Executives
Doug MacHatton - VP, Treasury and Investor and Public Relations
Kevin Buehler - President and CEO
Rick Croarkin - SVP and CFO
Dr. Sabri Markabi - SVP of Research and Development and CMO
Analyst
Amit Bhalla - Citigroup
Steve Willoughby - Cleveland Research
Peter Bye - Jefferies & Company
Louise Chen - Collins Stewart
Marc Goodman - UBS
Joanne Wuensch - BMO Capital Markets
Larry Biegelsen - Wells Fargo
Frank Pinkerton - SunTrust
Matt Miksic - Piper Jaffray
Scott Hirsch - Credit Suisse
Presentation
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the Alcon Incorporated earnings conference call for the third quarter of 2009. During the presentation, all participants will be in a listen-only mode. Afterwards you will be invited to participate in the question and answer session. (Operator Instructions). As a reminder, this conference is being recorded and will be available for replay from 11:00 o’clock am on October 28, 2009 through 11:59 pm on November 4, 2009.
I would now turn the conference over to Doug MacHatton, Vice President, Treasury and Investor and Public Relations. Please go ahead, sir.
Doug MacHatton
Thank you, Operator. Good morning and welcome, everyone. Presenting today are Kevin Buehler, President and Chief Executive Officer, and Rick Croarkin, Senior Vice President and Chief Financial Officer. Also participating in the Q&A session is Dr. Sabri Markabi, Senior Vice President of Research and Development and Chief Medical Officer.
Before we begin, I would like to remind you that certain statements that we will make in this presentation may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. And you should not place undue reliance on these forward-looking statements in this webcast. We refer you to our full disclaimer regarding these statements which is included in our third quarter earnings press release issued last night. And our Form 20-F filed on March 17, 2009 with the SEC.
In addition, this presentation may also include certain financial measures used to better understand our business, which may not be prepared in accordance with generally accepted accounting principles. These non-GAAP measures are reconciled at the end of this presentation or an associated SEC filings.
This conference call and accompanying webcast are being simultaneously broadcast over the Internet with replays available for one week. You may access information on our website at www.alcon.com in the Investors and Media section.
I’ll now turn the call over to Kevin.
Kevin Buehler
Thanks, Doug. And good morning everyone. And thank you for joining us for our third quarter earnings call. I am pleased to report that Alcon again delivered solid operational and financial performance in the third quarter. Sales increased 5.9%, with organic growth rising 9%. Third-quarter operating income rose 17% to $578 million, reflecting the P&L leverage delivered through our disciplined cost management programs that are controlling discretionary spending.
This solid performance translated to third-quarter earnings per share of $1.71. This performance highlights the value of our globally diversified business model across our three business lines, with important contributions from multiple product areas and geographies. Alcon's global presence not only brings balance and steady organic growth opportunities but allows us to leverage our worldwide infrastructure to grow net income faster than the top line.
While we have closely managed our SG&A spending throughout 2009, we have continued to spend on our strategic priorities to bring new products to market, gain market share and develop future important commercial markets. You can see the results of these efforts, in our continued strong performance in key areas like Advanced Technology IOLs, glaucoma and emerging markets. By managing the near term and investing in the long term, we expect to create a sustainable model for value creation.
As well as we have performed in 2009, we must recognize that the current environment continues to present challenges. The global economic issues that affect patient demand and government reimbursement are most likely not entirely behind us. And governments around the world are constantly seeking ways to pay for the social benefits they provide their citizens including medical care. The balance of our business model across geographies, distribution channels and customers reduces, but does not eliminate our exposure to the changing economics of healthcare.
One of these challenges is the prospect of changes to the healthcare system in the United States. We fully support the goal of expanding access to high quality healthcare. But the direct and indirect taxes placed on healthcare companies are not proportionate to the contribution healthcare companies make to lowering total healthcare costs, and they do not reflect the purchasing process for medical devices.
Essentially, the medical device industry has the potential to be negatively impacted twice, once directly through the medical device fee. And then again as hospitals manage through their increased taxes with potential price reductions to the medical device companies who supply them. These taxes will slow the pace of research and new product innovation, which will ultimately affect the quality of lives for the patients.
Fortunately, this legislation is still in draft form and we have seen some recent positive movement in Washington, as to the level and fair proportionality of the medical device industry fee in the legislation. We are committed to working through AdvaMed and other industry groups to communicate the impact that the current bill could have on the medical device industry, the pace of new product development and ultimately on patients' lives.
Considering the ongoing changes to the legislation, I think it's too early to speculate about the dollar impact of the legislation until it's finalized and passed.
Turning back to our business results, the benefit of our diversified portfolio across three businesses is evident in this slide. Our pharmaceutical and surgical products, delivered strong sales growth in the third quarter, which more than offset the consumer product, flat sales results. And improving the US pharmaceutical market environment and broad based gains from our glaucoma portfolio, were the primary reasons for the 12% organic pharmaceutical sales growth. These factors were partially offset by a rise in US rebates associated with increased utilization of Medicaid and our commercial success in Medicare Part D.
Surgical products delivered 9.2% organic growth in the quarter, because of strong performance in total IOLs, but especially in Advanced Technology IOLs the launch of the Constellation system and the continued penetration of the Laureate® world phaco system in emerging markets.
Organic sales in our consumer division were flat to Q3, 2008, reflecting a difficult comparison against the July 2008 launch of Systane Ultra in the US and differences in trade inventory purchases of contact lens care products between the quarters.
While we were very encouraged to see these strong and improved results in Q3, they did benefit from some favorable factors that will not repeat in Q4. Among these were some portion of the catch-up on cataract procedure volumes in the US, accelerated timing of purchasing tenders internationally. A late-season up-tick in allergy sales, and a favorable impact from seasonal Otic wholesaler inventories.
As we look into Q4, these items will not add to the sales trends and we will also have a high comparison in our Japan surgical business. As a result, we would expect Q4, organic sales growth to be certainly above the first half rate, reflecting the improved trends, but not quite as high as Q3.
As we indicated in the second quarter call, we have begun to see signs of stabilization within the US pharmaceutical prescription data. This trend has continued since that time, with August year-to-date ophthalmic and Otic category growth now at a positive 1.3%, versus a decline of 1.4% in the same period last year. As you can see here, all but two of the categories are doing better than last year, and this improvement is an encouraging sign for Rx consumption.
