Alcon - Q2 2024
August 21, 2024
Transcript
Operator (participant)
As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Dan Cravens, Vice President, Investor Relations for Alcon. Thank you. You may begin.
Dan Cravens (VP of Investor Relations)
Welcome to Alcon's second quarter 2024 earnings conference call. Today, we issued a press release and interim financial report. We also posted a supplemental slide presentation on our website to enhance today's call. You can find all these documents in the investor relations section of 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. We expressly disclaim any 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 public filings. For discussion purposes, our comments on growth are expressed in constant currency. In a moment, David will begin by recapping highlights from the second quarter.
After his remarks, Tim will discuss our performance and outlook for the remainder of 2024. 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.
David Endicott (CEO)
Thanks, Dan, and thank you all for joining today's call. I'm pleased to report another solid quarter. We grew sales by 6% to $2.5 billion. We grew core diluted earnings by 15% to $0.74 per share, and we delivered a core operating margin of 19.8%. Now, these results are a testament to the durability of our end markets, the success and breadth of our innovative portfolio of products, and our geographically balanced footprint. During the quarter, we continued our focus on preparing for product launches that will position us well for future growth, and we achieved some significant regulatory and clinical milestones towards these goals. I'll start with surgical, where we recently received clearance from the U.S. Food and Drug Administration for our next-generation Unity Phaco platform, which includes the combined vitrectomy cataract device and the standalone cataract device.
As I've said on previous calls, Unity is designed to create near physiological conditions during surgery. This should allow Unity to drive significant efficiencies over current systems in the market, including our own Centurion and Constellation devices. By some estimates, there'll be 31 million cataract surgeries in 2024, with that number rising to 37 million by 2029. Given these numbers, case efficiency is going to be crucial to allow surgeons to keep up with demand. If Unity can add even one additional surgery per day, that would be a meaningful improvement and an important value creator for surgeons and payers. Additionally, Unity brings first to market technologies and consumables that are designed to deliver meaningful benefits for the surgeon, staff, and patients. These include Phaco, that is twice as fast as Centurion, as well as cut speeds that are 50% faster than on vitrectomy than Constellation.
Globally, there's approximately 28,000 Centurion and Constellation devices in the market that we will target for upgrading over the next decade. We've begun user experience testing Unity in the U.S. with select doctors, and over the coming months, we'll continue this work in order to capture real-world data and feedback ahead of a broader commercial launch during the second quarter of 2025. Before I move to implantables, I'm pleased to announce that we recently closed our acquisition with Belkin. With this transaction, we plan to accelerate the global expansion of direct selective laser trabeculoplasty. We see an emerging consensus among leaders in glaucoma that SLT is an effective first-line treatment to reduce intraocular pressure. It also reduces reliance on eye drops, mitigates the cost of medication, and improves patient throughput. This acquisition broadens our existing glaucoma portfolio, which also includes eye drops and the Hydrus Microstent.
Now I'll discuss implantables, where I continue to be extremely impressed with our performance in international markets. In particular, we're seeing strong uptake of both PanOptix and Vivity in many regions around the globe. During the second quarter, we also saw inventory build related to China VBP. As we have articulated in the past, we continue to expect this to be a gradual ramp implemented province by province. In the U.S., we continue to collect surgeon experience and patient outcomes with our next generation PanOptix. We expect to make a decision on launch timing in the coming months. Now I'll turn to contact lenses, where our innovation continues to win in the market. In daily lenses, we saw another quarter of share gains across the category, driven by our product innovation, including the PRECISION1 family and the DAILIES TOTAL1 for astigmatism.
PRECISION1 continues to be an important growth driver for us, and even after more than four years in the market, the PRECISION1 family grew approximately 30% in the second quarter. This is a testament to how successful contact lens innovation drives long-term, durable growth. Now I'll discuss reusable lenses, where the category remains strategically important as it drives more than half of the new fits. Our flagship reusable lens is TOTAL30, which continues to gain traction in markets around the world. It's the first and only reusable lens to leverage water gradient technology. Additionally, our proprietary Celligent technology creates a protective layer that mimics the eye's natural surface in order to help resist deposits and bacteria for a clean, comfortable lens. The TOTAL30 family currently includes sphere, toric, and multifocal modalities. I continue to be especially pleased by the uptake of TOTAL30 multifocal.
Multifocals are an important category, as wear dropout steps up meaningfully beyond the age of 45. For patients, TOTAL30 multifocal leverages our Precision Profile lens design, which delivers a smooth progressive power gradients for clear, uninterrupted vision and works with the eye's natural pupillary function. And for ECPs, this technology delivers an excellent fit success rate, reducing chair time and improving patient flow. In addition, we will further expand our reusable portfolio with the upcoming launch of PRECISION7. PRECISION7 is a new contact lens, specifically designed for a one-week replacement schedule that's based on a unique proprietary technology. We expect PRECISION7 to help drive continued share gains in the reusable category, where we have historically been under-indexed. As a reminder, one point of share gain in the global reusables category corresponds to approximately $40 million of revenue for Alcon.
We're working with a handful of eye care professionals in the U.S. who have started fitting PRECISION7, and early feedback has been excellent. We will continue to collect this feedback with select customers through 2024, ahead of a broader commercial launch in 2025. Before I discuss ocular health, I want to briefly comment on the inventory provisions we referenced in our press release. In the second quarter, we booked an inventory provision related to a quality issue with a raw material supplied by a third party. This raw material was used in the production of select contact lenses in a single manufacturing site. We've initiated a limited voluntary recall with the appropriate health authorities, and to date, we've received no reports of serious adverse events. Now moving to ocular health, our over-the-counter portfolio of eye drops continues to perform exceptionally well.
I'm particularly pleased with Systane, where we had our fourth consecutive quarter of double-digit growth, driven by our multi-dose preservative-free formulations. In the coming months, we're going to refresh and simplify Systane's brand around these three products, Systane Ultra, Systane Hydration, and Systane Complete, in order to better reach the appropriate customers for each formulation. And finally, in our pharmaceutical portfolio, total prescription growth for Rocklatan in the second quarter was in the mid-teens, well ahead of the broader glaucoma market. Lastly, I'm pleased to confirm that we submitted the New Drug Application for AR-15512 to the FDA during the second quarter. In addition, we received our NDA acceptance and PDUFA date, which is 30 May 2025. Next, I'll briefly discuss market dynamics for the second quarter. In cataract, we estimate the global procedures were up approximately low single digits.
