Transcript STAAR Surgical (Nasdaq: STAA)

STAAR Surgical
(Nasdaq: STAA)
David Bailey, President & CEO
Deborah Andrews, CFO
May 2007
FORWARD-LOOKING STATEMENTS
All statements in this presentation that are not statements of historical fact are
forward-looking statements, including any projections of earnings, revenue, cash or other
financial items, any statements of the plans, strategies, and objectives of management for
future operations, any statements regarding expectations for success of the ICL or other
products in U.S. or international markets, any statements concerning proposed new products
and government approval of new products, services or developments, any statements
regarding future economic conditions or performance, statements of belief and any
statements of assumptions underlying any of the foregoing. These statements are based on
expectations and assumptions as of the date of this presentation and are subject to
numerous risks and uncertainties, which could cause actual results to differ materially from
those described in the forward-looking statements.
The risks and uncertainties include our limited capital resources and limited access to
financing, our ability to overcome negative publicity resulting from warning letters and other
correspondence from the FDA Office of Compliance, the willingness of surgeons and
patients to adopt a new product and procedure, and our ability to successfully launch and
market the ICL in the U.S. while overcoming the foregoing challenges, our ability to
implement our cost savings strategies and realize our expected savings, our ability to reverse
the decline in domestic sales of intraocular lenses, our ability to maintain or enhance our
existing product sales and gross profit margin and reduce compliance expenditures, the rapid
pace of technological change in the ophthalmic industry, our ability to compete with much
larger ophthalmic companies, general domestic and international economic conditions, and
other factors beyond our control, including those discussed under the heading “Risk
Factors” in our Current Report on Form 8-K filed with the SEC on April 26, 2007 and our
Annual Report on Form 10K for fiscal year 2006. STAAR assumes no obligation to update
these forward-looking statements to reflect future events or actual outcomes and does not
intend to do so.
Investment Considerations
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Large and growing addressable market – Cataract and
Refractive
Proprietary Collamer technology
Leadership in phakic implants; Visian ICL
Opportunity to rebuild Share in the Cataract market
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CMS ruling a positive
New product launches
Strong International growth
Turnaround and growth strategy underway
Company Background
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Founded in 1982
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(STAAR = Surgical Technology And Applied Research)
Original core technology was foldable IOLs, which
are now the gold standard in ophthalmology
1990s: Development of major new technologies:
Collamer material and ICL
2000s: New management, ICL/TICL
commercialization, Preloaded introduction
Two Main Businesses:
Refractive and Cataract
Refractive Revenue
% of Revenue
% Change YoY
Cataract Revenue
% of Revenue
% Change YoY
Total Revenue
% Change YoY
2006
2005
2004
$12.7
$5.4
$4.1
22.3%
136.1%
10.4%
31.5%
7.8%
37.6%
$44.3
$46.5
$48.2
77.7%
(4.7%)
89.6%
(3.5%)
92.2%
.3%
$57.0
$51.9
$52.3
9.8%
(.8%)
2.5%
Addressable Markets
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Refractive Error (Myopia, Astigmatism,
Hyperopia). Elective
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Cataracts: Opacification of the lens of the eye.
Age related. Reimbursed
Visian ICL™
Phakic Lens Sites
History of Refractive Surgery
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Refractive Keratotomy (RK) becomes widespread in
1980s, then declines
First laser procedure, Photo Refractive Keratectomy
(PRK) becomes widespread in mid-1990s, then declines
Second laser procedure, Laser In-Situ Keratomileusis
(LASIK) becomes widespread in late 1990s.