While the Prostaglandin category is still showing some volatility in the monthly growth rates, it is clear that the six months rolling average shows a rebound in consumption. This improvement is consistent with our expectations given the chronic nature of glaucoma treatment. And the importance of glaucoma medication in the preservation of vision.
Patients simply cannot defer filling their prescriptions indefinitely without the risk of impairing their vision. We also expect that the return to more normal cataract procedure growth rates will support improved growth in the Fluoroquinolones and NSAID categories when used pre and post operatively.
As you see here, the cataract market definitely slowed in 2009 due to the economy. Normally, cataract procedure growth is in the range of 3% to 3.5% in the United States, instead of the 2% range that has been observed earlier this year. Reports that we get through our sales channels and other informal research, indicate that doctors are reporting increased patient visits as patients who deferred surgery over the past year are beginning to come in for treatment in greater numbers. This is also not surprising considering the progressive nature of cataracts, which means surgery can only be put off for so long before the vision impairment becomes life altering.
While it is difficult to get an exact number for procedure growth, our internal data suggests that the procedure growth rate accelerated in Q3, which, as you can see is somewhat at odds with the Market Scope data.
Our internal data is pretty much inline with the Market Scope outlook for Q4, which is for a return to more normal procedure growth rate levels. This positive procedure trend should translate into increased demand for our IOLs and consumables.
With this market environment review, I would now like to spend a few minutes reviewing some of our key drivers in Q3 in more detail. Advanced Technology IOLs are one of the most important growth drivers in eye care, and they are critical to our current performance and long-term growth. The AcrySof® IQ ReSTOR®+3.0 and IQ Toric lenses in the US continue to accelerate our surgical sales. For the second quarter in a row, these leading technologies have delivered a combined organic sales growth of around 38%.
This rapid growth is attributable to the technological improvements afforded by the new ReSTOR®+3.0, as well as the gold standard performance of the AcrySof® IQ Toric in the correction of astigmatism. Since its launch in 2006, our AcrySof® Toric lens has taken an underserved category and grown it to 5% of the total US IOL implants today, based on the predictability of results and ease of implantation.
In addition to the Toric contributions, the AcrySof® IQ ReSTOR®+3.0 has dramatically changed the market dynamics in the presbyopia correction category. We have gained more than nine US market share points, since Q4, 2008 to regain the clear number one position, with more than 54% of the US presbyopia correcting IOL market. This increase in share reflects the improved patient outcome that surgeons are getting with the 3 ADD technology, which truly delivers high-quality visual acuity across near, intermediate and distance ranges.
The ReSTOR®+3.0 lens has set a new bar for visual performance in the presbyopia correction market, and we expect to continue to gain competitive conversions, and even more importantly, expand the market over the long term.
We have also seen the positive impact of our commercial activities in the pharmaceutical area. We continue to grow our pharmaceutical brands faster than the market in most categories. We're able to accomplish this on the strength of our product portfolio as well as the capability of our sales force in differentiating the Alcon brands from those of our competitors.
The investments we have made in expanding our sales forces in Japan, the US and throughout the EU are paying dividends, as we continue to build broad-based global market share gains, especially in glaucoma. These gains not only drive current top line sales, but also provide a solid foundation for continued growth when the markets return to more normal conditions.
In ophthalmology, glaucoma is the most important pharmaceutical category, both in terms of market size and long-term growth opportunity. We continue to build market share in the US and Japan on the clinical differentiation of TRAVATAN Z® based on its BAK-free formulation.
Our success in differentiating TRAVATAN Z® has led to 64% conversion of TRAVATAN® US prescriptions to the new Z formulation.
In Japan, TRAVATAN Z® achieved a 13% share of the prostaglandin market in the month of August. And contributed almost 30% organic growth for glaucoma in the quarter. This performance, combined with the continued success of DuoTrav in the EU, has led to an increase of more than six share points globally in the prostaglandin class in the last three years, and placed Alcon in the number two share position.
The other main driver for us in glaucoma is the CAI category. We established share leadership in this segment with Azopt® globally and we are continuing to introduce Azarga®, the combination of Azopt® and Timolol, into markets outside of the US. Because we're early in the launch of Azopt® in the EU and have yet to launch it in Japan. We expect this category to continue to contribute to glaucoma share expansion and growth in the future.
Alcon's broad portfolio of glaucoma products provides doctors with a total treatment solution for managing glaucoma for their patients. Our international markets play a key role in our long-term performance, not only consistently delivering high constant-currency growth, but also representing the largest proportion of our sales.
As of Q3, 2009, developed and emerging international markets represented 55% of global sales. Developed international markets recorded constant currency growth of 9.4% in the quarter, driven by a balanced performance across all major markets. Pharmaceutical products, and specifically glaucoma products, continued to be the biggest driver of our international performance.
In addition to the benefits of this comprehensive portfolio, we have realized significant value from the creation of a specialized sales force in Europe to promote glaucoma products, as well as our sales force expansion in Japan.
Emerging markets once again grew faster than developed countries in the third quarter, delivering constant currency growth of 11.3%. Year-to-date through September emerging markets have delivered organic growth of 11.1%, which I think is pretty remarkable in this economic climate.
Although this may be slightly below recent annual levels, there remains significant long term opportunity in the emerging markets. Our success in these countries is grounded in our consistent investment in market development, with a focus on building the sales and service infrastructures to commercialize our products locally.
These markets have the potential to experience volatility in growth rates based on short term changes to the economy, currency and healthcare budgets. However, our commitment to developing emerging countries ensures that they will be drivers of growth over the long term.
Our future success in emerging markets is predicated on establishing the phacoemulsification procedure to remove the cataract and use of a foldable IOL as the standard of care in these markets. Countries like China and Russia are under-indexed in their rates of cataract diagnosis and treatment and also in their use of phaco. And their sizable populations will benefit from greater adoption of this surgical technique. And while India does a large number of cataract surgeries, their usage of phaco is also very low.
A critical component to increase the adoption of phaco is the effort to increase the number of trained phaco surgeons and to create an infrastructure where they have access to phaco equipment. The Laureate® world phaco system is the foundation of this strategy, and we designed it specifically for the needs of emerging markets. It is smaller, less expensive and has the potential for lower procedure costs, yet the system allows a surgeon to perform high quality phaco surgery.
As you see here, this new system is being very well received in emerging markets, even [though] in this economic and market environment. With the first nine months already exceeding the full 2008 level, unit sales of Laureate® will be well ahead of 2008.
