Alcon Inc. (ALC) on Q1 2021 Results - Earnings Call Transcript

Operator: Good morning, and welcome to the Alcon’s First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. Karen King: Welcome to Alcon’s first quarter 2021 earnings conference call. Yesterday, we issued a press release and interim financial report and posted a supplemental slide presentation on our website to enhance today’s call. You can find all of these documents in the Investor Relations section of our website at investor.alcon.com. Joining me on today’s call are David Endicott, our Chief Executive Officer; and Tim Stonesifer, our Chief Financial Officer. Our press release, presentation and discussion will include Forward-Looking Statements. We expressly disclaim any obligation to update forward-looking statements as a result of new information or future developments except as required by law. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements. Important factors that could cause our actual results to differ materially from those in our forward-looking statements are included in Alcon’s Form 20-F and our earnings press release and interim financial report on file with the Securities and Exchange Commission and available on the SEC’s website at sec.gov. Non-IFRS financial measures used by the company may be calculated differently from, and therefore, may not be comparable to similarly titled measures used in other companies. These non-IFRS financial measures should be considered along with, but not as alternatives to the operating performance measures as prescribed per IFRS. Please see a reconciliation between our non-IFRS measures with directly comparable measures presented in accordance with IFRS in our public filings. For discussion purposes, our comments on growth are expressed in constant currency. And with that, I will now turn the call over to David. David Endicott: Welcome to Alcon’s first quarter 2021 earnings call. Let me begin by providing a brief update of our first quarter, overall market dynamics and recent performance. After my comments, Tim will discuss our first quarter performance and our outlook for the full-year 2021. Then I will wrap up with some closing remarks and we will open the call for Q&A. We started out the year with solid results in line with the expectations we shared during our last earnings call. We delivered sales growth of 2% and core operating margin of 18% despite continued impacts from the pandemic. Core earnings per share were better than expected at $0.49. Overall, our surgical franchise continues to perform above market, benefiting from the strong growth in our latest advanced technology IOLs and strong demand for our equipment. Tim Stonesifer: Thanks, David. We are pleased to report first quarter sales of $1.9 billion, up 2% versus prior year. Sales growth was driven by the surgical franchise, where sales increased 7% in the quarter led by North America. Implantable sales of $344 million increased by 9% in the first quarter, primarily due to the recent introduction of Vivity and continued strength of PanOptix. Vivity is available in the U.S., Europe and key markets in Asia Pacific and we are encouraged by the strong initial demand. We are particularly pleased that both PanOptix and Vivity are taking share and increasing penetration. This was offset by challenging year-over-year comparisons in Japan, which benefited in the first quarter of last year from the launch of PanOptix and favorable market conditions. In consumables while market procedures were down mid-single-digits, sales of $535 million were flat in the first quarter due to the strength of our refractive and Vitrec consumables. Equipment and other sales were $198 million in the quarter, up 25% versus the prior year. The strong double-digit growth was driven by multiple factors. First, we continue to do well with our FICO equipment, with the addition of the Active Sentry Handpiece and upgrades to newer generation technology such as Centurion and LEGION. LEGION is starting to gain momentum among surgeons who are looking for premium performance and affordable machine at a lower cost per use. Second, we are encouraged with the performance of our new ARGOS parameter, which is part of our small, but growing visualization portfolio. And third, our refractive business has seeing strong demand, which accounted for 11 points of the growth due to the increased amount of screen time and discretionary income. While we are pleased with the growth in refractive this quarter, we don’t expect this exceptional demand to be sustainable. David Endicott: Thanks, Tim. In summary, we started out the year in a very good position with new products driving top-line momentum and operating profitability returning to 2019 levels. Last March, we held our Capital Markets Day where we reiterated our strategy, delivered an update on our robust pipeline of innovation and laid out our updated long-term targets through 2025. So we are very excited about the positive response we received from our various stakeholders. We are fortunate to operate in attractive markets, we are gaining share through our innovative products and we are on track to deliver our long-term financial plan. Now we are inspired by the significant possibilities we have to advance the frontiers of sight and we will continue to innovate more than three challenging conditions like cataracts, rental disease and problems like dry eye, presbyopia, and myopia. Each and every day 20,000 associates come to Alcon to bring the gift of vision and the ability to see brilliantly the millions and more people. I want to thank every one of you for your continued commitment. With that, let’s open the line for Q&A. Operator: Thank you. And today’s first question