Additionally, global ATIOL penetration was up approximately a 190 basis points year-over-year, mainly driven by international markets. In contact lenses, we estimate that the retail market was up approximately mid-single digits. This growth was driven by pricing and continued steady wearer trade-up. Now I'll briefly comment on our eye drop strategy in China. Earlier this month, we entered into a long-term strategic relationship with Ocumension to commercialize and develop select eye drops in this market, including Systane Ultra and AR-15512, among others. Ocumension is an established leader in the local ophthalmic pharmaceutical industry, with strong commercial, R&D, and manufacturing capabilities, and we believe this transaction will maximize the long-term potential opportunity in China, and we expect the transaction to close later this year.
In surgical and in contact lenses, we remain committed to our direct presence in China, and we're excited to grow these businesses in this important market. With that, I'll pass it to Tim, who will take you through our financial results and provide more color on our outlook.
Tim Stonesifer (CFO)
Thanks, David. We're pleased to report second quarter sales of $2.5 billion, up 6% versus prior year. This growth is primarily driven by strength in our innovative contact lens portfolio and implantables. Our second quarter U.S. dollar sales growth included approximately 300 basis points of pressure from foreign exchange. In our surgical franchise, revenue was up 6% year-over-year to $1.4 billion. Implantable sales were $464 million in the quarter, up 9% year-over-year, mainly driven by our advanced technology intraocular lenses, including Vivity, PanOptix, and our monofocal toric in international markets. In consumables, our second quarter sales were up 5% to $736 million, driven by cataract and vitrectomy consumables, particularly in international markets, as well as price.
In equipment, sales of $223 million were down 1% year-over-year, in line with our expectations. We continue to expect equipment sales to be broadly in line with last year ahead of the commercial launch of Unity VCS. Turning to Vision Care, second quarter sales of $1.1 billion were up 6%. Contact lens sales were up 9% to $636 million in the quarter. Our innovation, including toric and multifocal modalities, continues to win in the market. Additionally, we saw strong contribution from price in the quarter. In Ocular Health, second quarter sales of $423 million were up 2% year-over-year. We saw strong performance in our portfolio of eye drops, including another strong quarter of Systane.
This was partially offset by four points of headwind from contact lens care, primarily driven by a tough comparison due to the recovery of supply in the second quarter of last year. Now, moving down the income statement. Second quarter core gross margin was 62%, down year-over-year. This was due to two factors. First, as David mentioned, the second quarter included significantly higher inventory provisions that resulted in a negative impact of $30 million, or 1.2 percentage points to margin. Second, as we communicated previously, we saw the impact of higher cost inventory flowing through the income statement, particularly in the surgical franchise. Given the unusual items we saw this quarter, we now expect full year core gross margin to be slightly below 2023.
Core operating margin was 19.8%, up 70 basis points year-over-year, driven by operating leverage from higher sales. This was partially offset by the factors I mentioned earlier, including 120 basis points of pressure from inventory provisions. Second quarter interest expense was $50 million, broadly in line with last year. Other financial income expense was a net benefit of $12 million, compared to a net expense of $9 million in the second quarter of last year. This improvement was primarily driven by higher interest income and lower foreign currency losses. The second quarter average core tax rate was 19%, broadly in line with last year.
Looking forward, we expect the tax rate in the second half of the year to be lower than the first half due to a number of discrete benefits we expect to materialize in the second half of the year. Core Diluted Earnings were $0.74 per share in the quarter, up 15% from last year. Now, before I touch on our outlook for 2024, I'll discuss a few cash flow and other related items. On a year-to-date basis, free cash flow was $667 million, compared to $189 million in 2023. This improvement was mainly driven from higher cash from operations. For the full year, we continue to expect a meaningful step up in free cash flow versus 2023. Now, moving to 2024 guidance.
Our current outlook assumes that markets will grow in line with historical averages of mid-single digits, and exchange rates as of the end of July hold through year-end. Starting with sales, we are maintaining our full-year revenue guidance of $9.9 billion-$10.1 billion, and our constant currency sales growth rate guidance of 7-9%. If FX rates at the end of July persist through the remainder of the year, we will likely trend toward the low end of our top line guidance range. Moving to operating expenses, we continue to expect full year core R&D expense to be toward the high end of the range of 7-9% of sales.
Turning to profitability, although we will see some additional pressure to core operating margin given the unusual inventory provision, we expect to continue to invest behind new product launches and are maintaining our full year core operating margin outlook of 20.5%-21.5%. Moving down the income statement, we now expect interest and other financial expense to be between $160 million and $180 million. This improvement is primarily due to higher interest income as a result of higher cash balance and higher interest rates. We continue to expect our full year core effective tax rate to be approximately 20%. Based on all these factors, we're maintaining our core diluted earnings guidance range of $3 to $3.10 per share, which corresponds to 15%-18% constant currency growth over 2023.
Given the recent depreciation of the U.S. dollar, we are absorbing approximately $0.08 of FX headwind versus the guidance we issued in February. And finally, I'd like to thank the entire Alcon team for another great quarter. With that, I'll turn it back to David.
David Endicott (CEO)
Thanks, Tim. To wrap up, we're pleased with the strong results for the second quarter and first half of the year. I'd like to thank our team of more than 25,000associates for their hard work and determination. We're a specialist company that competes and wins on the basis of our team's deep expertise in eye care, its technologies, and its end markets. While we still have a lot of work to do, our operating model, our human capital, and our culture are what differentiates Alcon. As we look to the future, we will continue to focus our efforts on delivering world-class innovation to our customers and their patients, and delivering value for our shareholders. With that, let's open up the line for Q&A.
Operator (participant)
Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. To allow for as many questions as possible, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Jeff Johnson with Baird. Please proceed with your question.
Jeff Johnson (Senior Research Analyst)
Thank you. Good morning, guys. David, I wanted to ask a question on the contact lens business. The 9% obviously seems like it's a couple points probably above market at this point. It did come down a little bit versus last quarter. Just maybe talk about pricing dynamics in the quarter. I think you anniversaried a pretty sizable price increase that you took middle of second quarter of last year, if memory serves correctly. So has pricing come down, even though it was still strong in the quarter relative to maybe the last couple of quarters? And what are you seeing just on rebate activity?
You know, our analysis of your rebates would suggest that they've been pretty consistent here over the last number of quarters, but there's been some noise out there in the channel about maybe taking some rebate activity up here recently. Would love to get your input there.
