Alcon second-quarter global sales increase 12.5% to $1.89 billion

Alcon, Inc. (NYSE:ACL) reported that global sales rose 12.5 percent to $1.89 billion for the second quarter of 2010, or 11.3 percent excluding the impact of foreign exchange fluctuations and acquisitions. Revenue from acquisitions added 40 basis points to sales growth in the quarter, while foreign currency fluctuations added 80 basis points of growth.

“These results and our outlook for the balance of the year reflect an improved market environment that we expect to support sustainable organic sales growth and operating leverage in the future.”

Net earnings for the second quarter of 2010 grew 15.1 percent to $670 million, or $2.21 per diluted share, compared to $582 million, or $1.94 per diluted share in the second quarter of 2009. Non-GAAP adjusted net earnings would have grown 15.8 percent to $674 million, or $2.22 per diluted share, compared to second quarter 2009 net earnings.

Adjusted net earnings in the second quarter of 2010 exclude $4 million in other operating expenses related to the potential change of control and merger proposal from Novartis AG. Reconciliations of reported and adjusted results for the second quarter are included in the financial tables below.

"Our strong performance in the first half of this year was driven by the successful global execution of our operational strategies and was further supported by a lower first half comparison period. We have risen above the global reimbursement challenges in 2010 to achieve very positive organic sales growth at the Alcon group level and market share expansion of our key promoted brands on a global basis. Key growth drivers like advanced technology intraocular lenses, glaucoma treatments and emerging markets are providing both near-term and durable long-term opportunities," said Kevin Buehler, Alcon's president and chief executive officer. "These results and our outlook for the balance of the year reflect an improved market environment that we expect to support sustainable organic sales growth and operating leverage in the future."

Sales Highlights

Summarized below are sales highlights for the second quarter of 2010. All growth comparisons are for the second quarter of 2010 compared to the second quarter of 2009. Organic sales growth rates exclude currency impacts and acquisitions and are non-GAAP measures that are reconciled in a table at the end of this release.

• U.S. sales increased 12.7 percent due to strong contributions from advanced technology AcrySof^® intraocular lenses, healthy growth in glaucoma sales and the stronger seasonal impact of a severe allergy season on sales of Patanol^® and Pataday^® ophthalmic solutions and Patanase^® nasal spray. Sales growth included 90 basis points from acquisitions and also benefitted from a more favorable market environment when compared to the second quarter of 2009.
• Sales in international markets rose 10.8 percent on an organic basis (+12.3 percent reported) due to strong sales of pharmaceutical products and balanced contributions from most global markets.
  • Sales in emerging markets increased 24.2 percent on an organic basis (+28.8 percent reported), led by the BRIC nations (Brazil, Russia, India and China), which rose 28.9 percent organically (+40.0 percent reported).
  • International pharmaceutical sales rose 12.7 percent organically (+13.7 percent reported) with broadly-based growth in all therapeutic areas.
• Global sales of pharmaceutical products were $837 million, an increase of 16.5 percent on an organic basis (+17.4 percent reported), due to continued solid global performance of the glaucoma franchise and a severe allergy season in the United States.
  • Global glaucoma sales rose 17.2 percent organically (+17.5 percent reported). The Azopt^® family of products (Azopt^® and AZARGA^® ophthalmic suspensions) increased 15.1 percent organically (+14.8 percent reported), led by continued market penetration of AZARGA^® outside the United States. Global sales of the TRAVATAN^® family of products (TRAVATAN^®, TRAVATAN Z^® and DuoTrav^® ophthalmic solutions) rose 13.8 percent on an organic basis (+14.3 percent reported).
  • Global sales of allergy products rose 31.9 percent on an organic basis (+32.5 percent reported) as the severe allergy season in the United States drove sales of Patanol^® and Pataday^® ophthalmic solutions.
• Global surgical sales increased 7.4 percent on an organic basis (+8.7 percent reported) to $823 million, primarily attributable to a 7.3 percent organic rise (+8.3 percent reported) in sales of intraocular lenses.
  • Global sales of advanced technology intraocular lenses rose 22.3 percent organically (+23.8 percent reported) on increasing adoption and utilization by cataract surgeons of the AcrySof^® IQ ReSTOR^® +3.0 lens and the AcrySof^® IQ Toric lens.
• Global sales of consumer eye care products rose 7.7 percent on an organic basis (+9.2 percent reported) to $226 million on the strong global performance the Systane^® family of lubricant eye drops.