Over the last 12 months, Alcon has commenced an R&D transformation that aims to create a new culture that seeks science based solutions to solving unmet medical needs in ophthalmology.
This transformation is based on two pillars, the first of which is enhancing our access to multiple sources of new technologies and compounds. This includes licensing and acquisition transactions that provide more opportunities for development of innovative eye care treatments.
While many of these transactions will be focused on longer term objectives, we are actively reviewing nearer term opportunities that could enhance our pipeline and revenue stream in the next couple of years.
I think the best examples of this new approach are the recent deals we have completed with AstraZeneca and ESBATech. While these two platform transactions are crucial to strengthening our pharmaceutical pipeline.
The AstraZeneca deal brings an extensive library of small molecules across multiple categories, many of which have been validated against our primary targets in glaucoma, retinal disease, ocular allergy and dry eye.
With the acquisition of ESBATech we immediately expand our internal capabilities and gain access to a proven platform for the ongoing development of biologics. Biotechnology has a great potential in ophthalmology. And the proprietary antibody fragment technology of ESBATech is particularly well suited for the treatment of ocular diseases and conditions. I believe these two deals will create significant value for Alcon in the years to come.
Late last week, it was also announced that Alcon has finalized a license and potential share acquisition agreement to develop Potentia's complement inhibitor POT-4 for the treatment of age related macular degeneration. It should be noted that the undisclosed upfront costs in the Potentia transaction will be applied to the Q4 results.
The second pillar, addresses the way in which we will move compounds and technologies through our pipeline. We are leveraging the clinical information from human proof-of-concept studies to better investigate how drugs and devices work. And to validate activity before moving into more expensive Phase II and III trials. This allows us to acquire and test more compounds and technologies than we have before, which over time, we believe will yield a more predictable flow of new products. The goal of this process is to generate clinically differentiated products with an enhanced potential to yield a superior clinical benefit and risk profile.
With these two pillars in place, our ambition is to be the world leader in translating the body of scientific knowledge of the eye, into products that fill the needs of ophthalmologists and their patients worldwide. Although, we have more work to do, I believe we have made a good start on enhancing Alcon's R&D organizational capability and process improvements so far this year.
Before turning the call over to Rick, to go through our financial performance in more detail, I want to reiterate how pleased I am with the performance of our business in the quarter, and throughout this year. Especially in the context of the challenging global economic and market environment. Even during this period, the Alcon business model has delivered balanced growth, which reinforces the strategic benefit of our globally diversified sales channels and market leading products across each of our three business lines.
Alcon is well positioned to deliver sustainable sales and profit growth in the future based on the fundamentals of the aging population, global business presence and commitment to develop innovative products.
The aging global population and the continued economic development in emerging markets will increase the need for our products. As more funding is being devoted to healthcare in these countries, and as life expectancies extend, there will be a significant increase in the long term patient population that needs our products.
I am optimistic about the future. And I thank all of our employees around the world for their continued efforts to deliver operational excellence that creates value for our customers and their patients.
I will now turn the call over to Rick.
Rick Croarkin
Thank you, Kevin. Good morning, everyone, and thank you for being on the call today.
As Kevin mentioned, Alcon's performance in the third quarter and really for the whole year has been the result of solid commercial execution across all divisions and prudent financial management of expenses that has allowed us to deliver financial leverage even in this most challenging economic environment.
I'd like to thank our employees around the world for their efforts in not only achieving this solid top line organic growth but also for remaining fiscally conservative in this environment.
With that, let's take a closer look at our third quarter results. Alcon's diversified global business model across the surgical, pharmaceutical and consumer business groups has allowed Alcon to deliver balanced and steady organic growth. The benefit of this structure is particularly evident in the third quarter, as organic sales growth was a solid 9%.
The surgical and pharma divisions performed particularly well, as we achieved growth in the two most important product areas, advanced technology IOLs and glaucoma. With less of a headwind from foreign currency, we reported quarterly sales growth of 5.9%.
For the first three quarters of 2009, organic growth was 5.6% which is right in line with our original guidance, while reported sales declined 0.3% due to currency.
This performance is consistent with the guidance we provided last quarter, where we indicated that organic growth would return to mid-to-high single digits in the back half of the year.
If the current dollar exchange rates trend continue, we will have a foreign currency tailwind in the fourth quarter that could benefit reported sales results.
Gross margin in the third quarter was inline with our expectations at 75.3%. As you will recall from our second quarter conference call, we projected gross margin would be at the lower end of our full year target range of 75% to 76% as the temporary impact of foreign exchange on cost-of-goods sold abated. This compares to Q3 of 2008, where the temporary impact of foreign exchange inflated gross margin to 77.2%.
Based on currency rates today, we would expect a modestly negative temporary impact of exchange, resulting in Q4 gross margin coming in at a bit below 75%. This would bring our full year gross margin right inline with the 75% to 76% range we have consistently guided to this year.
Third quarter operating income increased nearly $85 million or 17% over Q3, 2008 to $578 million, with operating margin improving 340 basis points to 35.8%. On a year-to-date basis, operating income rose 5.1% to $1.72 billion or 36% of sales compared to 34.2% of sales in the comparable period of 2008.
Dollar operating profit comparisons to prior year for both the quarter and the year-to-date were negatively impacted by the weaker rates translating the results of our non-US subsidiaries.
The Alcon organization was able to overcome this translation impact in the third quarter and for the year-to-date mainly through diligent management of discretionary costs.
It is important to note that we have achieved SG&A leverage throughout 2009, while still directing sufficient spending to demand creation activities that increase share of voice, drive market share acquisition, and further develop the markets in which we compete.
For the quarter, R&D expenses totaled $158 million or 9.8% of sales compared to $174 million or 11.4% of sales in Q3, 2008. As you have seen and as Kevin has discussed in detail, we're steadily enhancing our research pipeline through several successful business development transactions. Due to deal timing, these activities had little impact in the third quarter. Q3 R&D spending was lower than we had expected on our last call because we anticipated that the potential license would occur in the third quarter.
But as you saw in our press release, it actually shifted to Q4. It was also lower due to the ESBATech acquisition occurring later in the quarter than anticipated. In a comparison to prior year, Q3 2009 R&D spending was relatively lower because of lapping deals executed in 2008 with GlaxoSmithKline and Origenis.
Looking forward to Q4, R&D spending will be up sharply compared to Q3 because of the Potentia deal, higher spending through our new ESBATech investment, and generally higher overall internal project spending.
