Full Press Release Details
day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical Second Quarter 2017 Financial Results Conference
Call. (Operator Instructions). This call is being recorded today, Wednesday, August 2, 2017. At this time, I would like to turn
the conference over to Mr. Brian Moore with EVC Group.
you, Ayailah, 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 second quarter, which ended on June 30, 2017. On the call today are Caren Mason, President
and CEO of STAAR Surgical, and Deborah Andrews, Interim Chief Financial Officer. The news release detailing the second quarter
results was issued just after 4 p.m. Eastern Time and is now available on STAAR's website at www.staar.com.
we begin, 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 judgment 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.
addition, to supplement the GAAP numbers, we have provided non-GAAP adjusted net income and 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. A table reconciling the GAAP information to the non-GAAP information is included in today's financial release.
Following our prepared remarks, we will open the line to questions from publishing analysts. We ask analysts to limit themselves
to two initial questions during the Q&A session, then re-queue with any follow-ups. We thank everyone in advance for their
cooperation with this process. And with that, I'd like to turn the call over to Caren Mason, President and CEO of STAAR Surgical.
Surgical Company - CEO, President and Director
you, Brian, and good afternoon, everyone. I will begin our discussion with an overview of Q2 performance highlights and then we'll
spend a few minutes addressing ICL growth and market positioning, product pipeline, gross margin improvement and cash generation.
Deborah will then review key second quarter financial results before we open the call for your questions.
work to advance the ICL to its rightful position as a premium and primary refractive vision correction solution continues to spur
strong growth in many countries globally. Unit growth in Q1 of 20% followed by unit growth of 11% in Q2 in spite of anticipated
challenges in the India and Korea markets for the quarter are an indicator of continued strong progress. During Q2, the Toric ICL
achieved another new quarterly record for shipments. ICL unit highlights for Q2 include growth in Canada of 119%, China of 57%,
and Japan of 24%. Region growth was strong in ICL units as well with North American and Asia Pacific Regions reporting 15% unit
growth respectively.
the positioning of the ICL for the more competitive mid diopter range lenses and the addition of strategic accounts with incentivized
volume commitments, our average selling prices have been appropriately adjusted to gain share in targeted markets. Our position
as market leader and superior refractive surgical solution for high Myopes, however, continues to earn premium pricing. Our first-in-man
clinical trial for the next generation ICL with EDOF continued during the quarter and the results continue to be positive. In July,
DEKRA, our European Union notified regulatory body, re-certified our facilities as compliant with ISO 13485 and re-certified the
CE Marking for all of our currently certified and commercially available medical devices. With regard to FDA remediation, we completed
our internal work in the first quarter of 2017 and have notified the FDA that we are ready for inspection.
like to spend a few moments talking about the ICL, its current positioning and market growth potential. The ICL is the market leader
and the superior refractive surgical solution and positive patient experience for high Myopes. In competing with other phakic IOL
lenses, we believe we command approximately 80% market share and have implanted over 700,000 ICLs. We define the average correction
for the high Myopic market as above minus 10 diopters and we estimate the number of refractive highly myopic eyes corrected annually
as in the low 6-figure range.
there are tens of millions of high Myopes globally and the number is expected to rise to almost 1 billion by 2050 according to
published studies, we know we have to do a better job of building awareness of our technology and seeding the surgical landscape
with superbly qualified surgeons. In the coming planning cycle, we are taking a hard look at how we accomplish this next major
goal in our market development for the ICL. In addition, we know we are a competitive provider of refractive surgical solutions
and positive patient experience for mid Myopes whose correction we categorize as minus 6 to minus 10. Where we have focused our
efforts with selective strategic partners and large practices, we have moved our average use in an account for example from the
high Myope range to the mid Myope range. We have proved through practice development metrics that we are competitive with the other
refractive correction procedures and can be more profitable for the surgeon and more affordable long term for the patient.
is also our goal to become the market leader in refractive surgical solutions and positive patient experience for early presbyopes
aged 45 to 55 years old. The presbyopic market opportunity is reported as over 1.7 billion people globally. Our preliminary clinical
trial results remain promising. Adding the EDOF optic to our EVO+ lenses can result in our ability to serve early presbyopes who
can skip the readers and enjoy a prolonged visual freedom from glasses.
you add the number of eyes on an annual basis which would benefit from our ICL in correcting or improving high Myopes, mid Myopes
or early presbyopes, taking into account surgeon capacity, we are estimating upwards of approximately 2 million eyes per year.
