STAAR Surgical (Nasdaq: STAA)

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STAAR Surgical (Nasdaq STAA)

• David Bailey, President CEO
• Deborah Andrews, CFO
• May 2007

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FORWARD-LOOKING STATEMENTS All statements in
this presentation that are not statements of
historical fact are forward-looking statements,
including any projections of earnings, revenue,
cash or other financial items, any statements of
the plans, strategies, and objectives of
management for future operations, any statements
regarding expectations for success of the ICL or
other products in U.S. or international markets,
any statements concerning proposed new products
and government approval of new products, services
or developments, any statements regarding future
economic conditions or performance, statements of
belief and any statements of assumptions
underlying any of the foregoing. These
statements are based on expectations and
assumptions as of the date of this presentation
and are subject to numerous risks and
uncertainties, which could cause actual results
to differ materially from those described in the
forward-looking statements. The risks and
uncertainties include our limited capital
resources and limited access to financing, our
ability to overcome negative publicity resulting
from warning letters and other correspondence
from the FDA Office of Compliance, the
willingness of surgeons and patients to adopt a
new product and procedure, and our ability to
successfully launch and market the ICL in the
U.S. while overcoming the foregoing challenges,
our ability to implement our cost savings
strategies and realize our expected savings, our
ability to reverse the decline in domestic sales
of intraocular lenses, our ability to maintain or
enhance our existing product sales and gross
profit margin and reduce compliance expenditures,
the rapid pace of technological change in the
ophthalmic industry, our ability to compete with
much larger ophthalmic companies, general
domestic and international economic conditions,
and other factors beyond our control, including
those discussed under the heading Risk Factors
in our Current Report on Form 8-K filed with the
SEC on April 26, 2007 and our Annual Report on
Form 10K for fiscal year 2006. STAAR assumes no
obligation to update these forward-looking
statements to reflect future events or actual
outcomes and does not intend to do so.
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Investment Considerations

• Large and growing addressable market Cataract
  and Refractive
• Proprietary Collamer technology
• Leadership in phakic implants Visian ICL
• Opportunity to rebuild Share in the Cataract
  market
• CMS ruling a positive
• New product launches
• Strong International growth
• Turnaround and growth strategy underway

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Company Background

• Founded in 1982
• (STAAR Surgical Technology And Applied
  Research)
• Original core technology was foldable IOLs, which
  are now the gold standard in ophthalmology
• 1990s Development of major new technologies
  Collamer material and ICL
• 2000s New management, ICL/TICL
  commercialization, Preloaded introduction

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Two Main Businesses Refractive and Cataract
2006 2005 2004
Refractive Revenue of Revenue Change YoY 12.7 22.3 136.1 5.4 10.4 31.5 4.1 7.8 37.6
Cataract Revenue of Revenue Change YoY 44.3 77.7 (4.7) 46.5 89.6 (3.5) 48.2 92.2 .3
Total Revenue Change YoY 57.0 9.8 51.9 (.8) 52.3 2.5
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Addressable Markets

• Refractive Error (Myopia, Astigmatism,
  Hyperopia). Elective
• Cataracts Opacification of the lens of the eye.
  Age related. Reimbursed

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Visian ICL
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Phakic Lens Sites
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History of Refractive Surgery

• Refractive Keratotomy (RK) becomes widespread in
  1980s, then declines
• First laser procedure, Photo Refractive
  Keratectomy (PRK) becomes widespread in
  mid-1990s, then declines
• Second laser procedure, Laser In-Situ
  Keratomileusis (LASIK) becomes widespread in late
  1990s.
• 2000 - Heavy Investments in LASIK marketing and
  technology growth stagnates, Low penetration
  rates
• 2000 - Phakic Implants, Multifocal/Accommodating
  implants, Toric Implants
• Refractive Surgery is going inside the eye

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Vision Correction Market

• Up to 1.5 billion myopes worldwide geographic
  variances in key matrices e.g. mean myopia
• 3.0 million LASIK procedures/year WW
• 1.4 million US
• 0.8 million China
• 0.8 million ROW
• Recent cannibalization in the US to PRK 10 to
  15. Driven by large law suits over some
  cornea-based procedures

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ICL Market Limits of LASIK

• Target at -7.5D and above - adjusted population
  in the US of six million eyes per year. (same in
  -6 to -7 group)
• Targeted penetration rate of this market is 10
  over time 600,000 procedures
• In International equate to 100 million eyes per
  year
• Support for superiority of phakic implants
• Cornea, Dec. 2006 ICL safer more effective
  than LASIK for -4D to -7.88D
• ASCRS Presentation Apr. 2007 Phakic IOLs
  procedure of choice to correct myopia at -6.5D,
  Dr. Neatrour

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Change in Product Mix and Effect on Gross Margin
exclusive of obsolecence charge of 5.3
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International ICL Penetration of LASIK Market
Country Penetration of LASIK
Benelux 5.0
Switzerland 3.8
Korea 3.2
Spain 2.9
Scandinavia 2.8
South America 0.6
Germany 0.5
Middle East 0.5
UK 0.2
Italy 0.2
France 0.2
India 0.1
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Visian Advantages

• Architecture and Anatomy of the Cornea is
  completely unchanged with the ICL. Correct
  the Vision NOT the eye
• Ease of use for the Surgeon existing skill set
• Patient friendly topical anesthesia, small
  incision, quick rehabilitation, wow for
  patient.
• Exceptional clinical outcomes Navy driving
  study, ASCRS April 2007
• Additive Vs Subtractive Removable
• Manageable complication profile - With a LASIK
  complication an effective solution is not always
  easily available

