Alcon Inc Q3 FY2025 Earnings Call

Greetings, and welcome to the Alcon Third Quarter 2025 Earnings Call. Please note, this conference is being recorded. I will now turn the conference over to your host, Dan Cravens. Please go ahead, sir.

Welcome to Alcon's Third Quarter 2025 Earnings Conference Call. Yesterday, we issued a press release, interim financial report and presentation. You can find all these documents on our website at investor.alcon.com. Joining me on today's call are David Endicott, our Chief Executive Officer; and Tim Stonesifer, our Chief Financial Officer. Our press release, presentation and discussion will include forward-looking statements, including statements about our future outlook. We undertake no obligation to update forward-looking statements as a result of new information or future developments, except as required by law. Our actual results may differ materially from those expressed or implied in our forward-looking statements and as such, you should not place undue reliance on any forward-looking statements. Important factors that could cause our actual results to differ materially from those in our forward-looking statements are included in our Form 20-F, earnings press release and interim financial report, which are all on file with the Securities and Exchange Commission and available on their website at sec.gov. Non-IFRS financial measures used by the company may be calculated differently from and may not be comparable to similar measures used at other companies. These non-IFRS financial measures should be considered along with but not as alternatives to the operating performance measures as prescribed per IFRS. Please see a reconciliation between our non-IFRS measures with directly comparable measures presented in accordance with IFRS in our press release. For discussion purposes, our comments on growth are expressed in constant currency. In a moment, David will begin by recapping highlights from the third quarter. After his remarks, Tim will discuss our performance and outlook for the remainder of the year. Then David will wrap up, and we will open the call for Q&A. With that, I'd now like to turn the call over to our CEO, David Endicott.

