Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alcon Inc (ALC, Financial) reported a 6% increase in sales, reaching $2.5 billion for the second quarter.
- Core diluted earnings grew by 15% to $0.74 per share.
- The company achieved a core operating margin of 19.8%.
- Alcon Inc (ALC) received FDA clearance for its next-generation Unity platform, which is expected to drive significant efficiencies in cataract surgeries.
- The acquisition of BELKIN is expected to accelerate the global expansion of direct selective laser trabeculoplasty, enhancing Alcon's glaucoma portfolio.
Negative Points
- The second quarter included a significant inventory provision related to a quality issue with a raw material supplied by a third party, impacting margins.
- Equipment sales were down 1% year-over-year, aligning with expectations but indicating a potential area of concern.
- The company faces approximately 300 basis points of pressure from foreign exchange on US dollar sales growth.
- Full-year core gross margin is expected to be slightly below 2023 due to unusual items and higher cost inventory.
- The company is trending towards the low end of its full-year revenue guidance range due to market uncertainties and foreign exchange impacts.
Q & A Highlights
Q: David, I wanted to ask a question on the contact lens business. The 9% obviously, seems like it's a couple of points probably above market at this point. It did come down a little bit versus last quarter. Just maybe talk about pricing dynamics in the quarter. I think you anniversaried a pretty sizable price increase that you took middle of second quarter last year, if memory serves correctly. So has pricing come down even though it was still strong in the quarter relative to maybe the last couple of quarters? And what are you seeing just on rebate activity. Our analysis of your rebates would suggest that they've been pretty consistent here over the last number of quarters, but there's been some noise out there in the channel about maybe taking some rebate activity up here recently. Would love to get your input there.
A: Yeah, Jeff, thanks for the question. The market in total was up 6% retail and we were at 9%, obviously. And again, we're coming around is a tough comp from last year at 11%. So not surprisingly, we look pretty good relative to that. Price was a part of it. It was maybe half of that one. The price mix volume for us was really important. So -- again, we're getting trade up to new products from old products. We're getting good motion on the mix element of this. So I think directionally, we felt pretty good about that particular quarter. And I would just say that the rebating as we've been very consistent. I think we continue to be consistent on rebates which is a part of our promotion mix, but not a major part. We've seen some increase in competitive promotion.
Q: Just a follow-up question on your implantables business. Oftentimes, you provide some US color on your share of the AT-IOL market or at least the PC-IOL market. Any updates on that? And just -- as we think about competitive launches here upcoming from a couple of your competitors, I would assume that very high 80% PC-IOL share starts to trend lower? Just your outlook for maybe share within PC-IOL as we probably start to see some sampling here of some of those other products over the next few quarters. Thank you.
A: Yeah. Most of the competitive stuff in the PC-IOL share element is really pretty consistent with what we've said in the past. There's going to be a lot of folks coming into the market, but the majority of the action is in torics. And so I think at this point, we're still holding better than 80% share of the PC-IOL market, but the torics, again, pretty competitive market, and we see continued erosion there. I think the big thing is the penetration of AT-IOL was very positive this quarter. And so both the geographic distribution of what we have, which is important to think about because we had very good quarters in Europe and in Japan and in China. But we had -- even the US penetration was up, I think, 19.2%. So back to where it's been historically. And again, on a trend, which we kind of think is really the historical trend, which again, I usually say it's about 50 basis points a year of improvement. So if that keeps moving. The main discussion really is about penetration because the share loss is nothing unusual for us pretty much as we've seen it. And actually, internationally, we gained share. So we're feeling pretty good about where we are in IOLs.
Q: Just one -- is actually around the comments you made, David, in the press release in terms of to phrase the next phase of growth in 2025 and beyond. It's obviously been a pretty good year so far in 2024 on the top line, despite some headwinds, particularly in the equipment. I know it's early, but if we look at the dynamics for next year, given the launches in contacts in terms of once weekly, the equipment launch, PanOptix 2.0, dry-eye -- and would you be comfortable at this stage with the same dynamics and same type of growth at least being supported in 2025? And just a quick follow-up on that as well. Thank you.
A: Yes. I mean, Graham, I think the way we're thinking about the world is we have a lot of product flow coming through on an innovation basis. And so I wouldn't want to comment necessarily on growth quite yet, give us another quarter to get to a place where we are really staring at next year. As we finish up this year, we're really thinking about what happens with product flow next year, which we've invested a lot of time in. So Unity VCS is a big deal, Unity CS, big deal. 512, should get approved next year. PRECISION7 is a big opportunity. PanOptixPro, if we get that out next year, I think that's a great idea. Belkin is a new product flow for us, and we've got another eyedrop in the hopper here, too. So we've got a whole lack of stuff that we'd like to invest in that we think grows this market and grows our position quite substantially in the coming years. So this year is a little thin that way. You'll notice that we made a lot out of what we've got. But next year, we get a lot of product flow behind us.
Q: Are you able to share any more information about potential timings of data? And is this data that you have? Is it blinded? Or have you had it in has for a while? Thank you.
A: Yes. It's still -- we're still finishing the Phase I, the first in-human trial. We should have that data available to us shortly. In the next several months, we'll have a look at it, and we'll obviously comment on it once we have a full understanding of it.
Q: Just looking at the full year guide, I'm thinking mostly organic sales growth. Obviously, we're very much trending towards the very bottom of the 7% to 9% on constant currency. Just curious David, what gives you guys the confidence that there is scope for acceleration in the back half of the year? Or is there a specific region, product category that you're focused on? So if you could talk through that and your degree of confidence that we're going to end up towards 7% versus towards 9%. That would be my first question. Then I have a follow-up after then I'll let you answer that first.
A: Yeah. Hey, Veronica, how you doing? Yeah. So I think the difference between the 7% and 9% is really how the markets perform. If we get a little bit more market growth or recovery, then we have expected that would bring that number up I think it's also how effective our pricing actions are, how does the VBP do in China. We're not quite sure how that's going to roll that might come in better than we have. So -- listen, there's still five or six -- five months left in the year,
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
