Q1 2025 Bausch + Lomb Corp Earnings Call
Speaker Change: [music].
Good morning, and welcome to Bausch and Lomb. Its first quarter 2025 earnings 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 todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two.
Please note this event is being recorded.
I'd now like to turn the conference over to George got Petski, Vice President of Investor Relations and business insights. Please go ahead.
Speaker Change: Thank you good morning, everyone and welcome to our first quarter 2025 financial results Conference call participating on today's call are chairman and Chief Executive Officer, Mr. Brent Saunders and Chief Financial Officer, Mr. Sam Elder Suki. In addition to this live webcast a copy of today's slide presentation.
Speaker Change: A replay of this conference call will be available on our website under the Investor Relations section.
Speaker Change: Before we begin I would like to remind you that our presentation today contains forward looking information.
Speaker Change: We would ask that you take a moment to read the forward looking legend at the beginning of our presentation as it contains important information.
Speaker Change: This presentation contains non-GAAP financial measures and ratios for more information about these measures and ratios. Please refer to slide one of the presentation.
Speaker Change: non-GAAP reconciliations can be found in the appendix to the presentation posted on our website.
Speaker Change: Financial guidance in this presentation is effective as of today only it is our policy to generally not update guidance until the following quarter unless required by law and not to update or affirm guidance other than through broadly disseminated public disclosure with that it's my pleasure to turn the call over to Brian.
Brian: Thank you George and good morning, everyone I'm going to put our first quarter performance in context and provide updates on to timely topics.
Brian: Followed by Sam is focus on the financials, including 2025 guidance.
Speaker Change: Wrap things up with examples of growth and opportunity in each of our businesses that have us excited for what the future holds.
Brian: Almost two years ago.
Speaker Change: On my first earnings call after returning as CEO I outlined our plan to reestablish bausch and lomb as be best Eye Health company.
Speaker Change: Core to that strategy or the priority shown here, which have become a mainstay of earnings presentation and part of our DNA internally.
Speaker Change: Establishing our priorities was critical but.
Speaker Change: Our ability to stay the course will ultimately determine our success.
Speaker Change: We had a few bumps in the road to start the year, but our core business is performing well and we remain focused on positioning the company for long term profitable growth.
Speaker Change: We delivered mid single digit constant currency revenue growth in the first quarter, which we expect will be in line with industry growth what.
Speaker Change: What we did see constant currency revenue growth across all three reporting segments Pharmaceuticals took a step back for two reasons underperformance.
Speaker Change: Underperformance in our high margin U S generics business and so I drove revenue headwinds, which we previously communicated despite impressive T Rx growth.
Speaker Change: Both are being addressed which we'll get into later.
Speaker Change: Instead of using our sales and operations update to top market share growth or the latest advances in manufacturing I'd like to highlight the resiliency of my colleagues around the world.
Speaker Change: The voluntary recall of Io wells on our <unk> platform and the evolving tariff landscape presented new challenges and I couldn't be more impressed with the response.
Speaker Change: Greediness accountability and customer first mentality continued to define our team.
Speaker Change: When it comes to innovation enthusiasm around our pipeline is that at all time high.
Speaker Change: We are big things around the quarter with the potential to significantly enhance the standard of care in IL.
Speaker Change: I'll preface, our recall update with a simple message.
Speaker Change: Patient safety is non negotiable.
Speaker Change: That's why we didn't wait for additional data or regulatory action when a toxic anterior segment syndrome or test signal was detected and certain intraocular lenses on our desktop platform, we voluntarily pulled the whys as from the market in late March because it was the right thing to do.
Speaker Change: Our ability to return to market approximately one month later is nothing short of remarkable and speaks to the power of our people I referenced earlier.
Speaker Change: We immediately began a thorough investigation and collaboration with globally recognized tests expert advisory group of nearly 30 top cataract surgeons, including leadership from the American Society of cataract and refractive surgery.
Speaker Change: All sides began to point to watch that use raw material from a different vendor, which allowed us to confirm the cause.
Speaker Change: Inspection protocols for I O L <unk> have been enhanced.
Speaker Change: And we've established more explicit standards for vendors with these new processes in place. We've returned to full production of all industrial I O L.
Speaker Change: Replenishing the U S market is underway with timing for market reentry in other countries being handled on a case by case basis in collaboration with health authorities.
Speaker Change: The amount of positive feedback and encouragement from customers over the past month has been overwhelming.
Speaker Change: Our relationships with the eye care professionals are built on trust.
Speaker Change: And I'm confident our actions and transparency are helping to strengthen those bonds.
Speaker Change: One of the benefits of being in business for more than 170 years.
Speaker Change: <unk> experience in dealing with uncertainty.
Speaker Change: We've weathered many storms is a resilient business and a resilient industry.
Speaker Change: That's important in the current tariff environment, which we are approaching with level heads and confidence in our planning.
Speaker Change: Sam or quantify the potential impact on our business, which is of course, a moving target.
Speaker Change: As things currently stand our biggest exposure is exporting from the U S to China, given the escalation of reciprocal of tariffs.
Speaker Change: That said there are several levers we can pull that we believe will mitigate the overall impact of tariffs.
Speaker Change: These include inventory stocking moving more manufacturing in house, and reevaluating pricing, where and when it makes sense.
Speaker Change: But our biggest asset is our global footprint, which we began optimizing well before tariffs are on anyone's radar.
Speaker Change: Our manufacturing presence spans the globe and is matched by an expansive network of contract manufacturers and distribution facilities.
Speaker Change: When the dust settles whenever that may be we have the ability to ship many elements of a manufacturing based on cost effectiveness.
Speaker Change: In addition to blunting potential tariff impacts this flexibility allows us to play offense against competitors with footprint that may not be as advantageous.
Speaker Change: Production of daily Si Hy contact lenses, our fastest growing product is a prime example.
Speaker Change: Those lenses are made in two places Rochester, New York, and Waterford, Ireland, which could significantly lessen our exposure well.
Speaker Change: Or any shift in manufacturing would take time scenario planning is well underway.
Speaker Change: Q1 financial highlights include constant currency revenue growth across all reporting segments. Once again, demonstrating our holistic strength at lack of reliance on one product or region.
