...and strong results have followed 1 2 Fix the foundation and strengthen execution 1 Sales have returned to growth 1 Highest ranking of customer over the last several quarters satisfaction in major markets; Invest in promotion, capital and systems 2 SAP now spans ~60% 6% Reinvigorate the innovation pipeline 3 5% 5% 5% of sales; 4% 3% significant 1% Strengthen the customer relationship 4 capital investment -1% in contact lenses Develop a nimble medical device culture 5 FY16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 3 4 5 Launched new products Service levels at a Voluntary employee (e.g. PanOptix, Ngenuity, 3 year high; turnover at a DAILIES TOTAL1 multifocal) increased customer 6 year low and expanded the training and field pipeline service personnel by 10% 1. Sales growth figures presented in constant currency (cc), which is a non-IFRS measure. For additional information regarding the constant currency figures presented see “Appendix” starting on slide 112 11 Note: Some quarterly growth rates have been impacted by inventory movements
Improving the culture has been a top priority and the organization has responded Removed barriers Added management Increased resources Empowered to improve salesforce experience in eye care in customer training the organization effectiveness and medical devices and field service to serve the customer Employee surveys have shown a significant morale improvement 12
The foundation has been strengthened and we have advanced to the next phase Execute the Deliver Fix The growth plan leading-edge solutions Foundation AT-IOLs 1 Accelerate Innovation Vitreoretinal Expand markets & adjacencies DAILIES TOTAL1 New business models Dry Eye 2016-2017 2018-2020 2021 & Beyond 13 1. AT-IOLs refer to advanced-technology intraocular lenses
Introduction to Alcon Vision and Strategy David Endicott Chief Executive Officer
Vision Strategy Mission We aspire to lead the world in We help people see better We apply world leading eye care innovations that expertise to innovate products, enable extraordinary lives build markets and deliver new solutions in eye care 15
Strong management expertise David Endicott David Murray Michael Onuscheck Sergio Duplan Ian Bell Laurent Attias Chief Executive Officer Chief Financial Officer President Global President North America President International Head Corporate Businesses & Innovation Development, Strategy, BD&L and M&A Executive Committee: One additional position is currently vacant 415 / 210 Years in Years in healthcare eye care Ian Bell a.i. 1 Camila Finzi Jim Murphy Raj Narayanan Andy Pawson Michael Onuscheck Franck Leveiller Ed McGough Heather Attra Karen King Royce Bedward Sue-Jean Lin Merrick McCracken a.i. 2 Region President, Region President, Region President, Region President, President & GM, Head Global Head Global MTO Head Global Head Global IR & General Counsel Chief Head Global EMEA LACAR Japan Asia Global Vision Care President & GM, R&D Quality Assurance Communications Information Officer Human Resources Franchise Global Surgical Franchise 1. Ian Bell, President International, in charge a.i. until successor has been nominated 16 2. Michael Onuscheck, President Global Businesses & Innovation, in charge a.i. until successor has been nominated
Sizeable opportunities with substantial unmet medical need could be saved with of visual impairment is $102b 80 % appropriate eye care preventable or curable 1 services 1 People: 153 million 1.7 billion 352 million 20 million 93 million 67 million with uncorrected have live with are blind have live with refractive errors 1 presbyopia 2 dry eye 3 from cataracts 1 diabetic retinopathy 4 glaucoma 5 1. World Health Organization (WHO), www.who.int/blindness 4. Global Prevalence and Major Risk Factors of Diabetic Retinopathy, Diabetes Care 2012 Mar; 35(3): 556-564 2. Global Prevalence of Presbyopia and Vision Impairment, 2018 Oct;125(10):1492-1499. doi: 10.1016/j.ophtha 5. Glaucoma Foundation, http://glaucomafoundation.org/Get_Involved.htm 17 3. Epi Database. Kantar Health. June 2015. Custom Dry Eye Self-Reported Prevalence ages 40+, 16 markets
Variety of ocular disorders that can cause visual impairment and loss of sight Results in… Disorder REFRACTIVE Myopia, Hyperopia and Astigmatism 1 Blurred or impaired vision ERRORS Hardening of the natural lens due to age Inability to focus up close PRESBYOPIA (35 years and beyond) Blurred vision, itching, redness, and Poor quantity and quality of tears DRY EYE general discomfort Clouding of the eye’s crystalline lens Blindness if untreated CATARACTS Vitreomacular traction, retinal detachment, RETINAL severe eye trauma, ocular complications of Can cause irreversible loss of vision DISEASES diabetes (diabetic retinopathy) Damage to the eye’s optic nerve, usually from Vision loss and blindness GLAUCOMA increased pressure in the eye 18 1. Myopia (nearsightedness), Hyperopia (farsightedness) and Astigmatism (oddly shaped cornea)
Offering leading solutions for patients throughout their lives Children - 25 25 - 40 40 - 60 60+ Contact Lenses & Solutions REFRACTIVE Refractive Surgery ERRORS Monofocal and Toric IOLs Contact Lenses & Solutions PRESBYOPIA Presbyopia Correcting IOLs Systane Drops, Gels, Ointments DRY EYE CATARACTS IOLs, Equipment and Consumables RETINAL Equipment and Consumables DISEASES GLAUCOMA Filtration device 19
Eye care devices represent a large and growing $23b market 2017 Industry Sales 1 ($b) 2018E-2023E Industry CAGR 1 $23b 4% Total Market 6% Implantables 2 3 $9b 3% Surgical Consumables 2 4 CAGR: 4% 2% Equipment / Other 2 2 4% Contact Lenses 8 $14b Vision Care 4% Ocular Health 2 6 CAGR: 4% REFRACTIVE RETINAL PRESBYOPIA DRY EYE CATARACTS GLAUCOMA ERRORS DISEASES 1. Market Scope, GfK, Nielsen, IQVIA, Euromonitor , Alcon internal Estimates, see “Legal Disclaimers” on slide 5 for more information about future industry growth projections 2. Implantables include IOLs, surgical glaucoma devices; Consumables include cataract, vitreoretinal, and refractive disposable instruments; Equipment includes cataract and vitreoretinal consoles and accessories, FLACS lasers, refractive lasers, equipment service & maintenance, microscopes, diagnostics, and drops for mydriatics, cycloegics, diagnostics, and anesthetics; Ocular Health includes non-Rx dry eye drops, contact lens care solutions, ocular vitamins, non-Rx allergy drops, 20 and non-Rx red eye drops
