Alcon Inc. (ALC) Earnings Call Transcript & Summary

Thanks for joining us, and welcome to our 2023 Capital Markets Day. On behalf of everybody here at Alcon, I'd like to welcome you to our Fort Worth campus. We're also webcasting. So I want to say welcome and good morning to everybody who's listening in. My name is Dan Cravens, and I am the Vice President of Investor Relations here at Alcon. I've been here just over a year after about a 20-year spent in aviation. So I'm technically still the new guy. But when I look back and consider the reasons why I came here, the things that intrigued me the most about Alcon are going to be a lot of the things that we're going to talk about today. So it's things like market leadership, it's innovation, it's management execution, cash flow production, culture, all these things that come together create a company that's got a durable competitive advantage. And it's a real differentiator for a company like Alcon. So today is our first Capital Markets Day that we've done in-person since, I think, right before the spin. So it seems like a really long time. So it's great to have a real live in-person event so we can interact with each other. And it's also awesome from our standpoint, so we can share with you, and you can see firsthand all the great things that are more than 20,000 associates are doing or 25,000 associates are doing every day to help people see brilliantly. So we've got a terrific program for you this morning. But our hope is, by the end of the day, when you guys leave, you are as excited about the future of Alcon as we all are. So I'll quickly go through the agenda, which is up on the screen. David is going to walk us quickly through kind of how Alcon leads in eye care. He's going to talk about end markets and our strategy. We'll follow that up with a presentation by Tim, who is going to walk us through how Alcon creates value -- or value to profitable growth. We'll then have a Q&A session with both David and Tim and then a brief break. So after that, Jeannette is going to come on and walk us through how Alcon is a leader in ophthalmic surgery. We'll then hear some insights from both Max and Jonathan about their parts of the business on Contact Lenses and Ocular Health. And then after that, Ian is going to bring us home and he's going to give you a glimpse of the future of all the innovation that we're doing and that we have in the pipeline. So I think you'll be really interested in that. After that, we'll do a group Q&A with everybody on the panel. So each and every one of you will get an opportunity to ask your question. And then after the formal presentations, we have a lunch over in our Alcon Experience Center. And then for those that are interested and have time, we have some tours arranged of the Experience Center. And that's really cool. It's an opportunity for you guys to look and feel and see all the really interesting equipment we have out in display. So it's -- I highly recommend it. It's definitely worth your while. So a couple of housekeeping items before we get going. I know a couple of people have asked, we do have WiFi available. I'll leave this up here for a second. The login credentials are on the screen. They should be in your packet as well. There's [ laboratories ] just outside the auditorium here. For those that need power, we have power plugs down by your feet. They are a little bit hard to see, but they're down there. Just also take note of the exit signs in the event -- unlikely event that we need to use them. They're right behind you. And then lastly, as a courtesy to everybody else, please just silence your cell phones. For those online, we -- you will have an opportunity to ask questions. Just type your question into the web portal and one of us will ask it on your behalf. And then lastly, the full presentation has been posted on our website. So please feel free to download it, take a look at it, share it with your kids, your family, what you want, but it's there for you to [ prove this ]. So now the fun part, which is the moment you've all been waiting for is the safe harbor statement. No, I'm not going to read the entire text behind me. But just know that today's presentation does contain forward-looking statements, and there's numerous risks and uncertainties that could cause our actual results and projections to differ -- our actual results to differ materially from those projections. And we undertake no obligation to update those based on any future events. So please don't place any undue reliance on those projections. To see or review the risk factors that could cause our projections to vary, please refer to our public filings, our Form 20-F and our annual report. Those are available online. Lastly, our presentation does contain some numbers that are based on non-IFRS. We've provided some reconciliations to those numbers as well in the appendix of the presentation, and they're also online in the public filings. So before I hand it over, I do want to give a special shout out to everybody who helped put this day together, a lot of content. I think you'll find really interesting and a lot of work went into it. So thank you very much. We really appreciate your help in making today's success. So with that, I would like to introduce David Endicott, our CEO.

Thank you. Thank you, guys. Good morning. It's always fun to follow the disclosure part of this thing. It makes it a little easier to start, but welcome to Fort Worth. If you haven't been here before, this is our U.S. campus. It's really exciting to see everybody in person in 3D. It was fun to see everybody last night as well. I want to start just with a quick story. When I started the first time I was in the ophthalmic OR was 1986 with [ Leonard ]. I know I was a toddler. And when you see somebody come in for surgery, and this gentleman was probably 60-ish, [ but was probably 2,200 ] with a pretty brunescent cataract, did the surgery, and I saw the first day post op. And when you see somebody take a patch off their eye and see for the first time in, say, 15 years, and the impact that, that has on people, you never lose that. And it's a really remarkable thing. And the reason I bring it up is because at the core of what you're going to hear today is we have a great company. We have a great business and we have a great purpose, but it is the people that animate all that. And the people here are in particularly focused on this eye care thing. We focus very specifically, it's a core of the strategy. You're going to hear a lot about that today. And it's this kind of attachment that we have to this outcome that has made it so special for us at least. And I think that's where the -- if you want to know where the secret sauce is, it's in the people here, and it is in the people's expertise. We'll talk more about that. So what I'm going to try and do just in this first bit is give you kind of an overview of probably 4 ideas we want you to walk away with. So with the end in mind, let's just start with this. We're going to talk a little bit about. We've got great favorable markets. I mean fundamentals are very strong in this market. It's a steady grower. It's a market that we can depend on because of some really important macro dynamics. We'll talk about that. Our strategy is to win through superior specialty market and technology expertise. So we believe that, that is the core of how it is that we compete, that we have people who know more about the markets and know more about the application of technologies to the eye than other people do. And if we can do that and deploy capital on a risk basis more efficiently than other people can, that's how we win. So we have a strong track record as well. And I think one of the things we're going to talk a little bit about is, where do we start? For many of you, you were here when we were spinning out we had a story. We told you about what the long-term objectives are. I want to catch you up on where we are. But I think at this point, what we would say is, since spinning, we have a very strong track record of operational and financial execution. So we feel really good about what we've accomplished that far. And then if you take those 3 things, you put them together, I think what we've demonstrated so far as we can generate long-term shareholder value. We have a trend that we like. A trend that tends to continue. We'll talk a little bit about where it goes long term. But importantly, we think that's exactly how we get there, which is those 3 first elements, delivering in the end long-term value for shareholders. So let me start with the markets. And I think it is important to think about this, but the demand for eye care is very essential, right? I mean, by its very nature, 80% of what we learn is obtained through visual processing of information. So it's not surprising health authorities around the world understand and pay for the emotional and economic impact of sight loss, right? So it's underpinned with a real understanding of the value that it creates. In addition to that, you've got a lot of macros that really help. I mean eye care is correlated to age, and we have an aging world. That is going to continue for a while, right? We're going to see continued comorbidity, diabetes on the rise, retina disease comes right along with it. There's a series of other comorbidities that will continue to drive that as well. When you look at the increasing epidemic of myopia, nearly 50% of the world is likely to become myopic by 2050. That means contact lenses, glasses, LASIK. It means a lot of refractive problems over a long stretch of time. So a lifetime of refraction error that needs to be correct. So in addition to that, you see a lot of new technologies coming on. We're going to talk about a lot of those today. We'll talk about what we think can happen. Vivity, for example, has brought new patients and new surgeons into advanced technology lenses where you can get reading distance now. You can get intermediate distance, you can get all of that together. That's bringing more people into surgery, and it's changing what they use. And there's other access points here that we can see, which is you take a pharmaceutical product like a Pataday and you bring it over the counter and it's more accessible. It's more accessible both just because it's available and it's also inexpensive. So all of a sudden, it's a lot different. And there's a lot we can do for access around the world, both by technology and as we see prices come down and being more efficient in the system. So we like the eye care market, obviously. We think it's broadly resilient. We think it's got durable growth, and we think we're in a good place relative to that. Now the interesting thing is that even though there's a lot of need for eye care, there is also a largely unmet opportunity in here. So if you look at it, 90% of visual impairment is curable or preventable, which means, on top of that, you have this economic burden that's costly. So it's a little bit shocking that you could save $100 billion if you'd actually treat patients the way we think they ought to be treated. So in terms of real money, real market, there is a significant opportunity out there on an access basis, on a development basis of policy. And I think we're continuing to work diligently on trying to bring more care, more algorithms to treatment that drive opportunity for growth. And the other thing, obviously, is that if you do that, and as we always like to say, that has a really big impact on people's lives. And so at the very core of our purpose, we see that as a significant part of our journey. Now look, eye care, we see it this way. I mean the market now is probably $32 billion roughly the way we define it. It's made up of a variety of things. We'll talk about all these today. But directionally, we think that growth that we just talked about sits in the mid-single digits. And so I think to the extent that we show up and we don't lose share, we should grow in that kind of mid-single-digit range, right? And you're going to hear from us that we think we can grow share against that market. So we think we can grow a little bit faster than mid-single digits. But at the core of it, it's driven by in 2 different directions, surgical and vision care. So they're both 5% growers, but at the same time, there are elements in them that are slightly different. So let me start with implantables. Implantables is growing about 6%. We kind of think in that range mostly because you've got a 4% procedural growth underpinning this. And then you've got trade up and value coming from advanced technology lenses. So monofocal lenses, prices are flat to declining. Advanced technology lenses, kind of moving up substantially in terms of mix. So if you see penetration continue to move, we should see a market that grows around that kind of high-single digits or high mid-single digits. Similarly, consumables tends to run with procedural volume, right? So procedural volume, we said is kind of roughly around 4%. We think it will stay in that range globally. And I think directionally, we expect to see procedures continue that way consumables come along with it. So new technology helps price up. Generally speaking, older products, the prices are coming down. We neutralized that over some stretch of time, and we're in that kind of about procedural growth range on a value basis. And lastly, equipment in surgical, we've got a slightly more aggressive number than we've seen in the past. I think we've had 2 or 3 good years on equipment. I think what we're going to project is a little bit more of the high end of the mid-single digits for equipment. And I'll tell you why because we have a lot of equipment that you're going to see today that is coming out, and we are optimistic, I think, about the revitalization of a lot of ORs out there over some stretch of time. So we think that the market can continue to grow. We have new diagnostics. We have new phaco equipment. We have new retinal equipment. We have new refractive equipment. We've got a little bit of everything coming, and we think that, that is an exciting opportunity to try to drive market. And we're a big part of the market. So again, we expect to grow with the market here. But we also think the market will lift a little bit from where it's been in the past. All right. So then if we flip the Vision Care business, again, it's a little bit of the same story, right? And what we've got right now is a mix between Contact Lenses and Ocular Health. Contact Lens business, we think, is a mid-single-digit grower over the long haul. Again, we had some discussion about it last quarter, obviously. I think the interesting part to us has been, look, if you look back at the old '09 recession, we saw some slowing of growth, but not a decline, so we came down from 7% or 8% down to 3%, and then we went back to 7%. So remember that most of the growth is trade-up in price and mix to reusable -- from reusables to dailies. And so we expect that to continue unabated kind of indefinitely for a while. But if you are thinking about a mild recession, which we were in our, then I think you got to think about is there some this year's slowdown. So I want to get that out there because I know that's been a question a lot of you guys have asked us on what happened last quarter. I think there was a reaction to some of the comments we made. That and the core of it is how we think about it. So our view right now is this is a long-term mid-single-digit grower. We're comfortable with that. If we're wrong on the mild recession, then it will be on the high end of that if we're right, it will be on the lower end of that, and we've chosen the latter. On the ocular health business, a very interesting time right now. We've added some market here. If you looked at our last Capital Markets Day, you'd see this is up to $10 billion and growing 3%, maybe the rates -- the size is up, the rate is down a little. That's because we've added in glaucoma for pharmaceuticals. And so as we enter the pharmaceutical business with the Aerie acquisition and we look at Simbrinza participating in that as well. We now have kind of 3, 4 products in what is really a $3.5 billion market, somewhere in that range, and that's growing relatively slowly, about 2% -- 2% to 3%. So that brings that average down a little bit. This is still a collection of things. So remember, in the ocular health business, we've got a Contact Lens business -- lens care business, I'm sorry, that is kind of declining to flat and we'll probably stay that way. And then, of course, we've got the Eye Drops business, our OTC eye drops like sustained that's growing kind of in the high mid-single digits. So we're in a pretty good place in those markets. So mix all that together, we think that market looks 3%-ish over a stretch. All right. So that's where we are with the market. So when you add all that up and you say, how does it help us? And where does it look? We see a mid-single-digit grower kind of on a steady basis. And so our view is, of course, can you develop products or develop those markets make them grow faster, can you grow faster than the market directionally? And I think overall, we like the opportunity in these large and growing markets. So with that in mind, we're well positioned, right? So we are the market leaders in vision care and surgical. We -- question, we get often is how do you kind of grow from here? You've got a big market share in several categories. And there are lots of opportunities. And I think what you're going to hear today is where those opportunities sit for us, but we think we can grow faster than the market, and we think we can drive the market in many cases. So in implantables, we haven't seen the penetration that we think can exist out there. We have headroom, we'll talk about that is significant from where we are. And every 1 percentage of penetration gets us about $100 million. If you look at our consumables business and the procedural growth that we expect, we have new equipment coming that will necessitate new consumables to the extent that we trade up in that space. We think there's opportunity in consumables and in share around the world, particularly our international business. And I talked to you a little bit about equipment. You're going to hear a lot about equipment today from Jeannette and the team. But we still are winning more. We had our best year ever last year in equipment. So I know there's a lot of discussion about equipment and competitors, et cetera, got that. But truthfully, we sold more boxes last year than we've ever sold. So we're having a terrific year with Centurion, CONSTELLATION. These are late life cycle products that are still doing fantastic. There's nobody's equipment better than ours. At the end, what we're going to say here is, we believe we've got a lot -- we've got the most complete -- the most competitive portfolio. We'll talk a lot about vision care. We've got an exciting set of new products coming. We've got more to fill out. So we've got lots of growth in the reusable. We've almost always entered into 2 different ideas. One is, do we have an opportunity to get into a fast-growing market? So if you think about SiHy growth, for example, we've launched all the daily SiHy stuff because it's the fastest-growing segment. We got -- we had a 0 share in the fastest-growing segment of SiHy Toric, we can grow really fast there. We can also over-index there, getting our share back up to what it should be in sphere. Same thing is true with sustained preservative-free. If you look at the United States right now, it's a very low percentage of preservative-free product. It shouldn't be Europe's like 70%. Rest of the world is way up here. We think we can alter that mix and move preservative-free products in. So we haven't, particularly in Vision Care, real opportunities to find the fastest-growing subsegments and get our products in there and then also find the under-indexed places and drive business that way. So again, you'll see robust growth in '22 at the bottom, really nice revenue split across that. And again, opportunities with all of our existing portfolio to continue to grow. And then, of course, we're going to look at new products today a little bit. All right. So let me transition to how we win in a specialty space like eye care. And a lot of people say, at the core of it, what do you do? And I started with this a little bit a minute ago, which was we are specialists in eye care, and we have a long history in this space. We don't do anything else. That's a really important idea because what we're trying to do is create competitive advantage in our people. And it's sometimes easy to say that and sometimes you hear that from our people are the kind of core of the business. Well, the fact of the matter is, at this place, they actually know more than everybody else in this particular niche, right? We're -- it's that kind of hedgehog concept. We are really good at this thing. And so what we're trying to do is we believe we can generate deep expertise in eye care markets, and that is we can anticipate, understand, expect and be more right than wrong on whether a market is going to work, whether it's going to grow, whether it's going to develop, whether the product will succeed or not and make good judgments about how we deploy capital in that. If we do that better than competitors, I like our chances. Same thing is exactly true in technology. What we're basically doing is we're looking at technologies all over the world. We're inventing our own. And if we do that with a smarter, more efficient eye to risk and we can understand more often and be right more often than our competitors, I like our chances. So that's kind of the idea. And it really does come back around to do we have the best folks in the areas where we are. And if you add to that, then a discipline of capital management. And you say, look, we're going to put money in things that we're really convinced of which is why we are very disciplined about how we think about what we're doing in R&D portfolio and also what we're doing externally. Again, we think operationally and from a capital deployment perspective, we are very efficient. And that's, in essence, the strategy that we've got. Now it looks a little bit like this because the first thing I mentioned was technical, and we employ some of the world's leading experts in things like optical design and material science and surface chemistry. We employ hundreds of MDs, PhDs, ODs that are in ophthalmology or in this eye care space. And our management team collectively has over 200 years of experience in this space. So this is a very experienced management team with a lot of people here who do just this. And that's important because when you look at the expertise to make accurate assessments of technical risk on our projects, that's what we rely on, and it is our folks. The important part of this, too, is that at our core, we're an innovation company, so it's working out pretty well for us, right? If you look at how we've innovated new products, we've probably got 100-plus active products. And importantly, we've got a mix of kind of near-term stuff that is incrementally valuable, and then we've got a number of shots that may or may not work out, but we're taking a long-term view to how do we drive big ideas into eye care as well, and we'll share some of both of those with you today. We're going to continue to invest in R&D. It's a big part of our thesis, when we went out was get R&D going, and then we'll get product flow and then we'll get revenue. All of that piece is really moving nicely. But importantly as well, what we're spending time in energy developing is a real understanding of what the future looks like for data. We have got to do and are doing a terrific job of creating a value story for all of the new products we create. So we're combining the innovation we have with an ability to generate meaningful data that demonstrates the value of the products. And it is our customers who are demanding this. They are private equity backed now, and they are looking for efficiencies in ORs, and they are thinking about how many surgeries can I do in a day and how many disruptions do I have in that process? Or how often does the laser go down? And what is the workflow? And how do these products create value? And are the algorithms that are supported by the academic communities are they aligned to what it is you're trying to do? And so we have deep expertise working with the universities, the societies and creating new treatment algorithms and working on data that define the cost of care and data on the value of a product's visual outcomes. Those are really important ideas because the future of this is not just I got a great new product, the future is now, what's it worth and show me how -- why I should pay for it. And that system is here now, and we are going to have it, and it's going to continue to increase as the number of cataracts continue to grow, the number of refractive surgeries are going to grow and the number of surgeons is relatively flat around the world. So we're going to see a real demand for efficiency and economics. One of the things that we talk about too is commercial expertise. And one of the things we're very proud of is our ability to partner closely with customers. We spend a lot of time with the universities, doctors, nurses, staff, understanding their needs and making sure that when we put products out there, we are convinced that they're going to work and we're convinced that they're meeting those needs. And we think our understanding of that enables us to make a more accurate choice as to when and how and if markets will develop. And so we think about that for certain portfolios, and we try and do that. And if we do that really well and then we do it with the global scale and reach that we have, we're tough to be. So I think the idea here is, of course, that we wrap around our global footprint a commercial expertise that says, here's how, when and if we'll launch a product, and we feed that back through a process with our R&D teams that get us the products that we think are the most efficient. That's obviously a big chunk of how we win. Now I want to take a minute to comment just a little bit on how we've done since spin. So those of you are with us, you'll remember that our thesis going out was pretty straightforward. What we said was we're going to spend a bunch of money right now because coming back into getting products going, we're going to spend it in R&D., we're going to look and find products externally if we can. But what we're going to do is we're going to get R&D productivity in both Surgical and Vision Care going. We're going to find our way to revenue growth. The revenue growth we'll create will be faster than our cost growth. The cost growth, that leverage will drive core operating income change, which will generate cash. That was pretty straightforward, and it's exactly what's going on here. So let me start with the R&D productivity in Surgical and say, look, we've launched PanOptix, Vivity with great success, better than we expected. I think we thought -- and particularly, Vivity has been a nice surprise. PanOptix, we had a pretty good feel for. Vivity, I think, has -- there were some real true believers in the room when we launched it. And I think they've turned out to be exactly right. We've got ARGOS now winning often. When it's head-to-head, it wins almost more than half the time. I think we're excited about LEGION. We're excited about the CLAREON material that's out there now that's giving life to a new edge design, a new material that's more clear than anybody else's. We've got exciting stuff kind of continuing to come through the pipeline on this, and we're investing in next-generation Diagnostic, next-generation Phaco-Vit, next-generation IOLs, all stuff that will come in the frame, some will come outside the frame. But importantly, we're putting the right resources behind new ideas and a mix of near term and long term. Very similar story in Vision Care and Contact Lenses, we've been able to innovate manufacturing technology that can produce important new products on the same lines. And this is the kind of big magic that we've kind of pushed forward with here, which is we can create and use different materials now, different chemistries -- different surface chemistries, different modalities can be created, different geometries can be created, all on the same lines, and that's really important because the capital intensity of the Vision Care business is very high. And so if you have one line and it can only make one product, and you have to be, hey, you have to be right on the -- how much you're going to make part and you've got to buy that 4 years in advance to get it done right, or you're in a lot of trouble. You're either going to under capacity, you're going to be overcapacity. And it doesn't have any utility if you're wrong about the product and the product just doesn't do well. So this is allowing us now to create a lot of different products and do it very quickly and do it without necessarily having to invest risk capital at a level that we would be uncomfortable. So we're excited about what's going on here. We've done far better in the dailies area than we expected when we spun out. But you can see that we've put out a lot of products, right? PRECISION1, PRECISION1 Toric, the TOTAL30, the TOTAL30 Toric. There's a bunch of products coming in astigmatism. For TOTAL30, TOTAL1 has been the astigmatism product that Toric is already out. So there's a lot that's going on here, and we're very excited about the contact lens business. There's also real excitement, I think, around our Eye Drops business. And our Eye Drops business is a profitable business for us. We make -- I think Jonathan will tell you a little bit later. We make nearly 700 million units of pharmaceutical eye drops across the street. We make them for that other end company that we used to work with. And it's still a really capable effort of a lot of our guys here. And I think it's exciting to make those drops. But the most important thing is that we think we can reenter in the eye drop space and do well. So we've got a great -- Systane is a terrific product. A lot of the rest of our over-the-counter eye drops are really -- the allergy drops with Pataday are terrific. But we've got other ideas around this and both internal and external, and we have all the capability to make and bring those to market. So we're excited about what that can do for us as an opportunity driver over the long haul. All right. So we've been productive in that area, but how do you know? Well, here's the new product flow. I mean these new products have been driving our sales growth. It isn't the base business. The base business is flat. New products have grown 13% compounded over the last 4 years since '18. And when you add that together, that's how you get our growth rate. And I'll talk to the growth rate just as an example, all in, in just 1 second, but I just want to make sure you understand that this is just the new products we produced since launch. So these are -- this is the thesis we went out with. We would get new products, we would drive revenue growth and then that would then with the help of cost, give us leverage. So that's where we are. Now look, let's take the other part of that. The other part of that thesis was let's get control of the cost. Let's think about the cost envelope. And our transformation now is coming into its last year. We finished the transformation program this year at the end of the year. And recall that it was really about optimizing our business. So it's a combination of, yes, we needed to get a smaller percentage of cost to sales in the organization for sure. But it was really also about we need to shift costs out of areas like G&A and increase investments in R&D and commercialization of new products. And that's exactly what we did. So while the envelope had shrunk, we're down about 250 basis points in our core costs. What's happened really is it's a much more efficient cost structure because we've got now costs out of areas that are a little bit more back office, and we've got them in areas that are a lot more forward-facing, right, R&D, commercial. And that's really what we're trying to do. And that is the richness of this exercise. And we've done a really good job of getting money back in R&D, putting it into new product launches, and you can see kind of directionally where we're headed. We'll talk more about that. Tim will talk more about that in particular as we go forward in the next 5 years. So look, when we spun out, we said we would get a mid-single-digit growth number. With COVID, with inflation, with supply chain disruption, we got 5.5%, that's the actual number, right? You put FX on that, we grew almost 8%. So I think you can put a check by that one. We got the product flow, we got the revenue. We moved ourselves down the path of getting good growth in this business. The markets were roughly what we said they'd be. Our performance was roughly what we said it would be, maybe a little bit better. If you look at core operating margin, what we said was we get ourselves in -- by 2023, we said we'd get ourselves into the low to mid-20s. Well, here's where we are last year. We finished last year at 20% on an FX-adjusted basis. And if you look at our midpoint of our guidance this year, we're at 22% on an adjusted basis. So we're right where we said we'd be right, despite COVID, despite inflation, despite supply chain and the rest of it. So -- and when we look at the track record of what we've actually done, we've delivered as we said we would through this stretch of time, which I think has probably been one of more interesting stretch at the time, it's only a generous way I can say it. It's been a very crazy series of years. But this company and the people in this company, in particular and the team, I'm very proud of because this has not been an easy exercise for anybody. But at the same time, if you think about what we've got accomplished and the context in which we've done it, I think it's a remarkable outcome. So let me bring that together just a little bit and talk about long-term shareholder value. I think this is a really important idea. But our trend is pretty much exactly as we had hoped it would be, and we see it continuing. We see the revenue growth to continue, and we think we could get to $12 billion by about 2027. So as you think of the out years, we're talking about how do we get from here to '27. We think it's around $12 billion in revenue growth. We think our core operating margin, we're going to grow sales ahead of the market. We know that it gets to $12 billion. So if we grow costs a little bit slower than that, we think we can generate operating leverage, which gets us into the mid-20s that same time frame. And of course, that generates a good deal of cash, so more than $2 billion of cash. So I think for those of you who've been following us for a while, this is not -- this shouldn't surprise anybody because it's pretty much what we've been saying we were going to be doing by '25, just push it out a couple of years and you get a little bit more, right? So we're just on a nice trend that's working very well for us. And I think the track record of where we've gotten to so far should give you some confidence that these are achievable ideas, okay? So that said, that's not the only thing we worry about. I mean this is -- the shareholder value thing for us is an evolving idea. And importantly, we think a lot about corporate citizenship. I want to add to the core financial idea something that we're all kind of passionate about, which is access. And when we look at this, we've always said, look, our view of corporate responsibility is where our business and our citizenship can kind of intersect really valuable. And we know that we are uniquely positioned, for example, to drive access in eye care. And so we have a number of really cool programs that are about cataract access and underserved communities. We've got a really important program around kids and getting glasses and so they can read early on. We've got a number of programs in the brilliant innovation area, which is really around the diverse perspective on how we generate real innovation and cutting-edge ideas, trying to make sure that we represent the populations that we serve correctly. And directionally, as well on the planet, we've got a number of goals. Our carbon footprint is important, and we've got 2 or 3 important goals in that -- or a carbon-neutral goal and also a waste and water goal. We've got about 75 pages in your corporate responsibility report that's online that gives you all of that detail to the extent that you're interested or your organizations are interested in it. It's a very well written and very well done, but I think it will tell you how committed we are to doing the right things as we kind of pursue a financial objective. All right. So that said, I want to wrap this up and kind of bring it around to where I started on this one. So look, I said we have a really great business, and we have a really great purpose. But it is animated by the people and the expertise of those people. And to try and give you some sense of why it is -- I just started out with my story about [ Lenoard ] and it was a cool thing when you're 24 or wherever I was at the time to see that kind of stuff is moving. But if you haven't seen this, I want you to watch this video because it's kind of a cooling way of experiencing having not lived through it. [Presentation]