Earnings Highlights

Summarized below are earnings highlights for the second quarter of 2010. All growth comparisons are for the second quarter of 2010 compared to the second quarter of 2009.

• Gross profit margin was consistent with management expectations at 77.4 percent compared to 75.3 percent in 2009. The increase was primarily attributable to the impact of foreign exchange rates on cost of goods sold in each period.
• Operating income rose 18.8 percent to $751 million, or 39.8 percent of sales. Non-GAAP adjusted operating income would have increased 19.5 percent to $755 million, or 40.0 percent of sales. This performance was attributable to strong sales growth, positive price contribution and SG&A leverage, as well as the temporary impact of foreign exchange on gross profit margin. Adjusted operating income in the second quarter of 2010 excludes $4 million in pre-tax other operating expenses related to the potential change of control and the merger proposal from Novartis.
• Net earnings in the second quarter of 2010 rose 15.1 percent to $670 million, or $2.21 per diluted share. Non-GAAP adjusted net earnings would have risen 15.8 percent to $674 million, or $2.22 per diluted share. Adjusted net earnings exclude $4 million in costs related to the potential change of control.

Other Highlights

• On July 6, 2010, the company announced it had entered into a definitive agreement to acquire LenSx Lasers, Inc., an ophthalmic laser surgery company that has developed a customizable, image-guided femtosecond laser. This laser provides the surgeon with a complementary technology to perform certain steps in a cataract procedure with the precision of a laser instead of performing these steps manually with handheld instruments.
• On June 11, 2010, Alcon Japan Ltd. announced the launch in Japan of DuoTrav^® combination ophthalmic solution for the treatment of glaucoma and ocular hypertension.
• The company has begun the transition to TRAVATAN Z^® ophthalmic solution as its exclusive prostaglandin analogue (PGA) in the United States for the treatment of open-angle glaucoma and ocular hypertension. TRAVATAN Z^® is the only PGA available in the United States that does not contain benzalkonium chloride (BAK), a common preservative to which some patients are sensitive or allergic.
• The company received a CE mark in the European Union for the AcrySof^® IQ ReSTOR^® Toric intraocular lens for the correction of both presbyopia and astigmatism and for the WaveLight^® FS-200 femtosecond laser for the creation of corneal flaps during refractive laser surgery.
• Systane^® BALANCE lubricant eye drops, designed specifically for patients with meibomian gland dysfunction, was launched in the United States in July.
• On May 7, 2010, the company filed a drug approval application in selected European Union markets for a BAK-free formulation of TRAVATAN^® ophthalmic solution.
• On May 20, 2010, the company filed a New Drug Application (NDA) with the U.S. Food and Drug Administration (FDA) for a new formulation of moxifloxacin for the treatment of bacterial conjunctivitis.
• The company filed an Abbreviated New Drug Application (ANDA) with the FDA on May 10, 2010 for a generic version of bromfenac sodium, a non-steroidal anti-inflammatory drug (NSAID) used to treat pain and swelling following eye surgery.

Financial Guidance

The company raised its full year 2010 guidance for organic sales growth from the mid-to-high single digits to the high single digits. It also raised its earnings per share guidance to a range of $7.45 to $7.62. The higher guidance includes the impact of European fiscal austerity actions, a currency headwind in the second half of the year and higher research and development spending on internal projects as well as business development initiatives. The guidance includes the on-going impact of health care reform, which is expected to reduce full year 2010 sales by $20 million and earnings per share by $0.06. Full year guidance excludes costs related to a potential change of control to and/or merger with Novartis and the first quarter impacts of a change in royalty estimate. It also excludes the catch-up impact of the change in tax treatment of U.S. retiree medical expenses related to U.S. health care reform. The full year guidance assumes renewal of the U.S. Research and Experimentation tax credit in the fourth quarter of 2010 with retroactive application.