Alcon Inc. (ALC) Earnings Call Transcript & Summary

Good afternoon and good evening. I'm James Gordon, JPMorgan European Healthcare Analyst. And today at the JPMorgan Healthcare conference, it's my pleasure to introduce the Alcon session with Alcon's CEO, David Endicott. Today, we're going to have a 20-minute presentation from David, and then we're going to have 20 minutes for questions, and then we'll also be joined by 2 other members of the Alcon executive team: CFO, Tim Stonesifer; and President and Global Business & Innovation, Michael Onuscheck [Operator Instructions] And with that said, I'd like to welcome David to the conference. David, over to you.

Thanks, James. Appreciate it. Welcome, everybody. I'm pleased to be here to give you a little bit of background on Alcon. We're going to be referring to a presentation that's available online. Just starting off, Slide 3 on this. Just for those of you who may not be familiar with our story and who we are and what we do. Alcon is an eye-care company. We focus specifically on eye care. And importantly, we desire to kind of lead the world in innovation. We've been committed to this exercise really for the better part of 70-plus years. We have a pipeline recently that's been, to a large degree, refilled and reenergized. We have significant partnerships around the world and continue to focus on accelerating our innovation. We have more than 1,200 folks dedicated to just that proposition in our R&D organization. So that has historically allowed us to develop some industry firsts, certainly in the intraocular lens area, but also in phacoemulsification equipment, contact lenses, eye drops, et cetera. So we're active in all of those areas and continue to be. On Slide 4, one of the things I think most commonly described, I think we like to talk about is, is just the strength of the fundamentals underneath this business. And what we really represent consistently is that the aging population is an increasing consumption trends. So population over 60 is going to double by 2050. We know that more than 1 billion people, and with age comes significant eye needs. And so you pair that with increasing wealth from growing and emerging economies, and you see that we have some real opportunity to -- along the whole of the spectrum, advanced eye care needs of people that are either underserved or aging and increasing in need. The quality of the eye care going forward is improving a lot. And so when you look at the advancements made in cataracts and in presbyopia, myopia, and a series of other kind of eye disorders, glaucoma, retinal disease. These are advances that have significantly improved the quality of life. And importantly, governments feel that, that enables better economics and better, obviously, quality of life that's important to the citizenry. So it's a priority for health care around the world, and we continue to see that as a significant driver. Myopia also is a growing presence. Obviously, we see a great deal of that growing on in our -- in the Asian markets. But importantly, almost half the world by 2050 will be myopic, about 5 billion people. So we see no shortage or letting up of eye care needs in anytime soon. In 2020, obviously, there was a lot of progress made by our company against a very difficult backdrop. I would just say that when we set out to separate from Novartis, one of the key things was to get that separation done on time, on budget. And I think, to the largest extent, we've done that. So this last year could have been a relatively large hiccup for us. I think we were very pleased how the organization responded and was resilient in changing their methods of working and really thinking through how do we accomplish many of the things that would have been, I think, very challenging for us, had we known this was coming and tried to plan it. So I give the team a lot of credit for finishing the separation. We'll finish it probably the beginning of April. We'll exit most of our TSAs. We're out of about 90% of them now. And I think we're in a good place and in terms of beginning to stand up an independent Alcon and really transforming that into the company that we desire to be. So we're definitely down the road on that, the separation being completed. We're spending a lot of time on culture. And I think a lot of time talking about what it means to be an independent company and to own our results and to be accountable for those results. And importantly, to how do we speed up and simplify the work that we do. So in a lot of what we've talked about in the past, the transformation has featured. We believe that's both an economic advantage to us where we can move money from, what I loosely call the G&A supporting functions to the more operating functions, R&D and commercial by improving the speed and simplicity with which we work and to try and drive more accountability into the organization. So those are fitting very uniquely together to kind of form the backbone of what our transformation has been. Importantly, we finished a lot of work on our manufacturing implementation. So we have been in the process for the last several years of adding capacity to enable new launches in DAILIES, SiHy contact lenses, but also future platforms, including torics, multifocals and other modalities. So we've made a long process continue at pace through this particular difficult period, and I give a lot of credit to the manufacturing team who showed up for work everyday through the pandemic and has really delivered on what we had hoped to do, which is get PRECISION1 and PRECISION1 toric out early or late last year now. So importantly, as we go forward with