Reported third-quarter net earnings were $515 million or $1.71 per share. Excluding a $1 million charge taken in the quarter related to the reduction in force, Q3 net earnings were $516 million. This compares to reported net earnings of $627 million in Q3 2008 or $2.07 per share.
Excluding the $240 million tax benefit related to our investment in Summit Autonomous, adjusted net earnings for Q3 2008 were $387 million or $1.28 per share. As a result, adjusted net earnings for Q3 2009 were 33% higher than Q3 2008 adjusted net earnings. These results were driven by the contribution from operations that I discussed earlier. In addition, we realized $6 million of other income in Q3 2009 compared to a loss of $42 million in Q3 2008, which was attributable to our investments. We also had foreign exchange transaction costs of $10 million in Q3 2008, while we were flat in Q3 2009.
These positives were partially offset by a higher effective tax rate relative to the second quarter as a result of the rebound of sales in the US, where tax rates are higher. We are projecting the mix of US sales to be similar in Q4 and also expect to lose certain deferred tax assets in the fourth quarter. As a result of these factors, I expect the Q4 effective tax rate to be slightly above the Q3 effective tax rate.
On a year-to-date basis, net earnings for 2009 were $1.55 billion compared to $1.62 billion in 2008. In addition to the $240 million tax benefit in 2008, in our 2009 results we have a year-to-date pretax charge of $19 million related to a reduction in force, most of which took place in the first quarter of 2009. Adjusting each year for these items, year-to-date net earnings rose 13% in 2009.
Stepping back, I believe that the top line and operating results for the quarter and year-to-date are indicative of a solid business model, the value of our global infrastructure and the operating capability of the Alcon organization. That the Alcon organization and model performed this well in the difficult economic and exchange environment of the last nine months is particularly satisfying.
Turning to guidance for the remainder of the year, it is important to start with an understanding that sale so far this year have evolved pretty much as we expected when we first issued guidance in February. We believe that the operating and market environments we experienced in Q3 will carry over to Q4, which should allow us to achieve the higher end of our mid-single digits organic growth for the year, albeit with Q4 organic growth somewhat lower than Q3, for the reasons Kevin discussed earlier. While challenges remain in our markets, the overall conditions seem to be stabilizing or even improving in some areas.
With respect to earnings per share, we have posted solid growth in earnings in all three quarters of 2009. We have accomplished this mainly due to the strength of our commercial execution and financial discipline, with a little help from a weaker dollar than originally expected. We expect these trends to continue in Q4, but in Q4 we will also have somewhat higher SG&A spending and sharply higher R&D spending than we did in Q3.
Taking all these factors into account, we are raising our full-year guidance for adjusted earnings per share to a range of $6.60 to $6.70. This guidance excludes the $0.05 impact of the restructuring charge recorded in the first quarter and assumes no transactions in Q4 beyond Potentia. Of course, healthcare reform process in Washington is highly unpredictable, and our guidance excludes any impact that reform might have.
In closing, I'm very encouraged with how the Alcon business model has performed as we have navigated through this challenging economic environment. The global diversity of our operations and the breadth of our products across all three divisions have led to solid financial results. We also have maintained our investment in the critical areas of our business that are the foundation of our long-term value creation.
I believe that the Alcon business model, combined with our executional capability and the long-term fundamentals of eyecare, positioned Alcon well to deliver sustainable growth and long-term value.
I will now turn the call back to the Operator and open up the lines for Q&A.
Question-and-Answer Session
Alcon Inc (ACL) Q3 2009 Earnings Call October 28, 2009 8:30 AM ET
Operator
(Operator Instructions). Your first question comes from Amit Bhalla of Citigroup. Please proceed.
Amit Bhalla - Citigroup
I wanted to start on the pharma business. The performance was strong across the board. And I wanted to see if you could comment on the pricing trends and wholesaler stocking levels in the market, and if there was any benefit in the quarter?
Kevin Buehler
Sure. I think there are two trends that we really wanted to highlight. One is that when you look at the US specifically, we are continuing to see improvement in Rx category trends, especially in the chronic areas related to glaucoma. I think our growth is very representative of what our factory shipments were in the glaucoma area.
The one area that I would say had the potential for inventory adjustment was related to seasonal areas, allergy and otic. For the most part, we benefited in allergy because of an extension of the season, which in effect used up the inventory position in Q3. That was not the case with otic. It was a relatively mild season. And when you look at it, the inventory build anticipating the season probably overshot the actual demand by a little bit, but that would be the only area where I saw impact from inventory.
Amit Bhalla - Citigroup
What about pricing?
Kevin Buehler
Pricing, clearly we have seen a mix. If I think about it globally, we've seen markets where we've been challenged as it relates to pricing and rebates. Obviously, in the US, we're in a position where we did take a price increase, a second price increase, in 2009, and obviously that does benefit us in some cases. In other cases, where we've got managed plans, obviously, it increases our rebate levels. Rick can speak to price in general.
Rick Croarkin
Yes. Overall, we got price in the quarter. In the US, we had about 1.6% of price in the quarter. Typically, in international, we're breakeven on price, and we were roughly at that in the quarter as well.
Amit Bhalla - Citigroup
And just my follow-up is on the BRIC countries. Could you comment on how you see the continued investments and the market development efforts impacting the operating margin going forward?
Kevin Buehler
Sure. I think, first, we've got to look at the opportunity for the BRIC market. As we've said consistently, we see those markets as having significant upside for us to execute our strategy, first starting with the cataract business and then bringing behind it the pharmaceutical and consumer products area.
And when you look at some of the dynamic growth that we are seeing, for example in India, the surgical strategy is working quite well. Obviously, there have been some challenges in markets like Russia, with currency, and that obviously has an impact on the ability to execute the overall strategy, especially with imported products.
I think when you look at the fact that we lead with our surgical business, we've got two trends. One is that we have the opportunity to bring in more or less globally priced products. We have spoken about Laureate®, which is a lower-cost platform opportunity, to start the process. But then we're following it with our AcrySof® line and even Premium IOLs. So the opportunity for us to build that business out with premium-priced products is also very attractive to us.
Obviously, as we start to build out these markets, we do have to invest in terms of people, from a sales and technical service standpoint. But again, I would see it as a significant opportunity and not be that worried about what the margin position is.
Amit Bhalla - Citigroup
Thanks, and just a quick congrats to Bob on his new position.
Operator
Your next question comes from the line of Steve Willoughby of Cleveland Research.