comes from Scott Bardo with Berenberg. Please go ahead. Scott Bardo: Yes. Thanks very much for taking my question. So, first question, please just relates to the Precision1 rollout in the international markets. I think you were kind enough to give us some disclosure about the uptick in the U.S. markets being the leading new fit product and the fastest growing product in the U.S. I think round about now you should have some deterring in the international market. So I wonder if you could share that with us, please. And the follow-up question, please just relates to and the acquisition of Simbrinza. Can you confirm that you also have acquired the rights to the over-the-counter switch for this product in several years time? Thank you. David Endicott: It is going to be a prescription product I suspect until it knows generic, but it has quite a long patent life. So, recall that this is patented I think through 2030. So it has a long runway and we feel really good about the potential of its promotion sensitivity. On the P1 OUS, we just got started with OUS. It looks very good. But again, we are launching principally in Europe and Japan, which again are the two most affected sections of the international market. So we are going to see, as I said in the regional launch, we give it six months, see where -. It is going to be that same kind of time period and I do think that all signs are pretty much similar to what we expected to see. So we feel good about it, but I would just say it is too early to give us much from the first quarter. Remember that I think we put sphere out in Europe in February and toric went out in March and so again just really haven’t got any real time yet to see much result. But feedback from the optometrists is exactly what we would have expected, which is they are really like it on eye. Operator: Thank you. Our next question today comes from Daniel Buchta with ZKB. Please go ahead. Daniel Buchta: Yes, thank you very much. The first question from my side on your contact lenses business, I mean you recorded minus 2% while J&J few weeks ago was showing 3.5% after quite disappointing, let’s say, last 12 months and also Bausch & Lomb yesterday was plus 13%. I mean, can you have more color on why you only 2% compared to the others some being much better, is it stocking effects, any other factors that can explain this difference? And I mean I would assume, Q1 has helped because of the good uptake in the U.S. and usually a bit also on the European side. And then the second question on your core EBIT margin guidance for this year of approximately 17%. I mean, we have the first quarter now done with 18% and I would assume sequentially at least in terms of revenues it will be the lowest quarter, because the recovery is now taking place with growth as you guys coming back in the third and fourth quarter. Why only 17%, because if I look back what you were expecting initially for 2020 already before COVID-19, you were looking for 17.5% to 18.5% already at that time and some, yes, since then, I mean now you are back to growth again and PanOptix was playing out very well with How can you give us a bit more guidance on this 17%, how to get there? Thank you very much. David Endicott: Yes, Dan thanks. Let me start with the contact lens performance. We -- the market in the international global market was roughly flat 0% and we were off 1%. So pretty much with the market. The split between that, we did quite well in the United States. We are obviously hampered a little bit in the international markets by the trajectory of that recovery. So, Dan, I think we believe the market broadly is still at about 95% of the 2019 levels. Relative to other companies’ performance, all I would direct you to is the mix of recovery. So think very carefully about who has highest exposure and contribution to China and the rest of Asia, where we have very small business. So we had less of a downturn last year and less of an uptick this year. So though confused market share growth with the actual return of growth because we are on a global basis gaining share on the back of U.S. and obviously we are pleased with the early read on P1 and on EBIT. Tim Stonesifer: Yes, sure. So on the margins, although we are very pleased with the 18%, the one thing that I would say, as we said in the prepared remarks, we did pull back on some advertising and promotion spend, particularly in our international markets, because if you recall, in January we started to see some slowdowns again and we just wanted to make sure that we were disciplined and cautious about our OpEx. So if you think about hiring folks and all of that, we were very cautious through that. Now, we would expect to put that back into the P&L. A majority of that will go back into Q2. So I would think about it as, call it, maybe $15 million or $20 million that we didn’t spend in Q1 that we are going to spend throughout the course of the year, and again, a majority of that would be in Q2. So I think what you are going to see is Q1 might be a little bit inflated and then Q2 will be a little bit more depressed and it’ll sort of normalize similar to profile, maybe take a look at 2019 and you can kind of see how the margin profile played out there. Operator: Thank you. Our next question today comes from Cecilia Furlong with Morgan Stanley. Please go ahead. Cecilia Furlong: Okay. Thanks for taking our questions. I wanted to ask about equipment sales, which have been fairly strong in the past few quarters and -- but just as you look out with good sustainability in your mind in terms of the strength and just really what type of mix you are seeing recently in sales to developed markets versus other devices? David Endicott: Yes. Good question, Cecilia. Let