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The Cooper Cos recently completed its acquisition of UK-based Sauflon Pharmaceuticals, a privately owned global manufacturer of contact lenses and aftercare solutions. The transaction, closed at US$1.2 billion, has generated a muted reaction. This is perhaps due to Sauflon being relatively under the radar, ranked 10th in global contact lens value sales with a market share of less than 5% in 2013. While the acquisition is not likely to change the global hierarchy, at a closer look, it signals a significant shift in competitive dynamics within the industry.
Scanning the global landscape, the US has traditionally been the largest contact lens market, but it lags in growth when compared to other regions. Western Europe is forecast to be the fastest-growing region for contact lens value sales in 2014, which makes it an important market for contact lens players. Cooper, having acquired Sauflon, would now have a share of more than 10% in the daily disposable market in Western Europe. This puts it in third place behind heavyweights Johnson & Johnson and Novartis and also eliminates to some extent the rising competitive concerns that Cooper may have about Sauflon rapidly catching up with it in Europe.
Cooper’s acquisition is not purely motivated by acquiring a close competitor. More importantly, it is a strategic move to break into the global daily disposable contact lens market. The market for dailies has been the fastest-expanding area in soft contact lenses, and is forecast to lead growth over the next five years. Specifically, the strong growth is driven by silicone hydrogel one-day contact lenses. Cooper is a late entrant in this category, having only recently launched its MyDay range of silicone hydrogel dailies, which is priced high, only available in certain markets, and does not cater to astigmatism and presbyopia. Despite being slower than its peers, Cooper has gained rapid market entry by acquiring Sauflon’s lead product Clariti, which is the only full product family of silicon hydrogel dailies widely sold in spherical, toric and multifocal form.
The Clariti 1-day Toric is also arguably the first and only silicon hydrogel dailies product on the market that corrects astigmatism (with none available from the other leading contact lens players). This is a huge advantage for Cooper over stronger counterparts like Johnson & Johnson and Bausch & Lomb. It also firmly establishes Cooper as the leading manufacturer of speciality lenses (ie toric and multifocal lenses), which is in line with its strategic positioning.
With an extensive, multi-tier category of daily disposable contact lens for every eye condition, user habit and budget, Cooper would have to ensure that it properly manages its portfolio. If managed properly, a diverse portfolio can bring many benefits – Clariti being more affordably priced than its counterparts serves as a good entry-level category to widen Cooper’s share of the silicon hydrogel dailies market. At the same time, Cooper’s premium brand of MyDay lenses provides an upsell option to an expanded pool of consumers. The downside is that both Cooper and Sauflon offer conventional hydrogel lenses that are largely similar in the eyes of consumers, which, if poorly managed, could lead to product cannibalisation.
It will not be long before other players expand and improve on their range of silicon hydrogel dailies. Thus, acquiring a great product portfolio from Sauflon is just the first step for Cooper. Cooper will need to focus on leveraging Sauflon’s technological expertise in manufacturing silicon hydrogel dailies, and seek to continually push the frontiers of product innovation.