Speaker Change: 5% constant currency revenue growth in vision care was fueled by another quarter of dramatic daily Si Hy uptake and the Blink franchise, establishing itself as a fast growing brand in the OTC dry eye space.
Speaker Change: All words like Lula pie at art, a lot continue to outperform and build lasting brand equity.
Speaker Change: Premium I well, it's helped to drive 11% constant currency revenue growth in surgical which points to the ongoing opportunity and significance of getting and distal leads us back on the market safely and quickly.
Speaker Change: It is important to remember that our premium I O portfolio is more than just an vista. In fact, we expect to introduce the full range of vision walks of life I O Ellesse in Europe by the end of the second quarter.
Speaker Change: Earlier I referenced headwinds in pharmaceuticals, where Q1 performance can best be described as a mixed bag, despite 1% constant currency revenue growth.
Speaker Change: U S generic faced increased competition and lower inventory within the channel.
Speaker Change: And as I drove gross to net adjustments came in as expected.
On the flipside, my but once again hit the high end of our projections and international pharma posted another solid quarter.
Sam: Now I'll turn it over to Sam.
Sam: Deeper on the financials and provide 2025 guidance.
Speaker Change: Thank you Brent and good morning, everyone.
Speaker Change: Before we begin please note all of my comments today will be focused on growth expressed on constant currency basis, unless specifically indicated otherwise.
Speaker Change: Turning now to our financial results on slide nine.
Speaker Change: Total company revenue for the quarter was 1.1 37 billion, which reflects growth of 5%.
Speaker Change: As Brent mentioned, we are maintaining our focus on executing our strategy.
Speaker Change: Our core business is performing well.
Speaker Change: In the quarter. My book continues its exceptional launch performance and we saw ongoing growth momentum good humor and contact lens businesses.
Speaker Change: Our surgical segment delivered solid growth across all three product categories and we're excited to return to in Vista <unk> to the market.
Speaker Change: For the first quarter.
Speaker Change: Currency was a headwind of approximately 19 million to revenue and 7 million to adjusted EBITDA.
Speaker Change: Now, let's discuss the results in each of our segments in more detail.
Speaker Change: Vision care first quarter revenue of $656 million increased by 5% driven by growth in both consumer and contact lenses.
Speaker Change: The consumer business grew by 5% in Q1.
Speaker Change: Let me go over a few highlights.
Speaker Change: In the quarter <unk> grew by 9%.
Speaker Change: <unk> continues to expand its market leading position.
Speaker Change: We continued our strong execution in the dry eye portfolio, which delivered $92 million of revenue in Q1, representing 15% growth.
Speaker Change: Our two key franchises are to like and Blink once again contributed to this strong performance.
Speaker Change: Our July grew by 15% and blinked grew by 85% in the quarter.
Speaker Change: I vitamins grew by 4% in the quarter driven by consumer consumption trends.
Speaker Change: Contact lens revenue growth was 5%.
Speaker Change: In the quarter, we saw solid growth in both the daily and FRP portfolios.
Speaker Change: The daily portfolio was up 7%.
Speaker Change: The growth was led by our daily Si Hy franchise, which was up 42% in the quarter.
Speaker Change: The FRP portfolio grew by 5% led by our ultra franchise, which was up 15% in the quarter.
Speaker Change: In Q1, we saw growth in both the U S and international markets.
Speaker Change: The U S was up 7% and international was up 4%.
Speaker Change: Our contact lens business in China performed well and was up 6% in the quarter.
Speaker Change: Moving now to the surgical segment first.
Speaker Change: First quarter revenue was $214 million, an increase of 11%.
Speaker Change: In Q1, we once again saw growth in each of our three surgical product categories across the major markets.
Speaker Change: Consumables, which represents approximately 50% of surgical revenue grew by 5%.
Speaker Change: Revenue from equipment was up 9%.
Speaker Change: And the Implantables grew by 26%.
Speaker Change: Standard iOS, which are approximately 60% of the implantables portfolio were up 6%.
Premium Iowa's were up 77% led by growth of in Vista.
Speaker Change: Keep in mind that Q1 sales were not impacted by the recall.
Speaker Change: Burnt through their vehicle, we expected the Vista platform to be a meaningful contributor to our full year guidance.
Speaker Change: And it continued to perform ahead of our expectations in the first quarter.
Speaker Change: While we do expect that equaled to have a onetime impact in 2025. We are excited about the platform returning to market and are confident that overtime, we will see the strong growth trajectory continue.
Speaker Change: Lastly revenue the pharma segment was 267 million in Q1, which represents growth of 1%.
Speaker Change: Our U S branded Rx business was up 7% in the quarter led by the continued performance of Michael.
Speaker Change: My Blue delivered $57 million of revenue in Q1, this represents sequential growth of 8% and year over year growth of over 100%.
Speaker Change: Our investments in my book continued to drive the exceptional market adoption.
Speaker Change: With my Boots, Eurex, having expanded in each quarter since launch.
Speaker Change: As Brent will discuss average weekly T Rx, where approximately 20000 in Q1.
Speaker Change: And have nearly doubled from the prior year.
Speaker Change: Does that really delivered 67 million of revenue in the quarter.
To start the year the dynamics of the either are playing out as we have previously discussed.
Speaker Change: We saw the natural seasonality, where the first quarter is typically the lowest in the fourth quarter is the highest we also saw strong growth in volume with average weekly Chiara its up 14% on a year over year basis.
Speaker Change: The growth in <unk> was offset by higher gross to net deductions driven by the inflation reduction act and our investment to maximize patient access.
Speaker Change: We remain committed to driving either growth and believe this strategy will pay off giving the long runway.
Speaker Change: In other parts of the pharma segment, our international Pharma business was up 6% with strong performance in our largest markets in Europe.
Speaker Change: Our U S generics business declined 23% in the quarter.
Speaker Change: And by increased competition and lower inventory in the drug retail churn.
Speaker Change: As we look forward to the remainder of the year, we are executing multiple levers to help manage the dynamics in the generics business.
Speaker Change: Now, let me walk through some of the key non-GAAP line items on slide 10.
Speaker Change: Adjusted gross margin for the first quarter was 59, 5%.
Speaker Change: This includes a onetime headwind of approximately 140 basis points related to the recall and Vista.