me answer it this way. The equipment was up 25% versus prior year, which again surprised us in many ways. The refractive business was very strong and we continue to do well in refractive. LASIK as a procedure continues to be robust through this period of time. It looks like, I think people who have been not taking their vacation holiday money and spending it on traveling are investing in their eyes and so we have seen LASIK procedures, consumables and importantly equipment way up over prior year. That is driven about half of our growth in the equipment piece. But I would tell you that the other half of the growth is our core equipment. So cataract equipment on the back of Active Sentry Handpiece, constellation our, I’m sorry, our Vitrec machine is doing quite well, and of course we have two new pieces of equipment. One, our new biometer, which is a diagnostic before cataract surgery is doing quite well and our visualization system, which is the Revalia product again doing quite well. So we are very pleased with equipment. It is a combination of steady replacement and some marginal market share gain with kind of a refractive overlay that I suspect is not durable, but I do think the underlying strength of some of our equipment should persist. So we are a little bit careful about how we think about it, because to be honest, I really didn’t think the equipment -- the capital was going to be there for equipment, it looks like it is. And so for the moment, at least, we are having pretty good time with our capital equipment. Cecilia Furlong: Great, thank you. And I guess just second, if I could ask on, just as you look out two year, what you are considering really versus regards to traditional summer seasonality against the ongoing COVID impact just improvement 2Q to 3Q? And thank you. David Endicott: Yes. I mean I think what we said is that and what we really think is you are going to see some persistent COVID impacts through the end of the second quarter. There may be markets that persist beyond that, but I think in aggregate the -- our view is the market will return to kind of 2019 levels by the middle part of the year. That is our basic assumption. And that we will start to see that same growth through the end of the year so we will grow in the back half. The pace of that is going to -- it is just still a little bit unknown. We still see Japan and countries obviously like India, they are struggling mightily with this. There are other countries again, that are still kind of slow to come out of this. And so we are worrying a little bit about what the pace of that recovery is, but I would just say that is our basic assumption. So from our perspective, what that means is we focus on share and I think we feel very good about our share position in all of our categories at the moment and we particularly feel good about our product innovation cycle and where we are introducing new products. So again I can’t control the market pace, but I feel really good competitively relative to our current position. Operator: Thank you. Our next question today comes from Larry Biegelsen with Wells Fargo. Please go ahead. Lawrence Biegelsen: Good morning. Thanks for taking the question. Let me start on Simbrinza. So, first, how large is the dedicated sales force going to be and was that contemplated in the long-term margin guidance you provided at the Capital Markets Day? And David, should we expect more pharma deals like this in the future? And I have one follow-up. David Endicott: Yes. Larry, let me give you the sense of that. There’s about 10,000 prescribing ophthalmologists and optometrists. And so we will build a sales force adequate to cover that audience. It is fairly typical. I think most of the companies build around that size. So you could kind of benchmark it off what is I think kind of the standard in the pharma space. I think in order to be successful in eye drops business, you’ve got to be able to reach all those guys. So, Simbrinza, we are excited about it, because look it is a high margin product that we already manufacturer it. It remains promotionally sensitive. It has a critical mass to build a sales force around. And that also gives us then the means to take multi-dose preservative-free products. In particular, we are just launching right now multi-dose preservative-free SYSTANE Hydration which we think is a great idea and we are also launching right now Pataday Extra Strength. So remember that the same audience is the one that was prescribing Pataday last year, it is now over the counter. We are working directly with those folks to build the markets. And so we are excited about the opportunity put in a bag kind of multi-dose preservative-free products to build Simbrinza in glaucoma and allergy. So we are basically treating dry eye allergy and glaucoma in a sales force that I think can have a real impact on this. So that is kind of the direction we are headed. Tim Stonesifer: Just on a related topic, because I’ve seen some of the notes and we had some of the questions on, is it in 2021, is it not in 2021. We have made the comments in the prepared remarks, but again, the way I would think about it from a 2021 perspective is it $50 million of annualized revenues. Obviously, we won’t close the transaction, so what we predict to be the end of the second quarter. So you sort of have a half a year of that. But keep in mind, to David’s point, we will be building that sales force up. So we will be incurring those costs going out there and hiring those people. In addition to that, we have a transitional service agreement with Novartis. They will continue to sell the product for us, while we are building that sales force and we will get a markup for that. So that is why