¥474.6B ($3.57 Billion; Life Care)
Prior Fiscal: ¥407.5B
Percentage Change: +16.5%
Best FY22 Quarter: Q4 ¥185.7B (total)
Latest Quarter: Q4 ¥124.9B (Life Care)
No. of Employees: 36,571 (total)

The sakuras are blooming earlier than usual.

The pale pink flowers that traditionally herald the start of spring have begun spreading their small rounded petals in winter’s final weeks.

This year, sakuras—a.k.a., cherry blossoms—adorned Tokyo’s parks and suburbs 10 days ahead of schedule, tying record earliest start dates set in 2020 and 2021, the country’s weather agency confirmed. Cherry blossoms peaked in Kyoto (once Japan’s capital) on March 26 in 2021, the earliest date in more than 1,200 years.

The trees couldn’t wait as long this year to spread their beauty—the blossoms were spotted in Osaka in mid-March. The average flowering date is now April 4, about two weeks earlier than it was in 1850.

The early-blooming sakuras are the latest victims of a hotter planet: Weather data show that greenhouse gas emissions and urban warming have pushed up the cherry blossoms’ full-flowering dates by 11 days.

By 2100, peak blooms in March could be a regular occurrence, the data suggest.

“We find a significant anthropogenic shift in the mean flowering season of over a week, about half of which is due to urban warming,” scientists from the United Kingdom’s national weather service and Osaka Metropolitan University concluded in their study. “By the end of the century and under medium emissions, the early shift is estimated to further increase by almost a week. Extremely early flowering dates, as in 2021, would be rare without human influence, but are now estimated to be 15 times more likely, and are expected to occur at least once a century. Such events are projected to occur every few years by 2100, when they would no longer be considered extreme.”

The early-blooming sakura is just one consequence of a rapidly-warming Earth. The other well-documented repercussions include droughts, more severe storms, coastal flooding, acidic oceans crop damage, potential food shortages, and geopolitical shocks. Such impacts have prompted governments worldwide to initiate strategies for curbing greenhouse gas emissions.

Three years ago, former Japanese Prime Minister Yoshihide Suga promised his country would be carbon neutral by 2050, saying the goal was a sound economic growth strategy.

“Responding to climate change is no longer a constraint on economic growth,” he said in his first parliament address. “We need to change our thinking to the view that taking assertive measures against climate change will lead to changes in industrial structure and the economy that will bring about great growth.”

The potential for such growth likely motivated more than 700 companies, local governments, and non-governmental organizations to join the Japan Climate Initiative, an effort to foster action on the world’s warming temperatures. Among its members is HOYA, which joined the alliance last fall in its bid to improve its environmental and social accountability.

“In the midst of dramatic changes in the global society,” CEO Eiichiro Ikeda said in an online post, “we believe that responding flexibly and swiftly to the changes of the times, taking on the challenge of creating the value that society needs, and meeting those expectations are HOYA’s strengths and the vision that we aspire to.”

In keeping with that vision, HOYA joined the United Nations Global Compact and the RE100 international environmental initiative in February. The latter encourages companies to procure all electricity consumed in business activities from renewable sources. HOYA has committed to sourcing all renewable electricity in its global operations by 2040, with a 60% interim target by 2030. In addition to updating to high-efficiency equipment and energy-saving activities at its production sites, the company has begun installing solar panels and switching to electricity derived from renewable energy globally.

Part of HOYA’s vision—at least to shareholders, anyway—also involves fiscal stability, which the company soundly achieved in fiscal 2022 (year ended March 31, 2023) despite a small loss in one of its business units. Total revenue jumped 9.4% to ¥723.5 billion, while Life Care sales surged 16.5% to ¥474.6 billion. Both increases were slightly offset by a 1.6% decrease in IT proceeds to ¥244.3 billion.

HOYA fortified its future growth prospects through a pair of partnerships and a product launch. The first alliance occurred last summer with Chinese eyeglass lens manufacturer Jiangsu Sigo Optical. The partnership provides HOYA with access to a wider range of plastic and polycarbonate finished single vision lenses, enhancing its existing lens portfolio and providing a more sustainable supply chain for customers.

Under the terms of the transaction, HOYA will receive a near 61% equity stake (Jiangsu Sigo’s founder retains more than 39% ownership interest). Jiangsu Sigo continues to operate and manage its manufacturing and distribution facilities in Danyang, China, as a separate entity.

HOYA’s second partnership is with NIDEK Co. Ltd., a designer, manufacturer, and distributer of ophthalmic and optometric equipment. The global agreement creates a partnership between HOYA Vision Care and NIDEK, providing eye care professionals (ECPs) with a complete portfolio of optical instruments and products to provide a full-service approach to patient care. The union enhances eye care practitioners’ ability to offer the latest in eye and vision examination equipment, visual comfort, and performance to their patients.

“The strategic partnership with NIDEK aligns with HOYA Vision Care’s core mission to provide innovative solutions and products to our ECPs, enhancing their business and offerings to patients,” HOYA Vision Care CEO Alexandre Montague said in announcing the partnership in February 2023. “By bringing together our organizations’ optical expertise, technologies, and solutions, we are creating a seamless approach for our ECP business partners to expand their service offerings to their patients and focus on quality eye care for all.”

“Our collaboration with HOYA Vision Care is a great opportunity for us to provide more ECPs with seamless eyecare solutions and to support them in achieving greater patient satisfaction and enhancing patients’ quality of life,” NIDEK President/CEO Motoki Ozawa, said. “This collaboration allows us to deliver our products with their lenses, which offer complete patient care and directly lead to patients’ joy of vision.”

The NIDEK matchup occurred just one month after HOYA’s PENTAX Medical division gained CE Mark approval for a video processor and the i20c video endoscope series. Developed with a focus on healthcare providers’ needs, the new PENTAX Medical INSPIRA video processor maintains compatibility with PENTAX Medical’s recent endoscope models and sets new standards in combination with the new i20c video endoscope generation.

