Alcon Inc. (ALC) Earnings Call Transcript & Summary

Good morning, good afternoon, ladies and gentlemen, and welcome to this 41st Goldman Sachs Global Healthcare Conference. Unfortunately, due to the current circumstances, we don't get to enjoy the sunshine in California. But nonetheless, on behalf of the Goldman Sachs health care team, I want to welcome you all for joining us today. And I want to welcome, in particular, the Alcon management team. Thank you guys for being here. We are joined by David Endicott; Tim Stonesifer; Karen King; and Christina Cheng. So we have full house. Before we start, I do need to read some disclosures, so bear with me for one second. We are required to make certain disclosures in public appearances about Goldman Sachs's relationships with companies that we discuss. The disclosures relate to investment banking relationships, compensation received, or 1% or more ownership. We are prepared to read aloud any disclosures for any issuer upon request. However, these disclosures are available in our most recent reports available to you as clients on our firm portals, and they're also available by ticker on the firm's public website. Also the views stated by non-Goldman Sachs personnel do not necessarily reflect those of Goldman Sachs. And with that, we can get started. Just a couple of administrative questions for those of us who have joined us today via webcast or phone. If you have any questions that you would like me to ask of the management team of Alcon, feel free to e-mail me at my e-mail address or significantly through the webcast form. And now that all of that stuff is out of the way, I'm going to turn it over to David, who will start us off with some prepared remarks, and we'll be diving to Q&A. David, the floor is yours.

Thanks, Veronika, and good morning, good afternoon to everybody. It's a pleasure to be with you again. I think there's this old saying about living in interesting times, and these are certainly those. So it has been an interesting first half of the year, almost, if you can believe it. And as we kind of reflect on it, I think the thing that we observe, which I think gives us some confidence in how we're proceeding is that our markets are directionally still very strong. I think the business that we're in, which is the business of cataracts, the business of eye care, business of vision correction, these are businesses that are relatively stable, even when things get a little crazy. And so although there's clearly been an adjustment in revenue and a consequence of that, the need -- the fundamental need in the market for correction of myopia and cataract surgery and retina surgeries remains. And so we look to a couple of basic ideas that are still in play for us, which is we have very good product flow. We started the year, and we've articulated kind of what we thought was going to happen this year with product flow. We've been successful in getting a number of products out, and we were gaining a great deal of share through the first couple of months of the year. So we feel good about the positioning of what we had said, which was new product flow will drive revenue. Revenue top line will generate leverage. And leverage will generate bottom line impact that, over the course of our plan, we think is really still the right theory. It's just a question of when does the revenue recur at a level that we had kind of anticipated. How does that occur as it comes back into shape? So we spent a lot of time looking at that. We've obviously given some direction around that in our last call. But I think the key to that in the end is we feel good about the underlying fundamentals and where we are relative to product flow, which I think at the core of it is really what we're trying to make sure we've got out there as a message.

That's great. Thanks, David. Maybe we can sort of start with a little bit of current trading update to the extent that you're able to talk about it. I think at the time of the Q1 call, you talked about revenues being roughly at 50% of internal expectations. Maybe give us an update on sort of how things have progressed since. And I know kind of, at the time, your hope was that you'd get back to kind of normalized activity levels towards the end of the fiscal year. Do you still see yourself as being on track with that based on what you're seeing currently in the markets?