So that gives you a real sense, I think, of how we think about it. And it's cool, right? I mean, you can't -- it's hard to beat that kind of stuff. You get up in the morning, you go to work and you think, what am I doing today? That's a lot of fun. So that's what animates us. And I hope that, as we go through a lot of different stuff today, we'll come back to this, but it's a cool thing. And so I want to transition us now kind of to the financial piece of this. And I think to do that, I'm going to invite Tim Stonesifer, our CFO, to take you through what is a really exciting financial plan. Tim?

Thank you. Thank you very much. So my name is Tim Stonesifer. I'm the CFO here. First of all, I feel like I need to apologize for this morning's music playlist. I think we got that out of my mother's 50th birthday party. So we'll work on that for the next time. But anyway, seriously, I'd like to thank everybody for making the trip. We've had people come in from -- the Hague, from Paris, from Frankfurt, from New York. So it was great to catch up with everybody last night and looking forward to a good day. So David started out with a long-term strategy. And what I'm going to try to do over the next 20 minutes or so is show you how that translates to the financials. And I'll share with you how we think we drive shareholder value, some of the accomplishments we've had to date that position us for future success. And then lastly, we'll talk a little bit about how we're going to drive revenue growth, expand margins, and then that's going to generate a lot of free cash flow that will fuel our future innovation and drive long-term shareholder value. So here's our framework, and it's all about the product. Obviously, David alluded to it earlier, we have spent a lot of time and money on product. And our commitment to innovation has really created a strong product portfolio and technology expertise. So that's sort of the premise of it. And then you look at the markets we play in. We play in resilient markets that are growing, and they're growing because they're underpinned by favorable macro trends. So think about aging population, increasing myopia, emerging -- growing emerging markets. Then because of that revenue growth, we plan on growing our revenue, as we said, faster than our costs. That's going to expand margins. And those improved operating results will create significant free cash flow, which will allow us to leverage the balance sheet and gives us a lot of flexibility. So let's talk a little bit about what we've done today. Again, David alluded to this earlier, but the top half of the page is revenue. So if you look at revenue in 2019, we had $7.4 billion. Last year, we delivered $8.7 billion, which is about a 7.5% CAGR on a constant currency basis. So you're seeing all that innovation flow through on the revenue line. The bottom half of the page is profitability, both operating income and margin rate. So we've expanded our operating margin rate by about 100 basis points on a reported basis, but over 350 basis points on a constant currency basis. So again, that margin expansion is coming through as we continue to be disciplined about managing our cost base. So I think it's always important to sort of check in on what we said before. So here's a comparison of what we talked about at the 2021 Capital Markets Day and what we're going to show you here today. So left-hand side of the page is revenue. So Obviously, on our last earnings call, we guided 2023. So if you look at the revenue guide that we gave and take the midpoint, it's roughly $9.3 billion. Now if you were to translate that at foreign exchange rates as of the 2021 Capital Markets Day, that would equate to roughly $10 billion of revenue in 2023. Now what we talked about back then is that we would get to $10 billion of revenue in 2025. So again, just another proof point, if you will, of that innovation is flowing through the market and flowing through the P&L. Now on the operating margin, we get a lot of questions on operating margin. If you look at what we guided on the call, for 2023, if you take the midpoint, we said we'd be at roughly 20%. Again, if you translate that at 2021 rates, that would be 22%. What we talked about getting to, we said we'd approach the mid-20s in 2025. So well on our way there, despite all the market volatility, despite the inflation and all the other pressures that we saw. So I think what's another important thing that we're proud of is we were able to deliver these results, the team was despite the fact that at the beginning of the plan, we were still going through a separation, which takes a lot of time and effort. We persevered COVID, like everybody else in this room and all of our competitors. We fought off inflation, we faced foreign exchange. So the team was really able to say -- I think it's really an attribute to how the team was able to just kind of focus on what we control, not worry about the macro trends because we didn't -- we can't control them and deliver what we said we're going to deliver. So before we get into the numbers, I'll just share with you the assumptions that we have laid out in the plan. So from a market perspective, we would expect markets to grow at historical rates, so call it 5%, a little bit different depending on what segment of the market you're looking at. We -- given the innovation and the product portfolio, we expect to grow faster than the market. So again, very consistent with what we've talked about in the past. From an R&D perspective, we're going to invest as a percent of sales, roughly 7% to 9%. That's what we've been operating in over the last few years. It seems to work well. That may be a little bit lumpy depending on what the product pipeline looks like and how the projects are lining up, but think about 7% to 9% on average. From a tax rate, we expect our core effective tax rate to be about 20%. One thing to note here is we do assume that the minimum global tax rate of 15%, we assume that's going to be passed, and that will be implemented in 2024. So I would just keep an eye on that because that's really what's bringing up our effective tax rate a little bit. Exchange rates are as of today. So no current fluctuation in exchange rates. And then from a CapEx perspective, we would expect to get CapEx as a percent of revenue back down to sort of that mid-single-digit range. So those are the assumptions that are in the plan. And similar to 2021, we do not have any numbers -- we don't have any numbers in here for new M&A. So that would be all adjusted for if we were to go out and do something there. So that leads you to this. David talked about it. We're talking about roughly $12 billion of revenue in 2027. So nice revenue growth there, again, faster than the market. From a core operating margin, we expect to be in the mid-20s by 2027. So think about 24%, 26%, somewhere in that range. And then if you grow your revenues like that and you expand your margins, that obviously drops through a lot of free cash flow, and we expect to be at about $2.2 billion in 2027. So let's go into some of the details. So here's the growth. I'm not going to go into a lot of detail because Jeannette, Jonathan and Max are going to share with you the great product lineup that we have and what we're doing. But at the highest level, there are really 4 key drivers for us. The first one in contact lenses, SiHy lenses will be a key growth driver for us. So if you look at PRECISION1, that product continues to do very, very well. We continue to gain share. And the nice thing about this is it's a product and the fastest-growing segment of the market. So we're going to benefit not only from the share gains but the market growth. We also expect in contact lenses to get some share gains in T30 and some of the other Toric lenses as we're under-indexed in some of the markets there. From an equipment perspective, we've got the next-gen Phaco and Vit-Ret machines coming out. We're very excited about that. That will drive some incremental revenue growth, as you guys all know. The nice thing about that is that also pulls through some nice consumables growth. So we'll see that flow through the P&L. From an AT-IOL perspective, we're really going to do 2 things. In the international markets, we're going to grow share. We feel like we have a share opportunity in international. And then in the U.S., where we already have pretty high shares, we're going to expand penetration. So it's sort of a two-pronged approach, if you will, based off a geography. And then lastly, eye drop because it is going to be a growth driver as we expect to go that segment of the business faster than the market. So those are the key drivers from a growth perspective. So operating margins. This story has been relatively consistent since the spin. We're going to grow sales faster than cost, that's going to drive operating leverage -- that's going to drive margin expansion. About 80% of that expansion is going to come from operating leverage and 20% is going to come from gross margin expansion. So starting with gross margin, we do expect to realize manufacturing efficiencies and as we optimize our DSM flex lines that we've been talking about and the contact lens business and then just gaining overall productivity in our manufacturing footprint. And then from an operating leverage perspective, we've really done 2 significant things since the spin. The first one is we have created what I would consider a world-class shared service capability. And then secondly, we have invested in world-class systems. If you think about SAP, Workday, Veeva. So as I sit here today and I reflect on 2019, we had a very fragmented operating model, if you look at the functions. So because it was fragmented, we weren't able to kind of get the synergies and the efficiencies of scale. And then the second challenge we had is we were fragmented in a lot of high-cost countries. So if I look at where we are today, we have over 1,500 associates in shared services. So think about places like Bangalore, Warsaw, Mexico City, Kuala Lumpur. And those folks are working all day, every day, looking at end-to-end processes and driving efficiencies. Think about finance, HR, IT, legal investment quality work being done over there. We've actually moved some R&D work over there. So continuing to build upon those capabilities will drive further efficiencies. And then from a systems perspective, it's kind of a good news, bad news thing. We spend a lot of money on these world-class systems. We now have them. They have been implemented. So that's the good news. But to be fair, we're still -- they're relatively new. So we're still kind of working through it. We're trying to figure out how to optimize and how do we leverage them. And as we get more familiar with those systems and as we work more and more with them, that should drive some further efficiency. So overall, that's really what's driving that operating margin expansion, and that's why we feel comfortable and expect to be at mid-20s by 2027. So let's double-click now down on the franchises. So we'd expect to get margin expansion in both franchises, which you would expect, right, if the overall company is going to do that. From a Surgical perspective, I'd say a couple of things. I'd say, first of all, the ramp-up of the AT-IOL business, primarily PanOptix and Vivity, that ramped up faster than we expected. Therefore, we had more margin expansion than we expected. We expect that business to continue to grow, but it's going to be at a more normalized level. And then secondly, on the equipment side of the house, we talked about the new products that we're going to be launching. That will be sort of towards the back half of the plan. And given the margin profile, equipment margins, a little bit lower than consumables and implantables. So that causes a little bit pressure on the back half. But nonetheless, we're going to see margin expansion on the Surgical business. In Vision Care, it's going to be all about operating leverage. But I'll talk about a couple of things. I mean, first of all, the mix continues to change. So if you look at Contact Lenses, consumers are moving from reusable to dailies. We expect that trend to continue, okay? As that trend continues because of the pricing of dailies versus reusables, that causes some margin rate pressure. But what we really focus on is it drives incremental margin dollars. So from a business perspective, EPS perspective, that's a very, very good thing. Secondly, the other dynamic in the Vision Care margins is the Aerie acquisition. So we -- that does create some near-term pressure in the segment. But as we integrate that business, as we leverage those synergies and drive those synergies that we have in the deal model, we'd expect that to improve over the course of the plan, and then we talked about the DSM Flex line. So again, both franchises will be expanding margins throughout the course of the plan. Okay. A lot of questions on this free cash flow. So buckle up because I'm going to walk you through this in a little bit of detail. So I think the easiest way to describe this is let's start with 2022. Nobody can debate that number. That's an actual number, $600 million -- roughly $600 million. Now there are 4, what I'll call, notable items in that 2022 number. So the first one has to do with inflation -- with inventory. Because of the inflation, you obviously have higher inventory balances because we were paying more for raw materials. And the other thing that we chose to do is we increased our safety stock levels because of all the supply chain challenges that we had, we wanted to make sure we had enough inventory, so we wouldn't backorder any customers. So that sort of gave you what I'll call, inflated and inventory number. So that's the first item. The second item is transformation. So we had transformation costs in 2022. I don't expect to have those in 2027 because we will complete the transformation program this year. The third item is around the Aerie acquisition. So in 2022, we had acquisition and integration costs that would not repeat in 2027. And then lastly, we had a higher employee short-term incentive payment in 2022. That was related to our 2021 performance, which was a very good year for us. I'd expect to have a more normalized payment in 2027. So if you take those 4 items, they're real, they impacted cash, but they impacted the 2022 cash number, they would not impact 2027. So you kind of what I would call a normalized run rate number, I'd start with roughly $1 billion, okay? So that's how you get there. Now how do you drive from $1 billion to $2.2 billion? What you have to believe are basically 2 things. The first one is that we get to that $12 billion revenue number because if I go from $8.7 billion of revenue in '22 to $12 billion in '27, I apply that -- I apply 18% margin rate, which was my 2022 margin rate, that gives me roughly $600 million of volume benefit. So you have to believe that revenue growth. And then likewise, if I take those margins from 18% in 2022 to mid-20s in 2027, pick 25 as a midpoint, that's $800 million of free cash flow. So we have roughly $1.4 billion of incremental free cash flow tied up with volume and rate expansion. The other column is a little bit of CapEx, a little bit of net working capital. I wouldn't expect a lot of movement there because structurally, our balance sheet is going to be very similar. And then obviously, as you make more money, you pay more taxes. So our tax -- we have more tax expenses in 2027. So that's really how you get from the $600 million to what we would expect to be $2.2 billion. So again, the key thesis there, you got to believe in the revenue, and you got to believe in the margin expansion, that all drops down. Okay. Let's talk about capital allocation. So again, this is our capital allocation philosophy, strategy, if you will. It's very consistent with what we've talked about in the past. It's 3 pillars to it. The first one is organic investment. This will be our first priority. When we do this right and we do it well, it's good for doctors, it's good for patients, it's good for shareholders. Think about PANOPTIX, VIVITY, P1, T30, all the stuff that you're going to hear a little bit later, that will be the first priority. Now at the same time, we realize we can't develop everything. So we will look at M&A. We will do BD&L. Now we're going to continue to be disciplined about it because, again, the plan that I just shared with you, that doesn't include M&A. So we're not forced to do anything to get to those numbers, and we feel like those numbers are very attractive, but we'll take a look at it. And what has worked well for us in the past are deals in the -- the $100 million to $500 million range, we could do more than that if we wanted to. If you look at the Aerie, that was roughly $900 million. But typically, that's the range that we would look at. And then lastly, is returning cash to shareholders. So we have a current dividend policy. We've done it for the last couple of years. We pay a dividend that's roughly 10% of our prior year core net income. We review that every year. We will continue to do that and incorporate that in our strategic plan. So those are the 3 pillars. We look at all 3. We evaluate them. We bounced them up one against the other, all with the intent of maintaining our investment grade credit rating because that is very important to us as well. So let me wrap it up where I started. We have a strong product portfolio, and we're going to continue to invest in new innovation. We play in resilient markets that are growing, and again, they're growing because they're underpinned by very favorable macro trends. We have a very good plan, and we expect to drive revenue faster than the market, faster than costs. We're going to continue to be disciplined around that cost base. And when you do that, that drives significant operating leverage. And then lastly, if we grow sales, we expand margins, that's going to generate a significant amount of free cash flow and gives us a lot of opportunity and flexibility from a capital allocation perspective. So with that, I think we're going to pull up some chairs and jump right into some Q&A, and we'll answer any questions that you may have.