Favorable megatrends underpin strong market potential Myopia prevalence is Aging population Increasing wealth growing; increased Innovation improving the with growing eye care and growth from screen time and mobile quality of eye care needs emerging economies device use is impacting vision Population over age 60 Patients have more Middle class will grow By 2050, half the world, will double by 2050 options and by ~ 1.5b people in the ~ 5b people , ( >1b people ) 1 next 10-15 years 2 will be myopic 3 better outcomes 1. United Nations (UN), http://www.un.org/en/sections/issues-depth/ageing/ 2. The unprecedented expansion of the global middle class an update, Kharas 2017 21 3. Global Prevalence of Myopia and High Myopia and Temporal Trends from 2000 through 2050, Holden, Brien A. et al., Ophthalmology , Volume 123 , Issue 5 , 1036 - 1042
Alcon is the #1 eye care devices company in the world 2017 Sales by Business ($b) Surgical Vision Care 3.7 3.1 $9b market $14b market Note: All trademarks are property of the respective owner 22 Source: Internal analysis as well as GFK, IMS, Nielsen, CBG, Euromonitor data and Market Scope
#1 or #2 in all product categories Surgical Vision Care Implantables Consumables Equipment / Other Contact Lenses Ocular Health Market # 1 # 1 # 1 # 2 # 1 Position Key Brands $1.0b $2.1b $0.6b $1.8b $1.2b 2017 Sales 23 Note: Numbers may not add up due to rounding
Global reach provides a significant competitive advantage Independent Optometrists Eye Clinics Mass Merchandisers Surgeon Offices Optical Chains Public Hospitals Pharmacies Private Hospitals Distributors Ambulatory Surgery Centers Internet Retailers 24
Leveraging our core strengths to win in the market Global leader in highly attractive markets with the most complete product offering for eye care professionals Experts in eye care with 20,000+ employees and a strong management team Market leading development capabilities and investments in innovation with 100+ pipeline projects Long standing partnerships by surrounding the customer with sales reps and technical, clinical and training support staff Global scale and reach with significant commercial, manufacturing and research & development operations 25
The foundation has been strengthened and we have advanced to the next phase Execute the Deliver Fix The growth plan leading-edge solutions Foundation AT-IOLs 1 Accelerate Innovation Vitreoretinal Expand markets & adjacencies DAILIES TOTAL1 New business models Dry Eye 2016-2017 2018-2020 2021 & Beyond 26 1. AT-IOLs refer to advanced-technology intraocular lenses
Focusing on 4 near term growth drivers Surgical Vision Care AT-IOLs Vitreoretinal DAILIES TOTAL1 Dry Eye • • • • Gain share with PanOptix Deepen technology Continue rapid growth Continue roll-out of penetration in key markets of DAILIES TOTAL1 family SYSTANE Complete • Increase penetration of • • • advanced technology IOLs Accelerate conversion from Accelerate growth of Drive consumer demand through DTC 1 advertising optical to digital surgery multifocal category 27 1. DTC refers to direct-to-consumer
Expected to result in 80% of sales growth contribution Illustrative Alcon Sales Growth Contribution ~80 % of near-term growth 1 2018E AT-IOLs Vitreoretinal DAILIES Total1 Dry Eye Rest of portfolio 2020E 28 1. Majority of rest of portfolio growth comes from cataract and refractive consumables
Innovation, expansion and new business models expected to drive longer term growth Accelerate Expand Markets Develop New Innovation & Adjacencies Business Models 29
Working to bring exciting innovation to the market Accelerate Innovation Innovative contact lens New contact lens materials designs for presbyopia Multiple novel Enhanced lasers IOL technologies and robotics for surgery Ground-breaking Digital surgical suite to cataract/vitreoretinal deliver improved outcomes equipment platforms 30
Looking to capture opportunities to expand markets and pursue adjacencies Expand Markets & Adjacencies Shift to Premium Emerging Markets Adjacency are under-penetrated opportunities to enter products & procedures to increase and have favorable market trends new categories market size Market Diagnostics 97% Contact Lens Phaco 1 16% Penetration 4 Procedures 2 47% 41% 38% 3% 6 Consumer Driven US China Latin India US International America Ocular Health Products Cataract AT-IOL Surgery Rate 5 12.7 Myopia Control 14% Penetration 3 Solutions 6% 3.2 6 6 US International US International 1. Phaco refers to cataract surgery using phacoemulsification 4. 2016 Vision Needs Monitor Study (conducted by Market Probe), penetration equals # of contact lens wearers divided by people who need vision correction 2. Market Scope May 2018 Cataract Equipment report, percent of total cataract procedures 5. Market Scope May 2018 Cataract Equipment report, cataract surgery rate refers to the number of cataract surgeries per thousand people 31 3. Market Scope Quarterly, 2017 full year, percent of units divided by total IOLs 6. International represents all countries outside the United States
Working to develop new business models to improve access to our leading product portfolio Develop New Business Models Innovative Go-To-Market Solutions Digital Health Offerings • • Building solutions for eye care professionals (ECP) Focusing on connectivity, integration, and analytics and patients through an ecosystem of networked equipment • Expanding access to contact lenses through digital • Creating contracting opportunities that utilize solutions (e.g. subscription, online refraction) our portfolio 32
