The market for NovOculi's products currently consists of patients with refractive errors who desire to have sharper vision without external aids. Essentially, the potential market is the nearly identical to the potential market for LASIK, the current laser refractive surgery procedure. The markets are not exactly identical, though, as we expect there to be greater acceptance of a non-invasive refractive protocol versus the complication-ridden LASIK.
A massive potential market base exists for the laser refractive surgery industry. It is estimated that approximately 54% of the U.S. population (~162 million) has refractive errors, approximately 90% of which are eligible for correction using current techniques or those on the near horizon (Federal Air Surgeon's Medical Bulletin, Winter 1998). Furthermore, the demand for laser refractive surgery is approximately doubling annually.
The company has contacted 9 of the leading ophthalmological medical institutions in the U.S., 7 of which have expressed interest in participating in collaborative research and, given encouraging research results, performing NICS once it is available. Institutions expressing interest include: John Hopkins, Harvard, Stanford, Oregon Health Sciences, Duke University, as well as the University of California at San Francisco.
Furthermore, NovOculi has conducted a preliminary market survey at a local grocery market in the Durham, NC area. Fifty patients chosen at random outside of the grocery market, all with refractive errors, completed the survey, a copy of which may be found in the Market Survey topic. The following sections refer to this market study in further expounding on the tremendous market potential for NovOculi.
The following survey was given to 107 consumers at a local grocery store in Durham, N.C. on January 12th and 13th:
A) less than $500
D) more than $2000
Once 50 participants answered "Yes" to questions number 1 and 2, the survey was terminated and the following results compiled:
|Surveyed||Refractive Error||Consider Surgery||Pay Premium|
Of those that would pay the premium in order to decrease the rate of complications, the following distribution was found:
|Less than $500||$500-$1,000||$1,000-$2,000||more than $2,000||Total|
The data clearly indicate that, of those consumers in this sample population with refractive errors who would consider surgery for permanent correction, an overwhelming majority would pay a premium for a decreased risk of significant complications. Of the premiums that would be paid, the most common value was $500-$1,000 with a mean dollar value of approximately $1,100 (using midpoints and assuming midpoint for more than $2,000 is $2,500).
NovOculi will focus its marketing strategies on building market share among the outcome-conscious refractive surgery patients. For this customer segment, NovOculi will offer a branded technology which will help the patient to gain increased visual acuity with less of a risk of complications. The market research shows that this customer segment is less price sensitive and will absorb price premiums charged by ophthalmologists that use the NovOculi technology.
The market needs of the target segment are straightforward - clients want to permanently improve their vision using a process with the lowest possible risk of complications. Good vision is of paramount importance for such patients as it allows them not only to be independent of visual aids but also to become healthier in general. There will be no need to buy new frames or to rinse contacts, and such patients will literary open up their eyes to the world.
Patients desiring permanent refractive correction typically fall into two different groups with respect to their predominant concerns related to the procedure: Outcome-Conscious Patients and Cost-Conscious Patients. Outcome-Conscious Patients constitute the bulk of the refractive surgery market (46 out of 50 surveyed), and were willing to pay a premium in order to achieve a significant decrease in the rate of complications (defined as 50% less) with the procedure. The Cost-Conscious Patients typically felt that the decrease in rate of complications was not worth the extra expenditure.
The bulk of the population, these patients seek out the highest quality procedure with the most skilled surgeon, typically regardless of price. Most patients realize the importance of their vision and will not take chances with respect to their sight. This group will be the primary target for NovOculi as they will tolerate NovOculi's charging a premium for its superior procedure.
The small minority of the refractive error patient population, these patients will often fly to Canada or Mexico in order to capitalize on the large price differential with respect to the laser vision correction procedure between these countries and the United States. These patients will not be targeted by NovOculi initially as they are less interested in the superiority of technology and the skill of the surgeon as they are in the cost of the procedure.
Currently the industry is experiencing rapidly increasing competition in the form of price wars. The average consumer now pays approximately $1,650 per eye for LASIK, as opposed to greater than $2,500 per eye less than two years ago ("Laser Eye Centers Wage an All-Out Price War," New York Times, December 9, 2000). With this price crunch, the valuation of existing companies has plummeted despite their continued growth in earnings.
Insurance companies are beginning to experiment with reimbursement for LASIK as well. Currently, though, the only insurance companies that pay for LASIK at all do so with a subsidy, which is a small discount to keep patients within their health system.
NovOculi will be affected by the current industry trends, but to a much lesser degree than LASIK providers. Due to the superiority of NovOculi's technology over LASIK, NovOculi will be able to charge a premium. Also, due to its proprietary position, NovOculi is in a position to prevent the commoditization of NICS and thereby sustain economic profits for the duration of NovOculi's patent.
Currently, the major industry participants listed in "Laser Eye Centers Wage an All-Out Price War," New York Times, from December 9, 2000 are as follows:
The major corporate chain participants will be outlined in detail in the next section, Competition.
Currently, the distribution pattern for the industry involves high-end sales with excellent manufacturer support. The lasers cost millions of dollars and are large investments for the purchasing institutions. No distributor is necessary for these lasers as the internal sales staff and distribution mechanisms suffice.
The microkeratomes involved in LASIK are also sold directly from the manufacturer to the LASIK provider. With the microkeratomes, though, the small, tightly knit medical device distribution channels are beginning to play a role. For NovOculi, these medical device distributors will play a key role due to the fact that components of the NovOculi procedure are single-use and will require frequent purchasing and delivery.
As was alluded to in the previous section, the current buying patterns for the LASIK procedure involve substantial, infrequent purchases with excellent manufacturer support. The only significant purchases necessary in order to perform LASIK are the laser and the microkeratome, both of which are long-term, multiple-use devices. This buying pattern is related to the fact that none of the components of the LASIK procedure are single-use. These buying patterns are expected to change once NovOculi begins to capture market share and the need for replenishment of its single-use, dye-impregnated contact lens increases. NovOculi will need to develop strategic relationships with existing distributors in order to take advantage of their well-established distribution infrastructure.