Carl Zeiss: Innovative Vision for Eye-Care Technology

Originally Published MDDI January 2004

Q & A

Developing solutions for real-world clinical problems rather than products in search of a market is key to the firm's success in the ophthalmic arena.

Erik Swain

The Carl Zeiss name has a long history in the diagnosis and treatment of vision defects. Carl Zeiss himself in the 1800s invented a number of optical designs and instruments that allowed people to improve their vision. The entity that came to bear his name, the Carl Zeiss Foundation, was the first to develop prescription spectacle lenses and wide-angle eyepieces, among other breakthroughs. 

The name continues to have prominence in the field, although the organization has undergone tremendous structural changes in recent years. In 1991, the foundation acquired Humphrey Instruments. In 2002, in an effort to become more market-driven, it spun off the majority of its ophthalmic operations and merged them with Asclepion Meditec to form Carl Zeiss Meditec AG.
The idea behind the spin-off was to offer solutions across the eye-care spectrum. Not only did this mean being a player in the four major disease clusters—refraction, cataract, glaucoma, and retina—but it also meant offering both diagnostic and therapeutic product solutions. 
So far, the spin-off seems to be working, as sales grew 23% in its first year and a number of partnerships were formed with companies that make complementary technologies. 

James Taylor, president and CEO of U.S. subsidiary Carl Zeiss Meditec Inc. (Dublin, CA), spoke to MD&DI East Coast editor Erik Swain about spin-offs, synergies, lessons learned that could benefit the rest of the device industry, and the future of the ophthalmic sector.

Q: What were the reasons for the spin-off, and has it gone as you've expected?

A: We looked at the healthcare industry and the ophthalmic spectrum as areas of very favorable market potential. The baby-boom generation is aging. The developed-world population is aging. Major developing population centers such as India and China are starting to emerge as economic entities of note. These whole population bases are moving into the healthcare arena in a more active way. When you couple that with advances in eye-care technology, it represents an opportunity to play a more significant role in what we believe will be a major, attractive healthcare market going forward. There's also the factor of patient expectations.

One hundred percent of the world's population, if they live long enough, will need vision care. Everyone is guaranteed to need it before the end of their lives, if they live a normal life span. If you go back 10 or 15 years, the goal of the older population was to not look old. Today it is to look young. By the same token, in eye care, the goal was to see better, and now it is to see perfectly. And that's a very attractive market.

Zeiss had been in that marketplace for years. Humphrey had a history in glaucoma diagnostics. Meditec had a history in laser treatments. We decided we should pull together the different pieces of the ophthalmic-care puzzle and run them in a more coordinated manner.

Zeiss is a 150-year-old foundation, and moving the operations outside of the foundation provided both improved flexibility and focus. As a result, we ended up with a roughly $250 million company with 80% equity ownership by Zeiss. Out of this, we achieved a focus, a consolidation of resources under a unified strategic structure, and a presence in diagnostics and therapeutics.

Q: What has been the effect on the company's strategy and focus?

A: The natural evolution in medical systems has been that there is a coming together of diagnostic and therapeutic products, and they combine into integrated systems. It's similar to anesthetics, where patient monitoring and gas-delivery technologies have evolved into integrated anesthesia systems. It's not just a question of ease of operation, but you could start to get something approaching closed-loop inputs and outputs.

We see the same things out there in the ophthalmic systems market. The drugs and devices are starting to come together into combined solutions. An example is in age-related macular degeneration (AMD), where an agent is injected into the bloodstream and then activated by a laser light source. It's a drug/device combination. What the caregiver wants is to buy a total solution, not separate pieces of the puzzle. And here, diagnostics and
therapeutics merge as systems, and systems combine with other pieces to form solutions.

We went back and looked at our vision, which defines the leadership role we want to play in the ophthalmic-care business. Now we can do a much better job of delivering on that vision because we are able to look at problems from the patients' and caregivers' standpoints. We begin with the belief that everyone should have the opportunity to attain perfect vision in his or her lifetime. We believe that this is very achievable. There may still be economic and other barriers, but in terms of technological barriers, those are rapidly coming down. 

We see our position as an innovator and as a solutions provider. We do not intend to be a pharmaceutical or commodities provider. Our strength is in technology. But to be successful, we will need to have cooperative relationships in both of those areas. Again, the customer is looking for a total 
solution. 

Q: How have you been able to synergize diagnostics and therapeutics successfully, and do you believe it's possible to do so in other sectors of the device industry?

A: Look at laser vision correction. That market has evolved so that we can use wave-front diagnostics—the ability to use light waves to measure aberrations of the eye—to create a map as a guide for ablation of the cornea, which can be used as a guide in laser surgery. So work on this area is now housed within several of our technical skill sets. These processes can usually be done more elegantly internally.

Can other industries have it? Certainly. As long as the critical skill sets are there. We're already seeing it in anesthesia—patient monitors measure the heart rate, blood pressure, and the like, and those inputs are used to control or guide the delivery of the gas. 

People understand the individual technologies, but the systems integration and the clinical application development are inherently more difficult. The management's challenge is to figure out how to support integrated systems and produce clinical solutions. You have to broaden the core technologies that are available for you to control. But it's difficult to become an expert in all forms. So we have to decide, which do we want to control, which do we get from the outside, and how do we establish partnerships?

Taking technologies and turning them into clinical end points requires clinical input. For example, how do you take two different diagnostic tools and make them into something better than either is separately? That requires clinical research support, some of which is on the inside, but much of which has to be on the outside. It requires internal control but the ability to establish external long-term relationships. That means having both designs and an organization with an “open architecture” mind-set. 

Q: Have you been able to achieve synergies across disease clusters?

