Full Press Release Details
CORPORATE PARTICIPANTS
Brian Moore - EVC Group - IR
Caren Mason STAAR Surgical - President & CEO
Steve Brown STAAR Surgical - CFO
CONFERENCE CALL PARTICIPANTS
Chris Cooley Stephens, Inc. - Analyst
James Sidoti Sidoti & Company - Analyst
Matt Larew William Blair & Company, LLC - Analyst
Larry Haimovitch HMTC - Analyst
Good day, ladies and gentlemen, and welcome to STAAR Surgical's
first quarter 2015 earnings conference call. At this time, all participants are in a listen only mode. Later we'll conduct a question
and answer session and instructions will be given at that time.
If anyone should require operator assistance during the conference
call, please press *0 on your touchtone telephone. And as a reminder, this conference call is being recorded. At this time I would
like to hand the conference over to Mr. Brian Moore with EVC Group. Sir, you may begin.
Brian Moore - EVC Group - IR
Thank you, Sahid, and good afternoon, everyone. Thank you for
joining us on the STAAR Surgical conference call this afternoon to review the company's financial results for the first quarter,
which ended on April 3rd, 2015. Joining me on the call today are Caren Mason, President and CEO of STAAR Surgical, and Steve Brown,
The news release detailing the first quarter results was issued
just after 4:00 PM Eastern time, and is now available on STAAR's website at www.staar.com.
Before we get started, let me quickly remind you that during
the course of this conference call the company will make forward-looking statements. We caution you that any statement that is
not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations,
plans, beliefs and prospects.
These statements are based on judgement and analysis as of the
date of this conference call, and are subject to numerous important risks and uncertainties that could cause actual results to
differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking
statements made in this conference call and webcast are described In the Safe Harbor statement in today's press release, as well
as STAAR's public periodic filings with the SEC. STAAR assumes no obligation to update these forward-looking statements to reflect
future events or actual outcomes, and does not intend to do so.
In addition, to supplement the GAAP numbers, we have provided
non-GAAP adjusted net income and diluted net income per share information. We believe that these non-GAAP numbers provide meaningful
supplemental information and are helpful in assessing our historical and future performance. Also, in order to compare our performance
from period to period without the effect of currency fluctuations, we applied the same average exchange rate application to the
prior period or constant currency rate to sales. A table reconciling the GAAP information to the non-GAAP information is included
in today's financial release, which is available on our website.
Caren Mason - STAAR Surgical - President& CEO
Thank you, Brian, and good afternoon everyone. I will begin
our discussion with general commentary on the state of the business, and the initial steps we are taking to enhance our results
and shareholder returns. Steve will then review key first quarter fiscal year 2015 financial results before we open the call for
As you know, I took over as CEO on March 3rd, so my time in
position has been brief. I did have the benefit of nine months of board service, so I have been a STAAR enthusiast since June of
I would like to briefly review my impressions of the business
in three key areas of interest I believe shareholders want to understand: first, the status of our regulatory remediation; second,
my impression of the receptivity of our lenses worldwide; and finally, the initial focused areas for improvement or change as I
see them within the company.
I'd like to first address the regulatory remediation and quality
systems improvement. We have an intense effort underway to address the observations noted in the warning letter from 2014, and
the Form 483 letter from February of this year. We have submitted a plan to the FDA with our intent to answer the specific observations
with action plans and systematic corrections and upgrades. We provide monthly updates to the FDA regarding our progress on completing
our promised deliverables. We continue to work diligently to thoroughly complete our deliverable in a timely manner.
The path we have chosen to respond to the FDA's concerns will
require an investment of approximately $4 million this year that we expect will be fully funded from internally generated cash
flows. The investment breakdown includes a combination of fixed cost employee additions with skillset upgrades, equipment and building
monitoring system upgrades, IT investment, and variable cost allocations for consultant support.
At this time, the FDA is reviewing our response and proposed
plans. We will not comment, as we should not, on the timing of any agency response or any direction at all regarding potential
outcome. I, along with my team, have as our number MBO a cultural transformation within STAAR where quality is the linchpin and
guiding principle for every function and associated process in the company.
It was a great benefit for me, early in my tenure as CEO, to
attend the American Society of Cataract and Refractive Surgeons, ASCRS, meeting earlier this month. I had the benefit of one-on-one
meetings with some of the world's leading ophthalmic surgeons, significant distributors, visionary investors in Asia seeking to
build exceptional and numerous eye surgery centers, and manufacturers of new technology or equipment to enhance the vision experience
for surgeons and their patients.
I also had the opportunity to spend valuable time with our country
leaders from around the world who joined me with leading surgeons in their regions, to define what the STAAR experience is today
and how we can enhance that experience with service and products going forward.
Enthusiasm for our products and very high hopes for our future
does not adequately describe the loyalty and appreciation these customers have for STAAR's lenses, especially the Visian ICL with
the CentraFLOW technology.
Starting in Europe, I had a terrific meeting, for example, with
a very well-respected surgeon whose last LASIK patient was in December of 2013. Today his practice provision correction uses almost
exclusively the CentraFLOW lens. Fundamentally, when the surgeon is able to eliminate the PI, or peripheral iridotomy, the time
of procedure and the time with patient for the entire experience is dramatically improved.
Numerous papers detailing the European refractive surgeon experience,
with very positive patient outcome data, have been published and talks given about the exceptional results for lens implantation
through patient follow-up. Here are a few highlights from papers presented at ASCRS originating from Europe and Asia.
First, Dr. Joaquin Fernandez Perez of Spain presented a paper
on 63 eyes with the CentraFLOW ICL with two years of follow-up, concluding that the ICL is useful for an effective correction of
moderate and high myopia in a predictable, safe and stable manner.
And finally, Dr. Sri Ganesh of India presented a comparative
study between three modalities to correct myopia. Improvement in contrast, decrease in higher-order aberrations, and less dry eye
appears to contribute to high definition vision and the highest patient satisfaction with a Toric ICL.
Turning to Asia, with CentraFLOW having only been approved late
last year in China, 78% of our orders there are for this lens. The opportunity in Asia for myopic vision correction is clearly
astounding. In the March issue of Nature, the challenge for young people was clearly outlined. I'll quote from the article. Beginning
the quote, "Glasses have become the rule, not the exception, in Chinese universities. Up to 90% of teenagers and young adults
are short sighted. In Seoul, Korea, a whopping 96.5% of 19-year-old men are short-sighted." Unquote.
Vision care centers and ophthalmic surgical suites are being
invested in heavily by surgeons themselves and large healthcare business enterprises. We had the opportunity to meet with some
of these users and investors at the ASCRS. This is clearly a very large opportunity for us, and we will be focused aggressively
to answer the need for lens availability, speed, and exceptional surgeon and patient experience.
Regarding clinical proof in Asia, I would like to highlight
a recent article authored by Dr. Kimi Shimizu, whom we were happy to congratulate as he was awarded a lifetime achievement honor
as a legendary inventor and surgeon by his peers. His paper authored with leading doctors from Japan, published in December of
2014 in the Journal of Cataract and Refractive Surgery, indicated that the findings of the paper, which compared the quality of
life for patients after Visian ICL implantation, compared to that after LASIK, were very good. It concluded that the Visian ICL
may offer significant vision related quality of life benefits over wavefront guided LASIK for myopia in the long term.
In the US, we have a number of surgeons who are very successfully