Good afternoon, everyone, and thank you for joining us. We entered 2025 knowing that it would be a year of building toward the second half, and the third quarter reflects that progress. While there's still work ahead, we're encouraged by the momentum we're seeing in equipment and ocular health. I'll begin with surgical equipment, where we're seeing clear signs of strength with Unity VCS. As expected, the launch is delivering on its promise of greater efficiency and workflow optimization in vitreoretinal and cataract procedures. Surgeons are responding positively to the introduction of 4D Phaco technology. Unlike traditional systems, the 4D Phaco tip moves in a unique multidirectional pattern that enables more efficient lens removal while delivering significantly less energy into the eye. This motion combined with real-time fluidics is designed to enhance chamber stability. The result is greater control and confidence for surgeons and greater efficiency for the hospital or ASC. Importantly, as we articulated in the past, we're being deliberate in pacing installations so that surgeons can observe these significant gains in efficiency. We're investing heavily in training, clinical support, and workflow integration so that each site can fully realize the benefits of Unity. This approach is helping us build durable momentum and strong customer advocacy and reflects our long-standing commitment to customer-backed innovation with the surgical community. We're also gearing up for the launch of Unity CS, the stand-alone cataract version, which will be widely available in the coming months. Together, Unity VCS and CS represent a step change in surgical performance, and we're excited about the momentum heading into next year. Turning to implantables, PanOptix Pro is proving to be a meaningful differentiator. It builds on the success of Clareon PanOptix, but now with 94% light utilization and half the light scattered compared to its predecessor. These enhancements reflect a significant advancement in optical design by providing more uninterrupted light distribution and greater image contrast. Importantly, the launch of PanOptix Pro is beginning to stabilize market share dynamics in the U.S. Trifocal IOL category. Now turning to contact lenses, I was pleased with our results this quarter as we continue to outpace the market. Our toric modalities, in particular, delivered double-digit growth in the quarter and are expanding access for astigmatic patients. It's important because studies show that more than 40% of patients are astigmatic, yet less than half are fitted with toric lenses, representing a significant growth opportunity. These lenses feature our proprietary 8 and 4 design, which helps reduce eyelid interaction and allows these lenses to settle quickly. And for wearers, this means clear, stable vision and exceptional comfort. This enhances the patient experience as well as supports practice growth and retention for eye care professionals by expanding access to more astigmatic patients. Now moving to ocular health, I'm very pleased with the continued strength of the Systane family of artificial tears, which delivered high single-digit growth in the quarter. We continue to see encouraging momentum in the adoption of our multi-dose preservative-free formulations led by Systane Pro, which we launched in January. These formulations are helping us meet the growing demand for preservative-free artificial tears. We're also encouraged by the early performance of Tryptyr, which we launched in August. Unlike traditional prescription dry eye drops, Tryptyr is the first and only prescription drop that stimulates natural tear production as early as day one. This mechanism of action directly and rapidly addresses the core problem in dry eye disease rather than supplementing for evaporation or treating the resulting inflammation. This makes Tryptyr a meaningful advancement for both prescribers and patients. While it's still early, the breadth of initial uptake has been very encouraging, prescribable trialing is high, and we're seeing adoption from both ophthalmologists and optometrists. To support access and streamline the patient experience, we partnered with an easy-to-use digital pharmacy platform to simplify fulfillment. This collaboration is helping patients start the therapy quickly and conveniently, which is especially important in the early stages of launch. Now more broadly, our commitment to innovation and clinical excellence was on display at the recent ESCRS and AAO conferences. We supported over 40 studies reinforcing the value of our technologies across cataract and refractive care. I'll take a few moments now to highlight three topics. First, there was new data on Vivity AT-IOLs showing strong patient satisfaction in complex cases like early AMD and mild corneal irregularities. These findings reinforce Vivity's differentiated value proposition in the premium IOL segment. Second, there were time and motion studies that demonstrated statistically significant efficiency gains with Unity VCS compared to the legacy systems. With cataract volumes rising and the incidence of retinal disease increasing, demand for ophthalmic care is outpacing the supply of eye care professionals. These results demonstrate that Unity helps address this imbalance by enabling more efficient procedures and supporting higher patient throughput. Finally, a head-to-head study comparing WaveLight Plus and SMILE Pro revealed that WaveLight's ray tracing technology significantly outperformed SMILE in visual outcomes. Using a three-dimensional digital twin of the eye, WaveLight Plus achieved 20/12.5 vision or better in 98% of the cases versus 82% with SMILE Pro. It also delivered superior precision, astigmatism correction, and contrast sensitivity. These results underscore the potential of personalized LASIK to set a new benchmark for refractive surgery and reinforces Alcon's leadership in ophthalmic innovation. Moving now to market dynamics. Global cataract procedure volumes grew approximately 3% in the quarter, which is an improvement, but remains below historical averages. Additionally, global AT-IOL penetration was up 130 basis points. In Vision Care, we estimate that the global contact lens market grew approximately 4% in the quarter with a strong U.S. market partially offset by weaker growth internationally. And before I pass it to Tim, I'll briefly comment on our proposed acquisition of STAAR Surgical. We continue to view the transaction as attractive and believe that Alcon is best suited to maximize the value of their implantable polymer lens. And we believe that the ICL is complementary to our refractive laser business. So we like this deal, but it isn't essential to our long-term growth plan. Last week, we published a presentation expressing our perspective on the upcoming shareholder vote. We believe our offer represents an attractive premium across multiple measures and creates value for both Alcon and STAAR shareholders. So to wrap up, despite a soft first half, we're encouraged by recent signs of improving market conditions and the robust performance of our recently launched products. Our innovation pipeline is strong, our execution is focused, and our teams are energized. I want to thank our associates around the world. Your dedication and passion continue to drive Alcon forward. I'm proud of what we've accomplished together and excited for what's ahead. With that, I'll turn it over to Tim, who will walk you through the financials.

