One on One with Cary Rayment

Just 2 years after Nestlé’s historic IPO thrust Alcon into public view, another major event occurs for Alcon — the board names a new CEO.

Cary Rayment Image: Stiglich JM

FORT WORTH, Texas — Effective Oct. 1, 2004, Tim Sear, Alcon’s chairman, president and chief executive officer, the face of Alcon’s leadership since 1997, retired. Taking over the position of CEO is Cary Rayment, former senior vice president of Alcon United States and an employee of the company since the 1989 acquisition of CooperVision.

Noting that a change in the most senior position of the ophthalmic behemoth with its almost $4 billion a year in revenue warranted a look-see at the new leader, Ocular Surgery News sat down with Mr. Rayment less than 2 months before he officially took over the position. Mr. Rayment discussed his new role and the momentum of the company, and then proceeded through a lightning round of what’s new in Alcon’s ophthalmic world.

Mr. Rayment conveyed two main thoughts in this interview — a desire to maintain continuity between Mr. Sear and himself, and Alcon’s commitment to bringing innovative products to ophthalmology.

Ocular Surgery News: Where does your expertise lie? What does this change in leadership mean?

Mr. Rayment: I have been in ophthalmology since the early 1980s, working very closely with many ophthalmologists through the years. I was first involved with CooperVision and then throughout the 1990s with Alcon in a variety of roles after the acquisition.

I have had the good fortune of having a number of positions – surgical general manager, head of managed care, head of international marketing, responsibility for the Japan market and eventually senior vice president of Alcon U.S. for the past 4 years.

The theme I would like to stress with this change is continuity between Tim Sear and me. I have been very involved with all aspects of our business and in the development of the strategies and the launch of our new products during the last few years.

I have worked closely with Tim and the rest of the senior management staff to get us where we are today. Going forward, the management team and I will work diligently to build on this successful foundation. We will stay focused in eye care and invest significantly in research and development to develop new products in those segments that we currently participate in, especially glaucoma and cataract, as well as expanding our investment in the emerging and important segment of retinal disease, which today represents the leading cause of blindness in the developed world.

Markets outside the United States

OSN: Please discuss your investment plans and support of established markets on a global level.

Mr. Rayment: In addition to investing in new products, one of our strengths is the global infrastructure we have established over the last 30 years. We now have more than 70 operating companies around the world, which is the largest global organization dealing directly with eye care professionals. This is a cornerstone of our strategy to be close to ophthalmologists wherever they practice.

We see significant opportunities in markets such as Russia, China and the emerging European nations. In developing countries, ophthalmologists are being trained, and they increasingly want access to the devices and drugs their colleagues around the world use to treat patients. We are committed to building our organizations in these countries to ensure we deliver these ophthalmologists and their patients the highest level of quality and technology.

OSN: Does that require you to pull back on other markets, such as Latin America and Japan?

Mr. Rayment: No, absolutely not. We are committed to all of our markets. That is one of the themes that Tim stressed throughout his career with Alcon. He spent most of his years developing our international markets around the world. One thing I learned from him is the benefit of being a global company and of understanding different cultures and how to address their needs. We don’t abandon markets when the going gets tough as some competitors do because in the long run those economies turn around and ophthalmologists remember who provided service to them during the tough times.

A prime example of that is Argentina, where 4 years ago the economy went into a recession. We have stayed the course there and have begun to see the market turn around for us recently. A more recent example is Turkey, which is subject to a lot of volatility but is a very nice market for us. We have great personnel in these countries and excellent relations with physicians in these markets, and, not incidentally, we have strong market shares as well as strong overall financial performance. We are not about to abandon them.

OSN: A common concern of ophthalmologists in these emerging economies is price discrepancies of large companies’ products. How do you respond to these concerns?

Mr. Rayment: If you look at surgical devices and instrumentation prices globally, they are very similar worldwide. Ophthalmologists have choices and price points for different products. Part of our strategy from the beginning in the surgical area is to bring ophthalmologists a variety of instrumentation to perform cataract, refractive and retinal surgeries. It is up to us to then demonstrate the value of those particular technologies, and Alcon has a reputation of bringing innovative technology to the global market that provides benefits to patients.

OSN: Ophthalmologists in countries challenged by economic forces say they are passionate about having access to the most cutting-edge technology; however, they also say they can’t afford this technology.

Mr. Rayment: There are always going to be doctors who are constrained by cost and reimbursement. However, many doctors around the world appreciate the benefits our advanced technology provides to their patients.

When you look at the innovation brought to the market over the last 20 years from Alcon and our competitors, in terms of cataract instrumentation and IOLs and the value of that surgery for patients around the world, it is tremendous. It is important that we continue to advance ophthalmic surgery and demonstrate the value of this technology to doctors in less developed countries.

Sales and revenue

Tim Sear

OSN: In the second quarter of 2004, you reported more that $1 billion in sales.

Mr. Rayment: We posted the first billion dollar quarter ever, which was quite a milestone. Sales grew about 12%, and profits grew faster than that as we continue to leverage our global infrastructure. We did have some currency benefit as sales grew 9.9% in constant currency.

OSN: Alcon has increased sales and revenue in every category except refractive. What do you think accounts for that?