Well, I think we should comment through the April time frame because that's what we reported on the call. And I would just say that we were 50% of expected revenue in that period. We do think that was the trough, and we reported that. And I think we had said and we still believe that May will get a little bit better. June will be better yet. And that we'll kind of rise up into the third quarter, probably not really at full market size until probably late this year, early next. And I do think there's a slight difference between the businesses. I think our observations would be that the surgical business has a little bit more potential to -- it had a steeper drop, and it will have a faster return to full strength, I think, generally. And principally because we believe that the accommodations that are required for COVID can be managed by the surgery centers, the hospitals, et cetera, as they develop an understanding of how to turn rooms a little bit faster, how to manage the sterility procedures. And there is a pent-up demand for some of the surgery. I don't know that it gets better, and I don't think we recover surgeries that were lost necessarily. I think what we may see on the surgical business is a little bit of a bounce up because there were people who were anxious. They were scheduled for surgery. They got canceled. They'll come back easily. But then there's a period of time where the surgeons are going to have to refill that grouping of patients who need to get diagnosed, need to get in to get the right decision about lenses. And that process, I think, will take us some time to get there. But I think our current view -- and again, I should hesitate to say that this is a probability weighted view is that the market will kind of return roughly normal by the end of the year in surgical. Vision Care, slightly different. I think -- we think it was a shallower drop. We didn't see quite the -- remember that this is mostly in the contact lens business anyway, a refill business. And same thing with eyedrops. Largely, people are using them, and they go back for them. So what you lost was new starts, and what you lost was refills, and there's actually a little bit of pantry loading in the first quarter that we benefited from. So I think what you're going to see is a shallower drop followed by a little bit longer of a runup to what I'd say normal. I think we probably think that sometime in the first quarter we're in that back-to-normal zone for the market. So that's kind of the directionally how we see these kind of curves, if you will.

Veronika, I would add one thing to that. The other thing I would say, too is that the -- probably what's hardest to predict is consumer confidence and how quickly people feel comfortable coming back into the different health care environment. So we'll have to kind of wait and see how that one goes.

Yes. There's a number of variables we've been using and obviously, OR capacity, consumer confidence, patient safety. The one that's probably the most difficult for us to predict because we know most of the others is, in fact, how patients are going to feel as they want to return to the market. And so in contact lens, in particular, consumer confidence, I think is probably reasonable to track, but the seniors' willingness to go back into the office, I think, is probably the piece we're uncertain of on the surgical side.

Yes. I think that's very fair, and in some ways echoes a lot of the comments we're hearing from other medtech companies. Let me just unpack a little bit some of the stuff that you said. I think you were alluding to kind of OR capacity. When we speak to surgeons, in particular, on the cataract side, one of the things they're bringing up is there are more stringent infection control protocols that they're implementing, and that might be having some impact on their ability to derive the same throughput in terms of number of surgeries. How much of a concern is this for you? And what kind of responses are you seeing from folks out there to deal with this?

Well, it's a concern, for sure. It depends on the market in particular. I mean it is very market dependent. So when you look at the hospital-based markets, and I would read Europe as the most focused on the -- where most of the surgeries done in the hospitals, there isn't a ton of capacity in there to begin with. When you slow that down, it's going to be difficult for them to necessarily come back as quickly as some of the other markets would now. If you look at the U.S. market, it's probably 70%, 80% ASCs, and maybe half of those are owned by ophthalmologists or groups of independent folks who have capacity and I think will find an extra day. They'll work later. They'll do a number of things, I think, to accommodate for the extra time it takes to properly sterilize the room under the new circumstances. And so I think those are -- U.S. will do pretty well. I think Asia will be following that. I think there's a mix of countries which with ASC and hospitals in Asia kind of a different view. And then Europe will probably be the slowest parts of our business to come back. And that's, again, a little bit just dependent on what you see there.

Okay. And so far, I know it's early days, but any big impact you're seeing in terms of the product mix on the IOL side, monofocals versus AT-IOLs, one more likely than the other to be coming back faster?