Thanks, David. Our third quarter sales of $2.6 billion were up 5% versus the prior year. In our Surgical franchise, revenue was up 5% year-over-year to $1.4 billion. Implantable sales were $432 million in the quarter, up 2% versus the prior year period. As David mentioned, we've been very pleased by the surgeon response to the U.S. launch of PanOptix Pro, which is beginning to stabilize share dynamics in an increasingly competitive market. In consumables, third quarter sales of $745 million were up 5%. This growth reflects improving global cataract procedure volumes as well as price increases. As David mentioned, while procedure volumes in the U.S. improved during the quarter, they were still not back to historical rates. In equipment, as we expected, we saw a significant acceleration in the third quarter with sales of $243 million and growth of 13%, driven by the launch of Unity VCS. Turning to Vision Care. Third quarter sales of $1.2 billion were up 5%. Contact lens sales were up 5% to $707 million in the quarter, primarily driven by product innovation and price increases. This growth was partially offset by declines in legacy products, including DAILIES AquaComfort Plus, where we've limited our promotional activity. In ocular health, third quarter sales of $462 million were up 6%. Growth was led by eye drops for dry eye and glaucoma, including Systane, Rocklatan and initial sales of Tryptyr, which we launched in August. There was also some pressure resulting from the divestment of certain eye drops to Ocumension in China, which we will lap in the fourth quarter. Now moving down the income statement. Third quarter core gross margin was 62.9%, down 50 basis points year-over-year, mainly driven by incremental tariffs. Core operating margin was 20.2%, down 60 basis points, driven by lower gross margin, sales and marketing investments behind new product launches, and increased R&D investment. Third quarter interest expense was $51 million, broadly in line with last year. Other financial income and expense was a net benefit of $3 million. The average core tax rate in the first nine months of the year was 17.4%, down from 18.5% in the prior year due to higher discrete tax benefits in the current year. Core diluted earnings were $0.79 per share in the quarter, down $0.02 versus last year. Turning to cash. We generated $1.2 billion of free cash flow in the first nine months of the year compared to $1.3 billion in 2024, primarily due to increased capital expenditures. Our robust cash generation has enabled us to return $550 million to shareholders in the first nine months of the year, comprised of $384 million in share repurchase and $166 million in dividend payments. Regarding tariffs, we incurred $57 million of tariff-related charges in the first nine months of the year. Of this amount, $38 million was recognized in cost of sales, and $19 million was recorded on the balance sheet for product not yet sold. As we enter the fourth quarter, we expect to see a step-up in tariff-related charges and cost of sales. Given tariffs are capitalized into inventory and only recognized in cost of sales when the inventory is sold, this creates a timing lag between when the tariff is paid and when it affects profitability. Due to our inventory cycles, we will start to see the full financial impact in Q4. We continue to expect a full year impact of approximately $100 million to cost of sales, and we expect to offset this primarily through foreign exchange as well as operational actions. Now moving to our outlook. Our outlook assumes that aggregate eye care markets grow low single digits for the remainder of the year. Exchange rates as of the end of October hold through year-end and the current tariff structure remains in place. Based on these assumptions and our year-to-date performance, we are reaffirming our full-year guidance across all metrics. Sales remained on track at $10.3 billion to $10.4 billion with constant currency growth of 4% to 5%, and we continue to expect acceleration in the fourth quarter driven by new product launches. R&D is expected to finish toward the high end of our 8% to 10% of sales range, which also reflects the impact of recent acquisitions, including Aurion. Our core operating margin outlook remains 19.5% to 20.5%, and nonoperating expense is unchanged at $185 million to $205 million. We maintain our core average tax rate guidance at approximately 18% and our core diluted EPS range of $3.05 to $3.15, reflecting flat to 2% constant currency growth. Looking to 2026, while we won't formally guide until February, I'd like to share some color around expected headwinds and tailwinds. On tailwinds, we expect continued acceleration from new product launches, including Unity VCS and CS, as well as Tryptyr, PanOptix Pro, and Precision7, among others. These innovations should enable Alcon to grow faster than the market. And at the same time, we'll maintain disciplined cost management so that sales growth outpaces SG&A, driving margin expansion through operating leverage. On headwinds, although we've operationalized some mitigating actions, we expect a net incremental impact from tariffs of roughly $50 million to $100 million in 2026 versus 2025, which reflects an evolving sales mix as well as our inventory cycles. And with regards to investment, in 2026, we'll see the full-year impact of Aurion and initiate the Phase III clinical trial early in the year. Combined, these are expected to pressure core operating margin by an incremental 40 basis points. Beyond that, we remain focused on disciplined execution and are confident in our ability to deliver sustainable growth and long-term value for shareholders. Finally, I'd like to extend my heartfelt thanks to associates across the organization for their dedication and hard work. And with that, I'll turn it back to David.