David Endicott (CEO)
Yeah, yeah, Jeff, thanks for the question. You know, the market in total was up 6% retail, and we were at 9%, obviously, and you know, again, we're coming around as a tough comp from last year at 11%. So not surprisingly, you know, we look pretty good relative to that. Price was a part of it. It was maybe half of that one. The price mix volume for us was really important. So again, we're getting trade up to new products from old products. We're getting good motion on the mix element of this.
So I think, you know, directionally, we felt pretty good about about that particular quarter. And I would just say that that rebating, you know, as we've been very consistent, I think we continue to be consistent on rebates, which is, you know, a part of our promotion mix, but not the major part, and we have seen some increase in competitive promotion.
Jeff Johnson (Senior Research Analyst)
All right. Fair, fair enough. Thank you. And then just a follow-up question on your implantables business. You know, oftentimes, you provide some U.S. color on your share of the ATIOL market or at least the PCIOL market. Any updates on that? And just as we think about competitive launches here, upcoming from a couple of your competitors, I would assume that very high 80% PCIOL share starts to trend lower. Just kind of your outlook for maybe share within PCIOL, as we probably start to see some sampling here of some of those other products over the next few quarters. Thanks.
David Endicott (CEO)
Yeah, most of the competitive stuff in the PCIOL share element is really pretty consistent with what we've said in the past. You know, there's gonna be a lot of folks coming into the market, but the majority of the action is in toric. And so I think at this point, we're still holding better than 80% share of the PCIOL market, but the toric, again, pretty competitive market and, you know, we see continued erosion there. I think the big thing is the penetration of ATIOLs was very positive this quarter, and so both the geographic distribution of what we have, which is important to think about because we had very good quarters in Europe and in Japan and in China, but we had even the US penetration was up, I think, 19.2%.
So back to kind of where it's been historically, and again, on a trend, which we kind of think is really the historical trend, which again, I usually say it's about 50 basis points a year of improvement. So if that keeps moving, you know, the main discussion really is about penetration because, you know, the share loss is nothing unusual for us, pretty much as we've seen it. And actually, internationally, we gained share. So we're feeling pretty good about where we are in IOLs.
Jeff Johnson (Senior Research Analyst)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Graham Doyle with UBS. Please proceed with your question.
Graham Doyle (Executive Director and Equity Research Analyst)
Morning, guys. Thanks for the question. Just one, it's actually around the comment you made, David, in the press release in terms of the phrase, "The next phase of growth in 2025 and beyond." It's obviously been a pretty good year so far in 2024 on the top line, despite some headwinds, particularly in equipment. And I know it's early, but if we look at the dynamics for next year, given the launches and contacts in terms of once weekly, the equipment launch, PanOptix 2.0, Dry Eye, would you be comfortable at this stage with the same dynamics and same type of growth, at least being supported into2025? And just a quick follow-up on that as well. Thank you.
David Endicott (CEO)
Yeah, I mean, Graham, I think the way we're thinking about the world is we have a lot of product flow coming through on an innovation basis. And so, you know, I wouldn't want to comment necessarily on growth quite yet. Give us another quarter to get to a place where we are really staring at next year. As we finish up this year, we're really thinking about what, you know, happens with product flow next year, which we've invested a lot of time in. So Unity VCS is a big deal. Unity CS, big deal. 512, we should get approved next year. PRECISION7 is a big opportunity. PanOptix Pro, if we get that out next year, I think that's a great idea.
Belkin is a new product flow for us, and we've got another, you know, eye drop in the hopper here, too. So we've got a whole whack of stuff that we'd like to invest in, that we think grows this market and grows our position quite substantially in the coming years. So this year is a little thin that way. You'll notice that we, you know, we've made a lot out of what we've got, but next year, we get a lot of product flow behind us.
Graham Doyle (Executive Director and Equity Research Analyst)
Okay, brilliant. Maybe just a quick follow-up on Paravision. Are you able to share any more information about potential timings of data? And is this data that you have, is it blinded, or have you had it in-house for a while? Thank you.
David Endicott (CEO)
Yeah, it's still. We're still finishing the phase I, the first in human trial. We should have that data available to us, you know, shortly. In the next several months, we'll have a look at it, and we'll obviously comment on it once we have a full understanding of it.
Graham Doyle (Executive Director and Equity Research Analyst)
Awesome. Thanks a lot, guys.
Operator (participant)
Thank you. Our next question comes from the line of Veronika Dubajova with Citi. Please proceed with your question.
Veronika Dubajova (Managing Director)
Oh, hi, guys. Good afternoon, and thank you for taking my question. Sorry, I forgot to unmute before I started talking. That will do the trick. Two for me, please. The first one is just looking at the full year guide, you know, I'm thinking mostly organic sales growth. Obviously, we're very much trending towards the very bottom of the seven to nine on constant currency. Just curious, kind of, David, Tim, what gives you guys the confidence that there's scope for acceleration in the back half of the year? Is there a specific region, product category that you're focused on? So if you could talk through that and kind of, you know, your degree of confidence that we're gonna end up towards seven versus towards nine, that would be my first question.
Then I have a follow-up after that, but I'll let you answer that first.
Tim Stonesifer (CFO)
Hey, Veronica, how are you doing? Yeah, so I think, you know, the difference between the seven and nine is really how the markets perform. You know, if we get a little bit more market growth or recovery than we have expected, that would bring that number up. I think it's also how effective our pricing actions are. How does the VBP do in China? We're not quite sure how that's gonna roll out. That might come in better than we have. So, you know, listen, there's still five or six months left in the year, and there are a lot of variables out there. But, you know, given what we're seeing right now, that's why we're trending towards the low end, and that's why we called that out.
Veronika Dubajova (Managing Director)
That, that's great, and actually, that, that was a great segue to my second question, which is, are you able to break out for us what the contribution from stocking was to implantables from China VBP? And I guess, what are you seeing on the ground in terms of as you, you know, look at July and August, how much traction are you seeing so far on that VBP front?
David Endicott (CEO)
Yeah, we're just starting, Veronica. I mean, I think, you know, it's hard to tell from a distance how much was stocking and how much was demand. You know, this goes province by province, which is a little bit tricky. So, you know, we sell into a variety of distributors who then supply the hospitals. You know, I think even if you took out China, we had a very good growth, and read that as penetration was up, because as you'll remember, you know, we kind of focused for a long time on how does penetration move, and that's important globally. Penetration was up in Europe, penetration was up in China, it was up in most of the countries, including the United States, so that helped us overall.