Poised to grow at or above market while expanding core operating margins Sales Mid-single digit CAGR by 2023 1 Core Operating Margin Low-to-mid 20% by 2023 1,2 1. 5 year outlook is subject to various risks and uncertainties. See “Legal Disclaimers” on slide 5 and the assumptions underlyi ng our outlook on slide 96 for more information 33 2. For additional information regarding core operating margin above, which is a non- IFRS measure, see “Appendix” starting on slide 112 and “Legal Disclaimers” on slide 5
Margin growth expected to be based on 3 primary levers Gross margin Operational P&L improvement efficiency Leverage Favorable Process and cost Growing sales product mix efficiencies SG&A improvement Pricing discipline Leveraging SAP Leveraging existing Manufacturing Global Business infrastructure productivity Services (GBS) 34
Key takeaways Core strengths and Poised to deliver solid Sizeable markets , with large eye care expertise financial top & bottom line unmet medical needs help us win in the market returns 1 2 3 4 5 Significant opportunity for both #1 eye care devices near-term and long-term growth company in the world 35
Surgical Michael Onuscheck President, Global Business & Innovation
Strong legacy of innovation Introduced First First First First Balanced synthetic digitally combination femtosecond Salt Solution aqueous controlled OVD laser (BSS) all- humor pressurized (DuoVisc) assisted purpose (BSS Plus) infusion cataract irrigating system surgery fluid for eye (Accurus) surgery Today First First First Developed First First material single piece foldable blue gold acrylic toric intraoperative developed acrylic light filtering standard IOL aberrometery specifically hydrophobic IOL globally dispersive to correct device OVD 2 for use as an IOL corneal IOL 1 (Viscoat) astigmatism (AcrySof) 1. IOL refers to intraocular lens 37 2. OVD refers to Ophthalmic Viscosurgical Devices that protect internal eye tissues during surgery
Leading position in the global Surgical market 2017 Global Surgical Sales 1 ($b) 2017 Industry 2018E-2023E Sales 1 ($b) Industry CAGR 1 Others Implantables 3 6% ~$9b 3% Consumables 4 3.7 Market 2% Equipment/Other 2 4% Total 9 38 1. Market Scope; Alcon internal estimates; see “Legal Disclaimers” on slide 5 for more information about future industry grow th projections
Breakdown of Surgical market sub-categories 2017 Surgical Market Breakdown % Sales EQUIPMENT / OTHER CONSUMABLES IMPLANTABLES Visualization/ Vitreoretinal Other AT-IOLs Diagnostics $2b $4b $3b Refractive Service Glaucoma Monofocal IOLs devices Cataract Refractive Cataract Vitreoretinal • • • Cyclical equipment sales with a Steady procedural growth Market shifting from monofocal IOLs ~7-10 year buying cycle (3-4% unit growth) to AT-IOLs (11%) • Premium pricing supported by new • • Mid-lifecycle platform innovation, equipment and accompanying Sales per patient increases up to service contracts and expanded consumables 8x for AT-IOLs features help offset longer lifecycles 39 Source: Market Scope; Alcon internal estimates
The most complete line of ophthalmic surgical devices Surgical sales Market position Products $b 3.7 AcrySof brand IOLs #1 UltraSert pre-loaded IOL 1.0 Implantables Globally Clareon AutonoMe pre-loaded IOL Cataract consumables Vitreoretinal instruments & consumables #1 Consumables Custom surgical packs 2.1 Globally Refractive consumables Cataract Refractive Suite #1 Equipment / Vitreoretinal Constellation Vision System 0.6 Other Globally Refractive Wavelight System 2017 Source: Market Scope, Alcon internal estimates Note: Implantables include IOLs, surgical glaucoma devices; Consumables include cataract, vitreoretinal, and refractive disposable instruments; Equipment includes cataract and vitreoretinal consoles and accessories, FLACS lasers, 40 refractive lasers, equipment service & maintenance, microscopes, diagnostics, and drops for mydriatics, cycloegics, diagnostics, and anesthetics
Sound fundamentals for driving sustainable growth Industry-leading expertise built on decades of driving technology and business innovation Leading portfolio with strong future pipeline Best-in-class equipment platforms and leading equipment installed base with continued expansion Large consumables business alongside our leading equipment installed base World-class training, education, and service with global scale and reach 41
Unmatched equipment installed base Alcon equipment installed base (2001-2018) 2017 installed base share (%) 2017 new installs 7th gen 1st gen #1 52% Globally Phaco machines 2001 2018 3rd gen 1st gen #1 48% Globally Vitrectomy machines 1 2001 2018 3rd gen 3 #1 34% 1st gen Globally Refractive lasers 2 2001 2018 Source: Market Scope; Alcon internal estimate 1. Includes combined units that can perform both cataract and vitrectomy procedures 2. Includes excimer and femtosecond lasers Note: All trademarks are property of the respective owner 42 3. Refers to new installs of excimer lasers
Equipment footprint delivers a recurring consumable contribution Custom Surgical Packs Flexible contracting methods Consumables combining Alcon that enable adoption of latest that work with Alcon equipment & 3 rd party products technology • Reduces operating room complexity, improves inventory management 40% of consumables sales • Alcon delivers over 11,000 configurations from dedicated items 1 using >2,500 components worldwide 43 1. Dedicated items include fluidic management system (FMS) packs and patient interfaces