Thanks, Tim. To wrap up, I'm encouraged by the progress we saw across the business in the third quarter. The successful launch and growing adoption of Unity VCS, the strong reception for PanOptix Pro, and the early promise of Tryptyr all underscore the strength of our innovation engine. As we discussed at our Capital Markets Day, we remain intently focused on the long term. The markets we serve are resilient, underpinned by powerful demographic and technological trends. We're investing behind operational excellence and R&D so that Alcon continues to lead our industry. And our long-term vision is anchored in a steady flow of new products, a commitment to innovation and a deep understanding of our customers. With our global reach, dedicated teams, and rich pipeline, I'm confident that Alcon is well positioned to accelerate growth, expand patient access and deliver sustainable value to our shareholders. And with that, let's open our line for Q&A.

And our first question will come from Anthony Petrone with Mizuho Group.

Congratulations here on the quarter. One on Unity and one on just the underlying U.S. market. So on Unity, it looks like the cycle is sort of getting started here. The company has commented in the past that 10% of the base, that 30,000 base is sort of how to think about this cycle, but it could be more front-end loaded. So maybe just a little bit on the shape of what that S curve will look like into 2026. And then the underlying surgical market in the U.S., it's still below normal levels. What were the trends in October when you think about underlying cataract volumes, for instance? And what is the early view on how this is going to shape up into 2026?

Thanks, Anthony. Regarding the cycle, I don't have much new to add compared to what we've shared at the Bernstein conference or in previous discussions. We have a base of about 30,000 units spread over 10 years, which results in an average that shows a bit of delay in the latter part and faster progress initially. We'll start to see the shape of this manifest as we move forward. We've recently posted an estimate of the first couple of years on our website, which reflects our current expectations, and we feel confident about it. The U.S. cataract market showed some improvement in the third quarter, contributing to an overall global increase. We experienced around 1% growth this quarter, following flat performance in the U.S. last quarter. Overall, the cataract procedural market is up 3% this year, marking a notable rise compared to the first half of the year. However, we remain cautious since one data point does not indicate a trend. Let's wait until early next year to provide a more accurate number, taking into account the fourth quarter's full performance. Historically, we've seen a regression to the mean, with long-term trends suggesting around 4% in the U.S. and approximately 3%. We anticipate these historical figures will hold true moving forward.

Our next question comes from Ryan Zimmerman with BTIG.

David, on the STAAR transaction, you guys put out, I think, pretty pointed comments about your views about it. I guess what I would ask is if it were to fall through, even after this new go-shop period, you highlighted a number of alternative ICL offerings in the market, either coming or in the market. Why wouldn't one of those fit your needs? And I guess, what, in your view, makes STAAR's technology attractive other than they've been in the market, they've had success for some time?

I don’t have much to add beyond my prepared remarks since this is a sensitive time. I encourage anyone interested in details about this transaction to check out what we’ve posted online. We really like their product and their team, and we believe it would be a good complementary business for us. As I mentioned, it aligns well with our laser business; we share the same customers, and we have larger markets. We can manage this more efficiently. However, there are only a few proven ICLs, and this is one of them. It has been in the market for some time and features unique columnar material. Many users of these products recognize its reliability. In elective procedures, it’s essential to use something well-established rather than experimenting with new products. While new innovations can emerge, they require time to gain acceptance. STAAR faces a clear challenge as a single product company, making it difficult for them to achieve profitable growth. Ultimately, their shareholders will need to choose between a return to the unaffected share price and a lengthy journey with activist investors managing the company, or they can accept a solid premium from us. Regardless, we will end up in a good position. We’ll determine the next steps as we progress. But as I noted, if the deal doesn’t happen, we have a solid plan in place.

Thank you for the information. My second question is regarding your sales strategy. I believe you have integrated your Hydrus sales team into the larger cataract sales team. Can you discuss your current position in the surgical glaucoma market and what your plans are moving forward? You've already advanced in the treatment cycle with the BELKIN product and other alternatives, so I would appreciate your insights on your outlook for surgical glaucoma.