that, we're thinking about what's next. And so we're working hard on expanding our portfolio with innovation that we think is relatively risk adjusted. So I would just say that our priorities have been to try and bring things to market where we either have fast-growing markets or where we have a very low share. And so our innovations have been directed that way, and we've been relatively successful. I think I'll show you in a little bit that we are directed at things like the SiHy contact lens market, which is the fastest-growing sector of the DAILIES, which is also the fastest-growing modality. When you look inside of that, you go again at toric SiHy contact lenses. Again, we're innovating in that space because, again, it's the fastest-growing portion of the SiHy. So again, very selectively targeting the pieces of business that can add to the growth in the most substantial way. The innovation is obviously designed around trying to advance patient care and things that doctors really genuinely are representing as needs. And I think you'll see that in some of the things we brought to market, and we'll continue to bring to market. And notwithstanding all the activity, I would just put a really good comment out there around the effort of the team during this pandemic was really substantial. But we primarily endeavor to keep everybody safe and to kind of make sure that we were being responsible in the communities. And I think I feel really good about 2020 as a consequence of those efforts. So all in, I think, a pretty successful year given the circumstances. Now I think as you think about going forward on Slide 7, balancing our near and long-term innovation has been a goal for us. I think in the very beginning when we spun out, what we were trying to do was take things that we had on the whiteboard and get them into the clinic because we had a lot of ideas that had just been unfunded in many ways. And we thought by bringing them to market, we would do well with that. So we -- PanOptix, think about Pataday, think about SYSTANE, think about our DAILIES advances in torics. All of those were ideas that were around the house, but needed to be funded. As we move forward and as we kind of begin to kind of accelerate our innovation cycle, we're rebalancing our portfolio into a better look at novel innovation where we're getting a little bit more money moving towards big ideas that kind of create that next-generation of growth for us, where we have multibillion-dollar categories, which we think we can expand or which we think we can build. And we'll talk a little bit more about that as we go forward. But in the portfolio area, you can see that we've brought AT-IOLs, novel SiHys. The torics and multifocals have all been there. Surgical instrumentation this year has been importantly advanced in a number of different ways, but our ACTIVE SENTRY hand piece, for example, has been a big part of how we kept our phaco platform moving positively forward. And importantly, going forward, we continue to look at new IOL platforms, platforms that could generally change the AT-IOL penetration rates. We're looking at next-generation equipment. We're looking at how do we integrate digitally our surgical suite, make sure that all of our equipment is talking to each other, and how do we improve the outcomes of surgeons as a consequence of that. And importantly, as you think about the contact lens business, the real opportunity out there is really specialty lenses. So if you think about where the gaps are, the multifocality of a contact lens is really not yet established to be a premium response. It's getting there, but there's still lots of opportunity for us to improve distance vision and near vision. So we think there are designs, optic designs and material advances that we can make in those specific areas. I made the comment earlier on Slide 8 that we were targeting in specific, either areas that were we had low share, in essence, think about toric, we really had 0 share in the SiHy toric area. So as we enter a DAILIES TOTAL1 toric and PRECISION1 toric, we move forward with really, mostly, upside here. That will really help our shares overall because our sphere share has done pretty well as we've entered these products. It's really then our toric share that's been the problem. And as we solve that problem, I think we look forward to gaining in aggregate, growing faster than the market. Similarly, when you look at the AT-IOL business, even though we've had some reasonably positive shares in some of our markets, say, PanOptix for TRIFOCALs, we see in the EDOF markets, a non-diffractive, a very unique kind of EDOF, Extended Depth of Focus lens, can do a lot for us in share. So we're excited about what that can do for share in Europe, but also potentially expanding modestly the use of the AT-IOLs in certain practices. The Pataday and precision -- sorry, the Pataday and our over-the-counter products, obviously, in some cases, we've got very good market growth. Obviously, Pataday, when you have all the Rx product move into the over-the-counter space in the United States, grows that market quite rapidly. Underneath that is a very good, solid market growth and probably in that 4% to 6% on a most annual basis. But we're getting a real big movement right now into the OTC market as those things come off the Rx registration and go to the retail environment. So we're excited about what that looks like. Areas where we've added some energy, where I think it's been interesting for us, but mostly because we have a kind of a low share has been the visualization area and our diagnostic space. So we entered an ARGOS biometer. That