Highest ranking of customer satisfaction in major markets #1 overall in 13 markets representing 80% of sales Customer 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st Satisfaction 1 st * 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st Value 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st Innovation 1 st * 1 st 1 st 1 st 1 st 2 nd 1 st 1 st 2 nd 1 st 1 st 1 st 1 st Sales Reps Training and 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st 1 st Education Number surveyed (company blinded) 203 37 110 100 86 99 117 100 118 98 99 87 96 44 Source: Alcon 2018 Customer Survey (n=1,299); *Asterisks indicate tie as defined by 2 percentage points; Data on file
Focusing on 2 near term growth drivers 1 Advanced Technology IOLs 2 Vitreoretinal • • Deepen technology penetration in key markets Build on new product launches to drive AT-IOL share and increase margins • Advance smaller incision surgery and safer vitrectomy • Address barriers to adoption with new technologies and instruments business models • Accelerate conversion from optical to digital surgery 45
Leading global IOL share with room to grow AT-IOLs Global IOL Value % of % of Segment Description Segment Share per lens Market revenue Market units %, 2017 Presbyopia 31 Correcting 5-8x (multi-focal) AT-IOLs 30% 8% 22 Astigmatism Correcting 3-4x (toric) 6 Myopia/Hyperopia Base Value 70% Monofocals 92% 4 Correcting Source: Market Scope quarterly 46 Note: All trademarks are property of the respective owner
New technologies driving near-term growth ... Growth of presbyopia correcting IOLs with PanOptix launch Nordics Canada 2-3x 2x 5x growth opportunity 1 sales sales Pending regulatory 2017 2018 2017 2018 approval for PanOptix Q2 Q2 Q2 Q2 Source: Market Scope 47 1. Alcon internal estimates
...could lead to significant market expansion 2017 AT-IOL market penetration 1 % of units US potential • Opportunity to further expand New innovations and North American penetration technologies improve patient outcomes 14% AND • Lifestyle-driven consumers desiring Growing OUS spectacle penetration to independence current North 14 ~ $500m American levels • Training and practice 10 10 (14%) translates development 7 to market programs to enable 5 expansion of patient-pay North Japan Latin EMEA Asia America America Source: Market Scope, Alcon internal estimates 48 1. Market Scope Quarterly, 2017 full year, percent of units divided by total IOLs
Strong vitreoretinal market growth driven by disease burden, technology advancement, and growing access Disease Growth Technology Advancement Increased Access Diabetes and an aging population Improved diagnostics and Growing number of retinal driving retinal disease growth advancements with safer specialists in underserved markets micro-gauge instruments Retina specialists # per million population China 0.7 OCT US 7.3 vitrectomy +3.4% procedure growth 49 Source: Market Scope 2017 Retinal Surgical Device Report
Alcon is well positioned to continue to capture this growth Leading consumables share 2 Best-in-class console preferred by Strong innovation a wide majority of surgeons and a complete portfolio pipeline of equipment and instruments Vitreous cutters Preferred Vitrectomy system 1 % Forceps / Alcon Instruments Photocoagulation Laser Probes Competition Intraocular Gases Source: Market Scope; ASRS 1. ASRS Preferences and Trends Membership Survey (2015) 50 2. Share of global vitrectomy packs sold, 2018 Market Scope Quarterly
Longer term growth expected to be driven by innovation, market expansion and new business models Accelerate Expand Markets Develop New Innovation & Adjacencies Business Models Deliver a balance of Expand presence in key Create new models to breakthrough and incremental underpenetrated geographies maximize portfolio, reward innovation leveraging core and move into whitespace outcomes and reduce strengths and expertise categories complexity 51
Surgical has a broad and robust pipeline Accelerate Innovation Next generation equipment Next generation platforms to Novel techniques for AT-IOL technologies refresh our capital presbyopia correction equipment base and drive future consumables sales Technologies to bring efficiency to surgical planning, using predictive Next generation lasers and robotics technologies and artificial for cataract and vitreoretinal surgery intelligence to improve diagnostics and outcomes 52
Expand in markets and enter adjacencies Expand Markets & Adjacencies Invest in fast-growing and underpenetrated Expand share in markets (e.g., China) Diagnostics and Visualization China $600m+ Global 2017 IOL share 2017 IOL market growth market 1 % of units Units +13% China US +3% Source: Market Scope 53 1. 2018 Ophthalmic Diagnostic Equipment Market Report, operating room microscopes and optical biometry
Develop new business models Develop New Business Models Shift from individual product to full procedure contracts Digital health offerings delivered as a service through an ecosystem of Value-based models that reward networked equipment improved patient outcomes 54
Key takeaways Our Surgical business has ...with strong near-term ...and a long-term strategy to solid fundamentals... opportunities to drive growth... drive accelerated growth Broad and robust pipeline with new technologies coming Share gains to market from AT-IOL launches Leading positions in underpenetrated markets with opportunities in adjacencies Vitreoretinal technology • #1 global installed base upgrades and New business models share expansion to improve efficiency • Stable equipment footprint delivering and outcomes a recurring consumable business • Solid procedural growth 55
Vision Care Andy Pawson President & General Manager, Global Vision Care
Strong legacy of innovation First First First First First First to create a to develop a to develop to develop to develop (and only) visibly tinted soft contact a silicone a contact a one-bottle, to develop a soft contact lens for hydrogel lens with up peroxide lens water gradient lens periodic (SiHy) lens to 30 nights care solution daily disposable replacement of continuous without added (DD) SiHy lens wear preservatives Today First First First First First to develop to introduce to introduce to develop (and only) soft bifocal dual dis- an in-eye an emulsion to develop a contact infectants to a gelling that water gradient lenses multipurpose lubricant addresses soft contact lens contact lens Meibomian designed for care solution Gland people with Dysfunction presbyopia (MGD) 57