The INSPIRA video processor delivers striking image quality with any PENTAX Medical endoscope. Compatible with two connection types, it allows for upgrading the legacy endoscopy portfolio [to the latest imaging standards. Consequently, the image quality of current endoscope generations meets clinical needs for an extended time period. This smart feature thus extends the lifecycle of each endoscope for greater sustainability.

The INSPIRA video processor combines cutting-edge functionalities in one plug-and-play solution with intuitive usability. The video processor is controlled via a customizable touch panel equipped with innovative image enhancement functionalities and 4K image processing.

The i20c endoscopes are designed with superior ergonomics for healthcare professionals and exceptional imaging for the highest procedure quality. Physicians instantly benefit from improved maneuverability, angulation and handling, combined with further enhanced vision. The control body and light-weight connector of the i20c video endoscopes are designed to further optimize the endoscopic workflow.

“PENTAX Medical INSPIRA video processor not only upgrades legacy instruments’ imaging capabilities, in combination with our new i20c endoscope generation, it is a milestone for endoscopy,” PENTAX MEDICAL Global President Rainer Burkard said. “In line with our commitment to continually innovate products, this solution provides a future-proof platform and we are proud of the image quality it brings.”

HOYA made one personnel move during its most recent fiscal year, appointing Klaus Mergener, M.D., Ph.D., as chief medical officer of PENTAX Lifecare Division (PENTAX Medical). Mergener is a clinical gastroenterologist with special interest and expertise in interventional endoscopy and cancer prevention. He currently serves as an affiliate professor of Medicine at the University of Washington in Seattle and maintains a busy endoscopic practice.

Mergener attended medical school in Frankfurt and Heidelberg, Germany, and at Duke University and Harvard University in the United States. He completed his medical/doctorate thesis summa cum laude with 2008 Nobel Prize Laureate Dr. Harald zur Hausen at the German Cancer Research Center in Heidelberg. He then returned to Duke University for his residency in internal medicine and his fellowship training in gastroenterology and interventional endoscopy. He earned an MBA from the University of Massachusetts at Amherst.

Mergener is a member of several professional organizations including the American Society for Gastrointestinal Endoscopy, where he served as president from 2020 to 2021 and as vice chair of its Foundation from 2014 to 2018.

“We are pleased to have Dr. Klaus Mergener support PENTAX Medical in driving our mission to become the preferred choice in flexible endoscopy from screening to therapeutics providing for integrated solutions to optimize patient care,” PENTAX Medical Global President Rainer Burkard said upon Mergener’s appointment.

¥407.5B ($3.34 Billion – Life Care)
Prior Fiscal: ¥341.8 Billion
Percentage Change: +19.2%
R&D Expenditure: ¥25.3B
Best FY21 Quarter: Q2 ¥195.9B
Latest Quarter: Q4 ¥106.1B (¥173.8B total)
No. of Employees: 38,376 (total)

The timing couldn’t have been worse.

Actually, it probably could have been worse and maybe would have been worse, but the world will never truly know for sure. History has a way of trivializing such matters.

The narrative in question begins in November 1941—a time of great unrest on planet Earth. At least 35 countries were at war—among them, Japan, which at the time, had been on a near 50-year land-grabbing spree in the Far East.

Japan had officially joined the global conflict 14 months prior, siding with Germany and Italy in its territorial takeover quest. Rising tensions with the United States reached a boiling point during the second half of 1941, and ultimately led to the surprise attack on Pearl Harbor on Dec. 7 that year.

Despite the war’s escalation, Shoichi and Shigeru Yamanaka decided to open an optical glass production plant in Hoya, a small town within the Toyko metropolitan area. The Yamanaka brothers officially established their new venture in November 1941—at precisely the same time the Japanese Imperial Conference finalized war plans against the United States, United Kingdom, and the Netherlands.

Great timing.

The rest, to coin a phrase, is history: Japan bombed the U.S. naval base at Pearl Harbor (Hawaii), decimating the fleet there, and forcing the United States to enter World War II.

Surprisingly, the Pearl Harbor bombing had no immediate impact on the Yamanaka brothers’ entrepreneurial aspirations. Undeterred in their vision, the pair launched their company and began manufacturing optical lenses; nearly three years later, they officially incorporated their undertaking with ¥1.2 million.

Their fortunes changed, however, with the Allies’ victory. A weak post-war optical lens market forced the Yamanakas to switch their business’ main focus to crystal glass manufacturing. Crystal production remained the company’s core competency until the firm launched progressive multifocal lenses in April 1967 and soft contact lenses nearly six years later. In 1974, the company began producing IC substrates.

The company further diversified its offerings during the 1980s, by entering the intraocular and aspherical molded-glass lens markets. It also changed its name to reflect its history and honor its founding city, though interestingly, the municipality itself no longer exists (it was merged with a neighboring city, Tanashi, in 2001 to create the city of Nishi-Tokyo).

“It is crucial that we are able to adapt ourselves quickly and flexibly over the years to continue finding better ways to become even stronger in the markets at which we compete,” former HOYA Corporation president and CEO Suzuki Hiroshi said last fall in marking the company’s 80th birthday. “This diversification of our business forms the foundation of what HOYA is today, and the company will continue to seek an opportunity to further diversify and prepare itself for the coming next decades. Supporting HOYA’s enthusiasm is our commitment to become an undisputed leader in niche markets through creativity and innovation. This is the basis for building a strong business and is also the very essence of HOYA’s philosophy that has been handed down over the years.”

That philosophy served the company well in its 80th year—total revenue climbed 20.7% to ¥661.4 billion and profit surged 22.1% to ¥200.3 billion. HOYA scored gains in all geographic areas and in both reporting segments in the year ended March 31, 2022, with Asia/Oceania reporting the largest growth (39.1% to ¥258.6 billion), followed by Japan, Europe, and the Americas.

