Full Press Release Details
day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical Third Quarter 2017 Financial Results Conference
Call. (Operator Instructions) This call is being recorded today, Wednesday, November 8, 2017. At this time, I would like to turn
the conference over to Mr. Brian Moore with EVC group
you, Andrew, 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 third quarter, which ended on September 29, 2017. On the call today are Caren Mason, President
and CEO of STAAR Surgical Company; and Deborah Andrews, Chief Financial Officer. The news release detailing the third quarter results
was issued just after 4:00 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 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 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 for questions
from publishing analysts. We ask analysts to limit themselves to 2 initial questions during the Q&A session, then requeue 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 Chief Executive Officer of STAAR Surgical.
Caren L. Mason - STAAR
Surgical Company - CEO, President and Director
you, Brian, and good afternoon, everyone. I will begin our discussion with an overview of Q3 performance highlights and then we'll
spend a few minutes addressing ICL growth, particularly in China, clinical trial update and profitability. Deborah will then review
key third quarter financial results before we open the call for your questions. During Q3, we achieved a number of milestones for
the company. We were pleased to deliver a profitable quarter, with $0.03 positive earnings per share and approximately $3.1 million
in positive cash flow from operations. We achieved record revenue and gross profit for the quarter, while benefiting from planned
expense management and a shift in marketing expense for our Experts Meeting and ESCRS to the fourth quarter. Top line results include
record ICL sales and record ICL units, with Canada units up 200%, China units up 76%, Japan units up 48%, Germany units up 28%
and global distributors units up 22% over the prior year quarter. China's demand was especially strong as the third quarter encompasses
the largest procedure volume of the year in China. As we have expanded our business substantially in China, the largest refractive
surgical market globally, we now will be planning for greater revenue in Q3 than in previous years. Our first-in-man clinical trial
for the next generation ICL with EDOF is nearing completion and the results continue to meet intended outcomes. We plan to begin
our pivotal clinical trial during the first quarter of 2018 to evaluate the performance of an EDOF optic design to treat presbyopia
on the approved EVO Visian Implantable Collamer Lens platform. With regard to FDA remediation, we completed our internal work in
the first quarter of 2017 and notified the FDA in March that we are ready for inspection.
like to focus today on growth of the ICL business in China. We set out in early 2016 to forge a new path into the largest refractive
market in the world, with partners who had similar growth goals and a very strong commitment to delivering excellent patient vision
care. China's refractive market is estimated to encompass approximately 900,000 refractive procedures per year, which represents
35% of the total global refractive procedure market according to Market Scope's 2016 survey. In order to build confidence and trust
in EVO Visian ICL technology as a premium and primary refractive procedure, we launched extensive surgeon training programs, focusing
on leading refractive clinics in Tier 1 cities in China. The training encompassed broad certification criteria, with an emphasis
on long-term safety. We established 3 national university training centers in 2016 to accomplish our goal and many university professors
and surgeons are now pleased to address their confidence in EVO's long-term safety and effectiveness at national and regional congresses
in China and abroad. Today, Chinese surgeons express their pride to us upon reaching EVO ICL mastery status, which is then planning
a minimum of 500 lenses per year.
sales growth has primarily been driven through commercially focused large ophthalmic hospitals and clinics. We established our
initial strategic partnership agreement with Aier Hospital Group in January of 2016, which now operates close to 200 clinics in
China and performs approximately 200,000 refractive procedures annually. Recently, they announced their acquisition of a large
European refractive surgery provider, Baviera and have established their first clinical ownership in the U.S. They have partnered
with STAAR in essential training, expensive marketing and clinical research and to lower diopter use of the ICL. Together with
our experienced importer partner, we support leading refractive clinics in China in the organization and execution of patient education
roadshow programs, which are enabled through social media such as WeChat. While we are educating hundreds of roadshow attendees
in excellent educational in-person venues, thousands of potential visual freedom patients are streaming the event to their mobile
devices. We support our partners with data-supported content to help assure appropriate positioning of our EVO ICL technology.
When we began this pursuit in 2016, the EVO was an addition to the presentation of additional refractive options for patients.
