STAAR Surgical Co (STAA) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2013 STAAR Surgical earnings conference call. My name is Brittany, and I will be the operator for today. At this time, all participants are on a listen only mode. Later, we will conduct a question and answer session.

(Operator Instructions)

As a reminder, today's conference is being recorded for replay purposes. I will now turn the call over to your host for today, EVC Group, Doug Sherk, please proceed.

Thank you, operator. Good afternoon, everyone, thank you for joining us for the STAAR Surgical conference call and webcast to review the Company's financial results for the fourth quarter, which ended on January 3, 2014. The news release announcing the fourth quarter results crossed the wire about a half an hour ago, and it's available at STAAR's website at www.staar.com. Today's call is also being broadcast live via webcast.

In addition, a slide presentation will accompany remarks by management. To access both the webcast and the presentation slides, go to the Investor Relations section of STAAR's website at www.staar.com. If you are listening via telephone to today's call and would like to review the slides that accompany management's remarks, please navigate to the live webcast, as I have just reviewed, and choose the No-Audio/Slides-Only option. In addition, an archived replay and slides will be available on the STAAR website.

Before we get started today, during the course of this conference call, the Company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the Corporation's projections, expectations, plans, beliefs and prospects.

These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the Safe Harbor statement in today's press release, as well as STAAR's public periodic filings with the SEC, including the discussion in the Risk Factors section of our 2012 annual report on Form 10-K. Investors or potential investors should read these risks. STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.

In addition, to supplement the GAAP numbers, we have provided non-GAAP adjusted net income and diluted net income per share information that excludes manufacturing consolidation expenses -- excuse me, that excludes manufacturing consolidated expenses, sustained distribution transition expenses, gains or losses on foreign currency, fair market value adjustments for warrants and stock-based compensation expense. We believe that these non-GAAP numbers provide meaningful supplemental information and are helpful in assessing our historical and future performance. A table reconciling the GAAP information to the non-GAAP information is included in our financial release which is available on our website and in our slide presentation. Now, I would like to turn the call over to Barry Caldwell, President and Chief Executive Officer of STAAR Surgical.

Thank you, Doug, and good afternoon, everyone. We want to thank you for joining us on the call today. With me is Steve Brown, our Chief Financial Officer. I'll start our agenda this afternoon with an overview of the fourth quarter results against our 2014 metrics. Steve will then offer a detailed look at key fourth quarter and full-year financial results. I'll come back and discuss some of the key operating milestones, including an update on our Toric ICL rescheduled FDA panel meeting and then cover the metrics that we've established for 2014. Upon conclusion, we will open the call for your questions.

We had a successful fourth quarter, providing a strong finish to 2013 as we continue to grow revenues. The traction of our Visian ICL is increasing globally. We are expanding the product approvals to new markets, and the rapid cadence of new products in our pipeline continues. Additionally, the benefits are our manufacturing consolidation, our position to create a positive impact on our 2014 results and for several years to come.

The two significant headwinds we faced all year, those being the value of the yen and IOL supply constraints once again did have an impact on our financial performance during the quarter. Let me start by reviewing our key 2013 metrics which we established a year ago and have updated accordingly throughout the year. These metrics are focused on revenue, gross margin expansion, profitability, and manufacturing consolidation progress. With the exception of our gross margin target for the year, we met each of our metrics in the first three quarters.

Now, let's review how our performance during the fourth quarter stacks up against these one by one. First revenue growth. We raised, you may recall, our annual revenue growth metric at the midpoint of the year to 12% to 14% from the original 8% to 10%. And then at the end of third quarter, we moved that to the upper end of the 12% to 14% range and we achieved that.

Revenues for the fourth quarter were $18.9 million, which represented 15% growth year-over-year. Full-year revenue of $72.2 million reflect a 13.2% increase year-over-year as reported. You will hear from Steve that if not for moving some IOL injector sales to a reduction in the cost of goods line, our annual growth would've been 14%. We did achieve this metric for the quarter and the year despite continued downward pressure from the weakening yen, which reduced our revenue for the year by $3.8 million.

I'd like to provide a little more color on the impact of currency -- the currency exchange had on our revenue. First of all, revenues in Japan represented more than 22% of our global sales during the quarter as our sales in Japan increased 18% on a constant currency basis, but declined 6% as reported based upon the weakened value of the yen. For the quarter, the effect of foreign currency exchange reduced sales by $1.1 million, which otherwise would have reached $20 million, representing a 22% growth in constant currency. For the full year, foreign-currency exchange unfavorably impacted net sales, as I said, by $3.8 million which otherwise, we would have reached a revenue mark of $76 million for the year, and that would've represented 19% growth in revenue on a constant currency basis.