Japanese sales jumped 24.9% to ¥164.6 billion, while Europe’s proceeds swelled 19.8% to ¥130.7 billion, and the Americas revenue increased 15.1% to ¥99.9 billion.

HOYA’s Information Technology and Life Care business units posted double-digit growth as well. Information Technology grew revenue 23.6% to ¥248.4 billion, and Life Care expanded FY22 sales 19.2% to ¥407.5 billion. Life Care revenue clearly benefitted from robust healthcare- and medical-related product growth; higher sales of eyeglass and contact lenses boosted health care product revenue 19.2% to ¥299.8 billion whereas improved demand for medical endoscopes and intraocular lenses for cataracts enhanced medical product proceeds 19.5% to ¥107.7 billion.

Medical endoscopes is likely to become a solid growth driver for HOYA’s Life Care unit over the next few years, thanks to PENTAX Medical’s joint venture with Jiangsu Vedkang Medical Science and Technology. Announced last May, the initiative will produce single-use, flexible medical endoscopic therapeutic products.

Named PENTAX Medical Therapeutics (Jiangsu), the joint venture will leverage PENTAX’s marketing network to provide advanced single-use devices to clients globally. The offering will be reinforced by Vedkang’s production and research and development framework.

“We are excited to establish this collaboration with Vedkang to further advance our mission to improve the standard of patient care and quality of healthcare around the world. Our collaboration will support the fast-growing Endotherapy segment as new and innovative procedures achieve traction and penetration worldwide.  Instilling clinical confidence by delivering high performance, reliability and value to our customers is at the core of everything we do,” Gerald W. Bottero, global president of PENTAX Medical, said in announcing the partnership. “Now PENTAX Medical together with Vedkang looks forward to offering integrated endoscopy solutions to our valued global customers.”

The new company, PENTAX Medical Therapeutics (Jiangsu) Co. Ltd., will be headquartered in China and will develop and commercialize products for key markets in Europe, Asia and Americas.

“PENTAX Medical has always been a valuable business partner to Vedkang, and we are delighted to continue our close relationship in this joint venture by pursuing further possibilities with doctors and patients across the world,” Vedkang Chairman and CEO Zhuang XiaoJing said.

Along with its new joint venture, PENTAX Medical welcomed Rainer Burkard as global president of PENTAX Lifecare Division.

Burkard joined HOYA Lens Deutschland GmbH in 2002 and was head of Marketing until 2007. He was then promoted to the HOYA Vision Care global headquarters as general manager, Business Development. In 2014, Burkard integrated the European operations of SEIKO OPTICAL and led the development of the SEIKO Xchanger collection, which won the prestigious Silmo d’Or award for excellence in optical innovation. Burkard joined PENTAX Europe GmbH as CEO (Europe, Middle East and Africa) in August 2015, and expanded his global role as chief commercial officer of the Americas in July 2020.

Burkard assumed his new role on April 1, about a month after Eiichiro Ikeda succeeded Hiroshi as HOYA’s president and CEO.

$3.47 Billion ($5.34 Billion)
Prior Fiscal: $3.31 Billion
Percentage Change: +4.8%
No. of Employees: 36,795 (total)

Finally, some proof.

For years, scholars have postulated the existence of a “big-fish-small-pond” effect (BFSPE) in education. Introduced in 1984, BFSPE refers to the way students think about themselves as learners—i.e., their “academic self-concept.”

Studies have shown that pupils in high-achieving schools compare themselves with their peers and consider themselves less capable, while equally performing students in lower-achieving institutions have more confidence. Put simply, high-achieving students (big fish) in low-achieving schools (small pond) have better self-esteem than equally talented pupils (small fish) in high-achieving environments (big pond).

BFSPE is believed to be quite predominant in academia, transcending subjects, education level, sex, geography, and income. Although the effect has been documented in multiple studies, there has never been conclusive evidence of its cause, leading scholars to suspect factors like character traits might affect self-confidence.

Research from the Stanford Graduate School of Education, however, found a direct link between highly competitive academic programs and students’ low self-esteem. The data also reaffirmed the effect’s pervasiveness in education.

“This study tells us, in a meaningful way, what education psychologists have long suspected,” Prashant Loyalka, a Stanford Graduate School of Education assistant professor who spearheaded the research, said in releasing the findings. “As humans, we have a tendency to compare ourselves to others in terms of our abilities and, because of that, we tend to feel better or worse about ourselves. It’s fundamental to who we are.”

The BFSPE is not strictly an educational phenomena, though. The concept also has become an acceptable business strategy among large corporations looking to secure long-term growth. Borrowing the same general principles from education (sans the academic self-esteem concept), a BFSPE business philosophy encourages larger-sized companies (big fish) to enter small markets (ponds) to avoid the competition that exists in large markets with multiple players.

Many healthcare companies have used this strategy to gain a solid foothold in their respective markets. Medtronic plc, for example, entered the Chinese healthcare market in the 1990s, when only several foreign medical device companies service the country. Big fish, small pond (at the time).

Similarly, Zimmer Biomet Holdings Inc.—before its multi-billion merger with Biomet—entered the relatively uncrowded ceramic-on-ceramic hip replacement market in 2004. “Our view is that ceramic-on-ceramic will remain a niche option, primarily for younger patients, but we are pleased that surgeons will soon be able to turn to Zimmer, not a competitor, to meet all of their preferences,” former Chairman/president/CEO Ray Elliott said.

Big fish, small pond.

The HOYA Group is a champion of the BFSPE strategy too. As president and CEO Hiroshi Suzuki noted in the company’s 2020 Integrated Report, market selection is the most important factor in developing a strong, successful business.

