Building an oligopoly in eye care
Recently, US-based eye care firm Advanced Medial Optics (AMO) completed the $1.3 acquisition of Visz, Inc., the leader in producing laser surgery machines. This is the latest step in a textbook example of how a weak spin-off creates a major role for itself in a defined industry through an ambitious campaign of acquisitions and international expansion.
AMO was spun off from drug maker Allergan, best known for making Botox, but also in drugs to treat eye diseases like glaucoma. Allergan wanted to concentrate on pharmaceuticals, so it spun off its non-drug eye products. According to a Wall Street Journal story ("Eye-Care Firm Gets Focused", 5/27/2004), AMO was at that time "a jumble of eye-related businesses," but it has become "a powerhouse in vision correction, with a strategy aimed at tackling eye problems across all generations."
In 2003, the company bought Pfizer's surgical ophthalmology business, giving it a strong position in an emerging technology called videoelastics, used in cataract surgery. Recently it said it would buy Quest Vision Technologies Inc., which is developing a lens for presbyopia. The company evolved a strategy of serving eye care needs across several generations, and went ahead in acquiring technologies that would help it meet that goal by plugging the gaps. .
With an aging population and a new set of favorable Medicare guidelines, more and more people are option for eye surgery and implants to improve their vision. AMO has a major and growing presence in the surgeons' offices, where the buying decision for such equipment is made. The company has also used its existing sales force to push products in areas of the world where they have been under-represented previously.
In two short years, AMO has been transformed from a discard into one of the leaders in a thriving market segment. It's an example of how concentrating on a small market niche and buying intelligently to make a sensible, coherent company can be a quick road to success. Its market capitalization has gone from $350 million to over $1 billion.
And, as with other successful companies, CEO Jim Mazzo has declared "it is our goal to be number one or number two" in all the market segments they pursue. The focus on a single market is the growing trend in the industry, as companies like Pfizer and Allegan get out of medical device businesses to concentrate of pharmaceuticals, given an opportunity to ambitious smaller companies to build a focused market.