Now let's go drill down into our ICL and IOL sales. Global revenue for our Visian ICL product during the fourth quarter represented 61% of our total sales at $11.5 million. That was a new quarterly record. This reflects a 31% increase in ICL revenues and a 29% increase in units.

For the full year, ICL revenues grew 26% to $44.1 million and units grew 22%. To date, more than 400,000 ICLs have been implanted worldwide, and that number is growing every day. Visian ICLs with CentraFLOW technology represented 67% of all ICLs shipped during the month of December, and you would think this is a positive signal for ICLs in 2014. To date, there have been over 45,000 implants of the Visian ICL with the CentraFLOW technology, which takes a step out of the process, thus makes same-day surgery possible and as a result, it's much more convenient and cost effective for both the surgeon and the patient.

Our Visian ICL continues to gain market share globally. Procedures in the fourth quarter grew 29% and were up significantly in all three of our regions. Our European region up 24%, our Asia-Pacific region up 31%, and North America up 39%. You can see our three largest markets had very strong procedure growth during the quarter. Our largest market, Korea, was up 29%, China was up 81%, and the US was up 37%.

We saw better than 27% Visian ICL revenue growth in all three regions with total ICL revenues growing 31% during the quarter. You can see the top four markets are growing quite -- are getting quite close in revenue totals. The growth, Korea up 42%, China up 75%, US up 33%, and Spain up 15%.

Turning to ICL procedure growth for the full year, we saw a 22% increase in unit sales reflecting growth and market share gains in each of our 12 key markets. In fact, with the exception of Japan, all of our markets saw double-digit unit growth in 2013. You can see good growth in our largest markets, but also very exciting growths from some up-and-coming markets like France, which grew 54%, Latin America grew 43%, Italy grew 38% and Spain grew 34%.

All four markets have been positively impacted by the availability of the CentraFLOW technology. The growth in Spain is a nice highlight since the procedure growth was somewhat stagnant prior to converting the market to a direct distribution model. A big thanks and congratulations to our team in Spain. A job well done.

For the full year Visian ICL revenue increased 26% with 41% growth in our European region driven by the CentraFLOW technology. The growth in Asia-Pacific without CentraFLOW and the growth in North America, or at least the US without Toric, are both signs of strong market share gains.

Turning to our IOLs. Global revenue for the quarter was approximately 35% of total sales at $6.6 million. Sequentially, IOL revenue increased $1.3 million, but saw a slight decline year-over-year. The negative impact from foreign exchange on IOLs was nearly $1 million during the quarter, and constant currency IOL revenue actually increased 12% year-over-year for the quarter.

We ended the quarter with approximately $400,000 remaining in back orders from European customers. While that's an improvement of about $400,000 in the backlog we saw from the end of third quarter, our supplier of acrylic IOLs continues to be challenged in meeting the high demand for the new KS IOL products. Another major headwind that impacted our topline throughout the year. As a result, distribution efforts for the KS IOLs remain somewhat curtailed. For the full physical year -- fiscal year, IOL revenue declined 7% as reported, but increased 5% in constant currency.

Let me drill down into the regions just a bit. First, IOL revenue in Japan, our largest market, represented 47% of global IOL revenue and 35% of units during the quarter. You can see though, IOL revenue declined by 4% in Japan as reported and local currency IOLs increased 26%, while units increased 17%. IOL revenue in Europe increased 27% while units increased 23%. Sales increased by 2% in the US with China being the only decline due to the suspension of acrylic IOLs shipments to that market.

The KS IOL line continues to generate strong demand though our supply of the lens, as you know, has been limited. We believe that our supplier will be able to provide an increasing number of units to begin to fulfill that back order of demand, which will then enable us to increase the number of consigned accounts in Japan and expand to additional markets in Europe. We did see some improvement of supply during the quarter as we were able to ship over 50% more units in the fourth quarter as compared to the third quarter.