So I would say the VBP contribution, relatively small to the total.
Veronika Dubajova (Managing Director)
That's great. Thank you, guys, so much.
Operator (participant)
Thank you. Our next question comes from the line of Ryan Zimmerman with BTIG. Please proceed with your question.
Ryan Zimmerman (Managing Director and Medical Technology Analyst)
Good morning. Thanks for taking our questions. I wanna ask one on dry eye and one on Unity VCS. I'll start with Unity VCS a little bit, actually. So just, you know, as you think about the upgrade cycle at Unity VCS, I mean, how are customers, or how are you thinking about approaching it? If customers are buying, say, one Constellation and one Centurion, you know, what are the economics to you guys? And, you know, as a separate follow-up to that, what's the margin impact from new cassettes on Unity VCS? How should we think about those contributing as you launch that? And then I have a question on dry eye.
David Endicott (CEO)
Yeah, well, I mean, I think the way to think about VCS, particularly as we sell joint machines, you know, a combo machine of a vitrectomy and a cataract machine. Internationally, that is a very popular setup, principally because the ORs are shared amongst the vit and cataract surgeons, and so it's a particularly efficient setup, and the use is obviously more efficient. We expect to kind of make a premium on those. So again, I would think about it as put the two together at the current ASPs and think about a premium, and that's really where we are with that particular idea. The cassette element is part of the discussion, but I do think there's more to it than that. You know, the packs broadly are gonna get launched with new instrumentation.
So you know, things that are that may not seem really important but are to the surgeons, like moving from 23-gauge or 25-gauge instruments to 27-gauge instruments. This creates less trauma in the eye. We've got a new entry system that is you know the trocars you know on our retina piece. I mean, there's a lot of stuff that we're bringing in that will make this procedure safer, faster, and you know we think that really matters a lot. So, the consumables element, again, we'll be looking for a premium on it from our current project. But remember that we're you know we have a fairly sizable you know share of the markets right now, so directionally, this isn't really a share play as much as it is a you know an upgrade and replacement play.
And the only way we're gonna get that done is if we can generate real efficiencies that generate real economics for both payers and surgeons.
Ryan Zimmerman (Managing Director and Medical Technology Analyst)
Okay. That's helpful, David. And then, you know, turning to dry eye for a second, AR-15512, congrats on the PDUFA date. You know, as I think about that relative to other prescription pharmaceuticals in the dry eye market, how would you have us think about that product launch? I mean, we've tracked Xiidra, Restasis, MIEBO now, you know, we've seen how those have launched. In your mind, you know, what closely mirrors kind of what you expect for AR-15512, as you launch that next year?
David Endicott (CEO)
You know, it's tough right now because you know, the market has changed quite a lot, you know, since you know, Restasis or Xiidra, and probably you're gonna have to look at the more recent launches to really get a feel for the trajectory. The payer dynamics is a big part of what happens now, and of course, Medicare is probably 50% of the prescription, so you know, you need to think about the cycle of when Medicare brings formulary products on. You need to think about the cycle for which payers begin to pay, and we'll obviously manage all of that.
We're still working our way through it, and so it's a little premature for me to give you a lot of detail around it for us, but I think in the next. I would say, you know, four to six months, we'll have a pretty good read on what we're gonna do and how to think about this one. But I think it's. Look, what we're excited about with this product is, in the market, there is a real need for faster-acting products that treat, you know, successfully more patients. And I think, you know, those two elements will be a feature in the way we think about this product.
Ryan Zimmerman (Managing Director and Medical Technology Analyst)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of David Adlington with JP Morgan. Please proceed with your question.
David Adlington (Managing Director)
Hey, guys, just thanks for questions. First one, just in terms of your supply chain issues and contact lens care, I just wondered why you had to take a provision and why were you not able to go back and get some compensation from your supplier? And then secondly, just on the equipment growth, I just wondered if you could give us a feel for what percentage of units you sold this quarter actually have an upgrade option to a Unity at some point later down the line. Thanks.
David Endicott (CEO)
You know, on the provision, you know, we took it because obviously we had a lot of product in hand that had been made with something that wasn't gonna contribute, you know, to the final product correctly. You know, we are obviously gonna talk to our supplier about, you know, that situation, and we'll be careful to comment on that one right now. But I think directionally, you know, we feel like that's under control, and we're pursuing all the proper avenues to get that product safely secured, and we're moving down that path. On the equipment growth, you know, we are, you know, we're not really prepared to talk about the units sold and, you know, upgrading.
I think directionally, you know, we sell, you know, we have, as I said, you know, something on the order of 30,000 units out there. Those are generally done on an upgrade cycle of about ten years. So, you know, think of the world as kind of roughly 2,500 to 3,000 units every year, kind of roughly comes in and out of the market. There'll probably be an enthusiasm in the beginning for the product. That's usually what has happened historically, and then it slows down a little bit, but we'll try and meter that carefully so that you have both an upgrade element of it, but also kind of people who really want additional units. And, you know, we are excited about the combo unit, particularly in the international market. That's about what I can help you with now.
David Adlington (Managing Director)
Great, thank you.
Operator (participant)
Thank you. Our next question comes from the line of Patrick Wood with Morgan Stanley. Please proceed with your question.
Patrick Wood (Managing Director)
Brilliant. Thank you for taking the questions. Just to think about all the new product launches that are coming through, I'm just curious how you're thinking about incremental investment behind them, sales and marketing. You obviously have a massive distribution network, but, you know, dry eye takes a bit of dollars to sometimes get working. But then, you know, Unity, you already have a Rolodex of customers there. So how are you thinking about the interplay between incremental investment behind pushing the products as we move into next year versus that kind of top-line opportunity?
David Endicott (CEO)
Yeah, I mean, look, we're really trying to struggle with that question, Patrick. It's a great question, and I think, you know, as we come into the fourth quarter and we really get our budget set for next year, we'll have an opportunity to describe that to you next quarter, I think, with some degree of detail. I do think that we are gonna wanna put additional investment behind major project launches like Unity VCS, like five one two. And so I think, you know, that's what's been in our plan, so I don't think there's anything new there necessarily. But it does matter how many products we've got right now and how many opportunities we have, and we wanna make sure we maximize all of those to try and, you know, really drive revenue at its maximum value.