All right. While they're doing that, why don't we start -- I think we've got folks with microphones, too, so you can -- maybe the folks online can hear you, so let's go right away.

Just as a reminder to everybody, this is more about long term, so we're not going to be answering any questions about first quarter. So just please keep your questions limited to that. Thanks.

I think that was last night.

[indiscernible] Yes.

Chris Pasquale [indiscernible] takes away all my questions, so I'm not sure.

So Tim, a couple of follow-ups on the margin outlook. 80% of the improvement coming from OpEx that implies, by our math, maybe 100 basis points of SG&A leverage per year. So first, is that right? And then that seems like a relatively aggressive target. You got to grow SG&A significantly below sales. So just the confidence around that metric.

Yes. We feel pretty good about it. Again, we have -- we still have more opportunities to drive efficiencies. If you think about the shared services that I talked about, a big difference there is when we went on this journey, the first thing we had to do was we had to build it. And the second thing we had to do is internally, we had to get buy-in from people to actually put stuff there because they were a little bit uncomfortable with it. So they were like, "Hey, look, I can't have my FP&A guy in India, he or she needs to be right next to me." If you go -- if you look at where we are today, there's actually a push and people are actually coming to me saying, "Hey, look, we'd like to move this there. We think there's an opportunity there because we develop those capabilities." Same thing with the system. So I would expect to continue to get operating leverage, and we feel very good about approaching the mid-20s in 2027.

Okay. And then just one on Vision Care. Is contact lenses a helper or a drag as you think about the net impact of the manufacturing efficiencies that you get from all the investment in supply -- capacity you've made versus the increased SiHy adoption?

We have seen some pressure as we've installed the new manufacturing lines. But as those come up to fully optimal speeds, they will be a help to the overall margin story.

Yes, terminal value, they're a big help. But remember that as we switch to dailies, there's some rate pressure. I think as Tim said earlier, the thing to think about is the actual earnings growth. So on an EPS basis, it's helping us a lot.

Matt Mishan, KeyBanc Capital Markets. I was hoping you guys could talk a little bit about phasing of kind of revenue growth kind of as you think about the plan from like '23 through '27, like my sense would be you're benefiting from a trade up from -- to PRECISION1 from Dailies AquaComfort -- similarly to like TOTAL30 from like our optics and then contact lens solutions would also be like a lower base of sales moving through the plan. So as you think about like mix from '23 to '27, does like the revenue growth opportunity to actually grow and increase and accelerate from '23 to '27 -- or is it like very ratable?

Well, I would think about it as relatively stable and again, consistently growing above market. So depending on what market does. In some of our markets, we are a big part of the market. And so it's hard to avoid the market growth itself. So fundamentally, contact lens for a while is going to grow for us in a very nice way. So I think we expect to see dailies in particular grow nicely. We expect to see reusables grow as well. So the contact lens business in the near term, I think, helps us. It just switches around a little bit as equipment comes on, that begins to add a good bit of revenue. And it's a bit -- I would just say it's a little bit more balanced than anything else.

And just on the cap equipment with the market growth being at a higher rate. Is that a sense that -- because I view you guys as like a market share leader in a lot of the [indiscernible] equipment. Is that a sense that you guys are driving the market growth higher, where you have a base of equipment that needs to be upgraded and you have like an understanding that a lot of your customers are going to be doing that replacement over the next couple of years?

Yes. I mean that's basically it. I think our view is that we've got a lot of installed base that we want to come to the new machine, and we'll talk a little bit about that in a few minutes. Yes. I mean that's basically it. I think our view is that we've got a lot of installed base that we'll want to come to the new machine, and we'll talk a little bit about that in a few minutes.

Ryan Zimmerman, BTIG. Just a follow-up on the revenue cadence and the expectations. I think about what you guys did over the past few years, it implies maybe 250 basis points of market share growth relative to the market. If you look at the new targets, you're at 5% but you're calling for a 6.5% CAGR roughly. So just help us understand the difference in assumptions on market share gains relative to market for the target.

Yes, it's tough, Ryan, because you're talking about -- you're aggregating right there. And again, I don't think we've ever really tried to do that. I think in the individual segments, we'll have higher or lower pieces. You'll see some of that in this next section where I think our contact lens business, we expect to grow share consistently through this plan. Our share in ATIOL is a bit of a mix because our -- we have a very high U.S. share, and we have a more -- we have a pretty good share internationally. But I think they'll see more about penetration there, driving the market, driving our own business. So a little tough to answer that in aggregate.

Okay. Fair. And then CLAREON was introduced a while back to offset monofocal price degradation. I didn't hear much about price commentary in your assumptions. And I'm curious, Tim, if you have any implied price degradation or thoughts on price, especially as this is becoming a bigger topic in some parts of the world.

Yes. We've incorporated that. What we have done is basically, we've taken inflation. So we'd expect to see continued inflation sort of in the near term and that alleviates in the latter part of the plan. And as that inflation alleviates and we'd have less pricing power. So we've kind of linked the 2 together and that's how we built it into the plan.

And just on monofocal pricing around the world, I mean it just really depends on where you are. I think there are markets where monofocal pricing is really low and has a downward trend to it. I would say, we had a very good year last year with monofocal and CLAREON. We grew share in monofocal in the United States, for example, which I think some people would say surprising given how high our share was. That was with a price that was at or above our current pricing. So we're doing really well. People want the CLAREON material, and I think that's exciting to hear because I think we were a little bit mixed on what was going to happen with it. We knew it was a really great product. It's great to see the response.

It's Graham Doyle from UBS. Just a couple of questions. Firstly, your enthusiasm around VIVITY seems to be growing every time you talk about it. Can you give us some sense as to where this stacks up next to PANOPTIX in terms of the opportunity? I mean we're at like 19% penetration in the U.S. now in terms of premium and you've talked about 30 to 40 is VIVITY the bridge -- then maybe just one on the midterm target of 2027. When you get to mid-20s, does this then become a higher investment business and a higher top line growth business?

Well, let me take the second one [indiscernible] on the first one, just on VIVITY, we've been really pleased with what's going on with VIVITY. I think VIVITY has a very unique proposition because it has eliminated the halos and glare, which have been an obstacle for surgeons to using ATIOLs because if you get those -- very few patients do, it's like 2 in a 100. But if you do, it's a real problem, and these are very unhappy patients. And so that has kept a lot of surgeons from wanting to use the traditional ATIOL products. VIVITY has opened up a door for us to get other folks who have been maybe using toric lenses but upgrade to toric multifocal now because it has a different kind of profile that they feel more comfortable with. That is bringing in new patients. It's bringing in patients with corneal compromise with some other higher order aberrations with things that are interesting that we haven't usually been able to put in the advanced technology lenses, so I do think it's moving penetration I don't know that it will ever get as big as PANOPTIX. I think well lot of us would bet one way or the other. But directionally, they're probably very similar in the end. But I think the time frame on that is pretty long because I think penetration is still, as you say, it's 12% globally, and that's a huge difference between the U.S. and rest of world. So we think rest of world grows pretty quickly. The U.S., I hope it grows 50 basis points a year. That's our planning assumption, and I think we'll directionally believe that, that's where it's been. It's probably where it stays.

Yes. And then on the margin front, we are laser-focused right now on getting to the mid-20s. So that's obviously our first priority. We feel like we've got a great plan to get there and are comfortable with that. To your point, when we get to that point, I think we will have a decision as a business that says, do we want to drive incremental margin or do I want to take that money and invest it in R&D or something to drive an incremental point of revenue growth. And our view right now is an incremental point of revenue growth if you can keep that on a sustainable basis, from a shareholder perspective, is much more valuable than that incremental point of margin. But we've got a lot of work to do between here and there, but that's how we think about it.

David, we have a question online from Rajesh Kumar from HSBC. The question is you beautifully explain why fungibility of manufacturing lines are important. When you get new products from acquisitions, how easy is it to integrate these products into the system?

Well, in the contact lens business, we really haven't been looking very much for on the external side of things. I think we have a lot of ideas around what we can do ourselves. You're going to hear a few of them in a minute. So we have probably an increased enthusiasm for what we can do in the R&D world for contact lenses. And I would say, I don't think anybody is moving faster at this than we are. So I don't know that, that question is quite as relevant, but it is very difficult, I think, unless you engineer it with a purpose with the manufacturing team to get those products on generally. So I would just say, generally, we're not looking externally around that, which is probably what's underneath that question.

Veronika Dubajova, from Citi. I have 2, please, if that's all right. The first one is just for Tim on the cadence of the margin improvement from the 20% that you were expecting in 2023 to the 25% in 2027. How would you expect that to be phased? And anything we should bear in mind as we think about that in our model, so that would be helpful. And then I had a follow-on for, I guess, both of you. But I think if I rewind back 2 years ago to the CMD in 2021, the divisional margins were meant to converge a bit more than they are converging on the slide that you put up today. I don't have my ruler with me, so I might be wrong on that.

We will do that later.

I'll go grab it from my suitcase. But if you can just comment on whether your expectations on the relative positioning of the margins between the 2 divisions has changed at all? And if so, what explains that? And I get just that contact lens margin acceleration, are you more worried about it, less worried about it? Is that Aerie in there? Just walk us through that.

Sure. So starting with the cadence, I would say the cadence, given the fact that 80% of that margin expansion is going to be from operating leverage. It's going to really flow through with what David was talking about on the revenue cadence. So however you model your revenue, I would just drop through that operating leverage. And then your point on the convergence, you're absolutely right. It's a great observation. I would say the difference is really performance. And if you look at surgical, surgical would be a little bit higher. And that's really driven by the fact that if you look at the ATIOL performance that we've had, VIVITY, PANOPTIX, has been much better than what we had planned in 2021. So you kind of see that. On the Vision Care, we continue to see expansion. The overall rate is a little bit lower than what we had before. So you got sort of Surgical going this way and Vision Care is going up, but it's not converging, and that's primarily driven by dailies. We have done much better than we had expected in P1 as an example, and that's what's driving that. So again, I think it's really important. We are getting operating margin expansion. But that P1 and that dailies growth, which is where the market is going. It gives you some rate pressure, but it gives you a lot of incremental margin dollars. So that's really an important thing to take into account when you're thinking about earnings growth and performance. So that's -- those are the 2 factors.

Larry Biegelsen, Wells Fargo. Two for me, one on kind of U.S. versus international and the other on the equipment, 3% going to 6% kind of that CAGR, the new CAGR. So do you expect -- so international has been outpacing the U.S. in '22. Do you expect that to continue, David or Tim? And then second, on equipment, maybe a little bit more color, I think went from 3% CAGR to 6%. I thought I heard UNITY, Tim, you saying that's in the back half of the plan, I might have misheard, but that's a big increase. And what are you expecting for refractive. That's about 1/4 of that and refractive has been under -- under pressure?

Yes. We'll talk more about it when Jeannette does the next presentation on equipment. But I think directionally, on the first bit of that question, international is growing a little bit faster than the U.S. particularly in the Surgical business, but also, I think, in Vision Care both. So we've got a lot of opportunity to grow in a number of markets, Japan, China, particularly Europe is still a very good market for us, but there's plenty of opportunity there. So I think we -- directionally U.S. grows nicely, but international has got more room. I think directionally as well, you've got on the equipment side, a change in -- we've had very -- a number of good years in a row. I think I've said a couple of times that we've been a little bit on the low side of estimating the equipment market. I think our view right now is that there is some market expansion in ORs. There are some opportunities, I think, to upgrade that are more powerful. I think we believe our competitive position will improve. But in some of these markets, like United States where we have a very large percentage of the equipment, we see the upgrade cycle as in this frame, at least having an impact on the CAGR. It's not super smooth. To your point, it's a little bit backloaded, but I would just say it is an important part of how we see that particular market changing.

Anthony Petrone, Mizuho, a couple of questions here. Maybe on Slide 20, the 13% CAGR for new products. When we think about that through 2027, is that 13% sustainable? And then the follow-up within there would be specifically [ DT30s ] new for Alcon and [ monthlies ] relatively new. Intraocular pressure drops are new. So specifically to those 2 product categories, what can we expect through 2027?