No. We're optimistic about this. Let me clarify your point a bit, not because it could be misunderstood, but to clarify the situation. We have actually increased the number of people selling Hydrus. Our in-theater team now sells both IOLs and Hydrus. Previously, we had a set number of Hydrus staff who didn’t sell IOLs and a separate group of IOL staff who didn’t sell Hydrus. This division didn’t make sense since they were engaging with the same patients at the same time in the operating room. So we decided to consolidate and expand that group. Additionally, with the Voyager and Valeda products, we are forming a new expanded team to bring representatives into clinics to target glaucoma specialists and also to address the retina space for AMD treatment. We are growing in these areas. As I've mentioned before, there are significant opportunities in glaucoma, retina, and refractive. We are progressing into these areas, not retreating from them. I want to emphasize that we intend to expand in both sectors, particularly in interventional glaucoma, which we believe is the future.

And we'll go next to Graham Doyle with UBS.

This is Kavya, on for Graham. Just a couple, please. First is, do you expect to exit the year at a 7% plus top line growth? Why isn't that a good starting point when we're thinking about next year? And then second question is just on equipment again. So at a recent conference, you outlined targets for next year implying 50% volume growth. Is that a sensible starting point for next year for the half of equipment that is driven by Unity?

Look, I think we're not going to comment too much on next year until next year. And I think the reason we give a range, of course, is because these are assumptions we're making about the trajectory and the market, and we'll see. So I think the obvious opportunity here is to be at the high end of that. If it doesn't happen, it won't be a surprise to us. We're looking to just try and do as much as we can right now and think about the long term. So we've been very careful about Unity VCS, in particular, because it really, at this point, is so far in front of every other piece of equipment that's in its class. We just don't have to rush because the worst-case scenario is somebody is going to buy one of our other pieces of equipment. So I think what you're going to see next year in equipment is a robust year. I think it will accelerate from this year for sure. But I wouldn't want to venture a percentage guess until we really get through this year and get into a place where we're really guiding with some certainty around the assumptions. So let me do that for you in February.

And we'll go next to Tom Stephan with Stifel.

Great. First one, just on Unity. I know it's early, but can you talk a bit about, I guess, how placements are trending relative to initial expectations? And then maybe how the order book is building compared to those expectations as well?

Sure, Tom. I mean, it's kind of as expected. I think we gave some expectations recently at a conference. I think we're on those. Our order book, we don't comment on directionally. It's been very healthy. We could ship a lot more if we chose to. We are being clear about our intention to train these very carefully and make sure people realize the benefits of them. I mean the basic idea here is we're trying to get more efficiency in the OR. And to do that, you have to work with both the surgeon and the staff. And what you have to really do is begin to think about, well, if I did 20 cataracts in a day, could I do 21, and how would I do that? It has to do a lot more with the turn of the room, the priming of the machine, the transfer of settings, so everything moves smoothly, the priming of the handpiece. There's a great deal of detail in this. But what we're getting and what we demonstrated at the data we showed at the Academy is we're getting more surgeries in a day, and that's a beautiful thing for the surgeons and for the patients who need the surgery. So I think we're patient on this. I can tell you that we're right on track with what we expected, and our order book is very strong.

Got it. That's great. Tim, I appreciate your comments regarding the factors affecting margins next year, including tariffs and Aurion. Can you share your thoughts on how we should assess underlying operational margin expansion for next year? In the past, you mentioned a target of 150 basis points. Based on our calculations, the second half of 2025 seems to be trending towards 50 to 75 basis points, with the fourth quarter closer to 100 basis points. I'm interested to know if there is any updated perspective on what models should consider for underlying operational margin expansion going into next year, and what gives you confidence in that goal of 150 basis points or more?

Yes, I think it's clear that this year has been challenging and quite unusual for us. The revenue growth of 4% to 5% has fallen short of what we typically achieve in previous years. We are facing new pressures from tariffs and the investment in Aurion. We also had seven product launches this year, which required us to increase our marketing and sales efforts to ensure their success. All of these factors contribute to our performance this year and the pressure on margins. However, I still believe that if we look at historical trends, we can achieve a margin improvement of about 150 to 200 basis points. I am confident we can maintain this trajectory. That said, we do expect some additional pressure from tariffs and a full year of Aurion’s impact. Nevertheless, we anticipate continuing to see positive margin expansion next year.

Our next question comes from Matt Miksic with Barclays.