“At HOYA, what we mean by a ‘strong business’ can be summed up by the metaphor, ‘a large fish in a small pond.’ In other words, the business holds a dominant market share in a niche market,” he explained. “Hence, we aim for businesses that boast a high level of profitability. Since our objective is to be the top player in niche markets, we are not necessarily concerned with expanding the scale of a business or its sales. Consequently, the most important factor in the development of a strong business is market selection. If the pond already has a big fish, or there are a lot of fish swimming in the pond, or the pond is too large, the probability of success in such a market is lowered. If one chooses the wrong market, no matter how skilled the management team might be, it will not proceed well.”

HOYA appears to have chosen wisely, as the multinational set a new revenue record in fiscal 2020 (year ended March 31, 2020). Sales climbed 1.8 percent to 576.5 billion yen, and profit before tax rose 1.8 percent to 147.3 billion yen but profit for the year fell 6.1 percent to 114.6 billion yen, thanks to the encroaching pandemic and a $43 million fine incurred by the company’s PENTAX Medical division. HOYA’s profit before tax ratio remained even at 25.5 percent.

The fine was part of PENTAX Medical’s penance for shipping endoscopes without U.S. Food and Drug Administration (FDA)-approved instructions, and failing to file two timely reports of infections associated with the devices. In addition to the fine, PENTAX agreed to enhance its compliance policies and procedures, and certify it meets the requirements of its deferred prosecution agreement (DPA) with the U.S. Justice Department.

“PENTAX deeply regrets that it did not timely file the MDRs [medical device reports] identified in the DPA, as well as the failure to send the approved IFUs to customers. We accept full responsibility for these failures,” PENTAX America Inc. president David Woods said in a prepared statement.

The FDA required PENTAX to revise its existing cleaning instructions in 2014, but the company continued to ship endoscopes with the old instructions for 18 months, fearing lost business over the new directions. During that gap, PENTAX generated roughly $18 million in gross profits from the sales of four types of endoscopes.

Besides eroding HOYA’s profit for the year, the U.S. Justice Department settlement helped trim pretax profits by 10.2 percent (4.7 billion yen) in the Life Care segment, which comprises 65 percent of the company’s total sales. Pretax profits tumbled to 62.2 billion yen, aided in part by poor foreign exchange rates on eyeglass lens sales and startup costs for a new Vietnamese plant.

Overall Life Care segment sales in FY20 remained flat at 375 billion yen; revenue likely was impacted both by Japan’s sales 2 percent tax hike and the COVID-19-induced imposed by European governments. The tax hike (to 10 percent) took effect Oct. 1, 2019.

Contact lens proceeds rose compared with FY19 due to pre-tax hike demand, an increase in new customers, higher sales of value-added products, and new “Eyecity” retail store openings, according to HOYA’s financial report.

The Vivinex brand of intraocular lenses (IOL) and new product introductions generated robust sales of IOLs for cataracts. One of the newest products was the Nanex multiSert+, which received CE mark approval in July 2019. The Nanex multiSert consists of a new IOL delivered in a first-of-its-kind preloaded delivery system.

The multiSert+’s 1.62mm injector tip is believed to be the world’s smallest nozzle size in an open-loop preloaded hydrophobic IOL system. Ideal for micro incision cataract surgery as low as 1.8 mm, the lens features HOYA’s proprietary active oxygen processing treatment that is designed to reduce posterior capsular opacification.

The multiSert+ offers cataract surgeons multiple options for delivery. They can use either a single-handed push or two- handed screw injection based on their surgical needs and personal preference.

multiSert+ also contains a uniquely-designed insert shield for precise injector tip insertion depth management. It is a fully preloaded injector for consistent and predictable IOL delivery.

New products also boosted overseas sales of medical endoscopes in FY20 but domestic (Japanese) revenue remained flat.  Overall sales increased on a local currency basis but fell on a yen basis due to volatile foreign exchange rates.

One of the segment’s new entrants was the DEC HD duodenoscope, released in the United States in November 2019. The high-definition duodenoscope includes multiple disposable components, including the sterile distal cap and elevator lever, for unit reprocessing. The disposable elements help reduce the risk of bioburden remaining on conventional elevator components after reprocessing.

The advanced duodenoscope with HD imaging allows endoscopists to diagnose and visualize the mucosa in detail, identify abnormal tissue, and locate the papilla for cannulation.

“The DEC represents a significant clinical innovation both in device design and patient safety due to its sterile and disposable distal end cap with integrated elevator, and also a human factors-validated approach to both reprocessing and competency-based training,” global chief clinical officer Dr. Hudson Garrett said upon the duodenoscope’s debut. “The DEC was specifically designed in response to the evidence-based recommendations released by the FDA and CDC and represents a critical step forward in improving patient safety, reducing contamination, and optimizing endoscope reprocessing programs.”

About a month after releasing the DEC HD duodenoscope, PENTAX Medical secured CE marking for its Discovery artificial intelligence-assisted polyp detector. The company worked with expert clinical partners from six major medical institutions worldwide to develop the detector, which is designed to spot colorectal polyps in real time during exams. More than 120,000 files from roughly 300 clinical cases have been used in the development of the system’s software.

The new system is equipped with a flat monitor and a self-explaining menu that features an advanced touchscreen interface. It can be used with any of the company’s video endoscopy systems to detect potential polyps.

$3.48 Billion ($5.3B total)
Prior Fiscal: $3.38 Billion
Percentage Change: +0.4%
No. of Employees: 36,795 total

In the last Top Company report on Hoya, word was the firm was in a bit of hot water with the U.S. Food and Drug Administration (FDA) over its lack of appropriate activity regarding studies on the cleaning and disinfecting of scopes. With no additional slaps on the wrist, the organization has apparently moved completely past the issue and recently gained the agency’s clearance to launch a new system within the U.S. In November, PENTAX Medical, a division of Hoya, announced it was marketing the DEC HD Duodenoscope to American physicians. While the device had been in global markets since 2017, this marked its debut in the U.S.

