Alcon Inc.

Greetings. Welcome to Alcon's fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll now turn the conference over to Dan Cravens, Vice President and Global Head, Investor Relations. Mr. Cravens, you may now begin.

Welcome to Alcon's fourth quarter 2023 earnings conference call. Today we issued a press release, interim financial report, an annual report, and posted a supplemental slide presentation on our website to enhance today's call. You can find all these documents in the investor relations section of our website at 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 differ 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 Alcon's Form 20F and our earnings press release and interim financial report on file with the SEC and available on the SEC's website. Non-IFRS financial measures used by the company may be calculated differently from and therefore may not be comparable to similar measures used at other companies. These non-IFRS measures should be considered along with, but not as alternatives to, the operating performance measures as prescribed per IFRS. Please see a reconciliation between our non-IFRS measures with directly comparable measures presented in accordance with IFRS. And by recapping highlights from the fourth quarter. After his remarks, I'm going to call over to our CEO, David Endicott.

Thanks, Dan. Good morning and welcome to Alcon's fourth quarter 2023 earnings call. As I reflect on 2023, I'm extremely proud of what the team has accomplished. In a year of continued supply challenges, foreign exchange headwinds, high inflation, persistent competition, and geopolitical uncertainty, our team achieved some remarkable things. We outgrew our markets in almost every category with sales of $9.4 billion Double digit sales growth of 10%. This was driven by our broad portfolio of innovative products, solid earnings by 33% to $2.74 per 50 basis points to 19.7%. And when adjusting for foreign exchange, we grew core operating margin by 280 basis points to 21%. We generated more than 700 million of free cash flow, And we advanced our innovation and commercial agenda, particularly in our vision care franchise, with the launch of Total 30 for astigmatism and multifocal. We also expanded our ocular health business with the integration of Roqlatan and Ropressa and concluded phase three trials for AR15512, our dry eye pharmaceutical candidate. Now, based on these results, it's clear that our portfolio of products is winning. Our markets are growing and remain healthy. We're demonstrating our ability to execute commercially, and we're steadily advancing our pipeline. I look forward into 2024. I'm excited about our product pipeline and our commercial agenda. Let me start with surgical. The most exciting near-term product launch is Unity VCS, our next-generation FACO VIT device. This machine delivers unprecedented surgical performance that we expect will drive upgrades and capture market share. Unity is a dual console with best-in-class FACO and vitreo-retinal capabilities. This combination reduces the equipment footprint in the OR and streamlines the procedural setup and intraoperative workflows. In addition, it was designed to create near physiological conditions during surgery, which is expected to improve performance and efficiency without compromising safety. Additionally, Unity VCS represents an important opportunity to secure the next generation of consumables. As a reminder, consumables are a significant recurring revenue stream for us and contribute approximately half of our surgical revenue. We submitted for FDA authorization at the end of 2023 and expect approval in the coming months with international markets to follow in early 2025. As we look to the anticipated rollout, we plan to gradually introduce VCS to the market in late 2024 and expect more meaningful revenue contributions starting in 2025. We're also working to increase surgical efficiency in the clinic through better diagnostics with the upcoming launch of our next generation diagnostics device, UnityDX. UnityDX is a first of its kind whole eye analyzer that combines six separate devices into a single machine to deliver best in class performance at a lower price. This reduces the overall footprint in the clinic and reduces preoperative time. All of this is surrounded by the ability to seamlessly move data over to the cloud from the clinic into the OR and then back into the clinic postoperatively. Importantly, this technology will also leverage the data captured to improve outcomes through AI-driven algorithms. We're targeting to pilot UnityDX in select international markets in the back half of 2024 with broader international and U.S. commercialization in 2025. We'll position UnityDX as a premium diagnostic device that will complement our current offering, the Argos Biometer. We're very pleased with the performance of Argos, which continues to see very strong adoption. Now I'll turn to Implantables, where we're combining best-in-class materials, delivery, and optics to drive premium penetration and share. In the fourth quarter, global ATI well penetration was up 170 basis points year over year, driven by international