A leading position in the global Vision Care market 2017 Global Vision Care Sales 1 ($b) 2017 Industry 2018E-2023E Sales 1 ($b) Industry CAGR 1 Others Contact 8 4% Lenses ~$14b 3.1 3.1 Ocular market 4% 6 Health 4% 14 Total 1. Source: GFK, Nielsen, IQVIA, CBG, Euromonitor data, Market Scope, Company filings, Alcon internal estimates; see “Legal Di scl aimers” on slide 5 for more information about future industry growth projections 58 Note: All trademarks are property of the respective owner
Breakdown of Contact Lens Market sub-categories 2017 Contact Lens Market Breakdown 1 % Sales MODALITY DESIGN GEOGRAPHY Sphere International Reusable $8b $8b $8b Daily Toric US Cosmetic Multi-Focal • • • Market shifting from reusable to Increasing demand for premium lenses Accelerating growth in under- daily disposable lenses (Toric, Multi-Focal, Cosmetic) penetrated international markets • • • Sales per patient increases 2-3x Premium lenses command ~15-30% North America, Western Europe, for daily disposable wearers premium over spherical lenses due to and Japan remain highest added benefits penetration markets 59 1. Source: GfK, third party research, and Alcon internal estimates
Significant opportunity for growth in Ocular Health 2017 Ocular Health Market Breakdown 1 % Sales #1 #1 Market position Market position Dry Eye Contact Lens Care (CLC) Vitamins Allergy Red Eye Increased awareness Growth in daily lenses Aging population Growth in market with New technology Market of treatment options inversely impacts CLC in leads to uptick in younger population and revitalizing growth, forces drives demand developed markets consumption increased economic means disadvantages older mechanisms 60 1. Source: Nielsen, IQVIA, CBG, Euromonitor data, Market Scope, third party research, and Alcon internal estimates
A leading portfolio of recognizable brands Market position 1 Vision Care sales Portfolio includes: $b 3.1 DAILIES TOTAL1 water gradient lenses DAILIES AquaComfort Plus Contact #2 AIR OPTIX monthly reusable lenses 1.8 Lenses Globally AIR OPTIX COLORS cosmetic lenses FreshLook cosmetic lenses SYSTANE family of Dry Eye products #1 Ocular CLEAR CARE cleaning 1.2 Health Globally and disinfecting solution OPTI-FREE family of multi-purpose solution and rewetting drops 2017 Note: Numbers may not add up due to rounding 61 1. Source: Nielsen, IQVIA, CBG, Euromonitor data, Market Scope, third party research, and Alcon internal estimates
Strong brands across Contact Lenses and Ocular Health Contact Lenses Ocular Health Daily Disposable Reusable Dry Eye Contact Lens Care Market #2 #1 #2 #1 Position Key Brands • • • • DAILIES TOTAL1 is SmartShield SYSTANE Complete: CLEAR CARE offers first and only water- protects against fast-acting, long triple-action cleaning gradient lens, deposits lasting relief • OPTI-FREE: Product considered super- recommended by • HydraGlyde Most recommended highlights premium in SiHy doctors and maintains moisture brand among eye pharmacists • Industry-leading through end of day care professionals multifocal design 62
Sound fundamentals for driving sustainable growth Strong brands in fastest growing categories Preferred manufacturer among eye care professionals (ECP) in US and major European markets 1 Growing consumer capabilities complimented with retail scale and promotionally responsive product line Strong innovation pipeline expected to deliver new platform and design innovations over the next 3-5 years Next-generation contact lens manufacturing platform designed for steady innovation and scalability 63 1. Third party research, key brand equity study, September 2018
Focusing on 2 near term growth drivers 1 2 DAILIES TOTAL1 Dry Eye • Grow DAILIES TOTAL1 family of products • Continue global roll-out of SYSTANE Complete • Expand presbyopia category through increased consumer • Leverage #1 position in Dry Eye awareness, lens comfort and quality • Grow consumer demand with investments in DTC marketing • Capitalize on market shift to daily disposable 64
Building on the success of DAILIES TOTAL1 and its proprietary technology DAILIES TOTAL1 Sales and Market Share, Growth outlook remains strong: 2012 – 2018E 1 $m, % share in DD SiHy segment • #1 brand in category with $1b+ sales potential 33% $ Market Share 32% • Shift to daily disposable lenses of Sales 30% 29% Net Sales • Continued growth in multifocal 23% +62% • Increased DTC investment behind the brand CAGR 2 13% 8% 2012 2013 2014 2015 2016 2017 2018E Source: GfK, Alcon internal estimates 1. Revenue and share numbers for 2018 are projected based on August 2018 year-to-date data. 65 2. For additional information regarding the constant currency (cc) figures presented above, which is a non- IFRS measure, see “Appendix” starting on slide 112
With age, eyes get dryer and presbyopia sets in, creating an opportunity for DAILIES TOTAL1 multifocal 100% Large majority of presbyopes resort to “readers” to better Contact lens dropouts begin see items up close 80 as early as 30 due to % of US population comfort and changing vision needs (e.g., dryer eyes) 60 Presbyopia progress 40 Refractive need Alcon’s right to win: 20 • Proprietary multifocal design Contact lens wearers with high-performing DAILIES TOTAL1 technology • New awareness and education Age 2-11 20-24 30-34 40-44 50-54 60+ campaign for consumers • Intuitive fitting tools for ECPs 66 Source: Alcon internal estimates