Well, I don't think we know yet. I think we had a very good first couple of months with advanced technology lenses, principally because we were launching the 2 largest AT-IOL markets, Japan and the U.S. We have China coming up in the middle part of this year. So that will be our top-3 markets with a new product. So I think we'll do well on a share basis, and that's a little bit hard to read relative to whether that's just us launching new products and having the benefit of that, or whether that's really a market phenomenon. But I do think that there is at least a reasonable school of thought that, as surgeons get back to business on this, the more comfortable they are with the technology, the more likely they are to look at it as this is an opportunity for me to maximize revenue in an environment where I've been out of work for a while, and this is good for the patient. It's good for me, and it offsets some of the Medicare cuts, for example, in the U.S. that went to the surgeon this year. So I don't know. I mean that's a theory. I mean I don't know if that's really playing out or not. The alternative view is it's just a lot easier to put in, and it's quicker to put in monofocals. So we'll have to see how those play out against each other. But we're certainly optimistic about the share portion of this. And so we came through -- as I said, we came through January/February in a very strong position share-wise in the United States. Same thing in Japan, really. So we felt really good about our execution on and the performance of the products.

Okay. That's helpful. And maybe we can switch tacks a little bit and talk about contact lenses. I think you said this on the call and reiterated it this morning. You think the recovery will be slower. But one of your peers reported last week, and I actually felt that they were maybe slightly more optimistic about the market returning back to normal levels potentially as we move through the second half of this year. Is your perception changing to mirror theirs? Or do you think their view is very specific to their own portfolio? Kind of curious to get your thoughts on that.

Well, look, our view on the dynamic is that foot traffic is a really big deal in optometry and getting people into the office is -- I'll just -- let me throw out some variables, and we can mix them up in a stew, and I don't know what the answer is going to be, but I can tell you our view. And the first one, of course, is that these are tend to be younger consumers. These tend to be folks that are in there, kind of 20 to 40, maybe 45 that we're interested in who are contact lens wearers or eye-drop users. And these folks, again, are likely to come back in a little bit more assertive fashion as you go forward, you would think. The fact of the matter though is that optometry as a group is not necessarily ready for that to receive them. And if you think about the social distance requirements, the way in which they're going to -- the method right now often is we'll have the patient sit in their car and text in, and then we'll bring them into the waiting room that way, and we'll bring them in one at a time. The flow is slowing down the office traffic quite a lot. And so I think the question on how much foot traffic you can get through is a really interesting one, and when that returns to normal levels, I think, if it returns to normal levels, is a really important one to think through. The second one -- and the kind of the third one to me is there is a question about whether or not optometry in its near term is more interested in frames than contact lenses. And you should think about that as the near-term cash register ring for an optometrist is higher generally in their minds than it is than the value of a patient putting contact lenses in -- to giving them contact lenses. Now they're happy to do both. But generally speaking, if given a choice, they're going to tend to focus on frames first and then move to contact lenses second. We work on that all the time. Now that there's a fallacy in that because the contact lens patient is actually worth more over the year, but they're thinking about, I think, right now, how do I get the most out of this week's revenue. And if they have a choice, I suspect that they'll have to think through whether they want to do contact lenses or frames, and frames will figure well. And obviously, our friends at Essilor are doing a good job making that point. I think the third -- or the fourth one that I think is really worth thinking about is the patients themselves, the new starts. Again, new starts take time, so when you think about the time of the optometrist, if you've got a little bit lower patient flow and the specs are maybe the thing that I want to start with first, they're much easier to fit so many frames and much faster. And the money's a little bit better. The frame process just because of its nature of it, to put a lens in an eye, to have somebody try it on, to work it through and put them in the chair and do that, it takes 30 minutes, maybe an hour, really to get a new patient through. And right now, there are some optometrists that are balancing, do I want to do that right now? Or should I wait on that and do, again, more specs or something else? So I think there's a slew of things going on that we're trying to figure out. Clearly, some of the heavy contact lens practices are right back in it, and we feel good about that, and that's going. And then there are others, and particularly, I would say, the more mixed folks. And to a certain degree, the chains that we'll have to think about how much emphasis will they put on this and how fast will they get that throughput back. And again, I don't know the answer to that. So I think our view is that it will be a little bit slower, and it could take until a little bit into next year before you really see markets back to where you're getting new starts on contact lenses at a level you need. The refill market, I think, comes back. People were -- will go back to wearing their lenses. Everybody on Zoom has got their glasses on from home, if you can see that. I've been doing a little informal poll on how many people -- what percentage of people are in their glasses when they're at home. And it changes, but depending as we go forward. But I think there is more glasses wearing right now and less contacts because people are at home. So I think that all changes. And you're going to see a dynamic move back to the regular market, but it's just going to take a little bit longer than I think the surgical business.