Yes. I think we haven't forecasted that set of products forward. And I can't give you a really good clean number on it. I think what we're trying to point out there was that our thesis originally around getting product flow moving and getting new product flow to drive revenue is kind of borne out to be true. And I think that will continue to be true is the implication of that. Directionally on T30, we're very pleased with what's going on in the market right now. You'll see in a little bit here that we have an under-indexed position in the reusable segment, and we think that we can do well there. There's some real value in that, and we'll talk a little bit more in this next section about what that looks like. But T30, both the toric, the multifocal and the sphere are really great products. And I think you'll see it in a little bit that we're excited about what that can do. That said, dailies really does drive a lot of the market growth going forward. So I would say in the contact lens business, we've got a very robust pipeline of ideas and products that we are fairly confident on.

[indiscernible] So 1 question, just kind of bigger picture question on some of the macro trends. And then just a quick follow-up for Tim, if I could. So it seems with the banking -- what's going on with the bank system, maybe the consensus view of recession or depth of recession might be rising. I'm wondering if you could talk a little bit about how you think that scenario might affect patient behavior across your markets, maybe some of the staffing challenges or other macro-related issues if that were to play out. And then as I said, just 1 quick follow-up for Tim.

Yes, I think directionally, as we said in the call, in February. We've planned in a mild recession for this year. Not everybody has. I understand that. I think what we believe is it was wise to build a budget and an expectation that if we're wrong, we'll be okay with. And if we're right, we'll be okay with. And so I think directionally, that's what we did. The only thing in our business, and there's lots of different pieces of it. The 1 piece that I think we've talked about, which I think is worth talking about is the contact lens trade up, and that is does the reusable patient trade to a dailies lens, which is the vast majority of the growth in value that drives the contact lens market. And that's 1 part of our business, okay? And as we see that market, we went back and looked at '09, and we saw kind of an 8% market growth dropped to 3% during that '09 frame, and then bounce right back to 7%. So it keeps growing as I said in the early part of the discussion this morning. But it does slow down because people will, I can wait, I can trade up later, I can do something -- there's a little bit of that, that goes on. So we're not super concerned about it, but we've planned for some of it if it occurs. And I think that's what I would look for or be worried about at least if I were thinking through this. Directionally, we still grow. And in the context of our company, it's a part of our business but not the majority of our business. Similarly, I think when you look at the ATIOL business, we think the headroom in ATIOL is so large that there's plenty of patients out there that are going to have the resources to come to an ATIOL. I think directionally, we're at 12%. We think the headroom is 30% to 40%. So we're not anywhere near. Even in the U.S. where we're at 19%, we're not anywhere close to running out of patients that could afford this. And in this case, I think we looked back again, ATIOL market wasn't really well developed. In '09, it was kind of there, but we didn't see any effect at all. And I think, to a large extent, our assumption is that there's plenty of patients to work through this. So in aggregate, as I said, our markets are pretty resilient. Eye care is pretty steady. So I think there could be a little bit of a change. But I think it's something that is in the big context of things, relatively small.

That's helpful. And then just for Tim, I appreciate all the color that you've provided over the past few years on FX and the impact on margins and things like that. I know it's not a operating metric per se, but it does kind of blur some of the progress at one time or another that you've been making around the operating margins. Just wondering, we're entering this period of maybe flattish FX this year or something like that, plus or minus. And maybe just remind us how you're thinking about your strategy on sort of hedging or not hedging, just given that many other manufacturers that we cover do have some kind of offsetting strategy in place to kind of blunt the impact as it drops through the P&L.

Sure. No, it's a great question and obviously, a topic we've been spending time on a lot in the last year or so. So our view on FX is that it normalizes over time. Yet at the same time, we do understand the pressure it puts or the headwinds or the tailwinds it gives to earnings. We hedge the balance sheet, like many other companies, we will continue to do that. When we look at trying to create natural hedges, which a lot of companies are doing, it is a little bit more difficult for us, and that's really driven by [ topo. ] I mean the good news is, we are a global business. 55% of our revenues are outside of the U.S. But if I take, as an example, Japan is our second largest market. So we have a lot of revenue there. We don't have a lot of cost there. We have a sales team. We've got a headquarter team, if you will. So we are exposed to the end. Now to eliminate that exposure, you could then create a natural hedge, you could move manufacturing there. We've got plenty of manufacturing capacity that doesn't really make sense for us. The other big item on the P&L that we could do something differently with is we buy a lot of raw materials. So a lot of our raw materials are in U.S. dollar contracts. And when we go out and look at why we're buying, from whom we're buying from, the priority list is really quality of the material, surety of supply, FX is a -- currency is a component of that equation. But to be candid with you, it's really more about the quality and the surety of supply. So we take a look at it. Again, we want to be very transparent about it as we've been in the past. We were going to show everybody what that impact is. But we really kind of look at it at constant currency basis internally and externally when we're talking about operational performance.

Delphine Le Louet, Societe Generale. A broad question regarding the R&D. And I was wondering if you can share with us your view on what might be the ideal envelope in between -- the allocation between the Vision Care business and the surgery business? And how does that fit with the context of the industry moving into a service industry. And so how to help [ at max ] the productivity on your client side? And how much is allocated to that. So how should we think about the [ 7% to 9% ] bracket you gave us short term, midterm and very long term?

Well, look, I think -- right now, the -- we've been putting as much as we can into both businesses from the very beginning because we were, I think, for a number of years under-investing. I think when we first got here in the '18, '19 frame. We were surprised by all the ideas that R&D had that had just not been funded. That were really good ideas. It just in those days that wasn't the approach that the prior owner wanted to take. So I think directionally, we've basically been trying to figure out what's the most productive use of cash. And so we do that almost on a pretty numeric basis on a risk-adjusted value basis for each project. Now that said, we've also looked at it on a relative basis by business. So we say, we know the Vision Care business, for example, typically runs as lower R&D basis, but has a higher manufacturing investment. They're slightly different mixes. The Surgical business is going to have a higher-end investment in R&D than the Vision Care business and then pharma to the extent that we get involved and some of that stuff will be higher yet. So I think directionally, what we're going to -- you're going to see from us is a holistic portfolio view first that says, what's the risk-adjusted value of all of the projects we have, rank those, then sort them by business and look at them and say, okay, does that make sense? Are we competitive and add a little bit of our own judgment around what the timings of these look like? Are these long term, are they short term? How does that weigh in the way in which we should think about them and be competitive. So I think that's about the best I can do to give you directionally how we think about it. But maybe at the next Q&A, Ian can talk a little bit more about the portfolio and how we work our way through it.

It's Chris Gretler, Credit Suisse. 2 questions, 1 on the drug business and 1 on China. On the drug business, could you discuss how your appetite to take on clinical stage development risk. Now after the Aerie deal, we know the first no such product in the business portfolio. And then on China, just could you discuss the relevance of the country in your midterm plan? And what it means for the 2 business in particular?

Sure, sure. On the pharma business, look, clinical risk for us is pretty common. And we do a lot of it. We have been involved in the phase -- kind of the phased development of the Surgical business for a while. If you go back, a lot of the folks that we have here have been in the pharma business before and have a very good understanding and we have a competency in clinical development and particularly eye care end points in pharma. So I think we know and can execute well in that space. I don't know that -- what we won't be doing and I think you'll hear this a little bit from Ian and Jonathan is, we aren't looking to be a discovery company. That's not what we do. What we are -- and we never have been actually. What we've really done is, we've taken well characterized molecules and looked at how we can deliver them to the eye. That is a very different risk profile and a very different cost structure than trying to go and look at what does it take to develop or synthesize? Do wet chemistry or something else to get new molecules. So I think where we are is very interested in quality assets that we could pick up in Phase II or Phase III for pharmaceuticals. We'll look at all of those. Again, we're very disciplined about where they are, what their probabilities are and eyes wide open and all of that. However, we do have the capability to do it, and we are comfortable with that at some point. Now that said, we aren't rushing out to go do that. I think as I said, we're going to be very disciplined over some period of time and find the best opportunities. On the China piece, I think China directionally is at about 5% of where we are. We think it stays kind of roughly in that growth range. I think China right now is a little bit challenging. I think the -- everybody is aware of VIVITY. I must have got 6 questions last night on VIVITY. So I think it's on everybody's mind. Yes, there's an ophthalmology VIVITY coming again. They've gone through 1 round of what [indiscernible] VIVITY. So we're aware of it. We've planned it. And I think directionally, we expect China to be a good grower for us. I mean the growth rates in China could be very strong. They have been historically. For our Surgical business, that's a really powerful business. Our Vision Care business has not yet really developed in China in a meaningful way. It's small. We're looking at how to do that. But I would say that our planning cycle at this point emphasizes surgical and not so much on the Vision Care piece. So it probably stays proportionally the same as it has been.

Daniel Buchta from ZKB. Maybe the first question, if I take your free cash flow guidance of $2.2 billion and combine that with your capital allocation policy, you guide for mid-single-digit CapEx of sales, bolt-on, however -- how many you ever can do. I mean what are you going to do with all the cash? Are we going to see a pile up of acquisitions? Or share buybacks at some point? And then the second question, just to understand this mid-single-digit CapEx to sales, that is enough to grow your top line 6%, 7% per annum?

Yes. I like the first question better than the second question actually. Now, listen, we do think about that. I think it's just -- it's not going to change our capital allocation philosophy, right? It's -- our philosophy is, again, organic investments will be the first priority. We'll continue to look at M&A. We'll continue to look at returning cash to shareholders. So it really just depends on what the opportunities are when we get to 2027. So for sure, we can tell you that we expect to put our cash to work. And the question will be what is the best way, what are the best returns to make that cash work for the business. And my guess is it will be a combination of the 3. As far as the CapEx, yes, we have done the models. Again, we're kind of going through this catch-up phase with the DSM Flex lines as we kind of get through that a more normalized rate for us is that mid-single digits, and that does allow us to grow where we need to go. But again, that could fluctuate depending on demand. If we see incremental demand that would impact that number. But based off of what we see today and how we've laid out the plan that should be sufficient.

We have time for just about 1 more question.

Steve Lichtman from Oppenheimer. Tim, maybe a couple of follow-ups. One on the tax rate. Are you assuming that, that jump is in '24 that we start seeing that impact in our -- any offsets that you can employ there. And then on the SG&A leverage, are you assuming in that long term, any additional discrete new cost-saving programs? Or is it really leveraging the transformation programs that you've discussed to date?

Yes. Great questions. On the tax front, we feel like we have a pretty efficient tax rate today, and we've been working it pretty hard. So I wouldn't expect any offsetting at this stage. I don't expect any offsetting initiatives, if you will, to impact that. So that's why we baked in to 20%. Obviously, if we come up with new ideas or there are other changes and the regulations, we'll take a look at that. And then as far as the operating leverage, no, we don't have any further transformations plan. We're going to get our transformation done this year. So there won't be -- we don't expect any onetime charges going forward so that operating leverage will come through just the efficiencies and the things that we've talked about. I think the other thing to note on that is a lot of the transformation was in the back office and getting, as I talked about the shared services. So we feel that we have a solid -- we can take on another -- when you think about leverage, we can take on a lot more incremental sales and not really -- we have merit and that type of stuff, we'll have to manage through but -- so that is pretty solid right now, which is not the case when we started this journey back in 2019.

This concludes the Q&A session. We're now going to go into a 30-minute break. So there's coffee and refreshments outside, and we'll be back in 30 minutes. Thanks. [Break]

So I will get us started. Welcome back. I'm Jeannette Bankes, the President and General Manager of the Global Surgical business here at Alcon. I joined Alcon in an exciting time. 4 years ago, I was convinced to come over here in 2019 to join a phenomenal journey. I've had 30 plus, I love the fact that I can put plus behind it, 30-plus years of healthcare industry experience. The first decade of my life, I do remember those years, I actually was in biologics and pharmaceutics with Merck vaccine production near and dear to our heart in the last couple of years. And then the next 2 decades, I spent in medical devices, spanning everything from technical roles to commercial roles, 15 years at Boston Scientific and now wonderful 4 years at Alcon. As we start the next couple of presentations, this is a special day for us. Now I'm hoping you feel, it's a special day for you as well as investors and potential future investors. But as David said, 25,000 employees get up every morning with passion, perseverance and a purpose, I use the word purpose. So today is our [ show and tell. ] Myself, Max and Jonathan are going to show you that near term. So as I think about the questions that were asked of our leadership on the first Q&A, we define near term, that's in the next 24 to 36 months. Ian is going to take us in the back half. Some of it will be within that 5-year revenue generation period and some will be a little bit outside that window. And you can ask us questions on where we position some of these products. But in Surgical, I'm going to walk you through 3 areas: one, understanding the strategy. As the market leader in ophthalmology, we have to be strategic. We drive the market. Second, we're excited. A lot of you were peppering us with questions last night asking us about different technologies. We're unveiling that today. So we get to show you some new technologies. I'm sure it's the first. The street is hearing as well. So we're excited to show you that. And then third and most importantly, we're going to talk about commercial execution and the excellence in that. When you look at the Surgical business in 2022 and even previous to that, you should be feeling a momentum. And that's because when we're delivering best-in-class products, our commercial teams are delivering with excellence into the markets. So when you look at our market, we're $12 billion and growing. We love to see this pie chart because you can clearly see the definition of leadership in the Alcon surgical portfolio. When we start to segment our markets and we say, okay, what are the 3 big categories in which we can expect growth or choose to invest in. We categorized by implantables, consumables and equipment. As we've heard earlier, we expect a cumulative annual growth rate of 4% to 6% across the portfolio. But in our business, we are forecasting both the implantables and consumables to be above market growth, and we are driving that equipment growth. When we unveil what we're about to give out to the market, you'll see why we're driving that growth. So when you think about our 3 pillars, both in 2022 and as we look forward in the next 5 years, we really have a diverse portfolio, and that portfolio in total is driving our growth. So we love the synergy, the momentum in that diverse landscape. When we first look at our equipment and consumables business, we are $3 billion and growing. That is a very large business. And we take pride in saying that we're 60% of the cataract and vitreoretinal installs around the world. So we have a strong legacy of equipment. That solid 60% market share, and I think people were asking me questions last night and then in between is we do expect to upgrade our equipment, and we'll talk about that in a second. Second is our intraocular lens business, $1.7 billion. You guys have seen the uptick and the beauty, the brilliant vision that PANOPTIX and VIVITY are giving to the world. We still have tailwinds there. We're #1. We launched CLAREON in certain key markets. We still have additional key markets to launch, and we'll show you some of that. But we're #1 monofocal in the world, #1. And right behind that, we're #1 in PCIOLs and have tailwinds. I think what you need to think about as you're modeling the Alcon business is you're asking penetration questions, but you need to think about as we move into larger markets, that entry into the big markets for us and that premium upgrade both in revenue generation and margin when it comes to our premium lenses. And then last, we want to focus on our emerging businesses. We talk about opportunity. These 2 areas of our business, while modest in nature now, we think, has great growth potential for us. The refractive business $300 million, predominantly U.S., 70% market share in our LASIK's business. We'll tell you why that's stable here and why we think we have an opportunity to actually gain market share in key markets in APAC, in particular, China. In surgical glaucoma, we have the pleasure of acquiring Ivantis, the Hydrus stent in the first part of 2022. We've taken meaningful market share from our competitors in that space. And we're looking forward to both adding to that portfolio. My peer, Jonathan, has the drops for glaucoma. And when it comes to Surgical, we have the best stent in the world, and we're globalizing it. So let's take a look first at our equipment ecosystem. You hear us on the street talk about an ecosystem but we're going to set a definition today. Because if you want to be best-in-class in an equipment ecosystem, you have to not only have best-in-class equipment. You have to look forward and shape ophthalmology with connectivity. And then as important, you have to have a beautiful brilliant services organization. We're going to give you some figures around the amount of footprint we have in the world on our equipment. That takes a very dedicated brilliant service organization from install to proactive maintenance, to pretty active maintenance because things do go down. So we can't underpin or underscore the amount of services you need to stand up. What you know best for us is that middle intraoperative OR type equipment. From our lasers to our microscopes to our actual Centurion, Constellation, that is the household name in Alcon. We have the most market share around the world, and we're pleased with that, and we'll show you the upgrades we're going to make to these systems. But what's strategically critically important for us as a business is look to the left hand of the slide, it's our entrance into biometers and diagnostics. And I'm going to talk about the strategy around that. We're pleased with the entrance of ARGOS into the market, a biometer that has image guidance, to give you some data to try to think about this. In the United States, our peers were able to gain more than 50% new placement of biometers. Now, this is a little bit newer area to us versus our competitors and yet the breadth, depth and subject matter expertise and partnership with Alcon gained us the majority of new placements in the U.S. So we're going to look forward to bringing ARGOS to the world and make sure that we're in that diagnostic capability. Lastly, and we'll tap on diagnostics a little bit further. Tim actually mentioned this. While we love the breadth and depth of our equipment, the stability and long-term annuity that we actually gain in that consumable business. And so as you think about $3 billion, a portion of that is our equipment, but the larger majority is the consumables. So if you're best-in-class at Alcon, and that's being humble, how do you actually think about the future? A company like us is actually future -- actually defining a future and shaping ophthalmology. So what do we ask of ourselves. As we start to pepper in investments in R&D, how do we think about that? What do we focus on? We're going to queue on 3 things today. And I want you to think about every time we show you a technology we're about to bring out in the short term, did we actually answer this question? First is system economics. We have a pandemic-induced backlog. You guys keep asking us how much is that, when we'll come back into the market. We have that [ facing us. ] Second is we have a shortage of staff, surgeons, the entire healthcare providers that do these procedures. And then third, perfect storm. You have the macro conditions of aging populations that will count on an Alcon and a physician to actually do their cataract or retinal surgery. And so with that perfect storm, we have to think about speed and efficiency. So when we show you a new technology today, we have several of them, did we mark that box. We're going to say we're green and you test and see if we're right. Second is connectivity. While this may be intuitive and you think that's going to bring efficiency, it's not just efficiency. That will be our first leg of the journey. As we think about bringing diagnostics data into the OR and making a seamless integration, it also brings with it a lot of data that we can actually look at and say, what are the population of eyes, what's that next-generation technology that can help us? And the third pillar, most importantly is, can we better patient outcomes. We have some of the most brilliant lenses in the world. And when you deliver them, they're perfect. We also know we still have room to improve. So let's take a look. As you size markets, what's the opportunity you would ask of the surgical business in the next 5 years? As we think about equipment, we're forecasting a $1.5 billion market growth, and we're driving a lot of that market growth. So being the leader in the 60% vitreoretinal cataracts, we expect to gain a majority of that growth. How do we position ourselves to actually gain the majority of that? First is best-in-class equipment. I'm going to show you both UNITY vitro cataract system, UNITY VCS, and we're going to show you UNITY Diagnostics, 2 new entrants into our portfolio and a next-generation microscope. We bring out the best equipment and then we digitalize ourselves through cloud-based capability and an open framework, I'm going to say that open, we're able to bring our data seamlessly across the clinic to the OR. And then last, as we talk about that annuity. It's really making sure that we continue to upgrade or make enhancements to our premium consumables to still stay best-in-class. So let's announce the first one. While we're pleased to have ARGOS in our bag, and we're going to continue to have that product and serve the whole world with that biometer. We're excited to tell you today is we're launching UNITY DIAGNOSTICS in the near term. This is going to be a first whole eye analyzer. And as you think about it, and I'll walk you through this journey, most of us are not cataract eligible yet, but you can think about it. I have DT1s by the way, I'm high myopia and presbyopia now. When you go into the clinic, most clinics and/or ASCs and/or ophthalmology practices have to use 2 to 3 devices right now to capture all the preoperative measurements that are required to place a lens in the eye perfectly. We think we're bringing 3 value propositions. First and foremost, we did time and motion studies. The amount of time savings will be greater, up to 50%, we believe, as we take a patient from one machine versus 3. And you can imagine, as we start to see that abundance of cataracts, retinal procedures coming into our clinics, check efficiency. Second, this is material in nature and a cost savings for the customer. So while they're buying 3 machines at what we think an acquisition cost of USD 150,000 we believe we can bring meaningful reduction in cost by 40%. And then lastly, this was my biggest surprise coming into ophthalmology. I joke when I said I have done technology development from your [indiscernible]. I was blown away, especially coming from radiology on how much manual manipulation, how much data is deaggregated and separated at the beginning of operation. That I think that was the first thing an overwhelming in the job that I took. We believe with aggregating our data, having artificial intelligence and machine learning, we can make a meaningful impact on reducing refractive error. The next one, we're putting a smiling on our face and you'll see a theme here is going to be where our legacy is. And that's entering Unity VCS, vitro cataract system, a dual console and a single console cataract system into the market. Again, I'm showing you the near term over the next couple of years, we will upgrade our own centurion and constellation. I'm going to pause because this is the first time we've probably entered into the market, the branding that we're taking. If you look up Unity, it means one. So I challenge ourselves back on Unity diagnostic. We have 1 machine that can do what 3 did at a time and cost savings. On Unity VCS, this is going to be the first dual platform we've even outdone ourselves. So it's best-in-class in both front and back of the eye. That matters because when we check the box of efficiency, and we're going to hear from our customers. We have a video for you. This is the first time that you can run as high as you can in cutting and keep physiological state of pressure in the eye at a safe parameter. And so when we think about building efficiency into the OR, even the fastest cataract surgeons, which the ones you're going to see, we're surprised by our new system, pleasantly surprised. So we're going to bring efficiency, performance, but never, never jeopardize safety. We have [indiscernible]. And then lastly, as we think about unifying and you see all of the brand image of Unity, Unity DX diagnostics, Unity VCS, Unity Rs, refractive suite, everything will have a combination capability. From a user interface, our customers that we work with daily, they need things simplified. You need a tech to be able to go into a clinic or OR and recognize that machine. Why does an iPhone or Apple do so well because we know their -- iPads, we know their iPhones. We too at Alcon will have a seamless experience for our customers. So what we want you to hear is, well, we'll tell you all this is what are the top customers in the world, both cataract and vitreoretinal surgeons saying about our next generation because they have tested our Ferrari. [Presentation]