biometer is, I think, exciting because it's a little bit faster, little bit better for dense cataracts. And I think surgeons are finding that it's very easy to train the staff on this instrument. So we think we're getting good traction on that and see that as an opportunity where, again, we've had very low shares in the past, where we think we can have a real opportunity for growth there. Similarly, in visualization, whether it's 3D visualization, or our LuxOR Revalia microscope, we think there's opportunity in microscopes to add new revenue in spaces where we think we have a unique advance. And of course, with our Revalia, we have a very unique red reflex response for that microscope, which gives visualization that can't be observed in the same way with other microscopes. So we're excited about all of those products. And as I say, it's principally designed to get after either low share parts of this market where we have big opportunities to get new revenue or fast-growing parts of the market where we continue to see a need for growth. Double-clicking into a little bit of this. I'll just quickly roll through a couple of slides here on products. Slide 9, I think PanOptix has been an interesting story for us. I think we were pretty sure that we would do well with PanOptix. We've seen the response in international markets. But I think the story for us in the U.S. has been, I think, a little bit faster than expected response. So while I think we got to the same place, we probably got there a little bit faster last year than we expected, which is good news, I think, for patients, and obviously, the surgeons have been very responsive to that particular product. It's unique. In that it has an ability to get the focal points for distance correct and really in the perfect spot. So we're talking about 40 and 60 centimeters being the kind of near and intermediate distances that really are the functional distances, and it's very hard to do that with optical designs that other competitors have. Ours, which are patented, give us the ability to hit that 60 and 40 uniquely. And that's partly why this particularly TRIFOCAL has made such good progress. Similarly, we think we've entered a very new product and different product in Vivity. And we took about a year to really look at this thing carefully because what we've seen on the bench was exciting. But you always want to see it in practice. And so we spent the better part of last year in Europe and a little bit in the United States, seeing how Vivity played out. What we've seen, I think, importantly is that for some patients and let's just say 2 or 3 out of 10, they have a corneal surface that probably isn't perfect for an AT-IOL or a retinal disease, against which the surgeon would prefer not to use an AT-IOL so that they can continue to see and treat the retina efficiently or some other circumstance, maybe they're particularly -- they have a high need for driving at night and the halos bother them or the visual disturbances could bother them. Those patients are typically excluded from the AT-IOL market. And so as a consequence of that, what we tried to do is create something that had none of those kind of AT-IOL -- historically AT-IOL like side effects that are -- we made a much more monofocal like experience without the halos and glare and yet we've stretched the focal points so that we can get good intermediate distance and also pretty good near. So we're getting mostly -- most people are getting very good distance, very good intermediate. About half people are reading without glasses at the near point, which gives us, I think, a unique product, I think, very different than what's out there in the Extended Depth of Focus space right now. So we're excited about what that can do. For both share, I would say, in Europe and then I think, directionally, in terms of how we might advance the market into more patients. On Slide 11, we'll talk just a little bit about PRECISION1. Let me just suggest that we're very pleased with the early reads on PRECISION1 and PRECISION1 toric. We did make the call to launch simultaneous in Europe this month, the PRECISION1 and PRECISION1 toric. We think that, that helps the brand family. We think that, broadly speaking, the trajectory that we see in United States is helped by the toric, and we will continue to try and emphasize energy on that brand for the foreseeable future. And then we'll really think about when we enter new products beyond that. We have a lot to do right now, which is, I guess, a good problem. What we have in the United States, for example, is DAILIES TOTAL1 sphere, DAILIES TOTAL1 multifocal, PRECISION1 sphere, PRECISION1 toric, the Pataday product, the sustained multi-dose preservative-free product. And we kind of have an embarrassment, rich as this year. So we're going to have to be smart about how we play all this out, and we are doing that right now by making good choices about promotional energy. Right now, though, we think the response to PRECISION1 merits continued energy and effort. We're excited about it. Mentioning Pataday and SYSTANE, I'd just say that the performance last year was very solid. Our share growth was substantial. The movement in the market was pretty much what we'd expected. There was a significant growth. And I think we'll see that again this year. Our view has been that, as the market moves from Rx-to-OTC in the United States, that this market would grow from what was really little bit less than $100 million to something closer to $250 million, somewhere in that $200 million to $250 million range depending on what happens is where we think this settles out. And obviously, Pataday