If you can kind of fast-forward into 2021, I think I get this question a lot from investors. Just how are you thinking about the broader macro risks to your main markets? It's one of those where, obviously, with IOLs, there is a copay, especially for the AT-IOL segment, contact lenses, obviously out of pocket. There are some insurance coverage but not everywhere. What are your expectations kind of assuming that unemployment is higher as we move into 2021? Are these markets that can grow? Or are these markets that come under pressure and volume versus price and mix, if you can be that specific?

Yes. I think, look, I mean, I think our -- this is kind of where I started, which is our fundamental belief is that these markets are going to be solid. And the pathology that drives them isn't going anywhere. In fact, it's getting worse. We have great trends of market because, unfortunately, people are getting older, and they're getting cataracts. They're getting more retina disease and diabetes drives retina disease. And you've got -- myopia is a worldwide epidemic at this point. Probably 50% of the world's population will be myopic by 2050. So it's -- I don't think we are concerned about the fundamentals of the market from a demand perspective. So volume on that side of it should be solid. And I do think when you take apart that and you say, well, what about contact lenses and unemployment and price sensitivity to that, I think our experience was that in the '09/2010 frame, we saw some decrease that is much more related, I think, to people not trading up into DAILIES because they're more expensive, but staying put in weekly lenses. So there's -- yes, there's some effect in here. It's relatively short-lived, and it does drive -- it does kind of follow kind of graphically -- it kind of follows the consumer confidence, but it's a much shallower look. It's not the same kind of effect. So I think what we believe is that there'll be a little bit of an effect in the near term on trade-ups to DAILIES, and DAILIES is really what's driving the contact lens market value. So I think that's possible. And I think that's part of why we think this will continue to persist for a little longer than maybe cataracts. On the other side, AT-IOLs -- our view is the headroom on patients' willingness to pay, which we think is much higher than the penetration rate. So the penetration rate right now globally about 9%, 14%-ish in the U.S. We think the headroom to willingness to pay is up to 40%. So -- and the seniors really aren't affected necessarily because they -- on the income side because they kind of -- they're in a place in their lives where they've made most of what they're going to make, and they're in a different situation. So we believe that, that is still a pretty productive use of their money to find a lens that really gets them spectacle independent. And that's really the promise, I think, that we're trying to get out there and improve on. So I feel pretty good about where we are with volume and price. I think there will be some price erosion that comes from the annual adjustments that governments make. But we're not -- that's not new news to us. We get that every year. So we'll work through that as we normally do.

That's very helpful. Maybe we can move away from COVID because I do want to talk about some of the other exciting things that kind of COVID overshadowed in the business. And I want to start with PanOptix. Really impressive performance in Q1. Give us maybe a little bit of a sense, as you think about your U.S. market share, your Japanese market share for PanOptix, where do you think that is today? How much more room do you think there is for you to increase that? And kind of what's been the feedback? What do you think is the thing that's really resonating with surgeons when you put PanOptix in front of them?

