Alcon Inc.

Good day and welcome to Outcome's second quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Karen Kink. SVP of Corporate Affairs, please go ahead.

Welcome to Alcon's second quarter earnings conference call. Earlier, we issued a press release and interim financial report and posted a supplemental slide presentation to our website to enhance today's call. You can find all of these documents in the investor relations section of our website at www.investor.alcon.com. Joining me on today's call are David Endicott, our Chief Executive Officer, and Tim Stonecipher, our Chief Financial Officer. Our press release, presentation, and discussion will include forward-looking statements. We expressly disclaim any obligation to update forward-looking statements as a result of new information or future developments, except as required by law. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements. Important factors that could cause our actual results to differ materially from those in our forward-looking statements are included in Outcomes Form 20F, our Form 6K furnished on May 12, 2020, and our Earnings Press Release and Interim Financial Report. on file with the Securities and Exchange Commission and available on the SEC website at www.sec.gov. Non-IFRS financial measures used by the company may be calculated differently from and therefore may not be comparable to similarly titled measures used by other companies. These non-IFRS financial measures should be considered along with, but not as alternatives to, the operating performance measures as prescribed per IFRS. Please review the financial tables provided in the press release and our filings that reconcile non-IFRS measures to directly comparable measures presented in accordance with IFRS. For discussion purposes, our comments on growth are expressed in constant currency. And with that, I'll turn the call over to David.