Today, with our partners, the patient education roadshows and live-streaming events are most often exclusive to EVO ICL technology.
business in China has grown by over 200% in the past 21 months. Our goal is to continue this strong growth trajectory, and we are
planning to expand our footprint in China with people and program investment in the coming years. In all of the top markets we
serve, we are gearing up to expand the business model, we have successfully rolled out in China by retooling our global go-to-market
strategy to aid in this expansion of necessary resources. We have recently split our global commercial operations responsibility
in 3 major buckets. Commercial operations covering China and the direct markets in Europe; commercial operations covering Korea,
India and the direct markets of Japan and North America; and distributer operations covering the rest of Europe, Latin America,
the Middle East and the rest of Asia Pacific. We are intensifying our support of our largest distribution partners, where we have
significant STAAR investment and are improving our distributor partnerships as well globally. We are especially pleased with the
recent growth of our European distributors at 22% versus prior year quarter. In addition, we will continue the emphasis on ICL
expansion in Japan and Canada direct markets, which are reaping strong returns and have encouraging growth trajectories.
we are pleased with results from the premium and primary repositioning of the EVO Visian ICL, and we will use this approach as
the major way we market to surgeon and consumers in our planning for 2018 to 2020. Turning to Clinical and Regulatory Affairs requirements
for 2018 and beyond. We have a long list of initial clinical trials, post-approval clinical studies and essential regulatory requirements
to support our expanding product offering. During the first quarter of 2018, we plan to launch our pivotal clinical trial in Europe
to seek the CE Mark for the EVO Visian ICL lenses designed for the treatment of presbyopia. We will benefit from the experience
of patients implanted with this lens during the first-in-man clinical trial and are pleased that the design is finalized for these
lenses. It is the patient experience with the performance of the presbyopic visual optic enabled through extended depth of field
technology that we will be measuring most acutely. The safety of the EVO Visian ICL has been well established for the myopic patient,
so the effectiveness of the visual uptick for presbyopia and patient satisfaction are paramount in this trial.
are pleased that in September, our notified body in the European Union DEKRA approved an expanded age range for our EVO Visian
ICL for myopia from adults aged 21- to 45-years old to adults aged 21- to 60-year-old, which sets the stage well for addressing
the early years of presbyopia. We hope to complete the clinical trial in 2018, and if successful, to seek approval for presbyopic
ICLs in 2018 for CE Mark countries. With the commencement of the clinical trial and regulatory requirements associated with new
product studies and registrations, we anticipate that expenses will increase and will require well-managed investment going forward.
We have included these necessary costs in our planning for the 2018 to 2020 planning period.
achieved profitability for STAAR Surgical in Q3, and it was most welcome. Our top line growth exceeded expectations by over $2
million and expenses were substantially lower than Q3 2016 due to careful expense management, no accelerated stock option expenses
experienced in the prior year and the movement of the Experts Meeting and ESCRS to the October time frame, which was, of course,
dictated by the ESCRS. We have established our base business cost profile over the past 2 years in most of our functional areas
and appreciate our investors patience with the transformative spending requirements of the 2015 to 2017 3-year plan. We have substantially
completed our 3-year strategic planning for 2018 to 2020. We plan to responsibly increase investment in commercial infrastructure,
clinical studies and regulatory requirements. We also plan to selectively expand our commercial outreach to consumers, who remain
largely unaware of the benefits of the EVO Visian ICL and their opportunity for visual freedom. Ultimately, our goal is to increase
revenue through a projected range of 15% to 20% annually, which should yield very good bottom line results. We're also aiming for
sustained profitability to be achieved during the planning period. We will provide more color during our Investor Day presentation
on November 16. That concludes my prepared remarks for this afternoon. Deborah
STAAR Surgical Company - CFO
you, Caren, and good afternoon, everyone. I will start the financial overview with a summary of top line results and then provide
more details by product and market.
reported net sales of $23.5 million in the third quarter of 2017, an increase of 17% over the $20.1 million of sales reported in
the third quarter of 2016. The sales increase was driven by ICL revenue growth of 22%, with unit growth of 18% and increased injector
part sales, partially offset by decreased IOL sales.