Yes. Well, the market shares have been kind of what we would -- the number isn't what we -- we weren't surprised by the number. We were surprised at the pace we got to the number. So I think what we probably felt really good about was the speed with which we got -- I think we reported something in the 60s for the first quarter. And I believe that, that is a very similar number in Japan. So I think what we can say at this point is that the knowledge of this product around the world -- I mean, Europe did us a big favor in that we kind of launched third or fourth in Europe, and then we became the #1 lens. But after having been out there for 2 or 3 years, pretty much everybody knows what PanOptix is. So I think the surgeons moved through the normal trial phase quite quickly. And after they tried it a couple, 2, 4, 10 times, they basically moved -- a lot of them moved right into it full speed. And I think that's been encouraging for us in both markets. The thing that I think everybody likes that is unique about this lens is that it has 3 particularly sharp focal points that are functionally in the right place. And so what you'll know about other lenses is, of course, that they have differing focal point distances. And what we are doing with trifocals, with PanOptix, in particular, is we've created a unique optic design that allows the patients to get right on top of reading distance, right on top of this intermediate distance, which is the kind of computer shelf, that kind of thing that we do a little bit further out from reading. And then distance, of course, is the primary objective. But those accuracy of distances have allowed a better, what I would loosely call, kind of functional vision that I think is really what's been surprising surgeons who haven't tried it yet. And so when you look at it relative to other products, it just gives you a lot more, I think, satisfaction from the patient about what their actual visual acuity looks like. And of course, it still does have some glare and halos, and we've been careful to say that it isn't eliminating any of that. But it seems to have a slightly better profile. And I don't know if that's because people are just happier with their vision. And so they kind of just kind of live with it. There's no particular reason why it would have any different of a profile there other than we just observe that patients get through it faster if they're happy with their vision. So I suspect that's what's going on.

And how are you thinking about the sustainability of that 60% market share as we do see some competitive AT-IOLs come in to the market in the next 12, 24 months? Do you think this is a number you can hold on to? Or as we see more products come, this erodes over time?

Yes, I mean, they'll obviously -- we'll probably go up further, and we'll probably come back down as new products get launched. I think that's probably the natural way of things. But I do think we've got a little bit of room in the U.S. in time. And I do think that Japan is kind of similar. These are complicated markets. Not everybody is prepared to launch at the scale that we can do it. And so we feel good about what we've got relative to our major competitors. And there will be new people that come in as they did in Europe. I think in the end, there are going to be lots of multifocals, but there aren't going to be many trifocals, and none that we're aware of that are going to give a better performance than this one. So we feel good about the long-term share stability on this. And I do think if you look at the history of the United States, in particular, or even Japan, even when products come in, once physicians have settled in on a product that they really like, it's very difficult to dislodge them unless you have a better product. And we don't see a better product coming right now, but we do believe that there are other products that will do well. So just to -- I recognize that's a little bit squishy, but I think the truth is, we'll have to see how this plays out.

I was going to say you have a better product coming now with Vivity.

Well, we have another product coming with Vivity. I don't know if it's better or just different. It's a great idea, and we're watching it carefully because this one really does, and it was designed to take on this very basic problem of diffractive rings, and light that goes stray on you is troubling for a lot of patients postop, but most of them settle into it. But probably 2%, 3% really are bothered by that and bothered to the extent that they're willing to take that lens out, do another surgery, put a new one in. And that really does keep some people from getting involved in this. So Vivity, I think, would be an interesting product. We're watching it carefully in Europe, where we started launching it before everything went -- we had just launched in Italy in February when Italy kind of became very hot with the COVID. So as we kind of go back at that, as it picks up again, we're going to watch very carefully for how well the near vision does and how balanced this offering is. And I say that because we get very good distance vision with this. This is -- the lens itself is very much -- it's an advanced technology lens, but it has the simplicity of a monofocal. And so it's got an easier landing zone, a little bit broader landing zone, allows the surgeon to have a little bit more room for error when they put it in. It gives patients a very crisp distance vision, very good intermediate. But the near vision -- again, not everybody is going to be spectacle independent. So you're giving up a little bit of spectacle independence potentially for non -- no real halo and glares. And so that tradeoff, we're going to have to figure out what that tradeoff's worth and how patients respond to it and how surgeons think about it. So we're learning that right now. And we're excited about what it could do. But it may be what we think is more of a -- if you're already a surgeon doing advanced technology lenses, there are a group of patients that you generally won't put these lenses in. And that's because if they have retinal disease or they have glaucoma or you need visualization at the back of the eye, there's a series of, let's call it, patients that have things where this lens, because you can see through it more clearly, would give us a better opportunity, I think, to bring more patients into those surgeons.