For the full year, IOL revenue declined 7% as reported, but increased 5% in constant currency. IOL sales in Japan declined 1% as reported, but as you can see, increased to 24% in local currency. Units increased in Japan by 16% for the full year. IOL sales in the European region grew 23% for the year as units increased 16%. Despite the challenges in foreign exchange and supply, I'm pleased with our performance in the IOL product line. We've been saying we expect single-digit revenue growth in those products, and we are achieving that in constant currency dollars despite the supply headwind.

Now, to our second key metric, gross margin expansion by a minimum of 250 basis points for the year. As we indicated last quarter, due to the negative impact of the yen and the third-party supply constraints, we did not reach this target in either the last two quarters. And as a result, we said we would not achieve this metric for the year. You will hear from Steve that without a couple of issues unrelated to our cost structure or price, we actually would've grown by 290 basis points for the year. But that wasn't the metric.

Our third metric, GAAP profitability in each quarter, was not met in the fourth quarter. However, we were profitable for the full year. Our fourth key metric, to achieve manufacturing consolidation progress while maintaining quality and supply, was met in each quarter this year. Our team continued to execute successfully to this metric throughout the year, and we are on target to complete the consolidation project by mid-2014.

At the end of the fourth quarter, ICL inventories as compared to the fourth quarter of 2012 have increased by 10% while our standard ICL, or MICL inventory is up 50%. This inventory build is consistent with our objective to assure adequate supply and quality of product throughout the completion of this consolidation project and beyond. Manufacturing yields of the ICL and the Toric ICL from the US plant continued to increase.

We plan to officially cease manufacturing at our facility in Switzerland in June of this year and expect to add headcount in the US. Our employees in Switzerland have continued to perform at a very high level, and they produced more ICLs than we anticipated during the year. Those employees in Switzerland who will lose their jobs have been very loyal and consistent during this transfer process, and we thank them.

Looking back on the year, we had a successful fourth quarter and a strong finish to 2013. Value to shareholders increased 183% as revenue growth -- grew and profitability improved. Sales of our Visian ICL reached record levels, growing 26% for the year. Customer adoption of the CentraFLOW technology was a key growth driver.

We've gained approvals during the year in several large markets including India, Korea and Argentina with approval in Japan expected any day and approval in China on track for midyear. Let me say this again. During December, ICLs with CentraFLOW technology represented 67% of all ICL units shipped.

We're running a bit behind the anticipated launch for the pre-loaded ICL version 5 because of the few technical issues; however, we believe those have now been resolved and we expect to receive CE Mark approval in April. We began development of our version 6a and version 6b ICLs which will differentiate the ICL for treating presbyopic and myopic patients and could significantly expand the market for our ICL platform to include patients over the age of 45 for the onset of presbyopia.

Finally, I must say I'm quite pleased with our results in 2013. Yes, there are areas in which we could've done and should have done better, and those are areas in which we are focusing our efforts in 2014 and plan to improve. I like where we are right now, and I like the opportunity in front of us. Now, will turn the call over to Steve for a more thorough review of the fourth quarter and full-year financial results. Steve?

Thanks, Barry, and good afternoon, everyone. There are four areas on which I'll focus my comments: revenue, gross margin, expansion, 2013 key financial results and our shelf registration which we filed earlier today. As Barry discussed, the continuing decline in the value of the yen resulted in a negative impact to our revenue of $1.1 million for the quarter. Most of this, $983,000, negatively impacted IOLs sales for the quarter.

For the full year, the negative impact of foreign currency was $3.8 million and impacted IOLs by $3.2 million. Annual sales in constant currency grew 19% to $76 million from $63.8 million in 2012. The average value of the yen to the dollar for 2013 was 97.6 compared to 79.8 in 2012. There was also a negative impact on gross profit for the year of $1.9 million and a positive impact on our operating expenses of $2.1 million.

We sell injectors to a third party to be used in our pre-loaded IOLs, some of which are sold back to STAAR for sale to end customers. During the fourth quarter, the Company determined that a more appropriate accounting for these injectors would be to reduce cost of goods sold rather than the previous accounting treatment as revenue.

Therefore, fourth quarter injector sales of $476,000 were recorded as reduction to cost of goods sold rather than revenue, and this accounting treatment will be followed on a go forward basis. Including the $476,000 received for IOL injectors, total revenues would have been $19.4 million for the quarter and $72.7 million for the full year. These injector sales were not material during the first nine months of 2013.