So what I love and I smile most about is these are the most experienced fastest operators in the world, if you know any of those names. So for us to actually pass the test and say we can take the best of the best and bring more efficiency, that's the promise we're delivering on. Second is, so check the efficiency. Now it's connectivity for us. How do you -- and I draw your attention to the bottom of the slide, our current portfolio, whether it be us or a competitor has a lot of pieces. Number one, a lot of manual manipulation. So while we do diagnostics in the clinic and we take you into the OR and we have multiple machines, our vision, strategy and future is to simplify the surgeon workflow. You bring that into a unified Unity DX machine, 1 in all, 1 machine, 65-year-old goes in and in 30 minutes is done versus 90, that's simplifying the workflow. You then bring that through a cloud-based system called Smart cataract, we're introducing you to our cataract application first. You're able to take that data seamlessly and put it into the OR. And we believe with our next-generation operating room equipment, Unity VCS, CS, next-gen microscope and our next-gen consumables. We will simplify both in terms of efficiency, digital connectivity and better patient outcomes. We want you to enjoy the journey with us. [Presentation]

So I'll make the statement. Alcon is the future generation of ophthalmology. We are shaping the capabilities that some of our customers couldn't even imagine. So welcome to our journey. I'll turn our attention next to our interocular lens portfolio. From a surgical perspective, you're all excited you ask us a lot of questions around penetration, market shares. If you look to the right hand of the slide and what we would consider an economically challenging environment, we did market research in December, our North America colleagues performed this for us. And what we wanted to ask is even the economic conditions we're currently facing, what's the willingness to pay. We mentioned early in the presentation this morning, it's still a stable opportunity with regard to penetration. 30% to 40% still have a willingness to pay. And we even expose the patient to what we think current price of the procedure is, not just the product, what it entailed and what was the value extraction. You have 2 pair of eyes, okay? When we put an intraocular lens in, you're making a choice to most likely your debt, 30% to 40% of people would love to have a premium lens. So you have to ask the question. Why is only 12% of penetration happening globally and even in a market like the United States 19%, we definitely have headroom there. So we do a lot of peel the onion back and look and say, how do we make this better? We know patients want our premium lenses, the bottom 3 are innovation, it's technology advancements. Patient satisfaction comes in terms of making the best lenses. Surgeon workflow, we showed you Unity diagnostic. We need an all-in-one integrated system that has better prediction on landing 2020. Diagnostics plays a role in premium lenses. And that brings surgeon confidence. But the top one I want to draw your attention to on this slide and why the slide was created. We can't underpin the education needed by patients. If you have that perfect storm of healthcare provider stress, not enough text, the amount of time it takes to education a patient has to be at the point of decision-making. So we have put out a pilot in 2022 in the United States and look at bringing education to the patients prior to once they have the diagnostics preoperative. That is helping practices manage the time and the efficiency of introducing a premium lens. We've seen very good results around that, and we're deploying into more markets as well as enhancing in the United States. So we look forward to increase patient education and awareness. From an IOL pipeline. So if we educate the patients, people are willing to buy the premium, how do we continue to advance our portfolio in a meaningful way. First, as either investors or future investors, you have to understand that there's still opportunity for Alcon. You've seen significant growth in our IOL portfolio, in particular, our premium lenses, $1.7 billion. We still have major markets to launch in. So we have an expanded footprint. The United States is continue to expand the parameters of Vivity, the likes of Japan and China have yet to have patients benefit from these 2 product lines and the CLAREON material. So in the near term, which I present, we still have opportunity globally. Second, with all of the pressures in the system, we believed in developed countries, we're going to see an expanded use of preloaded delivery systems. Autonomy is seen as one of the best preloaded systems right now but we have a chance to better ourselves and we're introducing TRUEGLIDE. TRUEGLIDE is actually the next generation of being able to take the new material and consistently, it's the #1 fear of a physician if you've been in an OR, when you land that IOL is it soft? Is it consistent? And do the haptics place in because the last thing you want is a capsular bag break. We're delivering TRUEGLIDE consistency. Second, for those folks that are as concerned as we are with ESG, this is more environmentally friendly. It's less plastic, less packaging, and importantly to you and us, as a company, have better margin profile. And then last, another new announcing. Last night, I was smiling as you all saw me, we are coming with the next-generation PanOptix. So as we think about our first-generation PanOptix, we have the beauty of both pre-and-post market clinical. We believe as our competitors are coming into major markets with their first generation, our timing of next-gen PanOptix will be brilliant because we've been able to see where we can actually bring better visual acuity to a patient based on our data. So the last 2 areas I'll focus on is emerging businesses. So if you were to size up both the refractive and the glaucoma markets, in refractive, we expect that to be a $2 billion market, and we'll talk about where we think we can gain momentum and opportunity in that market. And then surgical glaucoma. Our first toe into the step was the purchase of Ivantis or acquisition of Ivantis and bringing the HYDRUS stent. We do project that to be a $1 billion market over the next 5 years. So highlight for refractive. I would ask you to ask the question of us, why is it in the United States, 70% market share with LASIK's when there's other options. Look at the clinical chart. No one in the world, no competitor has ever surpassed the outcomes data that has been done with LASIK's, except for now Alcon. As you look at the ability to deliver 20/20, which LASIK's patients want in the dark blue line is all of our data around LASIK currently. We are launching INNOVEYES, as we enhance our diagnostics capability at this company, we can individualize a 3D model of your own eye and put that ablation pattern into our software. We are the only company doing this, and what it will do is bring you brilliantly even better than 20/20. I draw your attention to the chart where we can get you to 20/12.5. I think about my elementary days when everything was so crisp and beautiful and we'll call it innocence. We can actually get to 20/12.5 if you can desire that outcome. So we're looking forward, especially in markets, the stability and maintenance of the U.S., making sure we maintain that market share. But in China, as you think about direct-to-consumer and the brand WeChat in that country, we believe individualized patient treatment will allow us to gain market share in that country. And lastly, on surgical glaucoma I think the story remains the same on both refractive as well as our glaucoma portfolio. We have international opportunity to grow market share. We've done phenomenally our first year in the United States, gaining market share from our competitors, but we have key HYDRUS expansion in the near term. So as we think about where we grow our products, where our growth comes from, it's all about new product launches. So we are pleased to be above $5 billion. I hope you guys were pleased with our '22 surgical performance because I know we were. We want to continue that momentum. We've made major investments in upgrades, upgrades to ourselves and we believe these new product launches will fuel our future. So in summary, we have the most robust equipment footprint in the world and growing greater than 40,000 machines around the world that count on us, the physicians and the patients. We love the stability of that business because when we place that piece of equipment, you have a recurring consumable and we continue to upgrade our consumable capabilities. We've articulated a headwind or a tailwind in our ATIOLs. We'll see that continuing with international expansion, next-gen PanOptix and our capabilities for penetration and patient education. Ian will take you even deeper into our rich innovation pipeline. We did what we said we were going to do. We reinvested in ourselves starting in 2019, and we're seeing that pay off. And lastly, don't underestimate service capability when you have that many machines counting on you on a daily basis. So for those that have invested in us, thank you. Thank you, because you are our partners. For those that have yet to invest in us, we hope that you really see how phenomenal the surgical business is at Alcon. So with that, I'll turn it over to my peer, Max Wolf, and thank you for your attention.

Thank you, Jeannette. That was awesome. Good morning, everybody. Good to see you again after a good chat last night and hello to everybody who's following us remote. My name is Max. I'm the General Manager for Vision Care and Contact Lenses. I am with Alcon since 11 years after 17 years in a few other places you may know. Actually, my first job in Alcon was to launch DAILIES TOTAL1 around the world and a few other contact lenses around the world, followed by creating and drafting the strategy that led to what today is called PRECISION1. And I'm just recently back in Vision Care after a stint in surgical. Now as you're thinking about Vision Care this morning, and I can read in your face, you're probably thinking about what's the market going to do? What are the opportunities in this market, and how is Alcon positioned to capitalize on those opportunities. We will cover that this morning. Now as I prepared for this morning together, and I stepped back and I thought about what I reflected on what I've seen in the last 10-plus years in Vision Care. My main takeaway is this. Alcon is uniquely placed to continue to grow ahead of market when it comes to Vision Care. Let's get into it. Let's take a look at the market first. Vision Care market, as we define it, as we compete in it, it's a $20 billion market. It's a very resilient market, and we have a strong position. About half of that market is contact lenses, and we expect that contact lens market to grow mid-single digit over the next 5 years. The other half of that market is what we call ocular health. Those are over-the-counter products to treat eye care for eye care and glaucoma drugs. I will go into the contact lens market in a moment. Later on, you hear from my colleague, Jonathan Balch, what is going on in the ocular health market. As for the contact lens market, this morning and specifically, I want you to take away 2 dynamics. I really need to understand 2 things that are important here. First, you see on the left side here, and that is a lot of the growth is coming from what we call specialty lenses. Specialty lenses are lenses like multifocal lenses to treat presbyopia or toric lenses to treat astigmatism. And as I look around here in the audience this morning, many of you either have astigmatism yourself or you probably have a close family member with astigmatism. And that is because the prevalence of astigmatism in the population is north of 40%, okay? So these are sizable segments. These are growing markets. These are premium lenses. And this is a space where we have been launching several of our most recent innovations, as you'll see, and we will continue to launch in these fast-growing markets. So main takeaway here is growth opportunity in specialty lenses. Dynamic #2, you can see here in the middle of the chart, and that is, and as you have heard earlier this morning, there is a continued trend of consumers moving from reusable contact lenses into daily disposable contact lenses. So much so that today, more than 1/3 of all consumers are in daily disposables. And as you see here on the very right side, that 1/3 of consumers is representing almost 2/3 of the value of the contact lens market today. This has 2 very important implications for us. First and foremost, there are still a lot of consumers in reusable. So there is ample room for growth in this category from continued trade-up from reusable into daily disposables. And we believe with our portfolio of TOTAL1 and PRECISION1, we are uniquely placed to capitalize on that. Secondly, as you look at this, the reusable market is still big, and we actually believe that is an opportunity specifically for Alcon, and I'll go into the details later on, okay? Now you're probably asking yourself, how has Alcon performed in this market. For those of you who followed us at the last Capital Markets Day in 2021, you probably recall, we were just starting to launch PRECISION1. We talked about launching PRECISION1 for astigmatism TOTAL1 for astigmatism. We talked about launching TOTAL30 and TOTAL30 for astigmatism. We have done all that and the strategy is working. We have grown 120 basis points in global market share, mainly driven by these new products. And what is particularly important for you to take away this morning is that, we expect to continue to see growth from these products. None of these products are at their peak, okay? Now the majority of the growth is coming from the segments that you see here on the right. 250 basis points of market share growth from daily disposable sphere, 250 basis points of growth from daily disposable torics and then 280 basis points from reusable in the United States. So right now, we're hovering around this 25% market share globally, which is good. Our plan is to continue to grow ahead of the market. So for that, we're pulling 3 short-term levers. Lever #1 is to build and leverage the most comprehensive portfolio of high-performance contact lenses. Lever number 2 is maximizing the value from our unique manufacturing platform and lever number 3 is to continue to bring novel innovation to this category. Later on, you actually hear from Ian Bell, who will share with you a bit more about our long-term levers how to continue ahead in growth ahead of the market. As for Lever #1, building and leverage the most comprehensive portfolio of high-performance lenses. We have launched 4 new products in the last 24 months. We have completed the TOTAL1 family by adding TOTAL1 for astigmatism and that brand continues to grow ahead of market. Similarly, we have added PRECISION1 for astigmatism and that product is doing particularly well for us globally. And then we have introduced a complete new contact lens called TOTAL30. We have launched the Sphere product successfully. And as we speak today, we are in the midst of launching the Toric product around the world. Now over the next 2 to 3 years, we plan to also introduce the multifocal product, and we plan to introduce the multifocal toric product. And that gives us a really broad portfolio of high-performance lenses, and we expect to see continued market share gains be from the products we have already launched as well as from the products that we will introduce over the next 2 to 3 years. On to lever #2, maximizing the value from our unique manufacturing platform. It used to be in this industry that if you wanted to bring a real innovation I mean, a really new contact lens to the market, you also have to develop a completely new unique manufacturing platform. And that brought with it multiple complexities. First and foremost, you added 3-plus years to your development time line because once you develop the contact lens, then you develop the manufacturing platform and then you need to build it and ramp it up. So not fast. Secondly, these manufacturing platforms were highly specialized, which means they were pretty expensive. And thirdly, if you do this a couple of times, you find yourself with a manufacturing line for this product and a different one for this product and a different one for that product. And next thing you know, you have too much capacity of one and not enough capacity of another not necessarily an easy situation an ideal situation to be in. Now a couple of weeks ago, actually, I happened to be in one of our largest manufacturing plants in Atlanta, Georgia, and it was yet again impressed what I have seen in terms of the progress that our team has made in migrating us towards the DSM flex platform, which is a new manufacturing platform that gives us multiple competitive advantages. The first advantage is over the long run, we expect better economics from this platform. Better economics because, first and foremost, these lines ramp up to peak output faster. Secondly, they cost less for the same capacity. And as a result of that, over the long run, they will give us better manufacturing costs per lens. So an economic advantage. And that advantage actually will become more and more important as the market shifts more and more to DAILIES, you all are good at math. You can imagine what happens when the consumer shifts from a reusable to a daily lens, the volumes that you need to produce continue to expand. And so as the DAILIES market continues to grow, we all need more capacity. And so this economic advantage is particularly important because of that dynamic, and we expect it to come through in our P&L over the long run. But beyond the economics, it gives us other competitive advantages. We can now produce all our new manufacturing -- all our new products on that new manufacturing platform. So no longer these problems of the past enough capacity here, not enough capacity there. It allows us flexibility to produce any and all new chemistries, something that we think is quite unique to Alcon. And another competitive advantage is now we can innovate faster because you no longer have to add these 3-plus years to also develop the manufacturing platform and build it. So now we can innovate at the speed we want not at the speed we can. And most of our new products over the last 24 months are already 100% manufactured on that platform. So all PRECISION1s made on that platform, all TOTAL30s made on that platform. and we're working on the next innovation on that platform. And that leads me to lever number 3, short-term lever number 3 is continuing to bring new innovation to this category. We call it PRECISION7. PRECISION7 is a reusable lens for 7 days. It's a brand-new chemistry, it's a new wearing modality for 1 week, 7 days, and it's particularly indicated for those consumers who benefit from a easier, more memorable, easier to remember replacement schedule. You replace this lens every Monday. It's also indicated for those consumers who benefit from a fresh, new, comfortable lens more frequently. We are very excited about this lens. We still have some work to do on it, but we think our research and development team has done a fantastic job yet again. It's a new chemistry, as I mentioned, it is optimized. It's optimized for 7 days. It has what we call ActivFlo system. An ActivFlo system means it moisturizes the surface of your lens for 7 days and that translates into great comfort and great experience for the consumer. It also comes with a new enhanced edge, and the edge in the contact lens actually matters quite a lot. Just think about it. When you blink, your eyelids glide or the edge twice and you blink more than 15,000 times a day. So if that edge is not great, you'll feel it. And so this is a great example of innovation on the edge. Now P7 in itself is a great innovation, but I think it's also an outstanding example of what differentiates Alcon. We have new product innovation, thanks to our R&D capability and we have manufacturing innovation because of our DSM platform. At this point, you're probably asking yourself, okay, what is the opportunity for this product? And why are you actually introducing another reusable lens. Fair? Okay. Now it's pretty straightforward, actually. As you probably all know, the contact lens market has a large segment in DAILIES and it has a segment in reusable. We and Alcon have done very, very well in the daily disposable segment. We have a 29% market share with TOTAL1 and PRECISION1 and we'll continue to do very well with the portfolio we have. However, as I mentioned at the beginning, the reusable market is still big. There is opportunity to trade up consumers within the reusable market and probably particularly relevant for all you this morning, margins in the reusable segment are particularly attractive. Furthermore, there hasn't been a lot of innovation in the reusable segment. And for us, in Alcon, we have an opportunity here to serve more patients because we only have a 21% market share. So if you do the math, 1 share point is worth to Alcon about $40 million. The delta is 8 share points, so you get overall, the size and the dimension of the opportunity for us in contact lenses in the reusable segment. Now we already have launched TOTAL30 in the reusable segment. But we think we need another product to really maximize on this opportunity, and that is PRECISION7. TOTAL30 is here. It's a great reusable lens, it's a 30-day lens, and it is here targeting a segment in this market that benefits from a better performance of a 30-day lens. So a classic trade up innovation. P7 is a bit different. It targets a different segment in the reusable category, and those are those consumers that benefit from a more memorable, more compliant replacement schedule, which is 1 week, those consumers that benefit from a fresh new lens more frequently. Now with that, I have just completed the contact lens version -- the contact lens portion, so to speak, not version, the contact lens portion of Vision Care. As I mentioned, the main levers in the short term to continue to grow ahead of market, building and leveraging the most comprehensive portfolio of high-performance lenses, maximizing the value of our manufacturing platform and continue to bring new innovation to the category. And with that, we strongly believe we are uniquely placed to continue to grow ahead of the market. Now there is also a second portion to Vision Care, and that's ocular health, and Jonathan Balch will take you through that.