A question on tariffs. You mentioned the capitalized tariff expense moving through the P&L. I know you're not giving a ton of color on '26, but on the gross margin line, any directionally the effect of that, should we expect kind of a flatter gross margin offset by some of the other operating changes you're making? Or does the FX kind of offset that in the gross profit line? And then just one quick follow-up on IOLs?

Yes. Listen, we'll give you more color on '26 when we get to the February call. But when you think about gross margin, again, we're going to have an incremental $50 million to $100 million of pressure that's going to show up in your gross margin line for next year. And that's basically driven by that we've got a full year impact of the margins. We're not going to have the FX benefit that we had this year, but we do have a lot of operational actions that are going to help mitigate some of that pressure. So I sort of think about it in that $50 million to $100 million range. And then there are going to be some other things that you're going to see in the gross margin, Ryan. You're going to see a mix impact, you're going to see some other things. So we'll give you more color in '26 when we get there.

Competition has been a challenge, along with volume growth. It appears that conditions are slightly improving. As you know, competition is expected to intensify next year. Considering this year has been difficult, will next year be easier, or do you anticipate ongoing challenges in those areas with the launch of PanOptix Pro and new data on Vivity? Are there other factors that could help stabilize market share and potentially increase volumes?

Yes, Matt, let me provide some context that may be helpful. As I've mentioned before, the next couple of years are likely to be quite challenging from a competitive standpoint. There are numerous new entrants, as you've pointed out, which will limit our growth potential. However, I do want to highlight a few positive aspects. We have experienced slower markets, but I don't believe this will sustain long-term due to the high number of cataract cases. Additionally, AT-IOL penetration increased by 130 basis points this quarter and has consistently risen in key markets like the U.S. This increase is partly a result of competitive selling, with more doctors and patients being involved. This actually benefits us significantly in markets where we hold a majority of the AT-IOLs. In the U.S., where we still dominate in AT-IOLs, the rise in penetration supports our position. While we will face price and market share pressures, this dynamic can serve as a counterbalance. We are also in the process of launching PanOptix Pro globally. We haven't faced significant competition yet in Europe and Japan, where we are still rolling out Pro. We won't see PanOptix Pro in Europe until next year. We're currently seeing a strong reception in Japan, and we've had to delay some launches in the U.S. to ensure we have adequate inventory. We're excited about our upcoming product series, and we recently introduced Vivity on the Clareon material in Europe, which is having a positive impact. We will provide more updates about our product pipeline and implantables next year, but I believe that with our current and forthcoming products, increasing AT-IOL penetration, and some market improvements, we will navigate the competitive landscape. Overall, I think we had a solid performance this quarter and aim to align with market growth moving forward.

And David Saxon with Needham & Company has our next question.

David and Tim, maybe, I'll start on the contact lens market. So I think the U.S. kind of drove that 4% growth. So would you consider the U.S. market kind of in that normal 4% to 6% range? And then what's driving that international weakness? And then relative to the DACP comments, I mean, I'm guessing kind of you're in the later innings of converting that base. So maybe talk about how you think about the mix benefit you could see going forward relative to what you've seen historically?

Thank you for the great questions, David. Regarding the global market, it remains within the usual range, though on the lower end at around 4%. We’ve always indicated that it tends to hover around mid-single digits. The U.S. market has performed significantly better, while the international market has lagged behind. Japan has been facing challenges for some time now, and its performance might have been flat or even negative. Europe hasn't shown particularly strong results either, falling below historical averages. This could be attributed to a lack of new product introductions in those regions. We're hopeful that as we introduce some new offerings, we will see normal market growth going forward. The 6% growth we experienced in the U.S. was promising, but we are starting to see some of that regained through substantial price discounts for consumers. I believe that established branded products will help expand the international market, and while the longer-standing brands in the U.S. will continue to perform well, some newer products focused on competitive pricing may hinder share growth to an extent. Regarding DACP, while the product mix is positively impacting our gross margins, it doesn’t significantly contribute to our market share. Instead, it helps at the margin level, as we integrate these changes into P1 and DT1. Overall, share in the U.S. DAILIES market is facing considerable challenges due to intense competition, particularly on pricing. Yes, Tryptyr is performing very well. The eye care community is quite enthusiastic, and we are pleased with the trial and adoption rates among potential prescribers. What is particularly encouraging is that patients are recognizing the unique effectiveness of this mechanism. It is not merely a supplement for the lipid layer or an anti-inflammatory; it directly addresses the fundamental mechanism that leads to tear production, which is central to the disorder. We are very excited about these developments. However, caution is warranted regarding the audited data, as it does not include the third-party resource we are utilizing to manage the initial product uptake. We have a platform that several eye care companies have utilized. Historical launches show that many companies engage in this type of work. This digital prescribing platform facilitates patient access to new prescription products, making the sampling process, prior authorization, and prescription processing easier, and it even delivers to patients' homes. It is a beneficial system that is well understood within the ophthalmology community, and adoption is happening rapidly. However, most of these prescriptions, which represent the majority of activity, are not reflected in the audited data you are referring to. So, please be cautious about interpreting that information at this time.