Speaker Change: In Q1, we invested 86 million and adjusted R&D.
Speaker Change: First quarter adjusted EBITDA, excluding IP R&D was $126 million.
Speaker Change: This includes a one time impact of $16 million related to inventory write off as a result of the investor recall.
Speaker Change: It also includes a 14 million headwind driven by the decline in our higher margin U S generics business.
Speaker Change: In the quarter currency headwinds to adjusted EBITDA were approximately $7 million.
Speaker Change: Net interest expense for the quarter was $91 million and.
Speaker Change: And adjusted EPS, excluding IP R&D was a loss of seven cents for the quarter.
Speaker Change: Turning now to our 2025 guidance on slide 13.
Speaker Change: As I mentioned, our core business is performing well and we expect that performance to continue throughout the year.
Speaker Change: We are raising our full year revenue guidance to a range of 5 billion to $5 1 billion.
Speaker Change: The updated range absorbs the onetime impact of the Investor recall.
Speaker Change: Offset by a favorable currency impact relative to our previous guidance.
Speaker Change: We are excited to attend to and Vista iOS to the market.
Speaker Change: As investor ramps back up.
Speaker Change: For the full year 2025, we estimate one time recall headwinds of approximately $55 million to revenue and 65 million to adjusted EBITDA.
Speaker Change: Recently, we saw a significant decline in the U S dollar, which reversed or previous FX headwind assumptions.
Speaker Change: Based on current exchange rates for the full year 2025, we now estimate currency to be neutral relative to 2024.
Speaker Change: The updated revenue guidance represents constant currency growth of approximately four 5% to six 5%.
Speaker Change: Excluding the onetime impact of the investor equal the constant currency revenue growth is expected to remain in line with our previous guidance range of five 5% to seven 5%.
Speaker Change: Shifting to adjusted EBITDA.
Speaker Change: We are updating our adjusted EBITDA guidance to a range of $850 million to $900 million.
Speaker Change: This also absorbs the one time impact related to the investor recall.
Speaker Change: Partially offset by a favorable currency impact relative to our previous guidance.
Speaker Change: In terms of the other key assumptions underlying our guidance.
Speaker Change: We expect adjusted gross margin to be approximately 61, 5%.
Speaker Change: The adjusted gross margin absorbed an estimated one time 60 basis point headwind from the Investor vehicle.
Speaker Change: For the full year, we continue to expect investments in R&D to be about seven 5% of revenue.
Speaker Change: As we monitor market conditions, we continue to expect interest expense to be approximately $375 million for the full year.
Speaker Change: We expect our adjusted tax rate to be approximately 15%, which is at the low end of our previous guidance range.
Speaker Change: The lower rate relative to our previous guidance is mainly driven by the impact of the investor recall.
Speaker Change: We continue to expect full year capex to be approximately $280 million.
Speaker Change: In terms of our phasing we continue to expect the natural seasonality of our business, where the first quarter being the lowest and the fourth quarter being the highest.
Speaker Change: Also keep in mind the impact of the Investor recall in our phasing this year.
Speaker Change: We anticipate the recall it to have a more meaningful impact in Q2, which will include cost incurred as part of the investigation and a slower ramp as we return to full market supply.
Speaker Change: We anticipate investor sales to progressively increase in Q3 and Q4, a surgeon adoption expands.
Speaker Change: Consistent with our previous guidance, our current guidance excludes any potential one time IP R&D charges that we may incur in 2025.
Speaker Change: Finally, let me provide more detail on our perspectives regarding tariffs.
Brent Saunders: As Brent mentioned the.
Speaker Change: The tariff policy continues to be a moving target.
Speaker Change: We are staying focused and executing on what we can control to help mitigate the potential impact.
Speaker Change: We have already taken immediate actions to help mitigate part of the impact.
Speaker Change: I will continue to evaluate levers that we believe will provide us with additional benefits to further offset the potential tariff impact.
Speaker Change: Based on what we know today.
Speaker Change: We estimate tariffs to be a potential headwind of approximately 120 basis points to adjusted EBITDA margin in 2025.
Speaker Change: To be clear.
Speaker Change: This does not include all the potential mitigating levers we are currently evaluating.
Speaker Change: Given the dynamic environment.
Speaker Change: And as we continue to evaluate various mitigating levers.
Speaker Change: Our updated guidance range does not reflect the potential tariff impact.
Speaker Change: We will continue to provide you with an update as we progress throughout the year.
Speaker Change: Moving to slide 14.
Speaker Change: Now let me provide some additional color on how to think about the updated revenue and adjusted EBITDA guidance in 2025.
Speaker Change: Excluding the onetime impact of the Investor recall will continue to expect our business to perform well throughout the remainder of 2025.
Speaker Change: Our updated 2025 revenue guidance range is $5 billion to $5 1 billion at.
Speaker Change: It absorbs an estimated 55 million one time impact of the investor recall.
Speaker Change: The updated revenue guidance range also includes a positive currency movement, we are approximately $100 million relative to our previous guidance.
Speaker Change: Our updated 2025, adjusted EBITDA guidance range is $850 million to $900 million.
Speaker Change: It absorbs an estimated 65 million one time impact of the investor recall.
Speaker Change: $60 million of which we saw in the first quarter.
Speaker Change: The updated adjusted EBITDA guidance range also includes a positive currency movement of approximately 20 million relative to our previous guidance.
Speaker Change: To sum up we delivered mid single digit constant currency revenue growth in the first quarter.
Speaker Change: In our core business is performing well.
Speaker Change: We are maintaining our focus on executing our strategy and positioning the company for long term profitable growth.
Brent Saunders: And now I'll turn the call back to Brent.
Brent Saunders: Thanks, Sam let's turn our attention to growth drivers for 2025 and beyond.
Brent Saunders: <unk> prescriptions grew a staggering 98% year over year crossing 20000 in Q1.
Brent Saunders: Perhaps more impressive was the 37% increase from Q4, which tells US we're still in launch mode with plenty of room to run.
Brent Saunders: Prescribers understand the medications unique benefits, which were driving home with data and.
Brent Saunders: In February a phase four study was published showing by BOE provided relief from dry eye symptoms for nearly 50% of patients in as little as five minutes after first use.