has been historically, olopatadine, the compound has historically been the most preferred agent in that category. So we're excited about the share opportunity that we have there in what will be a bigger over-the-counter market than what we had historically in the Rx generic market. Turning to Slide 13. I mentioned a little bit of our equipment that I'll continue to say, while we work on our next-generation platform, we have a series of interim opportunities, which we think are substantial and kind of give us movement in our equipment business. The first is our biometry entry, which is ARGOS; second is, of course, our NGENUITY 3D platform, which we think is the future of intraoperative visualization. And we also paired with that, have a new microscope version, Revalia, which is our LuxOR's line, which is also out last year. So we're excited about those. And obviously, the ACTIVE SENTRY, which moves the sensing of the intraocular pressure and the fluidics of the system much closer to the eye and gives a much safer outcome, prevents surge in a way that has not been able to be done before where the first one is to move it that close to the eye. So we're excited about what this means and how we can improve all of our existing equipment and add to it with new equipment. Coming around full circle on that, I would just say that our capital allocation priorities are probably intuitive. We've been in the process of investing in organic growth. We said from the start that what we wanted to do was reinvest in what we had internally, we thought we had a lot of good ideas. We think we still have many that need to come forward, and we're working on those. That will be our first priority. Right behind that is, let's get behind the marketing of those things. So we're going to maximize these new products. So we are going to spend some money getting behind these products and making sure that we get them to the maximum share that they can achieve. And we're going to continue to build capacity because we believe that particularly in the contact lens business, we have a real opportunity to continue to grow share in volumes over long haul. Second to that, of course, we're agnostic to where we find ideas. So we continue to look and we have the great benefit of seeing a lot in eye care as a specialist in the space. So we're very aware of most of what's going on in ophthalmology, medical device. So we will continue to look for bolt-on acquisitions and adjacencies, which are roughly in that, let's call it, $50 million to $300 million range. We're not opposed to doing something larger than that, but I think those would have to be fairly significant and important ideas that were priced right. The white spaces opportunities that we've talked about the past, everybody knows that in the ophthalmic category, glaucoma continues to be of interest to us. There are others that we think about in the myopia space, in the presbyopia space. And I think as we continue forward, we think there's opportunities in eye drops and pharma, which we'll continue to think about as we get to the right timings on it. Last but not least, of course is, what we would do with shareholders. And we intend this year to initiate a dividend. We had that plan last year. We delayed it just out of an abundance of caution as we saw the pandemic take shape. But we will institute and recommend to shareholders a 10% of core net income dividend, which will be our policy going forward. So I think in general, that, combined with a maintenance of an investment-grade credit rating is kind of the approach to the way in which we're going to deploy capital. And I think that's probably intuitive from most of what you've seen from us in the last couple of years. So just wrapping it up, I would say that, look, we think we've got underneath this market, really good fundamentals. So all the right mega trends on age, on developing markets, on technology and on value creation for economies and governments that want to pay for health care. Importantly, we've got leadership in key markets where we have durable growth prospects. We are importantly getting behind the high-growth markets and the low share opportunities. And so we're beginning to really dissect where it is that we can get the most profit and the most growth from and get our innovation targeted there. And obviously, over the same stretch of time, we're going to be keen to maintain a thesis, which is we believe we can grow revenue faster than we grow our expense line, and we think that generates leverage. And we know we've promised leverage over the long term, and we intend to get it. I think importantly, it comes, first and foremost, from revenue growth, which we seem to be getting at this point, and we're excited about continuation of. Last but not least, we're going to continue to push on R&D because, again, in this business, innovation is where the value gets created. And we will continue to extend energy on making sure we could then manufacture those products. So that's pretty much the approach to it. And I think -- again, I don't think it's materially changed from our going out strategy. I think it really is, in many ways, what we've said is a -- today, we see a kind of a derisked version of what we saw a couple of years ago, where a lot of the product flow that we thought would come seems to have arrived pretty much on time. A lot of what we had anticipated in terms of performance of those products has been derisked as we begin to see what happens with our AT-IOLs and our market shares in contact lenses. So we're excited about what that holds for this year. And with that, I'll just give it back to you.

