Alcon, Inc. (
Q3 2010 Earnings Conference Call
October 21, 2010 8:30 AM ET
Doug MacHatton – VP, Treasury and Investor and Public Relations
Kevin Buehler – President and CEO
Richard Croarkin – SVP and CFO
Sabri Markabi – SVP, Research and Development and Chief Medical Officer
Amit Bhalla – Citigroup Inc.
Joanne Wuensch – BMO Capital Markets
Kimberly Gailun – JP Morgan
Benjamin Pass – GLG Partners LP
Frank Pinkerton – SunTrust Robinson Humphrey Capital Markets
Louise Chen – Collins Stewart LLC
David Book – Buckingham Research
Josh Jennings -Jeffries & Company, Inc.
Lei Huang – Wells Fargo
Sachin Shah – Capstone Global Markets
Previous Statements by ACL
» Alcon Inc Q2 2010 Earnings Call Transcript
» Alcon, Inc. Q1 2010 Earnings Call Transcript
» Alcon, Inc. Q4 2009 Earnings Call Transcript
» Alcon Inc Q3 2009 Earnings Conference Call
Ladies and gentlemen, thank you for standing by. Welcome to the Alcon Incorporated Earnings Conference Call for the Third Quarter of 2010. (Operator instructions).
I would now turn the conference over to Doug MacHatton, Vice President, Treasury and Investor and Public Relations. Please go ahead, sir.
Thank you and good morning, everyone. Presenting today, of course, are Kevin Buehler, President and Chief Executive Officer, and Rick Croarkin, Senior Vice President and Chief Financial Officer. Also participating in the Q&A session is Dr. Sabri Markabi, Senior Vice President Research and Development and Chief Medical Officer.
Before we begin I would like to remind you that certain statements that we will make in the presentation may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and you should not place undue reliance on these forward looking statements in this webcast. We refer you to our full disclaimer regarding these statements, which is included in our third earnings press release issued yesterday, and our 20-F filed with SEC on March 16th, 2010.
In addition this presentation may also include certain financial measures used to better understand our business, which may not be prepared in accordance with the US Generally Accepted Accounting Principles. These non-GAAP measures are reconciled at the end of this presentation or in associated SEC filings. This conference call and accompanying webcast are being broadcast simultaneously over the internet, with replays available on our website at
in the Investors & Media section.
And I’ll now turn the call over to our CEO, Kevin Buehler.
Thanks, Dug, and good morning, everyone, and thank you for joining us this morning on the call. The third quarter was solid from both in operational and financial perspective.
Global sales increased 8.7% organically, which takes our full year organic growth rate to 9.9%. The strength of Q3 growth reinforces our continued ability to use our leading commercial position and global scale to drive top line growth.
Additionally, our recently completed acquisition added measurably to our sales growth in the quarter, which fully offset the negative impact of foreign currency resulting in reported sales rising 9% to $1.76 billion USD. Excluding the period charges related to the change of majority ownership and merge or proposal from Novartis, our adjusted operating income rose 8.7% and adjusted net earnings increased 8.5%.
These financial results include an increase investment level in the quarter to drive R&D product innovation and to support incremental brand growth opportunities. Research and Development spending grew almost 17% over Q3 2009 and we implemented several commercial projects that have expected high rates of return that push quarterly SG&A growth to almost 8%.
Additionally, with the closing of the LenSx acquisition, we began to recognize SG&A, R&D and other related expenses in this quarter. Although these investments reduced our leverage opportunities in the third quarter, they reinforced our commitment to delivering sustainable growth over the longer term. This is clearly evident in our year-to-date performance and the leverage we have achieved with operating income rising 15.7% and net income 16.1%, both on an adjusted basis.
As these slide shows, our performance in Q3 was a continuation of the strong performance trend set in motion in the second half of 2009. This performance is reflective of the general economic recovery and its impact on the consumption of healthcare as well as the durability of the Alcon business model.
It is important to understand the performance in the third quarter in light of the higher prior year comparison especially in the surgical procedure volume in the U.S. market.
Year-to-date, we have delivered organic growth of 9.9%. I believe our strong performance in the quarter and the full year is indicative of the value of our underlying product and geographic diversity and the balance growth opportunities this affords us.
As we move in to the final quarter of the year and into 2011, we will continue to measure our quarterly growth against prior comparable sales performance that are reflective of an improved market environment. I am confident that we are on track to achieve our full year sales and profit objective.
Rick will provide more information on our outlook and the expectations for the remainder of 2010 during his remarks.
Alcon’s global scales offers broad geographic diversification and combined with the breadth of our product portfolio provides a resilient and durable business model. Sales in the U.S. rose 9.5% in the third quarter to $803 million USD to represent 46% of global sales. This strong quarterly performance included a 160 basis point contribution from our recent acquisition of Optonol and DUREZOL as well as a positive impact from seasonal ODEC [ph] pharmaceuticals.
Growth in developed international markets was slightly dampened by the lingering impact of austerity measures throughout the European Union. While we expect this impact to continue as these markets seek to address their healthcare budgets, we are seeing continued strength in other developed regions including markets like Canada, United Kingdom and Italy.
Emerging markets remain a strong driver of our global sales with 19.2% organic growth in the third quarter.
Our pharmaceutical and consumer product lines performed well in the third quarter, which more than offsets softer growth in surgical. Pharmaceuticals sales, which rose 15 percent to $758 million USD, were lifted by the seasonal impact of a strong ODEC season, but also from solid performance in core products like DuoTrav and NEVANACs.
Additionally, newer products like the recently acquired Durasol, generic Brimonidine and the channels fill from the September launch of TobraDex ST contributed to the quarter’s strong sales growth.