Steve Willoughby - Cleveland Research
A question on the cataract business. The Toric has been out there for a couple years now. Just wondering what your thoughts are on longer term. You made the comment that it is now making up 5% of procedures. Where do you realistically think that goes to over the next 12 to 24 months?
Kevin Buehler
Well, I think the challenge for us is certainly not in the area of clinical performance. The product is performing extremely well, and I think the opportunity is for us to get more surgeons trained and actually trial and using the lens.
So when you know that the potential for penetration is a lot higher than 5%, it is not related to the clinical opportunity or the performance of the product. It is related to the fact that we need to get more surgeons trialing the product. And obviously, there is a second component to that beyond clinical, which is the ability to get the doctor to promote the product to the patient as a viable option for them to consider. And as you know, in the US, we don't have any limitations as it relates to reimbursement, which we do have outside of the US.
So I think what you're going to see is not a significant bend in the line in terms of the physicians using the product. What you're going to see is consistent usage of the lens, and then more doctors coming into the pool of doctors using a Toric lens. And that's just going to happen on a linear basis. But I think every surgeon should be using a Toric lens for the correction of astigmatism.
Steve Willoughby - Cleveland Research
Okay, thank you. That makes sense. And then just one quick follow-up on the ReSTOR 3.0. I was just wondering how do you feel the growth in that. Is that more right now market share gains, or do you think there is an opportunity for you where you're actually growing the overall market?
Kevin Buehler
I think it's an intriguing question that we're looking at here at Alcon all the time. There is no doubt that we're getting market share growth. So that one we know we're getting. And it's been significant since the fourth quarter, where we highlighted on the chart over 9 share points.
When you start to look at the sort of organic and unit growth that we are seeing on both of our premium IOLs, you have to start to wonder what the category trends really are. We just haven't had enough time over this last two quarters to really analyze that. But I think we're encouraged by certainly the market share growth, and then if we can start to expand the category that's where the real value proposition comes in.
Steve Willoughby - Cleveland Research
Okay. And then just one last real quick one. Kevin, there are a lot of upside here in the quarter. Either for Kevin or Rick, what surprised you the most kind of across the board here this quarter?
Rick Croarkin
Steve, this is Rick. Organic growth came in very strong. We were very pleased with that. Of course, foreign exchange, which is an uncontrollable, the foreign currency strengthened relative to the dollar since our July call. We had a couple deals that we thought would happen early in the quarter on the R&D side happened later. ESBATech happened September 15 for the close, and Potentia happened in October. So we had expected those two deals to have greater impact in Q3, and of course they didn't. So I would say those are some of the major factors that resulted in, or contributed to our expectations for the quarter.
Steve Willoughby - Cleveland Research
Great, thanks very much, guys.
Operator
Your next question comes from the line of Peter Bye from Jefferies & Company.
Peter Bye - Jefferies & Company
Just a couple quick ones. One, I guess, Rick, when you give your earnings guidance, what average currency rates are you assuming? Are you assuming today's rates, a blended average of the last three months? It does fall down. I know you just talked about organic on the top, but it does fall down. Can you give us any sort of flavor of what you're thinking about when you put together the bottom line?
Rick Croarkin
We assume roughly current rates, but we give ourselves a little bit of room for variability, a reasonable range, if you like.
Peter Bye - Jefferies & Company
Okay, great. And then just 2010, I know you are not talking about guidance there, but is there anything that assigns a fair amount of AMD stuff over the last 18 months or so and even more recently. Anything that might be going into Phase III? I realize the AMD sort of Phase III trials are its own animal and are pretty expensive to run as we're looking into 2010, anything that might be expected to go into Phase III.
Sabri Markabi
This is Sabri Markabi. We don't believe we will have an entry in Phase III in 2010. But we have large trials in AMD that will come from Potentia, and also our internal compound, tandospirone, that we talked about in the last quarters. So this will result in significant activity in the regiment space.
Peter Bye - Jefferies & Company
Okay, great. Thanks, guys.
Operator
Your next question comes from the line of Louise Chen of Collins Stewart.
Louise Chen - Collins Stewart
Just a few questions. First question I had was with respect to long-term growth rates. Given that the US pharma business and currency are stabilizing, what are your thoughts on sales and earnings growth over the next few years?
Kevin Buehler
Louise thanks for the question. I think we are certainly encouraged, based on what we saw in Q3 and some of the areas that we've seen improvement on. At the same time, we're continuing to look very closely at certain markets, most likely outside of the US. Eastern Europe markets are still seeing some challenges. We've got reimbursement challenges in Turkey, some of the dynamics that we saw in Thailand. So that's why we're signaling that we're not seeing this as 100% behind us. But yet, we're very encouraged by the trends that we saw in the Rx and cataract procedure improvement in the US.
I think, historically, we've talked about the long-term growth rates. And obviously, it has a number of considerations. One of the things that we had to deal with in 2009 was obviously the loss of TobraDex, which certainly affected our growth rate.
I think one of the other issues that we've got to think about is healthcare reform, which I mentioned briefly in my comments, that we're not quite sure what that's going to look like. But clearly, that's going to have an effect, assuming it gets passed, either in terms of reducing sales or increasing expenses or taxes.
So clearly, that's another factor that we're going to have to take a look at. But I think the basic fundamentals of looking at our business have not changed, global business model, the fact that it's going to be driven by aging population. We're just signaling that it is probably a little premature to be signaling that we're back to the longstanding model that we've looked at in the past.
Louise Chen - Collins Stewart
And then second question I had was, you've obviously done a good job of building up your earlier-stage pipeline. When do you expect to start seeing some commercialization of these products?
Sabri Markabi
Obviously, the rate of marketing will depend on the success of the trials. And we expect our rate of success to be higher with these platforms that will provide us with a steady stream of compound we hope with differentiated potential. So that's relatively, I would say, mid to longer term from now. But our, actually, activity in the pipeline, our efforts for the pipeline were not limited to these deals you have seen. We have also worked on the shorter time pipeline with acceleration of existing program and acceleration in terms of execution. For example, we've just filed in the United States the (Inaudible) and that will help us in the short term.
Louise Chen - Collins Stewart
Okay. And then the last question is just on your consumer business. You haven't talked about that in a while. Just curious as to longer term what are you thinking about for strategy or objectives for that business?
Kevin Buehler
Sure, Louise. I think when you look at the consumer products business, it's really broken down between two business segments. One is contact lens care, and the second one is over-the-counter dry eye products.