you are not going to see a material impact in 2021, but in 2022 we will obviously have a full-year revenue. Our sales force in play. We won’t have that mark up from Novartis. So that is how I would sort of think about it from a EPS perspective. Lawrence Biegelsen: And Tim, just in terms of guidance, is this sooner out, just to make sure everything is clear? Tim Stonesifer: This is not in the long-term guidance. This was not in, as we said at Capital Markets Day that did not include any acquisitions in our 2021 guidance. It is in that number, but it sounds material. Lawrence Biegelsen: That is super helpful. But the sales force build was contemplated and I apologize if you touched upon that. I didn’t hear it. And just for my follow-up, David, your implantable growth has been pretty impressive, but once we get past this year you’d have some increase in competition, J&J just got approval for synergy in the U.S. How are you thinking about being able to sustain above market growth in implantables beyond this year? Thanks for taking the questions, guys. David Endicott: Yes, Larry, look, I think we are pleased with the share performance that we have got in the US. In fact, it is obviously as projected faster than we had originally thought. Vivity appears to be additive to the PanOptix business in a fairly meaningful way. So what we are seeing right now and hope to continue to see is improved penetration of AT-IOLs. And so remember that one point of penetration is about $100 million globally. And so I think we are keen to think about how we move penetration of AT-IOLs up versus mono-focal. So, well, I think you are not wrong on that, there will be competition in and they will have some effect. We have contemplated that. What we are really interested in now, especially in the United States where we have better than 70 share, we are really thinking about what is the penetration of the AT-IOLs and how can we move that going forward. And so we have got a nice blend of products. So you’ve got the best trifocal in the world that has the, in my mind, the perfect focal point distance and real clarity of vision at those focal points. If you want that crisp vision, PanOptix is going to be very competitive for it. And likewise, on the other end of it, if what you really want is a non-diffractive lens, which has been some of the benefit of the EDOF as well. Vivity clearly does a better job than everything else out there. And so I think that while there are going to be competitors that blend things and do different things, I think we have solved for the two core needs in the market and I think what we believe is that that is going to be very competitive. So we can turn our attention now, I think, to trying to build the market on the back of what is a fairly strong share position. I do think there’ll be some share erosion. I think I’ve said that in the past, but we have contemplated that. Operator: Thank you. And our next question today comes from Julien Dormois with Exane BNP Paribas. Please go ahead. Julien Dormois: Hi, guys, good morning. Thanks for taking my questions. I will start with one question on the discrepancy that was seen between your implantable business and the consumables business over the past few quarters. My understanding is that in the end you should you broadening the same procedure or close to same procedures. So what is happening here? Am I missing something on that side? And then I have one follow-up, please. David Endicott: Well, yes, two things, one is share and the other is price. So you -- what you see in the consumables market is generally going to track to procedures depending on mix and the like. But you are directionally correct, consumables we will travel largely on a volume basis with procedures. What is going on in IOLs though is that we are gaining share in global IOLs and have been for about a year. And we are continuing to gain share in advanced technology lenses, which are significantly more valuable than a monofocal lens. So remember the monofocal lens is about $100 on average around the world, plus or minus a bit, in the United States the AT-IOLs or $800, $900, upwards that range. So you just see a different value change, the more we grow our share, particularly in AT-IOLs. Julien Dormois: Okay, thanks, that is helpful. And then my follow-up question relates to Q2. I mean, last quarter you told us that Q1 sales will be very similar to what they were in Q4 last year. Should we expect the same thing in Q2 in terms of absolute sales number considering maybe the seasonality, but also the challenges you are facing in this COVID world? Tim Stonesifer: Yes, again, we are not going to give a lot of quarterly splits. But what I would say is this obviously Q2 for us last year, like many companies, was significantly depressed. So we will rebound, but we anticipate to rebound from that. But I think the best way to think about it is again, our assumption is that markets return to historical levels sort of in the third quarter and then we will continue to see that natural growth that we have seen historically. So that is how I would sort of think about the total year and that is the assumption that we have used for the guidance that we have given. Operator: Thank you. And our next question today comes from Veronika Dubajova with Goldman Sachs. Please go ahead. Veronika Dubajova: Hi, guys. Thanks for taking my questions. I want to start a little bit on the revenue guidance for 2021. If I just do some very simple math, it seems to me that the guidance is in high something like a 7% to 8% organic sales growth versus the 2019 base. I think you are already at 7% in the first quarter. So I’m just trying to understand why you guys don’t think you should see more