Brent Saunders: Adding to an already impressive data set and addressing patient needs.
Brent Saunders: <unk> prescriptions grew 14% year over year, followed steady growth throughout 2024.
Brent Saunders: Both medications, which combined for 124 million in Q1 reported revenue continued to benefit from effective direct to consumer campaigns and coverage that allows us to reach significantly larger patient populations.
Brent Saunders: I referenced the staying power of <unk> and luma by earlier.
Brent Saunders: Let's focus on two consumer brands that fall under the blank umbrella and the power of effective direct to consumer outreach.
Brent Saunders: Last year in the U S. We launched blinked neutral tiers are clinically proven OTC nutritional supplement for dry eyes.
Brent Saunders: Uptake can be slow with any new offerings, especially in our space typically reserved for eye drops.
Brent Saunders: But the latest figures are very encouraging and build on the momentum we shared last quarter.
Brent Saunders: Since launching a 32nd AD in January across linear and connected TV, we've seen a 10 X increase in sales at major retailers with a positive story emerging in terms of repeat buyers.
More than 10% of eye care professionals recommended blink neutral tiers in the first quarter, thanks to convincing data and finally, having access to a once a day nutraceutical.
Brent Saunders: Uptake for blank eye drops is equally as impressive.
Brent Saunders: Our DTC campaign is driving that growth.
Brent Saunders: But the upward trajectory can also be attributed to old school blocking and tackling.
Brent Saunders: We're getting the product in front of eye care professionals through sampling and engagement at industry events, which is even more important following the release of two preservative free link offerings in the first quarter.
Brent Saunders: All told the blade family of products, which includes eyedrops lens care and supplements delivered 84% reported revenue growth year over year.
Brent Saunders: Daily Si Hy contact lenses continue to win over customers and consumers with 42% constant currency revenue growth in the first quarter.
Brent Saunders: That growth was even higher at 56% in the U S where the full suite of offerings is available.
Brent Saunders: The same will be true later this year in Japan, our second biggest market for contact lenses, when we expect to introduce a toric option.
Brent Saunders: We expect to introduce multifocal toric options in other markets in 2026, maintaining our thoughtful approach to expansion.
Brent Saunders: In the meantime existing brands are filling the gap.
Brent Saunders: Ultra monthly contact lenses is a prime example, with 13% reported revenue growth in the first quarter, despite a gradual industry shift towards daily lenses.
Brent Saunders: Another vision care a highlight worth noting is the March launch of a rise of lens fitting system that uses cloud based technology to streamline the ortho K lens design process. We believe this offering will help us build a foundation in a fast growing and critical area of myopia control.
Brent Saunders: This slide serves as a reminder, that I O walls are not the entirety of our surgical business not even close in fact consumables, which delivered 5% constant currency revenue growth account for roughly half of the business well equip it with 9% constant currency revenue growth accounts.
Brent Saunders: For nearly a quarter those areas have not and will not be affected by a M. Best a voluntary recall.
Brent Saunders: That said Implantables will continue to be a critical part of our growth going forward and feature prominently in our pipeline I mentioned, the pending looks like lunch earlier, we also expect to unveil our new loft Smarten charter within the next few weeks for select countries and anticipate a soft.
Brent Saunders: Launch for invest NV in Europe later, this year with a full rollout expected in early 2026.
Brent Saunders: I'll close with my favorite Slide a top line view of our refocused pipeline, which cuts across all businesses.
Brent Saunders: Several of these products could be category disruptors, including a first of its kind biomimetic contact lens that would optimize oxygen permeability.
Brent Saunders: The first door action therapeutic to address both evaporative and inflammatory dry eye disease.
Brent Saunders: The first product to treat ocular surface pain, and the first glaucoma product to lower intraocular pressure and improve visual acuity.
Brent Saunders: Others, most notably OTC offerings leverage brand favorability with new science.
Brent Saunders: When their process of initiating clinical trials for most of these products, which means we're making meaningful progress in our journey to significantly enhance the standard of care and I hope that.
Brent Saunders: That's what continues to motivate us every day.
Speaker Change: Operator, let's move to Q&A.
Speaker Change: Certainly we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you were using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Speaker Change: And the first question today will be coming from Patrick Wood from Morgan Stanley Patrick Your line is life.
Patrick Wood: Perfect. Thank you so much and good morning, everyone I'm going to skip over tariffs I'm much more interested on the impartible side of things actually before the recall and we wish we could all see it in the data envy was kind of kicking <expletive> in.
Speaker Change: Doing very well in the U S.
Speaker Change: Obviously all of us what looks like a fairly aggressive assumption on the revenue line Oh the hits.
Speaker Change: From the recall you know how are you guys thinking about the total impact how you're thinking about the effect that it has or hasn't habit customers. What are you hearing from the customer base I'd love to dig into that and I've got a quick follow up on the same topic.
Speaker Change: Alright, Thanks, Patrick and and I liked the way you you described them as performance I don't know if I could get away with saying that but thank you in the first quarter at least so luckily we we made the important decision. It really didn't require much thought right, which is always to put the quality and safety of our our.
Speaker Change: Uh huh.
Speaker Change: First and then we decided to make the recall when we started to see a signal on task.
Speaker Change: When you look at the work the team did to resolve the issue and identified the problem. After a thorough investigation, we feel incredibly confident that that we where we made the right decision also to return to market.
Speaker Change: We were at a S. R. S. A I was there and as most of the team was this weekend in Los Angeles, and so we had a really great.
Speaker Change: The opportunity to interact with thousands of customers and I think that the message is clear which is we earned a lot of trust by the way. We we moved swiftly to put patient safety first and the transparency and which we did it.
Speaker Change: I heard overwhelmingly from a lot of Kols that they plan to immediately return to implanting invested as soon as the next week or two when supply is restored.
Speaker Change: And then you know I've heard from other surgeons, who said you know, let's let's give it a couple of weeks or a month given the immediacy of the onset of tests. So we should know pretty quickly and that should settle the market. So when I look at it clearly second quarter is what it is because it happened during the second quarter I do expect third quarter to start to see a pickup in and Mike.
Speaker Change: My current thinking is by fourth quarter, we should start to restore trust and confidence in and be back in business and a full full full force.
Speaker Change: Super helpful does that make sense it does.