Gross profit margin for the quarter was 68.5% compared to 67.8% in the fourth quarter of 2012, a 70 basis point expansion. The product mix in the fourth quarter of total revenue was ICL sales at 60.8% and IOLs at 34.9%. Gross profit margin for the fiscal year was 69.7%, a modest increase over 2012. There were two primary factors that limited our gross margin expansion this year. First, the shift of manufacturing of the pre-loaded silicone IOLs from Japan to the United States which were then sourced by Japan, and US dollars now have a higher cost due to the weaker value of the yen as compared to 2012. This factor accounted for a margin decrease of 120 basis points.

Second, the increased mix of IOL injectors which were sold at low margins to our KS IOL lens supplier reduced gross margins by 140 basis points. Without the impact of these two factors, gross margin for the full year would've been another 260 basis points higher and 72.3%, representing a 290 basis point improvement and above our gross margin expansion metric for the year.

If the value of the yen continues to weaken against the dollar or if the mix of low margin IOL injectors is greater than expected, there will be a negative impact to our gross margin. However, once of these factors turn neutrals compared to the prior year, I expect that we would be able to regain our gross margin expansion momentum and perhaps catch up to our previous expectations for 2014.

As discussed, fourth quarter revenues were $18.9 million, reflecting a 15% increase over $16.5 million reported for the fourth quarter of 2012. On a constant currency basis, revenues grew 22% during the quarter compared with the fourth quarter of 2012. Gross profit margin for the quarter was 68.5% compared to 67.8% in the fourth quarter of 2012. Operating expenses for the fourth quarter of 2013 were $14.2 million, up 15% from $12.4 million in the prior year. I'll go into more detail in a moment.

Income taxes resulted in a benefit of $172,000 during the fourth quarter of 2013 compared to a provision of $466,000 during the fourth quarter of 2012. The net loss for the fourth quarter of 2013 calculated in accordance with GAAP was $876,000 or $0.02 on a per share basis, compared with a net loss of $1.4 million or $0.04 on a per diluted share basis in the fourth quarter of 2012.

I'd like to provide a bit more color on our fourth quarter operating expenses, which include an 8% increase in general and administrative expenses, a 29% increase in sales and marketing expenses and a 9% increase in investments in R&D. There were several factors during the quarter that led to these increases. Specifically, our fourth quarter of 2013 contained 14 weeks versus the fourth quarter of FY12 which contained 13 weeks. As result, we had an additional week of salary and associated costs in our fourth fiscal quarter of 2013, and that added expense of approximately $500,000.

Sales and marketing investments increased due to commissions from higher sales. The cost of promotions, including consumer awareness initiatives and the timing of the ESCRS tradeshow which fell in the fourth quarter of this year versus the third quarter of last year. In addition, R&D expenses included the associated costs incurred in preparation with our presentation to the FDA's Ophthalmic Devices Panel, which were approximately $200,000 during the fourth quarter.

Our GAAP results for the year include a 13% increase in revenue and a 14% increase in gross profit. Operating expenses grew 9%, which includes $2.2 million of costs associated with our manufacturing consolidation. The cost will be a minor expense in 2014 and occur only during the first six months of next year -- of this year. Also, we have invested $4.3 million for facility improvements, primarily in the expanded US facility.

The medical device tax was $203,000 for the year. Our income tax rate for the year was 64%, though our actual tax provision was $528,000 less than in 2012. Net income was $0.01 per diluted share versus a loss of $0.05 in 2012.

To provide investors with a better basis on which to compare results and understand our business, we also are reporting net income on an unadjusted basis which excludes manufacturing consolidation expense, Spanish distribution transition expense, gain or loss on foreign currency transactions, fair value adjustments for warrants and non-cash stock-based compensation expense. Excluding these items, adjusted net income for the quarter was $850,000 or $0.02 per diluted share, as compared to the adjusted net income of $495,000, or $0.01 per diluted share reported in the fourth quarter of 2012. With the exception of stock-based compensation as these onetime expenses start to drop, the non-GAAP results will look more and more like our GAAP results.

Non-GAAP adjusted net income for the year was $7.5 million, or $0.19 per diluted share, 57% higher than the adjusted net income of $4.8 million, or $0.13 per diluted share reported for 2012. Revenue growth for the year was 13% on an as-reported basis and 19% on a constant currency basis. Visian ICLs grew 26% during the year and IOLs grew 5% in constant currency. Gross margin was 69.7%, reflecting the negative impact of 260 basis points discussed earlier. And without these factors, gross margins would've been 72.3%.