revenue growth acceleration, especially as we move into the second half and the market normalizes. Is there something that you are seeing on the horizon that is leading you a little bit more cautious on that at this stage? If you can talk to that and then I will ask my follow-up after that. David Endicott: Yes, well I -- Veronika, the markets as we see them right now are probably 95% of what they were in 2019. So we are starting from a 5% deficit. And I do think that you need to think carefully about what the 2019 levels. We are going to have to grow back from here to get to the 2019 level. So I think we are in the ballpark. But again, I think what we are trying to figure out is what is the rate of return. And again, as -- without trying to be too repetitive, this quarter and two quarter is going to kind of see us get back to normal levels. There is some risk in that. I don’t know that that will happen exactly, but I do think that that is directionally the right assumption. And then as we kind of move through the rest of year, it is not going to be all soon popped up to the original rate. You are going to glide up to the original growth rate as things return. So it is just been our experience so far that this looks to be a more gradual return to normal than a all of a sudden it is over and we pop back to normal rates. So I think that graduated return is maybe what you may be missing as opposed to what would be kind of an intuitive endpoint growth rate. Veronika Dubajova: Okay, understood. Thank you for that. And then my second question is from the contact lenses. I appreciate there is a ton in the ways that not only your numbers like your competitors, and thank you, David, for the comment about China, but just may be can you give us a sense in U.S., if you look at your growth rate, and how that compares versus market just so we can see or have a better sense for where you think the P1 will mention as now in the U.S.? And then I guess, maybe if you could share that color on the OUS business excluding China. It is quite hard for us to see share gains from the print that you put out today. David Endicott: Yes, well, I mean, look in the United States, market grew about 5% in total contact lenses and we grew 7% in the U.S. So we feel good about that. I think what you see in the international markets is a decline of something on the order of 5% plus or minus a little bit and I think what we are going to try - and again we are working hard to get our products out there, but again we are kind of right at about market growth there. So when you kind of net those that is where you are coming up with this basically at market growth. So we think the full market around the world was flat. And we think that the -- again, we reported a minus 1%, so roughly flat. My sense of it is, is that the biggest difference in our peer group is their exposure to markets that have already bounced back. The last year had very big declines, read China, particularly in February and March. This year had extraordinary February’s and March. And so that swing which we have a lower exposure to is really I think what is happening. I understand there’s some other things going on inventory and gross and net, stuff like that, but again I think the big news here is just the exposure to the markets that bounce back and those that didn’t and we are obviously over-indexed in Europe and in Japan, both of which are still kind of under heavy COVID pressure. Operator: Thank you. Our next question today comes from Rob Cottrell with Cleveland Research. Please go ahead. Robert Cottrell: Hi, good morning. I want to start on the contact lens business and I wonder if you can update us on timeline for when you think the new contact lines will be kind of at capacity or full efficiency and then how much of a margin benefit you expect from that just trying to help us bridge from the 17% to the low-20s in 2023? David Endicott: Yes. I think the way to think about the contact lens lines is that there is going to be steady gross margin improvement over the period. We are very optimistic I think about the progress of Precision1 and the potential of T30. So we are going to continue to add lines to support those launches I think through the plan. And so the ones that are already in place get very productive and they run up nicely, basically in a 24-month frame and then you see new ones come on. And so they start at zero and then they kind of work their way up to productivity, full productivity. So you are going to get a blend all the way through the plan of new machines coming on as we add capacity continuously through the plan. And then the way to think about it really is that the average of that will kind of improved kind of consecutively year-over-year. And so that is probably the direction that I will give you. Tim Stonesifer: Yes. If I go back to the Capital Markets Day commentary and we would expect to see in 2022, 2023, you see some acceleration. So again, we put in a lot of lines. Last year we continued to put lines in this year. That is what is driving the pressure that we are seeing on the gross margins on the Vision Care business, and that is sort of accelerate to David’s point as you hit that kind of 24-month period. So I would go back to that Capital Markets Day material that may be helpful. Robert Cottrell: Got it. Thank you. One follow-up then on the surgical business. How are you thinking about pent-up demand for cataract procedures, either in the back half of this year or into 2022? David Endicott: Well, it is a really good question. I think we have estimated there’s probably 800,000 to 1 million cataracts that probably haven’t gotten done during this stretch. And I think that the question of great interest, I