Great. Thank you for the presentation. And we are going to kick off the Q&A part of the session. [Operator Instructions] We've got a few lined up already. So maybe I'll go straight into questions. First one is a -- like there's a common link for a few of them, so a few people are asking about myopia and your intentions there. So one person said, what is Alcon's interest, intentions in the myopia space?

Well, I think simply said, we have such a -- we've looked at this space for a long time, and we know that the vast majority of the energy right now is on ortho-k spectacles, Atropine or peripheral diffusion of light around contact lenses. We haven't yet seen markets develop to the size and penetration that interest us, although we have ideas in most of those spaces, if not active programs. What we intended to wait on is, these are expensive programs as we've deprioritized those to see if this market develops. I know there's a number of our competitors working on them. We hope that they succeed because it's a big need for the market, and this has the potential to be quite substantial. But those markets haven't yet developed. So I think our approach to this is going to be to be a fast follower. We're going to look for an opportunity to get in here with ideas that are fresh and different. But we're also going to look at alternatives to the kind of core set of propositions that are kind of currently in play and probably have been in play for the last I would say, 5 or 8 years.

Thank you. And there's another question related to myopia as well. So the question is, so what do you think about myopia contact lens because with J&J now going for Cooper, is there a concern that Cooper and J&J could capture customers from preteen and teen years before they get onto an Alcon contact lens offering? So effectively they're saying could we rather start to compare though.

Yes. No, for certain. I mean I think that's always been the theory, which is, if you can get people at a young age and prevent myopia from progressing, that's a positive. They all need correction. I think the question at a young age is, is contact lens the better alternative to spectacles? I think there are a number of spectacles approaches, which for some parents and some kids, let's just say, a 5- or 6-year-old where you may need to start initiating or even an 8-year old, getting contact lenses in their eye every morning and getting them out in the evening is a tricky business. And strapping a pair of glasses on their head is a little bit easier. So unless there's a demonstrable difference, I think what you're going to find is the economics and the convenience are different. There'll be a market for both. But I think the question really over the long-haul is going to be, are those making a material difference in the progression. So if you say, well, progression went from -- if I keep these patients in spectacles and or contact lenses for 10 years till they're 18 and the differences, I got 8 diopters of myopia instead of 10, how material is that? And how important is that -- does the worth the economics? And is that really changing the pathology in a material way. I think that's the question that I think most people are wondering about, and that is partly the reason I think that, combined with some just practical factors, why the market is slow developing right now.

Thank you. There's one question here, which is -- so I have one about your back to the growth drivers for '21, and I also have one about competitive launches, and the intensive launches. So the question is, what is our kind of strategy in surgical with increased competitive launches in '21 and the investors thinking about J&J's enhanced the synergy and Bausch & Lomb's launches and what could the impact be on your PanOptix, Vivity and monofocal products?

Well, we have expected competitive launches for some time. We obviously don't know precisely when they're going to come. We understand that it could come this year. What I can tell you is that the effects in Europe are likely to be the same effects that we see here. So I think what we've typically observed is, we've seen most of these products internationally before we see them in the United States. And so we get a pretty good read for what's going on and what they are. I think some of them, the monofocal lenses, I think we're interested in what they can do. I suspect that the right way to think about those lenses are they haven't really added a presbyopia correcting dimension to them. But what they have done perhaps is, has given them something new to talk about relative to a monofocal lens. And again, whether it's really better than a monofocal, we'll see over time. I think the European experience has been probably our guide to how we think about the threat there.

