Alcon Reports Solid Financial Results for Second Quarter

Alcon, Inc. (NYSE:ACL) reported global sales of $1,677 million for the second quarter of 2009, a 3.3 percent increase excluding the impact of foreign exchange fluctuations, or a decrease of 3.4 percent compared to the second quarter of 2008 on a reported basis. Net earnings for the second quarter of 2009 rose 2.6 percent to $582 million, or $1.94 per diluted share, compared to $567 million, or $1.88 per diluted share, in the second quarter of 2008.

"Organic sales growth is coming in as expected in 2009, as we continue to execute our sales and marketing strategies that allow us to grow even in the face of global economic weakness,” said Kevin Buehler, Alcon’s president and chief executive officer. "We expect that further development of key businesses like glaucoma, advanced technology intraocular lenses and emerging markets will enable us to achieve our full year guidance of mid-single digit organic sales growth with somewhat higher organic growth in the second half of the year than in the first, and to translate that growth into solid earnings performance.”

Sales Highlights

Summarized below are the key drivers of sales in the second quarter of 2009. All growth comparisons are for the second quarter of 2009 compared to the second quarter of 2008. 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.

• International organic sales growth was 5.9 percent (-6.4 percent reported), with emerging markets rising 8.1 percent organically (-8.2 percent reported).
• U.S. sales stabilized as they increased 0.3 percent due to strong contributions from advanced technology AcrySof^® intraocular lenses and share gains and market growth in glaucoma offset by generic competition to TobraDex^® ophthalmic suspension.
• Advanced technology intraocular lenses rose 38.3 percent organically, (+30.1 percent reported) due to market share gains by the AcrySof^® ReSTOR^® Aspheric +3.0 lens, which was launched in the United States in January of 2009, and the continued rapid adoption of AcrySof^® IQ Toric by cataract surgeons.
• Glaucoma sales rose 16.6 percent organically (+8.3 percent reported) led by a 23.6 percent organic rise (+15.4 percent reported) in global sales of TRAVATAN^®, TRAVATAN Z^® and DuoTrav^TM ophthalmic solutions, as these products continued global market share growth in the prostaglandin category. The launch of Azarga^® ophthalmic solution in the European Union contributed to unit growth of 15.5 percent for the Azopt^®/Azarga^® family.
• Sales of allergy products declined 1.8 percent organically (-4.8 percent reported), consistent with the company’s expectations for a weaker spring allergy market in the United States. The company increased combined Patanol^® and Pataday^™ ophthalmic solutions U.S. market share to 78.6 percent May year-to-date, an improvement of 0.8 percent over the prior year.

Earnings Highlights

Summarized below are the key drivers of earnings in the second quarter of 2009. All growth comparisons are for the second quarter of 2009 compared to the second quarter of 2008.

• Operating income margin rose from 37.2 to 37.7 percent of sales and net income margin increased from 32.6 percent to 34.7 percent of sales.
• Cost management programs and foreign exchange fluctuations led to a sharp reduction in selling general and administrative expenses from 30.4 to 27.9 percent of sales.
• Other income in the second quarter of 2009 was $19 million compared to $4 million in the second quarter of 2008, due primarily to gains from foreign currency transactions.
• The effective tax rate for the second quarter of 2009 was 10.6 percent, which included approximately one percentage point of period benefits related to settlement with tax authorities on prior year taxes.

Other Highlights

• Alcon has entered into a five-year collaborative research agreement with AstraZeneca for the exclusive ophthalmic discovery and potential development rights to AstraZeneca's compound library. The agreement covers multiple classes of small molecules with lead compounds targeting development of drugs to treat sight-threatening conditions such as glaucoma, wet and dry age-related macular degeneration and other retinal diseases, as well as ocular allergy, dry eye and other inflammatory eye conditions.

• Alcon has entered into a research and licensing agreement with PhiloGene, Inc. for rights to a VEGF protein. The company plans to develop this protein for the treatment of wet age related macular degeneration and diabetic macular edema.
• The company plans to launch TOBRADEX^® ST ophthalmic suspension, a new formulation of tobramycin/dexamethasone formulated with the Zexio^TM delivery system that enhances bioavailability to targeted tissues.
• Alcon completed the European Union decentralized registration procedure for Vigamox^® ophthalmic solution. National licenses have been issued by Bulgaria, Iceland and Romania and the company is awaiting licensing from the remaining 23 countries.
• The company filed an NDA supplement requesting approval of Patanase™ nasal spray for use in patients from 6 months to 12 years of age.
• Alcon filed a drug approval application in selected European Union markets for CILODEX^® otic suspension for the treatment of middle and outer ear infections. CILODEX^® is the European trade name for CiproDex^® otic suspension marketed in the United States.
• Alcon commenced a Phase 2 clinical trial of the aganocide compound NVC-422 for viral conjunctivitis. This compound is licensed from NovaBay, Inc.
• Alcon notified its publicly-listed German subsidiary, WaveLight AG, that it plans to acquire the remaining publicly-held WaveLight shares at a price of EUR 20.02 pursuant to German securities law.
• The court vacated the July 27, 2009 trial date that had been scheduled for Alcon’s patent infringement action against Apotex related to Patanol^®. The court said a new trial date would be set by a separate order.