In the case of contact lens care, for the most part you've seen over the last three to five years, relatively low single digit growth or in some cases flat or declining growth based on consumption and dropout rates from contact lens wearers.
Clearly, our focus in that business is continuing to promote to the physician's office to gain increased share against RepleniSH, and then looking at the opportunity to introduce even more new technology with new products that would allow us to capture share through professional promotion.
If you think of the dry eye products, clearly we've been on a path where we've been growing at a much faster rate than the category by introducing the Systane portfolio of products. And there continue to be products that are in the pipeline that we could bring out as line extensions to that Systane franchise.
I just want to comment, back on the second question Louise, that when you think about our pipeline, we've obviously talked a lot about ESBATech and AstraZeneca, Potentia and some of the deals that we've done obviously in terms of longer term development for the pharmaceutical pipeline. But when you think about our other two businesses being the consumer business and the surgical business, there continues to be internal pipeline projects that we would expect to come out over the three to five year period of time that would continue to drive shorter term revenue, while we are developing these earlier pharmaceutical opportunities.
Louise Chen - Collins Stewart
Thank you very much.
Operator
Your next question comes from the line of Marc Goodman of UBS.
Marc Goodman - UBS
On the premium IOLs [that had] such a nice quarter, can you talk about whether it was really US driven or whether outside of the US was also there?
And then second question is on expenses. Rick, how much are we going to hold expenses as we move into next year? The FX obviously changes if everything stays the same for you. Get a little more leeway to spend a little more or are we going to be very tight on expenses again next year and actually maybe even see SG&A as a percent of sales lower next year versus this year?
Kevin Buehler
I’ll start, Marc, with the premium IOLs. It's my pleasure to confirm that we got across the board benefits. Both US and international demonstrated very nice growth rates across both of the platforms, both ReSTOR as well as Toric.
Rick Croarkin
Good morning Marc. This is Rick. I would say that the actions that we've taken in the SG&A area are largely sustainable. So you saw in the first quarter the reduction in force, so that’s going to stay with us.
I think the organization has executed very well in controlling discretionary things, sampling, attendance at conferences, travel, promotional expenses those kind of things to really drive spending to really the critical areas that are strategic to us.
So, I think that these are all sustainable, the kinds of reductions that you have seen this year. And looking forward, we've said that long term we wanted to have sustainable operating profit margin evolution. We still think that's possible. SG&A is an area where we think there still is leverage available to us.
We largely have the infrastructure in place for our business, with the exception of emerging markets where we're investing significant dollars and people resources. But largely, when we get higher growth rates, it allows us to leverage SG&A and I would expect that to continue as a long-term trend.
Marc Goodman - UBS
Do you actually think you can achieve 40% operating margins?
Rick Croarkin
Marc, I wouldn't want to get into that level of specificity.
Marc Goodman - UBS
But over the long term, can your business even get there?
Rick Croarkin
I really wouldn't want to comment on that. We're in an environment of healthcare reform, and there's a lot of complex dynamics going on. So I really wouldn't want to get into that level of specificity.
Kevin Buehler
I think the other issue, Marc, is looking at this reallocation process that Rick is talking about and clearly we are looking at aggressive investment in projects in R&D that we believe have high potential for success down the road. So, clearly, part of the SG&A approach is a reallocation that we're looking at to also invest in R&D.
Marc Goodman - UBS
Thanks.
Operator
Your next question comes from the line of Mark Weinstein of JPMorgan.
Unidentified Analyst
It is Kim for Mark. Can you hear me now? Is that a little better?
Kevin Buehler
Go ahead; we'll see if we can get it.
Unidentified Analyst
I'll try to speak up here. Just a couple of questions, starting at the expense lines. You had some expenses shift from the third quarter to the fourth quarter. And I'm wondering, just to get a sense of how big that R&D number is in the fourth quarter could you really talk about what R&D growth should look like for the year? Should it be on par with organic revenue growth?
Rick Croarkin
I don't want to get in that level of specificity. I would just say that we have said that long term we want R&D to be in sort of the 10% to 11% range. We've been below that year-to-date. These transactions will bring us back into the range where we want to be. And I think, I wouldn't want to get into that level of detail for the quarter.
But clearly, ESBATech we're going to have the burn rate for that. We had only two weeks of ESBATech in the third quarter. That's going to be a full quarter's worth. And Potentia, you're going to expect the upfront license part of that transaction, as well as we have some internal projects that are we're increasing spending on.
Unidentified Analyst
And then the other question is on your emerging markets business. You've mentioned in the quarter that you did benefit from some tenders going your way in the third quarter that maybe didn't in the second quarter. Can you quantify that impact at all, and then maybe just a comment on your visibility into that business?
Kevin Buehler
Yes, that’s always the challenge of the international business is tenders obviously are somewhat by definition unpredictable. And obviously, the volume of the tender the period of time that’s intended to be addressed by the tender varies. And then, obviously, you've got the risk as to whether you win the tender or not.
Clearly what we're indicating is that, in the Q3 period, we saw some of the tender activity really be a little bit accelerated. And obviously that had some impact in our overall growth rate. But if you look at the overall business, there are clear parts of the business that reflected improvement for example the US business. And that business in both Rxs and cataract procedure growth we think for the most part is sustainable. So its just one of the factors that probably had a little higher impact in our organic growth rate in Q3.
Unidentified Analyst
Okay, great. Thanks, guys.
Operator
Your next question comes from the line of Joanne Wuensch of BMO Capital Markets.
Joanne Wuensch - BMO Capital Markets
You mentioned four different items in the third quarter that you don't expect will return in the fourth quarter. Is there any way to quantify those impact?
Kevin Buehler
Yes. We talked just briefly about tenders and that one is a hard one to do. When you look at the cataract procedures and I called it, I have struggled with what do I call it first. And I called it the catch-up on the procedures, because clearly the first half of the year, cataract procedures in the US were under-indexed. And as that line starts to change, you get a little bit of incremental benefit in the next one or two quarters. And some of that may even continue into Q4. But obviously, there was a catch-up component that was reflected in Q3.
The tenders, I think if you assume that they were accelerated and look at our international business, because its all outside the US, it's certainly a factor. And then, obviously, you've got visibility to the allergy, because clearly that was primarily in the US. And obviously, the fact that the season ran long, you can get a sense for the allergy growth. And then, obviously, if you look at our Rx volume versus the Otic factory volume, you can get a sense for that as well.