Okay. And it's -- I mean, it's a great segue to sort of one of the things I've been wondering about, which is, obviously, AT-IOLs have been around for a while, but penetration hasn't made a ton of progress. How much do you think these new technologies, things like Vivity, things like PanOptix, really can help you drive the penetration higher? Is there something else that you need to do?

Look, I think the expectation on market expansion should be modest. Having been in this business for a while, we've always -- every year, there's a new idea that's going to move the penetration because there's big money in penetration move. That's the real opportunity at the end. But I do believe that this is much more about the technologies than it is about the surgeons or the patients. I think the technologies are not yet delivering what is really required, which is distance vision perfect every time. And that's the first priority of the patient and the doc. And if I have to put spectacles on for distance vision -- and the best surgeons in the world only get that 9 out of 10 times. You have to have a LASIK ability to laser that patient to get them perfect or the proposition you basically gave them on an AT-IOL, which is you can be spectacle free following cataract surgery, you're not. So you're going to have to work that back. It's not really as much about the distance -- the near vision performance or the intermediate because we can do that. And I think there is something to be said about the glare and halos, but the technologies just haven't afforded people confidence that they're not going to have to take a lens out or they're not going to have to deal with a difficult patient experience. And monofocal lenses are a terrific outcome. And they're -- if I basically tell you the proposition is you come to me, I can get vision back beautiful. You'll see bright colors everything used to be, and I'm going to give your glasses back. You'll see just like you did before, but you'll feel like you were 25 because I took your cataract out, that's 80%, 90% of the battle. So you're really working at the, what can I get you for intermediate distance? How do I get you really functional vision, more functional than you would be without glasses? And that, I think, is the trick. Technologies like these two, I think, will get us a little ways there, but I don't think they're game changers. We are working on a lot of game-changing technology. And -- but it's just a long way out. We bought a company called PanOptix. Last year, that had a terrific base technology. It's going to take us a while to understand how to use that. And we're working on a lot of different ideas along with that. But I think it will be a technology play that's probably not in frame yet that really moves the penetration. What did I say? Well, I'm sorry. Karen's reminded me. I said -- yes, my miss. It was PowerVision instead of PanOptix. I said -- I get so used to say PanOptix.

Let's talk a little about contact lenses because you've had a new product launches -- product launch there as well, but we've heard a bit less about it, unfortunately timed, I think, all slightly poorly due to COVID. But maybe give us a sense what feedback [ you have ]? And kind of when I look at your growth rates so far, you do seem to be the slowest-growing contact lens company from among the big 4 fairly consistently. At what point in time should we expect to see some acceleration in that relative performance?