You know, my sense of it is we'll have a better, more clear picture as we guide for next year, and certainly, we'll begin to work that process, you know, next quarter.
Patrick Wood (Managing Director)
Brilliant. And then just as a quick follow-up, the Ocumension agreement. Excuse my ignorance. I'm just curious, like, the difference that you saw in the end markets in China for, you know, the ocular health side relative to surgical and contacts, and why direct makes more sense for one, relative to the distributor-led model for the other?
David Endicott (CEO)
The simplest answer, honestly, is that we don't necessarily have the capabilities in-house today to do what they have already made. So, you know, we'd have been in a build mode for China, and frankly, the portfolio was relatively small, with a fairly sizable investment on AR-15512. So, you know, what we were looking at was: Where do we wanna prioritize resource more than anything else? And, you know, I think what we saw was a very skilled partner who has good regulatory experience, good marketing experience, good manufacturing and R&D.
You know, it really seemed to make a lot of sense for us to let them, you know, take on the eye drops business for us instead of us trying to build all of that capacity while we do all these other products, while we do, you know, as many things as we've got going on. So, you know, it was really more of a "What's the most efficient way to maximize profit?
Patrick Wood (Managing Director)
Love it. Thanks for the questions.
Operator (participant)
Thank you. Our next question comes from the line of Jack Reynolds-Clark with RBC Capital Markets. Please proceed with your question.
Jack Reynolds-Clark (VP and European MedTech Equity Research)
Hi there. Thank you for taking the questions. I have two, please. Just on Unity VCS or even CS, wondering if you could share any initial feedback you're getting from surgeons, and any kind of initial data around the potential efficiency improvements that the systems can provide, and kind of how strong that case may be. And then the second one was just on equipment. So could you just kind of give a bit of color around kind of how much comp effect is here, and whether there's any kind of underlying weakness in demand, or if people are kind of holding off ahead of the Unity launch, or anything like that? Thanks.
David Endicott (CEO)
Yeah, the second one, Jack, is pretty easy. You know, we kind of expected, as you remember from the beginning of the year, that we'd see a little bit of a stall in console growth, particularly about this time. You know, and, you know, what I'm excited about with the equipment is underlying that is actually pretty solid demand for biometry, for scopes, for, you know, other equipment, which we've done quite well with, while we have kind of seen the console business kind of slow down. So directionally, I think, you know, you should feel pretty good about our equipment right now because we. You know, most everybody knows that we've got, you know, a bunch of product out there in the market with some key customers, you know, making sure we get it all kind of perfect before we launch it.
But directionally, I think equipment looks pretty good to us. On the Unity piece, you know, we are very excited from the feedback that we've gotten from surgeons on this, and we've had it with some of the best folks in the world in Japan, in the United States, in Europe. And, you know, consistently what we're hearing is, you know, very, very safe, you know, people operating at, you know, IOPs that are considerably lower than where they have been in the past, you know, in the 20s. You know, there are people now operating, you know, at physiological IOP, which we think is the end game, you know, for this product. And when you do that, you know, basically everything kind of, you know, looks safer and more stable, and you can move a little bit faster.
That's really the key to this thing, is to get the safety into a level where you really can speed up a little bit. The cut speeds on the vit machine are twice as fast as the Constellation. You know, our observation of the cataract machine. Again, we'll see some efficiency improvements there as well. We're you know, optimistic, and the feedback has been very positive.
Jack Reynolds-Clark (VP and European MedTech Equity Research)
Great. Thank you very much.
Operator (participant)
Thank you. Our next question comes from the line of David Saxon with Needham & Company. Please proceed with your question.
David Saxon (Senior Analyst)
Great, thanks. Good morning, and thanks for taking my questions. Maybe I'll start on the glaucoma portfolio. I know Hydrus is a smaller product for you, but can you talk about how that's been trending and the attachment rate you're seeing with your IOLs? And then, on BELKIN Vision, DSLT, maybe timing to launching that in the US. And then lastly, on glaucoma, David, I think you mentioned a new drop in the pipeline. Is that in glaucoma, or is that in a different part of the portfolio?
David Endicott (CEO)
Yeah, let me start with Hydrus. You know, the Hydrus business is going well. I mean, it's double-digit growth, which is ahead of the market, kind of as we expected, so we're doing well with that product. And we really don't think about attachment rate very much with the IOLs. That's really kind of indifferent to us. It's really specific about how we handle the glaucoma patients' needs. So, relative to Hydrus, we think adding Belkin makes a ton of sense because if you start with SLT, and we think this is a much faster, easier way to do SLT, you know, that's gonna make a ton of sense, and then you'll move into whatever's next, whether that's drops or Hydrus or whatever, depending on the patient need.
But I think the launch timing on BELKIN will be, you know, likely first quarter next year, and I think we're working through some of the final details of that launch. But we've got manufacturing to take care of, and we're building inventory on that product now. On the new drop, I'm not 100% sure which, you know, on the pharmaceutical, which one you're talking about. We have a number of things going on in the pharmaceutical space, but in glaucoma, I think one of the things that was mentioned earlier was a follow-on to ROCKLATAN, which again, we have put in a clinical trial. That is a reformulation to try and improve the efficacy or the safety of that brand. There's one of those out there, but there's also several other things that we're working on in the pharmaceutical space.
David Saxon (Senior Analyst)
Okay, great. That's super helpful. Thanks for that. And then, just on the cataract procedure volumes, low single digits this quarter, I think it was like 2% last quarter. So, I think that's a slowdown from what we've seen in the past. So what's driving that? Anything specific from a geographical perspective, or is it kind of global? Thanks so much for taking the question.
David Endicott (CEO)
Yeah, you know, the cataract weakness in the second quarter was real in the US, and it was pretty stable, you know, I would say, solid in the international market, so you know, if you think about the difference, it really has been the US that's been a little bit slower recently. You know, I can't tell you why exactly. I could give you nine thesis on why what it might be, but I don't think we know. I do think that over time, these things tend to be idiosyncratic. You'll have one quarter that will do really well, you'll have a slowdown, and then you'll have another quarter that does really well.
So, you know, our view is that the normal rate of cataract growth around the world is in the mid-single digits, kind of the low end of mid-single digits, call that four, four and a half. You know, higher in international, lower in the US. But directionally, you know, we've got a lot more surgeons coming into the international markets, you know, think China, think Asia in general. And then we've got, you know, a lot of efficiency gains coming through in the United States, which is driving basically the volumes up over time. So I think that's the best I can give you in terms of dynamics. I, you know, generally think this thing evens out over time, and, you know, we expect to see solid quarters coming up.