2000 - Heavy Investments in LASIK marketing and
technology – growth stagnates, Low penetration rates
2000 - Phakic Implants, Multifocal/Accommodating
implants, Toric Implants
Refractive Surgery is going inside the eye
Vision Correction Market
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Up to 1.5 billion myopes worldwide; geographic
variances in key matrices e.g. mean myopia
3.0 million LASIK procedures/year WW
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1.4 million US
0.8 million China
0.8 million ROW
Recent cannibalization in the US to PRK – 10 to
15%. Driven by large law suits over some corneabased procedures
ICL Market – “Limits of LASIK”
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Target at -7.5D and above - adjusted population in the
US of six million eyes per year. (same in -6 to -7 group)
Targeted penetration rate of this market is 10% over
time – 600,000 procedures
In International equate to 100 million eyes per year
Support for superiority of phakic implants
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Cornea, Dec. 2006 – “ICL safer & more effective than LASIK
for -4D to -7.88D
ASCRS Presentation Apr. 2007 – “Phakic IOLs procedure of
choice to correct myopia at -6.5D+,” Dr. Neatrour
Change in Product Mix and
Effect on Gross Margin
100%
50.00%
90%
49.00%
80%
48.00%
70%
47.00%
60%
46.00%
50%
45.00%
40%
44.00%
30%
43.00%
20%
10%
42.00%
0%
41.00%
Q1 2005
Q2 2005
Q3 2005
Q4 2005
Refractive Revenue
Q1 2006
Q2 2006
Cataract Revenue
Q3 2006
Q4 2006*
Gross Margin
*exclusive of obsolecence charge of 5.3%
Q1 2007
International ICL Penetration of LASIK
Market
Country
Penetration % of LASIK
Benelux
5.0%
Switzerland
3.8%
Korea
3.2%
Spain
2.9%
Scandinavia
2.8%
South America
0.6%
Germany
0.5%
Middle East
0.5%
UK
0.2%
Italy
0.2%
France
0.2%
India
0.1%
Visian Advantages
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Architecture and Anatomy of the Cornea is completely
unchanged with the ICL.
“Correct the Vision NOT the eye”
Ease of use for the Surgeon – existing skill set
Patient friendly – topical anesthesia, small incision, quick
rehabilitation, “wow” for patient.
Exceptional clinical outcomes – Navy driving study, ASCRS
April 2007
Additive Vs Subtractive – “Removable”
Manageable complication profile - With a LASIK complication
an effective solution is not always easily available
Sales & Marketing Strategy
Three-pronged strategy
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Training/Certification
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Focused on the surgeon and patient outcomes
Practice Integration
Establishing a “cut-off ” for patient selection
 Integrating the cut-off in the whole network
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Practice Building
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Marketing the procedure to drive volume
Advantages for the Surgeon
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ICL integration will build overall refractive volumes
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Exceeds patient expectations
Profitable procedure
Few re-treats
 Happy patients = free marketing = positive referrals
 Mitigated risk
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ICL diversifies the practice
LASIK technology is generic procedure
 Future growth driven by new technologies ex LASIK
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PRK – Not A Practice Builder
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Concerns about LASIK have led to resurgence
of PRK
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to Market Scope, PRK represented
13% of laser-based refractive procedures in 2006,
up from 8% in 2005
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PRK resurgence driven by fear of ectasia and
the perception that PRK is safer than LASIK
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perception of safety has been strongly
challenged if not repudiated
PRK – Not A Practice Builder
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PRK is very poor in early results and in patient
satisfaction
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The Slade contra-lateral study at 2006 ESCRS indicated
significantly higher pain and lower visual acuity
PRK patients will not yield positive referrals
If surgeons are uncomfortable with cornea-based
procedures, they should not do LASIK or PRK