Yes. Well, I think, look, you've got it exactly right. We've been kind of growing historically at or below the market rate. I think the mix has helped us a little bit with DT1. But truthfully, we have a large legacy business in this with AIR OPTIX and DAILIES AquaComfort Plus, which are products that are terrific products, but were at their peak 5 or 10 years ago. So I think the opportunity for us has always been to rejuvenate the pipeline, get ourselves in a position where we have new product flow, and then let that new product flow grow. And the moment in time when we'll start to really grow faster the market is when the new products are bigger than the old products. And I know how simple that sounds, but that is the thing that I think investors need to think about, which is we have a large legacy business in Vision Care that we are -- that does not grow very fast. We've got contact lens that's in a declining -- contact lens care, which is in a declining market right now. Reusable lenses where we have a bunch of money is a flat to declining market, so let's call it flat. And the DACP, which is our old HEMA product in DAILIES, was a great product. But again, it's not in a category that's growing at anymore. So the categories that are growing are where we have DAILIES TOTAL1, DAILIES TOTAL1 MULTIFOCAL. If you think about the DAILIES, they're growing roughly 6%, but the DAILIES SiHy is growing 22%. The DAILIES HEMA -- the all others are not growing well at all. So we're -- when you go beyond that, you can think about taking DAILIES SiHy apart, and you look at multifocal and toric and sphere, and toric is growing even faster than that and multifocal equally high, high double-digit kind of really into the 30s and 40s. Now relatively small markets yet, but I would just say that those are fine cuts because we're entering products in all of those spaces. And so what we're doing right now is we're bringing PRECISION1 into the SiHy sphere area at a value point that we think the market needs and wants. We're bringing in a toric lens for DAILIES TOTAL1 and for PRECISION1 later this year, both of which are the places when you look at -- if you really dissect our share, we're losing share in toric, and that's really the main place we're losing share for DAILIES. And then we've been gaining share in multifocal, and we've done a nice job there. And again, we're going to continue to press on what we think is a long-term market opportunity in expanding the use of multifocal lenses. So I think we're positioned with the next 3 years of products, which really give us entries into all the fastest-growing segments and allows us to kind of move forward and build the business along with DAILIES TOTAL1 and SYSTANE and Pataday that give us kind of a much more significant opportunity to grow in this business versus -- or to outgrow the decline of our other business. You see what I mean? I mean it's really just that balance.

And how are you thinking about the torics? Because I know with PRECISION1, you've always been fairly cautious. You said, listen, it's going to take us some time to get some traction. It's a new product. It's all about new fits. We're going to build that momentum. But I would think with toric, you might see some sort of growth acceleration a little bit faster, especially for DT1. Is that how you're thinking about it as well?

Well, I think, directionally, you're not right -- or not wrong. I mean it's a -- I think it's a real opportunity for us in DT1 because people know that brand, and they know how strong the product offer is. And I think at the core of DT1 is a unique surface chemistry that has -- it's just much more comfortable than the alternatives that I think most people have. So if you -- it's at a price point, unfortunately, for maybe not a main -- a mass market appeal, but that's why we've created the PRECISION1 product. But clearly, there's a lot of loyalty to this brand, and we -- and it's a big brand. So yes, I think DT1 toric gets a lot of kind of play, I think, early on. Whether that's the bigger brand or not, I don't know. I mean I would say that the real interest we have right now is in this middle part of the market where I think the world is moving to SiHy, and that's probably 40% of the market. There's a -- I always say there's kind of 30% on the bottom and 30% on the top, and then there's a big middle, which is a lot of consumers who would like to be in a SiHy product are moving that direction. And I think most everybody sees that in the market right now. We're all kind of headed that way. P1 and P1 toric, I think, bring us opportunities to give somebody something that is, well, almost DT1 like but at a different price point. And I think that's kind of the basic proposition. And I think it's -- if we do that, I think there's a huge toric market in there that, ultimately, we can really benefit from.

And I think you alluded on the Q1 call that you were maybe rethinking a little bit the different time lines for the launch for P1 and DT1 toric, just given where we are with COVID. What should we be expecting as you think about the launch cadence [ that is going to happen ]?