David Saxon (Senior Analyst)
Great. Thanks so much.
Operator (participant)
Thank you. Our next question comes from the line of Anthony Petrone with Mizuho Group. Please proceed with your question.
Anthony Petrone (Managing Director Equity Research)
Thanks, and good morning. Maybe one on margins and one on capital allocation. Tim, just on margin, you called out the supplier quality issue was 100 basis points. You back it out, you're at 21%. You're leaving the guidance unchanged, but if I heard you correctly, there'll still be a margin impact from the supplier quality issue, at least in some portion of the second half. So it suggests the underlying margin's actually a little bit better. Are we thinking about that correctly? And if there is underlying momentum, what are the sources there? And then I'll have one quick follow-up.
Tim Stonesifer (CFO)
Yeah, great question, Anthony. Listen, the way we're thinking about it is, obviously, we weren't expecting the impact of the inventory provision, and, you know, $30 million is, call it, you know, 30 or 40 basis points. But, the other thing to think about is, at the same time, we have quite a few investments in the second half related to new product launches that we're committed to making, because obviously revenue growth is key to the financial thesis. So you know, that's really why, you know, we give a range. So, you know, given the assumptions we've laid out, we're comfortable that we can hit that range. And the other thing to think about is, if you look at our R&D spend in the first half of the year, we're coming in at about 8.2%.
Again, we'd like to be at the high end of that because we think innovation is super important, and given the pipeline that we have right now, I'd expect the R&D spend to be a little bit heavier in the back half as well.
Anthony Petrone (Managing Director Equity Research)
That's helpful. And then just capital allocation, there was speculation out there during the quarter that perhaps Alcon was looking at a larger transaction than we've historically seen it pursue. So maybe just your latest thoughts on the M&A market, is the priority still for some of the therapeutic assets that are out there? What are you looking at in med tech these days? And maybe just some high-level thoughts there. Thanks.
Tim Stonesifer (CFO)
Go ahead.
David Endicott (CEO)
Yeah, you know, Anthony, you know, we're always looking at stuff in ophthalmology. You know, if it's in eye care, you know, you can count on us being somehow involved in looking at it. And so directionally, we still like the kind of technology-oriented, bolt-on ideas that kind of range in that $50 million-$500 million. Obviously, you know, with the strength of our balance sheet, we can do any number of things. But I think really, you know, what we're trying to do is fill out white spaces, and so think glaucoma, think refractive, think, you know, contact lens technology, think, I don't know, pharmaceuticals. You know, those are areas where we have big growth opportunities and relatively low shares. So that's kind of the, generally speaking, that's what we're looking at in that zone. Tim, you want to add?
Tim Stonesifer (CFO)
No, that's right.
David Endicott (CEO)
Yeah.
Operator (participant)
Thank you. Our next question comes from the line of Larry Biegelsen with Wells Fargo. Please proceed with your question.
Larry Biegelsen (Senior Medical Device Equity Research Analyst)
Thanks for taking the question. Good morning. Just one quick one on timing, and I had one follow-up. So the AR155 data and publication, when will we see that? And how far behind is the CS, Unity CS from ACS?
David Endicott (CEO)
Yeah, Larry, thanks for the question. phase II data will likely be available at the American Academy of Ophthalmology, coming up in, I think, October or November. It's somewhere in that zone. I think it's late October-ish. And then on the Unity VCS, and CS, the CS will come pretty close. I think, you know, probably six months behind VCS, but plus or minus a bit on that, let's just say, because I'm not 100% sure.
Larry Biegelsen (Senior Medical Device Equity Research Analyst)
David, just one follow-up. Just what have you guys said publicly on just phakic IOLs in general? I know Alcon had an internal program about 20 years ago that never, you know, I don't think it ever obviously wasn't launched. But what is your high-level view of just the phakic IOL market in general? Thank you.
David Endicott (CEO)
You know, I think directionally, we think it's a good idea. I think, you know, the projects that have been out there before we were in it, and, you know, historically with Cachet and, you know, we had some challenges with that. But I think directionally, you know, we like the progress that's being made there. You know, again, LASIK is really a very good procedure, and I think directionally, we still sell, you know, a lot of lasers for that procedure. So, you know, I think for high myopes, this is a really appropriate kind of project, and I think for anybody who's kind of minus six and under, I think you'd be hard pressed to go away from LASIK.
So our view is that market doesn't really impact our refractive market, so our LASIK business is still really solid. What's really going on is, I think the consumer is driving most of these decisions at this point. So strength of the consumer drives the strength of the refractive market. You know, and there's a lot of up and down in that, but directionally, still an important market.
Larry Biegelsen (Senior Medical Device Equity Research Analyst)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Michael Sarcone with Jefferies. Please proceed with your question.
Michael Sarcone (Equity Research Analyst)
Good morning, and thanks for taking the questions. Just, you know, first, you talked about a broader Unity launch in the second quarter of 2025. Can you maybe just elaborate on, you know, what the goalposts or things you're looking to accomplish prior to the broader launch are?
David Endicott (CEO)
Yeah, Michael, one of the things that we, you know, have really been careful about with the Unity launch is to make sure that, you know, it, we really understand it, we understand all the corner cases that could come up, that we've, you know, that we've looked at the preferences for software, you know, the way in which it looks and feels, the way it gets set up. There's a lot of detail that is important to kind of fine-tune, I would say, you know, once the product's approved. And, you know, we have the good fortune of having two tremendously successful products out there with Centurion and Constellation.
When you go in and you say, "Hey, you know, I'd like to get a premium for this product," or, "This is a better product," you know, it really has to be. That's really what we're after right now, is making sure that we know how to describe that, you know, we have the data to actually prove that. Those are the things that we're working on, so we're being patient with this, for sure. I recognize that, you know, it was approved some time ago, but directionally, this is the way really great products get launched, I think.
Michael Sarcone (Equity Research Analyst)
Understood. That's helpful. And then just, last question from me. On the next-gen PanOptix, I think you mentioned you're still deciding on launch timing over the next few months. Can you just elaborate on the factors that you're thinking about as you decide on the launch timing, and then, you know, any color on economics and if you may be able to take incremental pricing there?