Results of DAILIES TOTAL1 multifocal campaign have been promising Growth in US Daily Contact US DAILIES TOTAL1 Lens Market by Design 1 Multifocal Sales 2017-2018 (% Change) 5.5x Sphere 8 6 Toric 16 16 Multifocal 21 20 Alcon’s “Lose Your Readers” campaign 2016 2017 2018 Sales Growth Unit Growth Source: Internal figures, GfK; Coverage includes retail sales, excludes internet sales 67 1. H1 2017 vs H1 2018
‘Lose Your Readers’ Commercial
Dry eye is a large market with untapped potential 352 million people worldwide suffer from dry eye symptoms 1 Overall Opportunity Untapped Opportunity AWARENESS DIAGNOSIS TREATMENT ECP-diagnosis Products Products Undiagnosed suitable unsuitable 41% 55% 45% for Dry Eye for Dry Eye 55% 45% treatment treatment 59% Diagnosed Self-diagnosis 194 million (55%) dry eye Of the patients that are 42 million patients (45% of patients remain undiagnosed 2 diagnosed, 93 million (59%) self-diagnosed patients) self- self-diagnose 2 select products that are unsuitable for dry eye treatment 3,4 Opportunity areas Sources: 1. Market Scope – 2017 Dry Eye Products Report 2. Kantar Health (Jun 2011) 3. Global eye drop segmentation study (01-2017) Global eye drop segmentation study (01-2017). Directions Research. Fielded among 2,861 eye drop shoppers in US, UK, RU, JP, DE, BZ 69 4. Systane Global ATU- ECP Report (Dec 2016). Novartis Product Lifecycle Service Primary Research. Fielded among 536 ophthalmologists, 134 optometrists in US, FR, DE, SP, UK, CA, BZ, MX, AUS, IN, TU, CN
SYSTANE is the world leading brand for dry eye Comprehensive portfolio Responsive to DTC advertising $3.5b dry eye Alcon’s US dry eye market share (%, value), opportunity 2 with Apr-18 SYSTANE Complete promotion Doctor Recommended #1 brand for dry eye symptom relief Best-selling dry eye franchise in artificial tear solutions 1 ECP supported brand Sources: 1. Nielsen – US & Canada 70 2. Alcon internal estimate, MarketScope
Longer term growth expected to be driven by innovation, expansion and new business models Accelerate Expand Markets Develop New Innovation & Adjacencies Business Models Launch a wave of products Develop new omni-channel go Expand presence in key across new platforms that better to market business solutions underpenetrated categories address consumer needs that empower eye care and move into adjacent areas professionals and consumers 71
Vision Care has a strong pipeline Accelerate Innovation PRECISION1 to DAILIES TOTAL1 HydraGlyde enter the daily for astigmatism to expansion for disposable complete the AIR OPTIX mainstream SiHy premium offering segment Next generation reusable water Novel designs for presbyopia gradient lens correction 72
PRECISION1 expected to be a top performing contact lens in its class Accelerate Innovation Projected growth of global daily disposable (DD) market by sub-category PRECISION1 will compete in the fastest-growing daily disposable mainstream subcategory PRECISION1 contact lenses will aim to offer 2018 DD SiHy premium DD Mainstream DD Non-SiHy 2023 top performance in its class SiHy Patient price Alcon product 73
Opportunities to expand in new markets and adjacencies Expand Markets & Adjacencies Expand contact lens penetration Filling SYSTANE portfolio Innovation in new spaces Asia CL Penetration 1 U.S. Multifocal Penetration 1 % of units % of units 3% 5% • • Launch new SYSTANE products and Utilize dry eye as a foundation to technology to address physician and expand in adjacent areas $300m+ >6x consumer preference • Continue to explore nascent for a percentage market • Complete global offering technologies opportunity point increase Source: 2016 Vision Needs Monitor Study (conducted by Market Probe), Alcon internal estimates 74 1. CL refers to contact lens. Penetration refers to number of contact lens wearers divided by number of people in need of vision correction
Developing digital platforms to address ECP and consumer ‘pain points’ Develop New Business Models Easy connect & access to education Current market challenge Alcon solutions Easy shop Easy pay • E-commerce seen by and select options ECP’s as a threat versus opportunity • Inadequate tools to fully address changing patient and ECP needs • Patients only seeing appointments as a transaction • Multiple digital platforms, with limited integration Easy exam scheduling Easy order, ship & prescription validation and subscribe 75
Key takeaways Our Vision Care business has ...with strong near-term ...and a long-term strategy to solid fundamentals... opportunities to drive growth... drive accelerated growth New contact lens technologies Winning in daily on an innovative disposables platform Leading in presbyopia Category penetration, with DAILIES TOTAL1 portfolio expansion, multifocal and adjacent areas • Growing market with low penetration rates and favorable trends Digital business models • Strong brands in the fastest growing Driving category with ECP at the center of categories growth of dry-eye the consumer experience • Innovative pipeline to capture future growth 76
Innovation Franck Leveiller Sr. Vice President, Head of Global R&D
We aspire to lead the world in eye care innovation Commitment Pipeline fueled Close partnerships with eye to innovation for growth care professionals 100+ active projects and 35+ with positive proof of concept or with increased and key investments in R&D under regulatory review research institutions Legacy of industry firsts Focused on eye care with Partner of choice for and advancements leading talent and expertise external innovation >1,200 >20 have built a employees in R&D with over deals since 2016 strong reputation 11,000 granted patents 78
World class capabilities Material & Surface Chemistry Optics 40 60 cm cm Clinical Development Equipment & Instrumentation Automation 79
Advancing the field of optical design Optics Presbyopia 2 Correcting Accommodating, Diffractive Non-Diffractive Adjustable & Modular Best in class IOL Market leading contact Innovative new Astigmatism 1 PanOptix ENLIGHTEN lens design technologies Correcting Novel IOL proprietary PowerVision Fluid Lens design Technology Best in class stabilization of contact lenses and IOLs 80