What made this scope particularly noteworthy, however, was the fact it included not only a disposable distal cap, but also a disposable elevator lever. The device was specifically designed with the FDA’s guidance on reducing endoscope reprocessing in mind. The engineers also sought to deliver a “Triple Aim,” a framework developed by the Institute for Healthcare Improvement that describes an approach to optimizing health system performance, by improving clinical outcomes, reducing care costs, and enhancing physician and patient experiences.

“Duodenoscopes with a disposable elevator component represent another major step toward lowering the risk of infection among patients who undergo procedures with these devices,” Jeff Shuren, M.D., J.D., director of the FDA’s Center for Devices and Radiological Health, noted in a statement prepared by the 114-year-old agency in announcing the first-of-its-kind clearance. “Today’s clearance is another step in the FDA’s ongoing effort to advance the development and availability of safer duodenoscopes.”

In 2015, the American Gastroenterological Association published a release titled “How To Stop Duodenoscope Infections.” The release stated, “the problem of this infection transmission lies in the complex design of the elevator channel in duodenoscopes, which can allow bacteria to remain after cleansing, even if reprocessing follows currently accepted procedures developed and approved by the manufacturers and FDA.” With this device, that vulnerable component is safely disposed, helping to significantly reduce risk of infection.

ANALYST INSIGHTS: As with previous years, Hoya continues to be one of the “quiet” industry giants in both Optical (Hoya Vision) and Surgical (Pentax). As Hoya has large capital reserves, it will be interesting to observe how it chooses to execute on investing in its future growth.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

While most significant given the attention duodenoscopes have received in recent years due to the infection risk, the DEC HD wasn’t the only noteworthy product news from Hoya. The same division (PENTAX Medical) also gained a CE mark for its artificial intelligence (AI)-based DISCOVERY system. The AI-assisted polyp detector was designed to support endoscopists in finding potential polyps during a colorectal examination. The system is built in a flat, touchscreen monitor to provide high usability as it can be used with any of PENTAX Medical’s video endoscopy systems to highlight potential polyps.

Hoya Surgical Optics (HSO) added a wide-angle camera lens to its scotopic vision eyeglass-type wearable device—HOYA MW10 HiKARI. The technology was developed for assisting individuals who, because of nyctalopia (night blindness), have difficulty seeing things in dark places. The eyewear-type wearable device displays an image—captured by HSO’s originally-developed compact, low-light, high-sensitive camera—on an organic EL monitor screen immediately in front of the wearer’s eyes as a bright picture. The technology was authorized in Japan by Amakusa City, Kumamoto Prefecture, as a business project eligible to receive subsidies as a “daily living tool”—a welfare apparatus—which affects reimbursement. The device is available in Japan.

The devices join a portfolio of products within Hoya’s Life Care segment, which saw revenues virtually flat against the previous year. The firm’s 577 billion yen total in revenue in fiscal 2020 (ended March 31, 2020) demonstrated an approximately 2 percent rate of growth over the previous period, but the gains were enjoyed almost exclusively by Hoya’s Information Technology business. Life Care, which is home to the aforementioned products and divisions, reported 375 billion yen. That represents 66 percent of the organization’s overall revenue.

Between the two units housed within Life Care, 74 percent of the revenue is generated by healthcare-related products, which includes eyeglass lenses and contact lenses. Combined, these products resulted in 278 billion yen for the firm, a 1.4 percent decrease versus prior fiscal. The medical-related products portion accounted for 26 percent of the medical-focused business. This segment produces endoscopes, medical accessories, intraocular lenses, artificial bone, and metallic implants for orthopedics. These products experienced a 6 percent rise over the 2019 fiscal, finishing at 97 billion yen.

COVID-19 Consequences

Q4 2020 Revenue: $820 million
Q4 2019 Revenue: $868 million
Percentage Change: -8.2%

Back in early March, Hoya’s PENTAX Medical coordinated the donation of $430,000 worth of medical devices to Chinese provinces and cities severely impacted by the virus. The charitable gift included technologies such as bronchoscopes and intubation scopes. The bronchoscopes could be used in procedures such as bronchoalveolar lavage and sputum suction, providing high resolution images, offering precise and concise operation, and allowing for thorough disinfection.

AT A GLANCE
$3.37 Billion ($5.1B total)
Prior Fiscal: $3.32 Billion
Percentage Change: +1.5%
No. of Employees: 19,675 (37,512 total)

One would think endoscope manufacturers would be extra vigilant given the bad press of recent years.

The wave of infections topped headlines as accounts of contaminated duodenoscopes came to light. In response, in 2015 the U.S. Food and Drug Administration (FDA) mandated U.S. duodenoscope manufacturers to conduct a postmarket surveillance study assessing healthcare facilities’ ability to clean and disinfect the scopes. Specifically, the three manufacturers—Olympus, Fujifilm, and Pentax Medical (Hoya Group’s surgical division)—were ordered to conduct a study to sample and culture reprocessed scopes to glean more about the issues contributing to contamination. They were also required to perform a human factors study checking whether hospital staff were adequately trained to follow reprocessing procedures.

None of the scope makers complied save for Fujifilm, which had only met requirements for its human factors study. Unsurprisingly, the noncompliance prompted the FDA to issue all three firms a warning letter last March. Pentax both failed to provide sufficient postmarket data and did not comply with the human factors study requirements.

“The FDA has taken important steps to improve the reprocessing of duodenoscopes, and we’ve seen a reduction in reports of patient infections, but we need the required postmarket studies to determine whether these measures are being properly implemented in real-world clinical settings and whether we need to take additional action to further improve the safety of these devices,” Jeff Shuren, M.D., director of the FDA’s Center for Devices and Radiological Health, said in a prepared statement. “We expect these device manufacturers to meet their study obligations to ensure patient safety.”

