RPT-INSIGHT-Valeant's master plan for its contact lens business

Thu Oct 29, 2015 7:00am EDT
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(Repeating for additional clients without changes to text)

By Carl O'Donnell

NEW YORK Oct 28 (Reuters) - Valeant Pharmaceuticals International has pursued a plan in recent months to dominate the market for specialty contact lenses, according to two people familiar with the company's approach and some of the company's communications with its customers.

The Canadian drugmaker's goal, spelled out to key employees and demonstrated through its actions, has been to acquire other manufacturers, take on competitors and raise prices for unfinished lens components.

Valeant entered the contact lens business with its purchase of Bausch and Lomb in 2013 for $8.7 billion. At the time of the acquisition, Bausch and Lomb manufactured about 75% of the basic components of rigid gas permeable lenses, known as "buttons," said Kurtis Brown, who worked for Bausch and Lomb prior to Valeant's purchase. After manufacture, buttons are customized for individual patients, typically by laboratories specializing in that process.

With the acquisition of Paragon Vision Sciences in May for an undisclosed sum, Valeant and Bausch and Lomb further consolidated their grip on the market, gaining control of more than 80% percent of the gas permeable button market, according to one of the sources familiar with Valeant's operations and the representative of an industry group.

Rigid lenses comprise only about 10% of the contact lens market, and are popular among people who cannot wear soft lenses.

The acquisition of Paragon also gave Valeant and Bausch and Lomb full control of the small market for Ortho-K buttons, which are used to create one type of gas permeable lens, said Brown, now a marketing manager for lens manufacturer Menicon America Inc. Sales of Ortho-K buttons and finished Ortho-K lenses comprise only about $5 million in annual sales for Valeant companies.

The U.S. Federal Trade Commission is investigating the Paragon purchase as part of an anti-trust probe, a source interviewed by the FTC told Reuters. Valeant disclosed on Monday that it had received a letter from the FTC on or about Oct. 16 seeking more information about its acquisition of Paragon.   Continued...