We finished the year with $23 million in cash, which includes $3.4 million generated from operations. During the year, the Company invested a total of $5.7 million, of which $2.2 million was a manufacturing consolidation, an additional $3.5 million in fixed asset additions. GAAP net income was $0.01 per share versus a $0.05 loss in the same period in the prior year. Non-GAAP net adjusted income was $0.19 per share as compared to $0.13 per share in 2012.

In August 2011, STAAR filed a shelf registration for $75 million, primarily to take advantage of potential technology acquisitions. This shelf, which remains unused, expires in August of this year, and the Company today filed a new shelf at the $200 million level for the same purpose. It is important to note we have no current need to add cash and no plan to access capital markets at this time. Our intention is to have the shelf available if opportunities arise to acquire technologies that fit within our strategic focus and enhance shareholder value. This concludes my comments, and now I'll turn the call back to Barry.

Thank you, Steve. We continue to see very positive progress in our regulatory submissions worldwide. We are being told by the agency that approval of CentraFLOW technology in Japan is just a matter of days away. We also believe we remain on track for approval of CentraFLOW in China at midyear. These new approvals will be important to our growth plans in the Asia-Pacific region for 2014.

As said earlier, we expect to receive CE Mark approval in April for the pre-loaded ICL. This will make delivery of the ICL more convenient and decrease the surgical time for the procedure. This is important to our overall growth plans in Europe for 2014.

Regarding our Visian Toric ICL lens that is -- was originally scheduled to be at the February 14 FDA Ophthalmic Device Panel meeting, that meeting has now been rescheduled for Friday, March 14. We've been informed the FDA will make this public Friday on their website. Now typically, the executive summaries are available only 48 hours before the scheduled panel meeting. So, now we're in a little bit of an unusual situation as both executive summaries have been published on the FDA website anticipation -- in anticipation of that previously planned February 14 meeting.

We did exchange executive summaries with the FDA prior to Christmas, so we've seen these for quite a while. And if you have followed our story the past five years, I think you'd agree, there were no surprises in the summaries. The same questions regarding the submission have been previously discussed. Since the documents are out there, we wanted to make a few comments so hopefully you can understand that we will not comment any further until after the panel meeting presentations.

First, let's remember that the Toric ICL study protocol was approved over 12 years ago. And also, it's well known public information that between 2003 and 2007, the Company had some very poor audits and warning letters and deficiency letters. But in the last several years, we've continued to make improvements to our quality in manufacturing and have had several FDA audits since then over the past few years, and they've shown that we have continued to exhibit continuous improvement.

First, there are a large amount of protocol deviations. We cannot deny this, nor can we change history. Approximately two-thirds of the deviations were related to the patient form documents. Our clinical teams and surgeons presenting at the panel on our behalf do not believe these deviations impact the excellent clinical outcomes in the study, and you will see this in our presentation once public.

You may recall that one of the seven clinical sites was the Navy. The FDA had many questions over several months about eyes being examined beyond the 12 month window. At the Navy site, some of the patients were on active military duty outside the US and could not be seen at the 12 month period, but were seen later. You will see in both summary documents that including all of the eyes actually seeing, the accountability level was 94%. There is no time base therapeutic advantage for the eyes seen outside the window. Actually, you might even reason that those seen outside the window were exposed to more risk, given their exam was at a longer period of time after their surgery.

You may also recall that endothelial cell loss has been an issue. It's been an issue with anterior chamber phakic IOLs worldwide, and we've received several questions from the FDA on this topic during this review period. Some of those anterior lenses have been redrawn from European markets. For example, the Alcon lens has been on and off the market in Europe based upon concerns over endothelial cell loss. I will remind you, the ICL is a posterior chamber phakic IOL. We've not seen one non-traumatic corneal transplant in over our 17 year history of the ICL having been implanted.

Now, the safety profile for the Toric ICL is established by the parent ICL. More than 400,000 ICLs have been implanted worldwide over the past 17 years. The data supports our belief that there were no new safety-related issues raised by the Toric ICL study. The [MOD] database that are used in both summaries show that based upon between 220,000 and 300,000 ICL implants, the total adverse event rate was between 1.26% and 1.6%, depending on which sample size and which time period you use.