Speaker Change: It dovetails nicely actually because to your point on I S. Crs I guess the second question is.
Speaker Change: We've seen J&J is number we've got your number now, but certainly what we had been hearing a little bit for the U S. On the implantable side and I understand you guys are much smaller than the U S. So you asked but for the U S saw at Unemployable specific cataract volumes were actually pretty bad in the Q1 I would assume that would just be the premium side of things.
Speaker Change: You know the economy et cetera, blah blah blah and we also are access numbers, but do you have.
Speaker Change: What are you hearing from your customers around total cataract volumes I know that's less impactful for you guys given your position in the market I'm just really curious.
Speaker Change: Yeah, you know I don't we don't have hard data, but I can tell you anecdotally and.
Speaker Change: Through the recall and and even at the Srs I've been probably spending more time with cataract surgeons than than any other customer for the last few months.
Speaker Change: And you know I think I would describe volumes is kind of normal you know I don't think that there's a decline I don't think there's a big big increase either I I see it as very steady in the marketplace.
Speaker Change: With respect to the categories, where we see more growth, it's mono focal plus and clearly you know there are only competitor is J&J, so theyre going to benefit in the second quarter because of aspires recall.
Speaker Change: But you know I think when it comes to envy I think.
Speaker Change: When you look at first quarter, even fourth quarter of last year, there was really nice adoption because of the the the quality of the lens and the quality of the outcome.
Speaker Change: Surgeons, we're achieving for patients and that's what they want they want a predictable strong outcome for a premium I O L.
Speaker Change: Super Thanks, so much guys.
Okay.
Speaker Change: Thank you. The next question will be from young Li from Jefferies. Your line is life.
Li: Alright, great. Thanks for taking my question I.
Li: I guess to start wanted to ask a little bit about your consumer exposed businesses.
Li: Was wondering if you can talk a little bit about what you saw from both segments.
Li: March or even April.
Li: Is there any cautiousness or slow down.
Li: And then if you can focus a little bit.
Li: Consumer as well as the China consumer sentiment that'd be helpful.
Li: Yeah. So it's it's a it's actually a young great question and it's an interesting paradigm right because the data.
Li: We see and even in April we see strong consumption still.
Li: I think there's two things that you have to watch out which is you know I think we're still going to see some continued destocking of inventory from retailers as they they try to preserve cash or manage cash we saw that last year in the drug channel I think we're going to see it in a few other parts of the of the consumer channel over the coming year.
Li: And then second you know sentiment right and when you look at the the.
Li: The sentiments surveys out of Michigan. Another places obviously, they're they're quite concerning that being said if the dichotomy exist and we don't see it in the actual consumption yet that being said you know, we probably have more resiliency.
Li: Than others, because most of what we sell are a central health care products.
Li: So they tend to be less discretionary and and so you know I think we feel cautiously.
Li: Cautiously optimistic about our consumer business on a on a go forward basis demand looks looks really solid.
Li: And that is that includes China, I mean, even China, our best barometer in the first quarter is contact lenses and we saw a 6%.
Li: Growth in China and in contact lenses. So again you.
Li: I understand the sentiment, we just don't see it in the consumption data.
Li: Alright, great that's very helpful.
Li: I guess, one on tariffs still hot topic.
Li: Yeah.
Li: You have a pretty diversified manufacturer footprint.
Li: Lots of mitigation potential efforts that you highlighted I.
Li: I guess I'm just kind of curious how quickly can you implement some of those things and you know.
Li: Thoughts on your ability to.
Li: Pass price through.
Li: Through to customers as needed.
Sam: Yeah, Let me, let me take a stab at a high level answer and then I'll turn it over to Sam.
Speaker Change: Sorry, but you are correct I mean, most of our tariff exposure comes from the reciprocal of tariffs from China.
Speaker Change: And it's in our current configuration, most of our surgical and a lot of our contact lens and solutions are manufactured in the U S and and exported to China and so that's that's a vast majority of our impact today.
Speaker Change: I think as you walk if you believe these tariffs or perhaps maybe the better way to think about it is you got to divide the mitigation strategies into kind of two categories right. The things you can do immediately which Sam can talk about in terms of inventory in and utilizing free trade zones and then the second is if you believe these things.
Speaker Change: We're going to be long term, which as we know is a moving target almost on a daily basis.
Speaker Change: You you can strategize in terms of moving production to other facilities in Europe or even Asia.
Speaker Change: It takes a little bit more time and requires a little bit more investment. So we're spending a lot of time on scenario planning and getting ready, but not pulling triggers yet on on the second type of actions, but Sam maybe turn it over to yeah sure Ann.
Sam: The way we approaches we took <unk>.
Sam: Number of steps here quite seriously in terms of pulling together all referred to as the task force on tariffs and I lead the work with the with our operation teams on this and when you think about tariffs and how you think about and reflect on the slides that we shared with you earlier today or earlier this morning.
Speaker Change: We are well positioned from a manufacturing point of view in the U S. So when you think about it as Ben said like when you look at our manufacturing we are well positioned because of our manufacturing in the U S. S. G. The impact on how we actually move product from the U S into China and with that I think there's probably you are breaking up into the two parts of actions I'll refer to it.
Speaker Change: Step one as no regret actions, which is things that we've already deployed and will continue to deploy such as inventory management inventory movement, how we actually ship products in and out of certain locations and how it can be able to work through that part of it. The second part of the actions are a.
Speaker Change: A little bit more critical to think through and evaluate because the situation continues to be fluid, it's a dynamic sort of.
Speaker Change: Environment right now with how things are continuing to evolve and user changing quite a bit and those applications will have a longer.
Speaker Change: Element, which we believe many of those steps it will take to that second phase will meaningfully offset the tariffs exposure we talked about this morning.
Speaker Change: They will also require elements of implementation and those will include the pricing or changes in our actual supply chain our streams and says how are we and where we manufacture and ship products from so again, it's the ongoing work, we're taking it seriously with a I'll call all hands on deck in terms of focus on it.
Speaker Change: We will continue to monitor what happens from a policy point of view, Yeah, I would add one other comment just you didn't ask the question, but if we did see tariffs in pharmaceuticals, where we're really insulated from that our U S. Pharmaceutical businesses is made all those products by bauxite, Varian and and <unk>.