Leading in material and surface chemistry Material & Surface Chemistry 1 st in class water Blink activated Superior protection Aqueous extraction Next generation moisture to preserve against deposits while gradient with ultrasoft and surface treatment water gradient the tear film maintaining moisture hydrophilic surface gel 81
Robust clinical development capabilities Clinical Development Patient Reported Exploratory Global Outcomes Studies Footprint Validated, proprietary tools to Ability to iterate designs Strong relationships with measure subjective quickly through an internal health authorities and outcomes innovation model regulatory agencies 82
New contact lens manufacturing platform expected to provide flexibility, efficiencies and rapid scalability Automation New Contact Lens Platform ~40% Output per line improvement Improving Increasing cycle times flexibility ~40% Cost Developing quality Delivering per lens improvement (no-touch) productivity ~35% CAPEX per line improvement 83
The future of cataract surgery relies on seamless data exchange and cloud-based decision support Equipment & Instrumentation Digital Health Solutions Connected equipment seamlessly Applications to simplify the complexity Cloud-based decision support to moving data from clinic to the OR of eye surgery and add efficiency improve screening and outcomes Artificial Intelligence & optimization SMART cataract SMART retina SMART refractive Clinic Operating room devices devices 84
Majority of investments support novel innovation and portfolio advancements Novel Innovation Other Product Support Advanced technology programs: Novel • Customized & novel optics Innovation • Robotics & digital health solutions • New presbyopia solutions Line Extensions • Unique delivery devices $2.5b • Laser enhanced surgery over next Portfolio Advancements 5 years Incremental improvements: • Improved contact lens & IOL materials • Automated manufacturing Portfolio Advancements • New equipment platforms • Integrated surgical diagnostics • New laser upgrades 85
Partner of choice for external innovation Commercial strength and Execute a range of Leading reputation and strong global reach to maximize agreements, e.g. equity stakes, relationships in ophthalmology potential of new technologies options, licenses, acquisitions Examples of recent agreements 86 Note: All trademarks are property of the respective owner
Rich pipeline to fuel growth into the future SELECTED LAUNCHES Recent 2018 - 2020 2020+ PanOptix Trifocal (US) Clareon with 4 major new IOL platforms SURGICAL AutonoMe (Intl) Non-diffractive presbyopia correcting IOL ( e.g. accommodating) UltraSert Clareon with AutonoMe (US) Next generation cataract and vitreoretinal PanOptix Trifocal (Intl) technology platforms ORA System with VerifEye Lynk ReSTOR Toric with ACTIVEFOCUS (US) Integrative technologies CENTURION Active Sentry Handpiece to connect the clinic to the operating room NGENUITY 3D Alcon first Digital Health Platform VISION CARE SYSTANE Complete FRESHLOOK – 5 new designs AIR OPTIX plus HydraGlyde 2 innovative new contact lens platforms DAILIES Total1 Multifocal AIR OPTIX plus HydraGlyde (Toric and Multifocal lenses) Accommodating contact lens Clear Care plus HydraGlyde PRECISION1 new daily disposable contact lens platform SYSTANE product line expansion DAILIES Total1 for Astigmatism 87 Note: Global launch unless otherwise indicated
Key takeaways Alcon balances investment , both Alcon aspires to lead the world internally and externally to diversify the in eye care innovation portfolio and manage risk 1 2 3 4 Alcon has a robust pipeline Alcon leverages world class expertise to bring new in development to fuel innovations to the market sustainable growth 88
Financial Overview David Murray Chief Financial Officer
Financial framework to deliver strong shareholder returns Attractive market fundamentals • • Clear focus on 4 product initiatives to drive near term growth Sales growth • Accelerate innovation, expand markets & adjacencies and develop new business models to drive mid-to long-term growth Operating leverage through sales growth • Operational Disciplined cost management and increased productivity • excellence Focusing resources towards customers • Free cash flow Growth, efficiencies and disciplined cash management • (FCF) 1 generation Expect to drive 2.5 to 3.0 fold increase in FCF over the next five years • Focus on shareholder value creation • Value maximizing Investing in future growth via well-defined capital allocation plan • capital allocation Expect to pay regular cash dividend beginning in 2020 (for business year 2019) 2 • For additional information regarding free cash flow, which is a non- IFRS measure, see “Appendix” starting on slide 112 and “Legal Disclaimers” on slide 5 1. 90 2. Note: Regardless of the separation of Alcon, Novartis intends to continue paying a strong and growing dividend in Swiss francs, building on the CHF2.80 per share paid in March 2018
Diversified portfolio across businesses and geographies Vision Care $3.1b Surgical $3.7b U.S. $2.8b 15% Implantables 41% 27% Contact Lenses 2017 Sales 2017 Sales $6.8b $6.8b 31% 18% Consumables Ocular 59% Health 9% Equipment International $4.0b / Other 91
Several consecutive quarters of sales growth Quarterly sales growth 1 Invested in people (% growth constant currency) -1% +3% +6% in 2016 in 2017 in 9M 2018 Invested in direct-to-consumer +6 advertising +5 +5 +5 +4 +3 Improved supply +1 +1 and service levels 0 -1 Launched -3 new products Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Note: Numbers may not add up due to rounding. Some quarterly growth rates have been impacted by inventory movements. 92 1. Sales growth figures presented in constant currency (cc), which is a non-IFRS measure. For additional information regarding the constant currency figures presented see “Appendix” starting on slide 112