Financial Guidance

The company reaffirmed its previously-issued sales guidance for full year 2009 organic sales growth to be in the mid-single digits. The company raised its guidance for full year 2009 diluted earnings per share on a U.S. GAAP basis to between $6.20 and $6.35 and between $6.25 and $6.40 on a non-GAAP adjusted basis (excluding restructuring charges taken in the first half of 2009). This increase reflects positive earnings performance in the first half of the year, which is expected to be partially mitigated by higher R&D and SG&A expenses in the second half of the year.

About Alcon

Alcon, Inc. is the world’s leading eye care company, with sales of approximately $6.3 billion in 2008. Alcon, which has been dedicated to the ophthalmic industry for 65 years, researches, develops, manufactures and markets pharmaceuticals, surgical equipment and devices, contacts lens solutions and other vision care products that treat diseases, disorders and other conditions of the eye. Alcon operates in 75 countries and sells products in 180 markets. Alcon’s majority shareholder is Nestlé, S.A., the world’s largest food company. For more information on Alcon, Inc., visit the Company’s web site at www.alcon.com.

N/M - Not Meaningful

Note: Organic change calculates sales growth without the impact of foreign exchange fluctuations and acquisitions. Management believes organic sales change is an important measure of the company’s operations because it provides investors with a clearer picture of the core rate of sales growth due to changes in unit volumes and local currency prices. This measure is considered a non-GAAP financial measure as defined by Regulation G promulgated by the U.S. Securities and Exchange Commission. Certain reclassifications have been made to prior year amounts to conform to current year presentation.

N/M - Not Meaningful

Note: Organic change calculates sales growth without the impact of foreign exchange fluctuations and acquisitions. Management believes organic sales change is an important measure of the company’s operations because it provides investors with a clearer picture of the core rate of sales growth due to changes in unit volumes and local currency prices. This measure is considered a non-GAAP financial measure as defined by Regulation G promulgated by the U.S. Securities and Exchange Commission. Certain reclassifications have been made to prior year amounts to conform to current year presentation.

Note: Organic change presents sales growth without the impact of foreign exchange fluctuations and acquisitions. Management believes organic sales change is an important measure of the company’s operations because it provides investors with a clearer picture of the core rate of sales growth due to changes in unit volumes and local currency prices. This measure is considered a non-GAAP financial measure as defined by Regulation G promulgated by the U.S. Securities and Exchange Commission.

Note: Adjusted net earnings and diluted EPS measure the results of the company's operations without certain items that pertained only to the period presented. Management believes these measures are an important measure of the company’s operations because it provides investors with a clearer picture of the core operations of the company. This measure is considered a non-GAAP financial measure as defined by Regulation G promulgated by the U.S. Securities and Exchange Commission.

Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements principally relate to statements regarding the expectations of our management with respect to the future performance of various aspects of our business. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by our forward-looking statements. Words such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "hope," "intend," "estimate," "project," "predict," "potential" and similar expressions are intended to identify forward-looking statements. These statements reflect the views of our management as of the date of this press release with respect to future events and are based on assumptions and subject to risks and uncertainties and are not intended to give any assurance as to future results. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Factors that might cause future results to differ include, but are not limited to, the following: the development of commercially viable products may take longer and cost more than expected; changes in reimbursement procedures by third-party payers may affect our sales and profits; a weakening economy could affect demand for our products; competition may lead to worse than expected financial condition and results of operations; currency exchange rate fluctuations may negatively affect our financial condition and results of operations; pending or future litigation may negatively impact our financial condition and results of operations; litigation settlements may adversely impact our financial condition; the occurrence of excessive property and casualty, general liability or business interruption losses, for which we are self-insured, may adversely impact our financial condition; product recalls or withdrawals may negatively impact our financial condition or results of operations; government regulation or legislation may negatively impact our financial condition or results of operations; changes in tax laws or regulations in the jurisdictions in which we and our subsidiaries are subject to taxation may adversely impact our financial performance; supply and manufacturing disruptions could negatively impact our financial condition or results of operations. You should read this press release with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except to the extent required under the federal securities laws and the rules and regulations promulgated by the Securities and Exchange Commission, we undertake no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise.