Abbott Standing Pat Now, But Vision Deal Could Yield More

Now that Abbott Laboratories (ABT) is buying an eye-health business, through its proposed acquisition of Advanced Medical Optics (EYE), it could be on a path toward more vision deals.

Advanced Medical gives Abbott a broad ophthalmology portfolio, including laser-vision-correction systems, contact-lens solutions and products that treat cataracts. But there are two pieces conspicuously missing if Abbott wants a total eye-health franchise: contact lenses and drugs for eye problems such as glaucoma or infections.

Abbott officials said Monday that the company is satisfied with Advanced Medical's portfolio. "As always, we'll continue to look for opportunities to further supplement that business," said John M. Capek, Abbott's executive vice president of medical devices, in an interview. "But the acquisition is stand-alone."

Nonetheless, questions are being raised about whether Abbott will move in either or both directions. Shares of a small, stand-alone maker of contact lenses, Cooper Cos. (COO), took off on Monday on such speculation.

Cooper shares, down 55% since August amid worries about the health of the contact-lens market, rose 8.5% Monday to $20.50.

Jan Wald, an analyst with Stanford Group, said it makes sense for Abbott to bolt on the missing pieces to create a complete eye-care company, and that it may be easy following a nondilutive deal for Advanced Medical.

The other contact lens-makers include privately held Bausch & Lomb, Johnson & Johnson's (JNJ) Vision Care business and Novartis AG's (NVS) Ciba Vision.

Though it doesn't make lenses, Alcon Inc. (ACL) is the heavyweight in the ophthalmology market today, with a big presence in eye drugs, lens solutions and surgical products. Shares of Alcon, which was a major beneficiary when Advanced Medical pulled a lens solution from the market in 2007 due to infections, recently traded down 3.3% to $88.21. Alcon could face tougher competition if Abbott uses its resources to speed up Advanced Medical's product development.

Nestle SA (NESN.VX) owns 52% of Alcon, after selling about a quarter of the eye-care company to Novartis.

Bausch & Lomb and Allergan Inc. (AGN) are also big makers of eye drugs. Advanced Medical wanted to get into that market, and the lens market, in 2007 when it sought to acquire Bausch & Lomb, but that effort was hurt when a lens-solution recall caused financial damage.

Elsewhere in the eye-care space, shares of battered LCA Vision Inc. (LCAV), which runs centers for laser-vision correction and has been hurt by the severe, recession-induced downturn in that market, traded up three cents at $4.96. LCA Vision centers use a lot of new equipment from Advanced Medical.

Advanced Medical shares, which had been hurt by a sharp downturn in laser-vision procedures, leapt on news of the Abbott deal, rising $12.65 to $21.50 late Monday afternoon. Abbott shares fell 2.6% to $49.86.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; [e-mail]

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