think is how that comes back. My belief is that it is likely to come back slowly over a longer period of time, not in a bolus coming back in any one moment. So I think we have said in the past and I still believe this is that if you kind of draw a line, take a string from kind of end of 2019 through to 2023, you are going to see roughly our procedure growth get back to what was a historical norm in that kind of 4%, 5% range. But it could come differently than that, but I don’t know precisely how it comes back. The compounded growth rate is likely to be that. So probably modestly hotter, maybe 5% or 6% for a while as opposed to kind of a quick bolus back and then settles back and that is mostly because most ASCs run at a productivity rate that is pretty high already. And in particular in the public hospitals you are not going to see a lot of movement quickly because they are also running relatively full and there’s a lot of other procedures competing for a large time. So I think there is going to be more of a slow, steady and longer trail of kind of warmer than normal demand and it could be longer than that, but that is kind of best thinking now. Operator: Thank you. And our next question today comes from Bob Hopkins with Bank of America. Please go ahead. Robert Hopkins: Thank you and good morning. So Tim if that is OK I want to start with you on the margin guidance for the year. Could you just give a sense for what your guidance implies about how you are exiting the year and the fourth quarter from an operating margin perspective? And then maybe also just maybe go into a little more detail on the factors that impact that number relative to what you put up in the first quarter? Thank you. Tim Stonesifer: Yes. I would say, again, I will go back to the 2019 profile. I think it assuming that the markets do come back. You’ll see a similar profile. So Q2 is normally a little bit depressed, because as you recall, that is why we put in a lot of marketing and promo expenses to get ready for the summer season. So I would expect that to happen again in 2021. And then we will sort of ramp-up from there. So I would kind of look at that 2019 profile and I think that you’ll see something relatively similar to that. Robert Hopkins: Okay. And then are there any -- just any other factors besides that spending that would cause the margins to end up at 17% for the full-year when you start out at 18%, just want to make sure we have got all the moving pieces here. And then David, just on that last question, just maybe a quick comment in terms of why you think the backlog happens more over time and not a bolus, so is the short answer purely a capacity one? Tim Stonesifer: Yes. Again, I would say the factors to think about, we will see some gross margin improvement as we go throughout the course of the year as we start to ramp up production. You’ll get a little bit more operating leverage right as your sales improve. You’ll see some of that. And again I just want to reiterate when you look at that first quarter number of 18%, we do have $15 million to $20 million of spend in there that we chose not to spend but we will in the -- over the course of the year. So just keep that in mind as you are trying to do a run rate from that Q1 number. David Endicott: Yes. And Bob on the capacity thing, yes, it really is capacity and staffing in the United States that will take some time to kind of starts up. It is really site of care internationally. So the hospital-based markets have a lot of competing procedures and also frankly aren’t going to move through a lot more productivity than what they have historically had. So again I think the waiting list in international is going to get longer. They may look to find some other ways around that. I know there is some talk about trying to increase use of private facilities, but it really isn’t clear to me yet that those are really going to happen. So I would say in the current sites of care internationally and U.S. capacity is probably the main constraint. Operator: Thank you. Our next question today comes from Matt Miksic with Credit Suisse. Please go ahead. Matthew Miksic: Great, thank you very much. I just had a couple of follow-ups, one on implantables and one on contact. So Tim, I think you mentioned that you saw PanOptix and Vivity driving growth and penetration. I know this came up a little bit in Q&A, this idea of expanding penetration offsetting some of the competition, you may begin to face in different regions around the world, but if you could talk a little bit about how you see those two products. What you’ve seen so far? I know this was a question early in the Vivity launch, can it, will it expand penetration I’m wondering if you are starting to see that? And then I had one follow-up on contacts. Tim Stonesifer: Yes. Look Matt on the PanOptix and Vivity we have seen some data. I mean, we are obviously watching it carefully. Vivity is doing very, very well and we are excited about that, because it does not seem to be affecting our PanOptix trajectory either. So I think the two combined seem to be giving us an additive effect to a large degree, and there is some, there’s obviously some cannibalization that you should be thinking about. But I think broadly speaking, we have seen penetration move of the ATIOL particularly in the United States, but also internationally and the question that we are really still struggling with and I don’t know the answer to is that a phenomenon of just not being back to a 100% of capacity and we are really seeing the more progressive practices as a mix coming in with more ATIOLs then that mix itself driving the penetration up or is it actually a phenomenon that is a little bit wider than that. And I think