David Endicott (CEO)
Yeah, I mean, I think, you know, what we're trying to do right now is, you know, we have two different ideas. You know, we're working on a product that already is kind of the gold standard in trifocal lenses, that has a patented set point. Its optical design is particularly unique, and, you know, this is a really important product for us. So, you know, we're being very careful about how we work at improving it. And as we kind of get there, you know, we're looking at enhanced distance vision through improved contrast. We're looking at different ways to improve acuity, you know, at all ranges, using different light distributions. And so the optical designs, we're getting feedback on now. We'll see which one really, you know, has the best chance of improving this.
And when we get that information, again, as we do that through our testing work right now, we'll decide, you know, which product we want to launch and when that would be. So I would expect that in the front half of next year, but again, I you know, we'll see, you know, as we kind of go forward.
Michael Sarcone (Equity Research Analyst)
... Got it. Thank you and any color on the potential economics there versus current gen?
David Endicott (CEO)
No, not yet. I mean, I think we really need to see kind of what this looks like.
Michael Sarcone (Equity Research Analyst)
Okay. Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Issie Kirby with Redburn Atlantic. Please proceed with your question.
Issie Kirby (Senior Analyst)
Hi, guys. Thanks for taking my question. Firstly, on the Unity ramp, I guess if we look to Centurion when it first launched, is there any reason why the Unity ramp should vary in terms of how quickly it penetrates your installed base versus Centurion? And also, any comments you have on the health of, I guess, the end purchaser for the Unity systems from a financial perspective? And then I have a follow-up on implants.
David Endicott (CEO)
Yeah, I mean, I think directionally, that's not a bad way to to kind of model it. I would think about Centurion and the Constellation launches and really kind of think about the installed base. And one of the reasons we gave you the installed base in the opening remarks was really to give you some sense of how big the market is. And I think the other, you know, factor to think about is that these are generally eight to 10 years of cycle time. So you know, taking some division against the installed base and then some, you know, some portion of additional market is probably the right way to think about it. The rate will be probably a little bit more enthusiastic in the beginning because it usually is.
You can see that in probably the original Centurion launch, and then, you know, again, it'll slow down as you get a little bit more into a natural replacement cycle, so directionally, that's kind of the way to think about it. On the health of the end purchaser, again, I think there's room for these kind of capital choices, particularly if they create value.
And so I think what we're really focused on is trying to establish, you know, in some of these preference testing, you know, what is the actual duration and turnover of the ORs so that, you know, if the health authority wants to do more surgery and wants to shorten lines or wants to, you know, really benefit the time in the OR for somebody else, the utilization of that OR is much more efficient. So that's what we're trying to figure out, and as we get to that, that'll help, I think, drive a real interest in moving these products forward.
Issie Kirby (Senior Analyst)
That's great. Thank you. And then just on the implantables business and where penetration has reached in some of your other markets, like Japan and in some of these developed European markets, I guess, could you comment on where premium IOL penetration has reached, and if you're seeing perhaps any of these markets reach, a bit of a ceiling like perhaps we have in the U.S.? Thanks.
David Endicott (CEO)
Yeah, you know, I'm unconvinced that there's a ceiling in the U.S., and then I think. Well, I do. There's a ceiling, but it's considerably higher than where we are. I mean, I think historically, we've talked about, you know, willingness to pay. We've done. Every year, I think we do work with a consumer, that if they really understand this choice, they're willing to pay, and it's about, you know, kind of usually in the mid-thirties, plus or minus a little bit, of the market that will do that. So I think there's plenty of room for the U.S. to grow from what was a 19.2%, you know, I think, in the second quarter.
If you look around the world for IOLs, you know, the penetration globally is 15%, but obviously, that's a blend of the U.S. and the international markets. So international markets on penetration directionally, you know, are a good bit lower than that. Somewhere in the 14.3% is what I've got internationally. So, you know, I think what you'll see is continued steady growth of penetration internationally, in particular, because, you know, Europe had a good quarter and moved quite a little bit. China is helping a lot as it kind of moves. Japan has been solid. Korea has been solid. So there's a lot of opportunity still out there to move penetration, and you know, in most of those markets, you know, we have growing share, not declining share in any way.
So if you get penetration and share moving, that helps us a lot.
Issie Kirby (Senior Analyst)
Great. Thanks.
Operator (participant)
Thank you. Our next question comes from the line of Richard Felton with Goldman Sachs. Please proceed with your question.
Richard Felton (Equity Research Analyst)
Great. Thank you. My first question is on the deceleration in ocular health. I know you called out the impact from contact lens care in the quarter, but even adjusting for that, it seems like the rest of the business slowed a little bit in Q2, so is there any additional color you can share for that division, and specifically, were there any changes to the strong trends that you've seen for Systane?
David Endicott (CEO)
No, look, Systane is doing great. I mean, it was another quarter of double-digit growth for Systane, Systane brand. You know, the multi-dose preservative free all around the world is doing quite well. And I do think that it will continue to. You know, I think the quarter is pretty normal. I think it was somewhere in the five, you know, kind of mid-single digit range for the market. And as we kind of calculate out the CLC element of it, the kind of lens care element of it, I think that we were probably moving around 6%. So you know, a little bit faster than the market as we saw it, but I think you should just think about it as another normal quarter.
Richard Felton (Equity Research Analyst)
Great. Thank you. And then, maybe one for Tim on free cash flow, seeing a strong improvement in cash generation in H1. Is this sort of the new normal level of cash conversion that we should expect from Alcon moving forward? Thank you.
Tim Stonesifer (CFO)
Yeah, great question. Listen, we're very pleased with our free cash flow performance in the first half, and as we said, we would expect to see a significant increase year-over-year, so the one thing I would remind you of is we did have some unusual items that pressured free cash flow last year. So if you think about the legal settlement we had, if you think about the transformation costs, and some of the higher level inventory that we purchased, so I think you're gonna see this step up this year, and then next year and beyond, you're gonna see more of a normalized free cash flow progression that's sort of in line with our operating income. That's a good proxy for free cash flow. But we're pleased with our performance so far.
Richard Felton (Equity Research Analyst)
Thank you.
Operator (participant)
... Thank you. Our next question comes from the line of Tom Steffen with Stifel. Please proceed with your question.