Speaker Change: <unk> and everything else are made in the U S for the U S.
Speaker Change: Alright, great very helpful.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Thank you. The next question will be from Joanne Wuensch from Citibank, John Your line is live.
Joanne Wuensch: Good morning, and thank you for taking the question.
Speaker Change: I want to just pause for a second on the contact lens market I'd love to get your view on what you're seeing in the U S and the al you asked in terms of demand and a little bit going to the question earlier.
Speaker Change: You know recessionary potential recessionary impacts on the business and also my second question here looking at Slide 20, and you have 1234 different contact lenses in Q and anything you can share with us about the products that you're excited about all the timing would be fabulous. Thank you.
Speaker Change: Yeah, absolutely so.
Joanne Wuensch: No Joanne as you know the the market data on on contact lenses that we source is is comes in you know.
Speaker Change: And I guess in a couple of weeks or a month. So we don't have.
Speaker Change: The the actual data so I'll have to speak more based on what we're seeing in the market and anecdotal comments from customers and we see continued mid single digit growth of the market. I think there are some of our competitors that that that have different selling models that had some destocking just like we saw in <unk>.
Speaker Change: Our consumer business that doesn't really impact us.
Speaker Change: <unk> is as much but I think all in all I think our consumption or demand remains in that mid single digit kind of number.
Speaker Change: I think in terms of the recession you know when you go back and look at other recessions that I I don't think you know.
Speaker Change: If we entered one it would be perhaps as severe as as the financial crisis, driven one, but but you know there you still saw growth, albeit muted growth but.
Speaker Change: I think it is a fairly resilient market and and you know people don't drop out of of lenses.
Speaker Change: During a recession you may see less new starts, but not not in a significant way it would be a more modest impact.
Speaker Change: In terms of the pipeline.
Speaker Change: You hear that our our head of R&D is here do you want to just touch on some of your yeah sure.
Speaker Change: Specifically in terms of the contact lenses, we're continuing to make.
Speaker Change: Substantial progress on the development of our biomimetic lenses.
Speaker Change: We're currently in the final optimization study within our clinic, but we're going for the Big clinic as we announced in JP Morgan second half of the year. So until we start the study.
Speaker Change: And then we obviously also completed recruitment for our myopia contact lens and we are expecting to see some interim analysis data.
Speaker Change: By beginning of 2026.
Speaker Change: We have also started the program on the <unk>.
Speaker Change: Premium if our P. Si Hy lens that will give us also longer duration. So in terms of the pipeline for the contact lens in particular, we have some very exciting programs that are progressing and on track to deliver results and I would add Joanne I take also put aside that the novelty and and technology upgrades of some of these.
Speaker Change: Lenders they were designed for purpose on existing to be made on existing manufacturing infrastructure and so, thereby solving one of the biggest issues in bringing new contact lenses to market as the large capital investment usually needed to ramp up manufacturing, we largely avoid that with with this pipeline.
Speaker Change: And so very proud of of the R&D team's ability to drive innovation.
Speaker Change: On existing manufacturing platform, which is really an added difficulty.
Speaker Change: When trying to innovate and they did that well.
Speaker Change: I think I.
Speaker Change: I would just add one last thing on the pipeline clearly we have the the clinical.
Speaker Change: Trials for the pharmaceutical programs all starting in the second half of this year and so we're super excited about those programs, but also L. A O N E.
Speaker Change: Our migs.
Speaker Change: Glaucoma.
Speaker Change: Hope to they are anticipate an approval by the end of the year and so we have a lot a lot of work going on in R&D. This year.
Speaker Change: Excellent. Thank you.
Speaker Change: Thank you. The next question will be from Larry Pete Wilson from Wells Fargo. Larry Your line is live.
Speaker Change: Hi, Good morning, it's Lei, calling in for Larry and thanks for taking the question.
Speaker Change: Just going back to task at Sam you talked about tariff impact approximating 120 basis points to EBITDA margin next year can you give any thoughts on how we should think about that ramp through the year, just given how inventory runs through the P&L I mean, we've seen key T margin impact could be.
Speaker Change: From 120 basis points in Q4 would be great or can you give any sort of order of magnitude our color and I have a follow up.
Speaker Change: Yeah.
Speaker Change: Sure. So when you think about the actions that we've taken actually where you will protected the I'll say the first half of this year with the actions that have already been taken so I wouldn't expect that you would see much of a meaningful impact of the tariffs in Q2 for us.
Speaker Change: I think when you think about it it probably would be more into the second half of this year, assuming all the policy stays in order and we don't have any additional development in terms of our other delays or other shifts that would take place. So again, it's a very dynamic situation and so that for as you start thinking about your own modeling in terms of how we're thinking about it.
Speaker Change: Q2 is well protected.
Speaker Change: It probably would be more of a disappointing second half.
Speaker Change: Got it and would you say second half Q3, Q4 key fairly balanced.
Speaker Change: Do you expect a ramp from Q3 to Q4.
Speaker Change: I would say at this point I would say is probably well balanced again it depends on also the mitigating actions I I view this as a.
Speaker Change: It's a point of time right because I think we're again, we're not sitting still standing still here without taking action. So there'll be more actions that will continue to deploy that we would expect that we will continue to mitigate the 120 basis points as we look into the second half right. I think it's also important later to recognize we're basing our assumptions off of you know.
Speaker Change: Policy that was that it seems to change every day.
Speaker Change: And so we're looking at at the most stringent policy.
Speaker Change: Is essentially no change many of these tariffs going back into effect in June.
Speaker Change: After the 90 day pause, but if those deals are cut or extensions are given and clearly if a if a negotiation with China could happen. Then then this could look very different.
Speaker Change: Got it. So this is essentially a color of what type of scenario.
Speaker Change: Based on my email.
Speaker Change: You would like to think that but I think given the way the president announces tariff since it's hard to predict that that that he couldn't make them higher but.
Speaker Change: You got it thank common sense why is that this is the worst case right.
Speaker Change: Got it Okay, that's super helpful and for my for.
Speaker Change: Follow up on <unk> as he says in a prescription volume.
Speaker Change: As the non corn really wow pretty solid.
Speaker Change: And you said there are headwinds for Q1 as expected.