The FDA’s not-so-gentle nudge required Pentax to submit a plan outlining how study milestones would be achieved and expected 100 percent of samples and cultures to be processed by 2018’s end. If Pentax failed to appropriately heed the FDA’s warning, retribution would likely ensue in the form of seizure, injunction, and civil money penalties.

Pentax appears to have gotten its act together, because no such punishments have come to light. In fact, according to Hoya’s most recent financial data, the scope maker was a boost rather than a burden. Medical endoscopy sales trended strongly in Europe and the U.S. thanks to new product introductions and sales framework strengthening. Hoya’s Medical segment, which contains both Pentax and intraocular lenses (IOLs) manufactured by Hoya Surgical Optics (HSO), amassed 9.18 billion yen, rising 5 percent from the previous fiscal year. Favorable IOL trends in the Japanese market also aided this boost.

In late December 2017, before Pentax had incurred the FDA’s wrath, it launched the C.A.P. HD Duodenoscope (ED34-i10T), the first FDA-cleared duodenoscope with a disposable distal cap. The new feature aimed to improve cleaning and reprocessing access that was hindered by a previous risk of cracks and gaps developing in the adhesive that seals the scope’s distal cap onto the scope. The new scope also features a simpler user interface, improved ergonomics and image quality, and a reduced length.

“In my practice, the use of the ED34-i10T [C.A.P. HD Duodenoscope] has helped improve the quality of procedures as its high definition image provides increased detailed visualization of the papilla by using advanced digital imaging technologies. This allows us to differentiate between normal papillae and adenomas,” said Dr. Carlos Robles-Medranda, Guayaquil, Instituto Ecuatoriano de Enfermedades Digestivas (IECED), University Hospital OMNI, Ecuador, at the time of launch. “Additionally, the new design provides greater comfort during long procedures and requires less lever force to cannulate and maintain the required positioning, making this scope a must have tool for successful ERCP procedures.”

Pentax also launched the J10 Series Video Naso-Pharyngo-Laryngoscopes and the DEFINA EPK-3000 Video Processor last April. The J10 Series includes a portfolio of three endoscopes, each with vivid HD image quality and advanced hygiene features. The UltraSlim HD touts a 2.4 mm distal end, currently the smallest distal end diameter on an HD video naso-pharyngo-laryngoscope available on the market. DEFINA EPK-3000 combines surface, contrast, and tone enhancement algorithms to highlight topography, edges, and color tones to augment visualization of blood vessels and surface anomalies.

Hoya made the first of two notable investments in the endoscopy business last May. Israel-based 3NT Medical, a developer of endoscopes for ENT surgeons, closed a major portion of its $15 million financing round from Hoya. The funds will be used to complete 3NT’s family of specialty single-use endoscopes and therapeutic devices, as well as to begin U.S. and European commercialization of its Sinusway Driveable Endoscope. 3NT is Hoya’s first venture investment in an Israeli company.

Pentax gained majority stake in PlasmaBiotics last August. The Parisian firm specializes in endoscope storage and drying, with core products that significantly reduce scope reprocessing cycle times and minimize bacterial contamination via ultra-fast endoscopic channel drying and active storage with plasma. PlasmaBiotics’ products integrate easily into most current reprocessing protocols.

HSO began the purchase of California-based Mid Labs and Germany-based Fritz Ruck last October. Mid Labs specializes in ophthalmic surgical devices to prevent blindness caused by traumatic injuries and some retinal diseases. Fritz Ruck manufactures dual function phacoemulsification machines and accessories and distributes other ophthalmic equipment. The acquisitions fortify Hoya’s position in the IOL market and permits entry into the global retinal market, which is forecasted to grow as a result of the increasing elderly population.

The Hoya MW10 HiKARI wearable device, which was developed based on Kyushu University contract research implemented in 2016, hit the Japanese market last November. The eyeglasses-type wearable supports dim-light vision of patients with night blindness, projecting images captured by a low-light, high sensitivity compact camera on a display screen in front of the wearer’s eyes. Unlike infrared cameras, the device amplifies faint lights in places to recreate an object’s natural color.

Last January HSO opened the doors of its new global R&D facility aimed at developing breakthrough IOL technologies in Singapore. The move made Hoya the first IOL company in the world to establish worldwide integrated operations in Singapore—HSO’s headquarters, manufacturing plant, and R&D center are all based there.

Hoya’s Health Care segment, comprised of eyeglass lenses, contact lenses, and related accessories, garnered 281.61 billion yen. Growth in existing business in the Americas and the recent Performance Optics acquisition provoked the 6 percent rise. New “Eyecity” retail stores and enhanced existing stores also increased new customers and grew contact lens sales.

$2.8 Billion ($4.3B total)
NO. OF EMPLOYEES: 37,842 (total)

Nothing breeds success better than good timing.

Think about it: Would Facebook have grown into the planetary social media juggernaut it is today had it launched in 2015, replete with its current suite of features? Probably not. Though many factors contributed to Facebook’s success, timing arguably was the most critical.

The same tenet applies to countless other business success stories, most notably, Apple, Xynga, Google AdSense, Instagram, YouTube, Uber, LinkedIn, and Airbnb, the latter of which was famously passed over by various investors skeptical of the concept of short-term lodging rentals. “One of the reasons it [Airbnb] succeeded, aside from a good business model, a good idea, great execution, is the timing,” serial entrepreneur and Idealabs founder Bill Gross noted in a 2015 TED talk. “That company came out during the height of the recession, when people really needed extra money. And that maybe helped people overcome their objection to renting out their home to a stranger.”

Gross’ discussion was spawned by an analysis he conducted to determine the most important startup success factors. He considered idea, team, business model, funding and timing, and ultimately concluded that timing was the primary constituent, accounting for 42 percent of the difference between success and failure.

“What actually matters most for startup success?” Gross asked during his TED talk. “The number one thing was timing. Execution definitely matters a lot, the idea matters a lot, but timing might matter even more.”