Tom Steffen (Analyst)
Great. Hey, guys. Thanks for the questions. I think just one for me, David. I believe in the past you've talked about the tunable accommodative offering, potentially not requiring an incremental system for the post-op adjustments, and then maybe those could be done with a laser that, I guess, surgeons already have in their clinic. Is that still the thought or the strategy, when it comes to your future tunable offering? Thanks.
David Endicott (CEO)
Yeah, interesting question, Tom, and I think, you know, we've got a lot of projects in the what I'd loosely call tunable and adjustable areas. We probably have several projects. One of them I showed, I think, at Capital Markets Day last time we did it, which was a laser adjustment, which we think is probably a better long-term idea than, you know, kind of adjusting material with UV light, which again, you know, straight UV light and locking that in is still a little bit tricky. So I think directionally, you know, my view is that, there'll be better ideas going forward for tuning and adjusting, whether that's, accommodation, you know, again, which we have a number of ideas around, or tuning itself, we're working on several.
Tom Steffen (Analyst)
Got it. Thanks.
Operator (participant)
Thank you. Our next question comes from the line of Steve Lichtman with Oppenheimer and Company. Please proceed with your question.
Steve Lichtman (Managing Director and Senior Equity Research Analyst)
Thank you. Good morning, guys. And David, as you gear toward PRECISION7 launch, any color you can provide on how you think you'll position it relative to TOTAL30, and how it can help you expand your share in reusables? So what does your market assessment say on the type of patient that you can target with P7?
David Endicott (CEO)
Yeah, you know, P7 has been a really interesting product for us, 'cause, you know, we were unclear a little bit when we started down this path, how big this market might be. So I think you're asking an interesting question that we've spent some time on. The PRECISION7 is unique in that we've created a technology that allows water to move from the, you know, the lens material to the surface for kind of seven consecutive days. That keeps a fresh lens nearly every day, and that experience and that regimen of kind of every Sunday or every Monday, whatever day you wanna choose, you know, of replacing it with a fresh lens, seems to be very attractive to both patients and to the optometrists that we've talked to.
And right now, we've got a select group of key opinion leaders, you know, using this product. They've had it for, I guess, a couple of months, while we were building inventory on it, and it seems to be, you know, quite pleasing to them. And so I think they like the intuitive nature of the replacement schedule, and they like the fact that they're, you know, they're moving down to a fresh lens a little more frequently. That just, you know, I think, appeals to everybody. And then again, you know, the price point on this will fit in nicely, you know, between, you know, a dailies lens and a reusable lens. So what we're trying to do is squeeze a little bit of room in here, and I think there's a pretty good place for it.
You know, we'll see how it plays, but I think directionally, the feedback early on has been very positive.
Steve Lichtman (Managing Director and Senior Equity Research Analyst)
Great. And then just a follow-up, you mentioned earlier in the call, the strategic deal in China with Ocumension. It seems like an interesting new opportunity. Can you give a little more color on how you view that opportunity long term?
David Endicott (CEO)
Well, you know, we like the team that they've got there. I mean, they've built a business that has local manufacturing, local R&D, regulatory folks that really understand that market. You know, for us to get in there, you know, our assessment was it was gonna take us a while to do that and to build the capabilities that are really effective, you know, is expensive. And we really thought through carefully how we wanted to think about China, and I think really, you know, we decided that we had a lot of opportunity in surgical, a good bit of opportunity in vision care, and that the eye drops business we could find a partner for, you know, in a very efficient way.
And so this is a move for efficiency, for profitability, and I think capability really is the way to think about it.
Steve Lichtman (Managing Director and Senior Equity Research Analyst)
Got it. Thanks, David.
Operator (participant)
Thank you. Our final question comes from the line of Brett Fishbein with KeyBanc Capital Markets. Please proceed with your question.
Brett Fishbein (Analyst)
Hey, guys. Thank you so much for squeezing me in. I think we hit on pretty much every business area, maybe except for consumables, so I'll ask about that one. Didn't really come up much on the call. You know, kind of, like, down the middle this quarter, but a little bit lower than some of the recent high single digit or double-digit quarters that you've put up over the past couple of years. So just curious if you're looking at this as a bit of a one-off quarter, you know, ebb and flow, or if there was any type of headwinds that you could call out there?
David Endicott (CEO)
Yeah, good question, Brett. I mean, look, I mean, I would think about it as we generally think about the market and consumables as quite correlated. So, you know, I think, you know, we always get a little bit of share and a little bit of price as we kind of trade people up into the newer consumables, newer disposables. So think about the market overall as kind of 3%, low single digits kind of number, and, you know, we grew, you know, what? 5% in consumables. So, you know, I think that's the right way to think about it. It was just a little bit softer quarter around the world for procedural growth, and, you know, I think that's all there was to it. Early in the year, the first quarter, we had a really good, you know, procedural growth number.
So again, I think you've got the... You kind of got the gist of it.
Brett Fishbein (Analyst)
All right. And then just last follow-up question on contact lenses. You guys keep calling out strength in torics and multifocals as one of the key drivers, which is great to see. Just, I think it's interesting, the number of new launches in the daily high toric category with another one, you know, pretty recently. I'm curious just on how you're viewing competitive dynamics there, and whether you expect, like, any change, to the level of growth you've seen in some of your daily torics for the rest of the year. Thank you.
David Endicott (CEO)
Yeah, good question. The specialty lenses really are, you know, where the action is right now, and I think that's good because they're, you know, again, I think they're underdeveloped in terms of categories. So I think people see correctly that, you know, the multifocal designs today are, you know, they're acceptable, they're pretty good, but they aren't perfect. There's a lot of work we're doing right now to kind of improve those multifocal designs. Multifocal toric's, very difficult to make, very expensive to make, and I think, you know, there are still some launches going on in that space, but it's relatively small market.
We've spent a lot of time thinking about our toric design, and I spoke to it in the prepared remarks, but I think directionally, we're very pleased with the uptake of our toric lenses and how the toric lenses halo the rest of the brand family. So we've had a nice run with dailies, particularly with the torics, and so P1 Toric, DT1, you know, for astigmatism, those are terrific lens movements for us. And I do think there'll be more competitive dynamic around it, but I think we may be in a very strong position given the design that we have for our toric, which is really unique.
Operator (participant)
Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Cravens for any final comments.
David Endicott (CEO)
All right. Well, thanks, everybody, again, for joining us this morning. If you have any follow-up questions, for the media, reach out to our corporate communications department, or from investors or analysts, certainly feel free to reach out to either Allen Trang or myself. Thanks again.
Operator (participant)
Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.