This is a huge market. We have spent the last two years building, upgrading and in some disciplines completely overhauling our
functional competency and infrastructure. The areas of significant investment and projected successful return include quality and
regulatory, clinical and medical affairs, research and development, manufacturing and operations, branding and digital marketing.
Our work now turns to commercialization revitalization and a new go to market strategy for our global markets. We are excited to
be planning for a definitive movement into energizing and enabling the visual experience and visual freedom for a much larger population
with a definitive and overwhelming need for better vision and potential spectacle independence.
global product development pipeline to address this very large market opportunity consists today of preloaded ICL delivery system
for all ICL models, EVO+ EDOF presbyopic lenses Spheric, EVO+ EDOF presbyopic lenses Toric. We expect that CE Mark countries will
be the first to receive these new lenses and delivery systems. Our product pipeline at this time for the US is Toric ICL, preloaded
ICL delivery system, and the entire family of EVO+ lenses including presbyopic.
we are planning for potentially strong growth in the coming years, I would like to call your attention for a moment to our gross
margin expansion. Since 2014, gross margin has improved 600 basis points from 65.1% in 2014 to 71.1% in the first 6 months of 2017.
This improvement is largely due to year-over-year growth and ICL sales increasing from 58.7% of total sales in 2014 to 74.7% of
total sales in the first 6 months of 2017. We expect this trend to continue with anticipated year-over-year ICL growth.
cash generation, with continued expanding ICL sales and gross margins, the company has been able to invest in its operations while
maintaining its cash balances. Since 2014, we have maintained an average cash balance of approximately $13.5 million and went from
using approximately $8 million in cash for operating activities in 2014 to generating $1 million from operating activities in 2016.
And we expect similar improved results in 2017.
we shift from remediation expenditure to commercialization expenditure, we expect to invest more in sales and marketing while maintaining
quality. We believe these investments will accelerate high margin sales which should result in a significantly improved cash position
to reaffirm our view of the business for 2017, we continue to expect double-digit ICL unit growth for the year, driven primarily
by increasing market acceptance of the EVO Visian ICL in established markets with the exception of the U.S. and Korea. We continue
to anticipate gross profit as a percentage of sales for full year 2017 to be higher than 2016. In addition, we expect continued
investment in our operations including clinical affairs, corporate infrastructure, digital marketing and research and development.
As we complete our 3-year strategic transformation priorities and investments in 2017, our goal is to provide a preview of 2018
to 2020 strategic priorities and financial results direction during the fourth quarter of this year. That concludes my prepared
remarks for this afternoon. Deborah?
STAAR Surgical Company - Interim CFO
you, Caren. Good afternoon, everyone. I'll start the financial overview with a summary of top line results and then provide more
details by product and market. STAAR reported net sales of $21.9 million in the second quarter of 2017, an increase of 5% over
the $21 million reported in the second quarter of 2016. The sales increase was driven by ICL sales growth of 6% with unit growth
of 11% and increased injector parts sales partially offset by decreased IOL sales.
the second quarter of 2017, total sales of our ICL product line were $16.3 million compared to $15.4 million in the prior year
quarter. Asia Pacific ICL sales were $9 million during the second quarter, an increase of 7% in revenue and 15% in units compared
to the prior year period. China and Japan experienced strong double-digit growth that was partially offset by decreased sales in
Korea and India as expected. EMEA and LA ICL sales were $5.6 million during the second quarter, an increase of 2% in revenue and
4% in units compared to the prior year period. Double digit unit growth in Europe sales was partially offset by decreased sales
in the Middle East and Latin America.
America ICL sales were $1.8 million during the second quarter, up 15% in sales and units from the prior year period. The increase
in sales was driven by the continued successful commercialization of the EVO Toric lens in Canada.
our IOL product line, total IOL sales were $4.4 million for the second quarter of 2017, which was down 14% in revenue and 7% in
units from the prior year period. Decreased sales of silicone and Collamer IOLs were partially offset by increased sales of acrylic
preloaded IOLs. Due to the discontinuance of silicone IOL sales in the US in 2016, and material issues impacting preloaded silicone