The Birth of Daily Disposable Contact Lenses
by Ron Hamilton (published in ‘The Telegraph Business Club’ book ‘Intellectual Property’)
During the 1980’s I was employed as vice-president of a major US eye-care company, CooperVision Inc. This company had extensive manufacturing, sales and marketing activities for contact lens and contact lens cleaning solutions. During that time I was heavily involved in high-volume manufacture of lenses and oversaw the building and commissioning of a solutions manufacturing plant adjacent to one of our most advanced contact lens production facilities. Working closely with me at that time was our technical manager, Bill Seden, and we frequently found ourselves contrasting the way contact lenses were made with the methods adopted for their sister product, cleaning solutions.
In essence, contact lenses were treated as individual items even when made in sizeable batches. The reason for this was that the processes involved were not ‘stable’, i.e. they gave rise to significant lens-to-lens variation, even when made under ‘identical’ conditions. The established way to deal with this was to have massive amounts of inspection to weed-out the out-of-tolerance product and to assign parameters to each individual good lens. Process yield was typically 30%. By contrast, making bottles of cleaning solutions relied on strict process control, from the manufacturing environment right through to the selection and mixing process of the various chemicals involved. Process yield was around 100%.
The key question raised by contrasting the processes was, “if similar disciplines could be applied to the manufacture of contact lenses as are applied to the manufacture of solutions could the cost of making a lens be low enough to render cleaning obsolete?” On the face of it this was a rather idealistic goal. A pair of soft contact lenses retailed at around £150 whereas the cost of cleaning a lens was just a few pence. Only when a similar unit cost could be achieved would substitution be possible. The dream of ‘converging’ these costs was about to take-over the lives of Bill and me.
After some preliminary ‘skunk’ work at our UK facility I visited the US head-office to seek some funding for the formal development of a monthly-disposable contact lens, ie one which would be worn continuously for up to 30 days and then thrown away, not cleaned. The conversation went something like this:
“Tell us again Ron what you mean by a disposable contact lens.”
“One which would be worn once and then thrown away.”
“Never cleaned … single use.”
“Do you know how much money we make from cleaning solutions? Do you know how much we have invested in plant, inventory, etc, etc?”
These questions were rhetorical … I had, as mentioned above, just built a cleaning solutions plant and knew only too well the scale of the investments made by the company. The short answer was, “no budget”.
There were more ‘reasoned’ objections offered:
“Even if you could reduce the cost of making lenses people would still clean them. We would simply end up selling cheaper lenses. I know, I used to market tooth brushes … people just don’t like throwing things away … we could not get people to purchase new tooth brushes even when they had worn them down to the handle! Your idea is simply unmarketable”. Some time later when trying to get interest in disposable lenses I was told by a marketing manager for solutions that, “People likecleaning their lenses”.
Unable to raise interest within our company (we even offered to be spun-off and to be arms-length but this was refused) Bill and I resigned in early 1988. The company cars were returned, the pension contributions stopped, the business-class flights stopped and, of course, the salary stopped. It would be wrong to project a ‘gung-ho’ attitude behind this decision. The fact was that, based on a Business Plan, we had been offered over £4million by a leading VC to start a new business. We had made our intentions clear to our employer and our resignations were accepted in good part.
The funding package was conditional on our ‘lead-investor’ syndicating much of the funding. Preliminary soundings, we were informed, “indicate that syndication will be easy … the problem will be deciding which potential co-investors to reject”. BUT, after making numerous presentations not one company expressed any interest and our lead investor simply walked away! It became clear that the system was (is?) this … had the deal been syndicated our lead investor would have secured an immediate, very large, cash payment and been eligible for ‘sweet equity’, however, if it turned out that there were no syndication then they would simply cancel the Offer. For them it was a ‘win or no loss’ formula. We were told that this process was completely legal … in effect, “tough chaps”! Stung by this, I obtained Counsel Opinion (at not inconsiderable cost) which concluded that the withdrawal of the Offer of Financial Facilities was “in apparent breach of contract”! This opinion was sufficient for me to extract financial redress, just sufficient to cover the cost of some development work and, crucially, the cost of our initial patent application based on this work.
We were, however, about to jump from the frying pan into the fire. Following the above rejection I had contacted a major company regarding our work and, after preliminary discussions, they offered us an Option Agreement for a full technical appraisal. Fortunately these discussions started after our patent filing had been made (but by only a few days!). We spent several months with their technical teams following which they offered another Option. At last there was a chance of seeing our idea funded and a meeting was set-up to review the way forward. We went to this meeting convinced that it was to discuss licensing terms and a possible consultancy agreement. The meeting was barely started when a new, to us, representative of the company looked at us and said, “you two can go now”! Our main contact within the company asked for an adjournment during which he explained to us that his company had calculated that we did not have sufficient financial resources to fund the necessary international patent filing needed to protect our work. It would therefore, shortly, go into the public domain. He explained they since they reckoned that they now knew enough to take the technology forward themselves there was going to be no need to pay us any royalties. Lastly, we had insufficient time to find another possible partner … game, set and match to them! Oh, he also explained that what they were doing was, of course, completely legal.