given our instinct on it is, it is a little bit wider than we had originally expected, which is good. And so we are still cautious about it, because people for years has been talking about how do we expand the ATIOL market. And again, I’ve always been kind of it is going to be 50 basis points a year, because that is what it is been, even though you’ll see blips here and there. So I’m still careful to say that we haven’t proven this yet until we are back full speed, but right now the penetration of ATIOLs in the total IOL market is up and up -- and has inflected up over the last year. So I think again nice change for us to see. Our hope is that is continuing going forward. It is certainly our intention to try and get it that way, because we think Vivity gives a lot of opportunity for people who haven’t historically gotten excited about presbyopia-correcting lenses but do use torics for example to use a Vivity toric. I mean there’s just no downside to that in lots of ways and it is a more forgiving lens in lots of ways and it also has -- going to give you intermediate near. So I think this is -- there is a really interesting opportunity here with Vivity to bring in some folks that have been a little bit afraid of diffractive lenses and we think that is where the place for Vivity is going to be. Matthew Miksic: That is great and encouraging. Thanks for that. And then on contact lenses, just appreciate the color and tone for Q2 and the rest of the year that you provided, maybe if you could give a sense as to how this prior year stocking effect or anything else that we should be aware of here in Q2 may continue to affect contacts or what your visibility is into that just so we are in the right place here in terms of our expectations in the first half, the rest of the first half of the year? Thanks. David Endicott: Yes. On contact lenses, I would be careful to look at growth rates the rest of this year, especially growth rates over prior year, because it is going to be a giant growth rate this next quarter over last year, because of course COVID was particularly impacting second quarter. And there was some movement of stock, but that is going to be messy all year in both businesses. I really would encourage people to think about market share globally, because as the market stabilize and as things come back that will be the durable idea. And I would continue to say that we are very encouraged about our market share movement in the first quarter and we are encouraged about the potential in the second quarter and going forward. So we feel really good about the underlying demand and our competitive position. And the growth rates all year this year, if you look at them versus last year are going to be really messy. So I don’t want to venture a guess on 2Q, because it is going to be particularly messy, but I would say that it is going to be all year that we are dealing with loosely call challenging competitors for last year. Operator: And our next question today comes from Anthony Petrone of Jefferies. Please go ahead. Anthony Petrone: Great. Two from me. One would be just is it really to quantify the size of the backlog on a new fits in contact lenses coming back, that will be the first question. And then the second question on the Simbrinza sales force expansion, just trying to get a sense of how many products will actually be added into that effort over time in addition to Simbrinza? Thank you. David Endicott: Yes. On the backlog what I can tell you Anthony really is just for probably the last two quarters consistently optometry in the United States has been saying they are at about 80% of contact lens new fits. I don’t think that is any better outside the U.S., although I don’t have the data on it. So I would say the survey data in United States that we see says they are off 20% on new fits. So that is a significant chunk of new fits that we wish we had, but will likely return at some point. Again, I don’t know that it is a backlog, the same way you think about cataract backlog, because people may have just put it off and they are using their glasses and they are satisfied. It is a little bit different than really needing a cataract surgery to see. I do think that there will be some more aggressive market growth as we return to loosely call normal and I just don’t know how big that impact is, but I can tell you, that is the gap between what they used to do last year before the COVID and what they are reporting doing right now in the first quarter of 2021. I would also say that most of the optometrists are reporting still in dollar sales 95% of 2019 numbers. So just to give you some again reasonable data on where the market actually is, it is still not a 100% of 2019. So you are seeing some bounce back in some of the revenue growth, but you are really not seeing it back to where it will be, I think, in the back half of this year. That said, on the other piece, Simbrinza sales force, we are going to start with three products in the bag, actually a few more than that, in some ways, but the three brands that we will have in the bag they are going to be obviously Simbrinza. And then SYSTANE a multi-dose preservative-free in particular hydration which would be our first multi-dose preservative-free product. And again I would encourage people to think about that $700 million market in the United States and the relative penetration of preservative-free product versus the international markets, which we see quite significant opportunity. And so internationally, it is about 50-plus percent depending on where you are in the world, United States, about 25%. So we think there is an opportunity to encourage people to use a multi-dose bottle, but that does not have preservative