Let's not forget we've seen excellent clinical outcomes from the Toric ICL study. Now of course, 0% of the uncorrected eyes in the study were 20/20 -- were not 20/20 prior to the Toric ICL implant. They couldn't see. Remember, these are high [myos]. But post-op, 82% were 20/20 or better uncorrected. Post-op, 77% had uncorrected vision equal to or better than their best corrected vision pre-op. Also post-op, 47% had uncorrected better than their best corrected pre-op vision.

We've said all along, the panel meeting would be tough. But we believe that worldwide clinical outcomes will provide sufficient evidence that the benefits of the Toric ICL outweigh the risk. We have an excellent team of presenters and consulting experts for the panel meeting. I'll tell you, we've worked very hard over the past few months in preparation. We're confident that we're prepared to address the agency's questions on our submission of the Toric ICL in just over two weeks from today.

Now, let's turn our annual metrics that our team will be focused on achieving during 2014. They include revenue growth of 8% to 10%, ICL revenue growth of 20%, gross margin expansion of 300 -- 300 basis points over where we finished 2013, which would be 72.7% for the year. Profitable on a GAAP basis and successfully complete project comment at midyear.

Before I open the call for questions, let me review our investor meeting plans for the remainder of this quarter. On March 3, that's Monday, we will be presenting at the Cowen Healthcare conference in Boston and on March 17 at the Sidoti conference in New York. The week of March 24 we will be marketing with Stephens. In April, we will be attending the ASCRS in Boston and will host an investor breakfast meeting on Saturday, April 26.

We expect to report our first quarter results on Monday, April 28 and host our conference call live from the -- our booth at the ASCRS meeting. With that, operator, we are ready to take questions, and you can open the lines.

(Operator Instructions)

Your first question comes from Chris Cooley with Stephens.

Good afternoon, everyone. Can you hear me okay?

Yes, Chris.

Super. Two questions.

First, could you give us some additional color regarding your assumptions behind the guidance and explicitly, when we are looking at revenue and at the gross margin? I think you want to set a conservative bar, but it almost, if I'm doing the math right, looks like something's going negative here on the IOL side. I just want to make sure I'm not missing some potential headwinds.

And also, it looks like it would imply some further degradation to margin. So, I want to make sure I understand the assumptions there. And then the second question I would have would just be in regards to maybe a quick update on the timeline for CentraFLOW. As well as the V6a and V6b. And congratulations, by the way, for getting the panel back on queue this quickly. That's a great win.

Good. I'm really shocked, Chris, that you would say I'm more conservative than you.

But let me say that I think we learned our lesson from -- I learned my lesson from 2012 and that is not to get out in front and always leave a little bit in the tank for something that's going to happen. Usually that something that's going to happen is not something you know about. Now remember, we are still going to have headwinds from the yen in 2014. When you look at -- it will take, really every quarter of next year, even if we stay at the current $102 rate for the yen, we're going to be battling that value throughout the whole year.

Also, there are several approvals which could happen which could increase our number, but they could also not happen. So, we don't have those baked into our numbers. I think off on the gross margin line, you've got to remember that we don't see the benefit from Comet until the second half of this year. During the first half, this Swiss facility will remain open and continue to manufacture.

Are there possibilities that we can do better than these metrics we've outlined? Absolutely, yes. And does our team think we're going to do better than that? Yes. But there is always something that can pop it's ugly head up.

Now, you referred to IOLs on the revenue line, that indicates a decline. Well, we did, as reported, show a decline in IOLs in 2013. So, if we get better yen values, if we get more supply. And we did see an increase in supply fourth quarter from our third-party manufacturer of acrylics. If that improves, then yes, we will do better than that line. But at this point in time, until we see it we don't believe it, and I don't put it in the metric.

Understood.

Okay, so secondly on CentraFLOW, and I think we've said Japan, we're expecting any day.

I'm sorry, I meant -- if I can interrupt you, I just meant here in the states.

Okay. So, as an update, we did have a meeting with the agency in December back in Washington on CentraFLOW. It was a very positive meeting. There are some things that we need to do. Now, I will readily admit those things were put on our back burner as we were putting 110% efforts toward the panel meeting for Toric.

So, we've not spent any time or any work on some of the things we need to do for CentraFLOW. So, once the panel meeting is finished and we can send resources on to CentraFLOW, we will do that. Now, one of the things w will be doing is looking at a retrospective study of sizing outside the US. And that something the agency wants to see, so we're going to have to go into some of our surgeons who have implanted a lot of ICLs and go to their data several years based upon their sizing methodology and what their results were clinically.