markets, notably China. In the U.S., ATI well penetration has remained stable in the high teens versus prior year, However, it improved 50 basis points sequentially from the third quarter, and we continue to expect penetration to return to historical growth rates in the future. Based on our willingness to pay data, we continue to believe that there's significant headroom for penetration going forward. Turning to market share, I continue to be pleased by our leadership in IOLs. Globally, we are the market leader. Alcon has an enviable position with approximately one-third of the monofocal category and approximately one-half of the PCIOL category as of the fourth quarter. Indeed, in the U.S., our PCIOL share remains stable above 80%. I'm particularly excited about our opportunity to grow share in international markets. For example, in China, where we have historically been under-indexed, our recent success in the national volume-based procurement tender will provide a great platform to expand our footprint in this large and growing market. Following the award, Alcon will hold the preferred position in the trifocal, extended depth of focus, and bifocal categories, as well as their toric modalities across each of those categories in China. With this tender, we expect to gradually increase our market share in the advanced technology category starting in the second half of the year. Now, I'll turn to VisionCare, where our historical investments have created the strongest pipeline we've had in years. Starting with contact lenses, since SPIN, we've launched a wave of new products into fast-growing markets. These include the daily Sci-Hi category, as well as areas where we have opportunity to capture share such as Torex and reusables. Based on fourth-quarter reported sales, it's clear that our strategic investments are working, and we're now one of the fastest-growing companies in contact lenses. In 2023, we launched two new specialty lenses, Total 30 for astigmatism and for multifocal. These launches expand our specialty portfolio, which also includes Precision 1 Torex and Daly's Total 1 Torex, and it's multifocal. I'm particularly pleased by the performance of our Torex lenses. leverage our proven precision balance technology. This patented design features defined anchor points that deliver exceptional stability and a smooth fitting process. Additionally, with an expanded portfolio of specialty lenses, we're seeing an accelerated uptake of the spherical modalities. Now shifting to ocular health, as I mentioned earlier, we recently announced positive top line results from phase three trials for AR15512, a novel dry eye candidate, which we estimate could have peak sales of between 250 and 400 million. We're excited by 512 as it has the potential to address the limitations of current dry eye medications and provide dry eye sufferers with a new and effective therapy. While dry eye is one of the most common ocular disorders impacting approximately 38 million people in the U.S., less than 2 million patients are treated with a prescription product. The primary endpoint was met in both Phase III studies supporting a path to seek full indication for the treatment of signs and symptoms of dry eye. The 512 product is effective as early as day one and persistent to day 90, which is an important differentiator versus other products currently in the market. As for timing, we intend to file the new drug application around the middle of 2024 and anticipate bringing the medication to the US market around the middle of 2025. From there, we expect more meaningful revenue contribution beginning in 2026. 512 is the first product candidate in our emerging pharmaceutical portfolio, which also includes the glaucoma assets, Roclatan and Ropressa. I continue to be very pleased with the performance of these medications. For the full year 2023, total prescription growth was in the mid-single digits, ahead of the broader glaucoma market. Strategically, we will continue to focus on expanding its market access. Turning to our over-the-counter portfolio, our sustained brand continues to perform exceptionally well, with another year of double-digit growth. We continue to see strong demand for our multi-dose preservative-free formulations, which are helping expand the U.S. preservative-free category. And finally, we're pleased with the recovery of our contact lens care business. We're now in a situation of unconstrained supply and are happy to be able to restock this product in the U.S. and internationally. While contact lens care market is broadly flat, we do expect to see year-over-year growth in this category due to the supply chain challenges we faced in 2023. Now let me provide an update on our end markets. In surgical, we estimate that global cataract procedural volume growth was low single digits in the fourth quarter versus prior year. In contact lenses, we estimate that retail market value was up mid to high single digits. Similar to last quarter, we saw steady wearer trade up and meaningful contribution from price. Now with that, I'll turn it over to Tim who will take you through our financial results and provide more color on our outlook.