends in the ophthalmic market as well. For example, sales of other lasers for other applications within ophthalmology––such as diode and Nd:YAG lasers for diagnosing and treating a number of eye conditions, such as glaucoma and cataracts. In addition, the growing market for optical diagnostic systems is being fueled by sales of laser– and light–based products in ophthalmology.

Carl Zeiss Meditec (Jena, Germany), for example––which generates 60% of its revenues from laser–based diagnostic equipment for ophthalmic diseases and is gaining ground in the refractive surgery sector, reported a 21% increase in revenues in 2006, to $91 million. As of the third quarter of 2007, the company had already reported $104 million in revenues, which means they are on track to top $130 million in revenues for 2007. According to Zeiss management, compared with the same nine–month period in 2006, consolidated revenue for its diagnostics business segment had increased 25%, driven primarily by its Stratus OCT, Humphrey Field Analyzer, IOLMaster, and OPMI Visu products. Looking ahead, the company is developing and/or preparing to launch additional products that will further extend its presence in the ophthalmic market, including a femtosecond laser and a new laser system to treat retinal disease.

In fact, OCT is building some good momentum as a viable commercial market. At present, the global market for OCT systems is estimated to be $200 million and growing at an annual rate of 30%. The first commercial application for OCT––ophthalmology––is expected to remain the dominant commercial application through 2011; at the 2007 American Academy of Ophthalmology meeting in New Orleans last November, more than a dozen companies had OCT products on hand, and an estimated 37,000 OCT scans are taken daily in the U.S. for diagnostic purposes in ophthalmology. In addition, new applications and commercial OCT products are emerging in cardiology, dentistry, cancer detection, and dermatology (see table of OCT manufacturers).

––Kathy Kincade

REFERENCES

1. R. Duprey, “The Beauty of Lasers,” Motley Fool, April 10, 2007.
2. Millenium Research Group, “U.S. Markets for Aesthetic Lasers 2006,” May 2006.
3. K. Kincade, “Aesthetics continue to drive sales,” Medical Laser Report, Jan. 1, 2007.
4. K. Kincade, “Alcon makes takeover bid for German eye–laser firm,” Medical Laser Report, July 2007.