On the B6a and B6b, nothing has changed in those regards. We are continuing to make progress on both of those products in our R&D team. The 6a optic we've decided upon. And actually, we've spent quite a bit of money, $500,000, $600,000, $700,000 something like that, just recently on equipment for lathing the optics for the 6a So, we think we are still basically on target for that, which would be the end of this year or the beginning of next year. The 6b, which opens up an expanded market above age 45, we will -- our objective is to have the optic determined by that lens by the end of March into first quarter, and that which rail by 12 months the 6a launch.

If I may, just to clarify and then I'll get back in queue. When would we start to see initial clinical data on the A? I'm assuming that's what we will see first. Thanks so much, and I'll get back in queue.

Sure, on the 6a, it depends what our regulatory agency requires. Of course we will do some of our own clinical trials before we actually launch the product. But we could see some of those as early as ESCRS meeting. It's possible if we are able to stay on target that we would have presentations in our booth on some of that data at ESCRS.

Thank you.

Your next question comes from the line of Matthew O'Brien with William Blair.

Good afternoon, thanks for taking the questions. I was hoping to follow-up on Chris's question a little bit on guidance. It seems to me like the 8% to 10% total Company number that you're putting out there, if you exclude the move of the yen and then also the adjustment in the IOL business, that that would probably be something closer to 10% to maybe even 10% to 13% growth. Is that a fair way of characterizing it?

Well I think -- yes, Matt, as long as there isn't some headwind, some new headwind that comes up to jump to bite us. As we put the metric out there, we are trying to anticipate there is something we don't know about that could hit us.

Right, but just fundamentally, the shift from IOLs in sales down to cost of goods should be what, just under 200 basis points alone?

200 basis -- improvement you mean?

It would've been 200 basis points higher, maybe $1.5 million higher total revenue adjusting for that change, given that it was about a $500,000 adjustment this quarter.

No, no, no. The first three quarters it was minimal. The first three quarters was less than the fourth quarter total.

Yes, I understand that. What I'm saying is that the $500,000 that you mentioned in Q4, and we can follow-up offline if you want to, but it seems like, that adjustment you said is going to continue going forward, so you're pulling revenue out of 2014 and put it down in cost of goods. And so what I guess I'm asking you, is that $500,000 in Q4, would it have been a higher amount here in 2014, hence the revenue number, the growth number has taking a hit because of that?

Well, of course it's all dependent upon the ability of our third-party manufacturer to make IOLs that go with those injectors. So, it would be a higher if they are able to produce at a much higher level. We think they will be able to, but as I said earlier, I'm not going to project that until we actually see it.

Okay. And to follow-up on the Visian outlook going forward, you said about 20% this year. Can you give us a sense for how much of that is coming from the mix? You're mentioning CentraFLOW is now 67% of your sales in your shipments in December. How much of that 20% comes from mix versus geographic growth versus any new product launches? It sounds like you don't have anything in there for new product launches. And then specifically, do have anything in your guidance for the Toric approval in the US?

Yes, there's nothing in the metrics we put out there, products that are not approved today.

Okay, and then the mix side? The benefit there versus geographic growth?

Well, it's -- at 67%, that's pretty high. The key remaining market to fold in would be China in that volume, and so will start to see that the second half of this year. And then the final key market to drop would be the US, and we don't anticipate that in 2014.

Okay. And if you wouldn't mind, if I can just do one more real quick. It looked like India and Japan in Q4 were soft, down slightly, and I understand the reasoning for that on the ICL side of things. But do get the sense that both of those geographies are ramping up right now with the CentraFLOW or pausing in anticipation of the CentraFLOW?

Well, two different issues there with those markets. It's been reported by a lot of different sources that the Japan market had a significant decline in 2013 in overall refractive procedures. Now it's been reported as high as 50%. MarketScope data is not out yet, and we won't see that yet for several weeks or for the full year, but we do think that Japan market was down.

Now, I will say we've seen a rebound so far this year. Getting CentraFLOW approval in Japan will help us overall because then we'll be able to actively market the product. And the centers that have been using CentraFLOW will be able to have inventory of it readily available for their patients. They won't have to order on a named patient basis as they've had to in the past.

With India, there was a slight stall in the market fourth quarter. But you see our price did very well based upon the CentraFLOW introduction. And we've seen good growth so far the first quarter in India, so we've seen that rebound as well.

Great. Thank you.