Mr. Rayment: Basically, lower global equipment sales offset the positive trends of procedure growth. During the second quarter of 2003, we were launching the LADARWave wavefront diagnostic instrument and that activity continued throughout 2003. When we went into 2004, we had largely completed that launch. Other than wavefront upgrades, I believe equipment sales are down for all manufacturers. But revenue from procedures has gone up, for us and the industry. This is a great sign, and we certainly hope it continues.

Going forward, with increasing consumer confidence we expect increased demand for LASIK and, importantly, increases in custom ablation procedures. The conversion from conventional to custom procedures will be important for us and for the industry.

At the end of the second quarter 2004, we were pleased to receive approval for our CustomCornea software upgrade, which now gives Alcon the broadest treatment range for customized ablation. We estimate that over 90% of patients with myopia now have the option to choose a custom procedure.

Another objective is to communicate and demonstrate the benefits of custom ablation to our customers outside of the United States where adoption of custom LASIK for their patients has been slow to develop. The practice model outside the United States is different, and although we see some signs of this changing, it may take some time. However, we will continue to demonstrate the value of custom procedures, and we are also committed to enhancing our technology over time to increase both treatment ranges and outcomes. I think this will also help custom penetration in international markets.

OSN: Do you suspect that there may be a pull back from corneal refractive surgical procedures to lens-based refractive surgery?

Mr. Rayment: That has the potential to develop, but it will take time, and we believe that LASIK will play a key role in refractive surgery for now and years to come. Phakic IOLs will primarily play a role for patients outside the approved LASIK treatment ranges.

R&D

OSN: Please discuss Alcon’s research and development plans for the next few years.

Mr. Rayment: We will spend almost $400 million this year. Over the next 5 years, we’ll spend $2 billion to $2.5 billion in research.

We are excited and pleased with our balanced pipeline of new pharmaceutical, surgical and consumer eye care products targeted for approval and introduction over the next 3 to 5 years. One area of focus will be on age-related eye diseases such as glaucoma, cataract and retinal diseases.

OSN: Describe Alcon’s balance of organic development and licensing.

Mr. Rayment: We have historically grown from internal development and key strategic acquisitions that complemented our business or increased our presence in key markets. CooperVision is a good example. With that acquisition, Alcon acquired the leading position in cataract and vitreoretinal surgery, which we have continued to build upon. In the early 1990s, we also acquired some European companies to enhance our position in the pharmaceutical and retinal surgery markets.

Our leadership position in ophthalmology makes large acquisitions a challenge. However, we will continue to look for acquisitions or licensing of devices that are strategic, complement our businesses and bring value. We will also continue to look at the licensing of important pharmaceutical compounds that we can then develop into ophthalmic formulations and bring to market to ensure we maintain our leadership position.

We are intensely focused on internal development and enhancing our product portfolio through our own R&D. From my perspective, Alcon’s R&D pipeline has never been as rich and full as it is today. We are excited about the new products that have come out in recent years and the ones yet to come.

Focus by product category

OSN: Retina. You plan to launch Retaane (anecortave acetate for depot suspension) in 2005.

Mr. Rayment: We’re moving forward on Retaane. We should complete our phase 3 study at the end of August 2004. Our plan is to prepare our NDA for submission in fourth quarter of 2004, and if everything goes according to plan, it is possible to have a product in the first half of 2005.

The treatment of wet AMD is an exciting new area for Alcon. Our long history of success in the area of retinal surgery combined with a research program to seek therapeutic treatments for AMD and other retinal diseases will make this segment a key driver of future growth.

OSN: Glaucoma. Extravan?

Mr. Rayment: Extravan is our combination of Travatan (travoprost, Alcon) with timolol. The NDA was submitted in December 2003. By the end of this year, we will have more information on Extravan’s approval status in the United States. However, the FDA has high approval standards for combination drugs. Additionally, we will seek registration of Extravan in markets outside of the United States. As one of the leading causes of blindness, glaucoma is a critical focus of our research programs, and we will continue to pursue new therapies that help preserve vision for those affected by this disease.

OSN: And what about glaucoma surgery?

Mr. Rayment: We continue to evaluate new surgical devices and procedures to treat glaucoma. However, our primary focus is in developing new pharmaceutical therapies to treat glaucoma and to enhance compliance via novel drug delivery devices. These are products that we think will deliver the most benefits to patients.

OSN: Cornea.

Mr. Rayment: Dry eye is an underserved disease, and we continue to invest research dollars in developing dry eye therapies. We launched Systane, an over-the-counter treatment for dry eye, in the United States in 2003. This product has been a key growth driver in our consumer business, and we are expanding that launch into markets outside the United States. Despite Systane’s success, we are still focused on developing a therapeutic treatment for dry eye.

OSN: Any final comments?

Mr. Rayment: For almost 60 years, Alcon has been dedicated to preserving and restoring sight, and this will remain our core mission. A key component of this mission will be investing in research that continues to bring innovation and value to physicians, their practices and their patients in our existing business lines. As the world’s leading eye care company, we will also continue to fund research in emerging areas of eye diseases.

For Your Information:

• Cary Rayment can be reached at Alcon Laboratories Inc., 6201 South Freeway, Fort Worth, TX 76134-2099; 817-551-4754; fax: 817-568-7131; Web site: www.alconlabs.com.