So those are factors that clearly impacted our 9% growth rate that when somebody was asking earlier were we a little surprised on anything, clearly the 9% surprised us a little bit on the organic growth rate. And we spent a lot of time trying to understand exactly the parts of that that were sustainable. But clearly, the best part for us was the fact that we saw these improving trends, specifically in the US.
Joanne Wuensch - BMO Capital Markets
Is there any way to quantify it, though? Is that 2% of the 9% growth?
Kevin Buehler
I don't think we've got it down to that level, but it may be in that ballpark.
Joanne Wuensch - BMO Capital Markets
Okay. Can you remind us how much of foreign exchange impacts gross margins, and what the FX contribution or headwind was in the third quarter?
Rick Croarkin
Good morning Joanne, this is Rick. We haven't gotten into that level of detail about quantifying the temporary impacts of foreign exchange on the quarter. But clearly, last year in the third quarter, when the dollar was declining, we had an inflated margin of 77%. This quarter, when the dollar is weakening we had a 75.3%. So you can sort of get an idea of some of the effects just by looking at the change quarter-over-quarter.
Joanne Wuensch - BMO Capital Markets
When I look at consumer products, the other income line was down a fair bit. What’s in there, and what reverses that trend? Thank you.
Kevin Buehler
I'm not sure I know. I guess the only other pieces that are there, though, would be the over-the-counter vitamin business, and we do have OTC allergy business, which was the Naphcon brand. So I'm assuming it's those two, but they are relatively small.
Joanne Wuensch - BMO Capital Markets
Okay, thank you.
Operator
Your next question comes from the line of Larry Biegelsen from Wells Fargo.
Larry Biegelsen - Wells Fargo
Thanks for taking my question. Just one clarification, Kevin. Of the 11% you mentioned for emerging market growth I think you mentioned 11%, is that comparable to the 8% from last quarter?
Kevin Buehler
11%.
Larry Biegelsen - Wells Fargo
In the press release gave the BRIC markets of 13%, but the emerging markets [Technical Difficulty]
Kevin Buehler
Yes, I would say it is. Did we lose you?
Operator
Apparently, I think we did. I think we did. It just be one second. Do you still want to take his question?
Kevin Buehler
Yes, sure.
Operator
(Operator Instructions). Thank you.
Larry Biegelsen - Wells Fargo
Everyone, thanks for your patience. Sorry about that. So the 11% you gave is comparable to the 8% last quarter?
Kevin Buehler
Yes.
Larry Biegelsen - Wells Fargo
Okay. And then, Kevin, if you did 7% or so organic in this quarter, and you see improving trends, I was just curious at your analyst meeting at (Inaudible) you said basically you expected to get to high single digit organic sales growth in 2010. But at this past analyst meeting and today, you're much more cautious. But things are improving. So I'm just curious why are you just being conservative, or why the hedging on getting back to the high single digit organic growth if you're kind of there already?
Kevin Buehler
Right. I think, clearly, the one big change that we talked about both on the call as well as that the meeting at the academy is obviously healthcare reform, which we don't know what the full effect could be, and that’s one of the reasons for a cautious approach at this point.
And secondly, the situation where I don't believe that the healthcare impact and some of the recessionary impact, when I look at the number of markets that traditionally were just rock-solid, Thailand and Taiwan, those sort of middle of the basket of growth, we're still seeing challenges.
So when we're back to let's say this adjusted 7% growth rate, I think we need to see what the impact of the healthcare reform piece is. And then we also need to see a couple more quarters to see what’s going to go on around the world. That’s the only background on the cautiousness.
Larry Biegelsen - Wells Fargo
Okay. That's fair. Then lastly, Tandospirone you've mentioned a few times Kevin. There's on clinicaltrials.gov the Phase III study for geographic atrophy. It's a pretty large study. Is that a registration study?
Sabri Markabi
Yes. Actually, its a large trial, as you pointed out, for our agent Tandospirone in geographical atrophy. The study is we consider technically a Phase II, because we have not yet proven the efficacy of this compound in this indication. But because it's large, it actually gives us the potential to consider it pivotal in case it achieves certain predefined outcome.
So depending on the outcome of the trial, it could be considered pivotal, yes.
Larry Biegelsen - Wells Fargo
So you could file based on that data if it's strong?
Sabri Markabi
No, we would need another study probably.
Larry Biegelsen - Wells Fargo
So you would definitely need a confirmatory study before filing?
Sabri Markabi
That's correct.
Larry Biegelsen - Wells Fargo
Thank you very much.
Operator
Your next question comes from the line of Frank Pinkerton with SunTrust.
Frank Pinkerton - SunTrust
Thanks for taking the question. You haven't talked much about refractive, still down year-over-year despite the acquisition there. Is that economy, or is there any technology lag behind you guys still have for the competitors and when does that market start to move, either from an economic standpoint or from a new product launch?
Kevin Buehler
Clearly, it's been a tough year for refractive laser procedures. Obviously, we've got pretty good data through the first half and procedures were down in the 30% range. And part of the question is going to be around consumer confidence to come in back into the office and push procedures back up.
But again, I just have to tell you, from Alcon's perspective, our focus is on integrating WaveLight globally; secondly, rolling out the ALLEGRETTO 400 Hz, and obviously gaining competitive conversions, which, through 2009, nine months, we're quite pleased with the number of procedures that we've been able to garner under the system and the share that we've been able to capture. So its a rebuilding year for the industry, but its also a good opportunity for Alcon to establish our installed base.
Frank Pinkerton - SunTrust
Great. And then just a follow up. Maybe not believable to some, but actually before the economy kind of took over, it was supposed to be more of an expansion year. I remember several years ago, lots of investment went into product approvals and expansion sales force in Japan. You had the whole reorg, was shifting around in Europe. As we think about margins and the company goes to the cycle of investing over the last couple years in some business, should the margins be expanding? When is that next timeframe that we should think about a pretty big reinvestment for needs on sales force or other things for Alcon? Thanks.
Rick Croarkin
Yeah good morning Frank this is Rick. I think we've said for the long run, we believe there is still sustainable margin improvement on a year-on-year basis available to us. We think that that can come from SG&A leverage and also from gross margin evolution due to product mix.
And we think we can do those things while investing where we need to invest. This year is a good example of that. We have invested in all the places where we think that strategically we've got big opportunities, and it's a priority for us. And the way we're able to do that is because we largely have our infrastructure in place for most of the world. And that allows us, when we get into good organic growth, to get leverage in the SG&A area.