And then I guess this one is a question on competition which would be specifically to Carl Zeiss and their efforts in IOL, are you feeling impact on your products?

The Zeiss folks have done a great job, particularly in the Asia markets and in some parts of Europe and around the world. Again I think directionally, we continue to grow share around the world. So I would say our confidence in the products that we have is high. And I think directionally on TRIFOCALs, for example, PanOptix seems to be the preferred agent for most surgeons, principally, because the focal points give you, I think, a better result and it seems to have a little bit more of a comfort level with the surgeons as they get to use it more and more. So again, we see advances in that share kind of consistently and around the world. So we've got a good motion in the United States, good motion in Japan and again, to the China market, for example, we just launched in the summertime, and we're seeing a very good uptake there. So I suspect we'll see very similar results so...

Thank you. There's been a question on which you could say is the other side. And the question is about growth drivers. So the investor has said, there's a few potential growth drivers for '21. Which do you think could have the biggest impact, for instance, they mentioned it, Vivity launch in the U.S., PanOptix in China, PRECISION1 regaining momentum in the U.S. or PRECISION1 in Europe. What's the key growth driver, which is the most potential for '21 for you?

Well, look, I think you're going to see mostly in the lenses on both sides of our business. I mean I think the intraocular lens business is still growing nicely, and we anticipate it will continue this year. I think the contact lens business will also grow nicely for us. Again, we have a nice market there. We're spending most of our time in the DAILIES SiHy market. I think the DAILIES SiHy market late -- even last year, late last year, was growing, even though the whole of the market was declining. So I think the opportunity for us to continue to grow nicely with DAILIES is a big deal. And I think the same is true with our torics. So we got a lot going on in Vision Care, which I think could be positive for us. Actually, I would even push the OTC business because we didn't really get a full impact of the OTC year-on-year. So because we had to shutdown right on top of allergy season, I guess it was good for allergy sufferers, but if you're in the allergy relieving business, you wouldn't like to see people outdoors playing soccer. So -- because then they would have used a little bit more of our drops. But the good news is, I think we'll have 2 things going on. One is a full season, both fall and spring. And then secondly, we have a new extra strength version coming out this year. So a little bit of OTC, a good bit of contact lens and a good bit of intraocular lens, particularly U.S., China, Japan.

This is a question on glaucoma. And the question is, the glaucoma is transitioning from a medical disease to an interventional disease. So you've had a couple of choppy starts in this space, but it appears to be in area of strong growth. So is glaucoma a priority from a strategic and financial point of view?

Yes. I'll let Michael comment on this one a little bit. I think -- there, go ahead, Michael.

Obviously, when we look at the surgical business, our pillars are our cataract business and our vitreoretinal refractive business. The one open space that we still have is in glaucoma. We did have an attempt in this category with a shunt called CyPass that we withdrew for some safety concerns. But the reality is that this is a space where we believe they're highly effective therapies for patients, and it's an area that is a white space for us. So it is one that we chronically have on our radar, and we continue to look at.

A question here on product vitality. And so they are saying product vitality as in the percentage of sales from new products that are introduced in the last 1 to 3 years, what would you say your product vitality is? And what do you think it should be in 2 to 3 years?

Michael?

Yes. I don't think we would quote a specific number in terms of our vitality. But what I would tell you is, if you look at the number of innovative launches across the product portfolio, we've touched every single category in the last 2 years. So we've introduced a number of reusable instruments in our vitreoretinal category. We've launched new software in our refractive category. David spoke to the handpiece that we've innovated in, in our cataract category. And we've got 2 brand-new lenses, both PanOptix and Vivity, that we've introduced in surgical. On the Vision Care side, he's spoken to the PRECISION, PRECISION1, the multi-dose preservative-free sustain and Pataday. I mean there is not another company in this industry right now that has innovated this much and put it into the marketplace this quickly. So when you think about the gentrification of our portfolio, we really have come over-the-top of innovation. And instead of lagging in categories now, we're actually leading in categories, and the competition are going to have to catch up and play -- play up. Obviously, we've positioned ourselves well through our intellectual portfolio to protect those innovations. So we've got novel innovations that are now in the marketplace that are very well protected from a patent standpoint. And we're feeling pretty good about what we've given the commercial organizations to go take to marketplace. So you're seeing share gains in a lot of these categories. That is a demonstration of the way that the customers are receiving the technologies and the impact that it's having on their patients. So right now, we're feeling pretty good about where we've got our innovation portfolio positioned.