Thank you. Good morning. Thank you for joining us and for your interest in Alcon. I'm Jonathan Balch. I'm the General Manager of our Global Ocular Health Business. Now I know that you as analysts and investors are particularly interested in what we're up to in the pharma space. And I can say after completing a few deals after the last couple of years, I, too, am quite excited. I've been in healthcare for about 25 years. Most of that time was spent in the pharmaceutical industry and the momentum that we've created around the early building blocks for pharma and the future potential that we've created is really exciting. That said, what I'd like to do is start by framing our core ocular health business. Talk a little bit about our focus areas and key growth drivers in ocular health, and then we'll provide some color -- I'll provide a little bit of color on our pharma strategy and where we're headed with one of our lead development assets. So we define the roughly $10 billion ocular health market as Artificial Tears, Allergy, Contact Lens Care, and as David pointed out in the opening slides, we've now added the glaucoma pharma market. And that's about $3.2 billion, the broader optopharma market is estimated to be roughly $20 billion. So these are large, attractive, resilient categories where we enjoy really strong market share today. And we've got momentum headed into 2023. We're already #1 globally in Artificial Tears, and we're #1 globally in contact lens care. Within Artificial Tears, we're continuing to win behind preservative-free formulations and the migration to preservative-free across the world, with the U.S. remaining under-indexed. I'll show you a picture of that and just how fast the growth rate is there. In Allergy, we're focused on driving U.S. eye allergy overall market growth with targeted promotion during both the spring and the fall allergy season. And in contact lens care, we're already the leader there. And so our real focus is on protecting our status as most recommended contact lens care brands across our portfolio. On pharma, we're just getting started, but we see this as a natural adjacency. We believe that we can continue to grow in that space. We'll do that over time, making smart bets, both with internal investment as well as select acquisitions, and I'll share a little bit more about that. Let's first double-click on the bigger picture for growth drivers and ocular health. We need to continue to build on the momentum we've already created with Systane behind both preservative free innovation market expansion. I'll share a bit of detail there. For perspective, our Artificial Tears business grew 9% last year and grew -- and the Systane brand specifically grew 10%. We'll talk about our reentry into pharma. Many of you have become Alcon historians. I learned from some of you at last night's reception, you may recall that it wasn't that long ago that pharma was a significant part of our business and one of the most profitable portions of the business. And then I've had a few questions about our pipeline, some of which has been acquired through the recent Aerie acquisition. We'll talk about the planned launch for a novel dry eye compound, specifically AR-15512, and I'll give you a little bit of background on where we are in the development. For Systane, this has been talked about a couple of times, but I think it's important to note that we're continuing to win with Systane behind multi-dose, preservative-free innovation for the Systane brand. And that's happening through market expansion as we launch around the world. You can see we've launched in over 40 countries since 2021. And some really smart folks a few years ago, got ahead of this trend by starting to innovate in multi-dose preservative-free seeing the trends emerge. At that time, Europe had about 50% penetration of preservative-free formulations. As an example, many other international markets are much more penetrated with preservative-free. They're now close to 75%. We mentioned that the U.S. has been under-indexed at less than 25% today. That said, preservative-free is growing at north of 20% and multi-dose preservative-free specifically is growing at over 50% year-over-year. So we're continuing to innovate specifically with our preservative-free formulations. Systane Complete HA is in development today. HA is hyaluronic acid, excuse me. Hyaluronic acid is hydrophilic, which means water loving. It can actually bind with water up to 1,000 times its own weight. We believe that the combination of Systane Complete + HA will allow the nano lipids associated with Systane Complete and HA to help address more severe dry eye symptoms. We also believe that this product has the potential to be the longest lasting product in the Artificial Tears category. We did a little bit of concept testing in the fourth quarter of '22, and we get some pretty remarkable results when you benchmark against the standards for concept testing. This is on top 2 box asking both doctors and consumers what their interest level was. 86% of doctors told us that they would recommend the product and 81% of consumers suggested that they would purchase. We're really excited about this product, and we see a path to completing the development within the next 2 years. Let's talk a bit about pharma. This one has been a hot topic. I know our intent over time, to be clear, is to reestablish Alcon as a leader in the optopharma space. That's going to take us time, and we're going to make smart bets, but we believe that we can win because it's a fragmented market. Many of the assets are less than $1 billion, which is likely not to interest biggest pharma. We're a natural aggregator, arguably we're the largest and best capitalized, especially with big pharma, largely exiting the space, and some of our traditional competitors are exiting as well. We now have the opportunity to leverage our scale. Strategically, the Aerie deal has increased our scale of cross functional areas and in particular, our commercial footprint in the U.S. has grown. We have deep ophtha expertise. We know the categories very well. And don't forget, we've had a successful pharma business in the past. We also have strong R&D formulation capabilities that existed here in-house, only bolstered by the acquisition of area and some of the top science and top scientists in the optopharma space. And we have world-class aseptic manufacturing capabilities, David mentioned it, but over 700 million units, 2,000 SKUs, 5,000 batches of pharma products, are made literally right across the street. And from today's tour for those that are here in person, you'll be able to see some of the manufacturing facilities from a distance. So let's talk about our lead pipeline asset, AR-15512, it's the last time I'll say that, I'll refer to it as 512 from this point forward. 512 gives us the opportunity to participate in the nearly $1.6 billion chronic dry eye market. And for those of you that have followed the category before the existing approved products have their limitations. They generally act or many act as anti inflammatories and they're not effective for many patients. To put the opportunity in perspective, the U.S. market is huge. 30 million patients are estimated to suffer from dry eye. 18 million of which are engaged with a doctor and have been diagnosed and only less than 10% have actually been treated with an Rx. Now 512 would be a novel approach to treating dry eye. It's being evaluated today for the treatment of both the signs and symptoms of dry eye disease. The mechanism of action is TRPM8, which is actually a stimulation of the cold receptors on the cornea and eyelids. When we do that, what we've learn is we actually stimulate production of natural tears and a soothing sensation on the eye. You may be familiar with some of the data if you've been following Aerie prior to our acquisition. So I'll do a bit of a review on the Phase II data. The Phase II results were quite positive and served to really characterize both the efficacy and the safety of 512. It also informed a final study end points for Phase III and dose selection for Phase III. A quick orientation to the slide. The dark blue graph is the 0.003% concentration of 512, which is actually the concentration that has progressed to the Phase III trials. The gray bar is vehicle or placebo as the comparator. We're looking at 512 for both the signs and symptoms of dry eye. So the left-hand side of the slide is performance on Schirmer score. You can see the results were robust in terms of producing tears and 86% of respondents met the endpoint on day 1. On the right-hand side, you can see symptoms. This is the SANDE score. This is actually a standardized test to look at frequency and severity of dry eye symptoms. And you can see that by day 14, you're already seeing statistical significance in terms of performance and individual respondents suggested that they were seeing benefits when driving, reading and overall quality of life. There's more to come here. The Phase III trial is underway, but we see a path towards a differentiated label, a high responder rate and potentially very fast onset of action. Here's the Phase III development program, which is underway. There are 3 registration trials, 2 of which COMET-2 and COMET-3 are identical efficacy trials using some of the endpoints that I've just shown you. COMET 4 is a longer-term safety trial. COMET 2, first interpretable results will be the third quarter, COMET 3 fourth quarter, and we're now on track for the longer-term safety study we report out in 4Q. If the time lines hold, we report top line results publicly in the first quarter of '24, be ready to file NDA package by mid-'24 with a goal of getting to approval and launch in mid-2025. So let's just step back a little bit and take a look at the overall combined Vision Care growth outlook, looking at both contact lens and ocular health. We reported $3.6 billion in sales for Vision Care in 2022. We do believe that we'll continue to see growth and drive growth in our base business, but a significant portion of our growth will come from new product launches. As Max pointed out, we'll continue to roll out the launch of DAILIES TOTAL1 for astigmatism. We'll round out the TOTAL30 family, and we have the opportunity to launch PRECISION7, a novel modality in terms of contact lenses. In ocular health, we're going to continue to innovate in the preservative-free category and take advantage of growth that we believe we can drive in our newly acquired pharmaceutical business. So let me give a shot to telling you what Max and I have told you in the course of the last 20 minutes. We believe that we're well positioned to continue to drive our Vision Care business across both contact lens and ocular health. For contact lenses, new product growth over the next 5 years will be significant. We'll continue to make investments on the fastest-growing and most attractive categories of contact lenses. We need to maximize our growth with our existing products, and we believe we've got the right to do that because we've got an unparalleled portfolio, and we've already introduced a significant amount of innovation that continues to roll out around the world. And then we'll drive growth in the preservative-free category behind strong innovation and a leadership position as we continue to work to establish it. Again, as a point reference since 2020, the Systane business has been growing at 10% year-over-year. And then, of course, we see sizable growth opportunities in pharma, that's going to take time, but we see this as a natural adjacency in a place where we can win. On behalf of Max and myself, I wanted to say thank you again for joining us today, and I'll turn it over to Ian Bell to talk a little bit about longer-term innovation.

Thank you, Jonathan. So I'm Ian Bell. I'm the President of Global Business and Innovation. 18 months ago before coming into this role, I was the President of International. So I got to see just how impactful our innovation was all over the world to our customers and to patients. And I'm very proud to be part of this team that's leading the next phase of innovation so that we are able to continue to make a difference to patients around the world as you saw in the videos earlier. The team has covered innovation that will be coming to market in the next 2, 3 years. I'm going to take a slightly longer perspective and give you an insight into the longer-term innovations that we're working on. So you get an insight into our future portfolio. Alcon is uniquely positioned to be successful in innovating in this space. As David said earlier, we are a ophthalmology-dedicated company with deep expertise and a deep understanding of eye care needs. We have that world-class expertise. We have 1,600 R&D associates who wake up every day only thinking about the eye and what we can do to innovate in that space. This enables us to have a balanced innovation portfolio with some bold bets of really disruptive technology and some incremental improvements on existing technology that also provide real benefits to our customers. And as you've heard, we've made acquisitions, we're agnostic to whether that innovation comes internally through our own R&D associates or is acquired with maybe a goal for us to be developing those products from there. Since we spun from Novartis, we've continued to invest heavily in R&D. As we said earlier, that was our thesis to innovate that drives the top line so that we continue to outgrow the markets in which we operate. And we've launched 60 unique products since 2018 around the world. We invest more than any pure-play eye care company in R&D, over $3 billion since 2018. And as I mentioned, we have those 1,600 R&D associates thinking about the eye every day. And that enables us to build a broad base of active patent families to protect our future innovations. Today, we have over 100 projects ongoing in our R&D team. Once we invest to make sure that we are successful, we're also focusing on the productivity of the group as well and looking for ways so that we can produce more products and in a more efficient way. For example, in our organization structure, we have great capability in areas such as optics, and we now apply that optics group across both intraocular lenses and contact lenses, so we can really leverage their experience. Previously, we operated as 2 groups there. In terms of process excellence, we're looking at how we can build faster processes to get things to market earlier. But also critically at every step that we interact with customers to check the innovation that we're making, then it's going to be meeting their needs and whether there's an opportunity to do things even better. External ideation is really important as well. As I mentioned earlier, we're agnostic whether it comes from inside or outside. And so we've set up things like an Alcon seed fund to work with very early stage, sometimes individuals, sometimes small companies who have early ideas that they're working on that could be the products of the future that we look to bring to market. And finally, like everybody, we're modernizing. We're looking at how we use data more effectively and how we become more digital. For example, as we make digital prototypes of some of the devices that we're creating, we can do those prototypes digitally and test them digitally, which is far quicker than the alternative that we did in the past of physically having to make and test prototypes at every step in the journey. So that adds real efficiency to our approach. So I'm going to talk to you about 5 areas, 2 in surgical, cataract and refractive and then 3 across Vision Care. What we're doing in specialty contact lenses, dry eye and then what we continue to do to expand our pharma portfolio. In terms of the PowerVision lens program, where we are looking to be the first to bring to market a truly innovative accommodating and tunable IOL, we're really pleased with the progress that we've made here overcoming some significant technical barriers. In terms of accommodation, the goal is to have a lens that can adjust so that you're able to see near and far like it does when you're 20 years old. As you get a little older, maybe to my age, the lens gets a little harder. It doesn't accommodate nearly as well. And as we've done some testing on this product since our last Capital Markets Day, what we've shown is the ability for that lens to accommodate up to 4 years. This is a really key part of the program because it shows that, that accommodation is achieved, but it's also sustained which is really important for those patients to see as well as they need to. We also want to then marry the technology of accommodation with that being able to tune postoperatively so that you can set the distance point on the lens, if in some cases where you may miss that distance point, and then you can make that adjustment after the surgery. And since the last Capital Markets Day, we've shown the ability to make this adjustment by plus or minus 2 diopters. This is really important because one of the barriers to surgeons doing more PCIOLs is sometimes if they don't feel confident that they're going to give a perfect result with clear crisp distance vision as part of that, then they hesitate to take thousands of dollars of a patient. And therefore, if we can give them the confidence that even if they miss, they're able to make that adjustment, that's a really big idea in terms of giving them confidence to do the surgery more often. Now we aim in the end to bring a great product to market that marries accommodation and tunability. But clearly, there are also stand-alone ideas that could be applied separately on future innovations as well. So we're really excited about the progress that we're making here, and I'm going to show you a short video to show you where we've got to. [Presentation]