And company size is irrelevant. Tokyo-based Hoya Corporation, a multinational, multi-billion dollar manufacturer/supplier of advanced optics technologies, precision devices, and lenses, is decades past the startup stage but nevertheless subscribes to Gross’ timing doctrine: The concept is part of the executive team’s management philosophy.

“We must always have flexibility of changing ourselves or tweaking our portfolio to have a portfolio of the business that is in the right place at the right time,” Hiroshi Suzuki, Hoya’s president and CEO, said in the company’s fiscal 2017 annual report. “If we are in the wrong businesses, we will never be able to be successful. It’s not just the management as such, but the right circumstances in terms of being in the right place at the right time.”

ANALYST INSIGHTS: Hoya continues to be one of the “quiet” industry giants in both Optical (Hoya Vision) and Surgical (Pentax). As Hoya has significant cash to spend (approximately $3 billion), the question remains will it make complementary acquisitions or make a dramatic portfolio-changing type of acquisition?

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

Indeed, Hoya has taken advantage of its knack for good timing, growing sales 25 percent in the middle part of this decade to 505.7 billion yen ($4.5 billion). But the Japanese multinational inadvertently became the victim of bad timing in FY17 after two powerful earthquakes rocked Kumamoto and Oita Prefectures in mid-April 2016, killing 211 people, injuring 3,000 others, and damaging more than 190,000 homes and buildings. Among the affected structures was Hoya’s Eyecity retail stores (contact lenses) and its photomask manufacturing plant in Kumamoto, which supplies photomasks down to 32 nm process geometries to semiconductor firms worldwide. The twin temblors severely damaged precision equipment and machinery at the facility and sparked a fire in the cleanroom, forcing Hoya to move liquid display panel production to factories in Taiwan and South Korea, and LSI fabrication to Hachioji, a Tokyo suburb.

Though it was originally intended as a temporary fix, the Kumamoto plant shutdown negatively impacted Hoya’s finances in fiscal 2017 (year ended March 31, 2017), paring overall sales by 4.4 percent to 478.9 billion yen ($4.3 billion) and profit before tax by 7.1 percent to 110.7 billion yen ($984,762,000). The company’s Life Care segment—comprised of Health Care and Medical divisions—lost profits as well, but fared better than its corporate parent: Sales slipped 2.5 percent to 314.4 billion yen ($2.8 billion).

The decline is a bit surprising, considering revenue grew in the lower single digits in many of the Life Care segment’s product categories. The Contact lens franchise, for instance, matched its FY16 profit margin due to an increase in Japanese Eyecity stores, while Eyeglass Lenses revenue benefitted from strong North American sales, led by an 8 percent rise in U.S. earnings and a double-digit increment in Canadian proceeds. In an effort to ensure future growth, Hoya purchased Performance Optics LLC and 3M’s safety prescription eye wear business in Q3 of fiscal 2017, expanding its reach into the eyewear safety and customized lens markets.

The 48.98 billion yen ($476 million) deal for Performance Optics and its two subsidiaries, Vision Ease and Daemyung Optical, includes the company’s ophthalmic lens manufacturing business, which encompasses polycarbonate, photochromic, polarized, and high index eyeglass lenses.

The 3M agreement adds an optical laboratory to Hoya’s inventory and provides the company with a comprehensive line of frames, prescription lenses, and premium coating options in a customized solution. It also enhances Hoya’s safety prescription eyewear and frames portfolios in Latin America, Europe, and Asia.

“Hoya’s acquisition of 3M’s established safety prescription eyewear business expands our customer reach and entry into an important new optical market segment for Hoya both in the U.S. and globally,” Girts Cimermans, CEO of Hoya Vision Care, said when the December 2016 deal was announced. “The business provides Hoya with additional capabilities in safety prescription eyewear while expanding future global opportunities and strengthening the range and services we offer our customers.”

Hoya’s market fortification efforts extended into the medical endoscope arena as well with Pentax Medical’s Q4 purchase of C2 Therapeutics, developer of the CryoBalloon Ablation Technology for Barrett’s Esophagus and squamous dysplasia treatment. Its addition to the Pentax Medical product family boosts the company’s therapeutic endoscopy portfolio and extends its role to that of a dual advanced diagnostic imaging/therapeutic solutions provider.

The C2 Therapeutics deal occurred too late in the fiscal year to impact Medical Endoscopes sales, but the franchise performed surprisingly well without it, “returning growth momentum” through new product launches in Europe (the OPTIVISTA EPK-i7010 Video Processor) and stronger group purchasing organization and integrated delivery network sales in the United States.

Hoya’s Intraocular Lens business was the Life Care segment’s top performer in FY17—franchise sales surged more than 20 percent from the previous fiscal year, and the division captured close to 30 percent of the global IOL growth in cataract surgeries. According to the annual report, Hoya Surgical Optics is now first in Japan and third globally in terms of market share.

$2.9 Billion ($4.5B total)
NUMBER OF EMPLOYEES: 35,000 (total)

Tokyo-based Hoya Group is a brand-new inductee into the Top 30. The company was established in 1941 in Tokyo by the brothers Shoichi and Shigeru Yamanaka, with a single plant that produced optical glass. Hoya first expanded into medical products in 1967 when it launched its first line of progressive multifocal lenses, and shortly thereafter began selling soft contact lenses. The suite of eyeglass lenses and contact lenses comprise Hoya Vision Care, the company’s most enduring business. Hoya began manufacturing intraocular lenses (IOLs) in the 1980s, as an extension of its Vision Care business.

In 2007, Hoya fully immersed itself in the medical technology business and established a Medical division by purchasing nearby Japanese company Pentax Medical. The grab added medical endoscopes, laparoscopic surgical instruments, and airway scopes to Hoya’s product mix. Together, these offerings constitute Hoya Pentax, the company’s Medical division. (Hoya’s Life Care segment consists of these two divisions.) Hoya is also a manufacturer of information technology products, including optical lenses, ultraviolet light sources, and photomasks, among others. The Life Care segment comprised 64 percent of Hoya’s total revenue, and in fiscal year 2016 (ended March 31, 2016) Life Care reached sales of $2.9 billion, a 5 percent increase from the previous year.

