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

Explicit Guidance:

• Adjusted operating expenses for the current fiscal year are on track for approximately $225 million.
• Targeted adjusted EBITDA margins for the current year are projected to be between 20% and 25%.
• Long-term profitability strategy relies on revenue growth, expanded gross margins (recovering from ERP/Swiss facility launch headwinds), and operating expense discipline.

Business-Segment Outlook:

• China (Largest Market): Revenue grew 31% (Q3 adjusted), driven by higher average selling prices and mix shift to EVO Plus (V5) and Toric lenses; V5 mix has exceeded the 30% level seen at end of Q2, though supply constraints prevented full demand fulfillment in Q3.
• US Business: Q3 sales exceeded $6 million for the third consecutive quarter, representing a 15% increase; base revenue is approximately $25–30 million growing at double digits.
• Product Mix: Anticipated continued growth in the mix of Toric lenses (custom manufacturing capability) and EVO Plus; the premium "V5 Toric" segment remains the highest-priced offering.
• Supply Chain: Swiss plant scaling is complete with a second clean room receiving DECRA approval; production of all future China-bound inventory (V4 and V5) is transitioning to the Swiss facility to be tariff-free, with inventory builds initiated to capture Q1 seasonality.
• Pipeline: First-in-human trials for two columnar-based presbyopia products are scheduled to begin enrollment in the next few months.
• Commercial Structure: David Bailey returned as Chief Commercial Officer to standardize field execution, incentivize teams against specific goals, and optimize margins; a new Chief Technology Officer (Ben Park) leads the innovation cadence.

Market and Competitive Outlook:

• LASIK vs. ICL Trend: LASIK volumes in the U.S. are in double-digit decline (down to ~500k procedures from a peak of 1.8–1.9m); conversely, ICL adoption is seeing double-digit increases globally as patients shift toward removable/reversible procedures.
• Competitive Landscape: Zeiss is entering the Chinese market with a non-columnar acrylic lens (likely without Toric option for ~1 year); management expects Zeiss to validate the ICL category narrative but believes Star retains a "deep moat" due to columnar biocompatibility and custom Toric capabilities which competitors cannot easily replicate in the near term.
• Adoption Barriers (US): Primary hurdles remain clinical confidence (surgeons unaccustomed to intraocular procedures) and economic confidence (practice economics); success is linked to "walkout revenue" models where surgeons position ICL pricing ($7,000–$7,500) closer to LASIK ($5,500) to close deals.
• Market Size: Myopia is described as an "epidemic" with ~30% of the US population affected (vs. ~50% in China), driving long-term demand.

Macro / Industry Outlook:

• Regulatory: Product launches will require navigating PMA pathways (US), MDR (EU), and China-specific medical device approvals; new clean room certifications (DECRA) are critical for tariff-free manufacturing in China.
• Geopolitical/Tariffs: Transitioning production to Switzerland for Chinese shipments is a strategic move to maintain tariff-free status.
• Labor/Operations: Recent ERP implementation and Swiss facility ramp-up contributed to temporary Q3 gross margin headwinds; these costs are expected to normalize.

Strategic Initiatives:

• Innovation Cadence: Ambition to launch a new product in a critical market every 18 to 24 months moving forward.
• Capital Allocation: Increased investment in R&D to support the innovation pipeline; costs to be partially offset by reductions in G&A and OPEX.
• M&A/Partnerships: No specific M&A targets announced; focus remains on internal R&D and potential partnerships to accelerate global commercialization.
• Capital Return: Board authorized a $50 million share repurchase program in September; buybacks will be executed when management views the share price as "substantially devalued," after securing operational liquidity and innovation funding.

Risks and Headwinds to Outlook:

• Supply Constraints: Current demand for EVO Plus/V5 exceeds near-term manufacturing capacity, limiting revenue potential in Q3; scaling up requires careful management of custom Toric production complexity.
• Commercial Adoption Friction: US growth is constrained by the need to individually train surgeons on intraocular techniques and overcome entrenched LASIK referral networks (40% of US volume controlled by laser companies).
• Competitive Entry: Zeiss and other entrants may introduce acrylic ICLs with Toric options in ~1 year; however, the custom manufacturing and biocompatibility moat is expected to mitigate immediate share loss.
• Execution Risk: Successful commercialization of presbyopia trials depends on regulatory acceptance and surgeon ability to deliver consistent vision metrics (distance/intermediate/near) with residual accommodation.

Management Tone on the Future:

• Confidence: High confidence in the strategic pivot back to profitability and growth; management describes the organization as "clearly focused on innovation" after a period of disruption.
• Narrative Control: Strong conviction that the industry is structurally shifting from corneal ablation (LASIK) to lens-based solutions (ICL) due to patient preference for reversibility and biocompatibility.
• Guidance vs. Reality: Management hedges near-term revenue in China due to supply constraints ("light on units compared to what we could have been") but emphasizes the underlying demand trajectory is robust.
• Capital Discipline: Emphasis on "growing to profitability" rather than "cutting to profitability," with a strict stance on capital allocation efficiency.

Miscellaneous:

• EVO Plus Naming: Referred to locally in China as "V5."
• Product Differentiation: Columnar material (collagen + polymer) is positioned as superior to competitor acrylic (plastic) lenses for sulcus placement, reducing micromotion and endothelial cell damage risks.
• Target Demographics: Presbyopia is identified as a larger market than myopia, with ICL offering "residual accommodation" to preserve natural lens flexibility in 40+ age groups.