And a really important thing to emphasize is that, that adjustment is done with a noninvasive laser that surgeons will already have in their clinic and that it's able to be done in a single setting as well. So a really exciting technology that we look forward to developing more and bringing to market in the future. Jeannette mentioned about the equipment ecosystem and how important that is in the cataract space. we seamlessly move data between our devices and apply AI technology to enable things like planning to happen more and more effectively. For a refractive area, those same benefits are just as important looking at taking pre-operative diagnostics from the clinic into the OR, applying predictive outcome modeling so that the planning is even better, and then the laser can be optimized to give great outcomes for patients as they have that surgery. That integration is a really valuable idea. You saw from Jeannette , the great results that we're already getting, and we aim to go even further than that. And remember, we're already believers in laser refractive surgery. You saw the data that Jeanette presented and the outcomes that are possible with over 40% of people getting to that 2012 mark, way ahead of the traditional goal of 2020 vision, if you like. So we -- we're developing the next-generation laser platform. So a single unit with enhanced laser technology that combines femto flap cutting and an excimer laser so that it could deliver a range of modalities all in a single unit. This will greatly improve the patient technician and surgeon experience, and it also overcomes the idea where in today's laser refractive surgery, the patient needs to move between 2 different lasers. That enhances the workflow because it's all in a single unit and reduces the footprint that's required, which is an important consideration when people are considering buying a new refractive suite, particularly OUS, where sometimes space can be a little bit more limited. We're excited about this because it builds on our leadership that we already have in the U.S. and in some of those international markets where we're under indexed, it gives us further opportunity to take share and provide a great breadth of treatment modalities so that the surgeon can adapt the procedure to the individual patients. Now on to Vision Care, where I'm going to touch on 2 big ideas: presbyopia and astigmatism. Presbyopia is ubiquitous for those of us that are between 45 and 55, 80% of those, including myself, will suffer from presbyopia. And yet, the penetration of multifocal contact lenses and on U.S. presbyopes is only 3% to 4%. That 3% to 4% drives a global market of about $1 billion. But you can see that if we could have better technology that overcame some of the limitations, then the market opportunity is significant. And if it got to around 15% you could add another $3 billion or so. So this is a really big deal if someone can solve this issue. Two of the biggest technical challenges that happen are that trade-off between distance and near vision that the eye care professional faces when trying to find the right lens for the individual. And it's a time-consuming and difficult fitting routine that limits the appetite of some ECPs to do this as regularly as they might. Alcon is uniquely positioned to address this problem. We have great technology and great expertise in material science, and in Optics. As I mentioned earlier, putting the Optics group together gives us a chance to really think across our portfolio. So one of the ideas that we're exploring is to apply the PanOptix design and technology to a contact lens that could overcome many of these limitations, and there is undoubtedly a huge market out there for people who like myself don't want to wear glasses, but we want to be able to read the menu in a dimly lit restaurant. Similar to presbyopia, astigmatism remains undertreated among contact lens or areas. As Max referenced earlier, around 40% of people will have some form of astigmatism. And yet only 20% are wearing lenses of the toric styles that will help to manage that. We believe that if we can find the right technology to overcome some of the limitations that exist here, then this is around $0.5 billion opportunity for us. And accordingly, we're working on developing toric lenses that overcome some of these key issues. Again, the challenge in fitting it and getting that measure of astigmatism and the right lens is challenging. And so if we can find a quicker and simpler way to fit versus the current torics, that's a big idea. You also need thousands of SKUs to be held by the ECP and, of course, inventory to be managed by us. And if we can find a way to overcome that, then that creates really good opportunities for us, also in creating new technologies like dailies multifocal toric lenses where there's a number of SKUs is limiting people's ability to provide that type of technology. They also can be more stable on the eyes. So as you blink, you get some vision blurring. And if we can find a product that would be more stable on the eye as well, which we're working on, then that is really helpful as well. So -- if we can solve these issues, there is a significant opportunity out there, and we're working hard using our expertise to do exactly that. What about then on to dry eye. So one of the biggest challenges on dry eye is those that suffer from it. They're taking their drops multiple times a day. If we can find a treatment that stays longer on the eye, then you could take it once or maybe twice a day, that would be a very differentiated product in this market. And we're working on the next-generation tier therapy that interacts with the eyes natural mucin to be retained longer on the eye. And in the early work, what we see compared to SYSTANE is that tear will stay on the eye for 3x longer. So this is encouraging and gives us a path to a more differentiated product. We've also tested it in stressful test environments on the bench. And so what you see here is a layer of cells that is applied and then we apply the lubricants, the control, which is today's tears versus the next-generation tears. We then simulate 1,000 blink cycles, and we look at how many cells remain after that, that are retailed in place with the lubricants. 94% of the sales are removed with the current technology. But when we try the new technology on the bench, what we see is only 3% of those cells are removed. So 97% remain. Now if we can apply this technology going forward, we have a chance to have a highly differentiated product. Lastly, to Pharma, where we continue to expand our portfolio and our capabilities with things like the Aerie acquisition. You heard Jonathan talk about our lead candidate, 512 and the developments that we're making there in dry eye. But we also have formulation experts who are working on looking at the existing molecules we have in glaucoma to see if there are ways we can formulate that where we retain the efficacy, maybe improve the side effects that are possible there as well. So we're working on those types of ideas. We also continue to look outside at new technologies. As Jonathan outlined, -- we think we're in a good space as some of the big pharma, the likes of Novartis are saying ophthalmology Pharmers no longer a core strategy for them. It gives us a chance to look at many of those assets, some of which are too small for big pharma really to be interested in. So we continue to scour the landscape for interesting ideas there. What we're not doing is pure drug discovery, as David mentioned earlier, our plan is to take already characterized molecules and apply those within ophthalmology. And a good example of that is our in-licensed anti-VEGF molecule listed here as AR-14034. If we take that and trying other ways to deliver it using delivery platforms such as the print technology that we acquired with the Aerie acquisition that we think that gives really good opportunities for us to move forward and find innovative products to bring to market. So the print technology is a very flexible option that enables us to deliver small molecules across a broad range of therapeutic targets in the back of the eye. The way that it works is it's a sustained-release Bio-erodible implant technology that's small enough to introduce through an intravitreal injection. We think this has a number of uses and the first that we're going to explore is in the Wet AMD but it's also a very scalable and reproducible manufacturing procedure such that it can be adapted to deliver a number of different molecules to the eye. So it gives us a platform technology as we explore those already precharacterized molecules in the future to see if there are ways we can bring innovative products to market. So as you've heard from the team, we feel very excited about our near-term and long-term innovation and our ability to continue to deliver those products such that we can outgrow ahead of the markets. We're looking at how we enhance our innovation capacity, applying the world-class expertise that we have and finding ways to become more efficient and effective as we modernize and digitalize much of the approaches that we take. In surgical, you've seen we have some bold bets in terms of truly disruptive technology and accommodating tunable IOL is a really exciting idea. We learn a lot as we do that program. And as I said, stand-alone ideas themselves that could also be applied in different ways for accommodating and tunability as well. And we continue to expand our equipment ecosystem. We're already being successful in cataracts, and we're going to build on that. Refractive is another obvious area where we can utilize that technology and make the outcomes even better than they are today. And then finally, in Vision Care, huge opportunities in tackling unmet largely unmet needs in presbyopia and Astigmatism where if we can solve those issues, there is huge potential for growth beyond where we are today. If we can find a longer-lasting dry eye product, that would be a highly differentiated product. and we continue to expand our pharma portfolio and delivery options. So we are very excited about what we're doing. We have high belief in our ability to continue to deliver the innovation that is going to enable us to continue to grow ahead of the market for the years to come. So with that, I think we're going to take a very short break while we set up some chairs and then we'll have an open Q&A. Thank you. [Break]

All right. So thanks for coming back for the Q&A. We've got the team here I think we've got some time just the same rules as before, just raise your hand, we'll have Mike runners have the mic brought to you. And then for those online, as a reminder, you can ask questions just type them into the portal and we'll read them on your behalf.

All right. I'll kick things off. Those presentations are great. Ryan Zimmerman, BTIG. Again. Just want to ask on 2 things. One, you guys have made multiple bets on glaucoma, both surgical and pharmaceutical. I'm just wondering -- it remains a very competitive area given where your share is. Just help us understand if you need to further scale in the glaucoma space to achieve kind of your goals in the area? Or you think there's specific technologies that you want to go after in glaucoma? .

Yes. Let me take part of that, and Jonathan can jump in here if you want. In the pharma space, in particular, we feel pretty comfortable that we've got 2 or 3 really important assets here, right? So we've got Rocklatan, which we think is the most powerful ad you can do in glaucoma. And I think there are some challenges in the long term with finding new assets in that space. So I think as you look at it, there's probably 2, 3 assets in it. We've got them now. It's probably one other promoted assets. So scaling that one for us, I don't think is really the big idea. The big idea would be a different technology that could do drug delivery or could do something else in that space. And then similarly, on the device side, there are a number of spaces that we would look at. I think certainly, we had a good run with CyPass and stenting it. We feel good about where we are with the Ivantis product. So the Hydrus, I think, internationally will do well. It's going to do well, I think, in the U.S. But there may be more things we could do in glaucoma as you think about that treatment algorithm on the device side, which we would be interested in. But again, we're thinking through that.

Okay. And then I'll ask my second question. Power Vision, tremendous progress, very exciting to see what can you share from a time line perspective with the Street for Powervision?

It will be just outside of the plan as we have it now. I think it's fair to say, as I said, we've overcome some really significant technical barriers. And as you said, we're delighted with the progress we're making, but it will still remain just outside the plan period.

Anthony Petrone from Mizuho. Two questions. One would be -- first on Surgical and then a follow-up on Vision Care. So for Jeannette and Dave, Tim, maybe just a little bit on the IT IOL penetration. So it looks like the survey work is suggesting 30% to 40% category penetration. So U.S. is 19, global is 12, is that like the aspirational target? If you got to the midpoint of that versus the U.S. current penetration, it's $1.6 billion of upside. So how should we interpret that? Is that the target over time? Or is that the aspiration?

Well, it tells you why we're spending much time on ATI wells and in development while we're working on a number of next-generation ideas. Look, we think that the upper end of potential, which is what that is, that's the willingness to pay for a product that we define in the market is kind of in that 30% to 40%. So it's a long way from where we are and represents a really big opportunity. our view is right now that, that pace of change will occur probably a little closer to what it has been historically. We had a 50 to 100 basis points run for 15 years, that kind of moved about 50 basis points a year. And then we had a real run-up with PanOptix and Vivity which has been 100 to 200 for a couple of years, particularly in the U.S. I think what you're likely to see going forward is something that reverts a little bit closer to the historical rates. That's how we've planned it going forward is kind of in that 50 to 100 basis points. Think about that as the more likely answer, I suspect. And international should grow faster than the U.S. in penetration because it starts at an 8% level. But it's, again, I think, a difficult system outside the U.S. In many cases, that cash pay element isn't allowed or is -- has other kind of barriers to moving. So directionally, I think we feel pretty good about it. But I don't think there's a super fast pace to get. You shouldn't interpret 30 to 40 as where we're going soon. I think it's just -- that's the ultimate endpoint if you thought about being perfect.

Very helpful. And then the follow-up on vision would be on the lens effect of this slide. So when you think of the DSM Flex lines, was that -- should we interpret that 20 points that, that should be the unit economic margin expansion from the DSM and flex lines. When you look at that slide, it looks like year 3 is when that inflection point should occur in terms of the margin expansion. So just a little bit more on contact lens margin expansion related to the DSM Flex lines.

Do you want me to start with that? So what you saw on that slide is one single line. And so what you need to keep in mind, obviously, is as the market grows, you need to keep building capacity and bring new lines on. So an individual line gives you that cost improvement on the manufacturing side. And then I guess for the margin improvement, it goes back to what Tim mentioned earlier this morning, right, 80% is in operating margin, I think gross margin.

So think of that as a single line, right, and then we're playing in multiple lines over time. So you're -- and you're always chasing 2 things. One is we straight-line to appreciate these things. So you're going to have a depreciation that runs 10 years. You've also got then a mix of lines, some that start new and some that are at maturity. And so as you add more, it will move gently towards the terminal idea, but it takes you a while to get there.

Danny Buchta from ZKB. Maybe 2 questions. The first 1 on PRECISION7. I mean it's a completely new concept. To my knowledge, there is no such lens on the market. What makes you actually sure that there is demand for such a product. Why not going straight away to a daily or staying in a 30-day version? And then the second on the ideas in multifocal and toric contact lenses. What is the time line on that? So how creative are your ideas to make this a marketable product?

[indiscernible].

Yes, I'll take the first one. So look, we're in the contact lens space, obviously, since a while, and we have looked at the reusable market quite extensively because it's an opportunity for us. We believe there is a segment of consumers that really benefit from a wearing schedule that is shorter, more easy to remember and, therefore, more compliant. And we have seen interest from consumers and bearers for lenses that are replaced more frequently. So we have done research on this. We are confident that there is a segment and then we'll see how it plays out in the marketplace.

In terms of the opportunities in Presbyopia in Astigmatism, as we said, these are difficult ideas. We're doing work on them right now. In terms of delivery, likely just outside the plan period that we hope to be in a position to be able to address those.

Steve Lichtman, Oppenheimer. I was wondering if you could provide any more color in terms of timing on some of the products you laid out today next-gen PanOptix, Unity platforms in our eyes. and how that informs how we should think about growth of the surgical business in the first half of the planning period, perhaps versus the second half? And then, Maximilian , you didn't kind of talk about myopia management as a sort of category in and of itself. Just wondering what your latest thoughts are on that opportunity where Alcon stands?

So I'll put a frame around the equipment portfolio. As we had said, 24 to 36 months, that doesn't mean that everything is coming exactly at that point. What we'll give frame is that in diagnostics, you'll see that sooner in the sooner part of the beginning of our plan. When you roll out equipment like a Unity VCS, it takes us about a year to do UPE. That's looking at the system, building in our services organization and allowing true bug fixes prior to we fully commercialized. So I would think about that in terms of mid frame for that second equipment capability. But we have some near-term end. So hopefully, from a smoothing perspective and then you'll see consumables uptick as you come to the backside of that then as we install.

And as for myopia, obviously, as the leader in eye care, that's a space we watch very carefully. We have been looking at many things in that space, as you can imagine. We haven't seen anything yet that has met our disciplined threshold in terms of clinical performance and financial performance. But of course, if there is anything that is interesting from a technical perspective, that meets our thresholds, we'll be right there with an Alcon level solution.

Larry Biegelsen, Wells Fargo. One on AR 512 and one on Unity VCS is that what it is you?

Yes, for cataract, yes, yes.

So on AR 512, just hoping you can set expectations a little bit. It's a big category. So how derisked do you think the Phase III trials are based on what you saw in Phase II as FDA, those are not traditional dry end points. We talked about it before [indiscernible] Usually, it's an [indiscernible]. So how -- did FDA sign off on these endpoints? And how is it differentiated from Restasis and [ Kunze ]. And I have one follow-up for Jeannette.

Yes, we're feeling increasingly good about the Phase III program. We'll have to see the full data to understand what the label is going to say, one of the many smart things that the legacy area R&D team that's now part of the Alcon Inc. did was they included secondary and tertiary endpoints in the original Phase II studies, which is what I showed you today. That allowed them to look at the breadth of the data and then reengage with the agency and get alignment on what the Phase III primary endpoints would be. And they did that before going into Phase III, and we feel really good about the study design. We'll see what the results bear out.

Signed off those endpoints?

Yes.

Jeanette, on just UNITY VCS, you mentioned the timing a minute ago. But I'm curious why a combined Vitrectomy system, they're done by different physicians, they go side, the doctors tend to be pretty busy, right? So back of the eye front and the docs, we combined system? And how do we think about the replacement cycle? You have 25,000 machines out there. help us think about modeling, if you will, a replacement cycle.

So first, from an individual system, a cataract. The majority of the U.S. operates that way. So from the split between a retinal surgeon and a cataract surgeon, you will see that type of market condition where you're right, it needs to be a retinal. But when you look at the global landscape, over 50% of our units are actually combined because in international markets, they actually are doing the combine. So they're not as dramatic split in certain markets like we see in the United States. So second, when it looks -- you look at life cycle management, on equipment, we can say on average between 8 and 10 years because we're ready to upgrade their systems. If you look at the historical perspective of both Centurion and Constellation, people are ready and anxious to see our system. So we'll methodically go out and look at the age of the system, try to be that partner of choice -- we also believe there will be demand on switches based on the performance of it as well.

Larry, just to be perfectly clear, there are 2 units coming one that will be a stand-alone cataract system and one that will be a cataract and refractive in system. So the cataract VIT system will be the first, and that will be the combined unit, and then we will follow on with a cataract only. So we'll serve both markets. U.S. is dominantly a stand-alone unit to your point. Internationally, because the hospital shares ORs and the surgeons often share the space, it's much more efficient for them to have instead of having to roll in the cataract unit or roll out the [ Vitreous ] this is much more efficient. And this is state-of-the-art both machines you don't have to compromise on this one.

David Adlington from JPMorgan. Just on the next-generation PanOptix. Just wondering if we should be expecting a premium price for that product and sort of scale of it, if there is one? And then secondly, just on 512, just wondered in terms of your [ $12 billion ] sales target. I just wondered what you incorporated within that for 512? Or should we view it as an option?

Yes. So in next-generation PanOptix, we have not released the pricing strategy. But as you can imagine, the work we're going to do up to that and through commercial launch is a value extraction. So should we see a benefit, then we'll price accordingly.

And on -- for 512.

For 512, we have a risk-adjusted number prior to the Phase III completion in the $12 billion.