Having read about British Technology Group (then part of the DTI) I asked for a meeting to see if they would be interested in our technology. The upshot of this was that we made an assignment of our patent work in return for a 50/50 share of any related net income secured by BTG. Our patent work was going to be protected even if we had to relinquish it for no immediate payment.
Although BTG was confident that a license could be secured ‘from paper’ no such result was achieved even after considerable marketing to contact lens companies world-wide. It was decided that more hard evidence regarding the viability of our process was needed and BTG part-funded a small proof-of-concept laboratory. I moved house to one with a room in the back garden (600sqft) and with the help of some SMART (DTI) money (for related work in contact lenses) we built and proved a small-scale production line complete with 15 Ton moulding machine. Once again likely partners in the contact lens industry were contacted by BTG. This time a number visited us but, without exception, they all walked away, each with some plausible explanation on why they were not interested. For example, the VP of R&D from a major US company’s visited. After a long day he explained that, since he had a department of 150 working on related processes, he could not report back that two of us working in a back garden had anything to offer. Prior to leaving he conceded, “you may have something” but we never heard another word! Our laboratory complete with a ‘welcome’ sign in Japanese was also not enough to convince our friends from Japan.
It was now four years since we had resigned from employment to start making disposable lenses. Our unit cost goals had been to achieve a level that the lenses would be worn for some 30 days continuously and then destroyed. Evidence was now emerging that overnight wear (sometimes called ‘extended’ or ‘continuous’ wear) could result in eye ulcers with potential loss of vision. This wearing modality was now attracting much adverse publicity and the risks, whilst being reduced by not reusing the lens, were still likely to prove a major barrier to the success of our product. It looked like we had reached the end of the road. We had to invent an entirely new concept or give up. If our process could be adapted to produce lenses at an even lower cost threshold than that which was necessary for monthly disposable, we could throw the lenses away after a day … the idea of daily-wear/daily-disposable, ie no overnight wear, contact lenses was born.
I remember very well the evening I calculated the projected cost of making such a lens … the key was the huge scale-up volumes and the unique stability of our manufacturing ‘platform’ to deal with these volumes. Without the latter the concept would fail. We calculated that we could make contact lenses such that it would be cost effective to “wear for a day then throw away”. The labour cost, for example, was below 5% of the best then being achieved, even by heavily automated conventional processes.
After further small-scale tests in 1992 we went public with our invention (Optician, 5 June). The article included an endorsement by the department of Optometry at UMIST (the European Centre for Contact Lens Research). This, we thought, will bring them in … it did not! What does it take to be successful in starting a business?
Somewhat reluctantly we again decided to try to raise capital to start our own large-scale laboratory … at least we believed in our idea. After some difficulty (!) we were able to secure a license from BTG to make and sell our lenses in Europe. We were able to raise $1million in equity, mainly from Scottish Enterprise, augmented by government grants. So, after another 12 months of difficult negotiation we were able to open or first production laboratory in Livingston, Scotland. This was the world’s first production facility devoted to making daily-disposable lenses. Our fixed assets were an Amstrad computer and a filing cabinet … how the ‘majors’ must have shaken in their shoes! We had been unable to raise a penny of private sector venture capital.
Inspired by the commercial support of Boots Opticians, who became our major customer, we set about scaling-up the first production line with sales commencing in 1994. In 1995 we were approached by Bausch & Lomb for distribution rights. Given the fact that our company, AWARD, was by now established, with demand running ahead of capacity, there was no need for a distributor. However, after a number of meetings we decided to ask B&L if they would like to purchase the business for $33million in cash ($1million for every month since starting production). In early 1996 the business was sold for the asking price and another $5million was made available in incentives to lay the foundations for rapid investment and expansion. B&L also secured a world-wide license from BTG for $15million. We had retained 60% of the equity and 50% of the license income. In 1997 my involvement ended.
The company has gone on to employs 1200 people in manufacturing (from 2 in mid 1993) with several Billion of lenses made and sold to the original patents and designs. Perhaps more importantly daily-disposable contact lens wear, which we had invented and taken to the market, is now regarded as the safest and most convenient contact lens wearing modality available by a factor of 10 compared to any other form of contact lens wear.
I would really like to conclude that success in starting a business is easy … you just need a good idea and the world is waiting to “beat a path to your door”! However, my experience suggests that success is not just about the strength of the idea, the technology or the strength of the IPR. The availability of funding, the cost of protecting IPR and the culture of respect (or lack of it) for the inventor are all factors. To succeed in the UK, where there is, in reality, no early stage venture capital and where the culture is ‘if its legal its OK’ the situation is, to say the least, fraught. Perhaps, when you come right down to it, success in business start-up or success in other forms of IPR commercialisation or success in life generally ultimately requires a personal determination to persist, persist, persist. After all, no one owes us a living.
About the author.
Ron Hamilton is a chartered engineer, graduating from Strathclyde University with a Master of Science Degree. He is a John Logie Baird Award winner and in 1996 was the overall winner of the British Venture Capital Association “Venturer of the Year” award (co-sponsored by the Financial Times and Cartier). He is a founder member of the Entrepreneurial Exchange through which he tries to help individuals avoid some of the problems of starting a business. He is also involved in developing advanced manufacturing systems for the production of high-specification contact lenses at www.daysoft.com a new company he formed with his wife, Moya, in 1999, proving again that “success is a journey, never a destination”.