Maybe one more add on the vitality index. We have a vitality index. We do measure it internally. It is a metric we use internally. We just prefer not to disclose it.

There is a question here, which says, given all the plans, investments you're citing, are you still confident in the margin LRP targets that you previously gave a long way through?

Yes. We're going to give some more color at the Capital Markets Day coming up shortly. But I would say that the overarching financial thesis is still intact. If you think about to David's point, it really starts with the revenue growth. So that -- achieving that mid- single-digit revenue growth. So assuming that we can continue to invest in the business and innovate with products that resonate with customers, that will drive that revenue growth. Now the second piece of the equation is around the margin and getting that low to mid-20 margin profile. Again, our strategy is to kind of grow expenses at inflationary type levels. And if you do that with that mid- single-digit revenue growth, you should get margin expansion. Our view is that 2/3 of that comes from operating leverage, just as it falls through. And then 1/3 of it comes from gross margin expansion. And then if you get that revenue growth and you get that margin expansion, that should drop down to some very healthy free cash flow. So we think that the thesis is still intact. And as I said, we'll give you some more color around that at the Capital Markets Day.

And maybe just following the Capital Markets data, I believe that's being held in March or in Q1. Do we have a timing for that? And in terms of any other things you're going to talk about at the Capital Markets Day, what should we be looking out for?

Well, let me say, yes, we haven't put the data out yet, but we are working on it. We should have it out shortly. Our intention is to give 2 things: one is, look at where we are relative to our portfolio, in particular, in our development programs; give a little bit more color on some of the longer-term projects we're working on. I think to try and give people confidence, 2 things. One is, what is our 5-year plan from this point, having kind of lived through what I think at that point will be a pretty well understood COVID trajectory, where we're hoping that we can time this in a way that we know a lot more about that. I can say some definitive things. I suspect that's where we'll be. And then secondarily, we can give some more color on what is the basic proposition of some of our long term programs? Why are we doing what we're doing with R&D? We don't -- we're not going to often give color on this. We're going to kind of try and do it every couple of years. And so kind of in lieu of an R&D Day, think of it as a little bit more color on the big programs, a little bit more color on what's going on near-term and then really a 5-year outlook for financial guidance or let's just say, a financial plan.

We've got time for one more question. So maybe just a final question would be COVID-19. And we've been hearing a lot about, whether you call it second wave or the third wave, what are you seeing is it hitting your business in the same way that the previous first wave of COVID hit? Or are there some important differences?

No, I don't -- I suspect nobody really sees it the same way they saw the first wave. I mean the first wave of shutdown ORs for elective procedures for some markets, 6 weeks to 2 months, and that was very substantially different than what's happening right now, where there are some markets where the -- where elective procedures have been limited or shut down, but they aren't nearly as broad -- it's not nearly as broad as it was back then or as comprehensive. I also think that directionally, people are still visiting offices. I think in that stretch last year, people just really did shut down. Whereas, I think now we're still seeing foot traffic into the optometry office, into the optometric chain. And they've also figured out how to get products online or through other ways, means with the practices. So we see there's obviously an effect going on in the second wave. I think we'll be careful to kind of articulate that as we get into the next call.

But I would also add that the fundamentals of the business have never been stronger. We've continued to invest despite the COVID. We've continued to invest in our strategic initiatives, whether it's R&D, whether it's the Vision Care lines that we put in. We've kept all of our employees employed, so there will be no disruption. So our whole strategy has gentrified position ourselves and to put ourselves in a position of strength as we come out of this.

Great. With that, we're out of time. Thank you very much to everyone taken part, and enjoy the rest of the conference.

Thank you very much.