Yes, I mean, I think we're going to get both products out late this year. But I think the -- where we launch them first was really -- I might have been a little clumsy as I described that because I think we were debating where we're going to launch each one of them. There was kind of a sense that we would kind of go everywhere. And what we may do is kind of take the volumes we have and split them up, so we may launch DT1 toric in one market and launch all the P1 volume we have in another market so that we can get velocity moving a little bit more quickly. That's not a decision we've made yet, but we're kind of working through those decisions as we think through really this disruption because I think we launched P1 right into the teeth of the COVID situation here in the U.S. We really thought that we were going to have a fully distributed product kind of by the end of Q1. Q2 blew up on us. We had -- we really didn't have any time to do anything, and there's no new starts. And so we're a little worried about coming back in too aggressive. We're going to come back in right away but coming in with a lot of products like DT1 toric, DT1, P1, P1 toric, all of that in the United States at one go when the optometrists are still trying to figure out what they're doing may not be our best strategy. So we're thinking through kind of what the priorities ought to be, how do we help optometrists focus on things that are what they want to focus on and what they want to do in their practices and that are simpler and easier for them. So you might see, for example, to your earlier point, maybe we spend more time on DT1 toric early on because they know the brand. They know the material. They don't -- they're not going to feel uncomfortable fitting it. It's not new to them. So there's things like that, that we could do in Europe, for example, which rather than introduce P1 that we might consider. So we're just thinking through that right now, and we'll make a decision as we're going to get closer to launch, which, again, will be late this year. So really, we're going to -- we'll have time to see how this -- how fast optometry recovers, and we'll have a good sense of what to do then. But everything on production, which has always been historically the challenge, is on schedule. So I think we feel good about -- we really haven't missed a beat really on the production. We've had most of the production groups running at full speed even through this period.

Okay. And I do have a couple financial questions. But maybe before I ask though just final from me on the pipeline. And I think the Alcon story has really become about innovation as I look at it. What else are you excited about that's in your pipeline over the next 12 to 36 months other than all the things I've asked you about?

Yes. Veronika, we kind of -- we're going to try and keep our innovation ideas fairly specific inside a 24-month window, and then we'll give you signs of broad strokes about what's going on outside of them. The next 24 months, we've got our contact lens business, our OTC business, and our AT-IOL business, all have new products in them. And we can -- we've kind of gone through most of them. We have a multidose nonpreserved product that we're going to bring out later this year in Europe for our tier lines. SYSTANE is still doing well. Pataday is off to a good start. You can see that the contact lens business has several products we just talked about, all of which will take time to build momentum because, again, the contact lens business is a much slower business to accelerate than some of these kind of one use product markets. PanOptix and Vivity are both, I think, going to give us sustained opportunity to both take significant share in this space but also potentially bring some new patients in. And I'd say, I believe that those -- and I think we're in the right markets with those products. So if you look at the segments that we're in and what we're targeting, those are the fastest-growing parts of the business that we're in. Longer term, I think what you get excited about is, we've got a new console that we're working on that is the next-generation phaco machine, next-generation vit-ret machine. We're excited about what that looks like. We'll be finishing stage -- next stage gate in the next year. So we're -- we think that, that is a real opportunity. We're very interested in the other kinds of things we can build in the lens platform. So what I mean by that is we have -- there's a big reusable market out there that is really kind of flat but is still $6 billion of folks getting fit, and it's still one of the largest markets out there. AIR OPTIX isn't super competitive at this moment in time. We can offer this same line. We can get to another lens that has a better proposition. So there are new technologies out there a ways that, I think both in the contact lens area where we can expand, in the IOL area where we can expand and in the surgical equipment space, which is kind of the core of our surgical business. When you really step through it, that's the stuff. And long term, look, I think we will find a lens that is tunable and adjustable that will reverse a significant amount of phenomenon that is the miss for distance. And that's really because it's a complicated thing to take these measurements and diagnostics, put them into a calculator, get the right lens power, pick that power, put it in perfectly every time. It's amazing what these guys do in surgery for eye care and get it as good as they do. I think we can do some things with other kinds of lenses long term that, really -- will really change that dynamic. And that's where big money comes, which is, I think, the -- changing the penetration rate of AT-IOL.

Well, with that, I am afraid we're out of time. So I'll have to save my financial questions for another session. But Tim, you're off the hook. How about...

Thank you so much.

But thank you guys so much for being here. Thank you for everyone for tuning in, and good luck with the rest of the conference.

Thanks, Veronika.

Thank you, Ver.