And moving next to Veronika Dubajova with Citi Group.

I will keep it to two, please. One, just want to get your flavor, obviously, lots of questions around Unity and whether that's tracking in line with expectations, but there is a number of other products driving growth this quarter. So just would love to get your high-level thoughts on, one, how you feel about the Tryptyr uptake relative to what you were looking at and hoping for this early on? And I think, David, you've touched upon Pro, but maybe just a similar question. And if I can relate to that, I might have missed it, but what your PC-IOL market share in the U.S. was in the third quarter and how that moved sequentially? And then one for Tim. I guess if I look at the full year guide, the exit range for the fourth quarter is still pretty wide. I think technically, mathematically, the guidance implies 5% to 9% organic sales growth for the fourth quarter. Tim, I'm just curious if you have a point there where you feel more comfortable given everything that you see at this point in time.

Veronika, let me address your two questions by breaking them down. The Tryptyr growth has exceeded our initial expectations. We are encouraged by the positive patient feedback, as we anticipated the product would have some initial challenges. It's promising to hear that it is effectively meeting patient needs, as all eye drops typically have a bit of a sting. The feedback from both patients and doctors has been very positive, indicating that they are seeing real results. While we are still early in the process and cautious about our outlook, we are pleased with the uptake and prescribing metrics so far. Regarding PanOptix Pro, its performance has surpassed our expectations. We had a certain level of consignments planned, but we ran out during the third quarter, which affected our ability to ship to the Japanese market. However, as we are starting to get those shipments out, we are hearing from users that they truly appreciate the benefits, such as reduced light scatter and improved visibility, particularly at distance. In terms of market share, the situation can be complex, especially considering the competitor recall in the second quarter followed by a rebound in the third. Overall, our market share remains strong, significantly leading in the PC-IOL sector and holding a majority in the AT-IOL market. Additionally, we've seen growth in toric and standard monofocal segments globally. We are confident about our position in the implantables market, even as competition remains fierce in the PC-IOL realm. As for the fourth-quarter exit rate, I will leave that discussion to Tim.

Yes, Veronika, thanks for the question. Yes, it is a wider range than we typically have. I would say the thing that's a little different this year is the challenge we've had in calling the markets as well as the new product launches and how those are going to do. So I would say our base case is sort of at that midpoint. If markets are a little bit softer and launches don't go as well as we anticipate, then that would be at the lower end. If the markets come back roaring back and the launches continue to do really, really well, that's how you get to the higher end. But the base case is really more towards the midpoint.

And our next question comes from Larry Biegelsen with Wells Fargo.

Maybe Tim or David, can you provide a framework for your equipment growth since there are many components involved? We can assume the phaco and vitrectomy placements based on the data you shared at Baird, which indicated an additional 1,200 placements in 2026. Can you confirm that phaco and vitrectomy make up about half of equipment sales? Additionally, how are the rest of the equipment sales performing in 2025 and 2026? We want to ensure our estimates are as accurate as possible. I also have one follow-up question.