Good morning and good afternoon, everyone. I want to start out by acknowledging and expressing our gratitude to the healthcare professionals and essential workers who continue to serve patients every day. From the start, we said that the health and safety of our associates, doctors, patients, and our communities is top priority. As such, we continue to invest resources to safeguard their welfare and I also want to specifically thank all of Alcon's essential associates who work tirelessly to ensure that we can supply our customers with the products they need as their businesses recover from this pandemic. For today's call, I'll start by providing a performance update and then comment on overall market dynamics and our innovation agenda. Tim will discuss our second quarter sales by business, financial performance, and provide more color on our outlook for recovery. Then I'll wrap up with my closing comments and open up the call for Q&A. The second quarter will no doubt go down as one of the most challenging quarters in our history, with conditions that demanded extraordinary focus on carefully managing our business. Despite the uncertainty created by COVID-19, we're encouraged that we're tracking to the recovery that we outlined in our last earnings call. First, we said that we believed April would be the low point for the quarter with modest improvement in May and June. April sales did mark the low point of the quarter. Sales were down close to 50%, with May slightly better. As ophthalmologists returned to the OR and optometrists opened their doors for business, June sales saw a significant improvement, and we saw continued growth in the month of July. Second, we said that we were taking a variety of short-term actions to help offset some of the income lost to sales pressure. And these initiatives will result in approximately $200 million of savings in the quarter. We were able to do just that and decrease planned spending by approximately $200 million this quarter, despite unplanned COVID-19-related charges. Aggressive controls around discretionary spend included implementing a hiring freeze, reducing a meaningful amount of sales and marketing spend, and almost all travel, meetings, and consulting expense were reduced. These actions resulted in a 20% reduction in our core selling general administrative costs in Q2 alone. Third, we said we are aligning our production schedules to help us reduce some of our raw materials and labor costs. But the decline in revenue and the fixed nature of some of our manufacturing infrastructure will have a negative impact on gross margin. While keeping our associates safe, we were able to maintain largely uninterrupted operations in our manufacturing and supply chain. However, we did see an impact to our gross margin as a result of unfavorable manufacturing absorption due to production lines operating below normal capacity. We expect this to improve as sales increase. Fourth, we said we are still committed to the long-term strategic initiative we discussed at our last Capital Markets Day. In the second quarter, we stayed on course with our separation and transformation activities. We finished commercial implementation of SAP, and we're now rolling it out to our manufacturing facilities. We've launched two new company-wide solutions for HR and document management. and we're ramping up global service centers to support our enabling functions such as finance, HR, and IT. We've also stayed on track with the expansion of our vision care contact lens manufacturing capabilities. And despite the significant challenges during the quarter, we continue to invest in our product pipeline. Next, let me comment on the market recovery for both surgical and vision care and then talk about market share. In surgical, hospitals and clinics have gradually reopened. and surgeons across the globe are focusing on rebuilding their patient flow. Ophthalmologists are managing evolving safety practices, and turnover time between procedures is improving. In discussions with our customers, we're hearing that countries like China, where the large majority of surgeries are performed in hospitals, procedure volumes are running at about 80% to 90%. However, in countries like the U.S., where the large majority of surgeries are performed in ambulatory surgery centers or private clinics, our customers are seeing procedures volumes running above 90%. This is due in part to doctors increasing the number of surgery days or extending their hours to increase capacity. While we believe we will return to more normalized market levels by the end of the year, there could be some variabilities as doctors exhaust the backlog of pre-COVID patients and work to refill their pipeline. In vision care, most practices are back open, but optometrists are still adjusting to new safety procedures, such as spacing appointments, cleaning their trial spectacle frames between uses, and limiting foot traffic. Recent survey data indicates that optometry practices in the United States are down approximately 20% in visits, despite 95% plus being reopened. Assuming we do not experience further disruption from COVID-19, we believe vision care will return to more normalized volumes by early next year. Moving to market share, global cataract procedures were cut approximately in half this quarter after a high single-digit decrease in the first quarter. Second quarter market data shows us gaining share in the U.S. PCIOL category, where Alcon now has over 70% of the market. We're very pleased with the continued strong demand for Panoptix and a market-leading position in the PCIOL category. In video care, the contact lens market declined a little over 20% in the second quarter after a relatively flat trend in the first quarter. The fast-growing part of the market historically has been the daily psi high, which declined around 12% versus growing 22% in the first quarter. We're gaining share on the strength of our dailies total one, our newly launched precision one, and our multifocal lenses. We continue to be excited about the potential for PrecisionOne based on the feedback from ODs who have returned to fitting the lens in their clinics. And in ocular health, Pataday strengthened our leadership position in the U.S. OTC ocular allergy market, where we gained over 10 share points in the quarter, bringing outcomes shared over 50%. We believe our product development is directly addressing current and future patient needs, including those created by COVID-19. Social distancing requirements have separated family members that have previously served as caretakers and put a heavier burden on our elderly. For many of our elderly, visual impairment can compromise their ability to live independently and manage their own needs. In addition, for people pursuing everyday activities, we see an increased desire to be independent of spectacles. Glasses can fog up when wearing facial protection, people are getting screen fatigue after spending more time at home in front of the computer, and exercise has taken on an increasing importance. These behavioral insights continue to inform our product innovation, and we remain committed to leveraging our development expertise to address these eye care needs. For example, our growing eye well portfolio gives physicians more options to treat a broader range of patients. Panoptix, the AT eye well leader, not only restores visual acuity, but enables spectacle independence by offering good performance at every distance. Panoptix continues to see encouraging adoption following its introduction in the U.S. and Japan mid-last year. And in July, we began launching Panoptix in China with key opinion leaders, and initial surgeon feedback in that country has been very strong. We believe this advanced lens will play an important role in our global surgical recovery. Vividi, our patented, first-of-its-kind, non-diffractive PCIOL, offers a greater range of vision, yet it's as simple to use as a monofocal IOL. This lens may enable patients with otherwise disqualifying conditions, such as retinal disease, to benefit from an ATIL. We received very positive feedback during our pilot with KOLs in Canada and select European countries, and we're expanding our launch into most of the major European markets this year. In contact lenses, we're focused on three major programs. As optometrists return to their offices, we're regaining momentum for PrecisionOne with a variety of promotional programs in time for the seasonal back-to-school period, including one program directed at eye care professionals who utilize our online platform. This program helps optometrists address their patient needs through Alcon's own direct-to-consumer fulfillment capabilities, which contributes to patient satisfaction and strengthens the doctor-patient relationship. We also continue on plan with our manufacturing expansion, which will enable us to introduce new options for people with astigmatism, with the much-anticipated launch of Daly's Total One Tauric and Precision One Tauric later this year. Inoculate Health, we received U.S. FDA approval for Pataday Extra Strength, our third RxOTC switch in the past six months, which was formerly Paseo. Pataday Extra Strength contains more than twice the amount of olipatidine as Pataday, enabling customers to experience full 24 hours of eye allergy relief. Customers will be able to purchase online this year and at U.S. retailers in early 2021. We also received CE mark for sustained ultra multi-dose preservative free or MDPF. The MDPF category is particularly important in Europe, and this is our first entry into the large and fast-growing international segment of artificial tears. Sustained MDPF will open the doors to exciting share opportunities that build on Alcon's dry-eye leadership in this important region. So, as you can see, we continue the momentum with our investments and innovation. With that, let me turn it over to Tim who will review our financial results and provide more color on our outlook.