Medical market sees 18% growth in 2004

The medical-laser market regained a certain amount of buoyancy in 2004, reflecting the general economic upturn in most of the major world markets.

ALAMEDA, CA—The medical-laser market regained a certain amount of buoyancy in 2004, reflecting the general economic upturn in most of the major world markets. The bulk of this growth continues to be in aesthetic and vision-correction applications paid by the patient out of pocket, which has been the primary market driver for several years now.

As a result, several medical-laser systems manufacturers—notably Candela, Biolase, Laserscope, Cutera, and IntraLase—all saw strong growth (in some cases record growth) in 2004, a trend that translated into good news for manufacturers of diode, erbium, holmium, Nd:YAG, alexandrite, and, to a lesser extent, excimer and CO2 lasers. Much of this gain was driven by the aesthetic market, primarily hair removal and skin rejuvenation. Laser systems for these applications are now being sold not just to dermatologists and plastic surgeons but also to ophthalmologists, gynecologists, and general practitioners.

For example, according to Jerry Puorro, president/CEO of Candela, which offers a line of solid-state, diode, and dye lasers for aesthetic and dermatologic applications, growing consumer awareness of laser procedures is fueling much of this trend. In addition, he believes that nonsurgical cosmetic procedures, including lasers, are just scratching the surface in terms of numbers of procedures. Candela reported earnings of $2.9 million on revenues of $22.4 million for the quarter ended October 2, 2004, compared to earnings of $1.8 million on revenues of $18.7 million for the same quarter in 2003.

In ophthalmology, while excimer-laser system sales have stalled somewhat (although IntraLase appears to be on a roll), vision-correction procedures are up, which means royalty revenues are on the rise as well. For example, market leader VISX—which was acquired in late 2004 by Advanced Medical Optics (Santa Ana, CA), a global provider of ophthalmic surgical devices and eye care products, for $1.3 billion—saw its third-quarter revenues decline from $39.3 million in Q3 2003 to $38.7 million in Q3 2004. At the same time, however, license and "other" revenue (which includes per-procedure royalties), grew 16% in Q3 2004 from the comparable period of 2003 ($27 million in Q3 2004 vs. $23.5 million in Q3 2003); according to VISX, this increase resulted from 4% growth in U.S. procedure volume and higher CustomVue procedure sales in both domestic and international markets.

Outside of dermatology and ophthalmology, Biolase (San Clemente, CA) continues to dominate the dental arena. In fact, despite lower-than-expected third-quarter 2004 results, Biolase's view of the future remains upbeat. The same day the company reported a loss for the quarter of $1.2 million on revenues of $12 million (compared to earnings of $500,000 on revenues of $13.5 million for the same quarter a year ago), it also announced that Robert Grant had been appointed president and CEO and a member of the board of directors. Former president/CEO Jeffrey Jones is now vice chairman of the board and CTO, while John Hohener will assume the position of executive vice president and CFO.

Laserscope (San Jose, CA) has carved a nice niche for its solid-state laser technology and related disposables in the urology market, focusing almost exclusively on the treatment of benign prostatic hyperplasia (the company also offers a laser system for aesthetic applications and says this is a growing business sector for them). Laserscope reported record revenues of $24.2 million for its third quarter (ended September 30, 2004), a 69% increase from $14.3 million in the corresponding 2003 quarter. Third quarter 2004 net income was a record $4.4 million, or $0.19/share, a significant increase from net income of $533,000, or $0.02/share, in the same quarter of 2003, and net income of $3.0 million, or $0.13/share, for the second quarter of 2004.

"We had an active and productive third quarter in our worldwide urology business, selling a record 63 GreenLight laser systems and nearly 10,000 fibers," said Eric Reuter, Laserscope president and CEO. "Our number one goal is to ensure that Laserscope's GreenLight PVP (Photo-Selective Vaporization of the Prostate) is recognized as the new worldwide standard of care for treating BPH."

Outside of the United States, medical-laser companies saw mixed fortunes in 2004. Ophthalmic laser specialist Carl Zeiss Meditec (Jena, Germany) was recognized as one of the 50 most successful and fastest growing technology companies in Germany; for the first nine months of FY2003/2004, Carl Zeiss Meditec reported only slight year-over-year growth in sales (allowing for exchange rate changes) of 170 million Euros (US$231 million) but a doubling of net income to 9.4 million Euros (US$12.8 million). The company is also in the process of acquiring the US company Laser Diagnostic Technologies for an undisclosed sum. The well-known Israeli company Lumenis (Yokneam) experienced a more difficult year, reporting a net loss of $5.4 million for the first nine months of 2004, although this was a much smaller loss than the $55.4 million reported for the same period in 2004. However, the company's operating income was $4.8 million on sales of $198.0 million compared with $211.7 million in the same period last year. Product breakdown for the third quarter showed a rise in sales of surgical products over last year, but a drop in sales of aesthetic, ophthalmic, and dental products.

As a result of these trends, according to Medical Laser Report (January 2005) the global medical-laser systems market rose 18% in 2004 over 2003, reaching $2.4 billion. This systems growth is expected to continue in 2005, with projected systems sales of $2.7 billion (for a more detailed analysis of the medical-laser systems market, including a breakdown by laser type, see the January 2005 issue of Medical Laser Report). Looking at this market from the components side, sales of nondiode lasers for medical-laser systems totaled $397 million in 2004, up 22% from 2003, while projected sales of nondiode lasers in 2005 are expected to rise 9% to $433 million. (Our estimates of diode-laser sales in the medical sector will be reported in the February 1, 2005 issue of Optoelectronics Report.)

—Kathy Kincade

Ed. Note: Readers should note that the laser source revenues reported in the medical section of the Laser Focus World review/forecast are compiled by tracking medical-system end-user sales within this market sector. Revenue projections are based on medical-laser system sales to end users, and the laser is only one component of these system sales. The numbers in the Laser Focus World tables, however, are based on revenue estimates of the laser source itself.

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