The mix is currently fluctuating. I can't provide much insight into cataract sales at the moment, as we haven't focused on that area recently. This year, we've primarily sold VCS units, with a few CS units sold lately. Initially, we anticipated a much greater demand for CS than for VCS, but we are discovering that customers in several markets prefer both machines due to the unique efficiency they offer. I don't have a specific number to share with you. Overall, the rest of the equipment is performing quite positively. We're just beginning with Valeda, and I feel optimistic about its potential for next year. Regarding Voyager, we have managed to establish a consensus in the glaucoma specialty community that starting with SLT is essential. This was our primary objective this year, and I expect to see a significant increase in Voyager usage as we head into next year. We've had a solid performance with it this year, and as we introduce a new sales team to promote both products, I believe Valeda and Voyager will perform well and make valuable contributions. Additionally, our biometer and microscope continue to deliver good results, and we have new developments coming that we will discuss in January. I anticipate a successful year for our equipment next year.

You hit refractive?

I did mention WaveLight Plus. Yes, good point. What has been most exciting about WaveLight Plus this year is the ability to renew the market's focus on the significance of LASIK and how much we can enhance it. The percentage we can achieve of 20/12.5 or better is truly unique. We're also targeting one of our competitors with a comparable procedure. However, you simply can't surpass the performance of the existing LASIK machines once you incorporate our new WaveLight Plus product. It has performed better than expected this year. Although it remains a relatively small part of our business, it represents an exciting advance in our cataract and refractive initiatives.

That's helpful. Just one follow-up on contact lenses, David. Is there any consumer element here? If we look at kind of the year-over-year change in growth, I know at Baird, you talked about just less price, but there's been a pretty big change in the last year or two in the contact lens market growth. In Japan, you just talked about a lack of new product flow. But is there a consumer element here where consumers are stretching lenses, buying less bulk? Anything else you can add?

I need to think about that a bit more, but I've always acknowledged that there is some consumer impact here. Whether it's significantly affecting this market depends on which data you examine. The moving annual total for the contact lens market as of the third quarter was 5%, which is within what we consider a normal range, in the mid-single digits. It has been at 4% for a few quarters, easily explained by the lack of price increases this year compared to previous years. We are catching up after experiencing a lot of inflation during COVID. Most companies raised prices significantly in 2023 and 2024, and I believe that in 2025, there's a slight pause to give consumers some breathing room. Historically, as we've analyzed trends, there's usually not much change in consumption or trade-up. We've examined this during the 2009 recession and other times, and while it does show some correlation, it's not a strong one.

Moving on to Jeff Johnson with Baird.

One maybe follow-up question on Unity. I know you've gotten a lot of questions on it so far, David. But again, referring back to the chart that you put up at our conference, you did talk about some volumes there. We've kind of beat that to death today. What kind of price premium are you recognizing on VCS and do you expect to recognize on CS relative to CONSTELLATION and CENTURION in the past? At one point, we had heard it was going to be 20% to 30%. Then we heard maybe it was coming in a little lower than that. Just how should we model maybe or think about the price premium on the newer technology?

Well, look, I mean, VCS' list price, I think, is $185,000. We've given some discounting, but not much. And I think you can do the math off of the base two products. There is a premium to the box itself, and there's a premium to the packs as we go through it. It does depend on how big the customer is and what they're buying and what the commitments are and how long the contracts are. So it's a little tricky. But early on, I would just say that the ASP on the product is exactly or better than where we expected. So we don't see any challenge with pricing right now. So I would be thinking about it as pretty much as we've described in the past, probably a 10% to 20% premium on the procedure.

Firstly, regarding PanOptix Pro, I wanted to know what kind of price premium you are achieving, whether it aligns with your expectations, and if you have made any changes to the pricing of PanOptix. Secondly, I wanted to check if there has been any stocking of either PanOptix Pro or Ocular Health.

When you say stocking, are you talking about the third quarter?

Yes, exactly.

Yes. To my knowledge, there is a slight price premium. I don't have a definite answer on that. We have gone out with the belief that we can achieve this. Ultimately, it will depend on our customers' feedback, and we'll find out soon enough. We're only about six months into this, so we'll see if that develops as expected.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Dan Cravens for closing comments.

All right. Well, thank you, everybody, again, for joining us today. If you have any follow-up questions, feel free to reach out to Allen Trang or myself for investor questions or our corporate communications team for any media questions. Thanks again.

And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.