Abbott Looks To Boost Vision Care Product Sales With New Plant In Malaysia

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ABT: Abbott Laboratories logo
ABT
Abbott Laboratories

Abbott Laboratories (NYSE:ABT) recently announced that it will invest $60 million in an intraocular lens (IOL) manufacturing plant in Malaysia. IOLs are lenses which are implanted in the eye during the treatment of cataracts. The company expects the plant to be operational  by next year and cater to the global IOL market with a production capacity of about 1 million IOL units per year. This announcement reflects Abbott’s intention to sustain its high growth momentum in the Vision Care business, with an emphasis on lowering costs and augmenting supply. The global healthcare giant recently also received CE approval for its new TECNIS Symfony extended range of vision IOLs, used for the treatment of cataract patients who may also have difficulty focusing on close objects. [1] ((Press Release, Abbott, June 24 2014))

Vision Care products are a part of Abbott’s Medical Optics business and generated $1.1 billion in sales in 2013. Cataract product sales contribute over 65% of the total Vision Care revenues and are an important driver for the future growth of the business. The company’s new products – including the TECNIS Toric Intraocular Lens in the U.S., the TECNIS OptiBlue Lens in Japan and the new Catalys laser cataract system – have been accepted well since their launch, and helped Vision Care sales register double-digit growth in emerging as well as developed markets in the first half of this year. Going forward, we expect the new production facility and the introduction of TECNIS Symfony IOL to further aid the company in maintaining its double digit sales growth in the business, with improved sales in Europe as well as emerging markets. ((Abbott’s CEO Discusses Q1 2014 Results – Earnings Call Transcript, Seeking Alpha, April 16 2014))

We have a price estimate of $42 for Abbott Labs, which is roughly in line with the current market price.

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The Global Cataract Market

The global cataract market is currently valued at around $4 billion and Abbott holds the number two position globally in the cataract lens segment. [2] A report by Research and Markets suggests that the global cataract market could grow at a CAGR of around 5% over the next five years, with intraocular lenses (IOL) occupying about 85% of the total market. [3] The World Health Organisation expects total cataract surgeries to rise from about 12 million in 2000 to about 32 million by 2020. [4]

Cataract surgeries are expected to consistently grow in the near future because of the growing elderly population as well as new and advanced technologies. The increase in government spending on healthcare, especially in emerging markets such as China and India, is also likely to contribute to this growth. The adoption of IOLs in emerging markets is slowly gaining steam, as more people get access to advanced healthcare and better technologies at affordable costs. Considering that the company specializes in IOL devices and is consistently innovating and introducing new products, we expect Abbott’s cataract product sales to continue to grow faster than the market in the near to medium term.

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Notes:
  1. Abbott invests $60M in optics–its fastest growing device segment–with Malaysian plant, FierceMedical Devices, Sept 11 2014 []
  2. Abbott (ABT) Presents at William Blair 34th Annual Growth Stock Conference (Transcript), June 11 2014 []
  3. Cataract Surgery Devices Market to 2019, Research&Markets, Aug 2013 []
  4. WHO Blindness Vision 2020 []