Speaker Change: Expectations for the full year in terms of the <unk>.
Speaker Change: <unk> had that changed and should we think about how should we think about <unk> growth through the year should we expect sales to grow sequentially based on volume growth. Thank you.
Speaker Change: Yes, so so you're exactly right. So when you know last year, we probably talked almost every quarter about anticipated gross to net headwinds in in 'twenty five and those are why we say they were expected that.
Speaker Change: That being said I think when you look at the strategy for <unk> in particular, it was really a two part strategy one was to gain access to grow volume seeing about 14% tier X volume on on Xyrem, certainly confirms that that part of the strategy is working but now we have to pull through the profitability through the P&L.
Speaker Change: And and that has helped in part by seasonality right. As you go through the year that the first quarter because of Copays and deductibles is always the weakest, but fourth quarter is always the best in that regard.
Speaker Change: But we are also putting in other programs that go into effect in the next month or two to continue to focus on improving profitability. While we while we we we continue to try to expand access.
Speaker Change: And then on your last part of your question in terms of the guidance for the full year is still remains unchanged for us and I think that was clarified that as we were putting out the bridge for the guidance is really we changed the guidance on the Investor recall everything also remain unchanged yeah, I mean keep in mind first quarter for a product like <unk> will have the.
Speaker Change: The highest impact from gross to net because of the higher co pay deductibles Ah patients face in that quarter.
Speaker Change: Thank you.
Speaker Change: Next question will be from Douglas <unk> from RBC capital Douglas Your line is life.
Douglas: Yeah, Thank you and good morning.
Speaker Change: Just on pharmaceutical tariff ships they were introduced.
Douglas: What I'm curious about is.
Speaker Change: Where the intellectual property used help.
Speaker Change: For the likes of my Boeing XI draw and anything else of importance relative to <unk>.
Speaker Change: Where they are manufactured and sold and what the implications could be there.
Speaker Change: Yeah, so so to be fair and and Sam can touch on the IP, but the reality is its country of origin, where they're manufactured as what the tariffs have been based on to date.
Speaker Change: And all both my bow and <unk> and all of our pharmaceutical products that we sell in the United States are made in the U S. They're either made at CMO as in the U S or in our facility in Tampa, which is quite large.
Speaker Change: From a competitive basis I think that that is if we saw pharmaceutical tariffs that's a good outcome for us.
Speaker Change: As much as U S. Generics was a laggard all of our U S. Generics are made in our Tampa facility and that that would be up.
Speaker Change: Part of the business that would be more sensitive to tariffs given the lower margins of our competitors and so I think we're well positioned if in fact, we see.
Speaker Change: Tariffs on pharmaceuticals.
Speaker Change: But the IP Sam is probably.
Speaker Change: So we are we have a majority of our IP is doing in Ireland I think.
Speaker Change: Thompson that before in this part of our overall planning in terms of where we hope the IP in our tax structure.
Speaker Change: Okay Perfect and then just my follow up question.
Speaker Change: Brent you you commented on a couple you know your favorite slide and a couple of opportunities could you expand on the glaucoma product and the timing of when we might see that introduced thank you.
Speaker Change: Yes. Since you he is here and he's he's the expert on I'll, let what you're here answer that yes.
Speaker Change: So the glaucoma product.
Speaker Change: We are now in the phase of preparing all the necessity formulation and optimization of the formulation. We acquired this asset and have lost here in December actually.
Speaker Change: The assets, we acquired pet clinical data from a study of about 60 patients.
Speaker Change: That demonstrated clearly that.
Speaker Change: This alpha two agonist as a new chemical entity has the ability to reduce intraocular pressure, but it showed positive results on two functional outcomes. One of them was the low luminance visual acuity and the other one was the micro perimetry or the visual fields and this is bill.
Speaker Change: Actually matching with the hypothesis on its mechanism of action. So we what we currently are doing or are you just doing optimization of the formulation and we're going to start another confirmatory phase III study.
Speaker Change: We plan to start this around November timeframe.
Speaker Change: And it should actually not be a long study because it is a confirmatory studies, which should be about six months study and.
Speaker Change: The idea is to replicate the results of what we have seen in the first the study. If this is positive we can go directly to phase III and this would be the first IOP lowering agents that is associated.
Speaker Change: With functional improvement in terms of visual acuity and micro pretty much yeah, which as you know when I when I talk to glaucoma specialists that is kind of the Holy Grail and and so we're very excited about the product, but we need to do the work to confirm our findings and then move aggressively into phase III and we have to remember that.
Speaker Change: The unmet medical need is huge because currently all treatments are addressing the just lowering intraocular pressure. However patients are still losing vision despite being treated before.
Speaker Change: IOP lowering agents. So this is a great opportunity to address this huge unmet medical need as well.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question will be from Matt <unk> from Barclays. Your line is live.
Speaker Change: Alright, thanks, so much for taking the questions.
Speaker Change: And congrats on getting through and getting back to the market on the recalled products.
Speaker Change: On on that front.
Speaker Change: You know that.
Speaker Change: Off to a pretty good start as you talked about the end of last year and into early this year.
Speaker Change: Anything else in surgical whether it's equipment or.
Speaker Change: Any of the strategies that folks have pursued around our adjustable or where certain nextgen lenses that you think would be important.
Speaker Change: To sort of get a bigger footprint over time and in that business and I have one follow up.
Speaker Change: Yeah. So absolutely we are focused on on other areas I mentioned earlier.
Speaker Change: Our entry into the Migs glaucoma space with with we're still anticipating an approval at the very end of the year this year for a launch.
Speaker Change: Beginning of 'twenty six.
Speaker Change: We continue to do the eat off and Vista beyond studies and that is enrolling now and that study is going so that would finish out our premium IOL offerings.
Speaker Change: We have the the new stellaris.
Speaker Change: Ah <unk> program at the end of 'twenty six.
Speaker Change: It's called we're very excited about that.
Speaker Change: And so there there's there there's a lot of work, including new lasers Femto.
Speaker Change: And everything else so lots of lots of work I don't know if he had anything else you can comment on it.
Speaker Change: Actually we continue to drive actually all the franchises from Implantables.
Speaker Change: Two the equipments.