Now, we have had as a priority for us to ensure that we've got a pipeline in place for the long-run assurance of our revenue growth. And you've seen transactions that we've been doing to invest there. So we're thinking that we will be investing some of the leverage that we get in SG&A and any gross margin evolution back into increasing R&D spend. But we still believe at this point that the net of all that is that we still have sustainable margin evolution.
Now, in any year, there can be things that can happen. We're looking very closely at the healthcare reform and want to understand how that is going to impact us. But we think as a long-term trend that those dynamics are still available to us.
Kevin Buehler
Frank. This is Kevin. The only thing I would add to Rick's comments is that in terms of pharmaceutical build out in Japan and Europe, for the most part, we're at the stage that we wanted to be at in terms of share of voice and the balancing of the product portfolio. But clearly, the opportunity for investment is in the emerging markets, specifically, around phaco development in India, China and Russia. Obviously, we were in that investment mode in 2009. We will be in that same investment mode in 2010 based on the opportunity those markets present.
Frank Pinkerton - SunTrust
Thank you.
Operator
Your next question comes from the line of Matt Miksic of Piper Jaffray.
Matt Miksic - Piper Jaffray
Thanks for taking my questions. One, just clarification, Kevin, on your comments on the gives and takes in stocking that happened in the pharma side. We understand your comments on otic and allergy, it sounds like otic maybe overshot and there will be some destocking this quarter or next quarter. But allergy is sort of a sustainable, early-season bump that should be sustainable. Is that a fair way to look at it?
Kevin Buehler
Yes, I think you've got the otic right. And I think all we signaled in terms of allergy is that it wasn't related to inventory. It was really related to the fact that we saw Rx volume late in the allergy season that pulled through the inventory. So it should be a normal Rx volume in Q4, just not having the season.
Matt Miksic - Piper Jaffray
Got it. So one on sort of your surgery side and one more strategic question. On the tenders or some of the surgery strength that you saw in the quarter, how much of that was capital related and how much was did you see was procedure related?
Kevin Buehler
I think clearly, when we look at the overall surgical business, we see, in terms of the international, we continue to see build out of installed base. And it's not to say that there aren't tenders against capital equipment, but that business is performing a little bit like you would expect, considering some of the economic challenges. It is not a great period of time to be selling capital equipment.
Most of the tender activity that would've influenced positively probably would have been in the IOL area and the consumables area. And then switching to the US, obviously what we saw in terms of positive trends was directly related to increased procedures and had nothing to do with timing.
Matt Miksic - Piper Jaffray
Okay. And then so strategically understanding that you continue to execute on this R&D plus strategy on the pharma front, what is the next strategic priority that you see for the company in terms of potential investments? And in that spectrum of possibilities, how do you think about contact lenses?
Kevin Buehler
Okay. I think you're hitting on an interrupting point for us, because clearly we focused on the pharmaceutical area and we've certainly done some things to shore up our early-stage research efforts.
The next stage for us is looking at product areas that either can be generating incremental revenue in a three to five-year period of time, and we've actually codenamed those as [WIND]. And the second area is looking at devices.
And obviously, we just got back from the Academy of Ophthalmology in San Francisco. We spent a fair amount of time looking at interesting devices that obviously could be bolted on to our business, have shorter registration times. So I would look at things that would have a nearer-term impact and potentially the devices as being the next step for us.
Obviously, contact lenses is a large area that's always been interesting to us from the standpoint of combining lenses with solutions. And certainly, when you look at that business outside of the US, that's the way the business is conducted primarily with the optical chain markets as compared to, for example, in the US, the optometry market.
But I think that the first step for us, as we do with all of our acquisitions, is that we would need to go through a technical assessment to really understand the material and the design benefits for some of the more current emerging trends, like silicone hydrogel. And obviously in the contact lens care business, the manufacturing platform is also very important. So clearly, we continue to monitor it, but I would not see it in the short term.
Matt Miksic - Piper Jaffray
That is helpful. Thanks, Kevin.
Kevin Buehler
Operator we'll take one more question.
Operator
Your final question comes from the line of Scott Hirsch of Credit Suisse.
Scott Hirsch - Credit Suisse
Can you give us a little more clarity on the CONSTELLATION® launch, maybe in reference to the launches with Infiniti® or Laureate®? How is the trajectory going?
Kevin Buehler
Well, I think, first, I would comment on the product itself, because clearly, when your are replacing the number one market share position that we have with Accurus®, the focus and ultimately the success of that product launch is going to be related to the incremental technology that you bring to the market.
And we are encouraged, but yet we're very early in this process. When you think about some of the dynamics around IOP control, when you think about the high-cutter, 5000 cuts per minute probe and some of the things that the surgeon can do with that sort of capability, obviously some of the benefits related to going to smaller incision, we believe this platform offers a significant bundle of incremental benefits that is going to be wanted by the retinal surgeon.
So then when we look at the rollout, obviously I would say in the US, we've obviously sold more units. And the focus is getting trial and evaluation against those units and to some degree, getting the surgeon assessment. Outside of the US, it's much more targeted like a KOL management sort of priority. And as we build volume, then we'll expand out in terms of larger accounts and broader installed base. But it is going well.
Scott Hirsch - Credit Suisse
Is Japan's sales force fully staffed now, or is there still add-ons to go there?
Kevin Buehler
Fully staffed.
Scott Hirsch - Credit Suisse
Fully staffed, all right. And then very quickly on the last question, you've talked a lot about the impact of reform to your business and that remains outside of your guidance for fourth quarter and beyond. Is there really anything here, is it rebating or Medicare Part D, is there anything that can immediately impact you or even in the near term?
Rick Croarkin
This is Rick. There is the potential for some of the reforms to have an impact on accruals. An example could be, we sell to wholesalers during the year and we accrue for the rebates that we will have to make to the ultimate end consumer at that time. So if the rebates in the healthcare reform were to increase, we would have to adjust our rebates in Q4 for our Q4 sales to the extent that we had inventory or that our wholesalers have inventory. So that is just an example. But the whole healthcare reform thing, of course, is still very much in flux, so I think it is premature to get into a whole lot of detail on that.
Scott Hirsch - Credit Suisse
Okay, thanks very much.
Operator
Ladies and gentlemen, that concludes the Q&A session. I would now like to turn the call back over to your host for today's call, Mr. Doug MacHatton.
Doug MacHatton
That's all. Thank you very much. Appreciate it. And we will talk to you next quarter.
Operator
Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!