DRAPER, Utah, Dec. 15 /PRNewswire-FirstCall/ -- 1-800 CONTACTS, INC.
(Nasdaq: CTAC) and ClearLab, 1-800 CONTACTS' international manufacturing
business, (1-800 CONTACTS and ClearLab are referred to as the "Company") today
announced that they have signed an agreement which grants Menicon Co., Ltd.,
Japan's largest independent contact lens manufacturer, exclusive rights to
develop, manufacture, and market certain disposable contact lenses and related
intellectual property in Japan.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO)
Under the terms of the agreement, Menicon is licensing different types of
intellectual property, including contact lens material, manufacturing
technology, and related knowledge. In consideration, Menicon is expected to
pay license fees of $18 million, of which $5 million was paid in December 2004
upon signing the agreement. The remaining $13 million is expected to be paid
over the next three to five years as the Company fulfills its obligations and
as corresponding milestones relating to Japanese regulatory approval and
Menicon's launch of the product in the Japanese market are met. A minimum of
$10 million of the total license fee is guaranteed.
The Company will recognize the license fees as revenue as it fulfills its
obligations and the milestones are achieved, which is expected to occur during
the next three to five years, beginning in 2005. The Company continues to
expect break-even operating profit for its international business in 2005 as
license fee revenue is offset by an acceleration of its research and
development efforts.
If Menicon has not received regulatory approval within five years, Menicon
may return all intellectual property covered by the agreement and in-process
regulatory approvals to the Company, and the Company may pursue the Japanese
market on its own and terminate the exclusive agreement with Menicon.
Under the terms of the agreement, Menicon will also pay royalties for a
period of at least 15 years from the product launch date in Japan on contact
lenses sold that were manufactured using the licensed technology. The
royalties are expected to increase over time, with a guaranteed minimum of
$5 million per year beginning the earlier of the second year after product
launch or 2012. The agreement does not include the sale of any of ClearLab's
current equipment, facilities or capacity, and is limited to the Japanese
contact lens market.
Graham Mullis, President of ClearLab, said, "Menicon is Japan's largest
contact lens manufacturer, with better than 90% brand recognition among
contact lens wearers in Japan. Menicon is the perfect partner for ClearLab in
Japan and is renowned for the highest standards of quality and safety. With
ClearLab's lens material, lens designs, and manufacturing process, Menicon
will be well positioned to expand their sales in the Japanese soft disposable
contact lens market. We are delighted to be working with a brand leader like
Menicon."
Jonathan Coon, Chief Executive Officer of 1-800 CONTACTS, said, "This is
an exciting period for our international manufacturing business, and we are
pleased with the progress we are making in the development of new and
innovative contact lens products. This agreement with Menicon validates the
investment we are making in future technology at ClearLab."
Mr. Coon continued, "Japan represents approximately 25% of the world's
market for disposable contact lenses. ClearLab did not have approval to sell
products in Japan and the regulatory process there can be a very long and
costly process. This agreement allows ClearLab to capture some of the value
of entering the Japanese market through a partnership with a proven leader
like Menicon and allows Menicon to use its experience with the regulatory
approval process to develop, manufacture, and sell the licensed contact lens
products with its own Menicon brand in Japan."
About 1-800 CONTACTS: 1-800 CONTACTS offers consumers an attractive
alternative for obtaining replacement contact lenses in terms of convenience,
price and speed of delivery. Through its easy-to-remember, toll-free
telephone number, "1-800 CONTACTS" (1-800-266-8228), and its Internet web
site, http://www.contacts.com, 1-800 CONTACTS sells all of the popular brands of
contact lenses. 1-800 CONTACTS offers products at competitive prices, while
delivering a high level of customer service.
About ClearLab: ClearLab develops and manufactures a wide range of
disposable contact lens products and markets these lenses under the clear(TM)
brand to all major international markets. ClearLab's focus on product
innovation and flexible manufacturing operations distinguish it as a
distinctively different partner in the contact lens market. More information
about ClearLab can be found at its website, http://www.clearlab.com.
About Menicon: Menicon, a private corporation owned and run by the Tanaka
family since 1951, is the largest independent contact lens manufacturer in
Japan. More information about Menicon can be found at its website,
http://www.menicon.com.
This news release contains forward-looking statements about the Company's
future business prospects. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
set forth in or implied by such forward-looking statements. Factors that may
cause future results to differ materially from the Company's current
expectations include, among others: general economic conditions, the health of
the contact lens industry, inventory acquisition and management, manufacturing
operations, governmental regulations, integrations and growth of the Company's
acquisitions into its business, exchange rate fluctuations, advertising
spending and effectiveness, the length of time required for completion of the
Company's obligations under the Menicon agreement, the ability of the Company
and Menicon to complete the milestones under the Menicon agreement, the amount
of license fees and royalties that will ultimately be received under the
Menicon agreement, unanticipated costs and expected benefits associated with
the Menicon agreement and the Company's supply agreements and related
arrangements, research and development initiatives, and other regulatory
considerations. Information on the Company's websites shall not be deemed to
be part of this press release.
SOURCE 1-800 CONTACTS, INC.
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Related links:
http://www.contacts.com
Photo Notes:http://www.newscom.com/cgi-bin/prnh/20040107/LACONTACTSLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Brian W. Bethers, President and CFO, or
Robert G. Hunter, Vice President, Finance, both of 1-800
CONTACTS, INC., +1-801-924-9800, investors@contacts.com
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