Thank you.

(Operator Instructions)

Your next question comes from the line of Jason Mills with Canaccord Genuity.

Thank you. Hello, Barry, can you hear me okay?

Yes, Jason.

Good afternoon, thanks for taking the question. I have several, I'll try to limit it here for the operator's instructions.

First on China, fantastic year, really, all-in for you in China with the ICL and another strong quarter in the fourth quarter. Loved your commentary, Barry, on the sustainability of this growth and also the visibility that you have. Whether or not that's improved quarter to quarter, obviously in 2012 it bounced around, it didn't in 2013. Have you done anything to enhance your visibility or your ability to smooth out from a seasonal perspective or a quarter-to-quarter perspective in China? And what should we expect there as we move forward quarterly in 2014?

Okay, good. First, thanks for explaining the 2012. At first I thought you were setting a trap question for me there.

No, no.

Because China has been hard to estimate. And we are, as you said, we are also pleased with our results in China in 2014. But we also know, it's the largest refractive market out there and there's a lot of opportunity for us in China. We're very much looking forward, as are the surgeons in China, for CentraFLOW approval at the midyear term.

We hired more people in China during 2013. It has helped to give us more visibility and feedback on what the market is doing, so we do feel better about it overall. Plus I think, Jason, if anything happened in the China market again like it did in 2012, I think we're better prepared to react to that.

For example, in 2012, there was tremendous amount of negative press about LASIK that just carried on for weeks and stalled the whole refractive market. Well, we hired someone in China who specializes on our social media work there, and we think if that were to happen in that market, we're better prepared to be able to react to communicate to potential refractive patients better than we have in the past.

Staying on China for second, Barry. Relative to your guidance for the ICL in 2014. I guess not only China, but your three largest ICL markets, how are you viewing growth expectations in those three markets relative to that overall growth expectation? I would guess China, for example, would be higher growth rates year-on-year than the average for the entire world. Just give us a sense there, and I had one other.

Certainly in our metric that we put out there, ICL 20% growth, overall, we would expect in that metric a little less growth than we had this year. Being that the sales were at a high level and the comparables are higher. So, on a percentage-wide basis, it wouldn't be as high. However, if China comes through with CentraFLOW at midyear, that changes that metric. If Toric ICL becomes available in the US, that changes that metric for the US.

We are very pleased with our results in the US in fourth quarter. And we continue to watch that very closely because overall, according to MarketScope, procedures, total refractive procedures -- I'm sorry, laser refractive procedures were down 1% in the fourth quarter in the US, while they showed that phasic IOL type procedures were up 20%. Of course, we know we were up more than that, but that's the first time since I've watched that data that I've seen that kind of performance.

That's helpful. One more and I'll get back in queue. Following up on Chris' questions with the CentraFLOW in the US, it seems fairly obvious given the current mix in your business that that is been a really transcendent technology addition to the ICL, which in and of itself has done well globally. CentraFLOW has clearly been important. So, as it relates to the US, and understanding that you are planning to devote more resources to it post-panel, can you give us a sense, just qualitatively in broad scope terms, what you expect for timelines and what you expect FDA to require of you so that you can eventually provide that important technology of the US phasics. Maybe including myself, Barry.

Well, we can take you someplace. We've got some friends. But a really good question.

I think the two pacing items there are going to be for us is just retrospective clinical evidence on sizing and complications from different methodologies for sizing. And then secondly, at least as we continue to discuss with the FDA, they still currently believe that a clinical study will be required to get approval in the US.

Now, we don't yet know how long that would be nor how many eyes. We had suggested that protocol to the FDA, but I think before that can get started, we've got to fulfill the sizing data information that they're asking for. So, I don't -- as I look today, I don't see that as a 2015 product. That could change, but as a look at it today, I don't see it available in 2015.

That's helpful color. Thanks, Barry, I'll get back in queue.

Thank you.

(Operator Instructions)

There are no further questions. I will now turn the call back over to Barry Caldwell for further remarks.

Great, thank you, operator. And I'd like to thank all of you for participating in our call today. As a said, we plan to do this again on April 28 from the floor of the ASCRS meeting in Boston.

If you happen to be there, we'd like to provide you a live show of how this thing is done. And if you have any questions or want follow-up, please feel free to contact us. Thank you, and have a good evening.

Ladies and gentlemen, that concludes the presentation for today's conference. You may now all disconnect, and have a wonderful day.