Over half of the Life Care segment’s revenue was driven by sales of eyeglass lenses, which achieved a slight revenue bump of 3 percent over the year prior. Expansion in overseas sales (primarily in Europe and the Americas) was largely responsible for the modest hike. In Europe, sales broadened to both independent small and medium-sized eyeglass stores—particularly of the company’s Seiko lenses. Solid sales in independent small and medium-sized eyeglass stores and efforts to develop customers among large retail chains resulted in bolstered sales in the United States in FY16. Most of the lens revenue (a little less than half) came from the European region, and sales in the Americas made up about 25 percent.

In October 2015, Hoya added a bevy of high-tech lenses to its product mix through the acquisition of Swiss lens manufacturer Knecht & Müller AG. It is the newest addition to the DACH (Germany, Austria, Switzerland) region, where Hoya already has two locations: Hoya Lens Austria and Hoya Lens Germany GmbH. “We are proud to welcome Knecht & Müller as a member of Hoya Corporation,” Hans Werquin, CEO of Hoya Vision Care Europe, said in a company press release. “Switzerland is one of our key Central European markets whose customers we can now serve directly. Knecht & Müller has over a century’s tradition in the optical field and extensive expertise in the production of high-tech lenses. This legacy fits perfectly with Hoya’s strategic objectives in the DACH region and beyond.”

ANALYST INSIGHTS: With its Hoya Vision and Hoya Pentax, Hoya is one of the “quiet” industry giants in both Optical and Surgical. As Hoya has a significant amount of cash on its balance sheet, look for Hoya to continue with strategic M&A. The question is, “Will it be ‘add-on’ (complementary to its existing businesses) or ‘category shifting’ (creating new business segments within its organization)?”

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

Contact lens sales performed strongly in fiscal 2016, achieving a growth rate of 14 percent from the year prior. Eyecity (Hoya’s contact lenses specialist retail chain) actively opened new stores in urban areas, resulting in a total of 257 stores in Japan by the end of the fiscal year.

As a means to augment customers’ lens-buying experience, in September 2015 the company introduced the Hoya Vision Simulator, which is a virtual reality headset that visualizes the optical effects of various lens designs. Operated via a smartphone app, opticians can apply wearing parameters and exact prescriptions to the viewing field, adjusting for accurate pupil distance.

Hoya Pentax’s medical endoscope sales suffered somewhat in FY16, dropping about 3 percent from the previous year. The decline’s main driver was the United States, due to the priority Hoya placed on responding to U.S. Food and Drug Administration (FDA) inspections as a result of fellow Japanese endoscope-maker Olympus’ 2015 CRE outbreak stemming from reprocessing troubles. U.S. endoscope sales decreased 10 to 15 percent as a result of these efforts—and higher endoscope sales in the Chinese, Asia/Oceania, and several emerging countries could not offset the decline.

Hoya Pentax expanded into the endoscopic therapy market in September through the strategic investment in electrosurgical devices company Creo Medical Ltd. Pentax identified endoscopic therapeutic devices as a priority in its growth strategy, and grants the division access to an electrosurgical platform. Hoya’s flexible endoscopes—which are used in minimally invasive treatment procedures—will be combined with Creo Medical’s therapeutic devices in such areas as highly advanced gastroenterological surgeries. Pentax also launched the Splash M-Knife multi-functional Endoscopic Submucosal Dissection (ESD) device in May 2015. ESD procedures are gaining worldwide interest and adoption for their clinical and financial benefits contributing to early recovery, reduced procedural complexities, and costs. The new ESD device will contribute heavily to the early treatment of gastric cancer.

Hoya’s IOL business was the largest growth area for the company in fiscal 2016, achieving 23 percent revenue growth from the previous year. This was mainly stimulated by introduction of aspherical IOLs into the major markets including both European and Japanese, the latter of which represented half of Hoya’s IOL sales. The new IOLs are made of “Vivinex,” Hoya’s newly developed hydrophilic acrylic material. Vivinex builds on Hoya’s original surface reforming treatment, and the lenses are anticipated to curtail the appearance of posterior capsule opacification, a complication that causes the back of a lens capsule to thicken, causing cloudy vision. The IOLs made of Vivinex are currently undergoing a series of clinical evaluations to gain additional patient trust.

Furthering its commitment to surgical vision care, in October 2015 Hoya revealed late-stage venture investment in InnFocus Inc., a Miami-based company developing the InnFocus MicroShunt to treat open angle glaucoma. A tube less than 1 cm in length designed to lower intraocular pressure in open angle glaucoma patients, it is composed of a soft, biocompatible material that minimizes tissue damage and significantly reduces operation time.

Hoya Pentax also welcomed a new leader in February 2016, appointing Hoya veteran Gerald Bottero as global president of the division. Bottero joined Hoya in 1988, serving as representative on the Boards of Directors of Hoya’s Decibel Instruments (intra-canal hearing aids) and Lifespex Inc. (early detection of cervical cancer), president of Hoya Conbio (a medical laser firm focused on dermatology and hard tissue dentistry), and the president of Hoya Vision Care from 2005 to 2014.

“I am truly honored to support the richly talented and highly dedicated global professionals of Pentax Medical,” Bottero said in a company statement. “Our mission is to ‘lead the leading edge’ in intelligent, software-rich endoscopic solutions for the early detection and treatment of cancer. Patients comprise the center of our universe; every day in every way, our job is to help doctors, nurses and biomeds improve the quality of patients’ lives. We are very excited about our opportunities, and by the enthusiastic feedback we have received from customers regarding new technologies we are developing for interactive imaging, single-use devices, mobility, and scalable platforms.”