A: That's both an opportunity and a challenge. Some products can cross over disease clusters. Refractive and cataract therapies are beginning to come together. That's evolved over time. Cataracts are caused by the opacification of the lens inside the eye. It happens with age. The historic treatment has been to remove the opacification, put in an artificial lens, and get the patient to see well. What's evolved is that now when the cataract is removed, clinicians can put in a lens that allows the patient to see 20/20 or better. There are economic and reimbursement obstacles to this, but from a technological standpoint, it is possible to remove cataracts and get perfect or close-to-perfect vision. 

Glaucoma is another area with crossover. Traditional glaucoma tools can also be used for other retinal diagnostics and therapeutics. Carl Zeiss Meditec introduced OCT (optical coherence tomography) into ophthalmology. The technology uses light waves to provide cross-sectional images of the retina. It's similar to what we see in ultrasound images and can be used to diagnose a number of retinal conditions. But it can also measure changes in the retina that indicate the presence and progression of glaucoma. 

As a company devises strategies, it is always good to think how its different technologies can merge or cut across different disease states. Eventually, it may find that its core technologies have multiple applications.

Q: What do you consider significant technological developments in areas such as optical design and image processing?

A: We are seeing all kinds of advancements in refractive technologies, which are important as people start to look at refractive corrections of all types. Work is being done on a lens implant that can be modified with light technology, so you can adjust the lens characteristics once it is implanted. We're designing a digital light source that will be an enabling technology.

Another key development is OCT. I liken it to ultrasound, an area in which I once worked. When ultrasound was first developed, its primary use was to look at fetal gestation age. We knew the resolution would get better, and that additional capabilities would emerge, but I'd bet not one person ever imagined we would perform heart-valve surgery on an unborn fetus using ultrasound guidance. We believe OCT is a similar technology.

Today, we can look at cross-section images of the retina. Eventually we should be able to look at the front part of the eye in the same way. There is potential for the software and the algorithms to evolve into something more revolutionary. It's almost impossible for us to imagine how far that technology will go. 

From a disease-state perspective, we'll see a lot of advancements in treating AMD. Until recently, the baby-boom generation wasn't old enough to get it, and most people used to die of other things before getting it. But AMD is starting to emerge as a major problem. Eight to nine million people in the United States are affected. It robs your central vision first, then moves outward. Patients may quickly lose their ability to read or to see the faces of their grandchildren. Many pharmaceutical companies are working on treatments to slow or prevent the disease progression. And we are working on an early diagnostic tool to facilitate earlier detection and treatment. 

Q: How has Zeiss been able to grow in a less-than-optimal economy? Is it because of the market you're in, or things you're doing operationally?

A: We have been fortunate enough to be in a market that is growing. Irrespective of how much we want to control costs or how bad the economy is, people consider their vision very important. If you ask people which of the five senses they would least want to give up, vision is usually the one, so despite the economy, it is still a primary concern for patients. 

We have also introduced innovative and unique technologies. OCT is a major driver of growth. It provides clinicians with the ability to see and do things better and less expensively than ever before. Lens technology has advanced, and we have a biometric diagnostic (the IOL Master) that has contributed to better outcomes for cataract surgery. 

On the operational side, we've worked to install world-class manufacturing facilities, and we've benchmarked ourselves against other businesses throughout the healthcare arena. I've been able to visit device companies in other sectors and we've been able to share best practices and figure out how to do things better. And we have excellent people. We are blessed with people who really care about what they do. 

Q: What direction do you see Carl Zeiss Meditec taking in the future?

A: We plan to stay in the ophthalmic market. It's a great market that has been very strong for us. It totals over $15 billion, or about $5 billion if you remove the drug portion.

Our goal is to double in size in three to five years. That sounds aggressive, but it is clearly achievable. We are not as successful outside the United States as we could be. There is a lot of opportunity in global distribution.

We have new breakthrough technologies that could show significant growth. And the ophthalmic marketplace is well positioned.

There are a few big players and a number of small firms, and we will see consolidation, so there is the potential for mergers and acquisitions. But we will not get big for the sake of getting big. We will not seek out opportunities that do not match our value set.

We do need to integrate certain capabilities. We need to combine diagnostics and therapeutics into systems, and systems and other pieces into solutions. Some of these solutions will be all our own. Some of them will combine our technologies with those of other healthcare companies. And with other solutions, we will simply enable their development. For example, OCT is being used in drug trials. It has the potential to provide much more precise measurements at the end point of the clinical trials than pervious technologies could provide, and could allow the trials to be completed much more quickly.

We have to examine where we want to be a provider, where we want to be a co-provider, and where we want to be an enabler. In almost every development in ophthalmics, we want to play one of those three roles.

Q: What direction do you see the ophthalmic industry headed? The healthcare industry overall? 

A: There has been an immense amount of public attention devoted to the issue of controlling healthcare costs. We see it as an enormous factor in what we do. If we increase costs without providing a substantial benefit, it is not worth our time and energy.

But controlling costs while providing full value and reducing costs are two different things. We have to look at healthcare not only on the basis of cost, but also based on the value gained for the money spent. 

As far as the ophthalmic industry goes, the pharmaceutical companies are taking more of an interest in it, as are the biotech companies. More money, research, time, and energy are being focused on this market. There are more needs and more patients than ever before.

And I do see consolidation on the horizon. Smaller companies at some point will need global distribution, and an integrated diagnostics/therapeutics approach.

I also see more collaboration with the clinical community. They need to be involved earlier, more directly, and more completely in the development process. We are developing solutions for real-world clinical problems, not products that need to find a market.

The ophthalmic arena is clearly one of the most exciting areas in healthcare. At Carl Zeiss Meditec, we are excited about our opportunity to work with the clinical community to achieve major advances in patient care. 

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