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Sales Marketing Strategy

• Three-pronged strategy
• Training/Certification
• Focused on the surgeon and patient outcomes
• Practice Integration
• Establishing a cut-off for patient selection
• Integrating the cut-off in the whole network
• Practice Building
• Marketing the procedure to drive volume

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Advantages for the Surgeon

• ICL integration will build overall refractive
  volumes
• Exceeds patient expectations
• Profitable procedure
• Few re-treats
• Happy patients free marketing positive
  referrals
• Mitigated risk
• ICL diversifies the practice
• LASIK technology is generic procedure
• Future growth driven by new technologies ex LASIK

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PRK Not A Practice Builder

• Concerns about LASIK have led to resurgence of
  PRK
• According to Market Scope, PRK represented 13 of
  laser-based refractive procedures in 2006, up
  from 8 in 2005
• PRK resurgence driven by fear of ectasia and the
  perception that PRK is safer than LASIK
• The perception of safety has been strongly
  challenged if not repudiated

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PRK Not A Practice Builder

• PRK is very poor in early results and in patient
  satisfaction
• The Slade contra-lateral study at 2006 ESCRS
  indicated significantly higher pain and lower
  visual acuity
• PRK patients will not yield positive referrals
• If surgeons are uncomfortable with cornea-based
  procedures, they should not do LASIK or PRK
• Therefore, the Visian ICL is the answer for the
  1 to 15 of US volume that is now PRK (140k to
  200k eyes)

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Worldwide Cataract Market Large and Growing

• Worldwide IOL market, estimated 13.8M procedures
  (1.28 billion) performed in 05
• Market growing to 2.42 billion by 2010 (17.1M
  procedures), representing a CAGR of 13.5 by 2010
• Driven by innovation / improved outcomes

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US Cataract Market Large and Growing

• Largest IOL market, estimated 2.9M procedures
  (428 million) performed in 05
• Market growing to 1.034 billion by 2010 (3.2M
  procedures), representing a CAGR of 19 by 2010
• Medicare reimbursement is DECREASING doctors
  and looking to upsell the patient
• Presbyopic IOLs (accommodating and multifocal)
  and RLE will grow but slower than recently
  projected
• Toric IOLs will lead the upsell following CMS

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New CataractProduct Introductions

• STAAR Toric IOL qualifies for dual aspect
  reimbursement under new CMS ruling
• Collamer Aspheric IOL launched at ASCRS, April
  2007
• Silicone Aspheric IOL Q307 Introduction
• Preloaded Silicone Aspheric Injector 1H2008

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Players - Now
Material Material Material
Silicone Acrylic Other
Plate Bausch Lomb STAAR STAAR
Three-Piece AMO Bausch Lomb STAAR Alcon STAAR
One-Piece Alcon AMO
Aspheric AMO Bausch Lomb STAAR Alcon AMO STAAR
Blue-Blocking Alcon
Toric STAAR Alcon
Accommodating Eyeonics
Multifocal Alcon AMO
Enhancements
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Current US Cataract

• Opportunity to build share currently gt4
• Four players ACL, AMO, BL, STAAR
• Revamping the offering 2007 early 08
• Strengthening sales effort
• direct RMRs
• direct sales people to supplement agents
• Heavy commission bias to new products

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Q107 Financial Recap

• 11 year-over-year sales growth to 14.9 million
• Refractive product sales up 47.5
• Cataract product sales up 2.4
• Gross Profit Margin of 48.9 and growing
• Effective expense management
• 12 improvement in cash usage
• Buffered cash position to fund growth strategy
• Cash as of March 30, 2007 - 9.2 million
• 16.9 million raised May 1

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Strong International Franchise

• Products for sale in more than 40 countries
• Direct sales in the US, Germany, Australia
• Distributor sales in ROW
• German subsidiary stabilized and growing
• Intl. Refractive CAGR of 35 since 2004
• ICL adoption rate continues to grow
• New product approvals pending

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Revenue Change Year over Year
In Thousands
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2005 Sales and Gross Profit
Refractive Revenue as Percent of Total
Refractive Gross Profit as Percent of Total
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2006 Sales and Gross Profit
Refractive Revenue as Percent of Total
Refractive Gross Profit as Percent of Total
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Long-Term Operating Model
Sales - cataract 60 60,000,000 Sales -
refractive 40 40,000,000 Total
sales 100 100,000,000 COS - cataract 40
24,000,000 COS - refractive 15
6,000,000 Total COS 30 30,000,000
GP cataract 60 36,000,000 GP -
refractive 85 34,000,000 GP -
total 70 70,000,000 GA 9
9,000,000 MS 28 28,000,000
RD 8 8,000,000 Total SGA
RD 45 45,000,000 Operating Income 25
25,000,000 Other 1 500,000
Income before taxes 26 25,500,000
Income taxes 1 1,300,000 Net
income 24 24,200,000 100,000,000 is
a hypothetical number for demonstration purposes
only and is not meant to indicate actual sales
or projected sales in any period. Assumes no
U.S. income taxes paid until NOLs absorbed at
approximately 80 million earnings.
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Investment Considerations

• Large and growing addressable market Cataract
  and Refractive
• Proprietary Collamer technology
• Leadership in phakic implants Visian ICL
• Opportunity to rebuild Share in the Cataract
  market
• CMS ruling a positive
• New product launches
• Strong International growth
• Turnaround and growth strategy underway