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Therefore, the Visian ICL™ is the answer for the 1% to
15% of US volume that is now PRK (140k to 200k eyes)
Worldwide Cataract Market
“Large and Growing”
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Worldwide IOL market, estimated 13.8M
procedures ($1.28 billion) performed in 05
Market growing to $2.42 billion by 2010 (17.1M
procedures), representing a CAGR of 13.5% by
2010
Driven by innovation / improved outcomes
US Cataract Market
“Large and Growing”
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Largest IOL market, estimated 2.9M procedures
($428 million) performed in 05
Market growing to $1.034 billion by 2010 (3.2M
procedures), representing a CAGR of 19% by
2010
Medicare reimbursement is DECREASING –
doctors and looking to upsell the patient
Presbyopic IOLs (accommodating and multifocal)
and RLE will grow but slower than recently
projected
Toric IOL’s will lead the “upsell” following CMS
New Cataract
Product Introductions
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STAAR Toric IOL qualifies for dual aspect
reimbursement under new CMS ruling
Collamer Aspheric IOL – launched at ASCRS,
April 2007
Silicone Aspheric IOL – Q307 Introduction
Preloaded Silicone Aspheric Injector – 1H2008
Players - Now
Material
Silicone
Plate
Bausch & Lomb
STAAR
Three-Piece
AMO
Bausch & Lomb
STAAR
AMO
Bausch & Lomb
STAAR *
Toric
STAAR
Accommodating
Eyeonics
* Enhancements
STAAR
Alcon
Alcon
AMO
Alcon
Blue-Blocking
Multifocal
Other
STAAR
Alcon
AMO
One-Piece
Aspheric
Acrylic
Alcon
Alcon
AMO
STAAR *
Current US Cataract
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Opportunity to build share – currently >4%
Four players; ACL, AMO, B+L, STAAR
Revamping the offering – 2007 early 08
Strengthening sales effort
direct RMR’s
 direct sales people to supplement agents
 Heavy commission bias to new products
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Q107 Financial Recap
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11% year-over-year sales growth to $14.9 million
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Refractive product sales up 47.5%
Cataract product sales up 2.4%
Gross Profit Margin of 48.9% and growing
Effective expense management
12% improvement in cash usage
Buffered cash position to fund growth strategy
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Cash as of March 30, 2007 - $9.2 million
$16.9 million raised May 1
Strong International Franchise
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Products for sale in more than 40 countries
Direct sales in the US, Germany, Australia
 Distributor sales in ROW
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German subsidiary stabilized and growing
Int’l. Refractive CAGR of 35% since 2004
ICL adoption rate continues to grow
New product approvals pending
In Thousands
Revenue Change Year over Year
$3,000
30%
$2,500
25%
$2,000
20%
$1,500
15%
$1,000
10%
$500
5%
$0
0%
-$500
Q1 06
Q2 06
Q3 06
Q4 06
Q1 07
-5%
-$1,000
-10%
-$1,500
-15%
-$2,000
-20%
Cataract
Refractive
Percent
2005 Sales and Gross Profit
Refractive Revenue as
Percent of Total
Refractive Gross Profit
as Percent of Total
2006 Sales and Gross Profit
Refractive Revenue as
Percent of Total
Refractive Gross Profit
as Percent of Total
Long-Term Operating Model
Sales - cataract
Sales - refractive
Total sales*
60%
40%
100%
$ 60,000,000
$ 40,000,000
$100,000,000*
COS - cataract
COS - refractive
Total COS
40%
15%
30%
$ 24,000,000
$ 6,000,000
$ 30,000,000
GP – cataract
GP - refractive
GP - total
60%
85%
70%
$ 36,000,000
$ 34,000,000
$ 70,000,000
G&A
M&S
R&D
Total SG&A & R&D
9%
28%
8%
45%
$ 9,000,000
$ 28,000,000
$ 8,000,000
$ 45,000,000
Operating Income
Other
Income before taxes
Income taxes**
Net income
25%
1%
26%
1%
24%
$ 25,000,000
$
500,000
$ 25,500,000
$ 1,300,000
$ 24,200,000
* $100,000,000 is a hypothetical number for demonstration purposes only and is not meant to indicate
actual sales or projected sales in any period.
**Assumes no U.S. income taxes paid until NOLs absorbed at approximately $80 million earnings.
Investment Considerations




Large and growing addressable market – Cataract and
Refractive
Proprietary Collamer technology
Leadership in phakic implants; Visian ICL
Opportunity to rebuild Share in the Cataract market



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CMS ruling a positive
New product launches
Strong International growth
Turnaround and growth strategy underway