Jeff Johnson for Baird. David, I want to talk -- I understand the putting new lines in on the contact lens side and that throws more depreciation. It takes a while for the overhead absorption to come up to speed and all that. Where are we in that cycle, though, of you've been kind of in this hyper launch phase, right, of total 30 of P1 of DT1 extensions of adding new lines to catch up to everything you needed to do versus now kind of where just the annual gating of new line additions is going to happen, right? I mean we know the transition to dailies is going to -- every year, you're going to have to add more lines. But when does the added cost of adding all those new lines start to get dominated or less dominated, I guess, in the P&L to where you actually do start to see that inflection in the gross margin on contact lenses.

Yes. I think if you look at from what we said versus the '21 Capital Markets Day, there's 2 points that I'd make. I'd say, one, from an absolute number of lines, we're putting in more lines than we had originally anticipated, and that's driven by incremental demand, if you think about PD-1 and the success we've seen there. And then the second piece I'd look at, if you look at the productivity of the lines that are fully optimal. So we have some lines in Singapore that we installed a while ago. Those are running fully optimal speeds now the individual line results are a little bit better than we anticipated. So that's all good news. To get to your question around the CapEx piece, I would think at the sort of the midpoint of the plan, that way, you'll start to see that normalized CapEx, which is just keeping up with different demand capacity.

You're saying between now and 2027 in the mid half of that? .

Yes.

But remember, each one of those lines, the blend of that line will be kind of steady over a long stretch. And again, you don't get the terminal until you actually depreciate those lines. So thinking about competitive gross margin, for example, many of those companies have fully depreciated their lines. They're working on variable cost per lens. So that is a big margin impact at some point. So again, we expect that to be steady in Vision Care it's terminal value being very substantial, but it does take us a while to get there.

Yes. And then my follow-up, Max, I'm going to push you a little bit because I think we've asked a couple of questions here on the 7-day lens, both upstairs and here in this setting. If I go back, I think it [ Essilor Vision ] if I remember right, like 15 years ago that had the compliance studies that showed 2-week compliance was terrible. Everybody extended their lenses anyway to a month or something. So I guess I still struggle with the idea of a 7-day lens I understand what you're going to tell me, which is there's going to be moisture properties of the lens is going to wear out after 7 days on that. But we know 50%, 60%, 70% of eyes can put rocks in their eyes and be okay probably. So to a certain extent, I guess I still struggle with the compliance side of a 7-day, I'm going to pay $25 for a 6 pack of lenses and then I'm going to extend them for a month each and all of a sudden, we're devaluing at least a segment of the market. .

Yes. So if you've looked at the CBA data from 15 years ago, that actually says that one day and one month, this idea of one is very, very compliant because it's easy to remember one day, one week, one month. And so the data continues to indicate that the compliance correlated to the easiness to remember the schedule. And one day is easy, one week is easy, one month easy. Things in between, not that easy. And as that plays out in the compliance data. So I think you'll see a product that we expect to be more compliant and therefore, better for patients, better for consumers, better for the eye care professional.

I think maybe one other piece to add in here and, Max, I should comment on this, is this lens is designed to work for a week. And that's an important statement really when you think about it because -- if the lens is design -- all you've done is take your monthly and call it a 2-week, then people will wear it for a month. This is designed for a week. And importantly, we think that will be the perfect compliance moment because to Max's point, that seems to be where the other thing on pricing, we're acutely aware of what the pricing dynamic is. So again, we will price these lenses to the actual duration we expect so that there is a natural incentive to kind of go from one or the other and devalue the market per se. So I think your point is an excellent one because in fact, that's what's happened historically. And it's also one of the opportunities we see.

Veronika Dubajova from Citi. Three questions for me, please -- if that's okay. One for Jeannette on the ambition in Diagnostics, obviously, newer space for you guys. But I'm just curious, as you think about now the new UNITY offering, if you venture, I guess, on where you think your market share might be by the end of the plan and how you're thinking the absolute dollars there? And then David can opine to on that one, that would be great. My second question is just a follow-up to David's on the PanOptix next generation. What's the point of differentiation that you're working on there? And maybe just a slightly more precise time line. I think I've missed it, maybe you're keeping it to you. And then for Max on contact lenses, I just noticed on P1, there was no plan for multifocal, are you working on that? Is that in the plan? And if so, when do we get it?

You want me to start?

Yes.

I forgot the first one.

Diagnostics. Diagnostics. Look, this is a complex question because when you look at diagnostics, what are we doing? We're actually replacing multiple pieces. As we think about that market potential of where we would compete, it's about $300 million. So remember, and we're even segmenting mid-tier biometer. That's where we think we have coexistence within our current biometer and our future because people will tier it based on price and performance. So from a market share perspective, I'm not going to make any guesses there, but think about it in terms of what we've done in the U.S. with Argos, how do you step that up and then forecast your market share there. Second, which was a question for me, and David, please add in here. But when you think about next-generation PanOptix, I won't go to clinical or technical on you, but from a light distribution, we believe we actually can bring in more light. So one of the benefits we think with this next gen is contrast sensitivity. We love PanOptix. It is a perfect lens, it does every single instance of distance, intermediate and near. -- now be at dinner, I'm a high myo, DT1 in my eyes, how do you, after cataract bring that light to get better contrast sensitivity, which we believe will be a second generation versus anything coming into the market?

Timing?

Timing, mid -- so my frame was 24 to 36 months. We'll keep it that for forecast. .

All right. And then on the multifocal lenses. So think about the presbyopia patient or the consumer in the first place, right? So these are presbyopia guys that tend to have a dry eye, and they also tend to be affluent, and so as you look at our portfolio, we have the perfect technology and the perfect products there with our total brand with Total 1 and Total 30 with water grading technology and smart surface technology to really address the need of the dry eye and be particularly indicated for those type of consumers. And those are also our highest performing products. So we think we're in a pretty good place with the portfolio we have right now. And in the end, it comes down, what matters most is that total portfolio we have ultimately sets us up to continue to gain market share.

So we've got a question online from Falko Friedrichs from Deutsche Bank. The question is, would you be interested in developing a refractive laser technology that is similar to SMILE technology? Or do you prefer to just focus on LASIK?

Well, I mean, let me start and then you fill this in. I think directionally, we have great confidence in the LASIK procedure. I think most people, when you reserve -- when you really look at the data and most surgeons around the world, I think, will tell you that either a PRK or LASIK or the preferred procedures, if you're really looking for visual outcome. And so I think directionally, we intend to pursue that as a primary idea. However, the next-generation laser is really a very interesting product. I mean, it cuts more efficiently. It cuts more precisely. And I think we could probably do anything we want with it. So the question really will ultimately be how do we take it to market and what modality do we choose to use at that moment in time. And I think directionally, we'll have to see where the market is at that point. hopefully, from our perspective, we have a very successful launch of InnovEyes. We see people really want to move to a better than 2020 number, which you really can't do with some of the other procedures.

[indiscernible] You talked about a number of next-generation equipment launches that are coming to combine the work of 2 or 3 different systems in the lab today into one box. Does that cannibalize your replacement cycle for some of those boxes, you already have pretty high share in a number of those categories. How do you think about making this a win for Alcon versus just introducing stand-alone products in each of those segments?

So first, we'll focus on diagnostics. The combination of taking different pieces of equipment, that's a brand-new revenue stream for us. So that will be all new. We will be taking market share versus cannibalizing ourselves. When you think about in the OR, the operating room, we're replacing our own but with an upgrade. So if you already had a dual system, a constellation will bring you into UNITY VCS. So for us, it's not cannibalization. It will be replacement and/or extended ORs as we've talked to or competitive conversion because of the capability of this instruments. So diagnostics it would have been if it was a different space we played in, but it's not, it's brand new revenue streams for us. .

The other way to think about it, too, is that the efficiency of these ORs is you're still going to have the same number of procedures running out there and you can only run one procedure per OR room, so per suite. So you're going to have to have equipment in each one. So if you choose to buy shared equipment or a dual unit great, you're going to put it in one OR, but you can't use it at the same time. So you're going to have to try to run 2 procedures the retina guy is going to still need a constellation or the cataract guy is going to need the new cataract machines. So I think directionally, we're not super concerned about it.

Makes sense. And then a follow-up on AR 512. How do you see this fitting into the treatment landscape? Is there a way to tell which patients might respond better than to this? -- an anti-inflammatory or is this going to be a second-line therapy for those that fail RESTASIS , how you're thinking about that?

Yes. I thought the original question was going to be how does it fit into our portfolio. And so I'll just make the point that it fits quite nicely. We sustain artificial tears plus Eysuvis for the treatment of dry eye flare and then a chronic dry eye product. I don't know that we have an indication of who the target responder is, but it's a great question and something that we'll be looking at in the Phase III data.

I do think one of the unique things about it, as we've talked about, has been its ability to be added to things. So maybe comment a little bit on that.

Yes, it could be added to, obviously, used in conjunction with an artificial tier, which is what you see with the crown dry eye products today. And I assume this could be prescribed in advance of a chronic dry eye product in...

But in the near term, what was interesting in the data was the day one response. So if you think about the 2 most substantial products in that category, which would be RESTASIS and Xiidra both of them have a very long run in to get to efficacy -- and so I think this is a different mechanism that could run alongside any of those. So to the extent that a payer wanted to use a generic product, let's call it RESTASIS first, fine, but give them relief right away as well would be a nice positioning that you could find if you believe and if the Phase III data works out to be very quick onset. So I think that's, again, we don't have to necessarily fight everybody with this product if it works.

Matt Mishan, KeyBanc Capital Markets. Jeannette , I believe I heard you say that one of the drivers of IOL penetration is increased patient education.

Yes.

Like how would you go about that? Is that a DTC campaign or something different?

It's actually a partnership with the health care provider. So if you really look at it, the surgeons implanting IOLs, we're going to -- you have to make sure our premium IOLs, we have a partnership there. So it's an outreach. As a patient comes in point of decision-making, they're identified as a cataract -- the most efficient way is to then send materials home with them, either digitally via iPhone or print material depending on digital capability of the patient. But that's a point of service for a practice. And as they come in, the chair time needed to explain a premium lens has been reduced, and we've seen KPIs in our pilots in the United States to show that, that's a meaningful uptick to premium lens utilization.

And then just a follow-up on the contact lens platforms. In your 2021 Capital Markets deck, it previously introduced like a novel contact lens platform in 2023 or 2023 plus. Is that novel contact lens platform, the PRECISION7? Or is that something that got put off.

A little bit by a couple of more years.

so I think that's PRECISION7?

Yes, that's PRECISION7. We should call it that. You didn't want to tell everybody, we were coming with a 1-week lens before we actually had made it.

Anthony Mizuho , a couple of follow-ups. Maybe Jonathan, just on -- we didn't hear a lot about Rocklatan and Rhopressa in the prepared comments. So maybe just can you walk through the early trends the company is seeing after the closing at and sort of where you think the total share can go in the drop category for glaucoma? And then just on print technology, just to clarify, is the plan both a stand-alone delivery platform and an implant. And if so, what is the timing for that?

Why don't you take it? Let me take it will be real quick show. Just on -- we generally aren't going to comment on the specific of the individual products. But I will say on the Roc products, what's beautiful about that program in our minds is that there is an algorithm that I think is setting up with the scientific community in glaucoma that looks to me to be stabilizing around the world, which to a large degree, is going to be a generic latanoprost or something like that first. But almost immediately, you got to get in front of glaucoma. And the best thing you can do as soon as that product starts to drift is put Rocklatan in play. And so in terms of fixed combination, we know that's the most effective. And when you run out of gas there or if you're not a switcher, you can use Rhopressa. But once you've got a Rocklatan inhibitor on board, then what you're doing is you've moved to Simbrinza. So we've kind of got a -- the maximum medical therapy can be accomplished in 2 bottles in an essence, and an algorithm that really seems to work for the payer seems to work for the folks that are really in the glaucoma world right now. So we'll keep pressing on that, and I think that will be the direction of travel for us. share-wise, we're on a pretty good trend right now. The business finished where we expected it to, and I suspect it will continue on that trend.

And for the print technology, think about it as a delivery platform. So the first thing that we will be utilizing in the print technology is the in-licensed anti-VEGF. That will show us how well it works. But you can imagine a scenario that it could be used for a number of indications at the back of the eye, AMD, it anything that requires drug delivery to the back of the eye gives us an opportunity to think of it as a platform technology.

One question for me, and then I'll hand it over to Larry. Jeannette , on refractive. So InnovEyes, I mean LASIK trends this year have been pretty terrible in the U.S. market just coming out of COVID of tough comps. We've talked about the Asian market dynamics. And so how do you think about InnovEye's relative to LASIK from a pricing perspective? And what are you assuming for market growth in refractive as we kind of get through this idiosyncratic period with refractive. .

I'll comment first. You want to comment ?

No. No.

So first, as you think about InnovEyes, both in the United States and then internationally. Look, you're going to see individualized patient treatment. Our current commercial model is a click fee in the U.S. We think we can deploy that individual click fee outside the United States. So I think in terms of revenue streams versus just equipment sales. So that's the first thing to consider. Number two, you're right, as we think about both now and previous economic challenges, we still think that over time, the U.S. will increase in market share, single mid-digits. When you get into China, an opportunity, and I think we talked about this, some of us, as we walked out, you guys asked me questions, you've seen some of the competitors. That's a $350 million to $400 million market that clearly that's China alone, not the rest of APAC then we have market share gains. And especially with individualized patient treatment, we believe that marketing campaign will go very well in Asia.

And I think that's one of the really interesting parts of the InnovEyes program will be what we can do in Asia, particularly in China because I think directionally that's been a market that is sensitive to marketing and sensitive to what you do on the ground commercially. And I think we have a real opportunity to personalize this, come up with something that really sounds a lot like personalization of medicine, which is what it is actually where everybody will get a custom ablation if you do this right, which is a better outcome than anything else you can get. We like that story.

Can you hear me okay? One on ocular health. One area I did not see on the slides was red eye, what you're just like [ Lumify ] type product. [indiscernible] actually had a lot of success there. And then, Ian, you talked about for the accommodating tunable lens, you talked about stand-alone innovations. So is that coming out with an accommodating separately or coming out with a tunable lens separately? And these are PMA pathways, I would imagine, it's not like you could just launch one or the other, even tunable, I just want to confirm that you'd probably have to do a PMAs than ID for that. .

Red Eye First.

Yes. We like the idea of innovation in red eye and specifically beauty, and we're looking at that hard.

If it's growing, we're probably looking at that.

And then you're right. The Holy Grail for obviously where we want to go is accommodating and tunable and that's the main focus of what we do today. If we found that, that is continuing to push out, then we have an option for you could apply one or other of those ideas. [indiscernible] is probably a significant idea that you could apply to a number of different technologies accommodating, would be kind of a stand-alone idea. But as you say, it gives us those choices in terms of how we could...

[indiscernible] tunable alone.

We haven't commented on where we are with those. Yes. Thanks. That's right.

Best Shot.

[indiscernible]

Oh, yes. No, of course, you would.

So I think we've got time for one more question.

Really quick one and a slightly less quick one, if that's okay. Just on the Aerie deals. You talked a lot about dry eye and 512. How much of a factor you complete that deal was that [indiscernible] asset because I've always seen there's optionality rather than the key of getting over the line. And then just one quick one on refractive in terms of customizable treatment. How much extra time that add to the process? .

Let me take the first one. On the Aerie deal, we -- the economics of that, we were very deliberate on that. We have spent a couple of years talking to them and we never really we finally got to a place where we thought the deal made sense to us, but it was really because we were valuing the Rhopressa and Rocklatan as a stand-alone, and that's really what we did the deal on. The value was in essence, what we thought we could get of those 2 brands. And then our upside scenario was if we can get something out of that pipeline great, it gave us capability which we liked. So there was a number of kind of what I'd lose call upside scenarios to the economics, which paid for themselves really on the 2 core products that we're already on market.

And then from a refractive perspective, it's really about the diagnostic capability. So site map is our new offering through InnovEyes, and the ability to truly see 3D, we don't anticipate taking any additional time and then you program the laser and the laser perform the surgery. So for us, we're still committed to that efficiency play and we don't expect any additional time.

Great. That concludes the Q&A.

Thank you.

Okay.

All right. Thanks. All right. So you've had a whole lot of eye care this morning. Hopefully, you enjoyed it. I hope you pitched that at the right level, and you got just enough or not too much, but I want to bring you back to where we started because it is really our intention to try and deliver a couple of key messages. And that is we are a global leader in very favorable markets. We're underpinned by a real value creation effort by health care authorities and my people who really care about eyesight because it is exceptionally valuable. And those favorable markets are underpinned by trends like aging, like myopia, like all the things we've talked about that we expect the markets are growing that mid-single digits. So if you show up and you do okay, we should be able to grow mid-single digits. And of course, our strategy here to win is really through specialty market and technical expertise. So if we do that work and we do it well, and we're better at guessing whether the markets are going to develop or not and we're better at getting the technologies right then we should grow faster than the market. And if we do that, of course, as we did in the first Capital Markets Day, when we spun in our second one, our thesis is we get new products, that drives revenue. We grow costs slower than that. We get leverage and we drive our core operating income, and you've seen the financials. And I think we've got a track record that we've demonstrated so far. So hopefully, as we put these things up, we have fairly concrete plans that we're laying out here. We've been a little bit vague on time lines. I know that because we don't want to give every competitor in the business here exact timing on what we're launching stuff. On the other hand, I can tell you with some confidence we're very comfortable with our product flow and with our revenue trajectory. So I think directionally, all of this combines into what we think is a really important shareholder perspective, which is we can create long-term value here. Most importantly, we love doing it. And hopefully, you saw from the presentations energy from the guys that are actually in the trenches doing all this work. We love eye care. We've all been doing this for a while, and really think it matters to patients. So I want to finish up with just a short video and then we'll break. And thank you all for coming.