CG MEDTECH, DIAGNOSTICS AND DIGITAL HEALTH & SERVICES FORUM - STAAR SURGICAL CO

Financial Performance:

• Achieved 31% year-over-year revenue growth in China (Q3 adjusted), driven by a favorable product mix shift to Evo V5 (Evo Plus) and Toric lenses.
• U.S. U.K. sales exceeded $6M for three consecutive quarters, representing 15% Q3 growth, with a run-rate approaching $30M.
• Adjusted operating expenses (OPEX) projected at $225M for the full year.
• Adjusted EBITDA margins range between 20-25% for the year, with a trajectory toward further expansion.
• Gross margins previously impacted by ERP implementation and Swiss facility launch; expected to expand as supply chain stabilizes.
• Board authorized a $50M share repurchase program in September, pending market valuation conditions.

Guidance and Future Outlook:

• Strategic priority to launch a new product in a critical market every 18–24 months.
• Q1 2026 anticipated to be a key seasonal quarter for China; supply constraints expected to resolve with increased V5 inventory.
• Long-term goal to return to sustainable profitability and growth, moving away from a "takeout" mode to active innovation.
• Expect continued double-digit growth in ICL procedures as the market shifts away from declining LASIK volumes.
• Capital allocation strategy focuses on funding R&D innovation while maintaining OPEX discipline to offset costs.

Business Segments and Product Lines:

• China: Primary growth engine; demand for Evo V5 (V5) outstripped initial Swiss production capacity, creating a temporary supply backlog. Mix of Toric lenses (custom) and V5 is increasing average selling prices.
• U.S.: Launching in a fragmented market of independent practices; focus on "walkout revenue" by optimizing economics (targeting $500–$700 price delta vs. LASIK).
• Pipeline: First-in-human trials for two presbyopia-correcting lenses (Columnar-based) set to begin enrollment within months.
• Product Differentiation: Proprietary "Colomer" material (collagen-polymer) is highlighted as superior to competitor acrylic lenses for sulcus placement, reducing micromotion and endothelial cell damage.
• Leadership Changes: David Bailey returned as Chief Commercial Officer to standardize execution; Ben Park appointed as new CTO to accelerate R&D portfolio management.

Market and Competitive Landscape:

• Market Shift: Refractive surgery is transitioning from laser-based (LASIK) to lens-based (ICL) solutions globally, driven by patient demand for reversible, non-ablative procedures.
• LASIK Decline: U.S. LASIK volumes down ~5.8% this year; down significantly from peak (approx. 1.8M to 500k procedures).
• Competition: Zeiss announced "Lunana" (acrylic IOL) in China, but Star notes Zeiss lacks an immediate Toric option and faces long listing processes per facility.
• Competitive Moat: Star maintains >90% market share in phakic IOLs due to the difficulty competitors face in replicating the custom Toric supply chain and Colomer material biocompatibility.

Risks and Challenges:

• Supply Chain Complexity: Scaling production of custom Toric lenses and the new V5 technology in Switzerland created Q3 delays and unit availability issues.
• U.S. Adoption Barriers: Surgeon lack of clinical confidence (comfort with intraocular surgery) and economic headwinds in independent practices delay widespread adoption.
• Market Education: Need to educate patients and surgeons to distinguish Star's removable, biocompatible lens from irreversible laser procedures and non-proprietary acrylic lenses.
• R&D Execution: High capital requirements for new product trials (PMA) and regulatory approvals in multiple jurisdictions (US, EU, China).

Management Commentary and Tone:

• Tone: Confident and forward-looking; management expresses pride in rectifying previous disruptions and re-establishing growth and profitability.
• Strategic Focus: Emphasis on "growing" to profitability rather than cutting costs, leveraging the shift to premium product mixes (V5/Toric).
• Innovation: Strong emphasis on the "innovation pipeline" to prevent stagnation, citing the return to a culture of active R&D investment.
• Leadership: New C-Suite team described as a "good squad" with specific expertise to drive standardization and technical advancement.

Analyst Questions and Answers:

• Q (China Supply/Backlog): Management explained the backlog resulted from demand exceeding Swiss production capacity for V5; capacity unlocked with DEBRA approval for a second clean room.
• Q (Competitive Landscape/Zeiss): Confirmed Zeiss's entry validates the ICL narrative but highlighted Star's deeper moat via custom Toric supply chain and superior material (Colomer vs. Acrylic).
• Q (U.S. Adoption Rates): Addressed the gap between patient demand and surgeon capability; noted success in "triaging" practices based on economic efficiency and clinical training.
• Q (Presbyopia Trials): Clarified that two distinct first-in-human trials aim to demonstrate safety and efficacy for presbyopic correction, potentially serving different market segments.
• Q (Capital Allocation): Confirmed the $50M buyback is part of a balanced strategy to reward shareholders while funding innovation and maintaining liquidity.

Other Key Points:

• Product Launch: Evo V5 launched in China in Jan 2026; production moved to Switzerland to be tariff-free.
• Material Science: "Colomer" (collagen + polymers) is emphasized as the key differentiator allowing 30-year durability in the sulcus without tissue removal.
• Market Demographics: Myopia is described as an "epidemic," particularly in children, driving long-term demand for vision correction solutions.
• Operational Efficiency: Cost-cutting measures have been implemented, but the focus is now on leveraging those efficiencies to support growth rather than being the primary profitability driver.