Speaker Change: As you mentioned from an equipment perspective, we have the C. Nova Geneva, we approved the myopia only indication we are actually just completing the study for the hyperopia and we should be also submitting an indication for the hyperopia 40 view and then we don't have to forget also that we have a complete range of intraocular lenses.
Speaker Change: Which is the luxe smart and Lux life, which is under a cutting edge technology. We are expecting the approval of the lots of smart very soon actually in European Union.
Speaker Change: And it's a slightly different platform than the Mr. Because they use a different optical design diffractive technology. So we are really very excited about all these programs thats going and should be delivering for us on the short term as well.
Speaker Change: That's great. Thank you and then just a follow up.
I think we are we'd all like to believe the tariffs they're gonna have settled back down again.
Speaker Change: But one of the one of the things that was sort of hopeful it during this year and fairly active was was general activity on the on the M&A front, you've been active over the past 12 to 24 months.
Speaker Change: But would love to get a sense of your your posture there.
Speaker Change: You know how the environment is affecting your your activity level or thoughts on building out the.
Speaker Change: Portfolio strategically.
Speaker Change: Given the environment.
Speaker Change: Yeah.
Speaker Change: I think youre right everybody was expecting.
Speaker Change: Some sort of Bonanza, and M&A, and clearly that hasn't materialized in and Thats, because just like capital markets M&A markets don't like uncertainty and tariffs certainly creates some turmoil, particularly the ever changing posture around tariffs the other.
Speaker Change: I think the other effect, we're seeing is a slowdown and in venture funding in this space and so that's probably a net positive for US is as some of these really interesting technologies.
Speaker Change: That are small startup companies are looking for sources of capital.
Speaker Change: That allows us to get early looks or early rights to two technologies had at prices, probably we kind of thought about in the last year or two but you know in terms of M&A, we're not looking at doing any big M&A. This year, we continue to really hone in on a looking for intellectual property and early stage technologies.
Speaker Change: That can bolster yeah. He is already.
Speaker Change: Pretty robust pipeline.
Speaker Change: Very helpful. Thanks.
Speaker Change: Thank you and we have time for one last question today coming from Robbie Marcus from JP Morgan, probably your line of life.
Speaker Change: Great.
Speaker Change: Thank you for taking the questions.
Speaker Change: I'll I'll squeeze the two into one here.
Speaker Change: I appreciate that.
Speaker Change: So tariffs go away and they are transitory, but you're the only company. So far in med Tech that has been included in the guide and as of now there are real and policy.
Speaker Change: And by my Math, you know something like 20% to 25% EPS headwind for the second half this year of $40 to 50%.
Speaker Change: Without mitigation headwind to EPS next year, so I'm wondering if the tariffs hold.
Speaker Change: How do you feel about your ability to.
Speaker Change: To mitigate the tariffs assuming that number you gave was a gross number and are you at risk of tripping any of the debt covenants.
Speaker Change: Given the meaningful run rate impact thanks, a lot.
Speaker Change: Yeah. So let me start just philosophically and then Sam can can provide more color.
Speaker Change: The reason we're handling it but the way we did philosophically is is one to provide transparency on the impact and the actions, we're taking but two given that it seems to change on a daily weekly basis, we don't want to have to update guidance. Every time. There is a press conference at the White house, either and so I think.
Speaker Change: Quantifying in a very transparent way what those.
Speaker Change: Current tariffs impact of mitigation strategies are is the cleanest way for us to handle it.
Speaker Change: Certainly if they stay into effect and if you believe that that's the current status is the permanent status that would that would change the way I think we we handle it I don't think that that's the most likely outcome, but but again, it's such a fluid situation.
Speaker Change: I think this is the right way to handle it but Sam you wanted to talk about the other parts no that's exactly right and Ravi what do you think about again, it's a very dynamic global environment right things changes.
Speaker Change: If not on a weekly basis, sometimes on a daily basis on a based on what happens here. So I think the two things that you have to keep in mind is there's a movement on the tax itself into a policy setting and I'll leave that to the policy settings sort of aspect of it in terms of what they ultimately decide what's tariff sorry about the other part which is continuous.
Speaker Change: To be an important factor that U is.
Speaker Change: What we control and the levers that we have in our source control to be able to execute on and I tried to highlight it on the prepared remarks I also in the previous question, which is if you think about it there's multiple levers that we I'll call. It our fully executable, we are in and either already executed them Oren.
Speaker Change: In the process of executing them and they are offsetting elements of that tariffs. There's other levers as well that we will be able to execute duff will be meaningfully offsetting this exposure that we just talked about today. So the reason why I highlight that point is it's two moving pieces. There. So the test itself the policy setting itself as movie we don't know.
Speaker Change: A word that is going to ultimately end up landing, but there's also multiple elements in our control that we're taking action on to be able to offset that so that in itself should give you a sense of the fact that we are why we didn't put it into the guidance because it continues to be a moving target here I would.
Speaker Change: That sort of thing.
Speaker Change: Take the Liberty of trying to normalize that number for 'twenty six or anything beyond that at this point because of the elements have been moving elements nature of it as well as the levers that we are still executing that this should not give you a run rate a reasonable run rate as you think forward going beyond 25 now.
Speaker Change: Now on the last part of your question in terms of debt covenants, we are in full compliance.
Speaker Change: Again, we're looking at that with multiple levers multiple elements with our guys were in full compliance of our debt.
Speaker Change: Yeah.
Ravi: Great. Thank you Ravi.
Ravi: Operator, just some closing thoughts.
Ravi: Thank you and thanks to everyone, who joined the call. We look forward to continuing to engage around our business I'd like to end with just thanking our team around the world.
Ravi: Clearly it was a solid quarter, despite some bumps in the road.
Ravi: But I think when you when you see an issue like we saw with Investor Howard team responds as is so critically important and the the focus on patient safety first and the absolute mindset of finding the root cause and the amount of hard work our team demonstrated.
Ravi: As a testament to their they are great in this too.
Ravi: Their commitment to patient safety and their commitment to our company and our customers. So.
Ravi: A lot of lot of learnings, there and really proud of how the team reacted to a difficult situation. We look forward to keeping you updated and more will talk to you soon thank you so much.
Ravi: Okay.
Speaker Change: Thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.