Progressive annual improvement in core operating margin Quarterly core operating income margin 1 Focus has been primarily on top-line growth to drive (% of sales) margin improvement 17% 16% 18% in 2016 in 2017 in 9M 2018 Allocated more investment & resources 19 to the front line 19 17 16 17 17 17 16 15 15 15 Invested to reinvigorate the pipeline Implementing productivity measures Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Note: Numbers may not add up due to rounding 93 1. For additional information regarding core operating income margin, which are non- IFRS measures, see “Appendix” starting on slide 112
Financial performance in 2018 year-to-date Variance 1 9M 2017A 9M 2018A • Surgical driven by double digit growth of Total sales $5.0bn $5.4bn 6% (cc) AT-IOLs & continued growth in consumables and equipment Surgical $2.7bn $3.0bn 8% (cc) • Vision care driven by double digit growth of DAILIES TOTAL1 and Vision Care $2.3bn $2.4bn 3% (cc) growth of Systane due to the launch of Systane Complete Core gross margin 1 • Operating margin 62.5% 63.7% +125bps improvement from sales growth, product mix and manufacturing / Core operating 16.2% 17.8% +156bps commercial efficiencies margin 1 Note: Numbers may not add up due to rounding 1. For additional information regarding the core results and the constant currency (cc) figures presented, which are non-IFRS measures, including a reconciliation to the most directly 94 comparable measures presented in accordance with IFRS, see “Appendix” starting on slide 112
Core operating income bridge from Novartis to standalone Alcon ($m) FY2015 FY2016 FY2017 9M '17 9M '18 Alcon core operating income 1,555 1,150 1,168 866 999 within Novartis 1 Core operating margin (% of sales) 23% 18% 17% 17% 19% Adjustments Allocations 2 -49 -22 -82 -50 -46 Alcon core operating income 1,506 1,128 1,086 816 954 standalone 3 Core operating margin (% of sales) 22% 17% 16% 16% 18% Note: Numbers may not add up due to rounding 1. Restated to reflect the product transfers between Innovative Medicines and Alcon divisions as announced on October 24, 2017 and January 24, 2018. The FY restated figures have been published on the Novartis website on November 1, 2018 2. Incremental costs for a standalone Alcon and other adjustments 3. For additional information regarding the core results presented above, which are non-IFRS measures, including a reconciliation to the most directly comparable 95 measure presented in accordance with IFRS in the case of Alcon core operating income standalone, see “Appendix” starting on s lide 112
2018 – 2023 outlook assumptions Outlook assumes • Successful execution of four near-term organic growth drivers • Continued strength in equipment and consumables • Ability to outgrow the market in the latter years driven by pipeline launches • Faster pace of growth in certain international/emerging markets • Sufficient capital spend to support daily disposable contact lens growth • No customer or supply disruption due to separation from Novartis / full implementation of ERP system • Constant foreign currency and consistent standalone costs 1 Outlook does not assume • New M&A and business development opportunities • Entry into new whitespaces 96 1. As defined in historical carve-out financials
2023 financial outlook 2023E 1 Sales growth Mid-single digit (% CAGR 2018-2023) Core operating margin 2 Low-to-mid 20s (%) Capex Mid-single digit (as % of sales) Core tax rate 2 High-teens (%) 1. 5 year outlook is subject to various risks and uncertainties. See “Legal Disclaimers” on slide 5 and the assumptions underlyi ng our outlook on slide 96 for more information. 97 2. For additional information regarding the core measures discussed above, which are non- IFRS measures, see “Appendix” starting on slide 112
Sales growth to accelerate in 2021 and beyond Illustrative Alcon Sales 1 2018E AT-IOLs Vitreoretinal DAILIES Dry Eye Rest of 2020E Accelerated 2023E Total1 portfolio growth 98 1. 5 year outlook for our sales growth is subject to various risks and uncertainties. See “Legal Disclaimers” on slide 5 and the assumptions underlying our outlook on slide 96 for more information.
Committed to delivering significant margin expansion Core operating margin 1,2 Drivers of margin improvement (% of sales) Sales acceleration on the back + of near term growth drivers and new innovation Low-to-mid 20% + Favorable product mix Mid-to-high Manufacturing efficiencies from teens % + new lower cost contact lens platforms SG&A improvement as we leverage existing infrastructure + (built up during turnaround phase) Process & cost efficiencies from global business services + and reaping benefits of SAP 2018E Gross Margin… Gross Margin Operational efficieny 2023E 2018E Operational efficiency and P&L leverage 2023E implementation improvement and P&L leverage 1. For additional information regarding core operating margin, which is a non- IFRS measure, see “Appendix” starting on slide 112 2. 5 year outlook for our core operating margin expansion is subject to various risks and uncertainties. See “Legal Disclaimers” on slide 5 and the assumptions underlying our outlook on slide 96 for more information. 99
Cash flow generation expected to increase 2.5x – 3.0x by 2023 Free cash flow 1,2 ($) Drivers + Sales growth 2.5 - 3.0x + Margin expansion Stabilization of capital + and IT investments 2018E 2023E Including separation costs in 2019-2020 of ~$0.3b 1. 5 year outlook for our free cash flow generation is subject to various risks and uncertainties. See “Legal Disclaimers” on sl ide 5 and the assumptions underlying our outlook on slide 96 for more information. 100 2. For additional information regarding free cash flow, which is a non- IFRS measure, see “Appendix” starting on slide 112
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