in it so - when it hits the eye. So that is a really exciting opportunity for us in addition to Simbrinza. And obviously we will be selling our allergy brand Pataday in that same group. So most ophthalmologists and many optometrists, the generalists are treating glaucoma, dry eye as probably there two or three top visits day in and day out and allergy obviously during the season falls in there as well. So we are hitting categorically a lot of things that are important to ophthalmologists and obviously it starts us down a path of building out our eye drops business. Operator: Thank you. And ladies and gentlemen, our final question today comes from Jeff Johnson of Baird. Please go ahead. Jeffrey Johnson: Thank you. David, maybe two follow up questions just on stuff you were just talking about on Simbrinza and on the sales force, we are all trying to kind of circle around this operating margin guidance for the year. Will those sales force investments be dilutive near-term? And Tim, I don’t think I heard the answer, just longer term I know Simbrinza was not in your LRP, but that approaching mid 20% operating margin by 2025, how does the sales force and kind of doing what you are doing with these three products in the bag and going out to those 10,000, how does that impact that LRP margin target? Thanks. David Endicott: Do you want to take that? Tim Stonesifer: Yes. As far as the margin target in the 2025 again this is a $50 million U.S. revenue based business on an annualized basis that grows at call it low single-digits. So the margin profile is favorable to our overall margin profile, but just keep that the relative scale of that in mind. So I wouldn’t anticipate any impact to the long-term guidance that we gave you. David Endicott: And in this year’s guidance what we have got is really we haven’t put the sales into the Simbrinza, haven’t put Simbrinza it into this year’s guidance and the costs are borne by that P&L stand-alone. So we feel like, again, it is kind of a net-neutral for this year, if you will, relative to what we would have done without it, but it gives us momentum and an ability to sell some other products and obviously it is accretive next year. Jeffrey Johnson: All right, that is helpful. Thank you. And then just on the contact lens market, David, I mean we have been seeing some of that same data the 20% down in office visits and refractions and some of the things that you think would correlate well with contact lens fits, things like that and even some of that data looks like it is bled off or gotten a little soft or maybe here over the last month or two. But do you believe that data, I guess it is my question, you just talk about the U.S. market being up 5% in dollars year-over-year and new fits, even though new fits only make up sometimes 20% or so of given quarter’s revenue down 20%. It is hard for me to reconcile those two numbers and I would like to hear how maybe you do. David Endicott: Yes. Well, I mean, I would think very carefully about the 5%, because that is over 2019 remember. So 2019 was an unaffected quarter. So even in the U.S. in March, March kind of fell off the map for us. So remember that the 5% is a growth number in the U.S. that is off of a declining base. It went to substantially down in April and May. So I would say that I really do believe that there are a lot of opportunity for people to get into SiHy daily lenses which is driving the value mix up and that is still pretty robust. I think in the U.S., I can’t remember, I think it was 10% growth in the U.S. in daily SiHy value, even though it was only 5%, for example, in the overall market. So there is value trade in the contact lens market that is a real opportunity. And the question just is when are they going to come back and where are they. So I do believe that visits are down. I really I think we see it on the ground with our folks, even in the U.S. and I’m pretty sure what is being reported has been a very consistent in terms of decline of visits. And remember the 5% was versus 2020, not 2019. And so again, I think the 2019 number again was pretty robust. We had a good start to 2019 and 2020 and then obviously it is changed good bit here. I think the short version of that is, yes, we think it is still down. We think it is down in particularly in international. And particularly for us who are launching new products, new fits are the problem, foot traffic or you don’t have flow through the office, tougher to get new foots. Operator: Thank you. And Ladies and gentlemen this concludes today’s question-and-answer session and today’s presentation. We thank you all for participation for today’s presentation. You may now disconnect your lines and have a wonderful day.
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Alcon Stock Surges 9% Following Q1 Results

Shares of Alcon (NYSE:ALC) surged more than 9% in pre-market today after the eye care products manufacturer reported Q1 earnings that exceeded expectations and raised its 2024 guidance.

The company announced a first-quarter core diluted earnings per share (EPS) of $0.78, which beat the consensus estimate of $0.73. The company also reported Total Vision Care net sales of $1.11 billion and a core operating margin of 22.0%, an increase from 20.6% in the same period last year.

While revenue for the quarter was $2.44 billion, marking a 4.8% increase year-over-year, it fell slightly short of the consensus estimate of $2.46 billion.

Looking forward, Alcon has raised its net sales growth forecast for 2024 to 7% to 9%, up from the previously expected 6% to 8%. Additionally, the company adjusted its projection for core diluted EPS growth in 2024 to 13% to 16% year-over-year, compared to the earlier forecast of 15% to 18%.